Economics, or, The science of wealth

Digitized by tlie Internet Arcliive

in 2007 witli funding from

IVIicrosoft Corporation

littp://www.arcliive.org/details/economicsorscienOOsturiala

ECONOMICS

OR

THE SCIENCE OF WEALTH

BY

JULIAN M. STURTEVANT, D.D., LL. D.,

PROFESSOR OF POLITICAL ECONOMY IN ILLINOIS COLLEGE AND
EX-PRESIDENT OF THE SAME.

d Tcc oh ^elei ipryaleadai, fiTjSe Eadthu.

Paul.

NEW YORK

PUTNAM'S SONS

182 Fifth Avenue
1879.

COPTBIGHT,

BY G. P. PUTNAM'S SONS.
1877.

PREFACE.

I HAVE been induced to undertake this work by a
conviction, the result of many years of experience as a
teacher, that, to a considerable extent, the definitions in
use in the science of which I have attempted to treat are
indeterminate. Especially has it seemed to me, that
while in all our treatises the subject matter of the science
is assumed to be wealth, that word is either left without
any satisfactory definition, or if a valid definition is given,
it is not applied to the whole group of phenomena em-
braced in it. The words labor and capital also seem to
me to have been so loosely defined, as to give an aspect
of indefiniteness to the whole science. I can hardly be
mistaken on this point. I have constantly seen the
evidence in each successive class, and whatever text-book
I have employed, that intelligent minds are aware of this
indefiniteness, and their interest in the science is dimin-
ished by it. The same thing is apparent in the general
public. Many intelligent minds either deny that any
science of Economics exists, or if they admit its existence,
they regard it as so vague and indeterminate as hardly
to deserve to be called a science. I am compelled to
admit that these complaints are not altogether ground-

2108863

IV PREFACE.

less. If I am right in this admission, the ground of such
objections can only be removed by more accurate defini-
tions, and a more logical method. Such definitions 1
have attempted to frame ; such a method I have sought
to pursue. I have endeavored to present the whole
science as a logical development of a single law of
nature. Such I am sure it is, whether I have succeeded
in so presenting it or not. If I have failed in what I
have attempted, some other one more fortunate will
surely succeed. With this frank statement of the motives
which have induced me to write this treatise, I submit
my work to the candid judgment of the American public.
Surely no people ever had more urgent need of sound
economic knowledge than we have at the present time.

J. M. S.

Illinois College, Sept. 3d, 1877.

CONTENTS.

y. S. The figures refer to the sections.

INTRODUCTION.

FIRST PRINCIPLES. PAG

Fundamental natural law, i. All ownership acquired by
labor, 2. Two distinct sciences evolved from the same
fundamental law, 3. Definition of Wealth, 3. Defini-
tion defended, 4 and 5. Definition of Labor, 6. Labor
divided into two classes, 6. Name of the Science, 7.
Definition of Economics, 7. Science consists of three
parts, 8. Social and moral conditions assumed by the
Science, 8a.

FART I.— Production.

CHArTER L

STIMULI TO LABOR. It

A rational soul, 9. Impulse of appetite, 10. Need of clothing,
shelter, etc., 11. Love of acquisition and ownership, 12.
Love of the beautii'ul, 13. Love of humanity. 13. All
men's powers must be brought into use, 14. Satisfaction
of aitificial wants, 15. Necessity of Government, 16.

VI CONTENTS.

CHAPTER II.

PAGE 19

Love of gain insatiable, and why, 17. Definition of Capital, 18.
Subdivisions and other definitions, i8. These definitions
explained and justified, 19. Sole function »f Capital, 20.
How Capital aids Labor, first sustains the laborer, second
furnishes tools, third provides machinery, 2i. All buman
beings laborers, 22. Wealth not national, 23. Aid ren-
dered by Capital to Labor unlimited, 24. Partial limita-
tion in Agriculture, 25. Land the fixed Capital of Agri-
culture, 25,

CHAPTER III.

CAPITAL A UNIVERSAL PATRIMONY. 3O

Principle proved, 26. Illustrated by the estate of A. T. Stew^-
art, 27. Individual gratification the compensation of the
capitalist, 28. Promotes improvement in architecture,
28. How men become public treasurers, 28. Public
treasurers unfaithful, 29. Public liberality, 30. Recapitu-
lation, 31.

CHAPTER IV.

DIVISION OF LABOR. 37

Diversity of natural endowments necessary to society, 32. Law
of habit, 33, Definition of division of Labor, 33. Origin
of do., 33. Extension of the principle in modem manu-
factures, 34. Economic advantages of it, 35. Increases
skill, 35. Saves time in learning trades and in adjusting
tools and adjusts'compensalion to skill, 35. Limitationg
of division of Labor, viz., Nature of the process. Want of
sufficient capital, and Demand for the product, 36. Divis-
ion of labor not national, 37. Combination of labor, 38.
Other classifications of labor, 38a.

CONTENTS. Vll

PART IL— Exchange.

CHAPTER I.

VALUE. PAGE 4g

Definition of Exchange, 39. Importance of definition of value,
40. Definition of Competition, 41. Definition of Value,
Do. of Cost, Do. of Price, Do. of Supply and Demand, 42.
Relation of Cost to Value, 43. Competition the only test
of Value, 44. Objections to Competition as a universal
test of Value. 45.

CHAPTER II.

FLUCTUATIONS OF VALUE. 58

Two causes of fluctuations of Value. First cause, variation of
cost of production, by improvement in machinery, by in-
creased facilities of communications 46. By changes in
the cost of material, 47. Second, variation of the ratio of
Supply and Demand, 48. Ratio of Supply to Demand
may be increased or diminished temporarily or perma-
nently, 48. When Supply can be increased without in-
creased cost, 48. When Supply cannot be increased
without increased cost, 49. When Supply cannot be in-
creased, 50.

CHAPTER III.

Money the tool of Exchange, 51. Not the invention of a sin-
gle mind, 52. Definition of Money, 53. Money mercan-
tile fixed Capital, 53. Gold and Silver suitable for Money,
Universal desirableness ; scarce and obtained by great
labor. One suited for large Exchanges the other for small.
Capability of minute division, 54. Little subject to fluc-
tuations of Value, 55. Money cosmopolitan, 56. Indica-
tions of designing mind, 57.

68

CONTENTS.

CHAPTER IV.

THE RELATION OK THE GOVERNMENT TO THE MEDIUM OF

EXCHANGE. PAGE 78

Chimerical theories, 58. Right of the Government to prescribe
a legal tender, 59. Notes of the United States made legal
tender, 60. Why? 60. Government may not interfere
with contracts, 6r. Should never make its own promises
legal tender, 61. Obligation to redeem greenbacks, 62.
Greenbacks a depreciated currency, 63. Produce great
fluctuations, 63. No natural limit of their amount, 64.
Value varies inversely as the amount, 64. An elastic cur-
rency impossible, 65. Communism, 65. Unstable currency
injurious to trade, 66.

CHAPTER V.

CREDIT AND PAPER MONEY. 9O

Credit founded in human nature, 67. Always present in the
relation of capital to labor, 67. Definition of credit, 67.
Banks of deposit, 68. Facilitate exchanges, 6g. Credit
cosmopolitan, 69. Banks of loan, 70. Banks of issue,
Paper money, 71. Convenience of paper money, 71. Un-
stable, 72. Credit and legislation, 72. National currency,
73. Security for its redemption, 73. Not a satisfactory
solution of the banking question, 74. Depends on the
credit of the government, 74. No security for the pay-
ment of deposits, 74. Credit should be left to its natural
development, 74. Why not a national bank, 75.

CHAPTER VI.

FUNCTIONS OF CUKDIT.

Great influence of credit, 76. Quickens exchanges, 76. Unites
skill and capital, 77. Diminishes the amount of money

CONTENTS. IX

needed, 78. By book accounts. By checks and drafts, 78.
By bank notes. 78. The real advantage of paper money
7g. Will facilitate our return to specie payments, 79.
Power of credit to control prices, 80. Dangerous element
80. Financial crisis of 1837, 80. Binds the whole civil-
ized world together, 81.

CHAPTER VII.

MONOPOLIES. PAGE IIO

Foreign exchanges not international, 82. Definition of mo-
nopoly, 82. What monopolies are defensible, 83. The
monopoly of protection, 84. The word protection used
unfairly, 85. Competition the enemy of no legitimate
business, 85. Tends to the perfection of the product, 86.
General principles of the science adverse to 'protection,"
87. Human race one family, 87. Theoretical and prac-
tical, 88.

CHAPTER VIII.

FREE TRADE, OBJECTIONS CONSIDERED. IIQ

Definition of free trade, 89. Variety of industry said to be a
condition of national prosperity, 90. Not universally, 90.
Which is cause and which effect, 90. In the beginning of
society variety of industry impossible, 90. Free trade
only opposed to unprofitable industry, 91. Protection
said to be necessary for infant manufactures, 92. Free
trade said to deprive land of manure, 93. Free trade said
to be destructive of national independence, 94. What is
national independence, 94. Dependence of nations mu-
tual 95. Free trade tends to universal peace, 96. It is
said free trade should be reciprocal, 97. Self-destructive
retaliation, 97. Protection said to encourage skilled
labor, 98.

CONTENTS.

CHAPTER IX.

OBJECTIONS TO PROTECTION CONSIDERED. PAGE I35

Aim of protection, Means inadequate, 99. Injurious to public
morals 99. Constructs the economic fabric on a false
principle. loo. Corrupts our national legislation, lOi.
Destructive of statesmanship, loi. In its own nature un-
social, 102. Dangerous to our future, 102. Self-contra-
dictory and self-destructive, 103. Raises the price of pro-
tected articles 103. Benefits no class, 104.

PART IIL—i:>istribution.

CHAPTER I.

PRELIMINARY PRINCIPLES. 145

Exchange and distribution distinguishable. 106. Distribution
defined, io6. Controlled by competition, 107. Recapitu-
lation, 107. Two-fold division, 108.

CHAPTER II.

WAGES DETERMINED BY COMPETITION. I5C

Wages defined, 109. Labor and capital often in the same
person, rog. Employer and employe, 110. Location of
the conflict, no. Wages not controlled by the employer,
HI. Both parties controlled by competition, 112. Nee-
dle-women cannot be relieved of competition, IT3.
Wages above the rate of competition injurious to em-
ployes, 113. Minimum and maximum of wages, 114.

CONTENTS. XI

CHAPTER III.

WAGES AS AFFECTED BY COMBINATION. PAGE l6a

Combination of laborers, 115. Of capitalists, 115. The com-
peting unit individual not social, 115. Strike defined,

116. When it can and when it cannot succeed, 116.
Trades-unions, their objects, 117. Often monopolies,

117. Consequences if successful, ir8. Success impossi-
ble, 119. Cannot control all workmen, 119. Will arrest
accumulation, 120. Employers cannot resist competition
by combination, 121. Must have the reputation of pay-
ing fair wages, 121. Violence must not be used, 122.

CHAPTER IV. ■

VARIATION OF THE RATE OF WAGES. I70

Causes of the varying results of competition, 123. First cause,
change of the number of laborers in proportion to capital,

124. The greater the capital the greater the demand for
laborers, and vice versa, 124. When both labor and cap-
ital vary wages depend on the ratio of one to the other,

125. Employers and employes not natural enemies, 125.
Labor-saving machinery another cause, 126. Increases
the demand for labor, 126. Chimerical expectations, 127.
Exception for agricultural labor, 128. Wages vary with
the cost of living, 129. Not merely with the cost of the
necessaries of life, 129.

CHAPTER V.

CAUSES OF THE VARIATION OF WAGES FOR PARTICULAR

PERSONS AND CLASSES. iSc

First cause, diversity of natural gift, 130. Profits of eminent
professional men, 130. Second cause, cost of acquiring
skill, 131. Wages proportioned to skill, 131. Third

Xll CONTENTS.

cause, amount of confidence reposed, 132. Honor of po-
sition reduces wages, 132. Numerous causes, 133. Ex-
cessive competition in certain occupations, 134. Com-
peting unit, 134. Living of some of the competitors not
at stake, 134. Obscure and subtle causes affect wages,
135. Vicious celibacy, 135. Science not opposed to
marriage, 136. Alleged injustice of the wages of women,
137. Said to receive less wages for the same work, 137.
Why not pay women the same wages as men, 138. Com-
petition a guide to one's proper occupation, 139. Appli-
cable to the Christian Ministry, 139.

CHAPTER VI.

OWNERSHIP OF LAND. PAGE I92

Two parties in distribution, 140. Ownership of land must
depend on a natural law, 141. Case of land different from
that of air and water, 142. Nations own Vater on which
they bestow labor, 142. Ownership of land acquired by
labor bestowed, 143. Not merely temporary, 143. Gov-
ernment title not procured by purchase from savages, 144.
Savage tribes not nations, 145. Higher law, 145. What
shall be done with the Indian, 146. Origin of the gov-
ernment title, 147. Right of political jurisdiction, 147.
Objection to this view. Labor of subduing land said to
be over compensated, 148. Not true, 148. Not relevant
if true, 148. Another objection. Prospective enhance-
ment of value, 149. Allowed for in rent, 149.

CHAPTER VIL

204

Gains of the capitalist are either interest, rent or profit, 150.
Interest defined, 150. Consists of two elements, 150.
Why interest must be paid, 151. Legislative interference
with, 151. A violation of ownership, 151. Controlled

CONTENTS. XUI

by competition, 152. Various causes of fluctuation, 153.
Tenure of land affects the rale of interest, 153. Different
rates in different countries, 154. Declines with the pro-
gress of civilization, 155. Stationary condition of capital
not to be apprehended, 156. Demands for capital in-
versely as the rate of interest, 157. Cosmopolitan nature
of capital sustains the rate of interest, 158. Also labor-
saving invention, 158.

CHAPTER VIII.

PAGE 2l3

Rent defined, 159. No risk in rent, 159. Rent less than in-
terest without risk. Reason why, 159. Ricardo's theory
of rent stated, 160. Rent in new settlements, 161. Rea-
son why, 161. Progress of cultivation, 162. Fallacy of
Ricardo's theory, 163. Why rent rises with the progress
of society, 164. Law of diminishing returns, 165. Rent
an element in the cost of agricultural produce. 165a.
Abolition of rent impossible, 166. Rent offset by trans-
portation, 167. Fawcett's admission, 168. Same fallacy
applied to minerals, 169.

CHAPTER IX.

23a

Profit defined, 170, How differs from interest, 170. Rate de-
clines with advancing civilization, T70. Competition the
supreme law, 171. Rate different in different occupations,
172. Each occupation has its natural rate of profit, 172.
Combinations of capital to resist competition, 173. Free
Trade the best antidote, 173. Particular combinations.
Petroleum, 174. Great Railways, 175. General Railway
law, 176. Wisdom of the managers not a sufficient public
protection, 177. Question complicated and difficult, 178.
No effectual protection against such combinations, 178.
Great advantages of large combinations of capital, 179.

XIV CONTENTS.

CHAPTER X.

UNDERLYING CONDITIONS OF FREE COMPETITION. PAGE 246

Three conditions, J 80. First condition, freedom of exchange,
especially in land, 180. Required by the law of owner-
ship, l8r. Limitation of it injurious to both parties, 181.
Desire of the agricultural laborer to own land, 182. Life
hopeless without it, 182. Relative profit of large and
small farming, 183. Comparison of English and Ameri-
can tillage, 184. Land more valuable in small proprietor-
ships. 184. Why the number of holdings in England is
diminishing, 185. Difficulty of the question, 185. Second
condition, intelligence in both parties, 186. Competition
impossible without it, 186. Relation of our science to
public education, 187. Proper limits of public education,
187. Public education of itself not sufficient, 188. Agri-
cultural population of New England, 189. Third condi-
tion, moral integrity, 190.

CHAPTER XI.

POPULATION. 261

Malthus' theory of population, 191. False in practice, 192.
Two results of free competition, 192, First result, uni-
versal dissemination of civilization, 193. This law re-
cently developed, 193. English colonization, 193. Why
this law was little known in antiquity, 194. Not mani-
fested in some modern nations, 194. Depends on quality
of emigration, 195. True economic lesson, 195. Law
applicable to capital, 196. Second result, human race
propagated from best specimens, 197. Four strata in civ-
ilized society, 197, First and second contribute little to
population, 198. Fourth class contributes little, 199.
Population chiefly derived from the third class, 199.
Conditions most favorable, (99. Propagates the highest
civilization, 200. The law of wages beneficent, 200.
Darwin's natural selection, 200. Future of the human
race secured, 201.

CONTENTS. XV

CHAPTER XII.

ECONOMIC CONDITIONS OF GENERAL PEACE. PAGE 273

Economic importance of the peace of the world, 202. De-
graded masses dangerous to internal tranquillity, 203.
Dangerous to international harmony, 204. All must
demand and expect the comforts of life, 205. Strong to
repel invasion, weak for aggression, 205. The one con-
dition of general peace, 206.

CHAPTER XIII.

SUBSTITUTES FOR COMPETITION. SOCIALISM. ZSO

Public mind unquiet. Cooperation, 207. Socialism, pure and
simple, 207. A denial of our fundamental law,. 208. Mod-
ified socialism 209. Relies on competilioa while it re-
jects it, 2q9. Dispensing with the services of middle men,

210. Allowing laborers a share of profits, 211. The true
agricultural cooperation, 211. Education not sufiicient,

211. Laborers should be stockholders, 211. True coop-
eration not kindred to socialism, 212. Competition the
only hope for the laborer, 212. Abolition of private own-
ership of land, 213, National bankruptcy and anarchy,

213. Logical consequence of unjust laws of land tenure,

214. Should government find employment for the unem-
ployed, 215. Abolition of the right of property, 215.

CHAPTER XIV.

TAXATION. 295

No logical place for it, 216. Government a parther in all
production, 216. Protection of person and property not
the only political function, 217. Postal service. Streets,
thoroughfares, etc., 217. Local taxation, by whom levied,
217. Expense of public education, 218. Limits of, 218.
Care of the unfortunate, 219. How far gratuitous, 219.

XVl CONTENTS.

State must protect its own existence, 220. Its promises
bind individual conscience, 220. Abuse of the power of
taxation, 221. Mode of taxation, 222. Revenue duties,
222. Should not interfere with trade, 222. Taxation of
debts, 223. Creditor should pay, 224, to the State that
protects, 224. Dangers of excessive taxation, 225.

CHAPTER XV.

PAUPERISM. PAGE 3I2

An anomaly. No logical place for it, 226. Always attends
civilization, 226. No modification of economic law can
provide for it, 227. Moral forces require consideration.
Inadequate, 228. The economist insists on two prohibi-
tions. No ownership without labor. Men must not be
relieved from the fear of want, 229. Out-door relief to be
avoided, 230. Relief establishments should not undersell
in the market, 230. Objections to out-door aid, 231.
Tend to increase pauperism, 231. Paupers should not be
voters, 231. Relief establishments should be reforma-
tories, 232. Vicious self-indulgence should be restrained,
232. If society countenances vices it should support the
pauperism they produce, 233.

CHAPTER XVI.

WASTEFUL EXPENDITURE. 324

Supplementary topics, 234. Necessary and disposable pro-
ducts, 235. Stimulants and narcotics, 236. In great de-
mand, 236. No reasons to justify this vast expenditure,
237. Eminently dangerous, 237. Economy enters no
protest against the love of the beautiful, 238. False
modes of ornamentation, 238. Fashion, 239. Peculiarly
potent in democratic society, 240. Subject worthy of the
consideration of the wealthy, 240. Adverse to correct
taste, 241. Under freedom the people arbiters of their
own destiny, 242. Relation to national character, 242.
The wealthy not to lead useless lives, 243.

CONTENTS. XVU

CHAPTER XVII.

PUBLIC LIBERALITY. PAGE 334

Love of social prosperity a natural impulse, 244. Laws of ex-
change not adequate to supply all social want, 244. Gov-
ernments cannot supply them, 244. Low rate of interest
favorable to public liberality, 245. Intelligence of the
community important to capital, 246. The rich should be
voluntary public treasurers, 246. Public charities not to
hold land by inalienable tenure, 247. Higher Institutions
of education should be controlled by the highest culture,
24S. Government inadequate to it, 248. Tendencies of
democratic peoples to lavish expenditure, 249. Public
liberality the remedy, 249. Capital so used not with«
drawn from the aid of labor, 249.

dt (\r

INTRODUCTION.

FIRST PRINCIPLES.

§ I. The science we are about to expound, is the
logical development and application to a special group
of phenomena, of a single law of nature, as truly as
physical astronomy is the logical development and ap-
plication to the phenomena of the solar system, of the
law of gravitation. The law of nature to which we
refer may be thus enunciated :

Every man owns himself, and all which he produces
by the voluntary exertion of his own powers.

Every science must assume something. Ours must
assume that the idea of ownership is perfectly clear
and intelligible to every one. It is a simple intuition,
which originates in the spontaneous action of every
human mind, and is therefore undefinable. It ranks in
this respect with the idea of personality, of moral obli-
gation and of causation. As the being we call self is
conscious of its own wants, and exerts its own powers
to supply them, it necessarily discerns the idea of pos-
session, and begins to understand the meaning of pos-
sessive pronouns and learns correctly to apply them,

§ 2. This is our only idea of ownership. You
cannot convince any human being, that another per-
son may pi'operly claim the possession of any thing
as exclusively his own, unless his claim can be traced
back to an origin in the natural law just enunciated.

2 ECONOMICS.

If it can be so traced back, no man in his senses will
call in question its validity. The ownership may
have passed by voluntary gift or exchange, the nature
of which transaction will hereafter be explained,
through many hands; but if the ownership really ex-
ists, it must have been originally acquired by the exer-
tion of some one's individual powers, to render the
thing claimed serviceable to human well-being. The
human mind instinctively discerns that in this way ab-
solute ownership is acquired, and that the acquisition of
any real ownership in any other way is impossible.
The powers of nature are the free gift of God to all,
and cannot be possessed. All those objects whereby
man's wants are capable of being supplied by his own
superadded efforts, are given in impartial liberality alike
to all. The air, the water, the land, the spontaneous
productions of the earth, the primeval forest, the game,
the wild fruits are free to all. It is only when man has
put forth his own efforts to render that helpful to hu-
man well being which was not so before, that the idea
of ownership arises. Man's indisputable claim to the
results of his own exerted powers carries along with it
the material substance which by his exertion has been
made fit for human use. The wild fruits as they hang
upon the bush can be owned by no one. He who
gathers them, by gathering becomes their owner. The
nugget of gold that lies on the surface in some seques-
tered gorge of the mountains has no owner, any more
than the atmospheric air which circulates around it.
He who has made a journey to those unfrequented re-
gions of desolation, discovered and picked up the pre-
cious thing, and carried it to the haunts of men, has
become its owner, however great its value, just as he
owned the ripe blackberry as soon as he had plucked it
from its native bush. He who has entered on land

INTRODUCTION. 3

never before subjected to human culture, has acquired
the possession of all which by his own toil he has sub-
dued and rendered capable of producing food for man.
The savage who for generations roamed over it in pur-
suit of game, and lived on its spontaneous productions,
acquired no ownership, because he did nothing to in-
crease its capability of supplying human want. We do
not expect to obtain full credence for these proposi-
tions without further proof than we can give in these
preliminary statements. As we proceed in the devel-
opment of the subject, there will be occasion more
fully to illustrate and substantiate the principle. It is
only appropriate here to give it its place among the
fundamental principles of the science.

All cnv?iership of material things consists essentially in
our unquestioned claim to possess and enjoy the results of
that labor which loe have expended upon them.

§ 3. Two distinct sciences result from the develop-
ment and application of this natural law. The being
that owns these powers is capable of moral obligation,
and is a subject of moral law. To point out the moral
laws to which he is amenable in the exercise of these
powers, is the sphere of the science of ethics. To
develop the same fundamental law in the direction of
the multiplication and exchange of objects fitted to
satisfy human desire, and the distribution of them
among all those who cooperate in their production, is
the sphere of the science we are proposing to expound.

In constructing a system of science, it is necessary
first to draw its extreme bounding lines. This can
only be done by forming a comprehensive concept,
which shall embrace precisely and only all the phe-
nomena with which the science is to deal. We think
that writers on our science have often failed to do this,
and that much of the vagueness and indefiniteness with

4 ECONOMICS.

which it is charged is due to this cause. For the ex-
pression of that comprehensive concept we select the
word wealth. We propose to write a treatise on the
science of wealth. We must therefore define that
word.

At the present stage of our inquiries, we can scarcely
afford space for any controversy with those who think
with Professor Perry, that it is impossible to frame any
definition of wealth which will render the word fit for
scientific use. Professor Perry has written a book
which contains much clear thought and instructive
suggestion. But it greatly lacks the scientific char-
acter, precisely for the reason that, instead of applying
his acute mind to the definition of wealth, he has writ-
ten about it without defining it. It is of no avail to say
that the meaning of the word is unsettled. That only
shows that it is necessary to settle it. The science
itself will always be to a greater or less extent vague
and indefinite, unworthy to be called a science, till the
precise meaning of that word is determined by accurate
definition. If the word wealth cannot be defined, then
the science of wealth is simply impossible. Nor do we
escape the difficulty by adopting Archbishop Whate-
ly's definition of the science, — " the science of ex-
change." We must still meet the question, what is
wealth.? for to wealth only is exchange applicable. We
give therefore the following :

Definition, Wealth is anything which can be owned
and exchanged for an equivalent.

This definition embraces.

First, All human powers to adapt the materials of
the world to the satisfaction of human desire by vol-
untary effort; for the-st^are owned and can be exchanged
for an equivalent. A man can exchange his power to
produce such changes, for a day, for a year, for a life-

INTRODUCTION. 5

time, for so many dollars, or for so much of any other
desirable thing as may be agreed on between himself
and the other party to the exchange.

Second, All tools, instruments and machines by
which human labor is assisted.

Third, All objects which have been rendered capa-
ble by human effort of gratifying human desire, which
remain at any time unconsumed, whether the process
of fitting them for human use is completed, or in pro-
gress. Into precisely these three classes all wealth is
divisible, and into one of them every thing of which the
science properly treats will naturally fall.

§ 4. If to this definition it is objected that the
word wealth is not ordinarily employed in so com-
prehensive a sense, the fact is admitted, but it is
denied that this is any valid objection to the defini-
tion. In many sciences we are under the neces-
sity of employing technical terms as comprehensive
concepts of the phenomena with which any science
has to do, which terms do not agree in the extent of
their meaning with any terms which are in popular use.
The popular mind has never formed that precise group
of ideas w*ith which the science has to do, and there-
fore has no term which expresses it. In every such
case we have our choice of two expedients, either to
select a new term not in popular use, more commonly
derived from the storehouse of classical learning, or to
choose a word in popular use which comes nearest to
the desired meaning, and then limit it by a definition to
a precise technical import. In the moral and social
sciences we have for the most part pursued the course
last indicated. Thus in Psychology the term percep-
tion is almost never used in popular speech in that
precise meaning in which it is employed to express the
acquisition of a knowledge of the material world through

6 ECONOMICS,

the senses. We have in this case selected a word from
popular speech, and by a definition invested it with a
precise technical meaning which it does not bear in
common use. Precisely such liberty has been taken
with the word wealth in our definition. Such a use of
words finds innumerable justifications in all the moral
and social sciences.

§ 5. If it is further objected to our definition of
wealth, that it arranges in the same class things that
are incongruous, that it embraces in the same genus
things which have no generic likeness, as for example
the wealth produced and the powers by which it is pro-
duced, our answer is, that the things referred to are not
incongruous, that they are united by true generic re-
semblances. They are alike in the two generic char-
acteristics, that they are capable of being owned and
capable of being exchanged. The reason why so much
difficulty has been experienced in defining this word is,
that men have failed to notice that these are the true
characteristics of the genus, and that they pertain alike
to all which we have comprehended in our definition.
Nothing is more common than such an occurrence as
the following. One man has accumulated results of
labor which he wishes to employ in trade. But he is
infirm with age or otherwise incapacitated for exerting
the active force which the business requires. He is
therefore quite willing to enter into a partnership, on
equal terms, with some one who possesses the requisite
business efficiency, regarding the active powers of his
partner as a full equivalent for the accumulated results
of his own previous activity. One partner is just as
rich in present active power, as the other is in accumu-
lations of wealth. The two are regarded as perfectly
homogeneous, and the one is freely exchanged for the
other. If one of them is properly called wealth, why

INTRODUCTION. /

not the other? Examples involving and demonstrating
the same principle are innumerable.

§ 6. The word labor will be of frequent occurrence
in this treatise. We therefore propose the following:

Definition, Labor is the exertion of mans fiatural
powers, for the purpose of producing such changes as
conduce to the gratificatioji of human desire and the sup-
ply of human want.

All labor is divisible into two classes, viz :

First, That which is employed in constructing the
implements and machines by which labor is aided and
Tendered efficient, and,

Second, That which is employed in producing
changes whereby desire is directly gratified.

§ 7. The science of which we propose to treat is
usually called Political Economy. To this name there
are grave objections. We cannot help thinking that
the continued use of this name is a standing proof, that
the aim of the science has been to a certain extent mis-
directed. The name seems to suggest the idea, that the
object of the science is to promote the wealth of the
nation, that it always has special reference to the polit-
ical divisions of the world, to those lines which are the
conventional boundaries of nations. Some such idea
seems to have been in the mind of Adam Smith, the
father of the science, and to have induced him to choose
for the title of his great work, " The Wealth of Nations."
A recent writer on the subject, Professor Bowen, has
chosen for the title of his book, "American Political
Economy." In just so far as this idea of nationality
has possession of the mind of the writer, it tends to a
distorted and erroneous view of the subject. All this
is as inappropriate as to speak of national Ethics, or
American Astronomy. Science is not national or poli-
tical. It is Universal. It is Human. Economy means,

8 ECONOMICS.

the law of the household, the family. There is a Human
Family, " All ye are brethren." The Science of which
we are to treat embraces that whole family, as truly as
Ethics does, as truly as Astronomy gives us the science
of the heavenly bodies, however separated from each
other in immensity. We claim for the science its place
among the universal sciences, like Ethics, Esthetics,
Physics. Following the analogy according to which
these names are constructed, we claim for our science
the name Economics. We give the following :

Definition, Econo7nics is the Science of Wealth.

§ 8. As all wealth is either power to labor or the
product of labor performed, and as power to labor is
profitless unless it is exerted, our first inquiries will be,
— what are those forces in human nature itself by
which man is excited to exertion, and what are those
devices and arrangements by which his natural powers
are aided and rendered efficient ? The first part of
our science is concerned with these inquiries, and is
called Production.

As it will appear in the progress of this work, that
for the most part one man produces only one or at
most a very few things, and must therefore supply his
own multifarious wants by exchanging his products for
the products of other men, it will be necessary to show
how the law of exchange grows out of the law of
ownership, and to explain the principal arrangements
by which exchange is facilitated, and the natural law
according to which it is conducted. This second part
of the science is called Exchange.

As the whole human race is employed in greater or
less degree in producing wealth, and must have a share
in the wealth produced, or perish, we must expound
those natural laws by which it is detennined in what
proportion the wealth of the world is distributed among

INTRODUCTION. 9

all those who are concerned in its production. The
third part of the science is devoted to the consideration
of these laws, and is called Distribution.

To these it is customary to add a fourth part called
Consumption. In it are explained the principles which
regulate the application of wealth to the gratification
of human desire, and the promotion of human well-
being. But logically regarded, this fourth part of the
science opens up the whole science of ethics. To pur-
sue the subject exhaustively, we must inquire what is
the destiny of man, for we cannot judge what man
needs except in view of the destiny for which he was
made. Having settled this question, it would next be
incumbent on us to inquire by what application of his
powers, he may most surely and completely attain this
destiny. To pursue these inquiries by an exhaustive
logic, would be to construct the science of ethics.

§ 8 «. In affirming that the Science of Economics is
only a development of the single law enunciated
above, we are not to be understood to assert, that the
science so constructed is comprehensive of all the
actual economic phenomena of the world as it is ; but
only that, if the laws of human nature were uncounter-
acted, either by government or vicious custom, and
thus left free to work out their own proper results,
those results would be in perfect conformity with the
science thus evolved. This distinction is constantly
recognized in this treatise, and if in any instance it is
not formally stated, it is to be regarded as assumed and
implied. It is our business as economists, not to point
out a law which actually does regulate the economics
of all peoples, but to show how the laws of human
nature, when not viciously counteracted, would regulate
them ; and as far as may be, in cases where abnormal
results exist, to discover the causes by which the mis-

lO ECONOMICS.

chief is wrought, and to suggest the needed economic
remedies.

The enlightened economist will be quite ready to
admit, that there are conditions of the successful work-
ing of the economic forces, which lie quite outside of
his science. The intellectual and moral soundness of
the individuals and the communities working these
forces are such conditions. If we have to do with
masses of men, in whom the intellect is deeply clouded
by ignorance and superstition, and the moralities ot
life disregarded or unknown, economic science is im-
possible. That science always implies men, not brutes
in human form, — civilized men, not barbarians, — men
that know and obey the moral laws of human life.
When we assert the universality of economic laws, we
are not to be supposed to deny, or to be forgetful of
these truths. But the existence of these truths can in
no degree modify the development of economic laws,
or detract any thing from the universality, or from the
dignity or importance of the science.

PART I.

PRODUCTION,

CHAPTER I.

Stimuli to Labor.

§ 9. It is the object of this chapter, to inquire what
that is in the constitution of man that makes him the
only laborer that inhabits this world. The lower orders
of the creation cannot be said with any propriety to
labor. All labor implies intelligent purpose. Man
does not merely catch or gather his supplies. For the
most part he makes them. He imparts to the materials
which nature provides qualities which they did not
possess before, and thus fits them for his use. By the
combined agency of the atmosphere, the sunshine and
the land, he produces the materials of food and cloth-
ing. Nothing but air and water and sunshine is found
in a condition fit for his use. All else he makes fit by
the exertion of his powers under the control of a rational
soul. All the lower animals use nature as they find it.
They gather, some of them store up, but they never fit
it for their use. Man begins where all other animals
end. He, like them, takes from nature what she fur-
nishes, but unlike them, he fits it for his use by rational

12 ECONOMICS.

eflbrt. This only is labor. The first condition then of
the performance of labor is the existence of a rational
soul. Labor is not naere effort, it is rational effort,
i § lo. The x^c3lia stimulus to labor which we notice

' is the impulse of the appetites of hunger^ thirst and sex.
The two former have for their object the preservation
of individual life and health; the latter, the perpetua-
tion of the race. So important are these two objects
that they are provided for by implanting in our very
constitution impulses of appetite, so strong as to insure
the end, without any experience or consideration of
necessity. Men are driven to the satisfaction of these
appetites without any thought of the necessity of such
gratification to the preservation of their own lives, or
the perpetuity of the race. So imperative are they
that they compel a certain amount of labor even from
the most indolent and degraded savage.

Men work, not like the bee or the beaver, from a
direct impulse to work, but from a perceived necessity
of working that they may have something to eat. The
beaver is impelled to build his dam just as the man is
impelled to eat his food when it is made ready to his
hand. The bee and the beaver will work though
relieved from all necessity. Relieve man from the
pressure of the necessity of working that he may escape
starvation, and he would never work at all. This is a
law of human nature of which the economist must
never lose sight.

%^ § !!• Another stimulus to labor is found in certain
needs of the human body which man learns only by expe-
rience. These are the need of shelter from the storm,
from the cold of winter, and from the burning sun of
summer, and of clothing suited to the season of the
year. These wants are not like those of the bodily
appetites constant and regularly recurring, but vary

STIMULI TO LABOR. I3

indefinitely with climate, season and weather; and are
provided for by no impulse of appetite. We are driven
to provide for them only by experience of their urgency,
and the more human nature is cultivated and developed,
the more urgent and cogent these needs become. They
are a no less natural stimulus to labor than the impulse
of appetite. Apparently the only reason why they are
not ])rovided for by such special impulses, as in the
case of the bird, is that in all man's vast variety of cir-
cumstances and conditions, no impulse acting by a
uniform and unvarying law, like the appetite of hunger,
could have answered the purpose. Such an appetite
would have been too strong in one climate, and too
weak in another.

§ 12. Another very important stimulus to labor is
found in man's love of acquisition and ownership. It is
difficult fully to conceive the power of this principle in
our constitution, and its fitness to qualify man for his
social destiny. Even in an isolated and savage exist-
ence, man's condition without any accumulation of
the results of labor would be exceedingly precarious
and wretched. But it is only when we view man in
the social condition to which he is destined, that the
importance of this provision becomes fully apparent.
Without vast accumulations of wealth civilization is
impossible. The most superficial inspection of any
civilized community will convince any one of this.
Farms under high cultivation, tools and machines for
facilitating labor, roads, ships and railways are only a
few of the conditions of civilization which depend for
their existence on vast accumulations of wealth. There
is a very close analogy between the strong love of own-
ership implanted in man's nature as a provision for this
great social want, and the appetites already considered
as a provision for the preservation of the individual man

14 ECONOMICS.

and of the race. Perhaps men might have accumu-
lated wealth from a mere conviction founded on expe-
rience of the necessity of it to social well-being; but
in that case the conditions of society must have been
very uncertain, and its progress very slow and. toil-
some. We sometimes denounce the greed of gain, and
perhaps not without reason in particular cases ; for
nothing can be meaner than a life spent under the su-
preme control of the love of money. But on the whole
the desire of gain is not too strong in human nature.
It is one of the most beneficent provisions of the Crea-
tor, and the economist should be foremost to condemn
all arrangements which tend to restrain the freedom of
its action.

§ 13. Another stimulus to labor is the love of the
beautiful. This is a factor in our science of the im-
portance of which many writers have not been fully
aware. Some men who ought to know better inveigh
against those artificial wants which men experience in
civilized life, as though all which is expended in satis-
fying them, were so much withdrawn from the wealth
of the community. This is simply objecting to all
which distinguishes civilized man from a horde of sav-
ages, or human society from a herd of brute animals.
What such men have to say about natural in distinc-
tion from artificial wants probably has reference to
those wants which pertain. to the support of life and
the perpetuity of the race. They only are provided
for by appetite and animal instinct. If these only
were considered and their gratification provided for,
there could be no science of economics. The condi-
tion of a gregarious herd of animals, or the lowest stage
of barbarism in savage life would be all that man could
attain to. Here is no field for social science. What
are called the artificial wants of men are no less natu-

STIMULI TO LABOR. IC

ral than those to which we are impelled by natural ap-
petite. They differ from them, not in being less indi-
cated by nature, but in being discoverable only by the
rational use of the intellect.

Another stimulus to labor and the highest of all is
the love of humanity. It is often disguised and over-
laid by the appetites and the love of gain, until it seems
to have quite disappeared from the human soul. But
it is only in appearance. It is as truly an original and
universal law of human nature as the appetite of hun-
ger, and in proportion as man individual and social is
developed and cultivated, it exerts a greater and more
apparent influence on all human activities. It is the
organic force in all society, and to give it controlling
power over the individual man is the end to be aimed
at in the formation of character. It is therefore not
only entitled to a place, but to a foremost place among
the stimuli to human labor.

§ 14. In order that man may feel the full stimulus
to labor which exists in his constitution, it is needful
that his whole nature should be brought into active
development ; not only those appetites which he shares
with the brute creation, not only the consciousness of
those needs which are common to him with the savage,
but those propensities which belong to him as a being
capable of foresight and calculation, and those tastes
which raise him to the dignity of an esthetic and a moral
being.

The economist must meet the question how human
labor can all be called into the most energetic demand.
Otherwise men will be more indolent but certainly not
richer. Let us suppose that the only mode of employ-
ing human labor were for the supply of the bare neces-
saries of life. In such a case, a large portion of man's
power to labor would remain forever uncalled for and

l6 FXONOMICS.

unexerted. The human race is not constituted for such
a mode of life. Man has vast powers and capabilities
for which, in such a mode of life, he would have no use,
and from which he could never derive any advantage.
Nearly the same result will follow, if a large portion of
the community do not enjoy and have no hope of enjoy-
ing any thing beyond the same bare necessaries, though
a favored few do enjoy all the advantages of a civilized
existence. Obviously the demand for labor in such a
community would fall below its natural intensity, by the
precise amount of all the labor which must be exerted to
supply the unsupplied wants of all those who are re-
duced to the necessity of subsisting on bare necessaries.
It may indeed be true, that these depressed classes may,
as in certain classes of laborers in England and still
more in Ireland, find their labor all demanded in pro-
ducing something which is to find a market in other
lands. But in that case it is only necessary to remem-
ber, that wealth is not a national but a human phenome-
non. It will then become apparent that, over the whole
earth, the stimulus to labor is impaired just in propor-
tion as any portion of the human race, no matter within
what nationality, is reduced to the necessity of subsisting
on bare necessaries.

§ 15. Hence it appears evident that the stimulus to
liuman labor throughout the world will be increased or
diminished, according as a greater or less proportion of
the human race attain to the satisfaction of those wants
which arc commonly called artificial^ i. e., those wants
of which we become conscious only through an active
and cultivated intellect. All which adorns and beau-
tifies life is of this character.

This perfectly agrees with the observed facts of
human experience. The savage does not labor because
he has no artificial wants. His love of the beautiful

STIMULI TO LABOR. 1 7

aspires to nothing higher than the gaudiest feathers
which he can pluck from the birds he kills for food, or
a few daubs of paint derived from the colored earths
he chances to discover in his wanderings. The coarsest
food and clothing and the rudest shelter from the sun
and the cold are the only gratifications to which he
aspires. Neither does he furnish any market for the
beautiful products of more civilized peoples. If Amer-
ica were reduced to the condition in which Columbus
found it, England herself would find no buyers for a
large portion of what she produces, and must recede in
wealth and prosperity far back toward the condition in
which she was three hundred years ago.

Communities which are separated from the rest of
the world by an insular position or by barriers of moun-
tains, often acquire very slowly a knowledge of the
progress of invention in the arts which adorn and beau-
tify society. Such communities do not advance in
wealth more but much less rapidly than those nations
which are always abreast of the progress of invention,
and enjoy all its refinements and beauties. If you
would quicken the activity and increase the prosperity
of such an isolated community, you must multiply their
artificial wants. The theory that profuse consumption
is the source of prosperity is absurd and mischievous
enough, and yet it has in it an element of truth which
many economists have sadly overlooked.

A sound and true culture of the whole nature of
man is a most important condition of the highest activ-
ity of human labor. It is also of great importance that
the civilizing forces should be applied to all portions
of the community instead of being limited to a favored
few. The economist is most intensely interested in so
constructing society, that as far as possible, every por-
tion of the human race shall aspire to and actuall}

l8 ECONOMICS.

enjoy a civilized life, that there shall remain no out of
the way places, no dark corners where barbarism can
be hid away and concealed amid surroundings that are
all radiant with beauty. How far this ideal of the
economist can be realized in the actual condition of
society, we shall not be prepared to judge, till we have
considered those great natural laws which determine
the distribution of wealth among those who are con-
cerned in producing it.

§ i6. It is obvious that none of these stimuli to
labor can have much beneficial influence, unless men
can in fact own and enjoy the products of their own
labor. It is also evident that in all communities, there
are men who would rather live by theft, robbery and.
fraud, than by their own honest labor. Our science
therefore recognizes the necessity of the existence and
all pervading influence of just, equitable and enlight-
ened civil government, to protect every man in the
enjoyment of the results of his own labor, against the
violence and fraud of every other. Without the per-
vading presence and active efficiency of such a govern-
ment, there can be no effective stimulus to labor and
economic prosperity. Just in proportion as the laws
of any country respecting property or the taxation of
property are in contravention of the natural law ot
ownership, as ithas been already expounded; or the
government fails to protect the individual in the full
enjoyment of the products of his own labor, and of all
the property rights which he has acquired in harmony
with that law; just in that proportion will its stimulus
to labor be diminished, and the increase of wealth be re-
tarded. It is to be feared that governments often fail to
appreciate the delicacy and sacredness of this function,
and by inconsiderate legislation crush out that prosper-
ity which it is their business to cherish and encourage.

CAPITAL. 19

CHAPTER II.

Capital.

§ 17. Man labors that he may satisfy the cravings
of desire. But he has certain cravings that never can
be satisfied. The reason is, that the aims toward which
they are directed can never be fully attained. They are
needed as perpetual stimuli of man's effort to attain that
which he is always attaining but never attains. One of
these is the love of gain. It is easily seen why this is
insatiable. If all the laws of man's individual and social
nature are obeyed, the progress of human society has no
assignable limit. It is capable of an indefinite growth in
numbers and in all the elements of a true civilization.
It is certain indeed that there is somewhere a limit to
the possible increase of the materials of human suste-
nance which our planet can produce. But that limit is
so far removed beyond anything which man has yet
achieved or conceived of, that it is to us as though it did
not exist.

The insatiable character of the love of gain is cor-
relate to this capability of limitless progress in society.
It is a provision in the constitution of man for the indefi-
nite accumulation of the products of human labor, to
supply the wants of a civilization perpetually advancing
in population and in the successful efforts of inventive
genius. It is set over against all the other desires of the
soul, to limit their gratification. All the other desires
consume the results of labor in their gratification. This
one is gratified by saving. Hence life is a constant com-
promise between the desire of gain on the one hand, and
the tendency to spend in the gratification of other de-
sires on the other. As the former preponderates there

20 ECONOMICS.

Is an approach to one extreme, which we will call the
extreme of frugality. When the desire of gain is feeble,
and the other desires preponderate, there is an approach
to the other extreme, the extreme of prodigality. In the
former case, other things being equal, accumulation will
be rapid, in the latter it will be retarded, or in peculiar
circumstances altogether cease.

§ 18. There is then in the human constitution, a pro-
vision for the unlimited accumulation of the results of
labor for future use. Our present inquiry is, — in what
relation do these accumulations stand to the economic
system ? To what uses do they minister .'' Before how-
ever we enter on these inquiries, it is necessary to define
a word which must be frequently used in all our subse-
quent discussions. That word is capital. We propose
the following

Definition, Capital is n>ery thing produced l>y pre-
vious human labor which still remains unexpended.

We have previously included all that can be owned
and exchanged under the generic concept wealth. By a
definition also previously given we have embraced in a
species under that genus all human power to labor, and
called the species labor. By the definition just given
we have appropriated to the only remaining species of
the genus the name capital. Wealth therefore expresses
the content of the science, and the two words labor and
capital are its extent. In order that the whole subject
may be presented at a single view we give in this place
two or three other definitions.

All capital may be subdivided into two classes, viz.,
Fixed Capital, and Circulating Capital.

Definition, ivjctv/ Capital is that tvhiJi is employed to
aid labor and render it efficient.

Definition, Circulating Capital is that which is pre-
pared to be used in gratifying human desire.

CAPITAL. 2 1

Fixed capital is capable of a three-fold subdivision, —
the Real, the Mechanical and the Mercantile.

Definition, Real Fixed Capital consists of land and
all its improvements.

Definition, Mechanical Fixed Capital is that which is
used in producing and regulating momentum.

Definition, Mercantile Fixed Capital is that which
is used to assist exchanges.

§ 19. We are not sanguine enough to expect that the
definitions given in the previous paragraphs will be ac-
cepted without questioning and without argument. We
prefer however to leave the confirmation of our positions
to the subsequent discussion and development of our
system, rather than enter on any extended argument at
this point. A few things however must be said rather in
the way of explanation than of argument, it has been
usual to divide all accumulated wealth into two portions,
one portion comprehending all that which is devoted to
the gratification of desire, the other portion compre-
hending that which is devoted to the farther production
of wealth. To the latter portion only the word capital
has been applied. Our reflections on the subject have
led us to the conclusion that it is not possible to render
this distinction clear and definite for scientific purposes.
Scarcely any thing tends so much to confusion ot
thought, as attempts at distinction when the things to
be distinguished from each other are not separated by
any boundaries which can be exactly drawn and defined.
It seems to us that the distinction here attempted is of
this character, and that it has introduced a great deal of
confusion of thought into the whole subject.

We have chosen therefore to neglect this distinction
altogether, and to regard all human beings as laborers,
and the support of all who are supported, in such de-
grees of expensiveness as they actually attain to, as ne

22 ECONOMICS.

cessary to the maintenance of the labor by which the
economical machinery of the world is worked. It is true
that nearly half the human race are in infancy and child-
hood, and as yet not only unable to perform any labor,
but requiring the whole labor-power of one parent to
rear and care for them. But it is as necessary that the
wants of children should be supplied in order that the
ranks of efficient laborers should be kept full, as it is that
a power-loom should be built before one can weave with
it. You might just as well contend that a power-loom in
process of construction is not capital, as that a healthy
new-born infant is not a laborer, or that the man who is
making a power-loom is not a laborer, as that the
mother who is rearing that infant is not a laborer.
Whatever therefore is expended in rearing children is
as truly capital employed in supporting labor, as the
wages given to the laborer of to-day for the work of
to-day.

Many are incapacitated for labor by disease or the
decrepitude of old age. These must be supported in
consideration of the work they have done, or would do
if they were able. In our arrangements for the support
of labor, we must not forget our social nature. Mutual
support is as necessary to the working of the economical
machinery of the world as individual support. It is as
necessary that the laborer should sustain his decrepid or
disabled parent, child, brother, sister, as that he should
eat or wear clothes.

§ 20. It is true tiiat many live more expensively than
is absolutely necessary to the performance of labor. But
we have already seen that in the view of the economist
it is very desirable that all should do so. The princi-
ples of a true economy abundantly recognize it as fit and
wise that the support of the laborer should imply not
only such a supply of the bare necessaries of life as will

CAPITAL. 23

keep the machinery of bones, sinews, muscles and nerves
in working order, but all the conditions of a proper hu-
man life.

If it is still asserted that, beyond all that these con-
siderations embrace, there is a vast waste of the wealth
of every community ; our reply is, that the true economist
will.acknowledsfe this, and unite with all ffood n«;n in
'^ deplomig it. But all he can do about it is to wish that
men may become wiser and therefore happier. Their
lack of wisdom however cannot modify his science. If
all which is expended in the gratification of human de-
sire, is not the fit and proper reward of labor, the reason
is to be sought, not in the structure of the economic ma-
chine, but in the follies of men.

We are justified therefore in the position, that for all
the purposes of our science, i/ie sole function of all acai-
mtilated results of human labor is to support and assist
labor and render it efficient. It is therefore properly all to
be regarded as capital.

§ 21. Let us next inquire how this is accomplished.

First, Every laborer has immediate wants which must
be satisfied while he is performing his labor, and waiting
for the mature results of it. The supply of these must
come from the results of pre-exerted labor. Man is not
like the bird of the air that makes a breakHist of the
insect, the worm or the seed it has even now picked up.
He must for the most part live to-day on the results of
the labor of previous days, and the labor of to-day must
supply the subsistence of coming days. This is one of
the reasons why he is made capable of foresight and
accumulation. The first function of capital is to sustain
the laborer while he is doing his work.

Second, Man can do nothing withoul a tool. The
savage must have his bow and arrows*. Every tool is a
product of a rational soul. Human life is impossible

24 ECONOMICS.

except as man employs his rational powers in devising
and executing contrivances by which he engages the
forces of the material world to aid him in accomplishing
his ends. Every tool, from the bow and arrows of the
savage upward, is such a contrivance. No man can have
a tool to aid the work of the moment, except as the pro-
duct of some previous labor. Of all the millions who
are to-day performing the labor of the world, very few
could be found who had not tools in their hands, without
which the results they are aiming at, either could not be
accomplished at all, or if at all not without greatly in-
creased difficulty. The amount of wealth invested in
such tools at any one time is enormous.

The second function of capital is to supply each indi-
vidual laborer with necessary tools.

Third, I'he time is past in which the needs of society
can be supplied by those simple tools which have for the
most part sufficed for past generations. The demand
has now become imperative for those complicated ma-
chines for increasing the efficiency of labor, the use of
which is one of the grandest characteristics of this
modern age. In principle a machine does not differ at
all from the simplest tool, as a knife, spade, or hammer.
Both are alike arrangements for rendering the natural
forces around us the helpers of our toil. The difference
is only in the scale on which this is accomplished. The
machine is often as complicated and costly as the tool
is simple and inexpensive. It is only when we contem-
plate the vast outlays of wealth demanded by modern
manufactures and locomotion, that we begin to form a
just conception of the importance of capital to human
well-being. It is doubtful whether the wealth of the
Roman Empire in its palmiest days would have sufficed
to construct the railways of the United States.

The third function of capital is to encourage the inven-

CAPITAL. 25

tion and provide for the construction of the complicated ma-
chines which have become a necessity of civilization.

§ 22. We have no difficulty then in discerning the
purposes which capital is intended to accomplish in the
economic system. Every hictnan being is intended to be a
laborer, to affect more or less of changes which should be con-
ducive to human well-being. Every laborer is intended in
nature's plan to receive such a support from the results
of his labor as will enable him to lead a true and proper
human life. All labor is to be assisted by such tools as
human genius can invent, for rendering natural forces to
the utmost possible extent helpful of human effort.

It must also be kept in mind that man's power to
labor is applicable, and is designed to be applied to the
entire development of a perfected humanity. He who
exerts his God-given powers in aid of the true culture of
the intellectual, social, esthetic or moral nature of man
is no less a laborer in the view of a true economy, than
he who makes corn to grow, where without his labor
none would have grown. To aid, encourage and reward
such labor is no less included in the true function of
capital than to aid in tilling the soil. A true system of
economics has no more difficulty in finding a place for
the labors of a Raphael, or a Michael Angelo than for
the building of a railway or a steam engine.

§ 23. Nor will our view of the subject be adequate
without a full recognition of the principle, that both labor
and capital are quite independent of the nationalities,
the political divisions of the earth. In the grand aggre-
gate, wealth in all its forms is a God-given patrimony
of the human family. In the present condition of econom-
ic science, it is not to be expected that this proposition
will be believed, unless it can be proved, but we think
the proof is easy. This is certainly not the stand-point
from which economists are accustomed to view the sub-

26 ECONOMICS.

ject; but is it not the stand-point from which it must be
viewed, to be seen truly? The question which to a
great extent writers have had in mind is,-T:-how may a
nation grow rich ? We chiim that the true question is, — •
how may men grow rich? How may any man of any.
nation increase in wealth most rapidly? If we have a
science of economics it must be universal. If it is a
science it will develop an economic system, in accord-
ance with which all men of all nationalities will most
successfully supply their wants and increase their
wealth.

That this is the true stand-point from which to view
the subject, is demonstrated by many facts that admit of
no denial. There is no privilege which the world re-
gards as more sacred than the right of every man who
possesses power to labor to exert that power wherever
he can receive for it the highest compensation. For ex-
ample, the world is before an American laborer. He
may go and exert his powers in any spot on the f^ice of
the earth. National lines have no necessary relation to
the matter. The only question he is concerned with, is,
not how his labor can do most to enrich the United
States, but where on earth it is most wanted, as indi-
cated by the fact, that in that spot it will command a
higher compensation than in any other. His labor is a
part of the world's wealth, and not of American wealth ;
and where he finds the world most wants it, he will
spend it. Labor is then a human and not a national
patrimony. No American thinks of complaining because
labor of American birth and training is found in almost
every nation under heaven. This is just as it should be.

The same is true of capital. No man in his senses
would think of confining the capital of England to her
own island. It is a part of the universal patrimony. It
is only necessary to convince an English property-

CAPITAL. 27

holder, that an investment in a canal across the Isthmus
of Suez, or in a railway in India, or across the Rocky
Mountains, will pay better than any he can make in Eng-
land, to secure such an investment without delay. Capi-
/ tal has in itself a sort of consciousness that it is cosmo-
^politan, that it has and can have no nationality. Eng-
lish capital and Irish and German labor build American
railways and American cities, and American capital
runs a line of steamers far up into the heart of China.

/The fact that both capital and labor have in themselves
such a consciousness of their human and universal rela-
tions and destiny is surely a sufficient reason why the
science that treats of them should be universal also.

§ 24. There is no assignable limit to the possible increase
of the efficiency of labor by the aid of capital. As long as
there is any surplus above bare necessaries, there will
always be some tendency to convert circulating capital
into fixed capital. Men will always seek to accomplish
their ends with the least possible exertion of their own
powers. If one performs with his own hand the labor he
needs, he will find it irksome, and be always looking
around him for the means of making it easier. If he
employ the labor of others, he will wish to use as little
as possible, in order that his own gain may be greater.
Any means therefore will always be in demand, by which
a given desired result can be attained by less labor.
Some men will therefore find inducement to devote
themselves to inventing and constructing fixed capital.
As these men must, like every other human being, live
on circulating capital, they are engaged in changing cir-
culating capital into fixed capital.

In a general view of the case, it would appear that
the result of this must be two-fold, and it will appear
from a thorough examination of the whole subject that
this view is correct.

28 ECONOMICS.

First, It will increase the efficiency of existing labor, and
render the surplus of circulating capital above bare necessa-
ries greater than before. This will increase the motive to
convert circulating into fixed capital ; for there will be
more circulating capital than is needed, and some of it
must be converted into fixed capital, or be useless. No
one can assign any limit to this process.

Second, Such a continually increasing supply of circu-
lating capital as must result from this, must render the
satisfaction of all hu7nan want easier, and mankind richer,
and, if they are wise, happier. Other questions however
here arise. Will not this render the capitalist in a great
measure independent of the laborer, diminish the de-
mand for labor, and thus reduce its wages ? Will not
this progressive increase of fixed capital set the extremes
of society more remote from each other than ever ?
Will it not make the rich man richer, and the poor man
poorer ? Will not the owner of a powerful labor-saving
machine be able to dictate wages to his laborers, and
prices to his customers ? Will not society be divided be-
tween boundless wealth and abject poverty ?

To answer these questions belongs to Distribution,
and the consideration of them must therefore be deferred
for the present. If our science cannot at the proper
time return a satisfactory answer to them, it is surely a
prophet of evil and can afford us very little comfort.

§ 25. To this indefinite increase of fixed capital, there
s.eems however to be one very important exception, at
least in respect to labor-saving machinery. It can have
no such indefinite multiplication in the department of
agriculture as in many other branches of industry. The
reason is found in the nature of the case. In manufac-
turing industry, or in locomotion, a machine may be
kept in constant use, and thus yield a constant income.
In agriculture no machine can be used for more than a

CAPITAL. 29

portion of the year, most machines only for a few days
of the year, and must not only be quite useless for the
remainder of it, but involve expense to protect them from
injury. If the machines used in manufacturinoj could be
employed but three weeks in the year, and must be fur-
nished with house room for the rest of it, most of them
would be quite worthless. This is an inevitable and a
nearly fatal drawback to the profit to be derived from
agricultural machinery. It is admitted by those practi-
cally acquainted with the subject, that most of the agri-
cultural machines now in use do not much diminish the
expense of the processes to which they are applied.
They are chiefly important, because it is impossible to
command a sufficient number of laborers to accomplish
certain processes in the season of them. There doubt-
less are some machines of which this is not true. But
even in respect to them, the fact that they must be use-
less for ten or eleven months in the year detracts so
much from the profit of using them, that ,they become,
as compared with manufacturing machinery, of small
importance, and can never very greatly affect the cost
of tillage.

The fixed capital of agriculture is land itself, sub-
dued and fitted for cultivation, and its improvement
must consist chiefly in the discovery and application of
better methods of increasing its fertility. But as wealth
and population adv^ance, a vast outlay of capital will be
justified and required for subduing new lands, and sub-
jecting them to cultivation. The subject of rent is to be
examined hereafter. It is necessary to say at this point,
that the cause which extends the area of cultivation with
the progress of capital and population, is the fact that
an increased demand for food and a lower rate of inter-
est will render increasing outlays of capital in subduing
land not hitherto brought under cultivation profitable

3© ECONOMICS.

modes of investment. It is always costly to remove the
obstructions which naturally stand in the way of culti-
vation. The greater the demand for food, and the lower
the rate of interest, the greater will be the expenditure
of capital for this purpose. On the Atlantic slope of
this continent are many millions of acres of land, which
in their present condition will never yield anything. But
should our population be very greatly increased, and our
rates of interest decline to such rates as are now paid
in England, these lands would justify and reward a suf-
ficient outlay of capital to render them highly productive.

CHAPTER III.

Capital a Universal Patrimony.

§ 26. The principle implied in the heading of this
chapter has been already asserted, though without any
argument in confirmation of it. On the other hand the
fundamental law of the science already enunciated sub-
jects all possible wealth to an exclusive individual own-
ership. How can it be made to appear that these two
principles are possibly consistent with each other? It
is quite necessary that we answer this inquiry, or retract
one or both of our previous assertions. Our answer is
contained in the following proposition, viz :

By the law of individual ownership, the rise and benefit
of all existing capital is more perfectly secured to the whole
human family than it cojild be tinder any other conceivable
arrangement. The very nature of ownership insures this
result, not only in respect to capital, but in respect to
both forms of wealth. This proposition occupies a very

CAPITAL A UNIVERSAL PATRIMONY. 31

central position in the science of economics, and must
be clearly established.

Regarding every man's power to labor as an element
in the world's wealth, — or if we for a moment assume
that it may be so — we should readily admit, that the
first use to which the results of his labor should be
applied would be self-support, to preserve himself in
working order, tc save his power to labor from being im-
paired or extinguished. We should admit this if we had
reference to the general good only, just as we should
admit that the first use to be made of the profits of a
steam flouring mill should be to keep the mill in perfect
repair, in order to render it as useful as possible to the
public. Such a use of the first products of labor would,
on the supposition we have made, be in perfect accord-
ance with the law we are proposing to substantiate. Let
us now make the additional supposition, that the laborer
in question produces a surplus above self-support ; he
owns that surplus and will of course employ it according
to his own judgment, for his own advantage. There is
but one way in which he can use it for his own advan-
tage. He must use it to assist labor. The product of
his labor will thereby be increased, and as he does not
hhnself need that which will be produced by the addi-
tional labor which he will thus be able to perform, he
must anc^ will employ it in producing that which some-
body else wants. His own highest advantage will be
secured by producing that which is more wanted than
anything else within his power. He is compelled by the
very nature of ownership, as the only possible means of
securing the gratification of his own desires, to produce
precisely that which the world most needs, or at least
believes that it most needs. By the very law of owner-
ship, the addition which he has made to his own wealth
must also be an addition to the common patrimony of

32 ECONOMICS.

the human race. He can only use it as his own, by
using it in producing that which will supply the want of
which the world is most conscious. It may be that that
want exists on the opposite side of the globe, and that
to get the advantages which he is to derive from his
newly acquired wealth, he must send the products of his
labor to China or Japan. He will dispose of them in
the spot where he finds the greatest conscious need of
them to exist. To make his capital most his own, min-
ister most to his own advantage, he must be the servant
of mankind.

§ 27. Let us now apply this principle to such a vast
estate as that of the late A. T. Stewart. There are
questions with respect to the relations of such an estate
to general economic interests, which we are not prepared
to meet at this stage in the development of our subject.
It is asserted, not perhaps without reason, that such
great accumulations of capital under the control of a
single mind are capable of being so used as to suspend,
at least temporarily, the natural law of competition. We
must defer any inquiry into such a liability, till the law
of competition shall have been unfolded, as it will be in
a subsequent part of this treatise. Waiving that ques-
tion for the present, it is plain that such an estate may
be conceived of as divided into two parts, one of which
shall consist of all that portion of the estate which the
proprietor used for the gratification of other desires than
that of gain, the other and very much larger portion of it
which he employed as an investment, for the increase of
his wealth. It is obvious in respect to the part last
mentioned, that it was made, through his ownership,
strictly a portion of the world's common patrimony.
Mr. Stewart was the treasurer of it, to manage it for the
benefit of mankind. There may have been no philan-
thropy at all in his intentions. He may have been

CAPITAL A UNIVERSAL PATRIMONY. ^7

wholly governed by the hard, cold greed of gain. But
he could gain nothing from it except by employing it in
supplying the wants of mankind ; and he could make
the greatest possible gain from it, only by using it in
providing a supply of those wants of which the great hu-
man family was most intensely conscious. 'I he success
of his vast enterprises would of necessity have been
directly and exactly proportioned to his sagacity in dis-
cerning what and where that greatest conscious want
was. He meant not so perhaps, neither did his heart
think so, but the very law of ownership compelled him to
be, to the full extent of all which he employed for the
purposes of gain, simply and only a treasurer, and as
skillful a treasurer as possible for the general good of
the race. The law of ownership and the love of gain
with which he was endowed combined to compel him to
manage that great estate for the benefit of his fellow-
men. So far therefore as the capital of the world is em-
ployed by its owners for the gratification of their love of
gain, it must be used both to aid and reward labor, and
to employ that labor as efficiently as possible in produc-
ing that which mankind are most consciously in need of.
§ 28. Let us now see how the case stands in respect
to that part of his property which he used for the gratifi-
cation of his own taste and desires other than that of
gain. We must in the first place bear in mind that Mr.
Stewart was no less a laborer than the clerks that stood
behind his counters. It was no contemptible service
which he performed for mankind, in managing for their
benefit a property of many millions of dollars. If his
vast property had been owned by a joint-stock company,
the stockholders would have been only too glad to pay
a very large remuneration to a man of such financial
talent as Mr. Stewart possessed, to act as their manager.
The labor which he performed was of a kind which al-

34 ECONOMICS.

ways commands the highest compensation, according to
a natural law of wages to be hereafter explained. In
that view alone it would be difficult to prove, that the
compensation which he received for his labor was at all
extravagant. The most careful examination might
show, we think it would show, that he managed that
whole vast property for the supply of human want for a
very small remuneration.

Again it must be borne in mind, that those persons
who use large, means for the satisfaction of their own
desires, are, like the rest of mankind, esthetic beings,
and will therefore expend much upon objects of beauty.
Mr.ny of those objects wiil be open to the view of all the
world, and can be enjoyed by millions as well as by the
owner. Mr. Stewart's late residence, for example, on the
corner of Fifth Avenue and Thirty-fourth Street, is an
object of interest to every visitor of New York from
whatever land he comes. But for the large income of
men of wealth, the beautiful domestic architecture which
is more and more adorning, not only our cities and large
towns, but even our villages and farms, would never have
any existence. What intelligent man does not rejoice
that there is a provision in nature's economic system for
thus thickly strewing over the face of the earth the glo-
rious charm of beauty ? What man whose memory runs
back to fifty years ago would willingly consent that our
domestic architecture and landscape gardening should be
put back again to the condition in which they were at
the beginning of that period ? Does not every one feel
that it would be a sad loss to the whole community ?
Such would be the fact, if men of wealth had not the
means of gratifying their love of the beautiful. All
things considered, it would be difficult to show that the
outlay for such purposes is at all in excess of what a re-
gard for the general welfare would require.

CAPITAL A UNIVERSAL PATRIMONY. 35

Even in respect to those objects of beauty which
adorn the interior of a rich man's dwelling, though they
are covered from the view of the million, they are yet
seen and enjoyed by multitudes, and through their influ-
ence become instruments of general culture and happi-
ness. The existence of such objects of beauty is there-
fore by no means valueless to the whole human family.
We cannot however forbear expressing in this place our
disapprobation of all those usages in society which tend
to exclude the multitude from the enjoyment of whatever
is beautiful in natural scenery, landscape gardening and
architecture. It is to be hoped that in our country high
stone walls will never shut out not only the feet but the
eyes of the multitude from those combinations of natural
scener}^ artistic ornamentation, and elegant architecture
by which men of wealth seek to gratify their love of the
beautiful.

We have therefore sustained our proposition, that by
the very nature of ownership the possessors of this
world's wealth are made to hold their property as the
treasurers of the human race. Some of them may have
become treasurers by fraud and robbery. Our science
has no smile of approval for them, any more than for
other usurpers of positions of place and power. But all
those who have acquired their possessions by fair and
legitimate means have been made treasurers, not by pop-
ular election or by appointment from any of the higher
powers of the earth, but by their wisdom, industrj^, and
skill in affairs, or in other words by proving their fitness
for the high trust. If at any future time they become
reckless and improvident, or transmit their estates to
children who are so, their wealth will slip from their
hands ; they will be forced to abdicate their treasurer-
ship by showing their unfitness to discharge the trust
reposed in them.

36 ECONOMICS,

§ 20. It ma)' be said these treasurers are often un-
faithful and abuse the trust committed to them. This
cannot be denied. But human imperfection mars all the
works of man. If any one thinks he has a valid objec-
tion to this order of things, it were well for him very
seriously to consider, whether he can suggest any other
arrangement, which would afford as good security as we
have under the present system of individual ownership,
that the wealth of the world would be faithfully applied
to the supply of human want. Doubtless rich men might
often manage their afifairs much better for their own
good, and much better for the general good than they
do. But for the mismanagement of the great common
patrimony which really occurs, the masses are far more
responsible than the few rich men that own most of the
property. The masses often fatally misjudge of their
own real wants, and demand that the capital of the world
shall be employed in supplying wants which are imag-
inary and false, and the supply of which is not beneficial
but hurtful ; instead of furnishing those things which
tend to the promotion of real well-being. Of this the
enormous trade in alcoholic stimulants furnishes a very
sad example. When the people learn rightly to estimate
their own wants, this trade will decline from its present
enormous magnitude to very small dimensions.

§ 30. This view of the functions of capital would be
quite defective if it did not embrace one further con-
sideration. A treatise on the science of Economics has
nothing to do with questions of duty. But it is not in-
appropriate here to remark, that there are great public
interests which can be provided for only by the munifi-
cence of the wealthy ; and that in all the countries of
modern Christendom, such interests have been largely
so cared for. Every wise man, if by the possession of
capital he is made one of the world's treasurers, will

DIVISION OF LABOR. 37

recognize it as one of the privileges of his high position,
that he may enjoy the luxury of practicing an enlarged
and generous philanthropy. The more society is cul-
tivated and morally improved, the more will men of
wealth become the benefactors of the human family, not
only from necessity under the impulse of the love of gain,
but also from the promptings of a philanthropic spirit.

§ 31. In our examination of the functions and uses
of capital, we have therefore found good solid founda-
tions for the following positions ; that the one object of
all capital is to reward and assist labor ; that it is not
national or political, but universal and human in its func-
tion and destiny ; that it is a common patrimony given
to the human race by the Creator, compelled to be so
used by the law of ownership and the nature of man ;
that its owners are the world's treasurers, designated to
their high trust by having given evidence of possessing
such skill and wisdom as fit them to discharge it ; and
that there is in the nature of man and his relation to
things around him, provision for its indefinite increase
to supply the growing wants of a progressive civilization.

CHAPTER IV.

Division of Labor.

§ 32. Man was made for society, and society is ren-
dered possible only by the mutual dependence of those
who compose it. Division of labor is the necessary
result of this great social law of our constitution. The
most primitive and fundamental manifestation of it is
found in sex, creating the necessity of marriage and the
mutual relations of husbands and wives, parents and

38 ECONOMICS.

children. In this most natural of all societies, each
member has his function, and each is happy not by his
own independent efforts, but by the mutual helps and
services of all. Such in principle is all human life.
The man who should emancipate himself from this de-
pendence, do all for himself and nothing for others, would
sink lower than savage life ; he would become a solitary
wild beast. A flock of sheep or a herd of baffalo could
teach him lessons of civilization.

Two well established principles of human nature
combine to the same result. First, Individuals are very
differently constituted as to their powers and capacities.
One man has strength of muscle, and power of endu-
rance. Another has tact, pliancy of muscle, delicacy of
touch, and exactness of adaptation. Another still has
peculiar mental endowments, such as insight, the power
to analyze the most complicated wholes into their sim-
plest parts, and to combine many parts into new and
beautiful or eminently useful wholes. The more men
are civilized, developed, cultivated, the more these differ-
ences become apparent and the more they are multi-
plied. Each of these natural endowments constitutes a
fitness for doing some things, and often a corresponding
disqualification for doing other things. Those natural
endowments which perfectly qualify woman to perform
her function in the domestic society, disqualify her to
sustain those severe labors by which a fiimily is fed and
clothed and housed in circumstances of comfort and
abundance. Every human society is in like manner a
whole made up of very dissimilar parts all conspiring to
a common end. Every man and every woman is to be
made happy, not by doing every thing for self, but by
performing well some very limited function, and depend-
ing for all the rest on many other persons performing
their limited functions also.

DIVISION OF LABOR. 39

§ ;^^. Second, The other law of human nature referred
to above is t/ie law of habit. What one does frequently,
he acquires the power of doing easily and skillfully.
When therefore one devotes himself exclusively to the
doing of that for which he has some natural fitness, he
acquires such dexterity in doing it, that any one who
wants that thing done can far better afford to pay him for
doing it than to do it for himself; and the skilled man
can accomplish so much more in doing that one thing
where his skill lies, that he cannot afford to do any thing
else. In order therefore that labor may be in the highest
degree efficient, it is necessary that every one should so
devote himself to some one line of employment, as to ac-
quire the skill which habit confers, and that each should
as far as possible employ his labor in doing that in
which he has greatest skill.

Arrangements suggested by these two laws of human
nature have perhaps accomplished more to render hu-
man labor efficient than labor-saving machinery itself.
These arrangements are described by the phrase Divis-
ion of Labor. Of this term we propose the following

Definition, Division of labor is such a distribution
of the labor by which the 7ua?its of men are supplied, thai
each individual may devote himself exclusively to some one
or to a very fezv processes.

Let us now suppose that in a community devoted to
the cultivation of the soil, every man were accustomed to
build his own houses and barns, to make his own hats,
shoes and clothes, his own household furniture and ag-
ricultural instruments, shoe his own horses, in short, to
carry on every branch of mechanical labor sufficiently to
supply all his own necessities, it is apparent at once that
such a community would be almost entirely deprived of
all the advantages which are derived from skill. Every
one's farm must be greatly neglected and could vield

4© ECONOMICS.

only scanty products. All other wants would be very
imperfectly and inadequately supplied. A civilized life
would be impossible. Every family would be poorly fed
because farms were poorly cultivated, and they would be
very badly housed and clothed, and very scantily fur-
nished in every department, with the comforts and con-
veniences of life. Every thing men ever did in such a
community would be very rudely done, without any skill,
and consequently at a ruinous cost of time and labor.
Life would be barbarous and wretched. There would
perhaps be more equality than in more civilized commu-
nities, but it would be equality in poverty and wretch-
edness.

Let us now suppose that a sufficient number of men
leave farming entirely, and devote themselves to the va-
rious mechanical trades, to supply all the wants of that
whole community. Families will now be provided with
all the comforts and conveniences of life. Farmers will
be farmers only, and furnish all the products of the farm
in such abundance, that they can supply their mechanics
with all they need of what the farm produces, and still
have enough for their own families. Every mechanic
will devote himself to his own trade and thus acquire the
highest skill and dexterity in it of which he is capable,
every thing will be produced at the smallest possible
cost of labor, and all products will be as cheap and as
perfect as they were before costly and rude. A complete
revolution has been effected. Before, every thing was
done without skill, now nothing is done without skill,
and every one has the benefit of skill.

As wealth and population increase, what was origi-
nally a single trade will be subdivided into many.
Builders will be subdivided into carpenters, masons,
plasterers and painters ; and other trades after the same
manner, so that each man may devote himself more ex-

DIVISION OF LABOR. 41

clusively to those processes for which he is naturally
best fitted, and may have opportunity to acquire the
highest possible skill in the single process which he has
chosen for his specialty. In all progressive civilization,
this subdivision of trades and professions is constantly
going on and indicates constantly increasing skill in the
various departments of labor.

§ 34. The progress of modern manufactures has de-
veloped an application of division of labor till recently
little known. It is a subdivision of the processes of the
same trade. When for example the working of metals
had been divided and sub-divided until the making of
pins was recognized as a distinct trade, it might seem
that the limit of possible division had been reached.
But the making of a pin is itself divisible into many dis-
tinct processes. The wire must be drawn, straightened,
polished, and cut into pieces of proper length. Each
pin must be sharpened and headed, and placed upon the
paper. Each of these processes might be assigned to an
operative, who should conduct it, and do nothing else. At
one stage in this branch of manufacture this arrangement
was carried out we believe, in practice. Since the in-
troduction of modern machinery, this principle has been
enormously extended, and with an astonishing increase
of the efficiency of labor. Mechanical invention itself
has scarcely accomplished greater results than this skill-
ful distribution of labor among many operatives acting
in harmony for a common end. The results thus at-
tained are among the economic wonders of this modern
age.

§ 35. It remains to point out the reasons of the great
economic advantage thus obtained.

I. The principle has already been stated that when
one devotes himself exclusively to a single process, he
acquires much greater skill in it than is otherwise possi-

42 ECONOMICS.

ble. The simpler the process the greater the skill ac-
quired. If a common mechanic were to attempt to do a
day's work in heading pins, it is likely he would finish
but a small number. But when a man heads pins and
does nothing else, the rapidity of his execution becomes
something wonderful. It is like the dexterity with which
the accomplished pianist fingers his keys. A person who
has not the skill looks on with astonishment.
7i'>ite, s**"-'*' 2. If all the processes of a given manufacture must
-_ y,^-,/.H,..| be performed by the same individual, he must take time
to learn them all. Perhaps to accomplish himself in all
parts of the trade he must serve an apprenticeship of
seven years. But if the trade is divided into seven dis-
tinct processes, and each process allotted to a single
operative, he need learn but one of the seven, and can
therefore accomplish himself for his trade by an appren-
ticeship of a single year. Six-sevenths of the time
required to learn the trade and six-sevenths of the
material wasted by the unskillfulness of the learner
would thus be saved.

3. It is also said that much time is saved which would
^^') otherwise be spent in passing from one process to an-
other, especially if tools are to be adjusted, or a furnace
is to be heated up. Some recent writers claim, that
Adam Smith over-estimated the importance of this
advantage,

4. Another advantage is certainly real, and important.
When the fabricating of a given product is thus analyzed
into its distinct processes, all these processes will not be
found to require labor of the same grade of skill and effi-
ciency. Some will require the highest order of work-
manship. These may be assigned to workmen who
receive the highest compensation. Other processes
may require labor of only the lowest grade, and there-
fore receiving only the lowest rate of compensation.

DIVISION OF LABOR. 43

By division of labor each process may be compensated
according to the grade of workmanship which it requires.
But if one man must perform all parts of the work, he
must be paid for his highest skill and efficiency, though
emp]o3-ed in processes in which the cheapest labor would
suffice. Thus division of labor greatly reduces the cost
of the matured product.

It is also important to mention, that in this way di-
vision of labor furnishes suitable employment to many
persons who would otherwise have no employment at all,
because they are quite inadequate to the more difficult
parts of the work. Much labor is thus rendered produc-
tive which would otherwise remain unemployed. Wo-
men and their special advocates often complain that
modern economics do not properly reward women's
work. This subject will be discussed in its proper
place. It is evident however at this stage of our discus-
sion, that to division of labor they are to a great extent
indebted for the fact that they have any employment at
all, outside of the domestic circle.

§ ^6. Division of Labor is in its possible application
subject to several important limitations, some of which
are the following :

1 . T/ie nature of the process. When any work to be
done has been so analyzed as to divide it into the great-
est possible number of distinct processes, and each of
these processes has been allotted to an individual opera-
tive, division of labor can be carried no further. If
more laborers are to be employed, the number employed
must be some multiple of the number of processes into
which the work has been divided. But no further divis-
ion of labor can thereby be accomplished.

2. The application of division of labor may also be
limited by the want of sufficient capital. If a man has
only sufficient capital to support himself and supply the

,^^i£^/

44 ECONOMICS.

tools which he must himself use, he must of course per-
form all the work with his own hands. This is the rea-
son why so little division of labor is used in the ruder
stages of society, when little capital has been accumu-
lated. The savage whose only capital is his bow and
arrows can have no division of labor, and he must ad-
vance many stages on the road to civilization before he
can make any considerable use of it. This is the reason
why manufactures cannot be successfully conducted till
large accumulations of capital have been made. No
single man and no combination of men which can be
effected in the earlier stages of a people's progress can
command for the purpose a sufficient amount of capital
to procure the necessary machinery and to support the
requisite number of laborers and the requisite variety of
skill. Peoples that are in such a condition can never
compete with those whose capital is abundant. The
attempt to do so is only the farce of the child playing the
man.

3. The possible application of division of labor may
_V"^^j,^' also be limited by the demand for the product, to the
fabrication of which it is to be applied. If one man
working by himself can supply the whole existing de-
mand, he cannot afford to resort to a division of labor.
It maybe that two men dividing the work between them
might produce three times as much product as one man
working alone. But as there would be no demand for
two-thirds of the product thus furnished, there would be
no advantage in producing it. For this reason also, di-
vision of labor can be little used in the ruder states of
society. Population is sparse, capital is scanty, and
therefore the demand for most products is so small that
it can be supplied without much division of labor. As
population multiplies, capital increases and facilities for
communication between remote districts are made abun-

DIVISION OF LADOR. 45

dant and cheap, the demand for all articles of comfort,
beauty and luxury will be constantly multiplied, and di
vision of labor will be more used, and higher skill in
every department of production will be attained. All
men will be more skillful in their work, all products more
abundant and of better quality, and the whole commu-
nity more civilized, richer and happier.

§ 37. It is stated by many writers that the principle i^/T^t
of division of labor is applied between nations as well as /1i A/7^ii--vv-^
between individuals. This is certainly not scientifically
accurate. Nations are not, in the economic sense, la-
borers. It is not easy to see that they have any econom-
ic function, except to secure to all their subjects freedom
to exert their natural powers without any molestation,
and the most perfect enjoyment of their own products.
In the proper place it will be shown, that for this service
they are entitled to the loyal support of all who live
under their protection.

Division of labor is not, however, naturallv limited . ,

. ' -Lit 'i* ••''''

within any national lines. Like every other element of ^^ X^-«-^-

our science it is human, not national. Those laws of
human nature from which it springs act without the
slightest reference to the boundaries of nations. The
law holds good everywhere, that every man should use
the products of the highest skill and the greatest natural
advantages for the supply of his wants wherever they
may be found. Not to do so, tends not to the advance-
ment of civilization, but to the perpetuity of barbarism.
Division of labor however occurs in all cases, not be-
tween one nation and another, but between individuals
of every nation irrespective of nationality. We send our
products to the north and the south, to the east and the
west in search of the best market which the world af-
fords ; and we receive in return the fruits and spices of
the tropics, the manufactures of England and France,

46 ECONOMICS.

and the furs of Russia and Sweden. If we are wise we
shall procure every thing where it can be procured most
cheaply, and in greatest perfection. Such a division of
labor among all the inhabitants of the earth is accordant
with the intention of the Creator as indicated in the con-
stitution of man, and a beautiful illustration of the
brotherhood of the human race. Any nation incurs a
most serious responsibility by interfering with these
fraternal relations, except for reasons of the most cogent
necessity. Whether such necessity exists, we shall in-
quire in the proper place.

§ 38. Some writers are inclined to attach a good deal
of importance to what they have called the Combinatiou
of Labor. This is either simple or complex. It is sim-
ple when several laborers combine their strength to do
the same thing. This takes place when something is to
be done for the doing of which the powers of a single
individual are insufficient. He naturally provides for
combining the efforts of oth^r laborers with his own, and
thus securing sufficient strength to accomplish the end
he has in view. Such combination is a very common
occurrence in every civilized community, and is so per-
fectly simple and natural, and so much a matter of
course, as not to require any special attention in this
place.

Complex combination of Jabor is the cooperation of
many individuals conducting different processes, in ac-
complishing a common result. Thus the cotton planter
in Louisiana, the cotton spinner in Manchester, the car-
rier who transports the cotton from the planter to the
manufacturer, and all persons engaged in fabricating
machinery, and probably many other classes of laborers,
all combine their labor to produce a single yard of cotton
cloth. But this is only division of labor viewed under
another aspect. If the movement of thought is from the

DIVISION OF LABOR. 47

circumference of the circle towards the centre where the
result is completed, it is combination of labor ; if from the
centre towards the circumference, it is division of labor.
The combination of labor sustains the same relation to
the division of labor, that the distance from New York to
Boston does to the distance from Boston to New York.

§ 38^?. Writers have insisted on several classifications
of labor which have no scientific significancy, and there-
fore embarrass and confuse the student rather than in-
struct him. Ours is not a science of mere classification,
but of causes and laws ; and no generalization is of any
value in it which does not aid in the discovery or the
definition of causes and laws. Of this character is the
distinction of labor as that of the body, from that of the
niind. All human labor, even the simplest, is in greater
or less degree the labor of the mind. It cannot be per-
formed without the constant exertion of human intelli-
gence. No brute animal can be trained to the simplest
processes, not even to gather and pile stones. Mind
dominates over it all. It is true indeed that some kinds
of labor require much higher intelligence than others,
and some processes are purely mental, as those of dis-
covery and invention. But this is a consideration of no
special economic significancy.

In like manner, the division of laborers into the three
classes, — discoverers, inventors, and operatives, conducts
to no important results, and does not extend our knowl-
edge of the forces with which we are concerned. A man
seldom confines himself to either of these departments.
Operatives have sometimes made the most valuable in-
ventions, and inventors have often been discoverers also.
Much the same may be said of the division of industry
into the three departments of agriculture, manufactures
and commerce. Those forces and causes which have
already been explained as stimulating and aiding pro-

48 ECONOMICS.

duction, alike pervade and dominate them all, and ac-
count for the phenomena which the\' present. We think
therefore that by insisting on these distinctions we
should perplex and confuse rather than instruct the
student.

r

PART 11.

EXCHANGE

CHAPTER I.

Value.

§ 39. In our discussion of the forces concerned in
Production, it has been all along assumed that laborers
must to a very large extent exchange tlieir products with
each other. A man that makes hats must have food
and clothing for other parts of his body than his head.
If he makes nothing but hats, he must supply other peo-
ple with hats, and receive from them in return other
things which he needs ; or his hats, except an occasional
one for his own wear, will be of no use to him. We
have now reached that point in the development of the
subject, where it is necessary to explain the nature of
exchange, and the laws by which it is governed.

Definition. Exchange is the voluntary transfer of the
ownership of some item of wealth for the ownership of
somethifig else regarded by both parties as equally desirable.

It is believed this definition will be found to be ac-
curate and exhaustive, and in perfect consistency with
our definition of wealth. It matters not whether the ex-
3

50 ECONOMICS.

change be of labor for labor, or of labor for some
product of labor, or of one product of labor for another,
or what the nature of the products to be exchanged may.
be. It is in every case an item of wealth for another
item of wealth, regarded as equally desirable, with the
voluntary consent of both owners.

§ 40. As soon as one finds himself in possession of
something which he desires to exchange for something
else of which another person is the owner, the question
at once occurs to him, — how much of mine must I give
for what I desire of his ? If I make hats, and wish to
exchange them for wheat, the question is, — how much
wheat for a hat ? That for which one is inquiring
when he asks this question, is expressed by the word
Value. What is the value of a hat J What is it worth ?
We can proceed no further in the development of the
science till we have defined this word. Nowhere else
has so much confusion of thought found its way into
the discussions of economists, as in respect to the mean-
ing of this word. There can be no science of Econom-
ics without an exact and scientific definition of value.
If we succeed in framing such a definition, the remain-
ing part of the task which we have undertaken will be
comparatively easy and plain. If we fail in the attempt
it were better to prosecute the undertaking no further,
for it can result in nothing but confusion and endless
controversy.

§ 41. We cannot however give the needed definition
of value, till we have introduced to the reader's notice
another great law of nature of which we have hitherto
said nothing. We refer to the law of competition.
Through the remaining portion of our science, this law
must be our constant guide.

The law of competition results directly from the
fundamental law, out of which we said in the outset

VALUE. 51

the whole science should be developed. Every man
owns himself and all which he produces by the volun-
tary exertion of his own powers. What he owns he not
only may, but he always will use as he desires. It fol-
lows of course that what he does not want himself, but
desires to exchange for some object of desire owned by
another, he will so exchange as to obtain for it as much
gratification of his own desires as he can. If he wants
to exchange hats for wheat, he will inquire what is the
largest quantity of wheat which any one will give him
for a hat, and with the man that offers him the largest
quantity he will exchange in preference to any other.
He will refuse to make any exchange at all till he
thinks he has found the man that will give him more
than any one else, or at least as much. It is as much
a law of nature that exchanges should be conducted in
this way, and not in any other, as it is that the planets
should move in elliptical orbits, and not along the
bounding lines of a square or parallelogram. When
men conduct exchanges thus, they are not acting
meanly or selfishly, but they are obeying a law of na-
ture, as truly as a heavy body obeys a law of nature by
falling when it is unsupported. This law of nature is
competition. We propose Ae foyowinsi^

Definition, Competition is that law of human nature
by which every man who makes an exchatige will seek to
obtain as much as he can of the wealth of another for a
given amount of his own wealth.

It is to be kept in mind that we are not teaching
ethics. We do not say that a man has a right to buy
as cheaply as he can, and sell as dearly as he can, but
that by a law of his nature he not only will but must
do so. It is not a case of moral choice at all. Where
two objects of desire do not differ at all in kind, but
only in quantity, it is as natural for us to accept the

52 ECONOMICS,

greater rather than the less, as for a stone dropped from
the hand to fall to the ground. We do not mean of
course, tliat the buyer will bring every sort of influ-
ence true or false to bear on the seller's mind, to in-
duce him to sell cheaply, or that he will seek to exert
upon him any influence at all. All this our science
turns over to the teacher of ethics. Competition
simply assume.^ that every man knows his own mind,
and that he who has any thing to exchange inquires
who will give most for it, and that he who wishes
to get something by exchange inquires who will sell it
most cheaply, and buys and sells accordingly.

If any one says this is not a law of nature, that a
man will often sell to one man more cheaply than he
will to another, the answer is, that if such a case oc-
curs, it is only because the seller has some special re-
gard for the man with whom he prefers to exchange,
and is willing to take as a part of the gratification
which he is to get by the exchange, the satisfaction of
doing him a favor. It is no exception to the univer-
sality of the law. He still gets as much gratification
by the exchange as he can.

It matters not whether the thing to be exchanged is
the product of the owner's personal labor, or of some
other one's labor of Avhich he has obtained the owner-
ship by gift or exchange, or whether he wishes to ex-
change his labor for some other man's labor, or his labor
for some product of the labor of another. In either
case the law holds in all its force. In competition we
have a law which is as pervasive of the whole science
of economics, as the law of gravitation is of the science
of physical astronomy. He who is engaged in endeav-
oring to construct an economic system from which com-
petition shall be excluded, has on his hand an attempt
which is just as absurd and impossible, as to construct

VALUE. 53

a machine from which all influence of gravitation and
friction shall be excluded. But more of this hereafter.

§ 42. Definition, Value is relative desirableness as
aseertained by competition.

Value in its technical use is always a relative term.
Nothing has intrinsic value. It is an absurdity in
terms. In popular language, we speak of the intrinsic
value of a thing without impropriety. We mean of
course its utility. But utility does not imply value in
the strict sense. What is more useful than atmospheric
air.? But it has no economic value. It will bring
nothing in the market. When we speak of the value of
a thing in the technical sense, we mean that for which
it can be exchanged. If it will bring nothing in ex-
change, no matter how much labor has been laid out
on it, no matter how useful it is, in the strict sense of
the word it has no value.

There are certain words with the use of which it is
impossible to dispense, which it is necessary to employ
with technical accuracy. Before proceeding further we
will therefore define them.

Definition, Cost is the amount of labor and capital
expended on any product.

Definition, Price is the value of any thifig as com-
pared with some specific things regarded as a fit stand-
ard by tvhich all other values are supposed to be measured.

That specific thing in comparison with which price is
estimated is money, of which we shall speak hereafter.

Definition, Supply and Demand are correlative
terms, indicating, — the latter, the desire that exists for
any article of exchange as manifested by readiness to offer
other things for it, and the former, the amount of the
article demanded which is ready at any time to be ex-
chafiged.

§ 43. Economists have been much at variance re-

54 ECONOMICS.

specting the relation of value to cost. It is therefore
necessary to examine that question. Value has no
necessary relation to cost at all. Cost has no power to
control or determine value. Capital and labor will
render nothing valuable except as they make it capable
of gratifying human desire. But men will expend labor
and capital only in producing that which they them-
selves regard as more desirable than the labor and capi-
tal expended, or which they believe others will so re-
gard. One can command nothing in exchange for any
product merely in consideration of the cost of it. The
milliner who has a large supply of ladies' bonnets, will
plead in vain in justification of her high prices the cost
of her wares, after the fashion has changed. But noth-
ing will continue to be produced which for long periods
is found to be of less value than the cost. Men are
not fond of laboriously throwing away either labor or
capital. On the other hand, nothing can for long peri-
ods maintain a value which is above cost, for some-
body will always be found ready to produce it at cost.
Competition will therefore always insure the gravita-
tion toward cost of the value of all the great permanent
utilities of life. If a sudden demand springs up for
any article exceeding the supply, its value will be raised,
and of course its price enhanced. Labor and capital
employed in producing it will be more remunerative
than usual, and more of both will be invested in in-
creasing the supply. This will go on till the supply
and demand are equalized. The enhancement in
price however will in most cases not be permanent, for
reasons which will be explained hereafter.

§ 44. No test of value other than that furnished by
competitioii is possible. As in mechanics weight is^our
only available test of quantity of matter, so in econo-
mics competition is ouf only test of value. The pro-

VALUE. 55

position to determine what a thing is really worth with-
out reference to what it will command in exchange, is
an absurdity even in terms. Men may have a judg-
ment of the value of a horse without offering him for
exchange, but if it is worthy of any confidence it must
be founded on what it is known other horses of equal
desirableness have been sold for. It must go on the
assumption that people will regard another horse as
equally desirable with those which have recently been
sold. But one can never know it till the test of com-
petition has been appealed to. The price current is
not the judgment of any man however sagacious, what
the commodities mentioned in it ought to be worth,
but the record of the fact, what they were actually ex-
changed for.

It is true that valuable property may be offered for
exchange, in circumstances in which no one desires it
at the price which is usually paid for a like article.
And yet the owner may have so strong a desire to
obtain something else in exchange for it, that he would
be glad to part with it at almost any price which any
one will give him. It may in that case be said that he
exchanges his property for much less than its real value.
But if the language has any meaning, it is only that the
usual value is greater than that at which he exchanged
it, and that the belief is confidently entertained, that at
a not distant day, the demand for it will increase so
that it will command in exchange more than was re-
ceived for it. That however does not show that the
present value was not precisely what was obtained for
it. The anticipated future value of it may differ greatly
from the present. Probably the purchaser did not want
it for his own use, and was only induced to purchase it,
because he believed it would command more in ex-
change at a future time than rtow. He purchased foi

56 ECONOMICS.

the sake of gain by a future exchange, and not to satisfy
any present want. Its present value is what it will ex-
change for now, its future value will depend on what it
will exchange for at a future time.

§ 45. It may seem to some a valid objection to the
imiversality of the law of competition, that many trans-
actions of exchange are regulated by custom or law and
not by competition. If for example I employ a licensed
backman, the price which I must pay him is regulated
by law. Rents in many different countries are regu-
lated by custom, which has been handed down through
many successive generations, and with which competi-
tion does not interfere. The rate of interest on money
has been and is regulated by law. In these and many
other cases, competition has apparently and in some of
them really, no place. This is not the place to con-
sider some of the questions involved in the examples
just given. Rent? and interest on money belong to
another part of the subject. But it will be shown in
the proper place, that whenever rent is regulated other-
wise than by competition, it is because the fundamental
laws of our science have been utterly disregarded. An
immemorial custom is a law. In such cases the nom-
inal proprietor of the land is only the partial owner
of it. The tenant is also a partial owner. The pro-
prietor owns the right of disposing of one-half or one-
third of the produce, not the right of treating as his
own and disposing at his pleasure the land and all its
utilities. The tenant is also a partial owner. He has
a right to appropriate a certain share of "the profits of
the land. Our science has nothing to do with such an
order of things. Those natural forces with which it
has to do have no opportunity to act. The laws of
human nature are superseded by a custom which origi-
nated far back in ages of barbarism.

VALUE. 57

Much the same may be said of laws regulating the
interest on money. They are in direct conflict with
the law of ownership. So our science must regard and
treat them. They assume to forbid the owner of prop-
erty to enjoy and appropriate the full benefit of it.
The economist can not deal Avith them in any other
aspect. We must however add that for the most part
they are a dead letter on the statute book, quite disre-
garded in practice.

As to the case of the licensed hackman, he has made
a contract with the municipal government to carry pas-
sengers at given rates, and has paid for the privilege,
and is therefore bound to fulfill the contract he has
made. If he will surrender his license and the city
endorsement which that gives him, he may then regu-
late his charges by competition without any interfer-
ence of the law.

The founder of a Science becomes illustrious in suc-
ceeding ages, and justly. Yet it is often true, that the
reason why the foundations of the science were not laid
and its superstructure reared in previous generations, is
found in the fact, that in that age for the first time the
conditions of the possibility of the science had existed.
Physical astronomy was not possible, till the labors of
Tycho Brahe and others had furnished a vast accumu-
lation of observations, and Kepler had discovered the
laws of planetary motion. For like reasons our science
was scarcely possible before the time of Adam Smith.
Labor and capital were not sufficiently emancipated
from the despotic interference of governments, and the
tyranny of immemorial custom, to manifest the laws by
which they are governed in a free system. From that
barbarism of the earlier ages, many economic elements
have not even yet emerged, or if at all, only in a few
favored countries. Some of the examples given above
3*

58 ECONOMICS.

are illustrations of this remark. It is only in countries
in which the private ownership of land is understood and
recognized by the laws regulating exchanges and inherit-
ance, that the theory of rent can be successfully studied ;
and the natural laws which govern interest are never
very apparent, except in countries where the govern-
ment is wise enough to abstain from interfering with it,
or else the people intelligent enough to treat the statutes
which interfere with it as a nullity. In this view of
things, it is perhaps not wonderful, that the science of
economics has not reached its perfection in the first
century of its existence.

CHAPTER 11.

Fluctuations of Value.

§ 46. The general aspect presented to the unthink-
ing mind by those fluctuations of value which are
always going on around us, is, very analogous to the
impression made upon us by the wanderings of the
moon, or the varying directions and strength of the
atmospheric currents, which we daily experience. In
the previous chapter we explained the law of competi-
tion, and showed that it is the force which always con-
trols and measures value. It is our intention in this
chapter to show how competition explains and accounts
for the seemingly capricious fluctuations of value which
are constantly going on around us. As in the commer-
cial world all values are estimated by comparison with
a common standard, money, and as the value of any
article estimated in money is called its price, we shall

FLUCTUATIONS OF VALUE, 59

in this chapter conform to this popular usage, and
employ the word price instead of value.

All the fluctuations of price which can occur are
the results of one of two causes, viz.

1 . Variation of the cost of Production.

2. Variation of the ratio between Supply and De~
mand.

The cost of Production may be dijninished in vari-
ous ways.

First, By rendering labor more efficient. This may
be done by improvements in machinery, more perfect divis-
ion of labor, or better methods of applying it. The result
in all these cases must be to reduce the price of the
product. If a single producer could introduce any of
these improved methods, and confine the use of them to
his own operations, he might appropriate all the advan-
tage derived from them to himself, by exchanging his
product at the same prices which others receive, who
do not use the improved methods. But such secrets
cannot be kept, and society offers to the inventor of
any such improvement a sufficient inducement in the
form of a patent right, to disclose it to the general pub-
lic. Competition then begins at once to perform its
office, and reduces prices till cost and value are equal-
ized. There will never be wanting those who will be
eager to produce a commodity at a price equal to the
cost of production.

The consequence must be the cheapening of the com-
modity whose cost of production has beeti thus diminished
to the general public, and thus all men will share the
benefits of every new invention by which the efficiency
of labor is increased. The reduction of the price of
the commodity will proportionally increase the demand
for it. The reason of this may easily be rendered obvi-
ous. While the price was high none but the wealthy

6o KCONOMICS.

could afford to use it. As its price is reduced the
wealthy themselves will use it more freely and for pur-
poses for which it was not before employed, and persons
in moderate circumstances will be able to afford it.
The poor and those of limited means are always many
times more numerous than the rich, and as by reducing
the cost of production any commodity is cheapened, it
finds its way into the homes of thousands and perhaps
of millions who, at its former high price, would have
been entirely forbidden its use. Competition reduces
price, till what used to be confined to the homes of the
rich, becomes abundant in the humble dwellings of the
comparatively poor.

It should however be remarked in this place that
such changes in value as those described in the pre-
ceding paragraph have not hitherto in the history of
the world occurred, except in relation to commodities which
must be considered rather as luxuries thati as necessaries
of life. Should they ever occur in respect to such
commodities as strictly necessary food and clothing, the
occurrence would produce a revolution in the fundamen-
tal conditions of human life which it is not likely can
ever take place. We have already shown in a previous
chapter that from the very nature of the labor employed
in agriculture, it is highly improbable that its efficiency
can ever be increased by invention in any such degree
as has already been attained to in other departments of
industry ; and from agriculture the necessaries of life
are chiefly obtained. This subject will be further con-
sidered in connection with the subject of Rent.

Second, The cost of producing any commodity in
any given place may be diminished by increasing tlu
facilities of cofnmunication with the rest of the world. The
cost of any commodity at any particular place is the
cost of producing it added to the cost of transportation.

FLUCTUATIONS OF VALUE. 6l

If by means of increased facilities for transportation,
the producers of any commodities in remote places are
able to bring their products into the market at a less
cost than that of producing them in the immediate
vicinity, they will be able to undersell the near pro-
ducers, and reduce the price of the article.

Increased facilities for bringing into any market the
products of distant regions may be provided, by remov-
ing either artificial or natural obstacles. It may be
that the laws of a country have hitherto been such as
to prohibit the introduction of foreign products. The
removal of these prohibitions will of course enable for-
eign producers to compete with those at home, and re-
duce the price of the commodities in the market. Thus
the repeal of the English corn laws enabled all the
corn-growers of the world to compete with those of
England in her markets. If the result has not been
the reduction of the price of grain in England, it is only
because the increase of her population has been so
rapid as to create a demand for the additional supply
thus furnished, and keep the price nearly stationary.
It may yet happen, that the pressure of foreign grown
grain upon the markets of England may be such, as
actually to reduce the price of the food of her people.

The same result may be secured by removing natural
obstructions and providing the means of cheaper and more
rapid transportation. This is abundantly illustrated by
the history of transportation in our own country. As
a consequence of our greatly improved modes of trans-
portation, the productions of regions a thousand miles
in the interior of the continent are offered in the mar-
kets of the Atlantic sea-coast, at prices which are often
below the cost of producing them in the immediate
vicinity of those markets, and the price of agricultural
products in the markets of Great Britain is to a consid-

62 ECONOMICS.

erable extent controlled by the competition of the pro-
ducts of the interior of North America and even of the
Pacific Coast, The price of grain in our Atlantic cities
and in the markets of England and Europe can nevei
again depend on the resources of their immediate vicin-
ity, but on the productions of the whole earth. Practi-
cal economy is becoming, like the science itself, univer-
sal and human. The competition of the world controls
the markets of all civilized countries.

§ 47, There are various causes by which, in par-
ticular cases, the cost of production may be increased.
They may however be summed up under the single
statement that it may become necessary to derive sup-
plies for human want from sources involving a greater
outlay of labor and capital. For example, a mineral
may be needed, the supply of which comes only from
mines the working of which is constantly becoming
more costly ; or if new mines are discovered, they may
be in reginos so remote from the place of consumption,
or so difficult of access, that their products cannot be
cheaper than the product of the mines before known.
The case may occur that no new mines of gold and
silver may be discovered for a long time to come, and
that within a generation or two, the rich surface min-
ing of California, Australia and the Rocky Mountains,
may be quite exhausted, so that the future supply of
gold and silver must be derived from deep mines, re-
quiring an immensely greater expenditure of labor and
capital. In this way it may happen that the supply of
gold and silver, the cost of which has been greatly
diminished by the discoveries of the last thirty years,
may for generations to come be obtained at constantly
increasing cost. The point of lowest depression in the
value of gold and silver may soon be reached, from
which point onwards for an indefinite future, constantly

FLUCTUATIONS OF VALUE. 6^

increasing cost may cause steadily advancing value of
the precious metals. The effect of such changes in the
value of gold and silver will be discussed in connec-
tion with the subject of money.

§ 48. It remains to point out the influence of a
variation of the ratio of supply and demand on prices. In
speaking of the ratio of supply and demand we of course
mean, not that demand or desire can sustain a ratio to
that which supplies it, but the ratio of the quantity
ready to be exchanged to the quantity requisite in order
that all may be supplied who are able and willing to
offer the equivalent.

First, The ratio of supply to demand may be in-
creased either temporarily or permanently. If the
commodity in question is one of permanent utility and
desirableness, the effect will be only temporary. As
the supply exceeds the demand sellers will underbid
each other and prices will fall. The effect of this will
be two-fold. Fall in price on the one hand will in-
crease demand. Those who would not purchase at the
higher price, will be ready to purchase at the lower.
This will tend to equalize supply and demand. On
the other hand if supply is still in excess the motive to
produce is diminished. Production will be slackened.
Capital and labor will be withdrawn from the trade,
until supply and demand are equalized.

If the demand is dependent, not on any permanent
utility or desirableness, but on some caprice or fashion,
supply and demand will become more and more unequal,
the demand will rapidly decline until the production of
the supply entirely ceases, and the commodity is re-
moved from the market altogether.

Second, The ratio of supply to demand may also be
diminished either temporarily or permanently. If the
fluctuation is only temporary, it will be re-adjusted by

64 ECONOMICS.

the law of competition acting precisely in the manner
just described. But if it results from permanent
causes, three distinct cases arise, each of which must
be considered by itself. One thing is common to all
three of the cases. The demand constantly tends to
exceed the supply. The first case is that in which the
supply can be increased without increasing the cost of
production. This is the case of most manufactured
articles. All that is necessary to an indefinite increase
of the supply of these is to employ for the purpose a
greater amount of labor and capital. Under the con-
ditions in which the demand for manufactured articles
is steadily increasing, both labor and capital are increas-
ing also, and seeking new modes of employment. There
is therefore in the economic system, a provision for the
increase of the supply of such commodities to respond
to any demand which may ever arise, without increase
of cost. It is true that such an increase may raise the
price of materials, but the cost of the material in most
cases bears so small a ratio to the whole cost of the
product, that a considerable increase of the cost of the
material would scarcely affect the cost of the product
appreciably. On the other hand a constantly growing
demand will facilitate production upon a larger scale,
and therefore with increasing economical advantage.
It will also stimulate invention to devise better methods
of assisting and applying labor, better machinery and
more perfect economy in every department ; and these
advantages will probably much more than compensate
for any increase in the cost of raw material. Nature's
provision is therefore perfect for furnishing a supply
of the comforts, conveniences and beauties of life to
any increase of population.

To this view of the case there might seem to be one
objection. It may seem probable that in so great an in-

FLUCTUATIONS OF VALUE. 65

crease of manufacturing industry, the supply of some
article of essential importance to the process may fail, or
become so expensive as greatly to increase the cost of
the product. For example should the English coal fields
approach exhaustion, the cost of coal might be so much
advanced as seriously to increase the price of manufac-
tured articles. But it must be borne in mind, that our
science is not English but universal. The effect of such
an occurrence would be only to transfer the manufactures
affected by the change to other localities where fuel is
cheap and abundant. Whenever in any country the con-
ditions of cheap manufacturing no longer exist, its man-
ufactures will no longer be able to compete with those
of other countries in the markets of the world, and it will
soon be obliged to deliver over the trade to others who
possess the requisite conditions.

§ 49. The second case to be considered is that of products
the supply of which can not be increased^ except at an in-
creased cost of production. The reason is that some of the
conditions of production, perhaps all of them, must be
derived from sources of supply requiring a greater amount
of capital and labor to be employed in working them.
This case therefore is identical with that examined in
§ 47. Mr. Fawcett claims that the principle stated in
that section holds good in respect to all agricultural and
mmeral products. With certain modifications in his
modes of statement, which will be pointed out when we
come to speak of Ricardo's theory of rent, this might be
true of a single country like England, already far ad-
vanced towards maturity of her civilization, on the sup-
position that she could receive no supplies from the rest
of the world. But considering England simply as a small
part of the world, and her people only as a fraction of
the human race, the view has no approximation to cor-
rectness. The agricultural productions of the United

66 ECONOMICS.

States have been doubled within a few years, without
any appreciable increase, we suspect indeed with an ab
solute diminution, of the cost of production. They are
apparently capable of being increased by a much greater
multiplier within a few years to come, and still without
increased cost of production. The quantity of agricul-
tural products offered in the markets of England may be
increased in the same manner, to an extent to which no
one is at present able to assign any limit. Areas of fer-
tile land in comparison with which the whole surface of
Britain is simply insignificant, exist both in this and in
other countries, which are now quite uncultivated, and
which will only remain so till they can be brought into
cultivation without depressing the price of agricultural
products below the rates which prevail at present. Any
nation which like England opens its ports to corn pro-
duced in whatever nation, need have no apprehension
of any increased costliness of such agricultural products
as can be brought to her from beyond the seas. Her
increasing population may find it more advantageous to
trace back the lines along which food finds its way to
her shores, and make their homes amid the fields where
it is produced, than to remain crowded together in her
island homestead, dear as it justly is to all her children.
But either at home, or in the lands from which her sup-
ply of bread comes, her people have little reason to ap-
jDrehend scarcity of food, or much enhancement of its
price.

§ 50. The third case is that of desirable products
which from the nature of the case are limited in amount,
and can in no manner be increased. To this class be-
long paintings and other valuable productions of mas-
ters who are no longer living. The price of such works
is limited only by the desire to possess them, and ability
to purchase them. As long as the love of high art

FLUCTUATIONS OF VALUE. 67

continues to increase, and the works of any master con-
tinue to rise, or do not decline in the relative estima-
tion in which they are held; and the wealth of the
community, or of the highly civilized nations of the
world continues to increase, the works of such a mas-
ter will be likely to rise in price beyond any assignable
limit. The love of the beautiful in human nature is
sufficiently strong to insure a high valuation of the
works of genius.

The same considerations are applicable to all com-
modities and all exchangeable values, the supply of '
which is limited and incapable of being increased. To
this class belongs the land on which a great city is built,
embracing a considerable area around it. It is needed
for purposes of the greatest importance, and no other
land can be substituted for it. As the population and
wealth of the city increase, its desirableness increases
also, and men of wealth in increasing numbers, com-
pete with each other for its possession, and it is diffi-
cult to set any limit to its increasing value, so long as
the growth of the city continues. The constantly
advancing price of land in all countries of rapidly grow-
ing wealth and population participates more or less of
the same character. It performs a function in the
economic system which nothing else can perform ; the
importance of that function is growing with every suc-
cessive generation, and no outlay of labor or capital
can render any other land capable of performing that
function. Prices must therefore be steadily advanced
till the increase of wealth and population is by some
cause arrested. On the supposition of the simultane-
ous and persistent application of the forces of civiliza-
tion to our whole planet, the whole surface of the earth
must ultimately be subjected to this law. Land musi
every where advance in price under the influence of

68 ECONOMICS.

increasing wealth and population till its entire produc-
tive power has been brought into use, and the ultimate
limit of the possible increase of the human race attained.
The time however at which such a result would be
reached is so remote in the distant future, that the ap-
prehension of it pan make no modification of our pre-
sent economic system.

CHAPTER III.
Money.

§ 51. In no stage of the development of the science
of Economics, can we ever be far removed from some
great law of human nature. This holds of exchange as
of every other branch of the subject. Brutes use no
tools, man does nothing without tools. No brute is capa-
ble of such a comparison of the desirableness of two
things, as to qualify him voluntarily to accept of one of
thehi as an equivalent for the other. Man's life is not
only filled up with such exchanges, but, true to his
rational nature, he has invented and used through the
ages a tool by which such exchanges are facilitated and
assisted. That tool is money. By means of the tools
which we employ in the production of material wealth,
we avail ourselves of some natural force, to assist our
labor, as by the water wheel we employ for this purpose
the momentum of falling water. By means of the tool
of exchange, we make use of the desire of all men for
certain rare, brilliant and beautiful objects, to facilitate
the exchange of all other objects of desire which have
value.

§ 52. This tool is not however, like the steam engine

MONEY. 69

or the electric telegraph, the invention of any single mind.
It must have come into use gradually through the like
experience of many persons, and been brought to its
present perfection in the progress of many ages. All
exchanges must have originally been exchanges in
kind, — mere barter. Such exchanges always involve
great inconvenience. He who has anything to exchange
has great difficulty in finding some one who desires
what he has to part with, and will give him for it what
he wants. The exchange is therefore long delayed, and
during this delay that which he wishes to exchange
yields no profit, and much time is wasted in trying to
make the exchange, which would otherwise have been
employed in production. If what he has to exchange
is of considerable value, as a horse, or a yoke of oxen,
it is very difficult to effect such a division of it as to
procure many small articles which he needs. In order
to accomplish it, he is forced to make many exchanges
instead of one. He at length discovers, in the course
of his experience, that there is some one species of
wealth which nearly every one desires, and at all times
and in any quantity large or small. It immediately
occurs to a sagacious man, that by exchanging what he
has to spare for what he finds almost every one is in
want of, he can with that object of general desire pro-
cure without difficulty whatever he wants. He adopts
that method of exchange, and finds great advantage in
it. Other men easily make the same discovery, and
resort to the same method of exchange. This renders
the object of general desire still more desirable. Every
one will be eager to get it, because he can easily ex-
change it for anything which he happens to want.
Thus without any one's invention, without any formal
agreement, this object of general desire has become a;i
accepted medium of exchange, — money. It may be any

70 ECONOMICS.

thing which happens to be regarded as universally de-
sirable, in the particular community that uses it. If
that community is so isolated that it has no exchanges
with the rest of the world, it will be a satisfactory
money, as long as it continues to be an object of uni-
versal desire.

§ 53. It can only however perform its function sat-
isfactorily, so long as that community continues to be a
world by itself^ unless it is also regarded as universally de-
sirable by the rest of the world, as well as by the people of
that particular community. It would not in the least
facilitate outside exchanges. If for example some iso-
lated people had so great a fancy for certain rare sea
shells found on their coast, either as articles of ornament,
or because they believed them to be a peculiarly accept-
able offering to make to their gods, that everyone always
desired to procure them, and was willing to give in ex-
change for them whatever he desired to part with, those
shells would do well enough for money, while they had
no intercourse with any other people ; but they would
procure nothing in exchange from any portion of the
world where no such fancy prevailed. They could not
even be money to that people themselves, unless, for
some such reason as we have supposed, they were ob-
jects of universal desire. No agreement, no enactment
even, can ever fit any substance to become a universal
medium of exchange, unless it is an object of desire
wherever in all the world exchanges are to be carried
on, so that whoever desires to procure anything from us
may know what he must offer in exchange for it, and that
whatever we may wish to procure from abroad we may
know an equivalent by which we may be sure to obtain it.

Definition, Money is some product of labor which in
every region of the earth to which exchanges extend, is de-
sired by all men, in all quantities, and at all times.

MONEY. 71

Perhaps it may be thought that this definition is too
comprehensive. There may be — there are some, savage
tribes with whom occasional visitors from the civilized
world may make some trifling exchanges, who know
nothing of the value of the money which we use. But
no people can gain admittance into the economic brother-
hood without .some degree of civilization. The world of
our science is everywhere sufficiently civilized to carry
on something like regular trade. In so far as any por-
tion of the human race is in the savage state, it can have
no place in social science.

In connection with this definition it is proper to refer
again to the logical division of capital which has already
been given. Fixed capital was sub-divided into three
species — the Real, the Mechanical and the Mercantile.
Money is the mercantile fixed capital, the labor-saving ma'
chine of exchange, ft just as truly assists the labor which
is employed in exchange, as machinery assists the labor
of the manufacturer. The negotiation of exchanges is
just as truly labor as the spinning of cotton, and just as
truly needs to be assisted by invention. Professor Perry
says all labor consists in " moving things." This is quite
too narrow a view of labor. A great deal of labor is
performed without moving things at all. This is true of
much of the labor of exchange.

§ 54. In the two metals gold and silver we have sub-
stances which possess to a degree quite wonderful the
essential quality of money — universal desirableness.
They sustain such a relation to human taste and use,
that they have been universally desired all along in the
world's history, from the earliest antiquity of which we
have any authentic record. Nor is there any reason to
suppose that in the future, however distant, they are to
be supplanted from that place in human regard which
they have always occupied. The taste of all men for the

72 ECONOMICS.

brilliant, the beautiful and the permanent has made gold
and silver to be money for many ages and over a large
portion of the world. They are the ornaments of kings,
of their palaces, their persons, their crowns and theit
thrones, and their carriages of state, of the temples and
of the altars of divinity, of the wealthy and the great,
and of female beauty and loveliness. It is this relation
to human taste, that has so long made them the circu-
lating medium of the civilized world, and will probably
fit them to perform that function in the distant future.

They have also other qualities which combine with
their brilliancy and beauty to increase their fitness for
that function. Their scarcity and the great amount of
human labor necessary to procure them and introduce them
into the markets of the world, are such as to render a
small quantity of either of them of great value. Nothing,
it has been shown, will continue to be produced, unless
its value for long periods equals its cost. As the cost of
these metals is high, their value must be high also. A
small amount of gold and silver will procure by exchange
a large amount of other objects of desire. One can
therefore, by converting what he has for exchange into
gold and silver, compress great purchasing power into
very small bulk and weight. This very greatly increases
the usefulness of these substances as money.

It is however possible that a substance may be of too
high value to be used in exchanging articles whose price
is small. This is true of gold. When so minutely di-
vided as to represent very small values, the pieces be-
come so small as to be easily lost, and incapable of being
counted or handled with convenience. It is therefore a
great advantage that we have another metal fit in other
respects to be used for money, which is much less valu-
able, and therefore much better suited to small exchanges.
Gold coins of less value than one dollar would be very

MONEY. 7 J

undesirable, and are never made. The sub-divisions of
the dollar are always coined from silver. Even silver is
too costly for the minutest divisions which are found con-
venient. For these copper is therefore employed in its
stead.

Capability of minute division without loss of value is
another great advantage which gold and silver possess,
without which they would be ill-adapted to some of the
uses of money. Diamonds, like gold, have great value
in very small compass, but are incapable of division
without loss of value. A large diamond is greatly more
valuable than an equal weight of small ones. They
are therefore unfit to be divided into pieces sustaining
definite relations of value to each other, nor can they
receive any impress by which their value can be indi-
cated to the eye.

§ 55. Another quality is exceedingly important in
that which is to perform the functions of money. Its
cost, and therefore its value must be as invariable as pos-
sible. This introduces to our consideration another func-
tion of money not hitherto mentioned, which is of the
greatest importance. We have already shown that any
substance universally desired originally becomes money
only because the convenience of exchange requires it.
But any substance by becoming the universal medium of /^
exchange, also becomes of necessity(///^ ^^^'^^^'"^'^h^^^^'^Jl^lji.^cJth^^ ^
of value. ^ If there were no medium of exchange, ^^^^^[Ok..j^j^ ^
could be no generally recognized standard by which )^oXtA.>\/u
values could be estimated. No general estimate could ~~

be formed of the wealth of a man, or of a community.
You could only give a catalogue of existing possessions,
for example, so many horses, so many oxen, so many
sheep and so on. There could be no accurate compari-
son of the value of the things exchanged for each other,
and only a very rude approximation to true equivalency.
4

74 ECONOMICS.

But as soon as there is any accepted medium of ex-
change, it of necessity becomes also a standard of value.
All values are estimated by comparison with the circulat-
ing medium, and can therefore be directly compared with
each other. A horse is not worth so many oxen, or so
many sheep, but so many dollars. It thus becomes easy
to estimate the entire amount of any one's wealth or of
the wealth of a community or a nation.

This function of money becomes very important in
the case of time contracts. If one contracts to pay one
hundred bushels of wheat in twelve months the next
harvest may be a very bad one, and he may therefore be
under the necessity of paying one hundred bushels when
a bushel is worth twice as much as when the contract
was made. This makes the transaction inequitable, and
such a liability will make men averse to all time con-
tracts, and throw a grave impediment in the way of
the working of the natural law of exchange. The sub-
ject of credit will be considered in another place : it is
sufficient to say of it in this place, that the use of credit
in exchanges is an outgrowth of our social nature, and
if our instrument of exchange is not suited to it, great
inconvenience must follow. A medium of exchange will
always be a standard of value, and if it is liable to great
fluctuations of its own value, it will be a barrier nearly
insuperable fo all negotiations of exchanges which in-
volve the element of time.

The precious metals are eminently Jit to perform this
fiin.tion of money. Of course their value is not strictly
invariable. The discovery of new and more productive
mines than were before known sometimes sensibly di-
minishes the cost of the precious metals, and therefore
diminishes their value as compared withal! other objects
of desire. But history clearly shows that this variation
has been less than in the case of any other product of

human labor. There have been, so far as history in-
forms us, but two instances in many centuries, in which
there has been a change in the value of these metals
which was appreciable, without extending the compari-
son over long periods of time. Those two instances
were of course the discovery of America, and the open-
ing of the mineral resources of California, Australia and
the Rocky Mountains. The effect of this last great
monetary revolution is not even now fully developed.
But nothing has yet occurred to weaken the assertion,
that the value of the precious metals is less fluctuating
than the value of any otiier product of human labor.
Just so far as that proposition remains true, they are of
course preeminently fitted to be the standard of value
for the commercial world.

§ 56. We have here another illustration of the cosvio-
politan character of our science, and of the importance of
always keeping it in mind. It is exceedingly desirable
that whatever we use as the standard of value and the
medium of exchange, in one country, should be so used
in all other countries to the extreme limits of the eco-
nomic world. If the same substance is used for these
purposes everywhere, that circumstance alone has a very
important influence in preventing fluctuation of value.
If our country only had used the precious metals for
money, and all the rest of the world had used a different
medium of exchange, the gold which has been obtained
from our recently discovered mines would have mostly
remained at home. Its effect on the standard of value
would have then depended on the ratio existing between
it and the amount of gold which would have been in cir-
culation among us, had these mines never been discov-
ered. The effect must have been to produce a depres-
sion in the value of gold which must have greatly dis-
turbed the prices of all other commodities. Bat in the

76 ECONOMICS.

present order of things, gold being the money, not of a
single country only, but 'of the world, the effect produced
on the standard of value is regulated by the ratio of the
recently produced gold to the whole amount previously
existing in the world. Great therefore as the amount
of recently produced gold is, the fluctuation of value oc-
casioned by it, is comparatively small. A single heavy
rain will raise the level of a mill-pond or of a small in-
land lake, so as to produce disaster, but it will have no
appreciable effect on the ocean level. Gold and silver,
considered as a standard of value, are an ocean flowing
around the whole economic world, and very large addi-
tions at two or three points are immediately distributed
to every part, like water which is poured into the ocean
from a single river, can have no appreciable effect
on its level.

§ 57. It is hardly possible to avoid being impressed
with the thought of a designing mind, as we contemplate
the relation of these two metals to the economy of the
human family. Among all the materials of which the
solid earth is composed two substances are found, each
of which is so related to human taste as to render it an
object of universal desire among all civilized nations,
and thus fit to be everywhere without concert or any
form of agreement, a medium of exchange* and a standard
of value. Both these substances exist in quantities so
small and require so much labor to bring them into the
markets of the world, as to insure their great value, and
in a great degree to protect them from liability to fluctu-
ation. They stand also in such relations of value to
each other, as to fit one of them for large exchanges and
the other for small. They are so easily transported, that
by means of them the largest values may be carried to
any requisite distance almost without expense ; and thus
a deficiency of them in any one part of the world may be

MONEY. 77

very quickly supplied from parts where they are in ex-
cess. -They are thus fitted and seem intended to unite
the whole human family into one great economic world,
around which they circulate as an ocean of liquid value,
whose sea level is almost as invariable as that of the
ocean of waters, and whose fluctuations scarcely exceed ■
those caused by oceanic tides.

This comparative exemption from fluctuation is very
greatly increased by the facilities of communication which
recent invention has provided. Taken in connection
with the small bulk of the precious metals in proportion
to their value, these modern inventions give to the money
of the world almost the fluidity of water itself. If wheat
or iron or any uther heavy or bulky substance were the
medium of exchange, nothing of the kind could happen.
All men do indeed need and desire wheat. But its bulk
and weight are such, that to transport it from the point of
abundance to the poinr of deficiency would soon consume
half its value, or even in some cases its whole value. If
therefore it were scarce in one region of the earth it would
there rise in value without the possibility of supplying
the deficiency, and bringing down the price to the com-
mon standard, by transporting it from regions of abund-
ance. In that, case there could be no ocean of value of
a uniform level. One may, we think, in this view of
things easily become satisfied that all theories'of money
must be fallacious and deceptive, which leave out of the
account this oceanic character of the world's standard
of value. Such theories cannot be expressions of the
natural laws of exchange.

y

78 ECONOMICS.

CHAPTER IV.

77ie Relation of the Government to the Medium of
Exchange.

§ 58. In the present condition of the public mind, the
subject indicated by the heading of this chapter is one
of great delicacy, and yet of great importance. It is
therefore necessary that it should be discussed with can-
dor and thoroughness.

The fact that each piece of money as it is ordinarily
used bears a government stamp, most commonly a stamp
of the government under which it chiefly circulates, has
been the occasion of much confusion of thought, and
many erroneous conceptions of the subject. We hear in
these days utterance given to many such crude notions,
from men of respectability and intelligence, and even
from some who aspire to be the rulers and legislators of
the nation ; as for example, that money is the creature
of the government, that it circulates as money because
the government has made it money by enactment, and
that the government can make anything to be money
which it chooses. At the present time our country is the
hotbed of false and chimerical ideas on this whole sub-
ject. The reason why it is so, is found in the fact, that
our whole history since the American Revolution has
been a series of unsuccessful experiments on the cur-
rency, and the fact that some fifteen years ago an act of
Congress was passed in direct violation of the first prin-
ciples on which the monetary system of the world is
founded, and that that law remains still in force. Our
history in relation to this subject nas certainly been un-
fortunate, and in that better time coming when the true
principles of the subject shall be understood and reduced

RELATION OF GOVERNMENT TO MEDIUM. 79

to practice, will be reviewed with wonder ard sorrow.
The whole financial system of the nation is unsettled
and in confusion, and men's minds are filled with
strangely wild and chimerical theories. Of the finan-
cial arrangements which originated during the war of the
rebellion, under the pressure of military necessity, we
shall speak in another place. But the nature of that
power which governments exercise over money must be
explained here. We have already shown that money
originates, and the substance or substances to be used
for money are selected in accordance with natural laws,
without any intervention of the government whatever.
Coinage is a mere arrangement for the common con-
venience. To determine the precise quantity of gold or
silver in any given mass is difficult and troublesome, and
considering the ordinary crude condition in which these
metals are for the most part found, more or less alloyed
with the baser metals, it would be in the ordinary trans-
actioi-is of business, impossible. The governments of
the civilized world, in order to remove this inconvenience,
undertake to reduce the precious metals to a recognized
standard of purity, to divide them into pieces bearing
such relations to one another as convenience is found to
require, and to place on each piece a stamp which shall
certify, on the faith of the government, the quantity of
the precious metal contained in it. Coinage is in prin-
ciple precisely like the arrangements of the government
for furnishing invariable standards of length, weight and
capacity. All these provisions are alike matters of mere
convenience, and give the government no right of control
or dictation in the matter, beyond what the common con-
venience requires. If one has had the accuracy of his'
half bushel certified, by having a government stamp put
on it, that does not prove that the government owns the
half bushel, instead of the nominal owner of it, but onlv

8o ECONOMICS.

that the owner has made it more trustworthy for his own
use by the government certificate. The coining of money
has the same significancy — no more — no less.

That this is a true account of the matter, is very ap-
parent. During a considerable portion of our history as
a nation, the specie in circulation was of Spanish and
not of our own coinage. It consisted of the Spanish
dollar and its half, quarter, eighth and sixteenth, and
bore the image, not of liberty, but of the kings of Spain.
The people had confidence in the soundness and honesty
of that coinage, and were willing to accept it, instead of
putting our government to the expense of re-coining it.
We happened to have it, because at that time we pro-
duced little either of gold or silver, and received our
supplies of them from Mexican and South American
mines, then under the dominion of Spain.

If our government were to attempt to manufacture
money out of baser metal, such money would be just
as certainly and indignantly rejected by the creditor, if
offered in payment of his debt, as it would be if it came
from any irresponsible counterfeiter. Is it asked then —
has not the government a right to enact what shall be
legal tender ? and may it not make one thing legal tender
as well as another ?

§ 59. T/ie right of the government to declare what shall
he legal tender in the payment of debts sustains no relation
whatever to the nature and functions of money. It has
already been shown, that it is a necessity of all men, that
the civil government under which they live should pro-
tect them in their property rights. In the performance
of this duty, the government must necessarily undertake
to compel men to pay their fairly contracted debts. In
order to do this, it must prescribe some plain and equit-
able rule, by which it shall be determined what consti-
tutes payment. If for example A. has promised to pay

RELATION OF GOVERNMENT TO MEDIUM. 8l

B. a certain sum, and it is not specified in the obligation
in what it is to be paid, B. may perhaps insist on receiv-
ing it in some unusual product, which it is very inconven-
ient for A. to furnish. The legal tender law, as it existed
before the war, provided, that in all such cases the con-
tract shall be interpreted to require payment in the or-
dinary and recognized medium of exchange, gold and
silver coin of the United States. The full extent of the
power of the government to prescribe what shall be legal
tender in the payment of debts, is its power to prescribe
an equitable rule by which such contracts shall be inter-
preted, according to the clearly presumable intention of
the parties. Till the great financial revolution growing
out of the late war, no one ever imagined that the right
to prescribe a legal tender had any other significancy or
extent than this. Whence then the notion that under
this right there is included a power to compel the credi-
tor, whenever the government shall so enact, to receive
paper or tin dollars instead of gold in payment of all
debts ? Such an idea is utterly groundless, and its pre-
valence among a people every man of whom casts his
vote for the rulers and legislators of the nation, is danger-
ous in the extreme.

§ 60. IVas then the Act of Congress making the United
States Treasury Notes, known as Greenbacks, legal tender
for all debts, an act of injustice and tyranny ? To a ques-
tion so directly ethical in its nature as this, it is not our
business to respond. But it does come within our sphere
to show as clearly as possible what was the real effect of
that law on our economic system. When that law was en-
acted the value of a greenback dollar differed very little
from that of the gold dollar, and it was probably hoped,
and by many believed, that no great difference would
afterwards arise. It was not therefore supposed that any
great inconvenience was to be experienced from the

82 ECONOMICS.

working of the law, and little was therefore thought of
the question of its justice or injustice. But within a few
months after its passage it required two hundred and
eighty-five dollars in greenbacks to buy one hundred in
gold; that is a greenback dollar was worth only thirty-
six cents in gold. Its power to procure by exchange all
other objects of desire was depreciated in the same ratio.
The practical working of the law was a reduction by Act
of Congress of the value of all stated incomes in thi
ratio of one hundred dollars to thirty-six dollars. A
provision for the support of a widowed mother and her
children was reduced from a competency of ten thousand
dollars, with an income of one thousand dollars, to the
pittance of thirty-six hundred dollars, wuth an income ot
three hundred and sixty dollars. On the other hand
the debtor that owed one thousand dollars in gold, could
pay it with one thousand dollars in greenbacks worth
only three hundred and sixty dollars.

IV/iat motive, it may be asked, had the gover/wient
for enacting such a la7v ? This is a very pertinent ques-
tion and shall be fairly answered. It certainly was not
because any one supposed or pretended, that in the ordi-
nary conditions of national existence, any government
had a right to interfere in this manner with the relations
of a debtor to his creditor. It was well-known to be a
flagrant violation of the fundamental law of ownership,
and of a sound economy. It was justified only in con-
sideration of the stern necessities to which the war had
reduced the nation. Money could not be raised either
by taxation or regular loan with sufficient rapidity to
meet the expenses of the war. The government was
compelled by inevitable necessity to put off its creditors
for the present with promises to pay, which at the time
she was utterly unable to fulfill. It was evidently very
important to employ every practicable means to prevent

RELATION OF GOVERNMENT TO MEDIUM. 83

the depreciation of these promises. It was therefore
deemed advisable to mal<e them receivable in payment
of debts by all creditors as well as by the creditors of
the government. By this measure it was hoped that their
depreciation would be wholly prevented, or at least
greatly retarded. Hence the legal tender clause in the
law authorizing the issue of treasury notes.

§ 61. It is not within our province to express an
opinion on the very grave question, whether so high-
handed and anomalous an act could be justified even in
circumstances so urgent. It is enough for us to say,
that our science knows nothing of any such control of the
g07)er7iment over the world's medium of exchange. The
admission of the principle would be utterly destructive
of the property rights of the creditor in his relations to
the debtor. What the creditor might hope to receive
would depend, not on what the debtor had promised, but
on what tl.e arbitrary will of the government might enact.
The law of ownership can recognize no loans either to
individuals or governments, except by the voluntary con-
sent of the lender. For example A. owed B. one thou-
sand dollars payable in gold; the government owed A.
one thousand dollars expressed in a note of the Treasury
of the United States. It required B. to accept its
promise to pay one thousand dollars without interest,
at that uncertain future period when it should be pre-
pared to redeem its promise, as payment in full of A"s
debt of one thousand dollars in gold bearing interest.
It was a requirement that B. should loan the government
one thousand dollars in gold without interest, and wait
till the government was prepared to pay the debt. It
was a direct violation of the law of ownership. The
government took the property of the owner without con-
sent either granted of even asked.

It seems to be a very popular idea in the discussions

84 ECONOMICS.

of the present, that the government ought indeed as
soon as practicable to redeem greenbacks in gold when-
ever presented, but that they should by no means be
withdrawn from circulation. This is simply a proposi-
tion to perpetuate without any pretense of necessity, this
violation of a fundamental law which was originally
resorted to under a plea of a necessity involving the
very life of the nation. A government never can make
its promises to pay a legal tender in the payment of
private debts, without violating the fundamental law of
all exchange, the free consent of both parties. It is of
no avail to say that when the government redeems green-
backs with specie they will be at par with gold and sil-
ver. That may be true so long as the credit of the gov-
ernment is unimpaired. But if national disaster again
conies, and a severe strain is brought upon the credit of
the government, greenbacks will again be depreciated,
and the injustice which the creditor has suffered in former
years will be again renewed. It is no function of govern-
ment to intrude its promises upon the creditor in pay-
ment of debts. It is not protecting the property rights
of the citizen, but divesting him of his property without
his consent. The practice of issuing treasury notes
made legal tender may plead as a precedent the fact that
the notes of the Bank of England are legal tender in the
payment of debts. The example of England herself can-
not justify the violation of a fundamental law of ex-
change. That provision in the charter of the Bank of
England may work no individual wrong in times of na-
tional prosperity like the present, but calamity may yet
again come upon England, and then the consequences
of that law may be very disastrous. If at present it is
harmless, it is also useless. Why not then abolish it,
and let the future legislate for itself?

§ 62. One thing would seem too evident to require

RELATION OF GOVERNMENT TO MEDIUM. 85

any confirmation by argument. It is that no obligation
resting on our government can be more sacred, than the duty
of repaying such a forced loan at the earliest possible day.
The whole amount of greenbacks in circulation is a
forced loan, and if our government means to earn the
reputation of being the protector of the property of the
citizen, instead of openly and flagrantly violating it, too
much haste cannot be made in redeeming the promise
of the government which is expressed on the face of every
greenback. It is no wonder that strange theories of
money and finance are rife, when the government, dur-
ing the twelve years which have elapsed since the war
was ended, has scarcely taken a step in the direction of
fulfilling these promises ; while she is buying up her
bonded debt at what it is worth in the market, by hun-
dreds of millions, and that on the plea that it is desira-
ble to diminish the amount of interest to be paid, and
this forced loan is bearing no interest. An honest man
is tempted to reply with some sharpness to such a plea,
" it ought to be bearing interest. One would think it
had been held without interest quite long enough." But
with the morality of the question we are not now con-
cerned. It is to be hoped that so strange an anomaly
may soon be removed from our statute book, and that a
precedent so full of danger may be eliminated from our
legislation.

§ (iT^. It remains to point out the relation of this
anomaly to the economic system. It affords a striking
illustration of the phenomena which always attend a
depreciated currency. By a depreciated currency is
meant a national medium of exchange, which is in value
below the standard of the rest of the world. The effect
of the Legal Tender Act was, to give the people of the
United States such a currency. All debts were payable
in greenbacks. Of course as soon as £:reenbacks besian

86 ECONOMICS.

to be inferior in value to gold, all debts were paid in
them. It being at the option of the debtor to pay in which
ever he pleased, he always chose to pay in the less valu-
able. Gold therefore ceased to circulate as money, and
greenbacks became the sole medium of exchange and
standard of value. They were always at par and gold
at a premium, and all other species of property have ad-
vanced in price in the same ratio.

The natural consequences of a depreciated currency
have been conspicuously exhibited. We have had most
disastrous and seemingly capricious fluctuations of our
standard of value. We do not purpose to give the sad
history of the New York gold room for the last fifteen
years. It is melancholy enough, and by no means cred-
itable to our civilization. It is sufficient to say, that
again and again fluctuations have occurred within a few
days, sometimes even in a single day, of sufficient magni-
tude to reduce thousands from princely wealth to bank-
ruptcy, and to raise other thousands from comparative
poverty to great opulence. It is important to make the
causes of these fluctuations clearly apparent. It has
already been shown, that the stability of the medium of
exchange is greatly promoted by its being the same
throughout the world. The currency of the world thus
becomes an ocean, the level of which cannot be raised
in any part without raising the whole simultaneously.
While therefore the currency of any country is the same
as that of all the rest of the world, sudden fluctuation is
impossible. But our medium of exchange has no con-
nection with that of the rest of the world, and is there-
fore liable to rise and fall with any sudden and tempo-
rary impulse originating among ourselves. Increased or
diminished confidence in the government, the success of
one political party or another, a bad harvest, or any one

RELATION OF GOVERNMENT TO MEDIUM. 87

of a multitude of other causes may any clay occasion dis-
astrous fluctuations.

As gold and silver were no longer money we had lit-
tle use for them in any of the ordinary transactions of
trade. The government had large payments of interest
to make, and large collections of duties to be received,
in gold. It had therefore constantly on hand a large
amount of coin. But with that exception the precious
metals were only kept on hand as merchandise, and the
amount so kept was never very large. Merchants must
however still pay duties and foreign balances in gold,
and considerable dealings in gold were therefore inevi-
table. In these circumstances it was not impossiblf: for
combinations of speculators to obtain control of nearly
the whole amount of gold in the market, and dispose of it
only on their own terms. Panics of the most fearful char-
acter have been thus created, by which the whole nation
was distressed, and thousands were ruined.

§ 64. Another and most important cause of fluctua-
tion remains to be explained. No principle is better
established, than that whenever any object of desire is
thrown upon the market in greater quantities than the
needs of the people, or their ability to purchase requires,
the fact will be indicated by a fall in its price, and that
reduction of price will go on as long as the excessive sup-
ply continues to be increased. Such fluctuations of price
are in a normal condition of things certain to be arrested
by the fact that the labor and capital employed in pro-
ducing that which is in excess cease to receive satisfac-
tory remuneration, and are withdrawn to some invest-
ment in which they are more needed. In a sound con-
dition of exchanges, money is as much subject to this
law as any other commodity. If for any cause it is ex-
cessively abundant, it will no longer be profitable to
bring it in, and it will be profitable to carry it away. The

88 ECONOMICS.

equilibrium therefore cannot be much disturbed. But
with .such a medium of exchange as that which our
country now employs, ths quantity may be indefinitely
increased or diminished without involving any change in
the employment of either labor or capital. Its increase
or diminution depends only on the greater or less activity
of a single printing press. The necessities or the caprices
of the government may expand or contract its volume in-
definitely. If it is in excess, it is money no where except
within our national lines, and has therefore no outlet.
Increasing the quantity only diminishes its value, and
the system provides no remedy for the fluctuation.

Various efforts have been made to discover 7vhether
we have an excess or a deficiency of currency. But such
attempts are mere guess-work. We have no standard
by*which to judge. Accordingly the most widely op-
posite opinions are expressed. All are alike worthless.
In one way only can the question be decided. Bring
our medium of exchange to a par with that of the rest
of the world. Open the communications between it and
the great monetary ocean, and the question will soon be
decided. If our medium of exchange is redundant, it
will flow outward and the level will sink. If it is defi-
cient it will flow inward, and the level will rise.

§ 65. Our statesmen and legislators have been much
perplexed in trying to discover some means of rendering
our currency elastic. By elasticity they of course mean a
capability of spontaneously expanding and contracting
its volume, according as exchanges are more or less
active. It is even proposed that when mqney is excessive
in the hands of the people, so that they are unable to
find satisfactory modes of investing it, the government
shall borrow it of them, and pay them interest -for it, by
issuing a convertible interest-bearing bond, which may
at any time be given in exchange for greenbacks, and re-

RELATION OF GOVERNMENT TO MEDIUM. ?9

deemed in greenbacks on the demand of the holder. If
such a law is enacted the government should carry out
the principle of it to its logical consequences. Consis-
tency would require that when the people want work and
cannot find it at satisfactory wages, the government
should employ them at moderate wages, till they can find
more lucrative employment elsewhere. A government
that undertakes to find investment for all idle capital,
should surely furnish occupation for all unemployed
laborers also.

Such a medium of exchange as ours can have no
such quality of elasticity as is so anxiously sought for.
Indeed the quality needed is not elasticity but fluidity,
and that can be provided for only by a free and open
communication with the currency of the world.

§ 66. We are not of the number of those who think
that the unsatisfactory condition of trade which has ex-
isted in this country for several years^ is wholly referable
to any one cause. Many causes have probably conspired
to produce it. But of these our unstable medium of ex-
change is doubtless one of the chief. It has impaired men's
confidence in the future and rendered them incapable of
relying on any calculations respecting it. Excessive
caution is the characteristic of the time, not greater in-
deed than the uncertainties which surround us justify,
but such as to render energy and enterprise in trade
dangerous and to a great extent impossible. It seems
to every intelligent thoughtful man, that he knows not
what shall be on the morrow. Confidence in men and
in the order of things around us is one of the most po-
tent elements in the economic world. That element is
at the present time in this country singularly impaired
by an unstable currency, and by the lack of any satis-
factory proof, that the political forces that govern us can
be relied on to relieve us of this oppressive burden, by

90 ECONOMICS.

which all the movements of trade have been for years
overweighted and retarded.

V

CHAPTER V.

Credit and Paper Money.

§ 67. If we would construct a true economic system,
we must leave out of the consideration none of the forces
of human nature, which have any influence on it. One
of these is credit. It claims and will have its place in the
system, whatever our theories about it may be. It is
natural for every man to repose more or less confidence
in his fellows. If it were not, society would be impossi-
ble, and solitude better than any human intercourse.
Confidence always occupies a much larger place in the
economic arrangements of the world than we are apt to
suppose. Whenever any one has more capital than his
own labor can employ, he is compelled to entrust it in
some form to other hands ; and in every possible mode
of employing it, he is forced to place more or less con-
fidence in those by whose labor his surplus capital is
made productive. If he hires laborers, they are not
mere machines, but rational free agents, and no super-
intendence can entire!)' secure him against liabilities to
suflFer from their unfaithfulness. Every laborer of what-
ever grade has a character, which renders his services
more or less desirable to an employer, and either has
the benefit of credit, or suffers from the wint of it.
Credit is an element which cannot be eliminated from
any arrangement by which one man labors with the capi-
tal of another. All such transactions are more alike
in principle than they seem to be. All use of capital

CREDIT AND PAPER MONEY. 9I

requires not only the exertion of muscular power, but of
mind power to direct it to its end, Wiien one hires
laborers to employ his capital, he exercises the mind force
himself, as far as possible, and leaves as little of it to the
laborer as he can. The laborer therefore only receives
pay for his muscular force and such small exercise of
rationality as is necessary to the common laborer. The
compensation for the mind force the employer reserves to
himself Sometimes a laborer is hired in such a manner
as to allow him a large scope for the exercise of his mind
force, and greatly to relieve the employer from superin-
tendence, and is paid accordingly. The element of
credit enters much more largely into such a contract
than into the employment of a common laborer. In still
another class of contracts the owner surrenders his capi-
tal entirely, for a limited time, into the hands of another^
and is quite relieved from all superintendence of labor,
only exacting from the person to whom he entrusts it a
promise to return it or an equivalent agreed upon, at a
fixed time, with a stipulated compensation for its use.
It is common to apply the word credit only to the case
in which the owner entrusts his capital entirely to an-
other for a limited time. But it is plain that it is appli-
cable in various degrees to all the other cases, and can
never be absent from any transaction in which the labor
of one man employs the capital of another.

Credit is therefore one of the natural forces with
which we must deal, and an economic system which
should fail to find its true place would be radically de-
fective.

Definition, Credit is the confidence 7vhich any one in-
spires by his integrity, energy atid skill in afi^airs.

The methods by which it becomes influential in
economic arrangements, are very various and for the
most part quite spontaneous, and are so simple and

92 ECONOMICS.

natural as to require no particular notice here. Some
of them however are more artificial and complicated,
and on account of the important relations which they
sustain to the whole system of exchange, require a more
particular explanation.

§ 68. One of the most important of these is Banking.
This in all its varieties and modifications involves the
principle of credit. Banks perform four distinct func-
tions, and are known as Banks of deposit. Banks of dis-
count and exchange, Banks of loan and Banks of issue.

In any community in which numerous exchanges are
to be made, a Bank of deposit is a necessity. Any one
who has many exchanges to make must necessarily keep
on hand a considerable amount of the instrument by
which exchanges are effected. An accumulation of
money at any one place requires expensive precautions
to protect it against robbery. It is no more expensive
to furnish these safeguards for a large sum than for a
small one. If therefore an individual or a company pos-
sessing in a high degree the confidence of the public
provides such a place of safety, and offers to receive
money for safe keeping on reasonable terms, many per-
sons will gladly avail themselves of it. This can always
be done without any expense to the depositors. For the
managers of the bank, having a large amount in their
hands deposited by many individuals, can always have
the fullest assurance that it will not all, or even a very
large proportion of it, be demanded at any one time.
As taking one day with another, every man must receive
as much as he pays out, it may be expected that each
individual will deposit as much as he draws, and that
while one man is drawing out, another will be deposit-
ing. The managers of the bank may therefore at all
times lend a considerable portion of their deposits, re-
ceiving interest for the same. In this way they may

CREDIT AND PAPER MONEY. 93

easily and safely obtain remuneration for the expense and
trouble of taking care of deposits, without any expense
to the depositor. It must however be borne in mind,
that much wisdom and integrity are necessary in order
that such loans may always be restrained within the
limits of perfect safety. A rash, imprudent, unscrupu-
lous banker may and often does expose his customers
to great loss. The managers of a bank of deposit have
need not only to possess but to deserve the highest
credit.

§ 69. A bank of deposit will almost of course and by
necessity become an important auxiliary in exchanges.
The counting and handling of money will by its assist-
ance be almost entirely dispensed with. Any customer
of the bank makes his payments fbr the most part by
checks. Each check is charged to the account of the
drawer, and credited to the account of the person in
whose favor it is drawn. Thus the whole transaction,
however large the check, is completed without the use of
any money at all, merely by writing a few words in the
books of the bank. The labor thus saved to a great
trading community is immense.

The same things may be done with very little modi-
fication of the process, between individuals depositing in
different banks, and even residing at a great distance
from each other.

So extended and complete is the banking system of
the civilized world, that payments between dealers in
cities and countries however remote from each other are
generally effected by checks and drafts, without any trans-
fer of money, except the amount by which the purchases
of one country or one city may exceed those of another.
The extent to which the remotest portions of the earth
are bound together by these invisible bonds of mutual
credit, as invisible and yet as strong as gravitation, is

94 ECONOMICS.

highly honorable to human nature, and strikingly illus-
trates the vastness of the area of modern civilization,
and of the economic system that pervades it.

The banks which perform this function are banks of
exchange, and do not necessarily require any legislative
sanction, or the conferring of any special privileges by
act of the government. They need nothing in this re-
gard except protection of every man's rights of property,
and the impartial enforcement of the obligations of con-
tracts according to their true intent and meaning. They
are in no sense the creatures of legislation.

§ 70. Banks of Deposit and Exchange very naturally
become to a certain extent. Banks of Loan. 'J'hey lend
so much of their deposit fund as is not needful to be
kept on hand, to secure the entire safely of their deposi-
tors. The loaning of money is a business as truly legiti-
mate as any other. The subject of interest on money
will be discussed in another place. It is enough to say
of it here, that there are many persons who have money
which they cannot employ in active business. It is
greatly to their advantage and to the advantage of the
whole community, that all capital should be actively em-
ployed. It is better for its owners to live on the interest
of their capital than to consume their principal, and it is
a great advantage to persons having skill and power to
labor, to obtain at a moderate rate of interest, the means
of procuring tools and material, by which they can ren-
der their labor and skill available. Banks often render
ii very valuable service by collecting together such idle
capital, and lending it to those who need it, and are able
and willing to make reasonable compensation for the use
of it. For the performance of this function, no legislative
grant of peculiar privileges is at all necessary. It may
be performed by a single individual, or by several indi-
viduals in an ordinary partnership.

CREDIT AND PAPER MONEY. 95

§ 71. There is another banking function which re-
quires a rather more detailed examination. // is the issu-
ing notes payable on demand to be circulated as a medium
oy excliange, inste.a.d of gold and silver. Such bank notes
are called Paper Money. They can be called so only by
a rather violent figure of speech. No paper can be truly
money. A bank note is nothing more than a piece of
paper with a promise of some individual or corporation
inscribed oji it, to pay a given amount of money. To
call such a promise money, is a use of language which
strongly tends to that confusion of thought which is at
present so prevalent in relation to the subject of money.
Such a promise can only obtain general circulation in
any community at its par value, on condition that the
people have implicit faith that the promiser will on de-
mand pay what he has promised. On this condition a
bank note passes from hand to hand, not as money, but
as affording to the holder an assurance that he can at
any time obtain the money by demanding it. No one
can deny that such promises to pay, when implicitly con-
fided in by the people, have certain points of superiority
for general circulation over gold and silver. If one has
need to draw from a bank the sum of one thousand dol-
lars, it is surely much easier and more convenient to take
from the bank an assurance that the money will be paid
on being demanded, and with that paper to obtain what-
ever one needs to purchase, than to carry away from
the bank a bag containing one thousand dollars in gold
or silver. If those with whom one wishes to deal have
implicit faith in the assurance which is expressed on
that piece of paper, it will be more agreeable and con-
venient to them to receive that paper in payment for
what they sell than to be under the necessity of handling
and caring for bags of gold or silver. It is in the nature
of the case highly probable that for the sake of such a

96 ECONOMICS.

substantial convenience, men will always continue to use
in the transactions of exchange some such expression of
credit, to save themselves the inconvenience of handling
and transporting the precious metals.

During a large portion of our history the advantages
of some such use of credit have been so highly prized
and so much insisted on, that a large portion' of the
money in circulation has consisted in such promises to
pay. Banks were incorporated in great numbers by the
legislatures of the several states. They were for the
most part limited corporations, the stockholders of which
were liable for the debts of the company only to tiie
amount of their stock, and had a right to issue their
notes payable on demand for general circulation. In the
year 1856 no less than one thousand four hundred such
State banks were in existence in the United States. In
New England alone were five hundred and seven, with
an aggregate capital of one hundred and fourteen million
six hundred and eleven thousand, seven hundred fifty-
two dollars. The losses experienced by the failure of
such banks to redeem their notes were enormous almost
beyond belief, and, before the outbreak of the war in
1 86 1, had wrought in the minds of thinking men gener-
ally the conviction, that the system was radically unsound
and untrustworthy.

§ 72. Perhaps it is not difficult to point out in what
the unsoundness consists. Men's eagerness for substitut-
ing a paper currency for real money was a delusion, a
sort of madness. Credit is abundantly capable of ob-
taining for itself all necessary expansion, without being
stimulated by any artificial legislative helps and inven-
tions. The active enterprise of an intelligent, industri-
ous, commercial people will easily devise methods of
supplying all the substantial conveniences of a paper cur-
rency, without acts of incorporation or the endowment oi

CREDIT AXD PAPER MONEY. 97

banking institutions with special privileges, to enable
them to supply such a currency for the use of the peo-
ple. The experience of a century, both in this country
and in England, has demonstrated, that the demand
notes of incorporated banks are a very untrustworthy
medium of exchange. Credit should never be interfered
with by legislation. If an individual or a private co part-
nership can procure so much credit in the community
that their notes payable on demand will circulate as a
medium of exchange, we know no reason why the law
should interfere between them and the public. Each
man may be safely left to take care of himself. But men
who issue such notes should be held responsible for their
redemption to the full extent of all their property. Men
who are held to such a liability will be very cautious how
they issue promises to pay on demand which they can-
not perform. No advantages of a paper circulation can
possibly compensate for the disasters which experience
has shown to be inseparable from allowing banks of a
limited responsibility to issue their notes as the circulat-
ing medium of a community. We do not believe that ex-
periment will ever be tried again in the United States.
"A burnt child dreads the fire."

§ 73. The war from 1861 to 1865 S^^e the United
States a new monetary system which it is necessary to
examine. That part of it which consists of Treasury
Notes, called Greenbacks, we have already examined, in
speaking of the legal tender law. The necessities of the
government during that war were such as to compel
it to resort to every practicable method of borrowing
money. Out of these necessities grew our present novel
system of national banks, which so far as circulation
is concerned, has superseded the State banks in all por-
tions of the country, except the Pacific Coast. The
national banks are all organized under a law of the
5

08 ECONOMICS.

United States. A bank is constituted by depositing tho
amount of its capital stock in bonds of the United States
with the Treasurer of the United States, as security for
the redemption of the notes which it issues. It receives
back ninety per cent of ,the same in officially certified
notes, which the bank issues to its customers, and it can
circulate no notes not so certified. The notes of these
banks thus secured and certified are receivable for all
taxes except impost duties, and for all dues to and from
the United States except interest of the national debt.
They are redeemable on demand in lawful money of the
United States, including of course greenbacks, so long
as they continue to be by law legal tender. As long
therefore as the banks redeem their notes on demand
as the law requires, their value will be precisely equal to
that of greenbacks. If any bank fails to redeem its
notes as the law requires, its affairs will be wound up by
authority of the government, its notes will be redeemed
out of the Treasury of the United States, which will be
re-imbursed by the sale of the deposited bonds of the
bank to the highest bidder. So long therefore as the
United States keeps its depreciated legal tender notes
in circulation, the national bank notes will be a deprecia-
ted currency also. During the continuance of the war,
these banks afforded the government great assistance in
raising 'money, for many capitalists were eager to pur-
chase the bonds of the United States for the purpose of
using them in profitable banking.

In all the ordinary conditions of our national life, the
security for the redemption of national bank notes in legal
tender of the United States is absolute. The credit of the
notes of every national bank issued according to law
must be exactly equal to that of the government, for the
faith of the government is pledged for their redemption.
If a bank fails the government will redeem its notes. If

CREDIT AND PAPER MONEY. 99

hereafter the government shall do the tardy justice of re-
deeming its own long unfulfilled promises to pay, and
shall remove from its statutes that anomalous law, which
compels the people to receive the government's promises,
however long unfulfilled, in payment of all debts, there
will then remain no legal tender of the United States but
gold coin ; and the national banks will be forced to redeem
their notes in gold, or go into liquidation, and in the latter
alternative the United States Treasury will redeem their
notes in gold. A more perfect security for the redemp-
tion of national bank notes than would exist if the United
States fulfilled its own promises, would be inconceivable.
This will be admitted, we think, by all candid men.

§ 74. Js then our national banking system to be ac-
cepted as a satisfactory and final solution of the question so
long and so fiercely agitated, of banks and paper money i
We think not for the following reasons :

First, The credit of the banks under this system
must always suflfer, when from any even temporary cause,
the credit of the government suffers. Unfortunately we
cannot assume that a severe strain has been brought
upon our country's credit for the last time, and should
such an event occur again, while we have our present
national banking system, the immediate consequence
must be a depreciation of our whole currency in general
use, which must greatly intensify the effect of national
calamity. A medium of exchange, to be sound, must not
rest on mere opinion in respect to the solvency of any
government, but on solid permanent desirableness, as
estimated by the whole civilized world.

Second, Though our national banks afford a satis-
factory security for the redemption of their notes, they
afford no adequate security for the re-payment of deposits.
Formerly, in times of financial difficulty, the untrustwor-
thiness of our banks manifested itself in their inability to

lOO ECONOMICS.

redeem their notes. Under our present banking system,
it has appeared in their inability to repay their deposi-
tors on demand. It matters not in which of these two
ways the disaster comes, one is just as fatal as the other.
Our national banking system affords no adequate security
against destructive failure in this last form. It may be
said, and with some truth, that perfect security against
such failure is impossible. But this being granted as
true, should effectually warn us against building up any
such great artificial system of credit on the basis of
special legislative provisions. Credit is one of the great
natural forces of the world's economic system. Eut it is
for that very reason a delicate thing for governments to
meddle with. It is a dangerous experiment for a govern-
ment to establish a vast net-work of banks to cover half
a continent, to receive for safe keeping the spare funds
of many millions of people, while the private property of
those who are interested in founding and managing these
institutions is not held responsible for the safe keeping
of the funds which may be deposited with them. Let
credit be free and unrestrained. Let any man who de-
sires to receive the money of his fellow-citizens for safe
keeping obtain as much of their confidence as he can
on simple personal responsibility. Let all who choose
commit their money to his charge. But let not the gov-
ernment provide any means by which any portion of his
property may be exempted from responsibility to redeem
his pledges to those who have trusted him. Let govern-
ment interfere in no way whatever with the natural and
spontaneous development of credit. Let it confine itself
to its own proper function of rigidly enforcing all con-
tracts according to the true intent and meaning thereof.
The financial disasters which occur under such a sys-
tem, may fairly be presumed to be unavoidable by any
human wisdom or invention.

cri:dit and paper money, loi

Third, In the nature of the case this system can only
last as long as our national debt remains unpaid. If the
time ever again comes when, as in former years, we are
a nation without a national debt, there will be no na-
tional bonds in the market, which can be used as the
basis of a national banking system. The banks now in
existence must go into liquidation, because the founda-
tion on which they are constructed will have ceased to
exist. We shall then have no banks and no paper
money, or we must construct a new monetary system on
some other principle.

§ 75. Perhaps the ultimate and normal condition of
the economic world in relation to this matter of paper
money, will be found to be, that credit will everywhere
be left to its own spontaneous development, according
to its own natural laws, with, no artificial contrivances
to stimulate or to check it. It may be asked, why not
adopt the plan of a great national bank like that of Eng-
land, and those of other nations ? That suggestion does
not seem worthy of any special examination in this place.
The efforts which we have made in that line have not
resulted in such a way, as to encourage further experi-
ments of the same sort. Past experience would suggest
grave doubts, whether a great national bank like that of
England can ever be amalgamated with our institutions
and character. Why should we desire to experiment
further in that direction ? It must be obvious even now
to all well informed persons, that those vast lines of
confidence and exchange which rank among the grand-
est characteristics of modern civilization, are controlled
by private bankers, -who owe nothing to any legislative
tinkering or favoritism. The natural development of
credit over the economic world has produced private
banking houses, that are fully adequate to be the fiscal
agents of great nations, and even to negotiate the war-

I02 ECOXOMICS.

loans of all Europe. Why then should it be doubted
that credit, without being aided or interfered with by any
of the governments of the world, is capable of furnishing
to the individual merchants and travellers of all countries,
all the substantial conveniences and advantages which
have ever been supposed to be derived from banks and
paper money ?

CHAPTER VI.

The Functions of Credit.

§ 76. From what has already been said it is obvious
at a glance, that the influence of credit on the working of
the whole economic machine must be exceedingly great. J t
has been shown that without it no man could ever find
use for any more capital than his own hands could em-
ploy; for the moment he entrusted it to another hand to
be used in production, the operation of credit would
begin All mutual dependence, all mutual helpfulness,
all human society inevitably implies credit. The una-
voidable necessity of such uses of credit none will deny,

A little consideration will satisfy us, that the necessity
of some of the more extended and seemingly optional
forms of credit is scarcely less imperative. The first of
these which requires to be particularly mentioned is its
influence in quickening exchanges. The producer of
any commodity, so soon as he has completed it, has need
of the entire investment of labor and capital which he
has placed in it, to be used again in further production.
Perhaps his capital is small and is all invested in that
one product. He must therefore either by sale procure
it to be used again, or he must borrow the capital neces-

THE FUNCTION'S OF CREDIT. I03

sary to procure more material, and the means of living
while he employs himself on some other product, or he
must cease to work, and his means of present support
must fail. If he could disjDose of the product on hand
to some one of good credit on the promise of payment at
the end of six months, he could use the credit of the pur-
chaser in addition to his own, and thereby procure the
capital necessary to the continued prosecution of his
trade. The man who purchased on credit may by means
of that very purchase also have been enabled to prosecute
a successful trade, and before his debt falls due, have
earned the means of redeeming his promise. By means
of that credit transaction therefore all the advantages of
an immediate sale were realized. Had not the pur-
chaser procured what he needed on credit, two men
would have been reduced to the necessity of being un-
employed, through the tardiness of exchange. Credit
quickened the exchange, and procured for themselves
and the community the benefit of their labor. What oc-
curred in this case is constantly happening in all indus-
trious communities. Credit affords great and much
needed facilities for bringing all products into use as soon
as they are ready for the consumer. Without this quick-
ening influence of credit on exchanges, all industry must
move heavily and slowly. It is a natural provision for
bringing the producer and consumer as near together as
possible.

§ 77. Another influence of credit is tha.t i^ gives to the
energetic and skillful man witlnut capital abnost his only
chance of acqicirijig it. The world of trade is everywhere
full of illustrations of the great advantage to be derived
from the laborer owning the capital with which he works,
and being therefore able to regard as his own all the
benefits of his energy and skill. It is capable of work-
ing wonders. But if the skillful man who has no capital

I04 ECONOMICS.

cannot obtain it on his credit, he must in most cases be
a mere laborer on hire, till his best days of energy, in-
vention and enterprise are past, and his best chances of
a successful life gone. The capital which he uses only
for the profit of another will produce much less valuable
results than it would have done if he could have used
it for his own profit. All society is thereby poorer. No
man can calculate the loss to modern society, which
would accrue from depriving it of all the productive
power which credit in this way produces. Energy, inven-
tion, enterprise would become almost useless words. The
man that began life in poverty, must almost of necessity
end as he began, and even the rich would be much less
opulent than at present. The greatest fortunes are apt
to be amassed by those who began in their youth with
a judicious use of their credit.

§ 78, Another function of credit is, greatly to dimin-
ish the amount of money itccessary to be used in the trans-
action of busifiess. Perhaps the simplest illustration of
this is the case of two individuals, who have frequent
exchanges with each other. Neither pays any money.
What each buys is charged in the books of the seller.
Perhaps at the end of six months they adjust their ac-
counts. It turns out that the purchases of each are very
nearly equal. A small balance only remains to be paid
in cash, and perhaps even that may be charged over to
a new account. And yet perhaps the amount of traffic
between them may have been large. In this way credit
transacts a large amount of business without any use of
money whatever. And yet the existence of a recognized
medium of exchange is just as important in these trans-
actions, as though every purchase were made in money.
It is by the fact that the value of every thing is estimated
in a recognized medium of exchange, that these accounts
can be kept with so much ease and accuracy. Money is

THE FUXCTIOXS OF CREDIT. IOC

just as important to us, when we do our exchanges with-
out it, and the use of it in some cases enables us to sub-
stitute credit for it in many other cases.

In every case in which payments are made by checks
or drafts, whether payable at sight or on lime, credit is
made a substitute for money, and by so much diminishes
the amount of money needed to transact the exchanges
of the community. This becomes quite obvious in the
operations of a bank of deposit! If every man had kept
his money in his own hands instead of depositing it with
the bank, and paid by counting and handing over money,
the whole amount of the deposits of the bank would have
been no more than sufficient to effect the exchanges of
the depositors. But when they deposit the same funds
in the bank, and pay by checks, it is found that one
third the amount will suffice, and the remaining two
thirds can be placed at interest with entire safety. This
fact demonstrates the great diminution of the money re-
quired to be kept in circulation, which results from mak-
ing payments in checks.

The same tendency of credit to diminish the amount
of money necessary to be used in the exchanges of a
community is still more strikingly apparent in the use of
bank notes as a medium of exchange. It is the received
opinion that a bank whose specie on hand is equal to
one half its notes in circulation is perfectly safe. If this
is so, then the currency of any community might con-
sist of one third real money, and two thirds paper money,
and still be perfectly sound. But two dollars in every
three of that currency would represent credit, and only
one in three would be real money. Such a currency,
could it be perfectly insured to remain such, would an-
swer the purposes of exchange just as well as though
it were entirely composed of gold, without any use of
paper money. Credit would therefore diminish the

Io6 ECONOMICS,

affiount of real money necessary to negotiate the ex-
changes of that community by two thirds.

§ 79. This fact is the one truth which is to he founa
amid all the fallacies of paper money. No method has ever
yet been devised by which banks can be empowered to
issue such a currency, and yet be effectually restrained
irom exceeding in its issues a prescribed and definite
limit. Men cannot safely place confidence in such banks.
Sooner or later their issues, or their indebtedness in
some form, will not only transcend all prescribed limits
but all limits of prudence and safety. Disaster has fol-
lowed so often and spread ruin so widely, that the prin-
ciple must be given up as an utterly unsafe foundation
for a medium of exchange.

The truth however still remains, that by methods
which are perfectly natural and safe, credit is to a vast
extent made a substitute for money in conducting the
excnanges of the world. This function of credit has
certainly been greatly extended during the present cen-
tury. Should the governments of the world at length
become wise enough to leave the operation of credit
without any interference, to the spontaneous develop-
ment of its own laws, this function will yet be very
greatly extended, and the efficiency both of capital and
labor be much more aided by it, than hitherto.

The consideration deserves to be mentioned that this
power of credit to diminish the amount of money need-
ful in a given slate of exchanges, sustains a most impor-
tant relation to our present great problem of a return to a
sound currency. It may readily be admitted that if that
problem were actually to substitute gold for paper in
transacting all the exchanges of the country, any speedy
solution of it would be quite out of the question. Such
is not the problem however. We have our national bank
currency strictly limited by national authority so far as

THE FUNCTIONS OF CREDIT. I07

respects the ratio it sustains to the stock of the banks,
and depending for its circulation, not on individual or
corporate, but on national credit, and requiring only so
much gold as will enable the banks to redeem their bills
on presentation. In this state of things, with this ex-
tensive use of our national credit as a basis in part of
our medium of exchange, the amount of gold needful to
be employed will probably be less in proportion to the
amount of exchanges to be transacted, than in any other
country of the world, and a return to specie payments
must be comparatively easy. This is clearly indicated
by the fact that at this writing both greenbacks and na-
tional currency are reported at a discount of only about
five per cent.

§ 80. Another very important influence of credit lies
in its power to control prices. Such a power it must neces-
sarily possess. Price we have already seen varies with
demand, and evidently demand depends largely on the
use which is made of credit. If no exchanges are made
on credit, transactions must be limited to those who have
money in hand. But if credit is employed with freedom,
all who have good credit may be purchasers. The de-
mand therefore will be increased by precisely the amount
purchased on credit, which could not have been pur-
chased if no credit had been used. This function of
credit is very variable, depending very greatly on men's
hopes or fears. In times of prosperity hope preponder-
ates and credit is very freely employed. Prices as a
necessary consequence are buoyant, since all commodities
are in demand. In times of adversity men's fears pre-
ponderate, and the use of credit in exchanges is reduced
to a minimum. As a necessary consequence demand
diminishes and prices decline.

This is the dangerous and critical element in credit. In
circumstances favoring its largest development, it is capa-

108 ECONOMICS,

ble of so raising prices as for the time being to render
even a sound currency almost useless as a standard of
value, and when concurring with an unsound currency,
of producing a sort of temporary madness in whole com-
munities and even nations. About the year 1836 the
public mind throughout our country became greatly ex-
cited in prospect of the rapid settlement of that vast area
of fertile land which lies in the Upper Mississippi valley.
It was foreseen that in the life-time of men then living
several great States were to be founded in what was then
a wilderness, each equal in wealth and population to a
great nation. Men's imaginations were greatly excited.
The sites of the great cities which were soon to be, were
selected, and laid out on a scale of such magnificence,
as the imagination stimulated by the hope of gain could
suggest, where not as yet a human dwelling had been
erected. Lots were offered for sale on terms requiring
little cash, and giving long credits for the remainder.
Those small payments of cash, a highly inflated currency
rendered it easy to make, and about the future few had
any misgivings. Tens of thousands hastened to make
their fortunes by purchasing western city lots. The ex-
citement was nearly universal, demand increased rapidly,
and prices were advanced, being limited only by men's
imaginations. Men believed that they had made an
independent fortune in a single day, when those fortunes
existed only in the imagination. After a few months the
real began to assert itself Men must return from this
aerial flight to the actual world. Some men found they
must have money, and began to press their debtors for pay-
ment. These urged others to pay who were equally un-
able. All turned to the banks ; the banks were as unable as
individuals. Their credit failed them, their paper money
would no longer circulate, but returned upon them for
redemption. They were quite unable to redeem them.

THE FUNCTION'S OF CREDIT. I09

and in a few months nearly all the banks in the country
suspended specie payment, and universal disaster and
almost bankruptcy followed. Western town plats were
forgotten or remembered only in sorrow, and the nation
wiser but sadder turned again to sober industry. There
is in this power which credit possesses, an element of
danger, which is inherent in its very nature, of which the
foregoing narrative presents only one out of innumerable
examples. We do not believe this danger can ever be
entirely eliminated from the use of credit. It will be as
small as possible when legislators have learned that
credit is too delicate a thing for them to interfere with by
their clumsy tinkering.

§ 81. Perhaps enough has already been said of that
function of credit, by which // binds the whole civilized
world together in one economic whole of mutual depend-
ence and mutual helpfulness. It is a bond of universal
attraction as invisible and impalpable as gravitation it-
self, and yet as irresistible and indestructible. The
power of that universal attraction to bind the whole
human race into a common brotherhood and a common
civilization, is rapidly increasing. Every new improve-
ment in the means of locomotion and inter-communica-
tion among the various populations of the world, extends
the area of credit, and intensifies its attractive force.
Theoretically the world is the field of our science, and
the actual condition of the world is conforming more and
more to the theory.

no ECONOMICS.

CHAPTER VII.
Monopolies.^. -

§ 82. We confess to having felt some perplexity ahoui
the heading to be ei7iployed for this chapter. The thought
occurred to us to call it " International Exchanges." But
the thing which is naturally suggested by this phrase has
no existence in fact. Nations are neither producers nor
exchangers. Both these are individual and not national
functions. Why then talk of international exchanges,
when exchanges, wherever the exchangers may happen
to live, are inter-individual and not international. In-
dividual Englishmen may exchange with individual
Frenchmen, but this is not England exchanging with
France. Let us call things by their right names, if we
would have an understanding of their real nature.

What we wish to discuss in this chapter is, the eco-
nomic character of certain restrictions on exchanges,
which have been much practiced by the different nations
of the world in its past history. It seems to us that those
restrictions are common in their nature, design and work-
ing, and they are all fitly described by the word which
stands at the head of this chapter — Monopolies.

Definition, A Mo?wpoiy is such a control of the sup-
ply of any desirable object^ as will enable its holder to de-
termine its price without appeal to competition.

Some monopolies are conferred by the government,
and are provided for by legal enactments. Others are
secured by mere combinations of capital or labor or both.
Some monopolies are entire, protecting their holders
against all competition. Others are only partial, pro-
curing for their holders exemption from competition only
within certain limits. But protection to the holder

MONOPOLIES. Ill

against the competition to which other men are exposed
is the common aim and result of them all.

Monopolies have certainly occupied a very prominent
place in the arrangements of modern Christendom, and
the principle of monopoly may still be easily discerned
in the laws and institutions of most countries, nor can it
be justly claimed that our own country is entirely exempt
from them. It is therefore necessary, before leaving the
subject of exchange, carefully to examine their nature,
the grounds on which men seek to justify them, and their
relations to the economic system.

§ 83. Some monopolies are defensible on sound economic
principles. It has already been shown, that when labor
has been expended in giving value to any material thing,
the laborer thereby acquires the ownership of the sub-
stance upon which he has exerted his labor. If that
substance was the property of a previous owner, in con-
sequence of labor performed in producing it, the last
laborer that works upon it must compensate the previous
owner. But if it was without value when it came into
his hand, he has gained the entire ownership of it, by
the labor he has expended on it, and may exchange it
in the form to which he has wrought it for any other
value which he can obtain for it. Thus the possession
of the material on which he has labored insures to him
compensation for his labor according to its value. If a
man of skill has made a table out of wood which was of
no value, he is sure of being paid for his work ; for no
one can make a table of equal desirableness with less
work, and tables are always in demand.

But there are products of great value, the producers
of which have no such natural assurance of obtaining the
reward of their labor. For example, an ingenious man
invents a machine which is of great value to the labor
of the world, and builds a model or exhibits a drawing

112 ECONOMICS.

of it. Any ingenious mechanic may from that model or
draft construct and multiply the machine indefinitely.
The labor of the inventor was purely intellectual and not
connected with the ownership of any material thing, by
the sale of which he can secure his own reward. As
soon as his thought has been comprehended by another
mind, it may be by that mind communicated to any num-
ber of minds or to the whole world, and thus pass from
the inventor without any compensation whatever. The
public, the world, can well afford to give him as compen-
sation for disclosing so valuable a secret, a monopoly of
the manufacture and sale of that machine for a limited
number of years. A patent right confers precisely such
a monopoly. No right-minded man will hesitate to ad-
mit that it is good economy for the government, as the
representative of the whole community, to give to the
inventor of such a machine a monopoly of its sale, and
faithfully to protect him in the enjoyment of it. If it is
an invention of universal utility, no government should
refuse to grant the inventor a patent right on his appli-
cation. It should be granted equally to an alien as to a
native born citizen.

The same may be said of the copyright of books, and
of the products of purely intellectual labor generally, or
more generally still, of any product of labor or skill the
producer of which has no natural security for obtaining
the reward of his labor. The principle however does
not apply to professional skill and talent, though it may
be purely intellectual. For example the function which
the lawyer performs is one of urgent necessity for the
protection of the rights of individuals. No man can per-
form that function as well as he can, with less natural
talent and less skill than he possesses, and no one can
acquire the requisite knowledge of law and readiness in
applying it to particular cases with less time and labor

MONOPOLIES. 113

than he has bestowed upon it. He has therefore every
assurance that men will be glad to pay him the full value
of all the professional skill which he possesses, and can
put in no valid claim to be protected by monopoly, to
secure to him a fair compensation for the service he
renders. The same is true of all properly professional
labor.

There are a few cases in which labor not strictly intel-
lectual may be protected by a tnonopoly. Such are the build-
ing of biidges, and the establishing of expensive ferries
across rivers or straits, to accommodate public traffic.
It might often be true, that no man would be willing to
make the necessary outlay, unless he could be insured a
monopoly of the carrying trade across the water in ques-
tion, at least for a term of years. In such a case the
community would often purchase the accommodation
very cheaply by granting such a monopoly, and faithfully
protecting the holder in the full enjoyment of it. All
these are cases in which the holder of a monopoly ren-
ders to the community a full equivalent for the privilege
conferred on him.

§ 84. But there is another class of monopolies of a
very different character and which require a far more
thorough and exhaustive examination. If we mistake
not they can be justified by no plea of equivalent service
rendered to the community. We refer to monopolies
gratited to certain branches of industry in one country, to
shield them against the competition of similar industries in
other countries. We find examples, in all exemption from
competition granted to certain branches of manufactures,
to shield them from the competition of like manufactures
in foreign lands, by imposing discriminating duties on
imported products. It may seem to some a mistake to
class such arrangements under the head of monopolies.
But it seems to us that they belong under that head in

114 ECONOMICS.

the nature of the case, and we have sought in vain to
find any other head under which the discussion of them
can be introduced, without an obvious violation of logical
arrangement. No fundamental law of the science calls
for any such limitation of competition, but all conspire
together to protest against it. Economic principles can
deal with such legislation only in the form of protest.
In principle such legislation does confer a monopoly,
not always entire, but if not entire at least partial. Its
effect is to protect one person, or a particular class of
persons from a perfectly natural competition, which they
must otherwise encounter. It is true that the method in
which the end is sought to be accomplished is not by
absolutely forbidding certain products to be sold in this
country, but by compelling all foreign producers to com-
pete with the American manufacturer under such con-
ditions of disadvantage, as to amount to prohibition. It
is proposed to accomplsh this by levying such duties on
articles manufactured abroad, that the foreign producer
cannot pay the duty and still compete with the American
producer. It is assumed, that by thus driving the foreign
producer from our markets, the home producer will be
able to demand such prices as will render a business re-
munerative, which could not be profitable in presence
of foreign competition. One would think the bare state-
ment of the case might suffice, without further argument.
No injustice can be done by calling such legislation a
monopoly in favor of the American manufacturer. Such
legislation abounds in this country at the present time,
under the soft and taking pretense of " protecting home
industry."

§ 85. The phrase '''^ proiection of hofne industry " is most
infelidtously aiid laif airly applied. Protection is a pre-
cious thing, in which every good citizen believes. To
protect the industry of every citizen, to secure to him the

MONOPOLTES. II5

unobstructed pursuit of his legitimate objects, and the
full enjoyment of all the products of his labor, is the most
sacred function of civil government. The resources of
our planet can never be fully developed and applied to
the uses of human well-being, till every portion of it
where man can dwell, is under a gov^ernment that can
and will protect the industry of every dweller on the soil.
This is true protection. Let the phrase "protection of
home industry " be used in this its only legitimate sense,
and there will be no controversy about the matter.

But in the use that is made of the phrase by the
advocates of what is called " Protection,"" it is wrenched
away from this its proper and universally accepted mean-
ing, and, without any even pretense of definition, applied
to a device of their own, sustaining no relation whatever
to the proper meaning of the word. Protection implies
that the thing in behalf of which it is invoked, is in dan-
ger from some hostile force. In this use of the w^ord the
hostile force against which industry is to be protected is
natural competition. The interposition of the government
is invoked to shield certain people from competition in
trade, in order that they may be able to set such prices
on their wares as will be satisfactory to themselves. As
they press their demands upon the government, they ask
in tones somewhat lugubrious; will not our government
protect the industry of our own citizens? This assump-
tion is always false. Natural competition is the enemy of
no legitimate busitiess. It only determines, what all the
world is interested in knowing, who can make a given
product of the best quality at the cheapest rate. Who-
ever that person is, and wherever he dwells, it is cheaper
to employ him than any one else, and any one who is
permitted to own his own property, will employ him.
Those who cannot compete with him will employ them-
selves in producing something else which they can pro-

Il6 ECONOMICS.

duce in the face of competition. Let us suppose a case
which is as clear as possible. Some man takes a fancy
to produce coffee in Minnesota. No doubt by planting
trees in hot houses, and supplying the requisite tempera-
ture and other atmospheric conditions, coffee might be
produced. When the trees are grown, and have yielded
their first crop, the proprietor of this hot house coffee
plantation petitions the government for " protection of our
home industry." He says the competition of coffee grown
within the tropics is quite ruinous to me. Is competi-
tion this man's enemy? On the contrary it seems to be
the only teacher that can give him wisdom, and make
him see the folly of thus misapplying capital and labor.
If he will heed its lessons, it will show him the necessity
of employing himself in some more rational fashion. It
never can be known whether a given commodity can be
profitably produced in given circumstances of time and
place, except by trying the experiment in presence of free
competition. The competition which puts that question
to the test of a fair experiment is the true friend of hu-
man industry everywhere. If you would know whether
pig iron can be made as cheaply in Pennsylvania as in
Scotland, try the experiment, and you will kno\T. You
never can know in any other way.

§ 86. The freest and widest competition is the best
friend of all industry in another way. Let us suppose
that manufactures have been recently established in any
community, and are yet in their infancy. In what cir-
cumstances will those manufactures soonest reach their
maturity and perfection ? Obviously in the presence and
under the full stimulus of the most perfect manufactures
of the world. If the community in which they are situ-
ated were isolated by natural barriers from all the rest of
mankind, the low demands of the community around
them would be supplied, and nothing more would be

MONOPOLIES. 117

aimed at. There would be little stimulus to improve-
ment, and progress would be very slow. But if ttiey were
constantly in presence of the most perfectly manufactured
fabrics of the world, the best models would be always in
sight of their managers, and the strongest inducements
would stimulate them to bring every process to the high-
est perfection. If by legislation unfriendly to the impor-
tation of manufactured goods, you compel that com-
munit}' to accept their own manufactures, such as they
are, and at such prices as are demanded for them, the
inevitable result will be imperfect products at high prices.
The aim of producers will be to obtain the highest price
for the lowest cost. The effect of such legislative isola-
tion will be the same as the effect of isolation by impass-
able natural barriers.

No one will deny, that if you would bring the schools,
the literature, the science, the art, of any portion of the
world to the highest perfection it must be done in direct
competition with all that is noblest and most worthy of
imitation in the intellectual progress of the world. Hero-
dotus the father of history, and Homer the father of Epic
poetry, were the most cosmopolitan men of antiquity.
They made themselves acquainted with the knowledge,
the wisdom, the civilization of their times. There is
every reason to believe, that this is a condition of all
progress, of all civilization. Competition is so far from
being any man's enemy, that it is a great common force
impelling the whole human race toward perfection. The
enemy against which some men so plaintively implore
their country's protection is purely a creation of their
own imagination.

§ 87. We have already incidentally remarked, that
the general principles of the science are all adverse to the
monopoly of protection, and condemn and reject it as an
intolerable anomalv. We have alreadv shown that both

n8 ECONOMICS.

labor and capital obey laws of natural gravitation, which
are irrespective of national boundaries. They tend to-
ward the point of greatest demand as indicated by high-
est remuneration, whether that point be on one conti-
nent or another, or in the remote islands of the ocean.
Neither has exchange any natural relation to nationality.
It always seeks to buy at the point of greatest cheapness,
and to sell at the point of greatest dearness, in whatever
latitude or longitude those points may be found. It is
confessedly one of the grandest functions of any civilized
government, to protect its people in pushing their ex-
changes to the extreme limits of humanity.

The true economic theory is that the hiwian race is one
family. The Christian scriptures and our science are m
respect to this matter perfectly at one. " All ye are
brethren." The wealth of the world is the patrimony of
this one family. Our problem as economists is to deter-
mine by what laws, and under what conditions, this patri-
mony can be most increased. The true solution of this
problem is, that every man shall employ his labor in pro-
ducing that which has the greatest value possible to him,
exchange that value where it is a maximum, and where
the value which he is to receive in return is a minimum.
In this way it needs no argument to prove that every man
will be richer than in any other, and that as the wealth
of a nation can be nothing but the aggregate of the
wealth of its individual citizens, every nation will be
richest when each of its citizens is richest. That the
great laws of human nature which are the natural forces
of the science will, when left to their own freedom of
action, thus construct the economic system, is just as
obvious as that universal gravitation will construct the
solar system as it is.

§ 88. To all this we often hear the reply made, — this
is very heatitiful in theory, but it is mere theory. It will

FREE TRADE, ODJECTIONS CONSIDERED. I I9

not work in the actual world that is. Friction is left out
of the account. The real world differs so much from the
world of conception as to make the theory quite worth-
less. We believe this to be the only answer which it is
possible to make to the arguments we have advanced.
This answer, it should be observed, neither sets aside
nor modifies one of those great natural forces on which
we have insisted, nor pretends to deny that they must
act in the manner we have pointed out. It is admitted
then that they exist and must act as we claim. But the
assertion is, that there are counteracting forces, by which
our results will be essentially modified, so that our con-
clusions will not stand the test of experiment. The issue
has therefore been reduced to the simple inquiry, — what
is the friction, what are the counteracting forces which
we have failed to allow for? It is therefore incumbent
on us carefully to examine all suggestions which seem
to point out anything of this character, and allow them
•their full weight.

CHAPTER VIII.

Free Trade, Objedions Considered.

§ 8g. That system of perfect freedom of exchange
between different portions of the human family, irrespec-
tive of any national lines, which was advocated in a pre-
vious chapter is generally called free trade. That term
we shall frequently have occasion to use in much that
follows. We therefore propose the following,

Definition, Free 2rade is the liberty of every man to
buy where he can buy cheapest and sell where he ca?t sell

I20 ECONOMICS.

dearest, without any obstruction being thrown in his way
by the interference of government.

The advocate of the most perfect freedom of trade
is no enemy to duties imposed purely and simply for the
purpose of raising revenue for the legitimate purposes
of government. He only protests against imposts which
are of the nature of a monopoly,— imposts levied for the
purpose of screening certain products from the competi-
tion of foreign producers. The general subject of im-
posts for revenue will be considered in its proper place.
It was necessary to say so much here to guard against a
common misunderstanding.

Let us then proceed to examine those counteracting
forces, which it is claimed set aside the results to which
we were conducted in the last chapter, by developing the
great natural laws of the science. These laws it is said
are purely theoretic. The friction of really existing
things it is said renders them useless in practice. What
then is the friction ?

§ 90, First, // is said that no nation can prosper with-
out variety of industry, and that free trade would limit
the labor of a nation to the smallest number of industries,
and thus be fatal to its prosperity. This argument has
been urged, perhaps under every possible aspect, by
Henry C. Carey, who is certainly the most popular, and
perhaps the ablest advocate of " Protection " in the Eng-
lish language. It therefore deserves to be treated with
respect and answered with candor.

That every great and prosperous nation may be ex-
pected to exhibit a vast and complicated variety of in-
dustry, will be as cheerfully and fully admitted, as any
advocate of Protection could desire. Free Trade is 7iot
opposed to variety of industry. It would not however
pursue profitless industry for the mere sake of variety.
Accuracy however requires us to say that while the

FREE TRADE, OBJECTIONS CONSIDERED. i:t

proposition, that a nation cannot prosper without variety
of industry, is generallv true, its truth is not universal
and absolute. For aught we know, it may prove true,
that Colorado has mineral wealth so abundant and so
permanent, that she may be a prosperous state with a
single industry, and that she might be even if she were
an independent nation. The natural wealth of a nation
may be limited to a single product, and yet that product
may be so abundant, and so important to all the rest of
the world, that she may rise to great wealth without any
variety of industry. As a generalization therefore the
proposition fails. It must not be applied in the argu-
ment as a universal law. We must look to it that there
is not something in the peculiar conditions of the case to
render it inapplicable.

In most cases national prosperity will be indicated
by great variety of industry. But which is catcse^ and
which effects Do nations attain to great prosperity be-
cause they have great variety of industry ? Or does their
industry expand itself into endless variety, because they
are very prosperous ? It is very easy to show that in
most cases variety of industry is the effect of prosperity,
and not primarily its cause.

To the early settlers of that region of vast agricultural
fertility, the Upper Mississippi Valley, variety of industry
was simply impossible. Manufactures, except the pro-
ducts of the spinning-wheel and the hand-loom, were out
of the question. The first settlers had neither machinery
nor materials and no capital with which to procure either.
Money was worth four or five per cent a month, to be
used in purchasing those lands of exhaustless fertility at
a dollar and a quarter an acre, and in preparing them
for a crop, by subduing the rank growths of nature with
which they were covered. Mr. Henry C. Carey himself
could hardly claim that manufactures could afford to pay
6

122 ECONOMICS.

those rates of interest. The first settlers could do noth-
ing but avail themselves of the exuberant fertility of the
soil, and send its produce to the best market to which
it would bear to be transported, receiving in return such
things as they needed. Had a protectionist of Mr. Carey's
school gone on a mission to those hardy pioneers, to
preach to them the gospel of variety of industry, ho would
have preached to very unappreciative audiences. To
understand how protective duties on foreign manufactures
could give them variety of industry, would have been
beyond their mental capacity. They would have been
able perhaps to understand that such a duty would ren-
der manufactured articles dearer than ever, but surely
they had always found them quite dear enough.

Yet prosperity was not impossible to those people.
They did prosper greatly by this single industry, and by
the prosperity of their agriculture came in due time the
possibility and the necessity of more varied industry.
Accumulated wealth must be valueless, or seek new
methods of profitable investment. Their industry be-
came from year to year more various, because their
increasing wealth must find other modes of investment,
these new investments would in their turn become the
cause of still greater prosperity. But primarily they
were the effect, not the cause of prosperity.

If the Sioux Indians should discover in those barren
wilds over which they roam, some tract of fertile land,
and determine to abandon the chase and devote them-
selves to the regular pursuits of civilized life, their in-
dustry must at first be purely agricultural. They must
exchange with their white neighbors the products of the
soil for the products of mechanical skill which they need.
As they prospered, they would be able to cultivate the
mechanic arts among themselves. This would make their
accumulation of wealth more rapid. The accumulations

FREE TRADE, OP.JECTIONS CONSIDERED. 1 23

of successive generations would render variety of industry
possible and necessar3^ To such a people variety of in-
dustry is as truly a growth, a necessary growth as the
matured oak of the forest is the result of growth from the
acorn. Such must be the progress of any people, from the
poverty of its beginnings to the wealth of its maturity.
Simple industry comes first, then as wealth increases vari-
ous industry becomes possible and inevitable. To insist
on variety of industry as the primary cause of a nation's
prosperity, is to manifest a profound ignorance of the laws
of national growth. It is in the strictest sense prepos-
terous. It is to insist on the end before the beginning.
A greater delusion was never imposed on a credulous
people, than to make them believe, that by discouraging
the introduction of the products of skill and machinery
from abroad, which they need now to comfort their lives
and aid their toil, they can secure the production of such
commodities at home, under circumstances more favor-
able than to procure them in exchange for the products
of their agriculture, and that they shall thereby become
at once a skillful manufacturing people, with all that
variety of industry which belongs to nations of old civ-
ilizations and vast accumulations of wealth. This argu-
ment for protection is certainly fallacious.

§ 91. Free Trade has no tendency to 7-etard the intro-
duction of every profitable variety of industry. It can not
be too steadily borne in mind, that every man of every
nation will increase his wealth most rapidly by buying of
him that will sell cheapest, and what is for the interest
of every man must be for the interest of a whole world.
If therefore any branch of industry can be profitably
pursued in the face of all natural competition, free trade
will be no hinderance to its introduction ; if it can not
be profitably pursued, free trade will prevent its intro-
duction only because the products of that branch of in-

124 ECONOMICS.

dustry can be more cheaply imported from abroad than
made at home. The mere fact that it can not be profit-
ably manufactured at home is positive proof that men
in that community can employ themselves more profitably
in producing something else wherewith to purchase that
particular product from abroad. Free trade therefore en-
courages and invites to every kind of enterprise that can
be prosecuted with profit, but this is not all which it
accomplishes. It saves a community from wasting
itself upon unprofitable enterprises. Variety of industry
is not a good thing in itself, for a community any more
than for an individual. It is only profitable industry
that enriches. If for the sake of variety of industry an
individual engages in occupations in which he cannot
compete with his neighbors, he will be impoverished, not
enriched. This is as true of communities as of indi-
viduals. No man can commit greater folly than ti) insist
on doing for himself what another stands ready to do
for him at less cost. If a blacksmith can earn the mak-
ing of two coats by shoeing horses while he could make
one for himself, it would be nothing but stupidity and
folly to leave shoeing horses, to make his own coat, when
he had no reason for doing so except that he desired to
have a variety of industry. What is folly in an indi-
vidual is no less folly in a community. The whole truth
is, that every man and every people ought to have just
so much variety of industry as can be prosecuted profit-
ably. Free trade furnishes the only possible means of
determining, whether in given circumstances any branch
of industry is profitable or not.

§ 92. Second. // is affirmed that it is impossible to
establish manufactures in a nation where they have not
hitherto existed^ in presence of the competition of other na-
tions whose manufactures are already in their full ma-
turity. This objection very strikingly illustrates a cer-

FREE TRADE, ORJECTTOXS CONSIDERED. 12$

tain confusion of thought, which is an unfailing charac-
teristic of argument for protection. It is said the interest
of foreign, — say of English manufacturers, is so great in
having the American market entirely to themselves, that
they will crush out any manufacturing enterprises of our
own by a ruinous competition. The confusion of thought
appears in mingling with the matter the idea of nation-
ality. Grant that the danger here referred to is real and
to any degree imminent, it is just as likely to occur be-
tween two different sections of our own country, as be-
tween England and the United States. Boundary lines
of nations are totally irrelevant to the matter. The
manufacturers of the Atlantic States are just as likely to
crush out the infant manufactures of the Mississippi
valley, as the manufacturers of England are to crush out
those of the United States. If for this reason our coun-
try needs protection against English competition, the
Mississippi valley still more urgently needs protection
against the competition of the Eastern and Middle States.
If it is impossible to establish American manufactures
in face of English competition, it is certainly not easier
to establish Western manufactures in face of Eastern
competition.

This objection indicates no less confusion of thought
in the conception which it implies of the nature of com-
petition. To hear some men talk, one would suppose
the whole political power of England herself were to be
employed in crushing out an incipient American man-
ufacturing enterprise. By the application of a little
analysis, we shall readily see that it is not the combined
force of the English nation controlled by one social per-
sonality that is to be apprehended. It is the competition
of thousands of English manufacturers, with all their
mutual rivalries. They will compete with each other
just as freely in the markets of New York, Boston and

I2fi ECONOMICS.

Philadelphia, as they will in those of London, Liverpool
and Glasgow. The question is, whether all these rival
interests are likely to be combined in our markets, to
crush out an infant manufacturing enterprise by selling
below cost. Let us suppose that our woolen manufac-
tures are thought to be threatened with this danger.
The case is, that under the regular action of free com-
petition, the manufacturing of woolen can be profitable.
In this state of facts that branch of manufactures cannot
be crushed out by competition, except by supplying our
market with foreign woolens at less than cost. The
question then is whether English manufacturers can and
will combine together to supply 50,000,000 of people
with their products at less than cost. This is an exact
statement of the nature of the danger, and enables us to
form an exact estimate of its magnitude.

The truth is obvious enough. The only process by
which such a destruction of our manufactures could even
be attempted, is one by which English manufacturers
would bring inevitable ruin on themselves. In this state
of the facts, and under free trade, it must be just as easy
to found new establishments for the manufacture of
woolen on American, as on English soil. The supposed
danger is quite imaginary, and the necessity of protect-
ing our infant manufactures is a shallow delusion, which
a little tranquil thought would very easily dissipate.

§ 93, Third. // is said that Free Trade deprives the
land of the manures which resjilt from the consutnption of
its products.

This is also a point much insisted on by Mr. Carey,
and the men of his school. But a careful examination
will show that all the truth there is in this objection, is
only a verification of Solomon's proverb, "The destruc-
tion of the poor is their poverty." That proverb would
still be true as ever, if Mr. Carey should succeed in ap-

FREE TRADE, OBJECTIONS CONSIDERED. 12 7

plying his theory of protection to the uttermost. No
one acquainted with the subject will deny that, in order
to preserve the productive power of the soil unimpaired,
it is necessary to restore to it the offal which remains
after the consumption of its products. The law of rent
is founded in nature. The soil gives generously, but can
continue to give, only on condition that when man has
served himself of her products, he return to her the un-
consumed remnant.

But the possibility of doing this is unavoidably de-
pendent on the various conditions under which land is
cultivated, and no artificial legislation can place different
countries, or different portions of the same country, in
circumstances of equal advcintage in this respect. When
civilized men first sought a home amid the mighty forests
of Ohio and Indiana, they were under an unavoidable
necessity of cutting down and reducing to ashes masses
of timber which, were it now in existence, would in many
instances be worth more than the farms on which it grew.
Yet civilization could make no beginning there without
that vast atid as it now seems sorrowful waste. Even
after those forests had been reduced to ashes, the ashes
themselves could not be utilized. The manufacturing of
potash was not yet established in those wilds so remote
from the markets of the world. Even yet the inevitable
waste was by no means at an end. The product of those
farms could, perhaps for generations, find no market ex
cept at distant cities, from which its remnants never
could be returned to the land on which it grew. As to
fertilizing those farms it could make no difference, whether
it found a market in a North American, an English or a
South American city.

It has happened thus in all parts of our country by a
necessity inherent in the very nature of the case. The
products of the farm could for a time find consumers

12S ECONOMICS.

only at a great distance, and could not make the natural
return to enrich the soil on which they grew. The tillers
of those farms have not only been under a necessity of
destroying the magnificent forests which were their spon-
taneous products, and of allowing the very ashes to which
those forests were reduced to lie almost useless on the
ground, but of consuming for generations the rich mould
accumulated on their farms, by the decay of the luxuriant
vegetation of ages, before society could be brought to
such a condition of maturity, as rendered practicable the
fertilization necessary to restore the productive power of
their exhausted land.

It must be admitted that this is rather an inviting
theme for pathetic declamation, and if any one has a
taste for that style of composition, he may find an abund-
ant supply of it in the writings of Mr. Carey's school of
economists. But how it has any real relation to the
question under consideration is not very apparent. To
establish various industry in the forests of Ohio and
Indiana, create a home market for the products of those
newly cleared farms, utilize their magnificent forests and
provide fertilizers to prevent the waste of the productive
power of the soil, was as impossible as to mature har-
vests while those forests, with a density of foliage which
sunbeams seldom penetrated, shaded all the ground.
No doubt the wealth of a country is greatly increased by
sowing it over thickly with cities and villages and manu-
facturing machinery. But the evil is quite independent
of the nationality with which we trade. It results from
the fact that the products of the farm must be consumed
at a distance from the spot on which they grew, and not
from their being consumed on the other side of a national
boundary ; and it admits of no effectual remedy so long
as it remains true, that the inhabitants of a new settle-
ment can purchase many things from other communities

FREE TRADE, OBJECTIONS CONSIDERED. 1 29

more cheaply than they can make them for themselves.
It would be far more convenient for the infant and for
its mother, that it should walk rather than creep; but it
will still remain true, that creeping is a necessary stage
in the process of learning to walk. Lectures delivered
to infants and their mothers, on the superiority of walk-
ing to creeping, will not be found to be of much practical
utility. Mothers will gladly admit the truth of what you
say, but babies will still creep before they walk. And so
will communities in spite of all the theoretic exhortations
of Mr. Carey and his followers.

§ 94. Fourth. // is asserted that free trade is destruc-
tive of national independence.

We suspect that this objection has more influence in
reconciling a great number of minds to our present pro-
tective legislation than any or all other arguments. In
order to deal with it fairly, we must endeavor justly to con-
ceive what sort of national independence that is which is
practicable and desirable. Every man ought to be jeal-
ous of his own independence. There is a true independ-
ence, the loss of which is the loss of manhood, almost of
personality. It is the right and the habit of relying on
one's own intellect in the formation of opinions, and of
governing his actions by his own free choice. Such an
independence is not at all inconsistent with the innu-
merable dependencies of social life. It is not necessary in
order to maintain it, that one should keep himself in such
relations to his fellow men, as to be prepared at anytime
to dispense with the help of all his fellow-beings, and to
inaugurate a state of war between himself and the rest of
the world, whenever he may think it desirable or neces-
sary. Such a notion of his own independence would
unfit any man for the society of men. All true manhood
acknowledges all these innumerable social dependencies,
as cheerfully as it asserts independence in the only

130 ECONOMICS.

sense in which any wise and good man would be willing
to be independent.

The true conception of national independence is in princi-
ple precisely the same. It is the conception of an inde-
pendent social personality among the nations, with full
right and power and will to exercise all the functions of
sovereignty; but still admitting and delighting in all the
innumerable social dependencies which bind the human
race together in one great brotherhood of nations.

§ 95. It is asserted, that if we allow ourselves to be
dependent on the manufactures of any other nation, we shall
be brought info gre.J distress in case of a war with that
nation, for the want of those products for which we have
been accustomed to depend on her industry. When this
objection is urged, it is forgotten that all such depend-
ence is mutual. If in case of a war with a nation with
whose people we have a large trade, we are liable to be
distressed by the cutting off of our accustomed supplies,
our enemies will also be distressed by the failure of sup-
plies which they have been accustomed to receive from
us. If for example we are ever involved in another
fratricidal war with England, (and no war between the
United States and England can be other than fratricidal,)
it is doubtless true, that we shall be put to great incon-
venience for the want of what we have been accustomed
to purchase from her. But let no one suppose she would
be put to no inconvenience for what she is accustomed
to receive in return from us. On the contrary she would
be very much more distressed than we. We receive
from her, for the most part, luxuries, and our manufactur-
ing industry could be rapidly quickened to supply the
deficiency. She on the contrary receives from us the
raw material of her manufactures, without which her in-
dustry must cease, and the daily bread of millions of her
people. No fleets and armies could distress England

FREE TRADE, OBJECTIONS CONSIDERED. I3I

as she would be distressed by bringing the food supply
of vast numbers of her people into peril. The mere loss
of the United States as a market for her manufactures
would annoy and distress her more than all our arma-
ments. So far is it from being true, that our dependence
on the manufactures of England would be a disadvantage
to us in case of a war, that it would give us an immense
advantage in the conflict. If we must have war, let it be
with some nation that is dependent on us for a market
for the products of her industry, and for the food of her
people. He who on this ground objects to free trade
with Great Britain is sadly blinded to the real interests
of his country.

§ 96. If we take a true view of the nature of national
independence, and of the mutual dependence which free
trade implies and promotes, we shall never cease to give
to the doctrines of free trade our unqualified adhesion.
It is the obvious design and will of the Creator, that all
the human race should be bound together by ties of
mutual helpfulness, and live in perpetual harmony with
each other. Nothing tends so powerfully to promote
this, as perfect freedom of commercial intercourse. Na-
tions that are bound together by ties of mutual depend-
ence so strong as those which unite England and the
United States, especially so strong as they would be if
we on our side adopted free trade as heartily and thor-
oughly as England does on hers, cannot go to war, they
must therefore do each other justice, and by so doing
preserve the peace. Already in our past history our
commercial relations have again and again saved us from
engaging in deadly strife. It is devoutly to be wished,
that all remaining barriers to perfect freedom of com-
mercial interchange may soon be removed, and that thus
the peace of these two great free nations may be secured
for all the future.

132 ECONOMICS.

Every philanthropist looks forward with longing hope
to a good time coming, when men shall " beat their
swords into plowshares and their spears into pruning-
hooks, and learn war no more." One of the most in-
dispensable and hopeful conditions of the realization of
such an order of things, is the establishment of perfect
Ireedom of trade among the men of all nations. The
selfish national pride which scorns that universal natural
dependence of man on man, that mutual helpfulness
whereby the products of every soil and climate and civ-
ilization shall be exchanged for those of every other, so
that all men may enjoy all the bounties of the Creator, —
that seltish malignant pride and false conception of na-
tional independence, must be banished from the minds of
men, and the sentiment of fraternity must succeed.

§ 97. Fifth. It is said that free trade might be a very
good thing, if other nations would agree to it ; but that
while the rest of the world to a great extent adheres to pro-
tection^ it is necessary for us to do the same.

If this is the view taken, it is surely incumbent on us
to accept free trade in our relations to any nation that
adopts a free trade policy towards ourselves. If this is
conceded, then we may at least have free trade with
Britain, for her policy towards us is as free as could pos-
sibly be asked. The way is then open for perfect free-
dom of commercial intercourse with England and all her
colonies, and our government ought to lose no time in
cojisummating a league of commercial freedom with the
whole English-speaking world. The uniting of all the
populations of the earth that use the English language,
in such a league, would be an event of great and benefi-
cent significancy to all mankind.

But this objection is capable of a much more com-
prehensive answer. The fact that the commercial policy
of any nation is restrictive and exclusive, is no reason at

FREE TliADE, OTIJECTIOXS CONSIDERED. I33

all vvhy we should not buy from the people of that nation
anything which we can procure from them more cheaply
than we can produce it ourselves, or obtain it elsewhere.
The obvious rule of economy — buy where you can buy
cheapest— is entitled to cut its way through all national
rivalries, jealousies and antipathies. Some nation may,
by partial and ruinous laws, exclude from her markets
what we have to exchange with her people. Such laws
may operate to produce exclusion of commercial inter-
course. We may be in such circumstances that we cannot
profitably buy of her people unless we can give our own
products in exchange. In that case commercial inter-
course must be at an end. She has thrown barriers in
our way which we cannot surmount. But in such a case,
it would be quite unnecessary and useless for us to re-
taliate, by imposing discriminating duties against the
products of her industry. She has herself excluded them
from our markets. If my next door neighbor has built a
solid stone wall five feet thick and ten feet high, to ex-
clude me from his premises, that wall is perfectly suffi-
cient to prevent any intercourse between us. It would
be great stupidity and folly for me to build another sim-
ilar wall by the side of his, for the purpose of retaliation.
It may however be that the products which she ex-
cludes we can exchange elsewhere for something which
she will admit, perhaps for gold, which no nation rejects.
It may therefore still be true, that in spite of her ex-
clusiveness, we can obtain from her certain needed com-
modities more cheaply than we can obtain them else-
where. In that case the impolitic exclusiveness of her
legislation is no reason at all why we should not avail
ourselves of the advantage of buying of those that will
sell cheapest. If therefore her people are disposed to
offer in our markets commodities which we need, more
cheaply than any one else will s^ll them, why should we,

134 ECONOMICS.

in mere retaliation for her suicidal exclusiveness, refuse
to purchase? To do so is childish and unreasoning folly.
]f 1 raise cattle and my neighbor raises horses, it is very
childish in me to refuse to buy of him a horse which he
offers me at a bargain, because he refuses to buy my cat-
tle when he needs them, and I offer them to him on ad-
vantageous terms. Revenge is by many considered very
sweet, but it has no comniercial value. It is no wiser
between nations than between individuals. In either
case it is unwise, mean and degrading. If we have not
some better reason for retaining our policy of exclusive-
ness than national retaliation, it were wise to abandon
it with as little delay as possible.

§ 98. Jt is alleged, that protection is necessary, to en-
courage the acquisition of skill in manufactures.

It is inconceivable that such a provision can be neces-
sary, when we remember that wages are higher, as a gen-
eral rule, in our country than in any country of Europe,
and that our country steadily receives a vast emigration
from those countries with whose manufacturing skill we
have chiefly to compete. There can be no difficulty
under these circumstances in attracting to this country
by the offer of American wages any number of skilled
laborers we may need. The notion that in a case like
this it can be necessary to impose on all manufactured
goods duties varying from tvyenty per cent to more ihan
a hundred per cent of their value, for the encouragemsnt
of manufacturing skill, is in the last degree ab.surd, and
indicates that he who urges it, draws much more from
the resources of his imagination, than of clear practical
thought.

Protection docs not encourage but discourages the acquisi-
tion of manufacturing skill. Such skill is the child of
free, sharp, practical competition. If American manu-
facturers are to be as skillful as those of any other nation,

OBJECTIONS TO PROTECTION CONSIDERED. I35

they are to become so, by standing face to face with the
most perfect manufactures of the world, and competing
with them with no shield between. If a protective duty
is interposed, it will relieve our manufacturers from the
necessity of equalling the best foreign products, and
thereby render the acquisition of the highest skill un-
necessary to their success. To encourage manufacturing
skill by such protection, is like encouraging industry by
relieving men from the necessity of labor for the sup-
port of themselves and their families — a method which
we believe has never been found to be very successful.

CHAPTER IX.

Objections to Protection Considered.

§ 99. In the last chapter the objections which have
been urged against free trade by its leading opponents
were carefully examined. In the present chapter we
shall present a few considerations which seem to us quite
fatal to the whole scheme of protection. It is the aim oj
that system to screen certain branches of industry from the
cof/ipetition of like industries in other countries. The means
are etitirely inadequate to the end. No police force which
such a nation as ours can employ, can suffice to enforce
our present revenue system, along ten thousand miles of
sea coast, and three thousand miles of inland boundary.
Where (as is to a great extent true under our protective
system) the duty sustains a large ratio to the price at
which the commodity is customarily sold, the temptation
to smuggling is exceedingly strong. It might be antici-
pated beforehand, that in such a country as ours, it could

136 ECONOMICS.

not be prevented against so strong a motive, and experi-
ence demonstrates that it cannot. The difficulty grows
largely out of the fact, that the consciences of the
people are never with such restrictive laws, — not even
the consciences of those who make and advocate them.
There are few who would not evade and violate them
when they could do so without any risk of incurring the
penalty. Such laws can only be enforced by an omni-
present and ever vigilant police force — such a police force
as along the whole border of our country is impossible.
Consequently the branches of industry to be protected
are not shielded from competition as the government has
undertaken to shield them, and men who have imported
goods under the law, and honestly paid the duties, are
greatly injured by the competition of those who obtain
foreign goods without paying any duty at all. Those
well acquainted with the commercial intercourse between
the United States and Canada know the truth of what
we affirm.

Such a state of facts is very injurious to public morals.
All laws which are unsustained by individual conscience
are morally injurious. They tend to impair the force of
law as a rule of action. There are thousands who will
resort to expedients for evading our revenue laws, who
would never do a thing which was in itself contrary to
their sense of honor and right. To evade the law comes
to be regarded as a very venial sin, or no sin at all. No
government on earth can afford to forbid what no one
would have regarded as wrong had it not been forbidden,
and to enforce the prohibition. Such legislation on any
subject weakens the hold of the government on the con-
sciences of the people. When the great body of the people
in their own individual capacity can be thoroughly con-
vinced, that it is dishonorable to buy a foreign product
in preference to a domestic one simply because it is

OBJECTION TO PROTECTION CONSIDERED. 137

cheaper, the protective system may be enforced without
difficulty, and with perfect safety to public morals. But
SO long as no man sees any dishonor in preferring the for-
eign to the domestic commodity because of its cheapness,
the enforcement of such laws will be often impossible,
and always difficult and of evil moral tendency.

§ 100. The protective system tends to construct the whole
economic fabric upon a wrong principle and to give it a
wrong direction. By a code of laws which permeates and
pervades all the economic machinery of society, the gov-
ernment treats competition as a public enemy, and pro-
vides for shielding from its influence branches of industry
in which capital is invested to the amount of hundreds of
millions. By this means not only are all those who en-
gaged in the protected branches of industry taught to re-
gard competition as their natural enemy, and to look to
the governrrent more and more to shield them from it ;
but other men, whose trade lies not within the charmed
circle, come to regard competition as their enemy also,
and become painfully conscious how inconvenient it is to
them, and even though they have no prospect of legislative
protection, they begin to look anxiously around for some
device by which they also may escape annoyance from the
common enemy. A nation whose legislation is strongly
protective in its character will always be full of innumer-
able and endlessly varied combinations of producers,
whereby they seek to fix their own prices on their pro-
ducts, without the necessity of being controlled by com-
petition.

England has for ages sustained by her legislation and
handed down from generation to generation the privileges
which distinguish her aristocracy from the mass of her
people. Her laws have divided society into two ranks
only. But custom has taken the idea from the law, and
constructed many other grades as distinct as the one

138 ECONOMICS.

which her laws originated. For niany centuries every-
thing in that country has been graded. By a very anal-
ogous process, all American trade is at present seeking
to secure for itself the privileges enjoyed by the pro-
tected industries, and presents the aspect of a general
struggle so to constitute all its arrangements as to escape
the natural and healthful influence of competition. This
is at present among the chief obstacles to the growth of
our manufactures, and the expansion of our industry into
all that rich variety which our soil and climate admit.

§101. Protection corrupts our national legislation.
Does any one believe that our present tariff of duties is
the result of calm enlightened statesmanship, applied
with judicial impartiality to all the interests affected by
it? Is it the result of any statesmanship at all? He
who thinks so, is the victim of a good natured credulity,
which is more worthy of the prattling innocency of child-
hood, than of the sober good sense of mature manhood.
It is just such a set of laws as no man living would
make, if it were submitted to his judgment to decide
what laws are desirable and wise. It is a clumsy patch-
work, which has resulted from a compromise between
the conflicting demands and confused clamors of all the
great branches of our industry that encounter any foreign
competition, besieging and begging Congress for more
protection — more protection. The question with our
legislators is, not whose claims are really strongest and
most righteous, but whose clamors are loudest, who can
bring most votes to support our party, or if disobliged
alienate most votes from it. The bearing of the tariff
on the next election has had a great deal more influence
than its bearing on the prosperity of our people. That
with resources such as ours, and a national debt of more
than $2,000,000,000 to provide for, our revenue system
should be constructed and controlled by such influences

OBJECTION TO PROTECTION CONSIDERED. I39

as these, is a humiliation of our country in the eyes of
the nations. It is disgraceful to our civilization. To
this humiliation however must we submit, till we throw
off this nightmare of protection. It must also be added
to all this, that in this combination of evil influences,
direct bribery of the legislator to procure his vote in favor
of the further protection of some particular industry, is
we fear no uncommon element.

§ 102. The protective system is in its own proper nature
unsocial. It tends to reduce the intercourse of nations
to a minimum, and proportionally to weaken all the ties
of brotherhood which naturally bind the human family
together. Such a tendency in such a country as ours is
full of danger. Our safety requires that all the forces
which tend to national unity be strengthened, and that
all divisive forces be as far as possible eliminated. Pro-
tection is a divisive force.- With the exception of slavery,
nothing has ever exposed our national unity to so much
peril as the attempt to carry into effect the protective
system Any one who will candidly consider the sub-
ject will, we mink, acknowledge that our efforts at pro-
tective legislation, strangely persisted in, had great in-
fluence in producing those violent antipathies which
were ultimately developed into the great rebellion.

Nor are we safe for the future. If the doctrines of
protection are to be accepted as true, there are no two
portions of the earth between which there are stronger
inducements to apply them, than the New England and
Middle States on the one hand, and the great States of
the Upper Mississippi Valley on the other. The man-
ufactures of the Northwest are powerfully repressed by
the competition of those of the New England and Middle
Slates, and the agriculture of the latter has been greatly
depressed, in large districts annihilated, by the competi-
tion of that of the Northwest. If protection is the true

T40 ECONOMICS.

and proper remedy for such difficulties, then should the
AUeghanies be a dividing line of nations. If men be-
come generally convinced that the doctrines of protection
are true, and would relieve New England agriculture from
its great depression, and speedily give to the Mississippi
Valley " variety of industry," the AUeghanies will become
a boundary of nations, and no man can predict into how
many rival nationalities the territory of the present
American Union may ere long be divided.

§ 103. The protective system as it exists in otir country
is self-contradictory and self-destructive. No one will deny
that it is possible, that a single branch of industry might
be encouraged and stimulated into more rapid growth
by the monopoly of protection. Let us suppose that up
to a certain time free trade had prevailed, when persons
interested in establishing some new industry had found
foreign competition inconvenient, and applied to the gov-
ernment for a protective duty. The government grants
the request and the revenue law is modified accordingly.
The petitioners go away for the present satisfied. Let
us suppose that these petitioners were manufacturers of
woolen cloth. The woolgrowers are not slow to discover
that on the one hand they are obliged to pay more for
woolen cloths, while on the other hand they are severely
pressed by the competition of foreign grown wool. They
apply for protection, and it cannot be refn.sed. This
takes away a part of the value of the privilege conceded
to the manufacturers of wool, and they are discontented.

The principle of protection is now established, and
every industry which encounters any foreign competition
will demand and cannot be denied a share in it. The
iron men of every grade must be protected, and every
dime of protection which is granted to them increases
the price of machinery for the manufacture of woolens,
and thus damages the woolen interest. The cotton men

OBJECTION TO PROTECTION CONSIDERED. I4I

too must be heard. They have to pay higher wages to
their laborers because the cost of living has been in-
creased. Workmen in this climate must have woolen
cloth. The cost of machinery is increased and therefore
it cosis more to manufacture cotton goods. They too
must be protected. Soon the woolen interest has lost
more by monopolies granted to other industries than it
gained by the one originally granted to itself, and it
besieges the government more clamorously than ever for
more protection, and with a much more powerful argu-
ment. It now wants to be protected, not so much against
foreign competition, as against the monopolies granted
to other industries. These one and all are soon again
thronging the lobbies of Congress, demanding more pro-
tection. The privilege granted to one industry is de-
structive of that granted to every other, and no man can
tell to-day, whether his particular industry is on the
whole benefited or injured by the protection which
actually exists, or whether if the whole were at once swept
away, his interest would not be actually relieved of an
oppressive burden. But all still worship with unfaltering
failh at the shrine of exclusiveness, and clamor for more
protection, as the panacea for all their ills. The coal
interest must have protection, however much that may
injure the iron interest, and the iron interest must have
protection, however that may affect the woolen and the
cotton interests. If protectionists could demonstrate
some great law of nature, by which it might be deter-
mined with accuracy when and to what amount protec-
tion should be granted, the whole thing might be reduced
to order and law and reason. But till that can be done,
(and it never can be done), it will present a scene of
wild confusion, self-contradiction and self-destruction.

It is impossible to escape this conclusion, except by
denying that protection does raise the price of protcctea

142 ■ ECONOMICS.

products. Upon such a denial protectionists do often
venture. It is a sufficient proof that such denial is futile
and absurd, that if the- protecting duty does not raise
the price of the protected commodities, it can in no man-
ner protect against foreign competition. It can have
this effect only by enabling the home producer to demand
a higher price for his commodities than he could com-
mand in face of the free competition of foreign products.
This is the only beneficial influence which it can exert on
the home producer. But we are able to produce on this
point the sterner evidence of facts. We are furnished
the following figures on the authority of a merchant of
the highest intelligence, the foreman in the carpet room
in one of the largest commercial houses in the city of
New York. The following are the items of the cost of a
five-frame Brussels carpet per yard, in gold, of English
manufacture, in the city of New York, viz.

Cost in England .... 89 cents.

Duty 64 "

Exchange, freight, etc 22 "

Total cost in New York $i,75

A carpet of American manufacture of the same qual-
ity is sold by the New York dealer at the same price
with this English made carpet. Does then the protec-
tionist expect us to believe that the American dealer
could sell his English carpet at the same price as now, if
he were relieved from the necessity of paying that duty
of sixty-four cents per yard } Or that the American
manufacturer could obtain the same price for his goods
as now, if English carpets could be introduced into the
market free of duty, or by paying only a revenue duty of
ten or fifteen per cent on the cost in England ? It re-
quires some courage to assert in view of such figures that
a protective duty does not enhance price. It would be
easy to procure similar figures in respect to many other
products which are highly protected. How long our

OBJECTION TO PROTKCTION CONSIDERED. 143

present protective system is to be adhered to against
such facts as these we are quite unable to predict.

§ 104. One point more demands our attention before
we dismiss this subject. Mr. Fawcett, after having very
clearly demonstrated free trade as the natural law of ex-
change between men of different nationalities, looks
around for some cotisideration by which to commend
charity in our judgment of those who so stoutly resist its
introduction into the legislation of the nations. In this
line of thought he comes to the conclusion, that though
free trade is certainly for the greatest good of the whole,
yet there are certain classes that are benefited by an ex-
clusive system. We can not accept this conclusion. It
may indeed be true that when the exclusive system has
been long established, and trade has adjusted itself to
it, there may be classes who would suffer by a return to
the natural and healthful system of free trade. It is sel-
dom possible to right a great wrong without hurting
somebody. When the wrong was introduced many were
most seriously and unnecessarily injured. During its
existence, it is quite probable that persons may have so
identified themselves with it, that their interests will sutTer
when it is removed. It is generally much better that
such persons should suffer, than that a great wrong
should not be righted. But we deny that any class can
be pennancntly injured by substituting free trade for the mo-
nopoly of protection. It would at first view seem, that the
repeal of the English Corn Laws must have reduced the
price of agricultural products, and therefore been injuri-
ous to land-owners. And it is true that free trade has
kept the price of wheat from rising while the population
of the country has been immensely increased. But
though the price of wheat has not advanced with that in-
crease of population, rents have advanced. A smaller
portion of the bread of the English people is grown on
their own soil, but a much greater breadth of land is

144 ECONOMICS.

demanded for other products which cannot be brought
from a distance, and which pay a higher rent than wheat
can afford. The agricuUural interest of England has
not been injured by the repeal of the Corn Laws. Conse-
quent upon that great measure of British statesmanship,
England has experienced an addition of one-fifth to her
population, a vast enlargement in every department of
her trade, and a vast accession to her wealth unprece-
dented in any other portion of her history. In that
increased prosperity her agriculture has shared. Facts
prove that the selfish exclusiveness by which she sought
to foster her agriculture was as unwise and suicidal as
it was selfish and exclusive. Such must be the effect
of free trade in every case. Every one's true interest
lies, not in compelling his neighbor to receive from him
what he could buy elsewhere more cheaply, but in pro-
ducing that for the production of which he possesses
greater advantages than any other producer. The high-
est prosperity of a nation and of every body in it, of the
world and all that dwell therein, requires that every man
should be diligently seeking to produce more cheaply
than any one else can, something which is desired by the
greatest possible number of consumers. In this direc-
tion free trade turns universal effort. Protection turns
the effort of every man into the direction of compelling
as many as possible to purchase his products whether
for their interests or not. The former tends to universal
honest thrift, the latter to equally universal dishonest
sham. No fair-minded man, after carefully examining
this subject in all its bearings will doubt, that the aban-
donment, speedy and entire, of that system of legislation
called protection, and the adoption of free trade in all
our relations with the rest of the world, would procure
for our country as great an increase of prosperity in every
department of our industry, as England 'has experienced
as the result of adopting a similar policy.

PART III.

DISTRIBUTION,

CHAPTER I.
Preliminary Principles,

§ io6. There seems at first thought to be room for
a doubt, whether the two parts of our science which we
have distinguished as Exchange and Distribution are
really separated from each other by any clearly definable
boundary. The one law of competition is alike universal
and equally controlling in them both. It will be shown
as we proceed that we can no more escape from it in
dealing with the questions which Distribution presents,
than with the questions of simple Exchange. A little
reflection will however convince us, that they are sepa-
rated by a distinct natural boundary, which ought not to
be lost sight of. In treating of Exchange, we have been
considering the nature of value, the laws which regulate
the exchange of one commodity for another, and the in-
strument by which exchanges are facilitated. The dis-
cussion of these subjects is complete in itself, and may
be pursued to exhaustion, without involving any of the
applications of the law of competition which remain yet
to be considered. The question for how much a given
commodity will be exchanged in the market may be de-
7

146 ECONTOiMICS.

cidtcl without involving any consideration of the methods
by which its equivalent when received is to be divided
among all the interests which were concerned in produc-
ing it. 'J'he former of these questions belongs to Ex-
change, the latter to Distribution. 'Ihere are very few
commodities which are the exclusive product of a single
laborer. Even if some products seem at first thought
to be so, a little consideration will generally show us
that they are not. The laborer who seems to be alone
concerned in it used tools, and those tools were produced
by labor previously exerted. He was fed and clothed
while he was engaged in the work. That also implied
pretxerted labor. The material on which he wrought
had value when it came to his hand. When we pur-
chase the product from the laborer who made it ready
for our use, we must compensate him, not only for his
immediate labor bestowed upon it, but for all this pre-
exerled labor. Nor is even this all. He has paid and
we must repay him for the rent of the land on which
grew his food and the material of his clothing consumed
while employed in that labor, and for the use of the cap-
ital and for the oversight and labor concerned in its pro-
duction. We cannot buy a pin or a button into the pro-
duction of which all these things and many more have
not entered. It may be that so small an article as a pin
m.ay have laid under contribution not only many trades
and industries, but the remote continents and islands of
the earth. All must be adjusted, each must have its
share. To determine on what principles and by what
laws this division is accomplished is the aim of this part
of our science.

Definition. Distribution is that part 0/ Economics
which explains the laws which prevail in assigning to each
cf the parties concerned in production their respective shares
in the result.

PRtLIMHTARY PRINCIPLES. 147

Great confusion and error in dealing with this class
of subjects are constantly occasioned by rot bearing in
mind, that the questio?is with which we have io do are not
ethical^ but purely economic. The laws vvhich determine
the several results are not moral, but natural laws, as far
removed from the control of .human wills as cohesion or
electricity. The question is not how ought the proceeds
of production to be shared ? but what are the natural
laws which do and will determine the share of each ?
just as in physical astronomy we inquire, not how the
planets ought to move but how the) do move in obedience
to an irresistible force impressed upon them. Econom-
ic questions are precisely analogous. We never can
deal successfully with them unless we bear this in mind.
The condition of the public mii.d on this class of ques-
tions is to a great extent morbid, and demands a remedial
treatment. We shall confer incalculable benefits on
society, if we can succeed in convincing men, that natural
laws control this class of questions, and not the caprices
of human pride, selfishness and tyranny.

§ 107. The principles already laid down are so pre-
eminently important in this division of the subject, that
we deem a little recapitulation desirable if not absolutely
necessary. /;/ no part of our science is the law of com-
petition more prevalent and more potent. It is our busi-
ness to show how that law would divide, and when un-.
counteracted does divide the products of laborj and to
point out those artificial devices by which this law is
evaded, and temporarily, sometimes even for long periods,
rendered inoperative. We have shown how this is ac-
complished in relation to exchanges, and pointed out the
disaterous consequences which result from it. If like
violations of fundamental law exist also in this branch
of our subject, it is equally our province to point them
out, and indicate the remedy. Such attempts when-

148 ECONOMICS.

ever made can result in nothing but confusion and
disaster.

Let it also be borne in mind, that in our view all liv-
ing human beings are to be regarded as laborers. All at-
tempts to divide human beings into two classes — laborers
and not laborers — must fail and result in confusion of
thought. The capitalist is a laborer, not less than he
that plows the field, or works a steam engine. The
artist, the poet, the student, the mother^ are all laborers.
Infants in their cradles are laborers in prospect, and
must be reared to take the place of others that are soon
to pass away. The old and the decrepid are laborers
that have done their work, and their support is a neces-
sary charge on the world's industry.

In the same manner all the accumulated results of
labor are useful only to assist and sustain the labor that
is now living. The attempt to divide wealth into that
which is used to aid and sustain labor, and that which is
used to gratify desire, can result in nothing but confusion.
What is it to support labor? Is it to give to a human
being, considered as a mere working machine, just so
much food and clothing and shelter as are absolutely
necessary to keep the structure of bones and sinews and
muscles in working order ? Does it not mean more than
that ? To give him the means of living a social, an
esthetic, a moral, a religious, a human life ? The life of
a civilized, developed man ? Are not then all products
which are employed in enabling human beings thus to
live, the true and proper sustentation of labor? If not
how are we ever to draw the line between what is and
what is not used for the support of labor? How are we
ever to determine what portion of the expenditure of a
man or of a community is applied to the support of pro-
ductive labor, and what portion of it is to be set down
to the gratification of desire ? Is it not the simple truth

PRELIMINARY PRINCIPLES. I49

that the gratification of desire is the one only object of
all labor, and that it is therefore in the nature of the case,
the only possible reward of labor ? No man ever did or
ever can draw a definite line between that which is em-
ployed to gratify desire, and that which is the reward of
labor. The distinction is not definite and therefore not
scientific.

Let us illustrate this by an example. Let us sup-
pose that a man of great wealth sets aside one million
dollars to build and decorate a palatial residence. This
fund is no less employed in paying wages and furnishing
helps to labor than before. The stone quarriers and
stone hewers, the masons, the carpenters, the house dec-
orators, the artists in painting and statuary will feel the
stimulus of every dime of this capital just as before.
Even after his palace is completed, he may rent it, and
then it will be a part of his capital, as truly as though he
had spent it in building a mill. Or he may use it for
his own residence, and then its annual income will be a
part of the wages of his own labor. Even that which he
expends in clothing and decorating his person and the
persons of his wife and children must equally be em-
ployed in supporting labor, as truly as in the case of any
other outlay. It is true that when it has been expended
it will be capital no longer, but the same is true of the
wages he has paid to the humblest laborer. It is true
therefore that what this man expends for the gratification
of desire is as truly employed in sustaining and helping
labor, as any other portion of his wealth. He may even
be an epicure and a gourmand, but his cook is as truly
a laborer as his carpenter, and his cook-stove is as truly
fixed capital as any of his steam engines.

§ 108. This general account of the various interests
to be provided for in Distribution seems at first view so
complicated as to be incapable of bting reduced to any

150 ECOXOMICS,

general system. This however is merely in appearance.
We must here recur to our general classification. All
wealth is cotttposed of two elements only, Labor and Capi-
tal. These only are concerned in all Production. Our
problem is therefore reduced to this simple form — to
show how the products of production are divided between
the Labor and Capital concerned in any process. A two-
fold division of the subject is therefore clearly indi-
cated, viz.

/. T/ie share which falls to the laborer.

II. The share which falls to the capitalist.

We are aware that something must yet be said in
justification of this classification, but we prefer to con-
sider that subject in connection with land and rent, and
therefore postpone the matter for the present.

CHAPTER n.

Wages Determined by Competition.

§ 109. Definition. That share of the result of any
productive process which falls to the laborer is called wages.

The aspect under which this subject presents itself
in those nations that have attained to the most advanced
civilization is not the most favorable to an understand-
ing of it, in its elementary principles. In the first rude
beginnings of society, every man is a laborer without
capital. He must provide what is necessary to the sup-
port of life, while he invents and fabricates his first sim-
ple tool. When he has made that tool, he is its owner.
He has become both a laborer and a capitalist. If he
exchanges his products, he will demand compensation

WAGES DETERMINED DY COMPETITION. 151

both for his labor and his capital, in the price he will
demand for his commodities, and so far as he can under
the law of competition, he will obtain both wages and
profit. He cannot arbitrarily and by his own will deter-
mine either the one or the other. Even in these rude
beginnings of the economic system, competition will assert
its stern supremacy as a law of nature. As soon as the
results of his labor, assisted by such tools as he can in-
vent and fabricate, are more than sufficient to furnish
necessaries, he can decide by his own will how much he
will expend in the gratification of other desires than that
_of gain, and how much he will invest in improved tools to
render his labor more productive. He is both a laborer
and capitalist, and he can judge for himself what wages
he will demand for that labor which he expends in the
management of his capital.

The greater the extent to which this condition of things can
be perpetuated in the most advanced stages of civilization, the
better it is for the individual and for society. It is always
true that the laborer who works with his own tools and
upon his own capital, will for that reason be more in-
dustrious, more skillful and more frugal. The products
resulting from such a natural combination of labor and
capital will be more abundant and more excellent, be-
cause the laborer is constantly stimulated i)y the consid-
eration, that all which he produces is his own, to be dis-
posed of according to his own will. The best economic
system for every country and for the world is that in which,
to the utmost possible extent, labor and capital are united
in the same person. All political and social systems
which tend to collect capital into few hands, and to re-
duce the many to the condition of laborers without capi-
tal, are impediments to the increase of the wealth and
happiness of mankind.

§ no. It is however inevitable that, to a greater or

152 ECONOMICS.

less extent in the progress of societ\', the laborer will be
destitute of capital, and the capitalist will find the neces-
sity of employing more labor than his own hands can
perform, in order to put all his capital to use. Iletict
the relation of employer and employed becomes inevitable.
As soon as this relation originates, the question of wages
necessarily arises, and we are forced to discover and
apply the natural laws on which its adjustment depends.
This question has been growing in importance and in
difficulty for generations. At present it is very obvious,
that capitalists who employ laborers and laborers who
work with other men's capital are engaged in a conflict .
with each other of which it is difficult to foresee the ^x\^.
Violent passions and bitter antipathies have sprung up
in the progress of this conflict, which unless the strife is
terminated by a satisfactory adjustment, threaten anarchy
and revolution. Only one mode of adjustment is in the
nature of the case possible. The natural laws which pre-
vail in this department must be ascertained and ex-
pounded to the satisfaction of both parties. Such an
understanding of these laws does not at the present time
exist in either of the parties. If there is a science of
wages, this is the time when it ought to be expounded.

Jt is wrong to speak of this conflict , as we are accustomed
to do, as a conflict betiveen capital and labor. In this coun-
try at least it is still true, that a very large portion of the
labor is performed by men who own capital, and in all
countries capitalists are laborers. The conflict is not
between labor and capital, but between laborers who have
no capital, and capitalists who have need of other labor than
their own, to utilize their capital. To avoid therefore
any confusion of thought which might find its way into
our discussion of this part of the subject, we shall use
the word employer for the capitalist who hires laborers,
and the word employe for the laborer who is hired to

WAGES DETERMINED BY COMPETITION. 1 53

work upon capital which belongs to another. This will
locate the conHict precisely where it is, between employ-
ers and employes.

On the side of the employe it is assumed, that his
wages are determined by the arbitrary, selfish and tyran-
nical will of his employer, and that this is the reason
why his portion is so scanty and inadequate to the com-
fortable support of himself and his family. He is apt
also to forget that the foundation of that fortune out of
which comes the capital that furnishes him the employ-
ment he has, was very probably laid in frugal selt-denial
quite as severe as that which he is obliged to practice.
In such circumstances it is quite impossible that the two
should meet each other on terms of friendship and con-
fidence. The needle-woman for example, wearing away
her life " stitch by stitch," in her miserable garret, be-
lieves that she is the victim of her employer's grasping
greed of gain, that the starvation allowance which she
receives is dealt out to her by his arbitrary and tyranni-
cal will. Nor is she alone in this opinion. Thousands
who in a most commendable spirit of philanthropy com-
passionate her sorrowful lot, unite with her in this severe
condemnation of the greed of her employer. Our litera-
ture is full of such denurjciation. The inquiry is there-
fore one of great urgency, — Is there a law of wages .-• If
so, what is ii .'' And what are the causes of the terrible
suffering we often meet in the case of persons who are
compelled to live on the wages of their labor? These
are grave questions, and if our science can answer them,
the world will acknowledge it as a benefactor.

§ III. Wages are not controlled by the arbitrary will
of the employer. The facts are not consistent with this
supposition. It is true that some classes of laborers are
in a condition as miserable as they could be, if it were in
the power of the most selfish of employers to dole out
7*

154 ECONOMICS.

just such compensation as they pleased. But these
cases of extreme suffering are exceptional, not normal.
It will be shown also in the progress of this discussion
that these exceptional cases are due to a violation of the
natural laws which belong to the case, that there is a
law of wages which, had it been allowed to have free
course, would have prevented the mischief. There is
abundant proof in the history of humanity, that if the
arbitrary will of the employers could dictate wages, all
employes would be in a condition the most abject. This
is by no means the fact. It is true indeed that the agri-
cultural laborers of England are in a very distressed con-
dition, but those of many other countries are in a condi-
tion of comfort and thrift. The condition of agricultural
laborers in this country is so easy and advantageous,
that many of them become rich land owners and cap-
italists. The condition of employes generally, though
in many cases not satisfactory, is by no means consistent
with the supposition that wages are determined by the
arbitrary will of employers.

§ 1 1 2. There is positive proof that wages are determined,
even in such extreme cases as that of the needle-^women al-
luded to above, by the law of competition, and that neither
employers nor employed can escape from that law.

Let us still further examine that case. There is a
feeling rather than a conviction in many minds that the
law of competition is stern, harsh and cruel, and ought not
to be applied to such a case as this. If they should say
what they think, they would address the employers of
such women in some such language as the following.
What if the market price has fallen to the starvation
rates which you are paying these women ? Vou ought to
be ashamed to accept their services on such terms.
What if this is all their work will bring in the market ?
Why not do them simple justice by paying what their

WAGES DETERMINED BY COMPETITION. 155

work is really worth irrespective of competition ? This
is ver}'^ plausible, and seems to a great number of people
entirely conclusive. Let us apply it to the case.

How then shall we ascertain what is the real value of
their work ? This is a question from which we cannot
escape. No man can do justice till he knows what it is.
Discarding competition therefore as inapplicable to tiie
case, how shall we find the real value of any work ? Let
us suppose that a report of the distresses of the needle-
women in and around some great city has reached the
ears of their employers, and deeply moved their com-
passionate feelings. A meeting of employers in that
trade is immediately called, to consider what can be
done for the relief of all this suffering. They are honor-
able men and wish to do justly and mercifully. They
are quite convinced that the wages of these poor women
are not sufficient to sustain life, and they have no heart
to starve helpless women for gain. They agree at once,
that as competition has brought down wages to this ruin-
ous point, they will not apply it to the case any more,
but pay the women what their work is worth irrespective
of the market price. All unite in applauding this reso-
lution. Justice, philanthropy, can ask no more.

How then shall these noble men ascertain what the
work is really worth ? But one method is possible in the
very fiature of the case. It must be ascertained how
much time will be occupied in making any garment, say
a shirt. That question being settled, it must next be
ascertained what it would cost a woman to live in com-
fort during that time, and lay aside a little for days when
she will be unable to work. How much must she pay
for food, clothing, fuel, rent, and all other necessaries
and such comforts as contribute to. length of life and
efficiency as a laborer ? Every one says this is right.
How then is the question to be answered.'' By the price

156 ECONOMICS.

current of course. We have no other means of answer-
ing it, and every one knows that the price current is
purely a product of competition. Thus while intending
to emancipate themselves from the demon of competition,
these men find that they are still in his grasp, and cannot
proceed a step towards the accomplishment of their
humane intention, except by following his lead. The
attempt to escape from the law of competition in the
economic world, is just as hopeless as the attempt to es-
cape from gravitation in the material world. Its control
is absolute, universal and unrelenting over every eco-
nomic question.

§ 113. But it may be said, that though these employ-
ers cannot escape from competition, they can emancipate
the poor needle-women from it, and fix their compensa-
tion without reference to it.

This attempt will succeed no better than the other.
These employers are honest, earnest men, determined to
do justice, and follow up the inquiry till they reach the
result, that in order that seamstresses may live by their
work, the prices paid must be doubled. A new price-
list is therefore made out on that basis, and made public.
A joyful announcement is that to the starving needle-
women. But no sooner is this great rise in the prices
made known, than the number of applicants for work in
that line is increased in a far greater ratio than the ad-
vance in the price of the work. There are probably
three or four — it would not be strange if there were ten
women who would be glad to make shirts at a dollar
apiece to every one that would make them at fifty cents
apiece. These starving women have not escaped the
crushing effect of competition, the direction from which
it comes only is changed, it is more destructive than ever.
Before it was a ruinous competition in price. Now it is
a still more ruinous competition for any work at all.

WAGES DETERMINED BY COMPETITION. 1 57

Yesterday one was ruined by work at starvation prices.
To-day she has no work at all, being quite driven from
the market by the application of a crowd of well-to-do
■women, whose condition is not necessitous, and who
•would not think of working at such prices as had been
fixed by competition.

The evil is still further migmented by a new competition
which is sure to spring up in another quarter. The addi-
tional cost of manufacturing must be added to the price
at which the garment is offered to the customer. This
must diminish the demand for the goods. Many women
who have been accustomed to buy ready-made clothing
for their families will now find the difference between
the cost of the material and the cost of the ready-made
garment to be so great, that they will make it themselves.
The employers will therefore sell fewer garments, and
have much less work for the needle-women to do. The
employers, instead of benefiting their suffering employes
by their well meant effort to protect them from competi-
tion, have rendered their condition much worse than be-
fore. They have tried to relieve them from the crushing
effect of competition on price. They have raised up an
army of new and powerful competitors for the work, and
greatly diminished the amount of work to be done.

Two inferences from this case are inevitable. First,
That employers cannot benefit employ ts by arbitrarily raising
wages above the point at which competition would fix them.
Second, 2 hat every such effort arbitrarily to raise wages
must infiict serious injury on all those who are dependent
071 the occupation in question for a living. Of this it would
be easy to furnish innumerable illustrations. The one
we have given above must suffice. It will be asked then
— can nothing be done for such crushed and suffering
employes as these distressed needle-women ? We answer,
their employers as employers, can do nothing for them.

150 ECONOMICS.

Arbitrarily raising their wages will injure, not benefit
them. Their employers have the same opportunity that
all other persons have of relieving their sufferings by a
generous Christian charity. There are other aspects
however of this and like cases, which, though of great
interest, are not relevant to our present point of inquiry.
7'hey will be considered in another place.

§ 1 14. Wages are not therefore determined by the arbi-
trary will of employers. The notion that they are so is a
mischievous delusion. In a fair case, where competition
has had free course, employers cannot raise them above
the point determined by competition. Every attempt to
do so will prove equally disastrous to employes and em-
ployers. The sooner both parties know that they are
bound by a law of nature from which they are alike pow-
erless to escape, the wiser and happier they will be, and
the more agreeable and comfortable their relations to
each other.

It should also be borne in mind, that the competition
which determines wages (the amount of capital being
given, and on that supposition we have proceeded in all
this chapter) is the competition of labor with labor, and
not of labor with capital. It not only is not the arbitrary
will of the employer that determines wages, but, so far
as there is any will in the case, it is the will of the em-
ploye. Wages settle at a certain minimum point because,
in the conflict of competition employes select that point
as their minimum. Circumstances are found to be such
that those most anxious for employment prefer to make
their stand at that point and risk being unemployed
rather than bid lower on the one hand, and on the other
they judge it to be better to accept what is offered than
to incur the risk of failing of employment if they stand
out for more. This is the only will power that is con-
cerned in fixing the minimum of wages. The employer

WAGES DETERMINED KY COMPETITION. 159

has a precisely similar will power in determining the
maximum. As there is a point at which those most de-
sirous of employment, will bid no lower, so there is a
point at which those most anxious to obtain laborers will
bid no higher. Between these extremes each party uses
his own judgment as to what his interests require, and
when an employer finds one who will consent to work
for such wages as in the circumstances he judges it best
to offer, a contract will be made. In no case can one
will determine the question. A contract is always the
coincidence of two wills. Competition is the force by
which the coincidence of two opposing wills is brought
about.

Precisely here we must meet the question of combina-
tion to resist competition. Why may not employes com-
bine their wills into the will of one social personality,
and by refusing to work except at such wages as that
combined will prescribes, fix their own rate of compen-
sation as high as they please ? On the other hand why
may not employers combine and determine wages at as
low a point as they please .'' It is true beyond a question
that if the capitalist has more capital than he can use
with his own hands, the surplus will be quite useless
unless he can employ laborers. On the other hand it is
equally obvious that laborers without capital must be
employed by some one who has capital. Why then may
not either party by combination determine wages by a
social will ? This brings us face to face with one of the
gravest questions of modern civilization. Our next
chapter will be devoted to the consideration of it.

l6o ECONOMICS.

CHAPTER III.

Wages as Ajffeded by Combination.

§ 115. Two classes of combinations require our atten-
tion— combinations of those desirous of obtaining em-
ployment entered into for tlie purpose of raising wages —
and combinations of employers to reduce wages.

Before entering however upon the examination of
particular combinations, it is proper to remark, that there
are general considerations which reveal plainly enough the
impracticability of all attempts to control wages in this mati-
ner. The interests of the several persons or parties that
enter into such a combination never can be the same.
It may be better for one laborer to accept one rate of
wages rather than run the risk of failing to get employ-
ment. That rate may be to many others quite ruinous.
If combination fixes on the higher rate, the man whose
interests require him to accept the lower rate will feel
that the combination works to his injury, and wish to es-
cape from it. Others will be conscious that without the
combination they could obtain higher wages than the
combination demands. They will therefore be reluctant
to enter into the combination, and impatient at being
bound by it. The same difficulties will stand in the way
of combinations among employers. This is the reason
why such combinations are seldom of long continuance.
They have within themselves natural antagonisms, which
constantly tend to disruption. Individuals not artificial
combinations are the natural units of the economic sys-
tem. Individuality will assert itself.

The statement of the case made at the conclusion of
the last chapter shows clearly enough the impractica-

WAGES AS AFFECTED BY COMBINATION. l6l

bility of all such attempts. H on the one hand em-
ployes can by combination and refusing to work except
on their own terms, compel employers to accede to those
terms, to save their capital from being useless, on the
other hand it is equally in the power of capitalists by
combination among themselves to compel their employes
to accede to their terms, or submit to starvation. Com-
bination on one side is very likely to provoke it on the
other, and nothing can be expected from it but a dead
lock, which will render capital and labor equally useless.
Such a dead lock is too serious in its consequences to
continue long, and will be likely to end in a willingness
of both parties to submit the case to the natural working
of competition.

§ ii6. Combinations of labor against competition
assume the form either of strikes or trades-unions.

A strike is mi agreement entered into by employes, to de-
mand certain prescribed terms, and to cease work until those
terms are acceded to by their employers.

It is admitted that under certain conditions such an
agreement may temporarily succeed in obtaining the
wages demanded. If the occupation in which the strike
occurs is one in which a degree of skill is requisite, such
as can only be acquired by some instruction and practice,
and if the combination can be made to embrace all the
persons possessing that skill, that are within the reach
of the employers, it is evident that the demands of the
combination must be acceded to or work will cease. If
the wages demanded are so high as to leave employers
no prospect of any profit in continuing the work, it will
stop, till either the employes recede from their demands,
or other laborers can either acquire the skill, or be im-
ported from abroad. In one or the other of these ways,
the dead lock will in time be brought to an end, and the
employes will fail of their object, after having inflicted

l62 ECONOMICS.

much loss on their employers and brought on themselves
a great deal of suffering.

If the wages, demanded are not so high as to leave em-
ployers no margin of profit^ if it would still be better for
them to accede to the demand than to stop work, they
will be likely, for the time being, to do so. But it will
hereafter be shown, that every mode of employing capital
has its natural rate of profit, and-that capital cannot be
retained in any mode of investment, where that rate of
profit cannot be realized. If therefore the wages de-
manded in the case supposed are such as to reduce the
rate of profit on capital employed in that industry below
this natural standard, capital will be withdrawn from it
and otherwise invested, the trade will languish, fewer
laborers will be employed or demanded, and those al-
ready employed in it will be compelled either to with-
draw from it or recede from their demands. Thus wages
will decline to the natural standard as determined by
competition, and the strike will be ineffectual. It will
be proved that a law of nature is too strong for human
will-power, though strengthened by combination.

There may be still another case. It may be that
when the strike took place wages had been reduced by a
combination of employers to a rate tuhich was really below
the point which would have been fixed by free competition.
In this case the employers will not be able to obtain
workmen to take the place of the strikers, either by im-
porting them from abroad or by training new ones. If
therefore the employes are able to hold out for a time,
their employers will accede to their demands, if they are
not above the rates which would have been determined
by competition. If their demands are above that rate,
they will not be acceded to, e.xcept temporarily, till an
adjustment can be made by capital withdrawing from the
trade, and thus diminishinsr the demand for labor in it.

WAGES AS AFFECTED RY COMBINATION. 163

In none of these cases therefore can a combination of
employes succeed, except in the single one in which it
cooperates with competition instead of resisting it. The
result of this whole discussion shows therefore conclu-
sively, that employes are quite powerless to protect them-
selves against the results of free competition by any com-
bination among themselves.

§ 117. Trades iitiions are combinations of laborers of
another form and aiming at other objects besides the
protection of their members against competition. So far
as they are fraternal associations of artisans of the same
trade, for the purpose of promoting friendly relations of
sympathy and helpfulness, they lie entirely outside of the
sphere of our science, and we have nothing to say of
them here. They are however permanent organizations
with established rules and regulations, and often propose
not only to regulate the wages of their members, but to
dictate to employers the methods in which their affairs must
be conducted in many other particulars. Especially they
often attempt to confine the trade to a limited number of
artisans, by refusing to work for any employer who re-
ceives more than a prescribed number of apprentices in
proportion to the number of journeymen in his employ.
Such organizations are ramified over whole nations, and
it is said that some of them are not even confined by na-
tional lines. It is obvious that if such an organization
can succeed in attracting to itself and bringing under the
control of its regulations all who have the skill of the
trade, and preventing the accession of new members ex-
cept in such limited numbers as its rules prescribe, cer-
tain very important results must follow, which all good
citizens would do well to consider.

If a trades-union has the direct control of all arti-
sans who are qualified to exercise their trade in a given
country, the trade cannot be carried on except in accord-

164 ECONOMICS.

ance with its regulations. Employers in that trade must
pay the pr.'iscribed rate of wagss, or obtain no workmen.
If after paying such wages as the union prescribes, the
trade is not remunerative, owners must reimburse them-
selves by exacting higher prices from the public for their
products. These products the community must have,
and must therefore pay the price demanded by the only
men who have the skill to produce them. This is of
course the assumption of an unlimited power of taxation
of all other trades, and of the whole community. By
limiting the number that can be instructed in the skill of
the trade, they exclude many young men who desire to
enter it, from sharing its profits, and compel them un-
naturally to swell the stream of competition in other trades
and occupations. In short they establish their trade as
a perpetual monopoly.

§118. Let us now inquire how such a scheme is likely
to fare in the economic system of this modern world. It is
evident that if one trade may build itself up into such a
monopoly, so may any other. If the principle is admis-
sible and practicable in one case, why not in another?
Soon every trade may be a monopoly. Each may be a
permanent society making its own regulations, prescrib-
ing its own wages, and limiting its own numbers as
narrowly as it pleases, each virtually dictating the price
at which its commodities shall be sold, each thus exact-
ing from every other, and each exacted upon by every
other, and each losing vastly more by the exactions of all
the rest, than it can possibly gain by its own. In such
an order of things society would entirely lose its fraternal
character, and be composed of many rival fraternities,
each hostile to every other. This results from the very
nature of a monopoly, whether created by legislative
enactment or by voluntary association. Nothing is ad-
justed by natural competition, every thing by hostile

WAGES AS AFFECTED BY COMBINATION, iC)^

exaction. Meanwhile a large portion of the cominuniiy
are incapable from the nature of their occupations ot
organizing any monopoly at all, and are exposed to the
exactions of all, without any possibility of self-defense or
retaliation.

We have seen the tendency of " Protection " to or-
ganize every protected branch of industry into such a
monopoly hostile to every other and to society at large.
The only difference between that case and this is, that is
a monopoly created and sustained by legislation ; this is
an attempt to establish a monopoly without the aid of
government. In principle and aim the two cases are
exactly alike. Their common object is to protect their
industry from the beneficent natural law of competition.
It is, we think, obvious enough, that if such a system of
ideas can be carried out in practice, either in the one
case or the other, the civilized nations of modern Chris-
tendom are threatened with very serious disaster. Can
the attempt succeed ?

§ 1 19. T//e ultimate and general success of such schemes
in an age of freedom and intelligence is impossible. Such
ideas have prevailed and been put in practice in the past
ages of European civilization, to an extent of which the
men of the present time have very little conception. Till
a comparatively recent period, even in England, every
trade was a monopoly sanctioned and encouraged by the
government. But the time of such legislation has gone
by forever, or at least till the Dark Ages return upon the
world again.

In the present conditions of society, it is impossibb
for such an association to attract to itself all the workmen
who possess the skill of the trade. Many will have the
good sense to prefer the chances of success under free-
dom and natural competition. This is true as a matter
of fact. Such workmen will be favored and encouraged

1 66 ECONOMICS.

by employers, and find their own advantage in their
independent position. The trades-unions will not
therefore be able to obtain the monopoly of the trades.
They will equally fail in their efforts to limit the number
who can acquire the skill of the respective trades. Arti-
sans who are not attached to any union will freely in-
struct young men wishing to acquire the skill of any
trade, and their numbers will be indefinitely multiplied.
For the same reasons which were given in connection
with the strikes, they will not be able to resist compe-
tition in determining the wages of their own labor. They
can permanently succeed under the same conditions and
only under the same conditions as strikes, that is when
there is an abnormal condition of things in which wages
are lower than the rate at which competition will fix
them, so that competition itself will co-operate with their
efforts to raise the rate.

§ 1 2 o. There is another insuperable obstacle to the success
of any combination to raise wages above the standard of
competition. Grant that by such combinations they may
take the question of wages into their own hands, and
appropriate to themselves just so much of the gains of
production as they choose, the consequence will be, that
capital will cease to be accumulated, because it will cease
to be of any benefit to its owner. If capitalists discover
that nothing can be gained by accumulating, that labor-
ers really own all that is accumulated, they will not save
for the barren purpose of calling it their own. Laborers
will soon discover that they have killed the hen that laid
the golden eggs, that by refusing to capital its proper
share of the gains of production, they have annihilated
that by which their labor was supported and assisted.
Our country is at the present moment abounding in sor-
rowful proofs of the truth of this assertion. A very few
years ago, at a time when wages were higher than at any

WAGES AFFECTED DY COMni NATION. 167

former periods of our history, the daily papers were filled
with reports of the strikes of employes in almost all the
leading branches of trade, clamorously demanding mare
wages and often with additional details of violence
offered to laborers who still chose to work, and of the
reckless destruction of the property of their employers.
At this time our doors are almost besieged by tramps, tell-
ing the pitiful story of being out of employment, and beg-
ging for a piece of bread to save them from imminent
starvation. Who has told us or can tell us how much of
the present destitution is due to the fact, that by the strikes
of those years of extravagance, employers were induced, by
the pressure of present seeming necessity, to pay wages
which they could not afford, and as a consequence have
now no capital with which to pay any wages or employ any
laborers ? As from day to day we are feeding these poor
wretches, we are much reminded of those years of the
arrogant extravagance of laborers. One extreme follows
another. Laborers about to engage in a strike should
think of the foble of the hen that laid golden eggs.

§ 121. It remains to inquire whether einployers can, by
combination, reduce wages below the standard of competitio?t.
This part of the subject may be disposed of in very few
words. It is never more than a very small portion of
the capital of the world or even of a single country that
can be brought into any such combination. Let us take
as an illustration the great coal monopolies 6f Pennsyl-
vania. Those great companies can and do combine for
certain purposes which are injurious enough to the gen-
eral welfare. But they have little prospect of success in
any effort they may make to reduce wages below the
market rate. The demand for labor in the United States
is so great, that that portion of it which is represented by
these companies is, in comparison with the whole, quite
insignificant. The coal fields of the whole country are

l6S ECONOMICS.

SO extensive, that those of Pennsylvania are relatively
too small to exert any appreciable influence on the de-
mand for labor. If the miners employed by those com-
panies do not emigrate to other fields, rather than work
for wages that are below the market, the fault must be
in their own stupidity and folly. In a great free country
like this the laborer who remains under any such at-
tempted oppression has small claim on public sympathy.

// is always necessary to the success of any combination
of capital, that it should have the reputation of paying fair
7vages to its empcoy s. Otherwise its interests will greatly
suffer from the difficulty of obtaining a sufficient supply
of competent laborers. Of this our great competing
lines of railways afford a striking illustration. For cer-
tain purposes they manifest a disposition to combine for
the purpose of resisting competition on the most gigantic
scale. But they have little power to reduce the wages
of their employes below the standard of competition.
Not one of them would dare to let the impression go
abroad, that their employes are less liberally rewarded
.than those employed in other branches of industry.

All the conclusions of this chapter might be confirmed
by an appeal to facts. Multitudes still cling to the belief
that the law of competition can be resisted by combina-
tion of human wills. New combinations are formed from
time to time and some of them obtain a temporary suc-
cess. But 'it is only temporary, they soon fall to pieces,
and the stream of wages settles back into the well-worn
channels of competition. Were the history faithfully
written of all the efforts of this sort which have disturbed
the quiet of the economic world within the last fifty
years, we think it would convince any candid mind of
the impracticability of ever adjusting matters between
employers and their employes by any such methods.
The conflict never can be terminated, except by an

WAGES AFFECTED liY COMBINATION. 1 69

appeal to^some established and recognized natural law.
We admit that in peculiar circumstances that law has
sometimes produced results which are far from satisfac-
tory. But it will be shown in the progress of this trea-
tise, that those results are not due to competition pure
and simple, but to vicious social or political arrange-
ments which have turned aside competition from its
natural and legitimate course.

§ 122. In all that has been said in this chapter of
combinations against competition, it has been presumed
that, in the efforts of either party to dictate terms to the
other, peaceable means only will be used. As in this con-
flict physical force is always on the side of the employes,
they only are for the most part under any temptation to
resort to unlawful means. If they not only refuse to
work except on terms of their own dictating, but resort
to violence, to hinder other laborers coming in and ac-
cepting employment in their places, and in destroying
the property of their employers, the thing will then have
passed out of the sphere of science, and we must look
upon it as we do upon any other insurrection against the
supremacy of the laws, and the peace of society. The
government should suppress any such outbreak of vio-
lence with the utmost promptness and rigor. It is the
foremost duty which the government owes to the eco-
nomic interests of the people. That any man is at lib-
erty to judge for himself what wages he will demand, or
whether he will work at all, all admit, and the govern-
ment will protect every one in the exercise of that right-
But the employer owns his capital, as truly as the em-
ploye owns his labor, and will judge for himself what
wages it is expedient for him to pay, and whether in
given circumstances he will run his machinery or allow
it to stand idle. If one laborer will not accede to his
terms, he may employ another that will. If this matter
8

lyo ECONOMICS.

is to be carried through by force on either side, there is
nothing for the community but revolution, anarchy, the
annihilation of capital, the cessation of productive in-
dustry, and the extreme distress of all classes. It must
however be borne in mind that if one party resorts to
violence the other party must appeal to that force which
the government knows how to wield for protection.

CHAPTER IV.

Variation of the Rate of Wages.

§ 123. In the two preceding chapters we have shown
that competition is always a controlling force in determin-
ing wages, and that it cannot be permanently resisted by
any possible combination of human will-power, whether
on the side of employers or of the employed. But com-
petition is not a blind force. It acts through rational
minds and free wills. It does not therefore come to the
same result in all cases, but its determinations are as
•various as the circumstances and conditions in view of
which it is called to act. The rate of wages fixed by
competition is not the same in different places at the
same time, or in the same place at diflferent times. The
wages of different persons vary widely from each other, as
well as the wages of different occupations.

It is our object in this chapter to point out the lead-
ing causes of these variations of the rate of wages, and to
show that they all result from the law of competition
applied to a great variety of circumstances and condi-
tions.

§ 124. The first cause of variation which we shall

VARIATION OF THE RATE OF WAGES. 171

mention is the changing ratio behveen the number of labor-
ers without capital seeking employment^ and the amount of
capital dependent for its productiveness on hired labor. It
is common to state this case in another form, to say that
the wages of labor are dependent on the ratio of the
number of laborers to the amount of capital. This is
not accurate. All that capital which is kept employed by
the personal labor of those that own it, and all the labor-
ers who work with their own capital are to be left out of
the account as having no influence on the rate of wages.
If all capital were employed by the labor of its owners,
and all laborers used their own capital, there could be
no wages, however great the amount of labor and capital
might be. Bearing this limitation in mind, it is plain
that the rate of wages is a function of two variables —
labor and capital.

The amount of labor remaining the same, any increase
in the amount of capital employing labor must necessarily
increase the demand for laborers. A man who has only
capital enough to aid and sustain his own labor can hire
no laborers unless he is willing to be idle himself. He
who has enough for two laborers will wish to employ
one, and so often as he adds to his capital a sufficient
amount to fit out another laborer, he will demand an-
other. This holds universally. Other things being
equal, the more capital any one has the more laborers he
will demand. The same will be true of all capitalists
who own more capital than they can employ with their
own hands. It is true that some modes of employing
labor require a much greater amount of capital to each
laborer than others. In the statements just made we
must be understood to mean by the amount of capital
necessary to fit out a laborer, the average amount to each
laborer, taking all the different modes of employing labor
into the account. With this understanding of the Ian-

172 ECONOMICS.

guage just used, it is strictly true that the demand for
labor varies directly as the amount of capital dependent
for being utilized on hired labor. Wages will therefore
vary in the same ratio. The greater the amount of such
capital in the market, the more will its owners bid against
each other for laborers, and the higher the point to which
wages will be raised. If in a free and prosperous com-
munity wages are very high, it is an indication that ihe
amount of capital seeking to employ laborers is very
great in proportion to the number of laborers that can be
employed. The rapid increase of the wealth of employ-
ers by legitimate production implies a corresponding in-
crease in the wages of those whom they employ.

On the other hand, by an exactly similar mode of
reasoning it would be made apparent that, the amount
of capital dependent for its utilization on hiring labor
remaining constant, if the number of laborers without capi-
tal is increased, wages will decline. The demand for em-
ployment will outrun the supply, laborers will bid against
each other under the apprehension of being unemployed,
and employers will obtain the labor they need at lower
rates. If this state of things continues for a course of
years or for generations, the condition of the laborer will
become worse and worse, and pauperism and starvation
will be unavoidable. Many writers on the subject have
come to the sorrowful conclusion, that this is the inevita-
ble fate of the laborer in countries of dense population.
We hope to show in another part of this treatise, that if
economic laws are observed, such apprehensions are as
groundless as they are gloomy.

§ 125. If both the amount of capital seeking to hire
laborers, and the number of laborers seeking employment
are variable, then the wages of labor will depend on the
ratio which these variables sustain to each other. If the
capital increases more rapidly than the number of labor-

VARIATION OF THE RATE OF WAGES. 173

ers, wages will be constant]}' advancing; but if the num-
ber of laborers seeking employment increases more
rapidly than the capital, wages must with equal constancy
decline. In this law we find an explanation of the ex-
ceedingly low wages paid in India and some other coun-
tries of very dense population. Population has increased
because the cost of the necessaries of life is in that cli-
mate very small. On the other hand the government
of the country has been arbitrary and despotic, and the
rights of property have never been protected. The pres-
ent condition of the country presents all the phenomena
of an ex-^eedingly dense population with vast numbers of
men who depend on employment for their daily bread,
yet little capital has been accumulated.

The dependence of wages on the ratio of the number
of laborers seeking employment to the amount of capital
dependent for its utilization on hired labor is one of the
most important principles of our science. It shows con-
clusively, that the impression so cominoiily entertained, that
employers and employes are natural enemies to each other, is
entirely without foundation. If employers prosper by
legitimate production, their demand for laborers will be
increased, and the law of wages is such as to insure to
laborers a share in that prosperity. The employer will
have demand for more laborers, and will be compelled
to offer them more favorable terms in order to obtain
them, and, for long periods and in the general course of
trade, employeis can escape from this necessity by no
combinations. On the other hand, if the employer fails
to receive his profits he will have no increased demand
for labor, he will soon find no motive to continue the
processes of production, he will seek out more profitable
methods of employing his capital, and the laborers he
has employed will be out of employment. It is always
in some degree difficult for the employe to appreciate his

174 ECONOMICS.

relation to the capital that employs him. His employei
is a wealthy man, and enjoys those comforts and elegan-
cies of life which wealth can purchase. His employes
are often in straightened circumstances, and from neces-
sity lead frugal lives, denying themselves many of the
comforts which their employer enjoys. They are apt to
forget, that the foundation of that very fortune which
furnishes them employment, was probably laid in the prac-
tice of just such frugal self government as that in which
they are living ; that if their employer or some ancestor
of his had not practiced just such self-government, the
capital which now helps and sustains their labor would
never have had any existence. Capital and labor, em-
ployers and employes are not natural enemies, with in-
terests antagonistic to each other, but fellow laborers for
a common end. So this relation will be regarded by
both parties, whenever the principles of our science are
generally understood and accepted.

§ 126. Another cause which creates variation of the
rate of wages is the use of labor-saving machinery. It is
obvious this must be one of the elements of the problem.
No one introduces a machine or even a simple tool into
any industrial process, except for the purpose of accom-
plishing the end aimed at by a diminished amount of
labor. An instrument that will not accomplish this is
not labor-saving, and will therefore never be used at all.
The first effect therefore in all cases of introducing labor-
saving machinery must be, that a given end is attained
with a less outlay of labor. Our first thought might be,
that this settles the whole question, and that the use of
labor-saving machinery must diminish the demand for
labor and reduce the rate of wages. But this will be
found to be a very superficial and deceptive view of the
subject. No one indeed will deny that machinery en-
ables a man to attain a given end with less labor ; and

VARIATION OF THE RATE OF WAGES. 1 75

could the inventor of the machine keep his own secret
and confine the use of it to himself alone, he might be
able to sell his products without any reduction of price,
and in such increased quantity as to supply the whole
demand, and drive all other labor and capital from the
trade. In that case he might greatly diminish the de-
mand for labor in that trade without increasing it in any
other trade.

But such a secret cannot be kept, and the inventor,
well aware of that fact, will be easily induced by the
grant of a patent right, to communicate his secret to the
public. As soon as this is done, competition in the
trade will speedily approximate its profits to the general
level, and the result will be a reduction of the price of
the commodity whose cost is affected by the machine,
nearly in proportion to the diminished amount of labor
necessary to produce it. Such a reduction in the price
of the commodity will produce a vast increase of the de-
mand, resulting from the fact that great multitudes now
use it, who at the former price were quite unable to
afford it. In the course of the past century many com-
modities which at the beginning of the period were con-
fined to the palaces of the rich, have found their way to
the humble dwellings of the sons of toil. By this pro-
cess, in the case of most really valuable labor-saving ma-
chines, the increased demand for the commodity has
very far more than balanced the saving of labor in its
production, and in the ultimate result immensely increased
the demand for labor in that very department. Perhaps
no better illustration can be found than the art of print-
ing. To say nothing of printing itself, the demand for
labor in manufacturing printing paper exceeds beyond
all comparison the whole demand for labor in the book
trade which could have existed, if the art of printing had
not been invented. The history of labor-saving inven-

176 ECONOMICS.

tjon furnishes many other examples of the same ten
dency, which are equally pertinent and equally striking
A careful examination of the facts of history would un-
doubtedly justify the conclusion, that the use of labor-
saving machinery has immensely increased the demand
for labor, in the very departments of industry where it
has been most employed. We have tried in vain to call
to mind a single instance of a successful machine which
has come into general use without producing this effect.
We once thought the sewing-machine would prove an
exception to the general rule. But whoever calls to mind
the elaborate workmanship of ladies' apparel, which has
come into use along with the sewing-machine, and we
think as a consequence of it, will be convinced that it is
no exception to the rule.

Exceptions there may be in particular establishments,
or within very narrow limits. Mr. Fawcett furnishes a
few particular cases of the sort. But none of them have
any tendency to invalidate the general principle. No
principle of the science is, we think, established on a
firmer basis. Considering the influence of machinery in
increasing the demand for labor, it is in that view alone
one of the laborer's best friends.

§ 127. A certain class of writers in this countr}', more
distinguished by an amiable philanthropy, than by any
clear philosophic insight, have taken a very different
view of this matter. Seeing that all labor-saving ma-
chinery does diminish the amount of living human labor
necessary to the accomplishment of a given result, they
indulge the expectation that labor-saving invention will
be carried to such an extent, as to dispense with the
necessity of a large portion of the human effort which
has hitherto been necessary for the supply of human
want. Hence they indulge in a dream of a coming mil-
lennium of human labor, in which no part of the human

VARIATION OF THE RATE OF WAGES. I'J'}

race will be under a necessity of putting forth more effort
than would be really necessary for the preservation of
health and the full vigor of the human constitution. In
that good time which they dream is coming, they antici-
pate that the chief occupation of all persons will be the
cultivation of the intellect, and the enjoyment of the
pleasures of high art. The sentence pronounced on our
first ancestor, — '' by the sweat of thy face shall thou eat
thy bread " — they think is to be repealed in that happy
age of labor-saving invention.

Such persons have certainly mistaken the results
which the improvement of machinery is to produce in
the future of this world. It has always shown a tendency
/o increase rather than diminish the demand for human
labor. In a former part of this treatise it has been shown,
that in order that men may feel the full stimulus to labor
which is provided in the constitution of man, it is neces-
sary that all portions of society should enjoy not only the
necessaries of bare existence, but such comforts and con-
veniences as constitute a truly civilized life. It is by
means of labor-saving invention, if at all, that this result
is to be achieved. It is by this means that the civilizing
influences of society are to be so quickened and extended,
as to reach men of every grade and condition. In order
to the attainment of this result, men are not to lead aim-
less and purposeless lives in the enjoyment of the pleas-
ures of the appetite and the tastes, but lives of activity
and energy, in so multiplying the comforts and beauties
of life that all may share them. The age of machinery
is not to dispense with human toil, but to render the suc-
cess of human effort possible, we would fondly hope
actual, in providing for universal well-being. The des-
tiny of the race is not by labor to dispense with the
necessity of labor, but by labor to attain the appropriate
end of all labor, a civilized humanity.
8*

178 ECONOMICS.

§ 128. The principles just explained do not seem to be
applicable to any great extent to agricultural machinery. It
was shown in a former part of this treatise that agricul-
tural machinery has not thus far proved to be, to any
considerable extent, labor-saving. Reasons were also
assigned for believing, that the same must for the most
part be true in all the future. Should the opinions there
expressed stand the test of future experience, as they cer-
tainly do of the past, machinery never can have much influ-
ence on the demand for labor in that department. Even
if machinery should yet be invented to reduce the amount
of human labor requisite for conducting agricultural pro-
cesses in the same ratio in which it has been reduced in
manufactures, it would still remain true, that the influence
exerted on the price of agricultural products would be
very much less than it has been in the case of manufac-
tured goods. The price of agricultural products must
always depend very largely ei.her on the rent of land, or
the cost of transportation. These elements of cost would
both remain, however much the labor requisite might be
diminished by machinery. If then such inventions are
ever made, it will be a case in which labor-saving inven-
tion diminishes on the one hand the demand for -labor,
and on the other hand brings little compensation in the
cheapness of the product. We have given our reasons
for believing that it is very improbable any such thing
can ever occur. Even if it does occur, the truth will
still remain unimpaired, that the tendency of labor-saving
invention on the whole is, not to diminish, but greatly to
increase the demand for labor. The conclusions of the
two previous sections will not therefore be invalidated.

§ 129. Another cause which produces variation of
the rate of wages is the cost of living. It is customary to
say, the cost of food, or the cost of the necessaries of
life. We object to this as inaccurate. It implies the

VARIATION OF THE RATE OF WAGES. 1 79

assumption that the rate of wages is to press downward,
till finally at the maturity of the process, a bare existence
is all that is to be left to the laborer. This is not the
necessary nor is it to be the ultimate effect of compe-
tition. Neither is this an accurate statement of the case.
It is not mere increased costliness of food or of the neces-
saries of life that raises wages. It is the cost of living.
We are aware that there are large classes of laborers in
many countries, whose wages are so low as to place their
whole lives on the very verge of starvation. But it is yet
to be shown in a subsequent chapter, that this is not the
result of any natural law, but of a violation of natural
law.

Neither is it true that wages do in fact depend only on
the cost of necessaries. It has previously been noticed
that the minimum of wages is always determined by the
fact that those most anxious for employment prefer to
run the risk of being unemployed, rather than make a
lower bid. In determining the point at which such a
stand is to be made, any man who has before his mind a
standard of living in some degree of comfort would take
into the account not only what it would cost him and
those dependent on him to escape starvation, but what
it would cost him to live according to his conception of
life. If he finds that in a given position no wages are
offered which will enable him to support such a mode of
life, he will change his position, he will seek some new
employment, he will emigrate if need be, in order to find
some position in which he can earn a living. In the
present condition of the world, and with present facilities
of locomotion, no laboring population will quietly remain
where they must work at starvation prices, unless they
have been reduced to utter despondency by generations of ex-
perience in hopeless poverty. Such a population may from
sheer ignorance, stupidity and despondency, accept as a

l8o ECONOMICS.

remuneration for their labor the naked boon of continued
existence ; no other will. We shall show hereafter that
such a compensation is not in the sense of our science^ wages.
It is not the result of competition. The economic condi-
tions of such a life differ very little from those of slavery.
It is noticeable in respect to all those populations in what-
ever country that live in this abject condition, that they
have very little voice in determining their own wages.
Their employers have it all their own way, and when
they find that the wages which their laborers receive are
not adequate to save them from starvation, the employers
themselves yield to necessity and pay higher wages.

It is therefore true that in all cases in which wages
are really determined by competition, // is the cost of liv-
ing and not the cost of mere necessaries that influences the
rate of wages. If it is not possible by equitable legisla-
tion and a sound and healthy intellectual and moral
training of a people, to secure such conditions of society
that all wages will be thus determined, the outlook to-
ward the future of the civilized world is gloomy enough.
We shall have occasion to return to this subject in a
subsequent chapter.

CHAPTER V.

Causes of the Variation of Wages for Particular
Persons and Classes.

§ 130. The last chapter was devoted to the consid-
eration of the general causes which are liable to produce
variations of wages. The wages however received by
one person or one class of persons are found to differ
very greatly from those of another. It is desirable be-

CAUSES OF VARIATION OF WAGES. l8l

fore we dismiss the subject of wages, to point out some
of the leading causes.

One of the most important of these causes is the diver-
sity of men's natural gifts. There are some products of
human effort which are held in the highest esteem by all
civilized men, the power to produce which is possessed
by very few human beings, and consequently the products
themselves are always rare. The men possessing those
rare endowments are able to demand wages that are
limited only by the desire which men have for these
peculiar products, and the wealth of the community.
Most of the works of genius are to a greater or less ex-
tent embraced in this class, and are liable in favorable
circumstances to command prices which seem almost
fabulous.

To the same class are to be referred the extraordinary
profits so ffie tit/res realized by men of great eminence in the
professions. It is because their abilities are so rare as to
place them quite above the reach of competition. Thev
have the glorious gift of genius of which they have a
natural and god-given monopoly. Their services in
cases involving vast amounts of property, or the life and
health of persons possessing great estates, are esteemed
so valuable, that men will pay almost any price for them,
rather than not obtain the advantage of them. We are
economists, not moralists, and therefore have nothing to
say of the moral responsibility of such men. They enjoy
a precious gift of the Creator, and if they use it wisely,
it is a glorious life they live.

§ 131. Wages are higher in proportion to the expense
of time and money that inust be expended in acquiring the
skill requisite for performing services of which they are
the reward. Much labor requires no peculiar educa-
tion at all. But there are occupations the labors of
which cannot be successfully performed without an ex-

152 ECONOMICS.

pensive education for the business. Such labor must be
more highly compensated than that which requires no
such preparatory outlay. If any community refuses to
pay such superior compensation, if one can get no re-
muneration for the capital expended in acquiring such
an education, no one will be at the expense of acquiring
it, and the community will soon have to live without
educated labor. That which will bring nothing in ex-
change will, we have seen, soon cease to be produced.

The degree of that compensation will depend directly
on the perfection and rarity of the skill acquired and brought
into use. If for example the medical profession should
fail to give evidence of any decided superiority in the
treatment of disease, over the quack, or a mere nurse,
people would be willing to pay very little for professional
skill. But the physician who acquires a wide reputation
for eminent skill in administering remedies for the mala-
dies to which men are liable, will find an enlightened
public willing to give him a liberal reward for his services.
The principle holds here as everywhere else, that the
greater any man's superiority in any kind of labor to the
rest of the community, the higher the wages he can de-
mand for his labor, and the more other men can afford
to give him. The skilled laborer has therefore the
greatest possible inducement to bring his skill to the
highest perfection, and what is fur his interest is equally
for the interest of the whole community. Men are often
envious of one who acquires a reputation for skill, by
which he is able to command very large compensation
for his services. This is illiberal and inconsiderate.
The only reason why one can command such compensa-
tion is, that men find that his services are still cheap,
even at the price he demands for them.

§ 132. Another cause of wide variation in the rate
of wages is found in the amount of confidence reposed^

CAUSES OF VARIATION OF WAGES. 183

Services are often demanded in positions in vvhicli not
only eminent professional or mechanical skill is requisite,
but wisdom, sagacity, soundness of judgment in estimat-
ing men's characters, and a power of controlling their
passions and directing their wills, and above all unques-
tionable moral integrity are not only important but even
indispensable. Just in proportion as such qualities are
regarded as desirable in any position, and as the union
of them all is rarely found in one person, the man who
possesses such a combination of traits will command
higher wages than other men. The world is not so bad
in any civilized country, that eminent wisdom and high
moral integrity are without value in the market.

It is however true that many positions in which such
qualities are esteemed indispensable confer so viuch dig-
nity and honor on those who occupy them, and give such ad-
vantages of social position, that men are willing to accept
them at a lower rate of compensation than they could
command in less honored situations. For example, men
of the highest legal attainments and personal reputation
will often consent to occupy a position on the judge's
bench for a salary much smaller than the income they
might expect to receive at the bar. This consideration
explains the comparatively low salaries received by some
men of great eminence. The reverence and affectionate
homage of mankind is more desirable to an honorable
and generous mind than money.

§ 133. There are numerous causes affecting in many
subtle ways the wages of different persons afid classes, which
it is neither possible or desirable to particularize. One
of them is the uncertainty of success in any occupation.
Men will encounter that uncertainty only because they
see the prospect of proportionally higher wages in case
of success. The wages of those who do succeed must
be high enough to compensate for the lost labor of those

184 ECONOMICS.

who fail. Constancy or inconstancy of employment in-
fluences wages. If employment is irregular or uncertain
men must be paid for the time they are obliged to spend
in waiting for work. The ease or difficulty of the labor,
the pleasantness or disagreeableness of the occupation,
have a good deal of influence on wages. Even the dis-
gracefulness of an occupation is sometimes the reason
why it commands large pay. Men must be well paid
for doing dirty work. We think in the present state of
public opinion in this country, no one would engage in the
liquor traffic, who did not expect to realize large gains.

§ 134. There are certain occupations which are of such
a character that large classes of persons are disposed to en-
gage in them, whose constitutions, tastes, habits and educa-
tion disqualify them for most other avocations. Of course
competition in these occupations is very strong, and
wages are proportionally low. If one-half of the human
race were without eyesight, and there were a few occupa-
tions in which blind men could succeed, the competition
for these employments would be exceedingly strong.
They would become exclusively employments for the
blind, for wages would sink to so low a point, that a
comfortable living could not be obtained from them.
This is in principle precisely the case of the suffering
needle-women alluded to in a former chapter. It is in
place here to resume, as we promised to do, the consid-
eration of their case, and we shall find it a very instruct-
ive one. The causes that produce the starvation prices
at which seamstresses are often compelled to work, do
not at once meet the eye of ihe public. There are large
classes of persons in every civilized community, who
never enter into that general competition by which wages
are determined. The competing unit is to a great extent, not
the individual, but the family. The male head of the
family is responsible for the support of all its members.

CAUSES OF VARIATION OF WAGES. 185

and buffets the wild waves of competition for them all
by his single personal power and will. The women of
such families enjoy a sheltered existence, protected from
many of the storms that beat on all the out-door world.
Yet there are large and increasing numbers of women
who are not thus protected, and are obliged to engage
single-handed in the rude struggle for existence which
we call competition. They naturally seek those occupa-
tions which do least violence to female tastes and habits,
and are most suitable to the delicacy of female fingers.
The needle is apt to be a favorite resort, and their com-
petition is very largely thrown upon the employment of
the seamstress. The consequence is inevitable, ruinously
low wages.

But the evil stops not here. In those peaceful homes
where so many women are passing their tranquil lives,
there are many who are painfully conscious of the lack
of sufficient employment. They would rather earn some-
thing in almost any agreeable employment, than live in
idleness and earn nothing. It is not necessary for them
to do anything for their own support, their living is se-
cure. But they would like to be a little independent in
their spending money. They are therefore glad to take
in sewing, even at the lowest prices, to employ their un-
employed hours, and therefore enter into direct competi-
tion with all other women that earn money with their
needles. Wonien whose life depends on the needle find
their wages depressed by the competition of those who are
not working for a living at all, and to whose comfort in
life it is of no real importance, whether they receive high
wages or low. It is surely no occasion of wonder, that,
in a struggle so unequal, starvation comes to the woman
who must not only live by her needle, but perhaps sup-
port children, or even a husband disabled by disease, or
still worse by vice.

l86 ECONOMICS.

In such circumstances as these, it is quite useless
and childish to call employers by hard names, or de-
nounce the law of competition. Employers are no more
deserving of censure than any one who buys and wears
their cheap made clothing. We have shown that they
are just as much held in the grasp of an inexorable law
as the needle-women themselves. Nor is there any
occasion to denounce that law. It has in this very case
performed its appropriate function faithfully and benefi-
cently. It has afforded the clearest possible proof,
that these women are seeking a living where it cannot
be found, and that they ought at once to abandon the
needle, and seek some other mode of employment.

§ 135. This case clearly reveals the fact, that there
may be in civilized society obscure and subtle forces^ that
exert great influence on wages, which at first thought would
hardly be suspected of sustaining any relation to the subject.
It is not any natural necessity which concentrates so
great a force of female competition upon this one occu-
pation. There are modes of employment for which many
perhaps most of the needle-women are well fitted, that
are not at all crowded, and in which they would receive
wages sufficient to support them in comfort and happi-
ness. Such an employment is domestic service. But
thousands are repelled from this and other avocations
which are quite open to them, by fear of the loss of social
position. Multitudes of women would rather live from
day to day at their needles on the very verge of starva-
tion, than engage in an occupation imagined to be less
socially respectable with every assurance of comfort and
plenty. It is surely desirable that all classes of society
should be educated out of a prejudice so silly and mis-
chievous.

We cannot forbear remarking in this place, that this
is one of the points at which our science necessarily touches

CAUSES OF VARIATIOxV OF WAGES. 187

that of ethics. The great multiplication of this class of
women among us is largely due to the unsatisfactory
condition of domestic life. Large numbers of young
men of the finest promise are quite unfitted for domestic
life by self-indulgent vicious habits, and therefore never
marry. It requires no great skill in arithmetic to prove,
that, as the numbers of the two sexes are almost pre-
cisely equal except as inequality is produced by emigra-
tion or other accidental and transient causes, if large
numbers of men live in celibacy, an equal number of
women are sure to fail of obtaining their natural protec-
tion and support in domestic life. The number of
women compelled to engage single-handed in the strug-
gle for existence is thereby greatly increased. This is
becoming an enormous evil in American society. Many
writers on economics lay a great deal of stress on the
imprudent marriages of the poor. We are not disposed
to enter into any controversy with them on that subject,
but, in a true view of the matter, our science has more
and stronger words to say against that vicious celibacy,
by which thousands utterly fail to discharge their duty
as the natural supporters and protectors of women.
American society, American economy is suffering a great
deal more from vicious celibacy than from imprudent
marriages.

§ 136. The aid of our science will be invoked in vain by
those who at the present time are clamoring for the abolition
of that protectorate of women, which was alluded to in a
previous section. It is one of the wise provisions of the
human constitution, by which man willingly bears the
sev'crer and ruder toils and struggles of life, in order
that woman may be sheltered in the tranquil seclusion
of home, and perform in greatest perfection her great
function of rearing up in long succession the generations
of men, that are to bear forward civilization towards its

1 88 ECONOMICS.

highest perfection ; that when the parents pass away, the
children may be prepared to take their places, stronger
in all that constitutes the highest humanity, than those
who have gone before them. Division of labor is true
economy, the more perfect the division the more perfect
the economy. The progress of civilization will not dis-
pense with this most primitive and most necessary of all
divisions of labor, but will cultivate both parties in it up
to the highest possible adaptation to their respective
functions.

§ 137. There is at the present time an uneasy feeling
in many minds, growing out of the suspicion, that there
is some misadjustment of the economic system, whereby
women are deprived of their natural share of the products
of industry. It is one of the numerous cases in which
restless spirits seek to relieve themselves by denouncing
and censuring somebody, without being at the trouble
first candidly to inquire, whether anybody is censurable,
or if anybody, who and for what. It is claimed that when
women do the same work as men and do it as well, they
ought to receive the same pay. The very form of this
proposition shows, that the person who affirms it is look-
ing at the ethical and not at the economical view of the
subject. '' Ought " belongs not to economics. It is our
business as economists to inquire what is the natural
law which determines woman's wages. It will not take
long to discover, that it is the same law of competition
that determines all other wages. We have demonstrated
the universality of this law. Is there then some arbi-
trary and artificial adjustment of the economic machinery
of the world, by which the law of competition has been
made to bear unfairly on women ? This is claimed, per-
haps in some cases justly. It may be that law in a few
instances, and custom in more, may have shut out women
from competing for wages, in modes of employment in

CAUSES OF VARIATION OF WAGES. l8g

which they might have had a fair prospect of success.
Whatever obstacles of this sort may have existed, we
are not disposed to defend them, and they are certainly
assailed by forces which must sweep them away. If
women have not had a fair chance, they are sure to have
it soon. But a thoughtful person, whether man or
woman, will surely not fail to see, that the organization
of the sexes, their constitution both of body and mind is
such, that women will always enter the arena of competi-
tion for the prizes which labor wins, under great, una-
voidable, natural disadvantages, and that consequently
in the labor markets of the world, there will be one rate
for men and another for women. It is with this great
stubborn natural fact, that we as economists are com-
pelled to deal. He who demands that in this struggle
female muscles and sinews, female force and endurance
shall command, or if he prefers to say so, ought to com-
mand as high wages as those of the other sex, has en-
gaged in a desperate struggle with the laws of nature,
and we must leave him to manage his case as well as he
can. To us it seems quite desperate. We would really
advise him to give it over at once, for we think he is sure
to be vanquished at last. It really does seem to Us, that
from the very organization of the sexes man's labor will
always rate higher in the market than woman's, and that
eloquent denunciations will really accomplish very little
towards making it otherwise.

At the same time it would be very difficult to show,
that^ at least in all ordinary cases, women do not receive the
same ivagcs as men, when they do the same work and do it
as well. For example, if one wants to employ two teachers
in the same school, one male and one female, he will
certainly offer much higher wages for the former than
for the latter. The reason why he will, is that he knows
that by the law of competition he can obtain the services

rgo ECONOMICS.

of a woman at much lower wages than he must pay for a
man. But why does he employ the man at all ? Why
not two female teachers instead of one man and one
woman ? Evidently because he expects service from one
of them, which a woman cannot so well perform. He
does not offer the woman lower wages than the man, with
the expectation that she will perform the same service,
but with the distinct intention, that the man shall do
that which will not be expected of the woman. Since
he wants a man's work, he sees the necessity of offering
a man's wages.

§ 138. Is it asked why not place male and female
teachers at once on the same basis of pay ? We answer
a law of nature forbids it, renders it impossible, just as
was demonstrated in a previous chapter in respect to the
wages of needle-women. To offer man's wages for the
place that was to be occupied by a female teacher would
be a grievous injury to all women well-qualified for the
place, who would gladly perform the service desired for
wages determined by competition. Teaching is one of
those occupations upon which the competition of women,
obstructed and shut out by natural disadvantages from
many other modes of employment, will be concentrated
in great force. Wages will therefore be inevitably de-
pressed. Eloquent men, and perhaps still more eloquent
women may declaim agiiinst it, and produce any amount
of commotion in the popular mind, but they cannot help
it. It is a law of nature they are resisting, and no elo-
quence can prevail against it. If a woman is wanted
for a teacher of children and youth, competition will
make her wages low. If you want something done in
the school-room which you suppose a woman cannot so
well do, and therefore think it necessary to employ a man,
then you must pay him as much as he could obtain in other
employments, where equal skill and talent are required.

CAUSES OF VARIATION OF WAGES. IQI

In dealing with this question of woman's wages, it is
a grievous wrong to woman to forget, that in her high
and God-appointed function, the best and noblest ser-
vices she ever performs for the world, are high above all
commercial valuation, and are performed in such rela-
tions to domestic society, that her own proper reward is
secured to her, without entering the arena of competition 1
for wages. Those who forget this are not the true friends /
of women.

§ 139. We have dwelt the longer on this subject of
woman's wages, partly because the public mind is mor-
bidly excited on the subject, and greatly needs to see it
in the clear light of scientific analysis, and also because
it forcibly illustrates some of the most important princi-
ples of the general subject of wages. The suggestions
which have been made in the two previous sections are
capable of a very wide application. The principal func-
tion of competiiioa undoubtedly is to determine price.
But that is not its only function. // is in most cases the
safest guide one can have as to the occupation which he
should pursue. There are many persons whose life is in
a great measure a failure, because they will not follow
its indications. When one has found that in any given
employment he cannot obtain for his services a living
compensation, he ought to regard it as a clear indication
that he has mistaken his calling, and to seek some other
method of serving his generation. This remark is appli-
cable to many men who have attempted professional life,
but cannot succeed in it. One should assume that he
was not made in vain, and therefore if he cannot succeed
in one thing he should try another.

We would even apply this principle to those who have
undertaken the sacred function of the Christian ministry.
We apply it here however under a very grave limitation.
Men do not always value most that which is most pre-

192 ECONOMICS.

clous and most needful to them. There are cases in
which the noblest thing a man can do is, to spend his
life in rendering services to mankind which they do not
appreciate and will not reward. If a Christian minister
finds that he does succeed in rendering such service to
mankind, by promoting their moral and spiritual inter-
ests, let him never abandon his high function on account
of the scantiness of his pecuniary reward. But if on the
other hand he finds that his labors in the ministry fail to
yield him a support for himself and those dependent on
him, and yet sees no satisfactory evidence, that his labors
are successful as a preacher of righteousness and an
advocate of the highest moral and spiritual truth, he is
quite at liberty to serve God and his generation in some
other occupation.

CHAPTER VI.
Ownership of Land.

§ 140. Having considered the various phenomena of
wages, it would seem appropriate that we next proceed
to the examination of the remaining branch of Distribu-
tion, the share of the gains of production which falls to
capital. But a preliminary question will first demand
our attention. The received method of treating the sub-
ject recognizes three parties between whom the proceeds
of production are to be divided, viz., land-owners, labor-
ers and capitalists. We have recognized but two parties
viz., laborers and capitalists, and have proposed to legard
land as fixed capital and rent as the profit of it. Before

OWNERSHIP OF LAN'D. I93

we proceed further we must assign our reasons in justi-
fication of this division of the subject. For this purpose
it will be necessary to examine a question not generally
regarded as belonging to the science, — the nature and
foundation of property in land. It seems to us that the
want of a correct understanding of this subject has led
to an erroneous theory of rent, and rendered men's
minds tolerant of violations of fundamental economic law
in regard to the tenure of land, which would otherwise
seem unendurable. The discussion of this question is also
necessary in order to justify the position taken by us in
the preliminary chapter of this treatise, that no owner-
ship of any material thing can be acquired, except by
human labor bestowed upon it, whereby it is rendered
capable of being serviceable to man. We shall therefore
devote this chapter to a consideration of the ownership
of land.

§ 141. Undoubtedly the first aspect of this question,
is, that in the arrangements of nature, land, like the
water of oceans, lakes and rivers, or the atmosphere
which envelopes us all, is the free gift of the Creator to
all men alike, and can be the property of no one. There
are perhaps not a few who so regard it at the present
time, and nourish in their souls an ever glowing sense of
injustice at what they regard as the unjustifiable monop-
oly of the private ownership of land. It becomes there-
fore necessary for us clearly to point out the foujidation of
the private ownership of land in some incontrovertible
natural law, or submit to a most radical economic revolu-
tion. There is not a question which the economist is
under a more imperative necessity of examining. If the
private ownership of land is not the clear and inevitable
result of natural law, it cannot be permanently sustained
as a law of society arbitrarily established and enforced.
In this as in all other sciences, the laws of nature and
9

194 ECONOMICS.

all their legitimate consequences will remain forever, all
else will be swept away.

In the first chapter of this treatise, it was enunciated
as the fundamental law of the science, that every man
owns himself and all which he groduces by the exertion
of his powers. It was also stated as a consequence of
this law, that when any man expends his labor upon a
material substance which he has received as the gift of
God, no human labor having been previously exerted
upon it, by expending his labor upon it, he becomes the
owner of the material thing which by his labor he has
made capable of gratifying human desire. If for example
one finds a tree in some primeval forest to which no one
has established any previous claim, cuts it down, and
fabricates it into articles of beauty or utility, his labor
expended on it makes him the owner of the wood, in
order that he may enjoy the benefit of the labor he has
expended on it.

§ 142. A more attentive comparison of air, water and
land will show, that the last of the three is distinguished
from the other two by a most remarkable difference. The
two first mentioned require no modification by human
effort to fit them for man's use. The condition of the aii
cannot be rendered more fit for human lungs than it is.
It always envelopes us ready for our use. Nothing which
man can do will improve either its quantity or its quality.
All we can do in respect to it, is to see to it that we do
not shut ourselves out from its free circulation in its own
primitive perfection. Man cannot improve the atmos-
phere by any efforts of his, and therefore he cannot
own it.

The same is true of water as it exists in oceans, lakes
and rivers. No man can make the clear water of Lake
Michigan his own. If water can only be obtained by
digging a well at much expense of human labor, he who

OWNERSHIP OF LAND. I95

digs the well owns the water. This has been held to be
true ever since the days of Abraham and Lot. It is
recognized even among the wild wanderers of the desert.
The water of the Mississippi cannot be owned, though
he that has placed it in barrels, and carried it to families
living at a distance from the river may obtain compensa-
tion for it.

But land differs widely in this respect both from air
and water. Of itself in its natural state it supplies no
want of man. It can only be made to afford human
sustenance by being subdued and cultivated. In its
natural state it is as useless as the tree growing in the
primeval forest. It supports game, and that is the prop-
erty of any one that can capture it. By capturing it,
the huntsman acquires the ownership of it but not of the
land on which it grazed, and over which it ran. Untilled
land produces wild fruits, and he who gathers them, owns
them, but not the soil on which they grow. If land
could only minister to human well-being by its spontane-
ous productions, it could no more be subjected to owner-
ship, than the oceans or the great lakes.

Portions of the ocean are subjected to national ownership
by the out/ay (J hibor and capital by which they are ren-
dered capable of being navigated in safety. That por-
tion of the ocean adjacent to the land, where buoys are
established, light-houses built and sustained, and chan-
nels leading into harbors are improved, is recognized as
belonging to the government that makes these outlays
of labor and capital upon it. The principle for which
we contend is recognized even in respect to water, wher-
ever it is possible to apply it. For the most part how-
ever man's labor can make no modification of the ocean
by which he could appropriate it.

§ 143. But he that subdues the land, destroys the
forests that shade it, or any other spontaneous vegetation

196 ECONOMICS.

that hinders the growth of food for man, and tills and
sows it, acquires the ownership of it, just as of any other
natural substance, which by his labor he renders sub-
servient to human uses. Two men are ramblin;^ together
among the fastnesses of the Rocky Mountains. One of
them discovers a tree of rare fitness for the manufacture
of articles of beauty, and by his labor bestowed on it he
makes it his. The other discovers, in those regions of
almost universal barrenness, a tract of land capable of
abundant productiveness. He removes from it the wild,
luxurious but useless growths of nature, draws water from
the mountain stream that rushes along its border, and
thus provides for its perpetual irrigation, encloses it
against the incursions of animals, and plows and sows it.
This man owns the land by the same natural title by
which the other owns tl:e tree which he cut from the
original forest. No man can show any distinction in
principle between these two titles. In both cases alike
we recognize the only ownership which man can acquire
of anything which God has made. Man enters on all
land by the same process. Land on which no human
labor has been bestowed yields nothing to human well-
being. All its availability for this purpose is dependent
on conditions which human labor alone furnishes.

It may perhaps be said, that in the case just supposed
the man that first plowed and planted the land would be
entitled to gather the han'est which he has sown, but no
more. This is certainly untenable. The labor which he
has expended upon it has no exclusive reference to that
one harvest, but is a permanent preparation for every
future crop, and he will be the same absolute owner of
it at the end of the year as at the beginning. A single
crop will by no means compensate him for his labor.
He has conferred on it the capability of being a perma-
nent instrument of human well-being, and that capability

OWNERSHIP OF LAND. I97

by the law of nature he owns. He will stand in the same
relationship to it at the end of any number of years, as
when he planted the first crop. If he continues to keep
that land in a state of fitness for cultivation, the time
will never come, when he or the person to whom he has
transmitted his title, will not be by nature's law the one
only owner of it.

§ 144. It will then be asked what is the origin of that
ownership of new lands which the first settler buys from the
government! How is the government the owner ? The
common idea is perhaps, that the savage tribes that
roamed over North America when the Europeans came
to it, were the owners of the soil, and that our present
government owns it by having purchased this title by
treaty. We cannot regard this view of the matter as at
all tenable. We cannot admit, in the first place, that
these savages ever did own the soil. They never did that
which alone creates ownership. They never made any
modification of the land by labor expended on it, which
fitted it to be an instrument of production. They roamed
over it like the herds of buffalo, and lived on its spon-
taneous products, just as the wild beast did. But by so
doing neither the bufi"alo nor the savage acquired owner-
ship, the latter no more than the former. He that gathers
blackberries or shoots deer on a piece of ground does
not become the owner of it. No one owns a tree of the
forest because on a single year, or for many successive
years, he gathered the nuts that grew on it. The Eu-
ropean settlers of North America took possession of no
capabilities of production, which the labor of those sav-
age tribes had created. As those savages retired before
them, they had exactly the same labor to perform which
they would have had if there had never been any human
inhabitants of the continent before them. In this respect
the case was exactly the same, that it would have been

198 ECONOMICS.

if wild beasts only and not men had retired before them.
What they took possession of everywhere was the work
of the Creator, and not the work of n)an. The assump-
tion that these savage tribes were the owners of the soil
is therefore without any foundation at all, and the influ-
ence which it has exerted on the literature of Christen-
dom, and on our policy toward the Indian, is exceedingly
to be deplored.

§ 145. Nor again are these tribes independent nations.
Nationality implies a defined national domain, laws, in-
stitutions, a stable government, able to give substantial
guarantees for the fulfillment of its part of any treaty
stipulations. Every treaty we have ever made with the
Indian has been at two points radically void. On the
one hand the Indian was not the owner of that which
both parties made believe he sold to us : he had no title
and could therefore give none. On the other hand, we
stipulated to do that which the nature of the case made
it certain we could not do. We guaranteed to the Indian
the perpetual possession of the hunting grounds to which
he retired. It is devoutly to be hoped our government
will never make any more such promises to the Indian,
except on condition of his becoming a civilized tiller of
the soil. Without that condition the whole power of our
government cannot fulfill such a promise. There is a
higher law than any human government can enact, that
predestines the soil of North America, not to be hunt-
ing grounds for any horde of savages, but to yield all its
resources of whatsoever kind to the ends of civilized
humanity. Assign to any Indian tribe any spot you
please, if the Indian uses it as a mere hunting ground,
you cannot make him the owner of it. God does not
give ownership of this earth in that way, and you can not.
While it is held only for such a barbarous use, civiliza-
tion in its progress over the continent will discover its

OWNERSHIP OF LAND. I99

resources which no savage can ever develop, and will
demand and obtain its own ; and no treaty which any
government can make can doom those resources to per-
petual uselessness, that a horde of savages may perpetu-
ate their barbarous life. The law by which civilized
man is to increase and replenish the earth will always
prove to be superior to any claim which savages can set
up to their hunting grounds, and any treaty which a great
civilized nation may make with a savage tribe in disre-
gard of that law is a solemn farce, the pretense of mak-
ing which is a crime, not the yielding to an inevitable
natural necessity of permitting it to be broken.

§ 146. If we are asked what we will do with the
Indian, that is a question which does not belong to our
science, we must turn it over to the Christian moralist
and statesman. All we are concerned with at present is,
to set aside, and disabuse men's minds of the notion
that our title to our lands originated in purchase from
savage tribes, who never did that which our science must
regard as creating the only possible ownership. One
word however we must say of the treatment of the In-
dian, to protect ourselves from misconception. The
European occupants of North America should have
always treated the Indians as men, to be protected in all
their rights, to be restrained by any necessary exertion
of force from doing wrong, and to be encouraged by all
practicable means, to forsake their savage life, and adopt
the habits and accept the blessings of civilization. Give
the Indian every thing to encourage him in his efforts to
live a civilized life, nothing to aid him in perpetuating
his barbarism. Our policy toward the Indian has so
long been constructed on a false assumption, that it may
be no easy matter at this late day to return to sound
principles in our treatment of him. We trust however
that it is not quite impossible.

200 ECONOMICS.

§ 147. From this inevitable digression, we return to
the question, what is the origin of that title which the set-
tler buys from the government ? We answer it is the
title to these lands which the government has acquired,
by surveying ihem into convenient parcels, and marking
them out by metes and bounds, whereby every man can
identify the farm he has purchased, and be saved from
all disputes with his neighbors about boundaries, by
extending over them the jurisdiction of a civilized govern-
mefit,Xhus rendering life and property in a great meas-
ure secure from the very origin of the settlements, and
by aflfording to the inhabitants of the remotest frontier,
protection from the incursions of savages. These helps
provided by the government for the bold pioneers of
civilization are very cheaply purchased, by paying the
price which the government exacts for the fee simple of
the lands. Previous to the entry of the government on
these lands, by making such provisions as these for the
benefit of the future settler, they were, like the rivers that
water them and the atmosphere that overlies them, with-
out an owner. By entering on them and making these
necessary provisions for civilized colonization, the gov-
ernment became the owner, and conveys its ownership
to the individual purchaser.

As to the question, by what title the United States
claim the right to enter on certain lands, and acquire the
ozvnership of them in the manner described above, rather
than England or any other foreign power, it does not
belong to us to discuss it. That question does not re-
late to the ownership of the soil, but only to the right of
political jurisdiction, and depends on certain arbitrary
understandings entered into by the civilized nations of
the world, rather than on any clearly defined natural law
It belongs therefore to the writers on international Jaw
and not to us.

OWNERSHIP OF LAND. 201

§ 148. It may perhaps be objected to this view of
the nature of ownership, that the labor originally expended
in bringing land into cultivation is greatly overpaid by per-
petual ownership. It must be admitted that, in some
cases, it does seem to receive a ver}- high compensation.
In view however of all the facts this is, even in these
cases, more apparent than real. When the land pos-
sesses great natural productive power, and the labor re-
quired to subdue it is comparatively small, the outlay
necessary to constitute ownership is largely rewarded by
the value of the permanent possession. But it should
be borne in mind, that this outlay is often made, when
the interest on money is not less than five per cent per
month, and consequently one hundred dollars is equiva-
lent to one thousand dollars in ordinary circumstances.
Besides it should not be forgotten that the beginnings of
civilized cultivation often involve exposure to many hard-
ships and perils, for which it is very reasonable that the
first settler should receive compensation.

Nor is it by any means generally true that the labor
expended in acquiring the ownership of new land is very
largely rewarded. We suspect it would be difficult to
find a well-informed man who believes, that the present
market value of the lands of the United States at all ex-
ceeds the actual cost of subduing them, and bringing
them into their present state of cultivation, or in other
words, that the present rental of the whole country ex-
ceeds interest at current rates on the cost of improve-
ments. It is probably impossible ever to obtain any
answer to the question we here raise, which would be
even proximately accurate. But there is certainly a great
deal of cultivated land in this country, the annual rental
of which would fall very greatly below current interest on
the cost of improvements made on it. If there is also a
good deal of land the rental of which would exceed the
9*

202 ECONOMICS.

interest on the cost of improvements, that aflfects not the
question before us. Land is by no means the only ex-
ample of a materia] substance of which ownership has
been acquired by labor expended on it, the value of which
greatly exceeds the value of the labor so expejided. A
gold hunter opens a mine and finds gold in paying quanti-
ties. In virtue of the labor of opening it, he owns it
with all the riches which it contains, no matter how vast
the sum. If by a fortunate effort of ingenuity one in-
vents a machine for which the world will willingly pay
him millions, he is entitled to those millions, and may
refuse to disclose his secret, except for value received.
A man may be equally fortunate in laying claim to a
piece of land by bestowing labor upon it. Many have
been thus fortunate, but this by no means sets aside the
principle, that the ownership of any material thing which
the Creator has made, is obtained only by labor bestowed
upon it, whereby it becomes capable of supplying human
want. It is nothing different from what occurs in rela-
tion to all other material possessions, where the princi-
ple is confessedly applicable.

§ 149. There is one other object io}i to this doctrine which
to some persons may seem weighty. It must be owned
that land has one seeming peculiarity, distinguishing it
from most other kinds of property. It is very likely to
be enhanced in value by the progress of population,
wealth and civilization, without the expenditure of any
additional labor in its improvement. That there is such
a general tendency cannot be denied. Yet the facts are
after all by no means uniform. With the steady growth
of some of the New England states in all the elements ot
civilization, within the last fifty years, a large portion of
their land has greatly declined in price, instead of ad-
vancing, as this general statement would imply. The
investments made fifty years ago in improving it have

OWNERSHIP OF LAND. 2O3

proved as bad as those in some other parts of the country
have been good. When a man lays out his labor on a
piece of land, and takes the land as his reward, he does
not know that the community around it will advance in
civilization. It may decline. In that case his invest-
ment will be a loss and not a gain. He expends his
labor at a risk. If things turn in his favor, he will gain,
if against him he will lose. In this respect this case
does not in any degree differ from any other outlay of
labor. In this as in all other things, no man is certain
when he expends his labor, that he shall gain that which
he seeks by the outlay.

There is always a presumption however, that he who
by an expenditure of labor acquires the ownership of a
good piece of land, will obtain a possession which, by
the growing prosperity of the community, will on the
whole increase in value. It will hereafter be shown, in
treating of the rent of land, that this probability is allowed
for in every contract for rent. No man receives as high
interest on his landed capital, as on capital invested in
other ways. He willingly consents to receive a part of
bis interest in the presumed regular enhancement of the
price of his land by the progress of society. It is an ad-
vantage which he does not get for nothing, but constantly
pays for it.

We come therefore to the conclusion that, in rela-
tion to our science, land is simply and only a gift of God
to man, which in its natural condition is without value,
but which is rendered by the expenditure of human labor
on it, the most powerful and important instrument of
supplying human want. It is as truly and simply fixed
capital, as a water-wheel or steam engine. So we have
classified it in this treatise, and so we shall continue to
regard it, in considering the share of the gains of indus-
try, which natural law will allot to capital.

:1^ /2g^ e

204 ECONOMICS.

CHAPTER VII.

Interest.

§ 150. The share of the capitalist in the gains of pro-
duction must next be considered. These, according to
the nature of the investment from which they are derived
are called either Interest, Rent or Profit. Of these In-
terest is the least complicated and will therefore be first
considered.

Definition, Interest is compensation for the use of
capital which is entirely entrusted to another, to be repaid
to its owner at a specified time, and with such considera-
tion for its use as may be agreed on.

In some cases compensation for the use of capital is all
which is included in interest. The security for the re-
payment of the sum loaned according to the conditions,
is regarded as perfect, and therefore no consideration is
paid for any risk. Loans to stable and regular govern-
ments, for example like those of England and the United
States, are regarded as being of this character. Loans
secured by mortgage of real estate may be made as secure
as anything human can be. But in a great number of
loans from one individual to another, a greater or less
degree of risk is encountered, and the capitalist receives
compensation both for the use of his capital while in the
control of the borrower, and for the risk which he en-
counters that it may not be repaid to him according to
the contract. The lender will demand a higher rate of
interest in some cases than in others, according to his
estimate of the risk incurred. This is the reason why
some governments are able to borrow money at the very
lowest rates, while others can scarcely borrow it at all,

INTEREST. 205

and if at all, only at very exorbitant interest. The same
is true of individual borrowers. It will be the lot of the
man who is ill able to pay any interest at all, that he
will pay a much higher rate than the man whose means
of payment are most abundant. It is not because the
lender desires to oppress the poor, but because he must
have insurance for the risk he runs.

§151. The principle on which the payment of interest is
founded is very obvious. A man may possess capital
which he cannot himself use. He may be incapacitated
by the infirmities of age or disease so to manage it as to
derive profit from it. He may follow an avocation in
life in which he cannot invest his gains so as to derive
advantage from them. If he can get nothing for the use
of his capital, he will not incur the risk of entrusting it
to the hands of another, but will lay it away as safely as
he can for future use. The only motive therefore which
can induce him to part with it is, that he ma\ receive a
fair compensation for its use, and for any risk which may
attend the transaction. He will seek a borrower, and he
will find some one of good credit, who will be willing to
pay him the market rate of interest. For there are
always those who have power and skill to labor, but
no capital with which to procure necessary tools and
materials.

"YYi^ sa7ne competition \\\\\q\\ controls all other values
will no less assert its supremacy in determining the rate
of interest, and that rate which competition has estab-
lished for loans involving only ordinary risk will be de-
manded by the lender and willingly paid by the borrower.

It is not easy to see what excuse the legislator can
pie id for interfering in this matter. And yet in all the
past history of the world he has shown a strange but
universal propensity to do so. In most countries of the
world a reason might have been given for it, which can

206 ECONOMICS.

have no validity in this country at the present time. In
numerous instances both ancient and modern, govern-
ments have not only undertaken to compel the fulfillment
of contracts, but have enforced the payment of debts by
the imprisonment of the debtor, and even by selling him
into slavery. If governments resort to such measures
for the collection of debts, it is quite reasonable that they
should so construct the law as not to favor the increase
of indebtedness, or even to discountenance the lending
of money on any terms. Perhaps this is one of the rea-
sons why usury laws have been so persistently adhered
to. But if this is so, a more humane treatment of the
debtor should be accompanied by their abolition. When
as at the present time in this country, the law not only
exempts from seizure for debt the person of the debtor,
but also a considerable amount of his property, in the
form of necessary household goods and tools of his oc-
cupation, that reason for legislative interference between
the borrower and the lender can no longer have any
weight.

It must however be conceded, that the propriety and
wisdom of the usury laws of other ages, and perhaps of
other countries in our own age, cannot be safely judged
by our standards. It may be clear, that laws regulating
the rate of interest are incongruous with the general free-
dom of our system, and a violation of economic law ; but
it will not hence follow that in countries where all the
economic forces are in a great measure counteracted and
held in abeyance, such laws may not be necessary for
protecting the debtor against the cruel exactions of the
creditor. No one familiar with the Latin classics can
fail to see, that under Roman laws there was such a
necessity.

The law of ownership means that the owner will de-
cide by his own free will on what terms he will part with

INTEREST. 207

his capital, and it equally means that the borrower will
decide on what terms he will consent to take it. Till
these two wills are brought to coincide in the matter,
there may be force, but there can be no loan ; and when
they are at one by free competition, it is impossible to
give any good reason why any other personality should
interfere in the case. There can be no such interference
without a direct violation of ownership. We say nothing
of the morality of such interference, but we do say that
it is a violation of that original law of ownership which
is the foundation of our whole science. It is moreover
a futile and useless interference, an attempt to control by
statute law that which a law of nature has already de-
cided, and placed quite beyond the sphere of human
legislation. Jt is within the domain of natural law, and
therefore statute law will in vain attempt to meddle with
it. The law may forbid the capitalist to demand or ac-
cept more than a given rate of interest, but it cannot
compel him to lend at that rate. If he can use his cap-
ital more profitably in other ways than by lending it at
that rate, he will not lend it. It may forbid the borrower
being compelled to pay more than a given rate, but it
cannot enable him to obtain money at that rate. It may
forbid two human wills consenting together at any other
point than that determined by the law, but it cannot
make them consent at that point. It may throw obstacles
in the way of borrowing and lending capital, and thus do
great injury to both parties. But it cannot make them
borrow and lend on any other terms than those they
mutually agree upon. While men retain within them-
selves an intuitive perception of the nature and inaliena-
ble character of ownership, laws forbidding men to con-
tract to lend and borrow money on such terms as seem
to them fit, will be essentially nugatory, and provoke
unceasing efforts at evasion, and men will be ingenious

208 ECONOMICS.

enough to render those evasions successful. While the
general spirit of trade is as at present, these predictions
will be everywhere verified b)' fact. The law will more-
over fail to find any support in the conscience of the
community. There will be a feeling in the hearts of
men, that the law violates the property rights both of the
borrower and of the lender, and efforts at evasion will
either not be regarded as wrong at all, or be judged very
leniently, as sins of so venial a character as not to merit
any severe condemnation. We ask all thoughtful men
who are practically acquainted with this matter, to judge
for themselves, whether the above picture is not a true
exhibition of the facts as well as of the theory of the
case. If this is so, more words are unnecessary. The
sooner our legislators withhold their hands from all inter-
ference in this matter, the better it will be both for trade
and morals.

§ 152. When borrower and lender are left free of any
legislative interference, there is probably no case in the
whole economic system in respect to which competition
acts more freely than in determining the rate of interest.
There are seldom or never any attempts to control it by
combinations, either of lenders or borrowers. The rates
actually paid in different countries at the same time, and
in the same country at different times, vary between very
wide extremes. In some countries, in transactions sup-
posed to involve no risk, it is as low as two per cent per
annum. In some cases, as for example in the new states
of our own country, it is sometimes as high as fifty or even
sixty per cent per annum. It is perhaps generally sup-
posed that in these last cases rates of interest seemingly so
exorbitant can be occasioned only by the great risk which
the capitalist incurs. But so far as our observation has
extended, this is by no means a fact. These rates are
often due largely to the exceedingly low rates at which

INTEREST. 209

the government offers the perpetual ownership of some
of the most fertile lands in the world, and the scarcity
on the frontier of the money with which only the pur-
chase can be made. Most men who emigrate to the
frontier wilds carry little with them except their power
to labor. For the small sum of money necessary to pro-
cure for them the perpetual ownership of a farm of a
sufficient size, and indispensable tools, implements and
domestic animals, they can afford to pay almost any rate
of interest that may be demanded. In many cases they
hope, not without reason, to repay the loan out of the
first two or three crops from the land. They are there-
fore willing to give to the money-lender a liberal share
of the very large profits they are likely to receive, rather
than not obtain the small sum of money which is quite
indispensable to their success. Indeed one has only to
study the conditions under v;hich the borrowing and
lending of money is transacted in a prosperous frontier
settlement, to become quite convinced of the inexpedi-
ency and inherent absurdity of laws regulating the rate
of interest. If in such circumstances usury laws could
succeed in limiting the lending of money to a prescribed
medium rate, of interest, that success would be the great-
est possible injury both to borrower and lender. The
borrower would be unable to obtain money when it would
be a very great benefit to him to get it, even at a much
higher rate of interest than that demanded, and the
lender, unable to obtain his share of the gains of the
transaction by lending his money, would himself pur-
chase the land of the government, and sell it out to the
actual settler on terms much less favorable to him, than
to have lent him the money at the high rate of interest
proposed.

§ 153. It can hardly be interesting or profitable to
trace out the nearly in7imnerable causes which pro.Iuce

2IO ECONOMICS.

variations of the rate of interest between these widely re-
mote extremes. Through all the fluctuations which they
occasion, they are as true to the one law of competition,
as the tides of the ocean are to the law of gravitation.
Sometimes doubtless risk is the chief element of varia-
tion, as is apparent in the rates of the government loans
of England and Holland on the one hand, and those of
Turkey and Egypt on the other. Sometimes high rates
of interest are occasioned, as in Australia and in our
own new states, by the large profits that can be realized
from the possession of capital, and the great scarcity of
money in a community of recent emigrants. Men who
have plenty of money have no motive to emigrate to the
wilderness, and are not easily persuaded to send their
capital where they are not willing to go in person.

Any occurrence which raises men^s hopes of gain to be
realized from the investment of capital in active trade, will
make them more anxious to obtain it, and willing to offer
a higher rate of interest for it. Any thing -which dimin-
ishes the profits of trade and depresses men's hopes will
render them less desirous of borrowing money, less dis-
posed to compete with each other for the possession of it,
and therefore reduce the rate of interest. The phrase
"value of money" has two very different meanings. In
one use of it, it means the value of the precious metals
as compared with the value of other commodities. In
this sense it has been shown that the value of money is
less liable to fluctuation than any other commodity, and
that therefore it is better fitted than any thing else to be
the medium of exchange, and the standard of all value.
In the other use of it the meaning of the phrase is the
rate of interest which money will command in the mar-
ket. In this use of the term few things are more fluctuat-
ing in value than money, and therefore few things are more
suitable to be left to the influence of free competition.

INTEREST. 211

The tenure of land in fee simple, and the existence of
perfect freedom of exchange in respect to it, have a most
salutary influence on the interest market. They tend
greatly to secure it against violent fluctuations, and
dangerous extremes, and enable all that very large por-
tion of the community that under such a system own
land, at all limes to borrow money at the lowest current
rate, without paying for extraordinary risk. For this rea-
son all those provisions of the law which, under the in-
tention of protecting the debtor, make the foreclosure of
mortgages difficult, expensive, or subject to long delays,
are on the whole injurious to borrowers, rather than
beneficial. The more direct and speedy the remedy of the
creditor is, in case of the failure of the debtor to pay ac-
cording to contract, the lower the rate of interest at which
he will be willing to lend money. It is probable that
this is one of the causes why the rate of interest is so high
in British India. It is not merely on account of the
scarcity of capital, but also partly because, owing to the
absence of the tenure of land in fee simple, few are able
to give any satisfactory security for money borrowed.
This is a curious illustration of the tendency of the ten-
ure of land to exert an influence on all the economies of
a community. Free trade in land tends to freedom in
every thing else.

§ 154. It may seem to some that the fact that the rate
of interest may differ very considerably in two neighbor-
ing countries at the same time, as is the fact in respect
to England and Holland, is inconsistent with what we.
have said of the cosmopolitan character of capital. Why,
it may be asked, should a Hollander lend his money at
home at two per cent, when he can obtain for it in the
English funds three and a quarter per cent? The answer is,
that this is not by any means a national affair. The same
thing is just as likely to occur in respect to different parts

212 ECONOMICS.

of the same country, as between different nationalities.
There have been times when the current rate of interest
in Illinois was fifty per cent, while in Massachusetts it
was six per cent. And yet the lender in Illinois certainly
incurred no extraordinary risk. The explanation of the
phenomenon is found, not in any relation of capital to
nationality, but in the fact that a capitalist always pre-
fers to have his capital near him, under his own eye, and
under social conditions with which he is familiar. Es-
pecially he prefers to invest it under laws which he un-
derstands, and with the administration of which he is well
acquainted. In such circumstances he would rather
accept less interest, than make an investment in circum-
stances which he regards as less desirable. It is an ad-
ditional consideration applying to foreign investments,
that in case of a war between his own country and that in
which the investment is made, payment would be sus-
pended during the war. This of course would be re-
garded as a very great objection to a foreign investment,
unless the peace of the two countries was regarded as in
a great degree assured. Undoubtedly the danger of the
occurrence of war between the different nations of the
earth is a very great obstacle to the free circulation of
capital. The nations of the world can never enjoy the
full benefit of the universal huinan relations of capital,
except on condition of maintaining universal peace.

§ 155. The rate of interest always declines with the
gradual progress of a coni7nunity in wealth and general civ-
ilization. This is abundantly established by reference to
the past history of civilization. The fact is doubtless
partly owing to diminished risk. With the healthy pro-
gress of society trade becomes more regular, systematic
and sure in its results, governments become more stable
and just, and are more skillfully administered for the
protection of all the rights of property. But this is cer-

INTEREST. 2r3

tainly not a complete account of the matter. It seems
to be a great law of human progress, that of all the ele-
ments that enter into the economic system of the world,
capital is that which increases most rapidly. If a savage
enters on the attempt to become a civilized man, with
nothing but his bow and arrows to begin with, he must
first accumulate a surplus over self-support, to buy a
rifle. With that greatly improved instrument, he will be
able to accumulate much more rapidly than before. In
a short time he will not only be the owner of a rifle, but
he will have besides an accumulated surplus by which he
will be able to procure the means of rendering his labor
still more efficient, and his accumulation still more rapid.
The same principle seems to hold for every successive
step of his progress. Each new invention, each new
natural force that is made the helper of his labor, not
only compensates for the outlay of capital it has cost, but
greatly multiplies his surplus for still further and more
important investments. In this whole matter, the Scrip-
ture is constantly fulfilled : " To every one that hath shall
be given." With each new triumph of man over the
powers of nature, other and greater triumphs become
possible, which before were quite impossible, and we can
set no limits to the possibilities of the future except the
limits within which gravitation and inertia confine us.

But capital obeys the same law of supply and deniana
which prevails everywhere in the economic 7vorld. If one
element increases more rapidly than any other, it will
inevitably decline in price. This one consideration fully
explains the certain and steady decline of the rate of
interest in all countries of growing wealth and civiliza-
tion. It is the prodigality of nature's provision for all
man's prospective wants, and for his highest possible
development.

§ 156. Some of the most important consequences of

214 ECONOMICS.

this law we are not prepared to examine at the present
stage of our inquiries. There is however one important
relation of the law, which it is proper to point out in
this place. This sure decline of the rate of interest sug-
gests the thought, that it must at length reach a point be-
yond which ihe gain to be derived from capital would
become so small, that there would be no sufficient in-
ducement for any further effort at accumulation, and that
consequently capital would cease to increase, and the rate
of interest would becotne stationary. We are not disposed
to deny that at some distant future point of human pro-
gress, there may occur a maturity of civilization over this
whole earth, such as would produce a stationary condi-
tion both of capital and interest. But a little considera-
tion will convince us, that that point is yet so remote in
the distant future, that the prospect of its being reached
should awaken neither hope nor fear. There may be
for aught we know a limit to the solar system, beyond
which inevitable disaster awaits it. But the danger is
too deep in the dark unknown future, to awaken any
present apprehension. The danger of any such disaster
in the economic world can hardly be more imminent.

In considering this matter that cosmopolitan nature of
capital which we have already demonstrated, should not
be forgotten. In order that this minimum possible rate
of interest should be reached, the demand of the whole
world for capital must be far more perfectly supplied
than it is at present supplied in such countries as England
and Holland, where the rate of interest is lowest. At an
interest of three and a quarter per cent in one of these
countries, and two per cent in the other, in transactions
involving no risk, the accumulation of capital is still
prosecuted with great zeal and energy. How much
lower point it may reach without causing a cessation of
accumulation we have no experiment by which it can be

INTEREST. 215

determined. But the experiments with which we are
here furnished are quite sufficient to prove, that the in-
crease of capital cannot be arrested till the demands of
the whole human family are far better supplied than the
demands of either of those countries are at the present
time. On the supposition of a long future of peace over
the whole earth, and of such reforms in the governments
of the world as will render property as secure everywhere,
as it now is in those two favored countries, this world-
wide demand for capital could not be so completely sup-
plied except in some exceedingly distant future age.

§ 157. There is another consideration which tends to
postpone the day at which such a stationary condition
of the economic forces of the world can occur to a still
more distant future. As the interest on capital is di-
minished, the danand for it must be increased in a very
rapid ratio. The case is closely analogous to the in-
creased demand for labor which, we have shown, results
from the use of labor-saving machinery. The first effect
is that labor is dispensed with, and the demand for labor
diminished. But the immediately succeeding effect is,
that millions are to be supplied with the cheapened
product, where before only thousands could enjoy it, and
this increased demand far more than compensates for the
diminished amount of labor requisite to produce a given
quantity. The aggregate result is, as we have seen, an
almost unlimited increase of the demand for labor.

So is it in the case under consideration. A vast
increase of capital would be necessary to supply all
which would be demanded, for example in the United
States, at the present rate of interest. But if the rate
of interest should decline, as it surely will, by the regular
process of increasing wealth and prosperity, to two or
three per cent, who can compute the vastness of the de-
mand for the use of it which would come with those low

2l6 ECONOMICS.

rates of interest? How many and how vast would the
enterprises be, which would then become practicable and
easy, which at the present rates of interest are not to be
even for a moment thought of? Who can compute the
amount of capital which would be absorbed in enterprises
which in the present state of things would be quite chi-
merical, and yet in the state of things supposed would be
easily rendered actual ? The same would be true over
the whole world. In such a state of things enterprises
would everywhere be undertaken and carried through,
which in our times are never thought of. It would ex-
pose one to ridicule barely to suggest many an under-
taking, which in such circumstances would be far more
easily accomplished than the Suez Canal or a continuous
line of railway across the continent of North America in
our own times.

At those low rates of interest the possible uses of
capital would become so numerous and the amount
necessary to satisfy them so great, that a very great in-
crease of the capital of the whole world would hardly have
an appreciable influence on the general rate of interest.
Ever so great an increase of capital in one country
would be like a flood in a single river, causing it perhaps
to overflow all its banks, but having no sensible influence
on the level of the ocean. The capital of the world is
oceanic, as truly as its medium of exchange. When the
rate of interest for the whole world shall have been
brought down by general prosperity to two per cent, the
additional increase of capital necessary to reduce it to
one and a half would run far up toward the infinite.
Those who are alarmed at the prospect of a coming
stationary period are certainly troubled with groundless
apprehensions.

§ 158. It may be suggested in reply to the conclu-
sions of the previous section, that they are founded on

INTEREST. 217

suppositions not likely to be realized, that the world is not
likely to have a long future of universal peace, that the
governments of the world are not likely to be so reformed
as to mak*^ rights of property as secure everywhere, as
they now are in the most civilized countries. Then
surely we may dismiss all our apprehensions about the
occurrence of a stationary condition of economic forces.
Without the fulfillment of those conditions, it never can
come. Meanwhile it is certain the condition of the
world is becoming from generation to generation more
favorable to great economic enterprises, and inviting!
openings are presenting themselves for the investment
of capital in many and remote lands. If some countries
are becoming gorged with capital, and do not present
at any particular time satisfactory modes of investment,
the world is before the capitalist, and the capital which
will not yield him interest in his own country will not fail
to find a remunerating demand elsewhere.

Nor is there any reason to suppose that the resources
of labor-saving invention are yet exhausted. When we
consider the demands for more capital which have been
created by the inventions of the last century, we have
surely little cause to apprehend any lack of demand in
coming ages. Who is able to compute the time requisite
to accumulate a sufficient amount of capital to give to
the whole world the full benefit of the inventions of the
last century ? When will the world be rich enough to
procure for itself the advantages of the railway system
for all its peoples, as they are now enjoyed by a few of
the more civilized nations of the world ? There can be
no reason to fear that the emigration of capital from
countries where it is superabundant, and the use of it in
multiplying labor-saving machinery to supply the wants
of the world, will not so sustain the rate of interest for a
long time to come, that there need be no apprehension
10

2l8 ECONOMICS.

that it will touch a lower point than it has already reached
in a few favored countries.

ji-i^

CHAPTER VIII.
Rent.

§ 159. The word rent is used with a good deal of
latitude of signification. It is not only applied to land
and all permanent improvements of it, but to many other
of the more permanent forms of fixed capital. The
peculiarities however which make it necessary to give it
a separate consideration in this treatise pertain only to
land and the various permanent structures reared upon
it — to land in actual use for the various purposes for
which it is employed in the processes of production and
exchange. In our definition we shall confine the word
within these limits, taking no account of various other
forms of property to which it may be loosely applied.

Definition. Rent is the compensation received for the
use of capital invested in land.

As no human possession can be more secure from
liability to loss than capital invested in land at its mar-
ket value, the compensation received for it will be for
use only, without any consideration of risk. It cannot
therefore be higher than interest at the lowest rate, on
the present value of the land. The nature of the case
would lead us to expect that it would be even lower than
the rate of interest, in cases in which the security is sup-
posed to be absolute. A presumption always exists,
that the value of the land will be steadily enhanced with
the progress of society. For this reason a landholder will
always be willing to receive a lower rate of interest for

RENT, 2 I 9

his capital invested in land, because that capital itself is
presumed to be increasing in value. In addition to this
in some countries, as for example in England, the land
owner enjoys considerable advantages of respectability,
dignity and social position, for himself and his family,
which all men value, and for the sake of enjoying which,
he is willing to invest his capital at a lower rate of inter-
est than he would expect from other investments.

It is also true that the national passion for owning
land which so permeates all English thought, custom and
literature, is not entirely extinct even yet in any of the
peoples that are ofF-shoots of England, that still use the
English language, and read English books. Perhaps
even more than this is true. Perhaps a desire to own
land has its seat in human nature itself. Perhaps it is
natural for man as man, to feel a peculiar sense of dig-
nity, independence and personal importance, when tread-
ing on his own soil, and sitting beneath his own roof.
We suspect that men universally have a pleasure in the
ownership of land, which renders them willing to invest
capital in land with the expectation of receiving from it
less value in return, than they w'ould demand from most
other modes of investment.

§ i6o. One question relating to rent has received a
great deal of attention from economists, and occasioned
much diversity of opinion. That question respects the
cause of the increase of the rent of land which always at-
tends an increase of population and wealth, unless that
increase is accompanied by the introduction of agricul-
tural products from more remote sources of supply. The
theory of the subject now generally received by the lead-
ing representatives of English economic thought is that
published in 1817 by David Ricardo^ in his Principles of
Political Economy and Taxation. It has been generally
regarded since that time by writers of the English school.

220 ECONOMICS.

as a complete solution of the question. It may be
succinctly stated thus: The rent of any piece of land at
any time will be precisely equal to the difference bet^veen the
net value of its products and the net value of the product
of the poorest land, whose products barely pay the expense
of cultivation, without any rent. The reasoning by which
it is sustained is something like the following. In the
first settlement of a country, there can be no rent, for
there will be more land of the best quality than can be
cultivated, and therefore any one can have as much land
as he pleases without rent. When all the land of best
quality has been brought into cultivation, and by reason
of the increased population proves inadequate to furnish
the necessary supply of agricultural products, then poorer
lands will be brought into use. At the same time lands
of the best quality will begin to pay rent, because one
would be willing to pay for the choice between land of
the first and second quality the difference of the produc-
tiveness of the two. When the supply of the second
class is exhausted, land of third class fertility will be
entered on, the second class will bear rent, and the first
class still higher rent, and so on, the first class rising
higher and higher as the increasing demand for agricul-
tural products forces cultivation downward to poorer
and still poorer lands. The answer which this theory
gives to the question under consideration is, that the
cause of the increase of price of agricultural products is
the necessity of deriving them from poorer lands, and
therefore at an increased cost of production.

§ i6i. With th^i first settlefnent of a country, in which
Ricardo's theory assumes that a certain state of facts
must have existed, we were ourselves familiarly ac-
quainted for many years, and are all able to bear witness
of our own personal knowledge. The case furnishes a
striking illustration how ill men succeed in determining

i

RENT. 221

on theoretic grounds, what facts must have been in a
given case, while they are quite ignorant as to what they
really were. What actually occurs in such circumstances
contradicts what the theory assumes at every point. The
notion of a state of things in which cultivated lands will
bear no rent, is as fabulous as the centaur or the mer-
maid. Of two tracts of land adjoining each other, one
would be under cultivation, the other not. Both would
b:; of equal and unsurpassed fertility. The tract under
cultivation would pay a rent of one third of the crop.
The zero point from which rent is to be reckoned has no
existence in fact. The reason is obvious ; any piece of
land that bears cultivation will pay a rent equal to the
interest on the capital invested in it, making allowance
of course for those considerations which reduce the rate
of interest on capital invested in lands below the general
average. These new lands under cultivation will pay a
rent equal (o the capital invested in them at this rate of
interest. The Creator does not give us land in a state
of readiness for the plowman and the seed-sower. It
must be subdued, rank and useless natural growths must
be removed at the expense of no small amount of labor,
the whole must be surrounded by an enclosure, and fur-
nished with strictly necessary buildings. The prairie
lands of the upper Mississippi valley probably presented,
in their natural state, as few obstacles to cultivation as
any which have been subdued by man. Yet even they
could not be fitted for cultivation for a less sum than
six dollars to ten dollars per acre, including of course
the payment made to the government for the land itself.
This investment must be made in many instances, when
the interest of money is as high as fifty or even sixty
per cent per annum. Men who are without capital
would be glad of the opportunity of paying one third of
the crop for the use of the land in a stale of readiness

222 ECONOMICS.

for seed-sowing, through equally good lands adjoining
them were unused.

§ 162. Neither is the theory more successful in indi-
cating the successive steps by which lands of different degrees
of fertility are brought into cultivation. A great many
other considerations besides natural fertility influence
the choice of first settlers. The land is nearly all cov-
ered with a deposit of rich mould, resulting from the
vegetable decay of ages, and will produce a few luxuriant
harvests before its permanent quality becomes apparent.
A forest of timber or a spring or a stream of water will
often have far more influence on the choice, than the
permanent qualities of the land. Mr. Henry C. Carey
rejects Ricardo's theory of rent, but in his statement of
facts, he is hardly more fortunate than Mr. Ricardo's
theoretic assumptions. He represents that cultivation
almost invariably begins on the comparatively barren
hill sides, and makes its way slowly and gradually down
to the rich alluvion of the valleys, where the most fertile
lands are found. He can hardly have been an accurate
observer of farming in new settlements, or he would not
have made such statements. The circumstance which
affects the choice of the new settler more than any other
seems to be, the cost of preparing the land for cultiva-
tion. It may happen that the very best land may also
be that which requires a very small outlay to subdue it.
Or it may happen that the choice falls on a well-drained
hillside, which can be very easily subdued, and will bear
a few good crops, but will not be permanently fertile.
It frequently happens also that some of the richest lands
are encumbered with such natural obstacles to cultiva-
tion, that the rent they will yield will not pay the cost of
subduing them, till the community is already far advanced
in wealth and population. Some of the best lands on
earth are lying quite uncultivated, awaiting the time

RENT. 223

when rents shall have advanced to such a point as to
justify the outlay of capital necessary to subdue them.
All the facts of the case entirely justify and sustain our
reasonings and conclusions respecting the ownership of
land. It is to be regarded as fixed capital, and rent is
compensation for its use.

§ 163. Kkardo's theory of rent radically fails by sub-
stituting cause for effect and effect for cause. The real
cause for the increasing price of agricultural products,
as wealth and population increase, is the constantly
growing demand for them. Their price would rise and
equally rise, if there were no poorer lands that could be
cultivated, or if the supply of them must be perpetually
derived from the same unchanging sources. Increasing
demand always occasions increased price. If the amount
of capital needing to employ laborers is large, and the
number of laborers that can be emplo3'ed is small, cap-
italists will bid against each other under the apprehen-
sion of failing to get the laborers they need, and raise
the price of labor. So as the number of mouths to be
fed is multiplied while the supply of food remains sta-
tionary, men will be apprehensive of failing to obtain a
supply, bid against each other and raise the price with-
out any consideration whatever of the sources from which
the supply comes. The sources of supply and the cost
of production may remain absolutely unchanged, yet if
the demand is increasing, while the supply is stationary,
men will become apprehensive, and their apprehensions
will have an effect on the price. This is the one cause
of the rise of rents with increasing wealth and popula-
tion. It is exactly analogous to the rise of the rent of land
to be used for purposes of trade in the heart of a great city.
With the growth of the population and trade of the city,
the demand for those lands for certain uses which can-
not be supplied by any other lands, constantly increases,

224 ECONOMICS.

and the price rises accordingly, and this increase of
price will be limited only by the number and wealth of
those that want it.

§ 164. On Y>^e.c'\SQ\y X\i(t same principle the rent 0/ land
used for agricultural purposes is raised^ by the increase of
wealth and population. The increased rate of rent does
not depend on population alone but, as in the case of
land used for purposes of trade, on wealth also. If the
people were all too p>oor to pay any more for agricultural
products than they had been paying, they could bear no
increased price, it would produce starvation. If the
amount of capital in any country is small in proportion
to its population, rent will be low however densely it may
be peopled. But if population and wealth increase, an
advance in the rent is inevitable. Increased demand
for agricultural products will compel increased rent.
Poorer lands, if any exist not hitherto cultivated, will be
likely to be brought into cultivation. Entering on those
poorer lands will however be the effect of the increased
price of agricultural products, and not the cause of it.
Lands will be brought into cultivation perhaps, which
had lain neglected for ages, because agricultural products
are so dear and rents so high, that these lands will now
make a good return for the capital expended in reducing
them to cultivation. Rent is not high because these
lands are cultivated to produce food, as Ricardo's theory
would have it, but these lands are under cultivation be-
cause the demand for agricultural products is so great
that they will yield a rent which will satisfactorily re-
munerate the capitalist for subduing them. Rents would
have been even higher than they are, if there had been
no poorer lands to be brought into cultivation, and no
long neglected lands which could be rendered fit for til-
lage by large outlays of capital.

§ 165. Many writers have made much of " the law of

RENT. 225

diminishing returns " in connection with rent. We have
hitherto said nothing on that subject, because we think
the principle so obvious as hardly to require statement,
much less argument. It seems to us that any farmer of
ordinary intelligence knows, that, up to a certain point,
the more he lays out in the judicious improvement and
cultivation of a piece of land, the larger returns he will
get, in proportion to the outlay; but "that beyond that
point, though the product will perhaps still be increased
by additional outlay, it will not be increased in propor-
tion to the cost. The more he expends, the less his
percentage of profit will be. This is the law of diminish-
ing returns. It is also true, that as rent rises, it becomes
profitable to expend more in the cultivation. This is
because the increased demand for agricultural produce
enhances the price, and thereby compensates for the di-
minished quantity that is procured by a given outlay. In
a given state of the market, five laborers will obtain from
a given farm produce to the value of one thousand dol-
lars. In the same state of the market, the produce of
ten laborers would only be worth fifteen hundred dol-
lars. But if by increased demand agricultural products
have risen in price, so that what before sold for fifteen
hundri'd dollars, would now command two thousand
dollars, it will be as profitable to employ the labor of
ten men, as it was before to employ but five. That is,
the advanced price of agricultural products makes it
profitable to employ a greater number of laborers for a
given amount of product. The same holds of rent.
According to Ricardo's theory agricultural products are
dearer and rent higher because it costs more to produce
a given amount. No, say we, they are dearer only, be-
cause there is a larger demand for them, and because
they are dearer, it is profitable to produce them at a
greater outlay of both rent and labor. They are not

2 26 ECONOMICS.

dearer because an additional supply is produced at
greater cost, for they would be much dearer than they
are, if no additional supply could be produced. The
greater cost of the additional supply has no tendency
whatever, either to raise the price of agricultural pro-
ducts, or to increase the rent. Both these phenomena
are caused only by increased demand for agricultural
products, and instead of being intensified they are miti-
gated by the additional supply, though at increased cost.
§ 165a. The most important consequence deduced
from Ricardo's theory of rent, is the doctrine that '' rent
is not an element of the cost of obtaining agricultural pro-
duce*'' Mr. Fawcett asserts this paradox, and quotes
Mr. Buckle as saying, that this proposition " can be
grasped only by a comprehensive thinker." It really
seems to us that an intellect not very comprehensive is
quite competent to perceive that it is not true. In proof
of this doctrine the supposition is made, that by an act
of the government all rents were made free. Such an
act of wholesale spoliation it is claimed would make agri-
cultural products no cheaper than before. It is true that
if the same population remained with the same wealth
wherewith to purchase, the same demand would exist as
before. But these conditions would not be fulfilled.
The hundreds of thousands whose capital is invested in
lands, and the still greater number of thousands depend-
ent on them for their employment and their bread, would
be deprived of their living and reduced to starvation, be-
cause they had nothing with which to purchase food.
Their necessities would therefore be withdrawn from the
demand, and the price would fall. I'here is just as
much propriety in making the supposition, that by an act
of the government the wages of agricultural labor were
abolished, and laborers compelled to till the soil without
compensation. If this could be accomplished and agri-

RENT. 227

cultural laborers still live, it would equally be true that
agricultural products would be rendered no cheaper by
this gigantic act of spoliation. The same demand would
remain to be supplied, and the price would remain un-
changed. Will these gentlemen therefore allow us to
make the inference, that the labor employed in the culti-
vation of the land or rather the wages which it receives
" is not an element of the cost of obtaining agricultural
produce?" It is quite true that if the holders of agri-
cultural products could bring them into the market, with-
out having incurred any expense either for rent or wages,
other things remaining unchanged, they would be able
to obtain the same prices for them as now. But such a
supposition is fundamentally contradictory to the very
nature of ownership. They are the owners of what they
offer in the market, because they have paid both rent
and wages, and he who purchases of them must of neces-
sity repay not only wages but rent also.

§ 166. Mr. Fawcett speaks of the supposed act of
government making all rents free as the " abolition of
rent.''' Such an act of tyranny would not be the aboli-
tion of rent. It would be simply taking the rent from
the owner of the land and giving it to the farmer that
for the time being tilled it. Suppose a neighbor of that
farmer, perceiving that great gains could be realized by
cultivating land without paying any rent for it, should
apply to the fortunate incumbent for the use of half his
farm. The prompt reply would be, you may have it if,
as a private transaction between you and me, you will
pay me a fair rent for it. The farmer understands very
well that the tyranny of the government has despoiled
the owner of the land for his benefit. Why call such a
transaction the abolition of rent?

No government can abolish ' rent any more than wages.
We have shown that land becomes private property only

2 28 ECONOMICS.

because of the labor bestowed upon it to render it an
instrument of human well-being. It is capital. That
capital has descended to the present owner. Food can
no more be produced without the use of the capital in-
vested in the land than without the labor that tills it.
Nor is this all. A farm is in an important respect
analogous to the human body. As the body constantly
tends to decay, and can be kept in vigor only by con-
stant repair, so a farm constantly tends to revert to that
natural state from which it was redeemed by labor and
capital, and more labor and capital must constantly be
employed to preserve it in a state of vigorous productive-
ness. The tenant farmer has no interest in preserving
the permanent productiveness of the farm, and will make
no outlay which will not conduce to the abundance of
the harvest immediately expected. Buildings will go to
decay, and all other permanent improvements will be
neglected and deteriorated. The original outlay neces-
sary to bring a farm into cultivation must in the course
of a half century be renewed two or three times, and at
greatly increased cost. New and belter dwellings and
out-buildings must be provided, drainage must be re-
sorted to, more permanent enclosures must be con-
structed, and generally the farm must not only be saved
from decay but brought up to such a degree of cultiva-
tion, as the present state of agriculture demands. A
temporary tenant has no motive to provide for any of
these things. Ownership and rent only furnish the
requisite motive. Lands that have no owner will rapidly
revert to their natural condition, and cease to produce
food for man and beast. Rent is therefore as necessary
and inevitable an element in the cost of the products of
the soil, as the labor that annually tills it. The man
who brings the produce of the farm to market, must
equally demand compensation for rent and wages, and

RENT. , 229

the amount he will be able to obtain will depend on the
population and wealth of the community relative to the
supply of his products.

§ 167. There is another proof equally strong that
rent is an "element in the cost of obtaining agricultural
produce." It is an admitted fact, that England has
within a comparatively few years added nearly one-fifth
to her population, and yet during that period the price
of agricultural products has scarcely advanced at all.
It is also admitted, that the reason why the price of food
has remained nearly stationary is to be found in the fact,
that large supplies have been imported from other coun-
tries. These supplies have been largely obtained from
our own country. Why is it then that agricultural pro-
ducts from the interior of North America, transported a
thousand miles by land, and three thousand by water,
are yet oifered in the London market at prices so low,
as to prevent any advance in the price of food resulting
from so great an increase of population ? It is not be-
cause these supplies are derived from richer land. The
produce of wheat per acre in England is probably greater
than in the United States. It is not because they are
the produce of cheaper labor. The wages of agricultural
labor in the United States are probably more than twice
as great as in England. It is because those supplies
are derived from lands whose rent is scarce one-fifth
what is paid for lands of like productiveness in England.
The one cheap element in the cost of procuring American
agricultural produce is rent. Every Englishman who in
these days eats comparatively cheap bread, should grate-
fully remember the low rent of the United States. When
land rents in the region around Chicago shall approxi-
mate, as at no very distant day they will, the rents of
land around London, Englishmen must either eat very
dear bread, or derive supplies from other fertile regions

230 ECONOMICS.

not yet invaded by Accumulated wealth and dense pop-
ulation. Rent is an element in the cost of obtaining
agricultural produce.

§ 168. It is also noticeable that Mr. Fawcett himself
docs not after all derive the doctrine to which we object from
Jiicardds theory of rent, but from the consideration that
if all rents were free, the same demand for food would
still remain, and therefore prices be unchanged. This
is admitting precisely what we contend for, that the fun-
damental element in the case is the demand which results
from a given condition of wealth and population. We
trust therefore that it is apparent to all readers, that
Ricardo's theory of rent is not sustained by the facts
■which occur in the origin and progress of land culture,
that it depends for all its plausibility on the fallacy of
assuming that to be a cause which is only an effect, and
that the chief consequence which men have sought to
deduce from it, and for the sake of which the theory it-
self has been for the most part defended, contradicts
fundamental natural law and is quite erroneous, and that
it is not even deducible from the theory itself. We can-
not refrain from expressing our wonder, that this theory
and the paradoxical inference which men have sought to
deduce from it, can have for fifty years maintained their
position as fundamental laws of the science. We can
only explain the fact by the consideration, that the gen-
eral belief of the doctrine that rent is not an element in
the cost of agricultural produce is fitted to afford power-
ful support to those land monopolies which have been
very prevalent in European history, and one of which
still prevails in respect to the tenure of almost all the
lands in Britain. Of this subject however we shall speak
hereafter.

§ 169. It is also noticeable that the same fallacy is re-
sorted to in explaining the price of tnifterals xvhcn the rcla-

RENT. 231

Hon of demand to supply is changed. If for example the
demand for iron should at any time increase beyond
what existing mines could supply, or if demand remain-
ing the same the supply afforded by existing mines should
diminish, the price would rise. It is claimed that the
reason of this rise in price is to be found in the fact that
less productive mines must be wrought, requiring a
greater amount of labor and capital to obtain a given
amount of metal. This is incorrect. The price has
risen only because the demand relative to the supply has
increased. The price of the metal would have been still
more increased if there had been no other mines that
could be resorted to. Less productive mines are wrought
because the increased price of the metal makes it profit-
able to work mines which at former prices could have
been worked only at a loss. The working of a less pro-
ductive mine is therefore effect and not cause. The
principle will hold in all similar cases. Ricardo's theory
of rent will be found to involve the same fallacy wher-
ever it is applied.

It is quite correct however in certain cases to speak
of the cost of production as having been increased, or of
the cost of living as having been advanced by the neces-
sity of deriving supplies from more costly sources. If by
the utter failure of the coal supply of England, she were
compelled to obtain all which she uses from the coal
mines of North America, the costliness of her manufac-
tures would truly be said to be caused by the necessity
of deriving supplies from more costly sources. But if, the
coal supply of England remaining unimpaired, the de-
mand for coal should in any way be so much increased
and the price of it so much raised, that it could be car-
ried from North American mines, and sold in England
at a profit, it would surely not be sound philosophy to
ascribe the enhanced price of coal in England to the

232 ECONOMICS.

necessity of transporting it across the Atlantic. The
price would have been much more enhanced, if there had
been no American coal to transport.

CHAPTER IX.

Profit.

§ 170. Another form which the gains of the capi-
talist assume is profit. It is next to be considered.

Definition. Profit is the compensation which the ca/i-
talist receives from employing his capital in any process of
production or exchange.

It differs from interest in embracing a greater num-
ber of elements. Fnterest is compensation for the use
of capital, and such ordinary risk as one must for the
most part incur when he entrusts it to another. Profit
embraces interest on the capital employed, and in ad-
dition to it compensation for the peculiar risk which is
incidental to the modes in which capital is employed,
and for the labor, skill and pains-taking of the capitalist
in superintending and directing the process. The inter-
est element in profit of course varies with the variations
of the rate of interest. A capitalist will expect, in addi-
tion to compensation for the risks of trade, and his own
personal services, such a rate of interest as his capital
would command in the market. He will of course not
take into the account the minor almost daily fluctuations
of the rate of interest which are liable to occur, but the
more permanent changes in the interest market will be
taken into the account in determining what rate of profit
will be satisfactory. Any capitalist would be willing to

PROFIT. 233

engage in any business with a prospect of much less
profit when the current rate of interest was five per cent
than when it was ten per cent.

Of course profit must closely sympathize with interest
in that steady decHne of the rate which, as has been
shown, is always occasioned by the increasing wealth
and civilization of a community. As society becomes
more mature, it will not only become easier for laborers
possessing skill, industry and integrity, to borrow what
they need in aid of their labor, but all commodities into
the production of which capital enters will be produced
at lower prices, or at least brought more within the reach
of all classes of the community, in consequence of the
abundance of capital and the smallness of the rate of
profit. As already admitted for reasons shown, agricul-
tural products are not subject to this law.

§ 171. In this as in all other departments of our sci-
ence coi7ipetition is the supreme law. It is frequently as-
serted that competition will reduce the rate of profit in
all the different modes of employing capital to a common
standard. This cannot be admitted. It would be true
if all the other elements that come into consideration in
choosing the mode in which one's capital is to be em-
ployed were equal. But they are far from being equal.
Some modes of employing capital necessarily involve
great risk, others very little. If capital is to be em-
ployed in manufacturing gunpowder or in purchasing a
steamboat to run upon our Western rivers, it will be ex-
posed to great risk, and no man will make such an in-
vestment without a prospect of profits large enough to
insure him against this risk. Other modes of employing
capital are very numerous in which no such extraordinary
risk is incurred. Men can afford to engage in such
branches of trade at a much lower rate of profit, and
competition will therefore settle the rate of profit in them

234 ECONOMICS.

at a much lower point. Before engaging in any branch
of business, prudent men will insist on a prospective rate
of profit, which will fully insure them against all its fore-
seen risks.

Some modes of employing capital compel the cap-
italist to engage in occupations which are disagreeable^ or
are not held in much respect and /lotwr by the community.
Few capitalists will desire such investments, and conse-
quently those who are willing so to invest their capital
will encounter very little competition, and therefore ob-
tain compensation for the undesirableness of the occupa-
tion itself in other respects by a high rate of profit. It
is to be deeply regretted that not a few capitalists are
found who are willing to accept high profit as a com-
pensation for violated conscience, and are therefore will-
ing to invest their capital in producing that which is
destructive of the prosperity, the happiness and the vir-
tue of those from the indulgence of whose appetites their
profits are derived.

Other employments of capital are agreeable and re-
garded by the community as con/erring dignity and respect-
ability on those who successfully engage in them. They
are apt to acquire a high social position for themselves
and their families. Men are often willing to invest their
capital in such employments for very little profit above
bare interest and risk. They regard their personal ser-
vices as in a great degree compensated by the dignity,
respectability and desirable mode of life which they en-
joy. Of course there is great competition for such in-
vestments, and the rate of profit is very low.

§ 172. These considerations are quite sufficient to
show that so far is it from being true that competition
reduces the rate of profit in different modes of employing
capital to a common standard, it must necessarily result
in producing very wide diversities in this respect. One

PROFIT. 235

law does however prevail through every department of
trade. Every mode of investing capital does find its
own level. // does establish a rate of profit which is natural
and proper for itself. Competition will clearly determine
how much weight all the advantages and disadvantages
of any investment have in naen's minds, and what rate
of profit will be accepted in each particular investment.
Whenever in any case profits are found to exceed that
natural rate, capital will have a tendency to leave other
modes of employment and flow towards that in which
the excess exists, and will continue to flow, not till all
profits are equalized, but till each mode of investment
has its own proper rate of profit, after all advantages and
disadvantages have been duly considered. There is not
equality but a constant tendency to equilibrium of rates
of profit.

This law is not however so stringent as not to leave
room for wide diversities of the rate of profit in different
establishments employed in the same trade. Personal
characteristics may exert very great influence. Superior
sagacity, wisdom and skill in management may obtain
ample compensation by raising the profit far above the
general average, and this sort of superiority can only be
reached by the competition of other men possessing
equally eminent qualities in the management of affairs.
No free competition can deprive any man of the full ben-
efit of his own wisdom and skill.

In an order of things in which competition is not in-
terfered with by any impolitic legislation, it will deter-
mine with unerring accuracy what branches of industry
may be most profitably pursued in any place at a given time.
If any commodity is offered in the market at a cheaper
rate than that at which it can be manufactured there and "
then, it is proof conclusive that the capital of that com-
munity cannot be profitably employed in manufacturing

236 ECONOMICS.

it. Ine reason why it cannot is, that it is already em-
ployed in producing something else which yields a higher
profit. Any legislation which so obstructs the introduc-
tion of that commodity into the market, as so to raise
its price that capital can be profitably employed in pro-
ducing it, is simply compelling the people to pay more
for that commodity than its real value, and creating
artificial motives to induce capitalists to withdraw from
more profitable investments and engage in those that are
less profitable. It is taxing the community to pay cap-
italists for wasting their capital.

§ 173. All this goes on the supposition that the in-
vestment of capital is left to be determined by perfectly
free competition. In speaking of wages, we were at con-
siderable pains to ascertain to what extent the influence
of competition may be modified by combinations to resist
it. It is equally important here to inquire to what extent
the same natural force may be modified or counleracted by
combinations of capital. It is alleged that where a vast
fortune is owned by one person and therefore managed
by a single intellect and a single will, such a capitalist
may and often does obtain the control of the entire sup-
ply of some commodity for perhaps a whole nation, and
thus become able to exempt it entirely from the influ-
ence of competition, and set his own arbitrary price upon
it. It is also asserted that where this cannot be done
by a single capitalist, it can be by a combination of
capitalists whose interests are common. It is plain
that the best possible protection of the community
against such oppressive combinations is the widest
freedom of trade. If an exclusive commercial system
falsely called "protection of domestic industry " confines
"the supply of some commodity to a small number of
easily accessible sources, as for example to a single
country, a monopoly of that commodity in one or a few

PROFIT. 237

hands is rendered eas)'^, and the community may be ex-
pected to suffer from such exactions, and a community
determined to maintain such legislation should utter no
complaints of being oppressed by combinations of capi-
tal. " Protection " of the producers of a commodity thus
monopolized is protection of a combination of grasping
capitalists united in a league to practice gigantic exac-
tions upon a community, whose exclusive legislation has
rendered it powerless to resist them. It is a strange
state of things and not very agreeable to contemplate,
when a duty nearly prohibitory on the one hand dis-
countenances the introduction of the coal of British
America into the seaports of the New England and Mid-
dle States, while on the other hand a combination of the
Pennsylvania coal companies is assisted by that " Protec-
tion," for months and years in succession, to exact from
ten millions of the American people such prices for their
coal as their arbitrary will dictates, screened from foreign
competition in order that they may succeed in strangling
all competition at home. Such an anomaly our people
have endured and patiently tolerated under the paralys-
ing influence of the nightmare of " Protection," Under
such laws combinations of capital in particular lines of
industry to dictate arbitrary prices to all the rest of the
community will always be easy and of frequent occur-
rence. The only protection of the community against
the coal monopolies is free trade in coal, and if the com-
munity has not intelligence and spirit enough to demand
the application of that remedy, it richly deserves to suf-
fer all the exactions which those monopolies can impose.
But if our ports are open to the trade of all the world,
subject to no other imposts than those that are strictly
necessary for purposes of revenue only, such combina-
tions can very seldom be successful, and will be rendered
too hazardous to be often attempted.

238 ECONOMICS.

It must however be admitted that there are a few
cases in which the supply of some important commodity
is by the nature of the case so much confined to a very few
hands^ as to render the success of such a combination
possible, and in the present condition of the public mind
in this country, not improbable. Petroleum is an ex-
ample of this. Our great parallel lines of railway be-
tween the interior and the Atlantic coast furnish another
example. In either of these cases it is difficult to see
what means the people have of protecting themselves
against exactions, which at first view seem limitless.
Are they limitless ?

§ 174. The competition that naturally exists in the
case is between capital in one particular mode of invest-
ment and all other capital. Those interested in the one
mode of investment are seeking by combination arbitra-
rily to dictate prices to all the rest of the world. Such
an attempt is in the long run very likely to prove self-
destructive. The petroleum trade will suffice for an
illustration. Within a few months a combination of
holders has nearly doubled the price of that commodity
to the consumer. The consequence must eventually be
a greatly diminished demand. All other modes of arti-
ficial illumination will be resorted to more freely than
before. Less artificial light will be used on account of
increasing economy, and the area over which petroleum
will bear to be transported will be diminished. Dis-
covery and invention will also be stimulated to search
after other methods of illumination, and other sources of
supply. More recently it is announced tliat the com-
bination is falling to,pieces by the Canadian confeder-
ates refusing to abide by the terms of it. Would it not
be wise for our government to aid those American capi-
talists who are struggling hard to maintain so praise-
worthy a combination, by imposing a prohibitory duty

PROFIT. 239

on petroleum produced elsewhere than in our own coun-
try ? This would at least be a consistent carrying out
of our policy in respect to coal. Who stands ready to
prove his consistent statesmanship, by introducing a bill
for that purpose in Congress ?

§ 175. The great railway combination referred to above
is one of still greater interest and importance. These
lines of road seem to possess the power of combining to
establish the rates of transportation both for freight and
passengers at any point they may agree upon. Thus a
small number of railway magnates seem to possess a
power of taxation, which if not unlimited is at least of
very indefinite extent. It is true they have sometimes a
good deal of difficulty in agreeing together what that
fixed point shall be, and while they disagree, the com-
munity enjoys a season of temporary relief. But for the
most part they are agreed, and the public has only to pay
the prices which they impose. The excitement of the
public mind on this question has been intense, though
often we think, neither intelligent nor wise. The doc-
trine has been widely inculcated that the public has
peculiar rights in the case, growing out of the fact that
railways are held and worked under acts of incorpora-
tion granted by the legislature, and not by individual
capitalists. But is it not evident that their rights and
privileges are neither more nor less than individual cap-
italists would possess in like circumstances? The evil
lies in the ease with which they can control an immense
capital by the power of a single will. But this does not
result at all from the fact that they are corporate and not
natural persons, but from the greatness of the enter-
prises and the vast amount of capital necessary for their
construction and working. It cannot be denied that
these great corporations do often for months and even
years in succession so combine as to a great extent to

240 ECONOMICS.

set the law of competition at defiance. When, on the
occasion of ascertaining that the crop of Indian corn in
the great interior for a certain year was much larger than
usual, the " representatives of the great competing lines "
spent a social evening together at Fifth Avenue Hotel,
and closed the pleasant interview by adding ten cents to
the freight of a bushel of Indian corn from the Mississippi
to the Atlantic coast, the public were confounded, the
economists were made acquainted with a new law of
price, but neither the public nor the economists saw
any way of evading the tax so unceremoniously im-
posed. No one has yet succeeded in showing how these
corporations can be made amenable to the law of com-
petition.

Not only do such combinations set aside competition
in determining the price of transportation, but cases cer-
tainly have not been wanting, in which a great railway
company has been able to exert such an influence on the
Legislature, as to prevent the chartering of any parallel line
to compete with it, and thus to prolong the monopoly in-
definitely for the future.

§ 176. This last mentioned evil could be easily
remedied. Instead of granting a special charter to each
railway company, all should be constructed under the pro-
visions of a general railway law. Any capitalists might
then, by simply complying with the provisions of the law,
construct a railway wherever they might think it would
yield a profit, and all capital invested in railways would
be constantly liable to encounter new competition. Such
liability would be a great protection to the interests of
the public. The remedy is to be sought, as in a great
many other instances, in allowing the largest freedom
for the investment of capital.

This however affords no security against combination
of parallel Urns. If we are correctly informed a recent

PROFIT. 241

decision of the supreme court of the United States sanc-
tions the principle, that the Legislature may prescribe
by law a maximum rate of transportation. Such a law
wisely drawn would probably afford the public consider-
able protection. But that decision of the supreme court
does not reach far toward the root of the evil. Fixing
prices by law is not much more in harmon}' with sound
principles of economy, than dictating them by the will of
one of the parties. All economic arrangements must be
elastic. Prices cannot be uniform. They refuse to be
regulated by any cast iron rule. Rates of transportation
which would be exorbitant at one time, or in one set of
circumstances, would be ruinously low in other cases.
Man has not yet discovered any other method by which
prices can be equitably adjusted except that of competi-
tion. If railways reject that method it is difficult to see
how it is possible to make the law supply its place.

§ 177. The public ought to find protedioji in the
sagacity, ititegrity and wisdom of the men who manage our
great lines of railway. Nothing can be more evident,
than that the prosperity of these great companies will
always depend on the prosperity of the great interior,
especially on its agricultural prosperity. In an enlight-
ened view of things, the real interests of the railways
will be best promoted, by enabling the farmers of the
interior to transport the products of their farms to the
markets of the world at the lowest rate which will afford
a reasonable compensation to the carriers. That will
stimulate production to the greatest possible activity,
and insure to the railways a constantly increasing amount
of traffic, the profits oi which under the law of competi
tion will rapidly increase for a long time to come. It is
evident that the agricultural productions of that vast in-
terior region and especially the growth of maize can be
indefinitely increased, with scarcely any increase of the

242 ECONOMICS.

cost. It would be about as easy to double the agri-
cultural products of that portion of our country, as to
double the quantity of woolen and cotton cloths produced
in England. Increase of demand is the only lacking
condition of an almost indefinite increase of the agricul-
tural products of the Mississippi Valley. If the great
railway companies study their own real interests, they
will encourage and foster and not oppress that greatest
of American industries. In such a case a selfish and
grasping policy would be unwise and suicidal. In speak-
ing of the combinations of laborers to raise wages above
the natural rate, we had occasion to point out the dan-
ger of arresting the natural increase of capital and palsy-
ing the hand that feeds. The same danger exists how-
ever on the other side. It is admitted that capitalists
are apt to be sagacious, but it must also be admitted
that they are often too greedy of immediate gain to be
truly wise. Whoever will devise a method of establish-
ing a rate of transportation on these great lines of rail-
way on the basis of open and equal competition, will
doubtless confer a great benefit on all the parties con-
cerned. Surely while these great companies set so
stupendous an example of combination to resist compe-
tition, no one should be surprised that their employes
combine for higher wages, and that every where strikes
are of very frequent occurrence. Such examples in high
places are very likely to be followed.

§ 178. We cannot however refuse to admit, that
this railway problem is in some of its aspects compli-
cated and difficult. The occurrence of an exceptionally
large harvest in the interior of the country presents some
questions of real difficulty, which are not always con-
sidered. On the one hand should the railways attempt
to transport all which should be offered, at rates of
moderate profit to the stockholders, it would probably

PROFIT. 243

be many months before the necessary amount of " roll-
ing stock " could be procured to meet the demand.
The prompt filling of all orders would be impossible.
On the other hand if the railway companies should make
haste to procure the necessary equipment, as soon as
that emergency was over, their " rolling stock " would
greatly exceed their needs, and a large amount of unused
capital would be on their hands.

It should also be borne in mind, that if it were pos-
sible to send promptly to the great markets all which
would be offered at moderate freight rates, the supply in
those markets would be so greatly in excess of demand^ as to
reduce the price to a point ruinously below the cost of
production, and thus prove very injurious to the farmers
themselves. If competition could be brought to bear in
determining freight rates, it is certain those rates would
be greatly raised in such a case. The case may not
differ much from the practice of the Bank of England, to
raise the rate of discount, when pressed with more appli-
cations for discount than it can safely grant. It accom-
modates those who pay highest. At low rates of freight
it is certain the roads can not carry all which in such cir-
cumstances would be offered. To raise the freight rates
is the only method of reducing the amount of work de-
manded, within the limits of possible performance. It
should "also be noticed that this mode of procedure
comes fairly within the limits of the law of competition.
The arbitrariness of the proceeding may be more appa-
rent than real. It may be only saying, we cannot accom-
modate all, we will serve those who will pay best. An
honorable private gentleman in any profession might
feel himself quite at liberty to say the same. To one
who stands at a little distance and surveys this contest,
wisdom and justice would seem to unite in requiring,
that these great companies should at all times provide

244 ECONOMICS.

such an equipment as experience has shown can be kept
on hand with profit, to fix the medium price of transpor-
tation at rates of fair profit, and to raise the rates when
the traffic exceeds the capabilities of the line, and reduce
them again when the extraordinary demand ceases. If
the public could know, that the great competing lines are
conducted on this principle, all reasonable men would
be satisfied that competition has all the influence it can
have in such a case. If to this it is replied that the line
■which should be conducted in this way would be ruined
by the competition of parallel lines, it is perhaps a suf-
ficient answer to say, that since it is plain the railway
companies do not trust one another, it is perhaps not
strange that the public does not implicitly trust them.

We must leave this subject with the conviction, that
in the present circumstances of society, the public has no
very satisfactory assurance, that there are not some cases in
which capitalists devoted to particular industries can, by
combinations for the purpose, protect themselves from free
and open competition for periods, and perhaps for long
periods, and thus exact upon the public according to
their own arbitrary wills. If this is so, these cases must
be taken from the court of economics — it cannot deal
with them — and referred to that of ethics. If-such cases
really exist, the question will fairly meet us, to what ex-
tent honorable men can avail themselves of such oppor-
tunities of arbitrary exaction.

§ 179. It cannot be denied that some inevitable evils
are connected with the aggregation of large masses of
capital under a single management. But there are ad-
vantages also which civilization can not dispense with.
Without such aggregations, those vast enterprises which
form the most striking characteristic of our times would
be impossible. In many other cases in which they are
not absolutely indispensable, they greatly increase the

CONDITIONS OF FREE COMPETITION. 245

productive power of capital. Large establishments are,
from the very fact that they are large, often much more
profitable than small ones. It costs nearly as much to
superintend a small operation as a great one. Motive
power can often be much more economically used in a
large establishment. There are many other expenses
which do not by any means increase in proportion to the
size of the establishment. In many branches of industry
these advantages are so great, that if the demand were
not greater than the large establishments could supply,
competition would drive the small establishments out of
the trade. But the forming of large combinations of
capital is not always easy. The demand for the com-
modity produced must therefore be still partially supplied
from smaller establishments. The larger will, however,
other things being equal, enjoy larger profits.

CHAPTER X.

Underlying Conditions of Free Competition.

§ 180. In the whole progress of this treatise thus
far, we have been following the law of competition in its
application to all the various phenomena of labor and
capital. It seems desirable, before proceeding to the
remaining questions to be discussed, to point out and
insist on three underlying conditions of the sound and
healthful working of competition. These three condi-
tions are,

1. Perfect freedom of exchange in all circumstances.

2. Such a degree of intelligence in both parties to any

246 ECONOMICS,

transaction, as will place them on a footing of substantial
equality.

3. Moral integrity.

By insisting on perfect freedom of exchange, we do
not object to the right of society to protect itself against
any trade which is destructive of health and morals.
Against all such trades it is the duty of the government
to protect the community as truly as against the conta-
gion of small-pox. But in respect to all articles not in-
jurious to society, and possessing exchangeable value,
freedom of exchange is a fundamental law of humanity.
Many of us fail to see how profoundly fundamental it is.
Its import may be thus generalized. It is a first law of
society that he who offers a higher value for anything
than any one else offers for it, or sets upon it, is the
natural owner of it, and in the view of a sound economy
should meet no obstacles in becoming the actual owner
of it. In our previous discussion we have vindicated
such freedom of exchange in respect to the commodities
of commerce, and in respect to all transactions between
employers and employes. But there is one application
of the principle which it seems quite necessary to insist
on, before we proceed further, for to talk of free compe-
tition without the fulfillment of this condition, is in many
cases to delude ourselves with words which can have no
meaning. We refer to the application of freedom of ex-
change to the tenure of land.

181. The ownership of land which is acquired by
labor bestowed on it is absolute and entire. It includes
not only the right to hold and use and enjoy, but the
right to exchange it for anything which the owner re-
gards as more desirable. A law which renders the land
inalienable is a direct violation of this natural ownership.
It may be that the present owner of a farm derives his
title to it by inheritance from an ancestry that never

CONDITIONS OF FREE COMPETITION. 247

possessed such absolute ownership. Their title may
have originated from the grant of a conqueror who held
it only by the law of force. But it is now impossible to
repair that act of violence, by restoring the title to the
natural heirs of those from whom it was wrested. The
real owners are the present holders. The present value
of the land is due to the capital and labor which they
and those from whom they inherit have bestowed upon
it, and the law should recognize the absoluteness of their
title, by removing all obstacles to the freedom of ex-
change. The present owner may have no taste for agri-
cultural pursuits, and no talent for prosecuting them suc-
cessfully. Land is not therefore the instrument which
he needs to aid the work of his life, and will therefore
never in his hands be brought up to its full productive
power, and never render to humanity the service of which
it is capable. He will pursue perhaps the line of life
for which he is qualified by his taste and his talents under
a great disadvantage, because the instrument which he
possesses is not that which he needs.

Near by him is one who has both taste and talent for
an agricultural life, but he has no land. That farm is
the very instrument which he needs to aid the labor
which he is best fitted to do. He is able and willing to
give for it a sum of money which seems to the owner of
the farm much more desirable than the farm, because
with it he can obtain the instruments and helps that
will aid him in the work of his life. If now he owns the
land in fee simple and no unnecessary obstacles obstruct
the transfer, he will exchange it for the money, and
both parties will thereby be greatly benefited. But if he
holds it by an inalienable tenure, or the transfer is en-
cumbered by many difficulties and expenses, the farm
will probably remain comparatively unproductive, his
own labor must be done under a life-long disadvantage,

248 ECONOMICS.

and his neighbor must shift as well as he can without the
land he needs. It requires no argument to show, that
the exemption of that land from the freedom of exchange
is hurtful to every person interested in the ownership of
it, and to the whole community. Nature's beneficent
system is interfered with, one of her fundamental laws is
violated.

§ 182. Let us not leave this topic till we have some
correct conception how widely this mischief spreads it-
self, in a community in which land is generally exempted
from the freedom of exchange, and how deeply it pene-
trates. We need not look far into the history of nations,
to assure ourselves that it is the highest ambition of the
agricultural laborer everywherey to own the land which he
tills. To accomplish this he will impose on himself un-
remitting toil, and submit to a life of the severest self-
denial and frugality. The ownership in fee simple of the
land on which he labors is his natural savings-bank.
Let the possession of land be subjected, like that of all
other property to perfect freedom of exchange, and bur-
dened with no exorbitant expense for conveyance ; and
the ever active desire of the laborer for the land he tills
will, through the innumerable incidents to which the life
of every community is subject, find its opportunity. A
case like that already supposed will occur. Or the
owner of land will become involved in debt, and his
lands will be sold in payment. Or he will leave his
farm to many heirs, and it will be sold to facilitate parti-
tion. Or by some other one of innumerable possible in-
cidents the same thing will be accomplished, and nature's
intentions will become effect. Ownership will pass to
him that most desires and most needs it. The tiller of
the soil will become its lord.

But if the land is owned in great estates by a title
which forbids any present owner to alienate it, the laborer

CONDITIONS OF FREE COMPETITION. 249

has no hope. He never can be any thing but a landless
drudge. The ownership of the soil he tills is not "war-
ranted and defended," but forbidden " to him and his
heirs forever." He and his fellow laborers sink more
and more deeply into the condition of a degraded class
of " hewers of wood and drawers of water " for the favored
proprietors of the soil of their common country, A here-
ditary class have a monopoly or rather the exclusive
possession in perpetuity of the only property which can
be of any real importance to the agricultural laborer. A
class of men, who with their ancestors who have gone
before them, have given to the lands of the country all
the real value which they possess, not only do not own
those lands, but are virtually by law forbidden to own
them. They spend their lives in a long succession of
generations without the stimulus of hope. They may
save, but they have little inducement to do so, for the
savings bank is their orily place of deposit, and the in
terest it pays is so small that it makes scarcely an ap-
preciable addition to their income. They have no inter-
est in trying to make their labor more efficient, for they
will themselves derive no advantage from its increased
efficiency. The buoyant forces are all taken out of
their lives. It is sorrowful to read the philanthropic
words of enlightened and humane Englishmen, deploring
the condition of the English agricultural laborer, and in
real earnestness inquiring what can be done for him.
Should these words ever meet the eye of such men as
Mr. Fawcett and Mr. Joseph Kay, they may perhaps
attach little importance to opinions coming from the far
off interior of North America. But for all that we know
whereof we affirm, and must speak that we do know.
Nothing can they do for this wretched class of their
countrymen, and we claim the privilege of saying, our
countrymen too, — nothing effectual, till they can pro-
11*

250 ECONOMICS.

cure the abolition of this hateful land inonopoly, and thus
give to every Englishman that fair chance which nature
intended fur him of owning that which he more desires
and more needs than any one else.

§ 183. There has been and there still will be much
effort to set all this aside, by proving that after all largi
farming is more profitable than small farming. Doubt-
less it can be easily proved, that the owner of a large
farm enjoys some advantages over the small farmer. It
is easier for him to avail himself of those agricultural
machines which require a pretty large outlay of capital.
But // cannot be shown that small farmers cannot combine
together to secure those advantages, just so far as they
are found really to reduce the cost of perfect cultivation.
American experience shows that they can and will do
any thing of the sort which their interest requires. Great
landed proprietors need give themselves no philanthropic
solicitude, lest the land should not be well cultivated if
it should pass out of their hands. It has already been
noticed, that agricultural machinery is not to any very
great extent and probably never can be labor-saving.
It is also far more important to the economy of a large
farm than it can be to that of a small one. However
that may be, no advantages which any intelligent man
can expect from the use of agricultural machinery can
make any compensation at all for degrading millions who
should be self-active, self-impelling, self superintending
men, into mere machines, to be impelled and guided by
the will and intelligence of an overseer. They say one
overseer can superintend a hundred laborers as easily
as fifty. But each one of those fifty or one hundred
laborers will accomplish more as his own overseer, tilling
his own land, and will produce better results than any
overseer can obtain from him when reduced to the posi-
tion of a mere working machine. Such is the precise

CONDITIONS OF FREE COMPETITION. 25 1

diflference between the agricultural laborer that never
treads a foot of his own soil, or knows the luxury of sleep-
ing under his own roof, and the man that owns the soil
he tills, lies down at night in his own cot, and superin-
tends and urges on his own labor.

§ 184. It may perhaps be urged as an objection to
this view of the subject, that English tillage under their
system of large proprietorship is more thorough and com-
plete than American tillage under our free system. No
American who has had the opportunity of making the
comparison will deny this assertion. English tillage is
more thorough and perfect, but it does not hence follow
that, in our circumstances, it would be better. The
English farmer and the American farmer are employed
upon problems of quite different conditions. The prob-
lem of the English farmer is, to obtain the greatest profit
from land of very dear rent, with very cheap labor. The
American problem is to obtain the greatest profit from
land of very cheap rent, with very dear labor. Any sen-
sible man would employ more labor at fifty cents a day
on land whose rent was twenty dollars a year, or even
twenty five dollars, than he would if his labor cost a dol-
lar a day and his rent only five dollars a year. Precisely
this difference exists in the two cases, and fully accounts
for the different degrees of thoroughness of the cultiva-
tion. The perfection of English tillage does not result
from the tenure of the land, but from very high rents and
very cheap labor. Any English traveler in the United
States may easily satisfy himself, that in all instances in
which the price of our lands approximates the English
standard, the thoroughness of our tillage improves in
much the same ratio.

We must not lose sight of another fact, which shows
conclusively, that on the whole large farming under a
great permanent proprietorship, is not more profitable

252 ECONOMICS.

than the small farming of freehold estates cultivated by
the owner. Any man that owns a large farm can, pro-
vided no unnecessary difficulty or expensiveness obstructs
the transfer, sell it in small parcels^ each suited to the wants
of a small proprietor^ who is to till it with his own labor,
for much more than it can be worth under one management,
and the tillage of hired laborers ; and the small proprie-
tors who may buy it at these high rates will be far more
prosperous, and live in a far higher style of comfort, than
the laborers that tilled it under the single management
and ownership.

§ 185. We are liable to be asked why, if this is so,
English lands are continually being aggregated into large
farms, and the holdings rapidly becoming less numer-
ous. The answer is obvious. English law from the time
of the Conquest, backed up by English custom founded
on the law, and if possible more imperative than the law
itself, attaches an unnatural dignity, personal importance
and social position to the owner of land. These advan-
tages excite in every man of wealth an artificial eager-
ness to be a landholder, and make him willing to pay
more for it than, considered merely as a source of in-
come, it is worth. Primogeniture greatly increases and
intensifies this passion for land. The law sustains primo-
geniture by giving the landed estate of all inlestates to
the oldest son. Custom follows out the same idea, and
extends it where the law does not carry it. To will one's
landed estate to his oldest son comes to seem right, it is
custom, it is respectable, it is English ; to divide it
equally among his children smacks of agrarianism, it is
an approach toward — something not quite English. Law
and custom combine to aggregate landed property into
the smallest number of holdings, and to throw the labor
of tillage as far as possible upon laborers to whom the
ownership of land has become impossible. All the

CONDITIONS OF FREE COMPETITION, 253

attractions of rank, so powerful to English minds, attach
themselves to land, and raise its price far above its worth
as a source of income. There can be no equal compe-
tition between the land owner and the laborer in circum-
stances such as these. The laborer has been degraded
by being subjected to these unfavorable influences for
successive generations, and can conceive of nothing as
possible to him but the hard lot in which he lives. He
has no home of his own to be rendered tidy and neat and
beautiful by female care and taste ; his wife and daugh-
ters and sisters having no home function, often sustain
at his side the labor of the field, and swell the super-
abundant supply of labor which keeps down its wages to
the very verge of starvation. This sad picture might be
verified in every particular, by citing English authorities
of the very highest respectability. If English philan-
thropy will do anything for the agricultural laborer with
permanent effect, she must direct her efforts to the total
and perpetual abolition of her land monopoly.

If we are told that we Americans know little of the
difficulty of accomplishing so fundamental a revolution, both
in the political and social life of England, we reply that
is very probable. Yet we do know enough of the serious
difficulties of the case, to discern very clearly why Eng-
lish philanthropists, statesmen and Christians are very
averse to looking this question full in the face in all its
painful aspects. We once had a question involving still
more alarming difficulties. .We were compelled to meet
it. With nearly three hundred years of experience of
the beneficent workings of free trade in land, we are
competent judges of the necessity of abolishing a land
monopoly, however difficult it may be. We are willing
to hear lectures from the other side of the Atlantic, on
the monopoly of protection ; we need them, some of us
are grateful for them. Many of us are grateful for the

254 ECONOMICS.

support and encouragement we received from English-
men in our conflict with slaver)'. But we are soundly
qualified to give lectures on land monopoly. Of these
two monopolies, both of them sadly out of place in the
last quarter of the nineteenth century, the land monopoly
is beyond comparison the more fundamental, and the
more subversive of all sound economic principles.

. § i86. A second underlying condition of free com-
petition stated in the first section of this chapter is — such
a degree of ifiielligence in both parties to any transaction, as
will place them on a footing of substantial equality.

Every transaction of exchange which is conducted by
competition assumes sjich equality. No honorable man
will negotiate an exchange with another party, knowing
that he is ignorant of the value of his own property, and
of that which is offered him in exchange, or if he does
exchange with him, it will not be on the principle of com-
petition. He will take upon himself the entire responsi-
bility of making sure that the ignorant man suffers no
loss in the transaction. A farmer cannot enter into com-
petition with his domestic animals. According to his
own knowledge he must give them what they need, and
they can only have what he gives.

On precisely the same principle, individual men and
classes of men may be so far degraded below the ordi-
nary standard of inteTligence, as to be disqualified to trans-
act many of the common affairs of life by cotnpetition. There
are classes of laborers who are in this very condition in
respect to all contracts for wages. 'J'hey might perhaps
obtain higher wages from other employers than they are
receiving. But they do not know it, and have too Httle
mental activity to raise the question. It may be that
higher wages are paid for such labor as they are accus-
tomed to perform in other districts not far away, and to
them not difficult of access. But they do not know it,

CONDITIONS OF FREE COMPETITION, 255

and are too spiritless to raise the inquiry. We are told
the difference between the wages of agricultural laborers
in the counties of Wiltshire and Yorkshire, England, is
five shillings a week, or considerably more than one-fifth
of the entire wages which the Wiltshire laborer receives.
Why does not competition equalize the wages paid in
these two counties ? For the most part the answer is
the ignorance and stupidity of the Wiltshire laborer.
The laborer might emigrate to some other country of
cheap land, abundant food and high wages, lands too of
liberty and security of life and property. But such la-
borers know not that there are any such lands, or that
emigration is to them possible. In short it is a thing of
most frequent occurrence, that in highly civilized coun-
tries large classes of men settle down into such condi-
tions of ignorance and semi brutality, that competition
can do nothing for them. The pretense of competition
is a mere sham, and will result only in stripping the ig-
norant man of his all, to enrich his sagacious and quick-
witted competitor. While these classes continue in this
degraded condition, our science can do nothing for them.
It cannot reach them. It may point out as we are try-
ing to do the causes of their unfortunate condition, and
put in a plea for the removal of them.

§ 187. Jt is for this reason only that public provision
for education claims the attention of the economist. We re-
joice to say that there is in this country almost a una-
nimity of opinion, that the government ought to provide
against the existence of any such degraded and ignorant
classes in the bosom of society. The only point of differ-
ence which exists among us in respect to this matter re-
lates to the manner in which provision shall be made for
the supply of this want. There are those who think that
the sovereignty over society should be divided, that one
portion of it should be committed to the secular or civil

256 ECONOMICS.

power, and another very important portion of it to a
spiritual power called the church, and that the education
of the people should never be undertaken by the former,
but entrusted entirely to the latter. The civil power
may raise money by taxation for the support of schools,
but it must entrust the management of them entirely to
the ghostly power of the church. It would be a novel
arrangement indeed, that the civil power expressing the
common voice of a free people should annually raise
many millions of money to be entrusted to the manage-
ment of a distinct sovereignty, sustaining no responsi-
bility to the people that contribute it, and perhaps owing
allegiance to a foreign prince. But we have nothing to
say in this place of this matter. It belongs to morals
and not to economics.

Neither shall we attempt to define with any accuracy
the limits of that system of education which should be pro-
vided for all the people at the expense of the state.
Public education comes within the sphere of economics
only from the necessity of qualifying all the people for
entering into that competition, which we have seen is the
controlling force throughout the economic world. It is
obvious that a system of public instruction must, in order
to accomplish that end, afford to every citizen the means
of acquiring a sound acquaintance with our noble rnother
tongue as spoken, written and printed, and thus come
into communication through common and public dis-
course, personal correspondence and periodicals and
books, with the existing actual world, and with the civil-
ization of our own age and of all ages. He should also
be supplied with a knowledge of numbers, as requisite
for all the ordinary purposes of computation and accounts.
The great outline facts of geography, history and science
will be everywhere open to the easy acquisition of any
one who possesses such a knowledge of a civilized mother

CONDITIONS OF FREE COMPETITION. 257

tongue, and of the science of numbers. We do not affirm
that the state ought not to provide for all the people a
much more extensive education than this. But we do
say on the one hand, that no one can be fairly qualified
to meet the competitions of life without having received
an education substantially fulfilling these conditions. On
the other hand we affirm that such an education does
place the man who has enjoyed it in vital communica-
tion with the thought of the world, and qualify him to
take his place as a civilized man and citizen, and if it
can be shown that the state ought to furnish to every
citizen at the expense of the taxpayer, an education more
extensive than this, the proof of that obligation must
surely be found elsewhere than in the economic relations
of the question. There is no pretense that persons thus
educated are not well-fitted so far as schools can do any-
thing for them, to meet all the competitions of trade and
industry.

§ 188. Philanthropists to whom public education is
a comparative novelty, are in danger of placifig too much
dependence on it alone, as a means of elevating depressed
and degraded classes. You cannot educate a people
without the stimulus of hope. The reason why popular
instruction has always been so powerful in this country
is to be sought in the fact, that hopefulness is the most
powerful element in the life of our people. The very
child at school sees that all the prizes of life are free to
his competition, and that all the paths of prosperity are
open before him. Remove from American society that
element of hopefulness, and our system of popular edu-
cation would cease to yield its beneficent fruits. It
would languish and die. We do not believe "National
Education " can do much for the English agricultural
laborer, till the possibility of becoming the proprietor
of the soil is given him. You cannot make him aspire

258 ECONOMICS.

to become an educated drudge. For his elevation out
observation would lead us to repose far more confidence
in free trade in land without public education, than in
public education without free trade in land. A people
with the avenues to every species of prosperity open be-
fore them are far more likely to educate their children
without the aid of the state, than a class of persons
against whom the avenues to a prosperous life are ob-
structed, are to receive an education when gratuitously
tendered them. The experience of this country every-
where teaches the efficiency of self-help rather than of
government help.

§ 189. The history of our country furnishes one ex-
ample of the combined influence of free trade in land
and a system of public education substantially such as
that defined above, in qualifying a farming community
for the vicissitudes of life, which deserves to be recorded.
We refer to the history of the farming population of New
England. Free trade in land existed there from the
origin of the Colonies, and it has always been the glory of
New England, that through her system of public schools
every child was taught to read and write his mother
tongue. The consequence is that New England never
contained a degraded and wretched class, unless brought
there by foreign emigration, and that a greater propor-
tion of her sons have not only received the education of
her common schools, but have been liberally educated
at her colleges for professional and public life, and have
become men of national and some of them of European
reputation, than in any other community on the globe.
'I'his has been true not only of the sons of her wealthy
families, but of the hard-handed farmers, that have forced
a subsistence out of her rugged and unfriendly hill sides.

Nor is this all. The soil of these states is for the
most part barren and its cultivation very laborious. Its

CONDITIONS OF FREE COMPETITION. 259

winters are long and very severe, increasing the cost of
living, and rendering the rearing of domestic animals
very expensive. Early in the present century the farm-
ers of these slates began seriously to feel the competi-
tion of products procured from much better lands.
Within the last fifty years, the products of the great
interior of the country have found their way to the mar-
kets of the Atlantic coast by great lines of easy com-
munication, and by their ruinous competition have driven
most of the products of the New England farmer quite
out of the market. Lands in New England have declined
in price in many cases to one-half and in some cases to
one-third the rates at which they were sold at the begin-
ning of the century. In most cases in the history of the
world, the falling of such disaster upon a numerous farm-
ing population has produced great distress and pinching
poverty. The New England farmer has had the intelli-
gence and energy to pass through the trial without any
such experience. Some have remained at the home-
steads of their fathers, and bought the lands of their
neighbors at the reduced prices at which they were
offered, and found the means of making a good living
from the few products which could still be reared with
profit. Oiliers have disposed of their farms, and ac-
cumulated wealth by making the mountain torrents that
rush down their valleys drive machinery of almost every
variety. Others still went to the cities, engaged in com-
merce and often found their places among the merchant
princes of the land. By far the greater number however
traced back the lines along which that superabundance
of agricultural products came that ruined their New
England farming, made new homes amid the boundless
fertility of the Great Valley, and became wealthy land-
owners. Give a farming population freedom of exchange
and migration, and the self-reliance which is nurtured by

26o ECONOMICS.

high intelligence, and they will be equal to any emer-
gency. The history of New England farming is worthy
of the study of the economist.

§ 190. We mentioned at the beginning of this chapter
a third underlying condition of equal competition — moral
integrity. We do not propose dwelling on this topic.
It is necessary to do little more than to name it. Com-
petition in the economic sense assumes the truthfulness of
both parties to the transaction, that each party is offering
for exchange that which he professes to offer, and not
something else. Whenever this ceases to be the fact
competition between the parties ceases, and the struggle
between them is no longer an effort of each to obtain the
true value of his commodity, but a succession of cunning
tricks to outwit each other. Prosperity means success-
ful villainy, failure unsuccessful effort to defraud another.
If any honest men come to such a market they are but
too likely to fall victims to the arts of deception that are
practiced all around them. Let no one imagine that
such a scramble of knaves, each endeavoring to appro-
priate to himself the greatest possible amount of dis-
honest gains, bears any resemblance to that competition
which is the pervading law of our science, of which truth
is ever the fundamental element. The transaction of a
people's business in the manner just characterized is the
sure symptom of social decay and rottenness. The
struggles of unprincipled men in the gold market, the
stock market and the grain market to outdo other men
in the arts of deception, sustain the same relation to
honorable competition, that the ostentatious prayers of
the hypocrite do to the genuine devotions of righteous
God-fearing men.

POPULATION. 261

CHAPTER XI.

Population.

§ 191. It has been made evident in our previous dis-
cussions that population is an indispensable element of
our science. We have seen how it is related to wages,
to rent, and to the cost of living. It is necessary there-
fore next to inquire into the economic laws by which the
movements of population are controlled. Toward the
close of the eighteenth century, the celebrated Mr.
Malthus published his theory of population, which has
since exerted a prodigious influence on the economic
writers and thinkers of the English school. It was
originally in the mind of Mr. Malthus a powerful reaction
against the day-dreams of the enthusiast Godwin, about
the perfectibility of human nature. But its influence on
the speculations of economists since its publication have
been perhaps scarcely less injurious, than the prevalence
of the theories he opposed would have been. As Professor
Bowen very justly remarks, "the whole subject of Politi-
cal. Economy is colored with it," and we will add that
coloring is a deep tinge of melancholy, which has ren-
dered the whole subject repulsive to all minds of a cheer-
ful and hopeful turn. It is our intention in this chapter
to show that a true view of the subject gives no coun-
tenance to any such sombre and melancholy conclusions.

The fundamental principle of Mr. Malthus' theory is,
that the natural fecundity of the human race is such, that
the population in all countries constantly tends to outrun
the means of subsistence, and therefore to keep the lower
stratum of population always on the verge of starvation.
English economists especially have accepted this doc-

262 ECONOMICS.

trine without due consideration of the checks and modi-
fications to which natural law subjects it, and have laid
it so much to heart, that they often seem to regard it as
the foremost duty of the economist, to point out methods
of preventing the too rapid increase of the laboring classes.
Scarcely any theme is dwelt on with more copiousness
and eloquence, than the imprudent marriages of the la-
boring poor ; and we will add, that it seems to us, that on
no subject have more eloquent words been wasted. The
increase of population in a given country or in a given
class depends on natural laws which will have their
course, with very little respect to the eloquent words of
economists.

§ 192. We have already shown, that in the long course
of human events, the fundamental principle enunciated
by Mr. Malthus would prove true, provided the whole
world can be brought into such a condition of peace,
prosperity and civilization as to permit both capital and
population to increase according 10 their own laws, till
all the resources of our planet are developed to the ut-
most, that is till the entire food-producing power of the
whole earth has been brought into active use and devel-
opment. But we purpose to show that in the long inter-
val which must intervene before the human family can
make any sensible approach towards such a consumma-
tion, the doctrines of Mr. Malthus are to all practical pur-
poses worthy of no consideration, and that even at that
distant day when if ever there shall be an approximation
to that completed order of things, there are ample pro-
visions in the very nature of the case against the sombre
conclusions to which the followers of Mr. Malthus would
conduct us. The safety of the human race in all the
changes through which it is to pass in the progressive
development of civilization is to be sought where, in the
progress of this treatise, we have so often found it, in the

POPULATION, 263

full application of the law of competition. The opera-
tion of that law will afford the assurance we need through
two consequences which will flow from it.

I. It will disseminate by a regular and fiecessary pro-
cess civilized commufiities over the whole earth, or at least
where there are natural resources to sustain them.

II. Faithfully applied this law will always derive each
succeeding generation from the soundest and healthiest part
of the generation that precedes it.

§ 193. We are first to consider the influence of com-
petition in securing the gradual dissemination of civilized
communities wherever they can find sustenance. This,
like many other laws of our science, has only within very
recent times sufficiently emerged from the confusion of
the long conflict which has existed between civilization
and barbarism to be capable of being distinctly discerned.
But for the last two centuries it has been becoming
more and more apparent, and can now be established as
a permanent law of human progress. It takes effect both
upon labor and capital. We must first consider its rela-
tions to labor. If the laborer is only a barbarian, hew-
ing wood and drawing water for a civilized employer, he
will be too ignorant to know that there is any place to
which he can emigrate and find a better lot, and too
stupid to make the effort. Such classes of laborers are
almost as immovable as though they grew to the soil.
But if the laborer has the intelligence and energy and
self-reliance of a developed manhood, whenever the con-
ditions of his life become hard; the government of his
country oppressive, or the wages of his labor inadequate
to the support of his family, he will seek a new home in
some region of virgin fertility of soil and abundant un-
appropriated resources. And he will carry civilization
with him. He cannot do otherwise. It is inwrought
into the very texture of his soul. Wherever he makes

264 ECONOMICS.

his home, the institutions of civilization and freedom will
spring up spontaneously. From the emigration of such
a people civilized communities are as sure to spring up
in any wilds where they make their home, as the fruits
of the earth are to spring from the seeds which they sow.
Such communities can not spring from any migrations
of laborers who are not themselves civilized men, and
consequently no nation can become the parent of such
young offshoots of civilization, whose laborers are de-
graded and uncultivated.

Perhaps the first manifestation of this law occurred
in the English colonization of North America. The mag-
nificent results which have come from the settlements on
the eastern coast of our country by emigrants from Eng-
land, as compared with all else that has been achieved
by the European colonization of the fifteenth, sixteenth
and seventeenth centuries, can be explained only by the
peculiar character of the population that planted those
colonies. They were composed of farmers, artisans,
merchants and scholars from the middle classes in Eng-
lish society, and bore with them to the new world the
best elements of the civilization of the mother country,
and transplanted them to their new homes, and the emi-
nent success of England in planting colonies in all parts
of the world is due to the fact, that she sends out emi-
grants that unite labor with culture. No nation can
plant civilized colonies in the wilds of the earth, unless
she has within her own bpsom a working population
which is imbued with her civilization. It is a great
blessing to the world, that in the seventeenth century
England had no Mr. Malthus to advise her to bring her
birthrate and death-rate as near to equality as possible,
and that when he did appear, she was too wise to follow
his advice, and that of the men of his school. Her

POPULATION. 265

population is still increasing at home, and widely diffus-
ing her civilization in both hemispheres.

§ 194. We have said that this law of diffusion was not
apparent in the ancient world, or until comparatively recent
times. Several of the civilized nations of antiquity sent
out many colonies, but none of them manifested much
power to transplant and reproduce their own civilization
in the lands which they colonized. It was for the want
of that very element of which we have been speaking,
laboring men, artisans, tillers of the soil, who could
colonize and carry the civilization of the parent state
with them. The reason why the Egyptians did not fol-
low the Nile to its source, as the American emigrant
does the Mississippi and its branches, and plant their
civilization upon the fertile lands of Central Africa, and
around the magnificent lakes which recent travelers have
made known to the world, was that her civilization was
confined to the upper strata of society, and her toiling
laborers had no share in it. They did not know how to
seek a better lot in other lands, and escape the com-
petition that crushed them at hoiVie. They had no cul-
tivation, and if they emigrated could not carry it with
them.

There are some of the most cultivated nations of our
own times, that seem to be in conditions in this respect
very similar to theirs. The birth-rate and the death rate
are very nearly equal, and consequently they neither
send out colonies to transplant their civilization, nor in-
crease in population at home. They are as stationary as
the followers of Mr. Malihus could desire. Such a
nation may exert influence upon the world by its litera-
ture and science, its arts, its diplomacy and its arms,
but that higher prerogative of reproducing itself under
other skies by its colonial off-shoots is denied it.

§ 195. The power which a nation possesses of trans-
12

2 66 ECONOMICS.

planting her civilization to unoccupied or sparsely oc-
cupied portions of the earth, depends far more on the
quality than on the quantity of her etnigration. There are
at the present time several countries of Europe which
swarm with emigrants, and yet the emigrating population
of these nations shows very little power to lay the first
foundations of civilized settlements. Their places of
destination are colonies founded by men of other nation-
alities, and already in a prosperous condition. They
are mingled with populations of strange language and
institutions, and in a generation or two lose their own,
and nearly all traces of their national origin disappear.
Nations will be successful in transplanting their civiliza-
tion, just in proportion as the civilizing forces have
reached those middle and lower strata of society, in
which the pressure of competition is most felt, and the
impulse to emigration strongest. Even England herself
would be far more powerful in this way than she is, if in
any way her agricultural population could be brought up
to the position of intelligent, cultivated, self-reliant men.
A far less number of such men could do all the work of
English agriculture than are now employed in it, and do
it much better than it is done, and English economists,
instead of uttering fruitless lamentations over the impru-
dent marriages of their laboring population, would exult
in a still wider extension of the English language and
English freedom in new regions of the earth than ever
before. No doctrine can be more directly at war with
the true prosperity of the world under its present condi-
tions, than that of Mr. Malthus and his followers. The
true economic lesson of the nineteenth century is not
that of the Malthus school, but that given to our first
parents, " to be fruitful and multiply and replenish the
earth." But we must remove from the generations that
are coming all the oppressions of feudal and class legis-

POPULATION. 267

lation, and open to them all the blessings of free thought,
free exchange and free locomotion, and then we shall
have no reason to stand in fear of the " natural fecundity
of the human race."

§ 196. Free competition will not only disseminate
civilized labor over the earth, but // will equally tend to
send abroad the surplus capital of civilized nations. We
have seen that by an invariable law, the interest and
profits of capital decline with the growth of wealth and
civilization in any country. As the rate of interest de-
clines, capitalists naturally become dissatisfied with the
small gains they receive, and look abroad for more profit-
able investments. If there are other countries where
the risk is no greater than at home, and the demand for
capital so great as to pay a much higher rate of interest,
capital is as sure as labor to yield to the force of com-
petition, and go where a higher rate of interest can be
obtained. Such opportunities of safe and profitable in-
vestment will be sure to be found in those new settle-
ments which civilized labor is building up. The surplus
capital of the country will therefore follow the emigrant
laborer, and render him its powerful aid in founding and
rearing up new free stales and nations. As this process
goes on, the safety of capital in the remote lands of the
world will be constantly growing more and more assured,
and capitalists will become less and less reluctant to
trust their capital abroad. The corsequence will be
that the market for capital at home, relieved of a surplus,
will be more buoyant, and accumulation more rapid.
Surely then it should be the ambition of every civilized
nation to secure for itself such a condition of its social
and economic forces at home, that it may be able to bear
its part in extending the blessings of civilization to the
rest of the world.

§ 197. The other consequence which will result from

268 ECONOMICS. "

the application of competition to tlie problem of popula
tion is, that // will always derive each succeeding generation
from the soundest and healthiest elements of the generation
that preceded it. It is not denied that the law of compe-
tition honestly applied to society must produce great
inequalities of condition. It is now necessary that we
should examine these inequalities analytically, and en-
deavor to understand how they stand related to human
■well-being on the whole. Any observant man may easily
satisfy himself that any civilized society, under the influ-
ence of competition, will present four classes of persons.

1. A considerable number of persons will be found, who
are not able to pet form a sufficient amount of labor for their
own support. The persons who belong to this class have
partly been reduced to it by disease, or misfortunes
which they had no power to avoid, partly also by their
own vices, or the vices of their natural protectors, and
partly they have been born with natural endowments so
inferior that they are incapable of self-support.

2. Another class is composed of those who, though
able to labor for self-support^ are not able to support fami-
lies. These persons also have come into their unfortunate
position through the same causes just enumerated.

3. A third class is composed of those, who by a life
of labor and frugality are able to support a family in plenty
and substantial comfort. In this class, in the best condi-
tions of civilized society, are comprehended the great
majority of the people.

4. The fourth class is composed of those ivho are
able to command an income that surpasses all that is need-
ful for the sustenance and substantial comfort of a family.
This class is small in numbers, but controls a large por-
tion of the capital of the community.

As civilization advances, competition has never failed
in any country to develop these four classes ; and, in

POPULATION. 269

respect to the problem of population the division is one
of great importance.

§ 198. From the nature of the case the two lower
strata of society as just defined can contribute nothing to the
capital of the future, and little to its population. If mar-
riages occur in these two classes and children are born,
they will be born to conditions of poverty and want, and
will either perish in infancy or be reared by charity. To
a great extent the former will be the fact. Charity may
do what it can for them, but their ordinary conditions
will be so unfavorable, that few of them can survive those
violations of the laws of life and health to which they
will be exposed. These results will follow, not only ip
those advanced states of society in which population is
approximating its greatest possible density, but in all
stages of society. The difficulty in these cases is not
the scarcity of the necessaries of life, but the inability of
this class of persons to earn the support of a family. It
is simply an application of the fundamental law that one
owns nothing, except what he produces by the exertion
of his own powers. These classes of persons do not own
the means of supporting a family, because they do not
produce them by their labor.

The persons included in these two lower strata will
not therefore be to any considerable extent parents of the
coming generation. Just in proportion as society is per-
meated by intelligence and high moral principle, the
marriages of persons of these classes will be few and
rare, because everywhere discountenanced and disap-
proved. They will for the most part spend their lives
under the protection and in the families of those who
belong to the more prosperous classes, and will not suffei
the inconveniences and privations of poverty. Thus
competition fairly applied will clearly draw the line be-
tween those who should marry and those who should

270 ECONOMICS.

not, and to a great extent prevent the marriage of the
latter.

§ 199. The upper stratum or fourth class is, as has
been remarked, small, and does not contribute to the
population of the future in proportion to its numbers. For
various reasons the self-indulgent spirit which is apt to
prevail in the homes of the rich is proved by experience
to be unfavorable to the rearing of children. The ranks
of population for coming generations are therefore chiefly
filled from the third class. It is also obvious, tiiat for
the most part in this class only are found the conditions
most favorable to a sound, healthy and vigorous human-
ity. In all the other three classes they are in some de-
gree wanting. In the higher, there is too little of self-
denial, self-control and self-government. Both physical
and mental energy are apt to be impaired by the absence
of any felt necessity of exercising them. Humanity in
the homes of the rich is too often like a hot house plant,
sickly and delicate, because not inured to the trying
varieties of experience which must be met in the open
air of ordinary life. In the two lower classes the condi-
tions are still more unfavorable either to physical, men-
tal or moral soundness and health. But in the third
class all the conditions of a perfect manhood may be
more reasonably expected to exist, physical and mental
vigor, a sound body and an active and instructed mind.
If in this class the standard of domestic morality is
elevated, marriage will be the almost universal condi-
tion of life, and large families will be apt to be reared.

§ 200. From the stand-point we have now attained, we
can discover the relation of the law of competition to the
reproduction of the race. It is simply and only a great
natural provision for propagating the race from its
soundest and most healthy specimens. Every intelli-
gent farmer knows the necessity of providing for this, in

POPULATION. 271

order that his domestic animals instead of deteriorating,
may improve in their successive generations. The law
of competition secures the propagation of the human
race in accordance with such a provision. Any other
mode of distributing the products of industry than that
which results from competition, would defeat this benefi-
cent design, and propagate the race indiscriminately
from the best and the poorest specimens, or even give
preference to the poorest. For example that system of
involuntary servitude which but lately existed in this
country propagated the laboring population in the por-
tions of the country where it prevailed, from a race of
barbarians, retaining its barbarism in the midst of us.
The master encouraged the breeding of his slaves, and
reared their offspring as a matter of profit, precisely as
in the case of his domestic animals. For the most part
slaves were the only available laborers. The system
therefore contained a provision for raising up an inferior
humanity, a race of barbarians, to be depended on to do
the work of the country in all the future. It artificially
and in violation of nature's law provided for the propaga-
tion and perpetuity of barbarism — a barbarism as devoid
of all the ornaments and beauties of life, of every thing
except strictly necessary food and clothing, as the beasts
of the field.

2Vie foundation principle of all free society is every man's
ownership of hitnself resuhing by an inevitable logic, in
the law of competition. The law of competition gives
us the law of wages, and draws the future succession of
the race precisely from that portion of the community
that is must favorable to health of body and soundness
of mind, and all the noblest attributes of humanitv, and
thus places the race on an ascending and not on a de-
scending plane for all the future.

One cannot fail to notice the agreement of the law of

272 ECONOMICS.

population as thus developed with thai struggle for exist-
ence, thai survival of the strongest, which Mr. Darwin has
shown to be very widely prevalent, both in the animal
and vegetable kingdoms. We have by no means accepted
the extreme inferences which Mr. Darwin draws from his
very acute and philosophic observations. We do not
think them justified by bis facts. But he has shown that
the principle above referred to has great influence in
modifying a species within itself. We are not however
in the least indebted to Mr. Darwin for the application
of the principle to the human species in the law of popu-
lation above stated. In the year 1863, years before we
had any knowledge of Mr. Darwin's observations, we
developed this law of population in an essay published
in the Continental Monthly, then edited by Hon. Robert
J. Walker. We have not since seen any reason to call
in question its soundness.

§ 201. We come therefore to the conclusion that the
law of competition in the distribution of the products of
industry, applied to a people however numerous, and
spread over however vast a portion of the earth, pro-
vided that people is thoroughly pervaded in all its
classes with a sound and true civil izatioii, will secure its
propagation on an ever progressive course of growth ana
improvement ; but that if there is an understratum which
is excluded from the benefits of its civilization, poor,
ignorant, stupid, vicious, that fact will entail upon it
hereditary disease, which it will be exceedingly difficult
to eradicate, when society has reached its maturity. We
admit of course that the time must come, even on the
supposition that all the social and economical laws of
human well-being are strictly obeyed, when the popula-
tion of the world will press hard upon the means of sub-
sisteiice which can be derived from its soil. But the law
of competition, applied under its necessary and natural

CONDITIONS OF GENERAL PEACE. 273

conditions, affords the means of meeting that exigency
as easily and with as little inconvenience, as it daily
regulates the supply of breadstuffs or butcher's meat to
tiie population of a great city. The supply is so accu-
rately adjusted to the demand, that on the one side there
is no lack and on the other no loss by excess. Precisely
in the same manner, give competition unobstructed
course, and give it freedom, rationality, intelligence and
moral integrity to act upon, and it will adjust the popu-
lation of the globe to the full productive power of the
planet, without giving any occasion of anxiety or perplex-
ity to the economic philosophers. There need be no
fear of the too rapid increase of the laboring classes.

CHAPTER Xir.
Economic Conditions of General Peace.

§ 202. It has been made apparent in the two pre-
ceding chapters, that it is an important condition of the
healthful working of the economic forces, thitt intelli-
gence and all the higher elements of civilization should
reach and permeate that portion of the community that
is composed chiefly of laborers possessing little or no
capital. It was also shown incidentally, that the fulfill-
ment of that condition is greatly facilitated by such an
extension of free, stable and just government as will en-
able both kbor and capital to avail themselves of the
resources of the whole world. Such an extension of
civilization over the whole world is the ultimate result
toward which the whole system tends. In order to this

2 74 ECONOMICS.

the prevalence of peace among all civilized nations is of
prime importance. It is our intention in this chapter to
turn a little aside perhaps from the direct line of our
argument, to show that this also is greatly dependent on
the extension of the benelits of civilization to the labor-
ing masses. Nations will not live in peace with their
neighbors, while they maintain within themselves such
misadjustments of economic forces, as have been all too
common in the past history of the world.

In a former part of this treatise, it was shown, that
there is such a natural adjustment of man's power to
labor to the supply of his wants, that if the necessaries
of life only are sought and enjoyed, a large part of his
pow?r to labor will find no employment, and remain per-
petually useless. The same results will follow to a con-
siderable degree, if the civilizing forces are applied only
to a part of society. Doubtless the fund which the
Creator has provided for the comfort, culture and orna-
ment of human life is sufficient, if entirely utilized, to
confer these blessings in some degree on all parts and
portions of the community. When this end fails to be
accomplished, when a small portion of society only enjoy
these benefits to any degree, and the larger remainder
live in disgusting squalor and rudeness, the beneficent
designs of the Creator are not accomplished. A large
portion of the fund which he has provided for human
culture and development is wrapped in a napkin and
buried in the earth. For example, we do not believe
that the philanthropic and enlightened Englishmen who
have reflected deeply on this class of subjects, would for
a moment hesitate to admit, that the cultivation of the
farms of England might be much better accomplished
than it is, by a much smaller number of laborers than
are now employed, if those laborers were stimulated by
the hope that they and their families were to enjoy the

CONDITIONS OF GENERAL PEACE. 275

comforts of civilized life. There is at this moment in the
economies of England a vast waste of productive power,
which might be developed and utilized for the elevation
of those degraded masses. The same number of la-
borers under the influence of proper stimuli might not
only produce the food which they consume, but ver)'
many comforts and beauties of life, which they never
enjoy. The same must be true wherever vast masses of
people labor throughout life, stimulated by no hope,
but that of continuing a little longer their wretched
existence.

§ 203. The point insisted on in this chapter is, that
the existence in any of the nations of the world, of such a
vast amount of unused and wasted power is and always
must be a destructive element. In all constitutions of
society, it threatens sooner or later to break out into
insurrection and anarchy. If you reduce large masses
to the helpless and dependent condition of domestic
animals, you do not thereby impart to them quiet and
unresisting instincts. You cannot so subjugate the
human soul to power, that it will not retain a conscious-
ness of manhood, and an intuition of the rights of man-
hood. It is always a thing not only to be apprehended,
but expected that, perhaps after generations of passive
subjection, millions of these degraded men will at length
find a common expression of their sense of injured hu-
manity, and give vent to their long pent indignation, by
laying waste and destroying that wealth for which they
and their fathers have labored, but which they have
never enjoyed. That tranquillity and social order which
are indispensable to the development of the great eco-
nomic forces of the world cin never be assured, indeed
must always be in great peril, while the mighty nations
that have the peace and prosperity of mankind in their
safe keeping, embody within themselves vast masses of

276 ECONOMICS.

men that are doomed to these unnatural conditions.
Perhaps there is not a nation on either side of the Atlan-
tic, that has not occasion to look well to its ill-conditioned
and sufifering masses, lest a cancer should be fastening'
upon the body politic, destined at some time to prove
fatal to the nation. Such phenomena are a violation of
nature's intention wherever they exist, and cannot be
perpetuated in any country without imminent peril. We
ask for no revolutionary reforms. We have shown that
all which can be done for such neglected classes is, to
give them the full benefit of free competition for the
acquisition of any species of capital by the possession
of which their labor may be rendered efficient, and the
opportunity to acquire that sturdy substantial intelli-
gence, which fits men for success in the practical afifairs
of life.

§ 204. The object however for which this chapter
was especially designed, was to point out the dafiger to
the peace of the world, which results from the existence of
such degrcuted jjiasses. If the government of a nation is
largely concentrated in the will of one man, or of a lim-
ited privileged class, the peace of the world is always
endangered by the existence of unused labor power, out
of which armies may be constructed. Any one who will
attentively consider the character of ancient civilization,
will be easily convinced, that the reason of its warlike
aspect is chiefly to be found in the fact, that the masses
of the people were in a degraded condition. They en-
joyed nothing, they hoped for nothing but the bare neces-
saries of life. There was therefore at all times a vast
unused labor force. It was disposable and could be
thrown now in this direction and now in that, at the
caprice of powerful rulers. They had a better prospect
of enjoying in plenty those necessaries of life to which
only they aspired, in the service of the state, than in any

CONDITIONS OF GENERAL PEACE. 277

private employment which was open to them. They
were therefore always at the command of despotic rulers,
and could be used for any enterprises on which their
hearts were set. They might sometimes be employed
on such works as the pyramids, the temples of the gods
and the massive walls of cities. But they generally were
employed in those great military enterprises, which made
the history of antiquity one long struggle for universal do-
minion, till it was finally won by Rome. All the great
empires of antiquity were conquered and held together by
armies made up of such material. It was this partial
character of all ancient civilization, which made military
prowess the only title deed by which any nation of
antiquity could hold one foot of earth's surface as its
own.

§ 205. Just in proportion as modern society embraces
in its bosom this same element, it is in similar peril.
Free governments that are thus conditioned are in con-
stant danger of anarchy and military despotism. Govern-
ments that are strong and concentrated in the hands of
one man or a small class, if a large portion of their sub-
jects are it) the condition of which we are speaking, con-
stantly threaten the peace of all their neighbors. It is not
enough that by book education the people be instructed
in the reading and writing of their mother tongue. They
must acquire a standard of civilized livings which will ren-
der them no longer content, for themselves and their
families, with the bare means of sustaining existence, and
lead them to aspire to something like the true and prop-
er life of rational manhood. When such a standard of
living pervades the entire people, its whole labor power
will be in demand, to supply its own conscious wants.
There will be no disposable hordes of half-civilized men,
fit material out of which to construct great conquering ar-
mies, to fill the world with terror. All continental Europe

27S ECONOMICS.

is to-day a sad testimony to the truth of what we are
saying.

A people thus internally conditioned will be strong to
repel invasion. Any foreign power will trespass on its
territory at its peril. But it will be incapable of disturbing
the peace of the world by any efforts at foreign conquest.
It is not to the shame but to the glory of Britain, that
within the last half century her peaceful industries have
been so greatly extended, and her labor power so
absorbed in them, that she can no longer plunge into
foreign wars and dictate terms to the nations of Europe
at the cannon's mouth, as she did in the end of the last
century and in the beginning of the present. It would
be greatly to the honor of her continental neighbors, if
they were in this respect much more like her than they are.
It is glorious to any nation on earth, that it is too intent
on the pursuits of peaceful industry, too much occupied
in providing for all the wants of all its people, to have
any labor power to waste in meddling with the affairs of
its neighbors, and too much love of country and of lib-
erty, not to defend itself against all invasions of its soil,
and of its rights among the nations. It would be still
more to the honor of Britain if she could so modify her
internal economies, as to lift up into the light those
classes of her laboring population that are now deprived
of the benefit of her civilization, and make the law of
competition as efficient to protect them as it is under her
present arrangements to degrade and crush them. Till
she does solve this problem, the future of her freedom
and prosperity will be in peril.

§ 206. Many of the finest intellects and the most
philanthropic hearts in the world are employed in earnest
endeavor, to devise some method by which for the ages
to come, the peace of the world may be preserved. All
good men in all lands must sympathize with their aims,

CONDITIONS OF CENKRAL PEACE. 279

and devoutly desire their success. But we must express
our undoubting conviction, that their radical and per-
manent success is impossible, except on condition of first
finding a complete and satisfactory solution of the prob-
lem presented in this chapter. The disease is internal,
though its manifestation is external, and an internal
remedy must be applied, before the external manifesta-
tion will cease. The root of the evil is in the internal
economies of society, and until those are brought into
nearer conformity with nature's laws, Europe will as now
bristle with bayonets. "I made war on Maria Theresa,"
said Frederic the Great, " because I had men and money
and wanted to hear myself talked about." Any powerful
monarch who has unused material out of which he can
make powerful armies, will be very likely to make war
on his neighbors for no better reason, than that he de-
sires the celebrity and the fame of a warrior and a con-
queror. The one only reason why an army of more than
one million of men that our country had in the field at
the close of our great civil war mingled with the people
and disappeared forever from view in the short space of
three months, is to be found in the fact, that that army
was composed of men who longed to return to civilized
homes and peaceful industries, from which they expected
to derive prosperity and happiness for themselves and
their families. Employ the whole labor power of a nation
w'ith such efficiency as civilized and enlightened men can
attain, in such pursuits as these, and with such hopes,
and there will remain nothing out of which to construct
permanent armies, or any armies at all, except to meet
the urgent necessities of national defense and preserva-
tion. For these purposes armies may be made quickly,
and will be as quickly dissolved when the end is accom-
plished. The rulers of nations whose internal economies
are thus adjusted, will be powerful still to protect and

28o ECONOMICS.

bless the people, but powerless to disturb the peace of
the world. Such nations cannot be warlike, they will
" beat their swords into plowshares and their spears into
pruning-hooks."

/,-^

CHAPTER Xlir.
Substitutes for Competition. Socialism.

§ 207. We think it has been made apparent in the
progress of this treatise, that competition is no device
of man, but a permanent law of nature ; and that it as
naturally bears sway in all the transactions of exchange,
and in the distribution of wealth between the parties
concerned in producing it, as the law of gravitation
controls the movements of the planets in their orbits.
From this it would seem to follow, that all those who are
dissatisfied with the working of competition have their
quarrel with human nature itself. We think also that it
has been made apparent, that this law of nature is, like
every other, beneficent, that it provides for the protection
and well-being of all classes of men, in all the conditions
of life, and for the steady progress of the race as a whole,
in all that is useful to man.

But there are still not wanting those who are dissat-
isfied with the results of competition, and are earnestly
looking around them in the hope of discovering some
other and better system, according to which the econo-
mies of the world may be constructed. It must be ad-
mitted, that there is much in the present condition of the
world to excite disgust and heart-sickness at the things
that are, and a vague and indefinite longing for some-
thing better, of which however few minds seem to have
formed any definite conception. Perhaps the long and

SUBSTITUTES FOR COMPETITION. 281

painful conflict which seems to be everywhere raging
between capitalists who employ labor, and laborers who
work upon other men's capital, has more influence in
producing this mental anxiety than any other cause.
It has produced wide-spread distrust of the present
order of things, and a vague longing for the re-adjust-
ment of capital and labor on some other principle than
that of competition. Cooperation is the word which
many persons and many schools of social reformers have
chosen to express that unknown new order of things for
which they are seeking, much as x and y are used to
denote unknown quantities in algebra. The word can
not be defined till the problems in the statement of which
it is employed shall have besn solved.

Some use this word and socialism almost inter-
changeably, meaning by it a new organization of labor
and capital, by which capital shall be controlled by com'
munities, not by rich individuals, communities shall be reck-
otied the owners of the wealth created by their individual
members, and the individual, being absorbed in the com-
munity, shall rely on the community for support. This
is socialism pure and simple.

Others are aiming at a modified socialism, in which
the capital of all the members of the community shall be
managed and their labor directed by the society ; but
each member on the other hand shall be credited with
the capital he has furnished, and with the labor which
he performs. All labor is to be classified by the officials
of the community, and rated according to the degree of
skill it requires. Every member is to have the neces-
saries of life from the common fund, and if profits accrue
from the industry of the community, they are to be dis-
tributed among the members, in proportion to the cap-
ital furnished, and the relative value of labor performed
by each.

282 ECONOMICS.

Another conception of cooperation is that of an ar-
rangement for dispensing with the services of the middlt
men, and enabling many consumers, by combining in
their purchases, to obtain commodities directly, either
from importers or manufacturers, at wholesale prices.
Cooperative or union stores are of this character. So
far as we are informed, little success has attended such
efforts in this country, but a good deal of success has
been attained to in other countries.

Others still intend by co-operation such an arrange-
ment as will enable the laborer iji some form to share the
profits of production.

There are also some other conceptions of the or-
ganization of labor for the purpose of protecting the
laborer from competition, which will require consid-
eration.

§ 208. The first of these modes of organization,
which we have characterized as socialism pure and simple,
will require but little space here. It proposes to treat
what we have throughout this treatise assumed to be a
fundamental law of human nature, as a nullity. If the
ideas upon which such a system of social organization
must be founded are true, then there can be no such
science as that which we are endeavoring to expound.
No man who accepts the fundamental law which we
enunciated at the outset, and appreciates the irresistible
force of such a law can for a moment think the experi-
ment proposed by these men worth trying. Man is no
more adapted to such a life, than the barn fowl is to live
on the water. He is formed for individual self-care,
self-support, self-reliance, self-direction. The desire for
individual possession and the sense of individual rights
are in every man strong, clear and irrepressible. The
attempt to place such a being in a community, which, by
its united or corporate will and judgment, is to super-

SUBSTITUTES FOR COMPETITION. 283

cede all individual will and judgment, and reduce each
man to a machine to be impelled and guided in the ap-
plication of his powers by a personality not his own, and
patiently to accept through life and for his children after
him such results of his labor as the community may
allot, — such an attempt cannot succeed. The incorrigi-
bly lazy, the men without enterprise, without high pur-
pose, or any sense of personal dignity, may be satisfied
with such a life as a convenient way of living on the pro-
ducts of other men's labor and other men's wits. The
artful and unscrupulous demagogue may be delighted
with such an organization of easy-going enthusiasts, as
furnishing him an excellent opportunity of getting other
men's earnings entrusted to his care, and profiting by
the credulity of the simple. But upright, honorable,
intelligent, industrious men will neither be willing to
work for the support of the indolent, nor content, for any
great length of time, with the results which will come to
them from a life of toil under the direction of others.
This is not human life. This is not human society. The
perfection of human development cannot be obtained
under such conditions. Investigators however sagacious
will search in vain in human nature for the " attractions "
by which such communities can be organized and held
together. They must, in the future as in the past, soon
fall to pieces and come to nought. It is the law of
human nature, and must be the law of all human society,
that the individual man is responsible for his own sup-
port, and the owner of all which he produces. Nature
herself has provided a modification of this law in domes-
tic society, human ingenuity can devise no other. At all
events as economists we need pursue this matter no fur-
ther. It is quite outside of that fundamental law which
we accepted at the outset, as the germ from which our
science must grow. If such experiments can succeed, it

284 ECONOMICS.

must be by finding somewhere in the world a human
nature -with which we are quite unacquainted.

It should also be borne in mind, that no temporary
success of a community founded on this principle can
prove the soundness of the theory. Such an experiment
is made in the midst of the civilization which has been
growing up for ages on the principle of competition, and
must use a thousand advantages and helps which have
originated from that very competition which the advo-
cates of this theory reject. It is necessary to prove
more than that a community of socialists can live amid
the sustaining influence of the civilization of the nine-
teenth century and guided by the light of ages. It must
be shown that it can stand alone, grow from its own
roots, and mature a civilization by the development of its
own laws.

§ 209. That scheme of socialism which we have just
considered seeks to eliminate the idea of individual owner-
ship from the human soul, and treats all competition, not
as a law of nature, but as a mean and mischievous
selfishness. The modified form 0/ socialism of which we
are next to speak does not wholly discard individual
ownership, but denies to the individul any appeal to com-
petition for the protection of his right to the results of his own
labor. The oflScials of the community must grade all
labor, and assign to each class its relative price. It is
impossible they should do this with any pretense of jus-
tice in any other way than by reference to the current
wages of labor as fixed by competition. A community
organized to protect its members from all competition is
therefore dependent, in adjusting its most important and
delicate arrangements, on results which never could have
been attained to, except under the free competition of
that society at large, against which its existence is a per-
petual protest. It is not therefore a system within itself.

SUBSTITUTE'S FOR COMI'ETITION. 285

While it rejects and condemns as oppressive that organi-
zation of industry which free competition produces, it is
glad enough to guide its own way in the darkness which
its negations have created, by the light which that hated
and rejected system emits. It refuses competition to
its own members. But it is still compelled to settle the
property rights of its members by rules which that very
competition has established. Such a community has
surely very little reason to boast of the progress it has
made in organizing a new system for the cooperation of
labor and capital. How would it settle matters among
its members, if all the rest of the world should be con-
verted to its " new system ? "

In other respects this form of communism is liable to
nearly the same objections which have been urged against
socialism pure and simple, though perhaps in a less de-
gree. The lazy, the stupid, the careless of the future, are
made sure of support by the labor, the skill, the foresight
of others. The crafty, the cunning, the unscrupulous
have still an inviting chance of practicing on the easy
credulity and unsuspecting thoughtlessness of enthusi-
asts ignorant of human nature, and too good naturedly in-
dolent to take care of themselves. It is an admirable
device for enabling those who will not or cannot work, to
live by the skill and pains-taking industry of those who
will. Such a system is in open conflict with human na-
ture, and we need not be at the trouble of arguing against
it. Those laws of nature against which it has arrayed
itself are quite strong enough to vanquish it without anj
help from us.

§ 210. Those organizations of consumers which are
formed for the purpose of dispensing with the services of
retail dealers, and deriving supplies directly from the im-
porter or the manufacturer, with little or no addition to
wholesale prices, need not detain us long. They violate

2S6 ECONOMICS.

no economic principle. It is of course desirable that the
consumer of a commodity should obtain it from the
original source of supply through as few hands as pos-
sible, for he must pay a profit on each transaction of ex-
change. The question, for example, how the products
of the great manufactory may be most advantageously
distributed to the consumers is a xair and open field for
the exercise of ingenuity and skill. The economist will
not hesitate to pronounce that plan the best, which on
the whole accomplishes the distribution most cheaply.
An examination of the methods which have been adopted
for this purpose under the name of cooperation, will show
that none of them are complete in themselves. They
are not solutions of the problem for universal use. For
example in many of them many consumers unite in fur-
nishing the capital. Commodities are then purchased of
the manufacturer or importer at wholesale prices as
regulated by the general law of competition. They are
then sold out to the combined consumers at customary
retail prices, and the net profits are divided in propor-
tion to the capital furnished. Of course both the price
at which the goods were originally purchased, and
those at which they are disposed of to the consumer are
determined in the ordinary method of competition. The
whole system is therefore founded on unmodified compe-
tition, and is no solution of the general question. This
is no reason why individuals should not resort to such
methods when they find they can be benefited by them.
But it does suggest a doubt, whether they are likely to
prove extensively and permanently applicable. The
present system of retail dealers is the result of long ex-
perience, and it is very probable that many and unex-
pected difficulties will be encountered in the attempt to
dispense with it. We see no reason however for making
any show of those difficulties. We shall rejoice in any

SUBSTITUTES FOR COMPETITION. 287

success which may attend experiments of this sort, as in
ail successful applications of labor-saving machinery.
Such it would really be.

§ 211. Cooperation as a means o{ giving to the laborer
the advantage of an interest in the results of his own tabor,
deserves more attention. We have already remarked,
that the most perfect system of labor is that in which,
to the greatest extent, the laborer owns the capital which
he uses. As all which he produces is then his own, the
stimulus which impels him to labor, and to use all his
powers both of mind and body in rendering the results
in the highest degree abundant and excellent, is as strong
as possible. A man acting under such a stimulus will
invariably accomplish more, than the same man would
accomplish if he had no interest in the matter, except to
obtain his daily wages. Any constitution of society
either by law or custom, which tends to divide men into
two classes, a small class owning all the capital and
under no necessity of performing any labor, and a large
class having no capital and doing all the work of society,
is economically bad, and on economic grounds should be
reformed if reform is possible.

We have already indicated what the needed reform in
respect to agricutural labor is. In every country under
heaven the true cooperation of agricultural labor and
capital is the ownership of the land by the men that till
it. The true movement towards such cooperation is not
the compulsory equal division of estates practiced in
France, but absolute free trade in land. We do not
believe that any scheme which philanthropy can devise
will reach far towards the so much to be desired improve-
ment of the condition of agricultural laborers, without
the abolition of land monopoly. Some land owners may
be humane and wise enough to try and to succeed in the'
experiment of giving their laborers, in addition to living

288 ECONOMICS.

wages, an interest in the products of the farm. Such an
arrangement would no doubt be as wise as philanthropic.
Any employer can afford, on the simple principles of
gain and loss, to pay to a laborer who knows that he has
an interest in the profits of his work, more wages than to
one who feels no impulse of hope of a future better than
the present. But it should not be forgotten, that such a
boon is no compensation to the laborer for being per-
petually excluded from the proprietorship of the land,
nor is even this small boon likely to be often extended
to the laborer under the present system.

Something may be done for the laborer by education.
Of that we have spoken in a previous chapter. Those
who are well acquainted with our great system of public
education will not be very sanguine as to what mere
book education can do, except under favoring circum-
stances in other respects. Few of us will believe, that
the laborer can be educated into comfort, while he still
remains the hopeless drudge, deprived of all prospect of
ever becoming the lord of the soil.

As to such cooperation as we are now speaking of,
in other modes of production than agriculture, there is
no natural obstacle in the way of applying it to any de-
sirable extent. But it is entirely at the option of em-
ployers to adopt or reject it, and we have not much hope
of obtaining a general reform from the philanthropy of
employers. We do not deny that they are as philan-
thropic as other men, but most men are slow to carry
philanthropy into business arrangements. They are
much more apt to construct them according to the cold,
hard laws of profit and loss, than to take any philan-
thropic considerations into the account. If it can be
demonstrated by experiment, that to admit laborers to a
share of profits is the most profitable mode of manage-
ment, we should then hope, that, like any other new and

SUBSTITUTES FUR COMPETITION. 289

useful invention, it would be adopted into general use ;
and if so adopted we sliould believe it would greatly in-
crease the profits of the manufacturer and the thrift and
comfort of those who live by labor. The subject is cer-
tainly worthy the diligent study both of the philanthro-
pist and the capitalist. Perhaps nothing would tend
more powerfully to bring to a happy termination the con-
flict which has been so long raging between capitalists
and laborers without capital, and unite as friends those
who now so often regard each other as natural enemies.
The continued prosperity of all branches of industry, the
peace o( society, as well as the comfort and happiness
of all who work with other men's capital, imperatively
require, that in some way cooperative and friendly rela-
tions should be established between these two parties as
speedily and as widely as possible.

No reason exists in the nature of the case, w/iy at
least a portion of the capiial of a joint stock company should
not be thrown open to the competition of operatives, thus en-
abling them, if disposed, to invest their savings in the
stock of the company. Of course those who have sup-
plied the larger portion of the capital would reasonably
wish to retain the control of its management. But this
is no reason why operatives might not be permitted and
encouraged to purchase a minority of the stock. Such
an arrangement would greatly benefit the operatives, by
affording them a desirable investment for all their sav-
ings, and their employers also by insuring the good will
of employes, and a deep personal interest in the pros-
perity of the company. Such experiments are eminently
worth trying in the present relations of employers and
employes to each other, and both capitalists and philan-
thropists have a very deep interest in them.

§ 212. Such modes of cooperation as the last two we
have considered are not at all kindred to socialism. They
13

290 ECONOMICS.

leave the ownership of all property intact. In the case
of the co-operative store, competition is only removed
one step farther back, from the retail merchant (whose
services are dispensed with) to the wholesale merchant.
Prices are determined just as in the ordinary method of
obtaining supplies through the retail merchant. In the
case in which employes become sharers in the profits of
trade, it is only another method of paying wages. The
wages paid are not a fixed amount, but depend in part
on the profits realized. Should any company succeed in
so establishing this cooperative system, that it should be
seen to give to its employes a decided advantage, other
operatives would be anxious to be employed by that
company, and other employers would be under a neces-
sity of adopting the same system, in order to compete
successfully for laborers. This consideration encourages
the hope, that if co-operation is really practicable and
capable of being made beneficial, it may come into gen-
eral use. It has the same chance of being generally
adopted as any other really good invention. It will
prove true in this case as in so many others, that if tried
and found to be good, competition will compel everybody
to adopt it.

We cannot leave this subject without saying emphatic-
ally, that there can be no more mistaken philanthropy than
that which assails the law of competition in the interest of
the laborer. There are but two possible methods of di-
viding profits between the laborer and the capitalist.
One is the method of competition, the other the method
of force. If the latter is to be resorted to, it must be
done either by enforcing the will of the laborer or the
will of the capitalist. If the laborer is to enforce his
arbitrary will, capital will cease to be accumulated, the
capitalist can gain nothing and will therefore have no
motive to employ his capital, or to save his gains if any

SUBSTITUTES FOR COMPETITION. £91

were acquired. Capital will decline, production will
languish, and the laborer will be without employment.

But if the will of the capitalist is to be enforced, the
laborer will be a slave. The only hope of the laborer is
in meeting his employer on equal terms, and entering into
a contract with him with the free consent of both parties.
This is the freedom of labor and the freedom of capital,
and there can be no other freedom of either. Philan-
thropy and economy are perfectly at one in so organiz-
ing labor and capital, that in all cases these two parties
shall meet each other under such conditions, that com-
petition shall have its free and unobstructed course.

§ 213. Two so-called reforms have been proposed in
the interest of socialism which merit a passing notice,
more as an illustration of the utter anarchy which has
taken possession of the minds of that class of men, than
because they are really worthy of any serious considera-
tion. We shall first consider the entire land revolution
which has been proposed. The scheme is, that private
ownership of land shall be abolished, and the state itself
shall become the sole land-holder, and that it shall assign
the use of particular portions of land to each cultivator,
according to rules prescribed by law. The first question
which presents itself to the mind in view of such a prop-
osition, respects the method by which the state is to
become the owner of the land. The more respectable
of those who advocate this theory would deny that they
have any thought of depriving the owners of land of their
property without compensation. If this is so, then. a
nation situated as ours is must, by a single act of legisla-
tion, incur a debt equal to the entire value of all the
lands of the United States now owned by individuals.
The owners of the property must be divested of it, and
compelled to receive in compensation for it the promises
of the government to pay. The first step therefore in

292 ECONOMICS.

the execution of this scheme must be ?i forced loan, equal
in amount to the value of all the landed property in the
United States.

One is impelled next to ask, how is the interest of this
loan to be paidi If we are told that it is to be by the
rent of the land, then we ask, in what manner the land is
to be rented ? If it is to be thrown open to free compe-
tition, rents will be as dear as now, and it is impossible
to see what benefit the landless cultivator of the soil can
derive from this stupendous revolution. And yet if the
state has stipulated to pay to the divested owners the
full value of their land, full rents must be obtained, or
the state will not receive enough for rents to make its
annual payment of interest. A constantly increasing
deficiency of income must involve the state in inevitable
bankruptcy. If the intention is to assign lands to the
cultivator at a reduced rate of interest, then national
bankruptcy is inevitable. On that supposition competi-
tion in the assignment of lands would be out of the ques-
tion. That is the enemy which the scheme is intended
to crush. How then is it to be determined who are to
enjoy the most desirable parcels of land ? Evidently
there are only two methods by which it is possible that
this should be determined. Either they must be allotted
to those who will pay most for them, and in that case
this whole revolution will be a failure, or else they must
be assigned to the favorites of the government, than
which nothing more odious and tyrannical can be im-
agined.

§ 214. We must believe that this wild scheme of in-
iquity and folly is a very natural offshoot from the almost
equally tmsound priiiciples which have underlain the land-
tenures of Europe for ages. To a very great extent, those
land tenures have been, it is sad to say are even now, in
flagrant violation of the only economic law which can be

SUBSTITUTES FOR COMPETITION. 293

defended on strict principles of natural justice. When
the legislation of the nation violates fundamental eco-
nomic law, the wildest confusion of thought will get pos-
session of the minds of men, and anarchic ideas will pre-
vail more and more till the abuse is corrected. The
insane theories in relation to the nature and functions of
money, which have gained prevalence since the passage of
thf' Legal Tender Law of 1862, afford a striking illustration
of the truth of this remark. Had the legislation of Europe
for centuries recognized the simple truth, that the owner-
ship of land differs not at all in its nature from the own-
ership of any other species of property, and permitted
the exercise of that right of free exchange in respect to
it, which is implied in the very nature of ownership, such
theories could never have gained possession of even a
portion of the national mind. There is little hope of
successfully meeting such theories by argument, till the
land tenures of the several countries are brought into
conformity with natural justice. Even in France, the
existing order of things is far from satisfactory. The
owner of land has a right to bestow it at his death ac-
cording to his own will and judgment, and the law re-
quiring the equal distribution of it among his heirs is an
assumption, on the part of the state, of a right to inter-
fere in the matter, which could not exist or be supposed
to exist, if the proprietor was admitted to have the same
absolute ownership of land as of any other property.
The right to interfere in one way with the matter, implies
the right to interfere in any other way, at the discretion of
the state. Free trade in land is the only weapon by
which tendencies to such anarchy can be eliminated from
the public mind.

§ 215. The other proposition of the socialist reformers
on which we purpose to say a (ttw words, is the daim that
it is the duty of the government to provide employment and

294 ECONOMICS.

pay wages fo all unemployed laborers. This claim has
been more insisted on by these reformers than any other.
It has cut an important figure in some of the great rev-
olutions of Europe, and there probably is no country in
Christendom, in which it has not at times been asserted
with so much energy and show of force, as in some de-
gree to endanger the public peace. It is the most rad-
ical and the most subversive of all social order of any of
the wild schemes of the sect. It is in principle an utter
negation of the right of private property. When it is
asserted that the state is bound to provide employment
and wages for every unemployed laborer, it should not
be forgotten, that the state is not a producer and there-
fore not an owner of property, except so much as is
needed for its public uses. What therefore it gives to
one, it must take from another. If therefore the state is
bound to see to it that every man has a living (and this
is what the claim amounts to), the meaning is, that the
state is a personality charged with the right and the duty
of taking from those that have, and giving to those that
have not, just so much as their necessities may seem to
require. The property which the state will protect for
any citizen is not that which he has earned and therefore
rightfully owns, but what the state may see fit to leave
him, after taking from him what it may think necessary
to supply the wants of his neighbors. Every man is
freed from all apprehension of want. If times are pros-
perous and wages high, one has on the one hand no fear
of want however prodigal he may be, for if times become
hard, and he is out of employment, the state will provide
for him ; and on the other hand he has no motive to
accumulate, for if he does the state may at any time take
it away from him, to supply the wants of those who waste
all their earnings in reckless prodigality. If he becomes
discontented with his wages, he has no fear of losing his

TAXATION. 295

place by engaging in a strike, for if he finds himself
unemployed, the state is bound to employ him and pay
him wages. It needs no argument to show that such
doctrines as these are destructive of all rights of prop-
erty, all social order, and of civilization itself.

It becomes every honest statesman and true philan-
thropist to turn a scrutinizing eye upon our whole system
of legislation, to discover if possible any trace of the
recognition of these anarchic teachings. Socialism is a
madness, but there is much method in it ; and if we allow
ourselves to admit into any part of our system, and re-
tain there any germ of socialism, it will be developed
rapidly, and bear fruit after its kind. Our poor laws,
our public charities, our system of public education at
the expense of the state, and all our legislation in respect
to the relations of laborers to their employers should be
carefully examined, and in every particular placed upon
a basis of sound economic principles. It is the business
of the statesman and the moralist and not of the econo-
mist to pursue this investigation. The signs that this
leaven of mischief and anarchy is present and working
upon the masses of American society, are painfully ap-
parent to every thoughtful observer of the passing scene.

CHAPTER XIV.
Taxation.

% 216. Should the suggestion be made that this is
not the proper place for the discussion of this subject,
our answer is, that perhaps the suggestion might have
been equally appropriate, if it had been introduced else-

296 ECONOMICS.

where. Tlie relation of taxation to economics is not logical
but accidental, and therefore a treatise on that science
has no logical place for it. And yet it is so- connected
with all the economies of society, that it cannot be passed
by in silence. The science must at all points assume,
that those natural laws which it would construct into a
system must have free action, without l>eing turned aside
from their natural course either by fraud or violence.
The fact however is apparent, that in all communities
there are men, who are not disposed to respect those
laws, but will utterly disregard and violate them, unless
restrained by force. The only agency which can effect-
ually exercise such restraint u[X)n the lawless is govern-
ment, acting in the name of society, and able to com-
mand the whole physical force of the community to exe-
cute its will. In the performance of this important
function, civil government becomes quite indispensable
to all production and all exchange. It may be regarded
as a laborer whose services can nowhere be dispensed
with, like a watchman that guards our premises by night,
and this service it cannot perform, any more than any
other laborer, unless it receives its appropriate reward.
And yet its wages are not determined by economic laws.
It receives whatever it demands. In some cases it takes
the position of a partner, and accepts for its compensa-
tion a certain per centage of the profits. But that share
of the profits is not determined by agreement between
all parties, but by the will of this one partner. The state
furnishes no capital, because it has none to furnish, but
it cannot perform its function unless it is supported by
the contributions both of the capitalists and the laborers
whom it protects.

We cannot therefore apply to the consideration of
this subject those economic forces with which we have
had to do in our whole previous discussion. As econo-

TAXATION. 297

mists we have really nothing to do with taxation, except
to point out those functions for the performance of which
the econornies of society are necessarily dependent on
the state, and to protest against the assumption on the
part of the state of any functions which do not legitimately
belong to it. I'he first duty of the state to the economic
interests of society we have already indicated, — protec-
tion of every citizen in the enjoyment of all his personal
rights, — protection against all enemies threatening to
assail those rights, and most of all against any species
of tyranny or injustice from the state itself. No people
can be prosperous that does not habitually live in the
conscious security which the ever-present protection of
such a civil state affords. There must be an assurance
that the laws are just and" will be justly and efficiently
executed, that the judiciary is pure, enlightened and
righteous, and that the police force is energetic and un-
ceasingly vigilant. Such a government is always cheap
at what it necessarily costs to sustain it, and such a gov-
ernment will never place unnecessary burdens on the
people. Exorbitant and unnecessary exactions always
prove that the government itself is unfaithful to its most
essential function.

§ 217. It is sometimes asserted, rashly and thought-
lessly we think, that protection of person and property is the
only function of government. It is certainly not true. In
addition to this function civil government must be the
agent of society for providing certain conveniences and
comforts which are necessary to all, but cannot well be
provided for by private enterprise. One of these is the
postal service, by which intelligence is rapidly, safely and
cheaply conveyed to every part of a great nation. In-
deed under the present peaceful relations of the nations
to each other, and those improved international postal
arrangements which modern statesmanship has devised,
13*

29? ECONOMICS.

it provides for cheap and rapid communication between
any one individual in the civilized world however hum-
ble he may be, and any other. Every little post-office
in Christendom is in easy and certain communication
with every other. Nor is this limited to Christendom.
The present postal system of the world is as cosmopolitan
as our science itself. It is a grand practical recognition
of universal fraternity, and a striking illustration of the
vastness of the benefits which enlightened governments
at peace with one another can confer on mankind. The
benefits which it confers on the economic interests of
society are simply incalculable. It renders the negotia-
tion of exchanges not only possible but easy and cheap,
between any two individuals dwelling in any portion of
the civilized world.

The expense however of sustaining this magnificent
system should not fall either in whole or in part on the
taxpayer. It should l^e and may be self supporting.
That nation whose postal service is a burden upon the
general revenue may well be suspected of a lack of states-
manship.

Another very important service which the govern-
ment renders to the economic interests of society is the
construction of the great thoroughfares of the country, and
the roads by which every man cottimunicates with every
other. This also includes the care and improvement of
the streets of cities and the numerous arrangements which
are necessary for the health, comfort, convenience and
safety of their inhabitants. It is not possible to point
out any agency by which these necessary arrangements
could well be provided, except that of the government.
In such a system of government as ours, all these wants,
except the construction of great national thoroughfares,
should be provided for by local taxation. Each local
community should in these respects take care of itself

TAXATION. 299

It is also worthy of very serious consideration, whether
the resources necessary for such objects of local improve-
ment should not be raised and appropriated by the votes
of taxpayers onl3\ Excessive municipal taxation is at
the present time one of the greatest burdens of the
American taxpayer, and we will add one of the greatest
dangers of the future. The rights of property cannot be
safe in any country, where men who pay no taxes and
bear none of the burdens of society have an unlimited
power of imposing taxes for other men to pay, and where
the hope of obtaining a profitable job from the public
will induce multitudes of men who perhaps never paid a
tax in their lives, to vote for some costly public work,
without any proper consideration of its utility or impor-
tance, and quite regardless how inconvenient and oppres-
sive may be the burdens which it will impose on the tax-
payers. If we are told that under our system there is no
remedy for such an evil as this, our answer is, that only
shows that the system greatly needs reforming. We
believe in liberty, but liberty which works constant injus-
tice will not be of long continuance. Men who pay no
taxes are not well qualified to impose taxes on those
who do.

§ 218. We have already explained the necessity of pro-
viding at the expense of the state certain opportunities of edu-
cation to all the people. In so far as this has not been
sufficiently provided for by the munificent school funds
which many of the states received from the general gov-
ernment, or other funds for school purposes which the
states may have acquired, the means necessary must also
be raised by taxation. Under our system they should be
raised by local taxes. To what extent of costliness pub-
lic education at the expense of the state should be carried,
it is not within our province here to inquire. It is proper
however to lay down a principle which, if we are right in

300 ECONOMICS.

the conclusions to which we have come in the course of
this treatise, must be fundamental to the whole subject.
'I'hat principle is, that the only reason why provisions for
gratuitous education should be made at all at the expense
of the state, is that the health and safety of society re-
quire it. It is a reason of the same kind as that which
justifies and requires such police regulations as are
necessary for the prevention or removal of local nui-
sances dangerous to the health of the community. It is
to prevent the growth upon the body politic of cancerous
tumors and fatal gangrene. The doctrine that it is the
duty of the state to provide gratuitously for every child
of every resident on the soil the means of an accom-
plished education in every department of literature and
science, rests on no better foundation than the doctrine
that the state is bound to furnish employment for all un-
employed laborers, or to render the ornaments of dress
equally accessible to all men whether rich or poor. Aside
from what is necessary for the safety and health of the
community, the state is under no more obligation, and
has no more right, to undertake the education of every
man's children, than to feed and clothe and house them.
The same fundamental law which makes a man the
owner of all which he produces by his labor, also throws
upon him the burden of supporting himself, and that
family to which he gives existence by his own voluntary
act, and the support of a family includes education, as
truly as food and clothing and shelter. The more we
scrutinize the phenomena of human society, the more
apparent it will become, that the family and not the in-
dividual is the constituent unit.

It may perhaps be urged, that the well-being of society
requires that facilities should be furnished at the expense
of the state for the complete edijcation of all the people.
If this were granted, it would not hence follow, that the

TAXATION, 301

benefit derived to society from such an arrangement
would justify the cost of it. It might be a fine thing for
the community, that every man should have a railway
station directly in front of his own door, but the levying
of a tax sufficient to accomplish it, would be the confis-
cation of all property. The same would be true to no
small extent of the attempt to provide for the gratuitous
education of the entire people by taxation, provided that
education was extended to the whole circle of literature
and science. Nothing can realize that conception of
public education which is entertained by many minds,
and is deeply affecting our school k^gislation, short of a
severity of taxation which will be found insupportable to
the taxpayer. There may be good things which a
householder cannot afford to provide for his family, and
so there may be good things which the state cannot afford
to provide for the people, because it will cost more than
the people can afford to pay.

It has however never been proved that a provision for
the universal gratuitous education of the people would be
beneficial to society. It is a question which lies quite out-
side of our science, and we cannot therefore permit our-
selves to enter on the discussion of it here. We can
only state it, and leave the discussion of it to others.
Can it be shown that the constitution of the state is such
as to qualify it to devise and carry into execution a com-
plete system of education for ail the people ? Does any
sane man believe that it would be wise and safe to en-
trust that entire interest to political bodies and political
action ? If not, then surely it is time for thoughtful men
to begin to search in earnest for the limit, beyond which
state provision for the education of the people ought not
to go, and at which the burden ought to be thrown upon
individual parents, of educating their own children. The
whole subject is left in the recent legislation of the coun-

302 ECONOMICS,

try at loose ends, and no limit can be discerned to the
burdens which are liable to be thrown upon the taxpayer
in the interest of gratuitous education. The subject re-
quires, not popular declamation, of that we have had too
much already, but discrimination, definition, thoughtful
statesmanship. We are convinced that to a certain ex-
tent gratuitous education ought to be provided for the
people at the expense of the taxpayer. But there is a
limit beyond which it is not possible to carry that pro-
vision, without ruinously severe taxation, and beyond
which the interests of education are much more wisely
left to the fathers and mothers of the nation, than con-
trolled by the state. The time has fully come when this
limit ought to be determined by wise, sound statesman-
ship, and legislation be made to conform to it.

It is surely not difficult to see that the principle
which we asserted in respect to taxation for local im-
provements equally holds here. A greater injustice can
hardly be conceived of, than that men who pay no taxes
should have unlimited power to vote taxes upon all the
property around them to educate their own children.
The men who pay the taxes should surely have the right
of deciding by their own votes, how much shall be ap-
propriated to the gratuitous education of the whole com-
munity. To deny them that right, is, so far as it goes,
to take the disposal of their property out of their hands
and commit it to the hands of others who have no inter-
est in it, except to obtain as much as possible of it for
their own uses. This cannot be a sound and righteous
system of taxation, and if persisted in it will sooner or
later result in disaster.

§ 219. Provisions for the care of the unfortunate con-
stitute another important part of American taxation. We
cannot conceive that a government representing a Chris-
tian people can fail to make some provisions for the

TAXATION. 303

education of the deaf and dumb, the blind, and the fee-
ble-minded, and for the care of the insane. The only
questions which can be raised with reference to such
provisions must respect the scale of costliness upon
which they shall be constructed, and whether the bene-
fits of them should be given to all gratuitously. It is
evident that if such interests are provided for with un-
thinking prodigality, considering only what is desirable,
and not at all what burdens may be thrown upon the
taxpayer, it is quite possible that these provisions may
become far more costly than the real necessities of the;
case require, more costly too than a regard for the well-
being of these unfortunates demands or permits. Such
provisions should certainly be made in a spirit of gen-
erous liberality, but not without the frugality of the true
statesman, who will incur no greater cost than is neces-
sary to accomplish the substantial ends at which he
aims. That there has been much of this statesman-like
frugality of late in our outlays for public charity, we
think will hardly be pretended. If burdensome taxa-
tion is an evil at the present time, this subject will bear
examination.

Provisions for the care of the unfortunate vmst neces-
sarily be to a certain extent gratuitous, otherwise the poor
to whom they are especially important would not be able
to enjoy the benefit of them. But it is impossible for us
to conceive of any good reason why the state should as-
sume the entire burden of the education and care of all
these unfortunates, however affluent their condition may
be. The burden upon the taxpayer would be greatly
relieved, if all persons in affluent circumstances were re-
quired to make fair compensation for the benefits which
they receive from these institutions, and we believe such
persons would prefer to pay the full value of the service
rendered them, rather than to receive it as a gratuity.

304 ECONOMICS.

Under the present tendency to burdensome taxation of
which all taxpayers are sensible, the state ought to study
every honorable method of diminishing the burden as
much as possible. Of taxation for the relief of the poor
we shall speak in a chapter especially devoted to that
subject.

§ 220. There is one claim of the government not only
upon the capital but upon the labor and the life of the
citizen, which is in the nature of the case unlimited. A
government which is the defender of the peace of society
and of all the rights of the citizens, not only has the right
but is bound in duty to protect its own existence^ and its
power to perform its proper function, against any enemy
that may assail it. When thus assailed, the government
may claim the property and the personal service of every
citizen, to whatever extent and at whatever hazard may
be needful for its own preservation. To preserve the
life of society is more important than any individual per-
son or private interest can be, and the less must give
■ way to the greater. On this principle only can national
existence be preserved and prolonged.

When a nation has incurred obligations however
great in such a struggle for self-preservation, those obli-
gations are to be regarded as a mortgage on the entire
labor and capital of the nation, from which they can
never be released, except by the full performance of all
the promises which the government has made. National
indebtedness binds the conscience of an entire people.
Nations should be very cautious of incurring such obli-
gations unnecessarily, and scrupulously faithful in their
performance.

§ 221. There are some uses to which the tax-levying
power is often applied, against which it is the duty of the
economist to enter his protest. That power should nroc?
be used for the purpose of diverting either capital or labor

TAXATION. 305

from those modes of employment to which they would resort
if left to themselves. A legislature is destitute of nearly
all those qualifications which are necessary to fit it for
judging in what way capital ought to be invested, in
order to be most profitable to the community. Bring
such a question as this before an American Congress for
decision, and there is not one chance in a hundred that
it will be decided correctly. The members are not prac-
tically acquainted with the real elements of the question.
They do not view it from the stand-point of the man who
is about to lay out his own labor, or invest his own capi-
tal. They will be open to the influence of any man who
may approach them for the purpose of accomplishing his
own selfish purposes. Many political considerations
which are quite irrelevant to the case will influence their
minds and their votes. To draw a correct decision of
the question out of the midst of such influences is seem-
ingly impossible. Yet these men after such a delibera-
tion come to the conclusion that American capital is too
largely invested in some one branch of industry, and
ought to be withdrawn from it, and invested in some
other, in which these sages have been made to believe
that more of it should be employed. They immediately
look around themselves for the means of accomplishing
what they think desirable. The power of taxation is
chosen as the instrument, and a heavy tax is imposed on
all those who use certam foreign products, not for the
legitimate purpose of taxation, to bring revenue into the
national treasury, but only for the purpose of compelling
labor and capital to leave one mode of investment in
which they are profitably employed, and seek another in
which our legislators think it would be better that they
should be invested. This is a two-fold abuse ; it is the
exercise of the legislative function for a purpose for which
it was never intended, and is quite unfitted ; and it is ap

306 ECONOMICS.

plying the power of the legislature to impose taxes to an
end quite foreign to its legitimate uses. The power of
taxation is frequently used for the purpose of discounte-
nancing modes of using capital which are regarded as
immoral or injurious to society. The propriety of such
a use of it involves moral and religious questions which,
though very interesting and important, cannot be appro-
priately discussed in this treatise. But the cases of which
we are speaking are not of this sort. Both the mode of
employing capital which is encouraged, and that which
is discouraged, are admitted to be legitimate and proper,
and conducive to the general good ; and the legislator
assumes to encourage the one and discourage the other in
the comparison, because he claims in his capacity of
legislator to be a better judge how capital ought to be
invested than the capitalist does, and uses his power of
levying taxes to compel such a use of capital as he judges
best. This is a usurpation. The fit reply of the capi-
talist to such intermeddling of the legislator is, — that, sir,
is none of your business ; I am a better judge of it than
you are.

§ 222, This introduces the consideration of the mode
of taxation, — a subject which lies outside the limits of
our science, and of which we had therefore purposed to
say nothing. But more reflection has convinced us, that
it so nearly concerns the subject matter of which we must
treat, that its consideration cannot be entirely omitted.
Our views of imposts levied for the purpose of fostering
certain industries, by protecting them from foreign com-
petition, have been freely given. But otir science enters
no protest against imposts levied for the purpose of raising
7iecessary revenue. It cannot be denied, that that mode
of taxation is recommended to the legislator by many
important advantages. But instead of being in his
hands a fit instrument to be employed in diverting trade

TAXATION. 307

from channels in which it tends to run, into others
which he regards with more fovor, the greatest objection
against the use of it Hes in its liabiHty to ';xert such an
influence.

Let us suppose, for example, that a duty is imposed
for the purpose of revenue only, on some commodity,
the supply of which is partly produced at home, and
partly imported. A duty levied on the importation of
that commodity must, to all appearance, raise the price
of that portion of the supply which is produced at home,
and give a relative advantage to those engaged in that
industry, to which they are in no way entitled. No true
statesman, seeking revenue only, would sanction such an
impost. He would either levy imposts upon commodi-
ties that are not and cannot be produced at home, or he
would balance the foreign imposts by a precisely equiva-
lent internal tax on the home production, so that the
home and foreign product would meet on terms of equal
competition in the home market as before. Otherwise
the price of the commodity would be raised to the con-
sumer by the whole amount of the duty, and yet, so far
as the supply was produced at home, the producer and
not the public revenue would receive the benefit of it.
In the free trade system of England, this point is care-
fully guarded. Her policy is to raise her revenue from
commodities not produced at home.

It may be objected to this, that it would often bring
the burden of taxation on the poor as well as on the
rich ; since, for example, such articles as tea and coffee
must be taxed, because they are not produced at home.
To this we reply, first, that these are luxuries rather than
necessaries of life, and therefore very properly subject to
taxation ; and second, that the most efficient revenue
duty is shown by experience to be a low rather than a
high one. The tax which it would be necessary to levy

303 ECOyOMTCS.

on those articles would be so low a percentage, that its
effect on a pound of tea or coffee would be but barely
perceptible, and could not be a ground of just complaint.
A demagogue might be disposed to magnify it, but a
statesman would hardly regard it as a matter of serious
importance. In a country where the vote of a poor man
is just as weighty as that of a rich man, a small tax on
an article of luxury, which presses with absolute impar-
tiality on every voter, should never be complained of.
A man who cannot pay a tax of five to ten cents per
pound, on the few pounds of tea and coffee which any
poor man would use in a year, can hardly be fit for a
voter. No man of any spirit, whether rich or poor, would
permit such a plea to be made in his behalf

§ 223. The question is much agitated at present, ofi
what forms of property taxes may be properly levied. One
of the most important points in this discussion relates to
the adjustment of tax levies, in respect to debtors and
creditors. A definition of property has been proposed,
according to which debts due any one are not property,
and are therefore not taxable. All property, it is claimed,
has materiality and a local situation. Debts due to any
one have neither, and are therefore not property. The
reader need not be told, that we cannot accept this defi-
nition. According to our definition of wealth, skill and
power to labor are property. Yet they have no material-
ity. An invention is a mere conception of the mind,
yet it is property. But in the case under consideration,
the definition of property proposed, even if admitted,
would not avail. A man may be to-day the owner of
one hundred thousand dollars in gold. To-morrow he
may lend it, and receive for it real estate security. He
has not by that transaction divested himself of all his
property, or of any of it. Indeed it matters not whether
he has taken security on real estate, or relied on the bare

TAXATION.

309

credit of the borrower. The moment that loan is made,
he owns the property of the borrower to the amount of
one hundred thousand dollars. The evidence of indebt-
edness which he holds is the proof of his right to such
an interest in the property of the borrower. It is his
title deed. The borrower may use the gold as he pleases,
but the creditor is the owner of that amount of property
which is in the present possession of the borrower.

The question is certainly a fair one, how the transac-
tion as thus described^ should affect the two parties^ in re-
spect to their liabilities to taxation. By the laws of some
of the states, the tax assessor disregards this transaction
entirely. He estimates the property of the debtor just
as if the debt did not exist, and the property of the
creditor as though the gold was still in his hands. It is
only necessary thus to state the case, to convince any
candid mind of the unreasonableness of the law. That
item of one hundred thousand dollars is doubled in the
assessment and twice taxed. A state that makes out its
tax lists on that principle estimates the property of the
people of the state at an amount immensely greater than
it is in truth. Such an assessment is a delusion, and a
tax levied on it is a public oppression. It would be easy
to show that, if taxes are assessed on this principle, the
same property is not only liable, as in the case above
given, to be reckoned twice over, but to be repeated any
number of times. It is wonderful that any legislator
should fail to notice the bald injustice of such a system
of taxation. Nothing can be plainer than that the same
property should be taxed but once.

§ 224. The question will x\%q. whether the debtor or the
creditor should pay the tax. The answer cannot be difficult.
Who is the real owner of the property in question "i No
one can be at a loss for an answer. The property of the
debtor is the amount of all which stands in his name.

3IO ECONOMICS.

minus the debt. The property of the creditor, in the
case supposed, is one hundred thousand dollars, the
amount of the debt due him. Then let each of the par-
ties be taxed for the property he really owns. Let the
amount of the debt be subtracted from the property of
the debtor, and assessed to the creditor. No injustice
will then be done to either party. An assessment con-
ducted on that principle would give the nearest possible
approximation to the real value of the property of the
people, and a tax levied upon it would be as near an ap-
proach to equity as is attainable.

In case of a debtor and creditor residing in different
states^ the question would arise in which state the tax
should be paid. A very clear and simple principle
seems to be at hand to settle this question. All capi-
tal should contribute to the support of the government
that protects it. Property should therefore be taxed in
the state, to the courts of which its owner would resort,
to enforce his rights, A mortgage must be foreclosed
in the courts of the state in which the mortgaged prop-
erty is situated. To that state therefore the creditor
should pay taxes, no matter where he himself resides.
The same principle will hold, when no real estate security
is given. The creditor should still pay the tax to the
state in which he is to bring suit, to enforce his rights.

The construction of a system of taxation on these
principles would gve.ci.\\y facilitate the discovery of all prop-
erty rightfully subject to taxation. If the person in whose
name any taxable property stands, is required to make
an exhibit of his property, he will of course, for his own
protection, make known any indebtedness which can be
offset to it. Let him also be required to give the credi-
tor's name and residence. Let the neglect of the credi-
tor to pay the tax, work a forfeiture of his claim against
the debtor; in which case, the debtor being released

TAXATION. 311

from his obligation to pay the debt shall become liable
for the tax. The effect of such a law would doubt-
less be, that in the original contract for the loan, the
debtor would agree to pay the tax, as a part of the con-
sideration for the use of the money. In such a case the
property of the borrower would be estimated without
reference to the debt, and the creditor would be unknown
in the assessment, and would simply receive a lower rate
of interest on account of his exemption from taxation.
This arrangement, so perfectly equitable between the
parties, would secure to the state precisely the amount
of revenue to which it was entitled. For such a debt,
the creditor should of course not be taxed in the state in
which he resided. The adoption of these principles of
taxation in all the states, would greatly facilitate the free
movement of capital over our whole country, according
to the law of supply and demand. It would secure
equity everywhere, and work injustice no where.

§ 225. It needs no argument to prove that the rapid
increase of taxation for purposes of local improvement,
gratuitous education and charitable provisions for the
unfortunate is one of the great dangers which threaten the
future of our country. The entire amount of taxation
borne by the citizens of many of our towns and cities,
exclusive of all charges levied by the federal government,
ranges from three and a half to seven per cent on an as-
sessment of property at its cash valuation, and that at a
time when the current rate of interest cannot be said to
exceed eight per cent per annum. It surely needs no argu-
ment to prove, that such taxation must be very oppressive
to the industries of the country, and a great obstacle to
the accumulation of capital, especially when it is farther
considered, that to the figures given above must be added
all the charges of supporting the federal government,
and for paying interest and principal of the national debt.

312 ECONOMICS.

If any one thinks there is nothing burdensome and alarm-
ing in such taxation as this, we must be excused from
believing that he is either a financier or a statesman.
Such burdens laid year after year on the industry of the
country do not indicate statesmanship, but recklessness
such as disqualifies one for any position of public trust.
These are plain spoken words, but the gravity of the case
requires it.

CHAPTER XV.
Pauperism.

% 226. There is no logical place in the science of econom-
ics for such an anomaly as pauperism. That scier^ce
has to do with a society made up of units, each orie of
which is a personality endowed on the one hand with
power to labor, and capable on the other of supporting
itself by its own labor. Each one is expected to be,
not only self-supporting, but to be capable of adding
something to that great human patrimony, which is con-
stantly being acccumulated for the benefit of all. In
each of these units may be embraced all the individuals
of a family. There may be a mother whose entire power
to labor is absorbed in the care of children. There may
be children who will not yet for many years be able to
bear the burdens of the laborer, or adequate for self-
support. There may be decrepid age whose task is al-
ready done. There may be the invalid whom disease
has prematurely disqualified for labor. But the unit is
the family, and that unit with all embraced in it is ex-
pected to be self-supporting, and if possible accumulat-

PAUPERISM. 313

ing. "If any one will not work neither shall he eat," is
sound economy ana sound morality.

But this theoretic economic world is not in all respects
the real world in which we live. There are frictions in
the workings of our economic machinery, which we must
not refuse to consider. Some are never endowed with
powers of seif-sustentation. Others are deprived of
those powers by disease or by the inevitable providence
of God. Others through sheer indolence refuse to work
that they may eat. Others still are disqualified for self-
support by their vices, or are deprived of the means of
subsistence by the indolence and vices of their natural
supporters and protectors. Any of these cases of disa-
bility are liable to occur in respect to persons who are
not embraced in any self-supporting unit, and are there-
fore entirely unprovided for.

Over and above all this, it has been true in all the
past history of the human race, that in the progress of
society in wealth and population, large numbers of men
have fallen out of the current of general prosperity, and
spent their lives on the very verge of starvation. No
civilization has ever existed for any considerable length
of time, which had not a lower stratum of extreme pov-
erty and wretchedness. Perhaps nowhere in the world's
history has this phenomenon put on more shocking and
revolting aspects, than in some of the most cultivated
and wealthy modern nations. To this hour we are pro-
vided with no effectual antidote or remedy for this dis-
ease of the body politic.

§ 2 2 7. W/ia/ then shall be done for these masses or with
theinl As economists we cannot refuse to consider this
question. We have pointed out tlie laws by which am-
ple supplies of human want are created, exchanged and
distributed. But here are vast masses belonging to our
common human ity^ that perform no such service in the
14

314 ECONOMICS.

creation of wealth as would give them an available claim
to a share in the distribution. Is there no possible re-
adjustment of economic laws, by which these wants may
be supplied ? Must not our laws of distribution be made
in some way to bend, or relax their tension, so as to give
bread to these hungry mouths? All agree in maintain-
ing that the bounties of the Creator are intended im-
partially for all, and that the system should be so con-
structed as to give to all a fair opportunity to supply
their wants by their own labor. All would equally agree
that it is the province not only of Christian charity, but
of humanity, to supply the wants of all those who are in-
capacitated to labor, either by natural imbecility or
inevitable calamity. All these cases are easily disposed
of, not only in theory but in practice. If the sufferings
of the poor could be confined within the limits which we
have just defined, the humane impulses which are native
to the human heart, and still more the charity which is
deeply imbedded in the very foundations of our religion,
would be entirely adequate to provide for every exigency
of the case, without any interference either of the econ-
omist or the legislator. But when all these cases have
been provided for, there still remains a vast amount of
uncomforted and unmitigated wretchedness. What shall
be done with and for it ?

§ 228. At this point it seems to us the question should
first be referred to the consideration 0/ the Christian, the mor-
alist and the statesman. We have already indicated the
economic causes, which we think tend to increase and
perpetuate these evils, and earnestly insisted on the
necessity of their entire removal. We have insisted on
such a construction of all our economic machinery as
will give to every man a fair chance in the race of life.
Our science can do no more. Are there misadjusted
moral forces, are there social customs and arrangements

PAUPERISM, 315

which increase the temptations to vice and multiply the
number of its victims? Can any change in our laws and
police regulations remove dangerous temptations out of
the way of the young and the unwary? Are our towns
and cities collecting revenue from branches of traffic
which deprave the morals and waste the substance of the
people, and which therefore ought to be utterly prohib-
ited instead of being made sources of revenue ? Is there
any possible application of moral forces in the power of
the moralist and the Christian, whereby men may be lifted
out of these morasses of societ\', and restored to virtuous
self-control, self-support and self-reliance ? There is no
good citizen who is not deeply interested in every one of
these questions, and the man who passes by any one of
them, saying this is no concern of mine, is not a good
citizen.

§ 229. There is nothing in the past history of the
world to justify the expectation that any immediate and
effectual remedy of these evils can be secured by the ap-
plication of social and moral forces, and we are forced
back upon the question how will the economist deal with
them. Our answer is, he can deal with them only in
negations, but those negations are very grave and im-
perative.

I. We must 7iot repeal or disregard the great funda-
mental law of the science^ that every man owns himself and
all which he produces. To over-ride that law under any
pretext, is not to relieve the poor, but to make everybody
poor and all poverty hopeless. That law is the gravi-
tation of the economic universe. Repeal it, and the
whole falls to pieces. Repeal it, and no man will work
except for the supply of immediately pressing want.
Why should a man work, when his neighbor who will not
work is as likely to enjoy the fruits of his labor as him-
self? Under such an order of things there can be no

3l6 ECONOMICS.

accumulation, no civilization. Just in proportion as you
weaken one's sense of security in the enjoyment of the
fruits of his industry, you diminish the stimulus to labor,
and weaken all the forces that impel society onward in a"
career of prosperity. In helping a few you bring all into
peril.

2, Another prohibition which science lays on us is,
that we must not remove from any man the fear of suffer-
ing want, as a consequence of neglecting labor and frugality.
We have shown in the tirst part of this treatise, that all
that originally induces any man to work, is the seen
necessity of working, that his wants may be supplied.
Take from any man or any class of men all sense of this
necessity, and they will cease both to work and to save.
We do not at all hesitate to say, that it is better that
some, nay that many should sutfer want, and even per-
ish, than that these two prohibitions should be disre-
garded. If the laws and the government cannot provide
relief for the poor without weakening the force of these
two fundamental principles of our science, it is far better
that they should abstain from any interference, and leave
the poor to the care of individual charity. If in our
efforts at public philanthropy, we weaken these great
natural forces, we make ten paupers in relieving one.
We take food from the mouth of him that has labored
for it, and give it to him that is living in idleness on the
fruits of other men's toil. Remove the hope of gain and
the fear of want from men's minds, and you have no other
motive by which you can induce men to exert their
powers either for their own or for the common good, and
all must go down together into the common wretchedness
of savage life. To insist on these two prohibitions is
nearly the whole which our science has to say of pauper-
ism.

§ 230. Still the ear of humanity cannot be entirely deaf

PAUPERISM. 317

to the cry of suffering, perishing poverty. It is to be hoped
provisions may be made for relieving the extreme neces-
sities of the poor, without any dangerous violation of
fundamental laws. The first principle which we shall
enunciate as the result of experience and philanthropic
inquiry is, that relief should be furnished if possible only
at establishments provided for the purpose. Experience
shows that relief granted at public expense to the poor at
their own homes or on the streets, is always demoralizing.
These establishments should always be provided with
the means of furnishing employment for all who are
aided, and all ^should be required to work to the full
extent of their ability. " By the sweat of thy face shalt
thou eat thy bread,'* is a divine law, and men must not
repeal it. Such houses for the relief of the poor may
with suitable management be made nearly self-supporting.
The greatest care should however always be taken,
not to throw the products of such establishments on the mar-
ket at rates 7vhich are below the price as determined by gen-
eral competition. It is quite ruinous to producers in any
line of industry, to be liable to be undersold by the pro-
ducts of the labor of those who are not working for a
living. It is the case of the needle-woman over again in
another form. It is better to support either paupers or
prisoners entirely at the public expense, than to ruin the
business of honest and industrious men by such an un-
natural competition. Indeed it is no competition. True
competition is a struggle for life on both sides. In this
case life is at stake on one side and not on the other.
For this reason it is always best to employ the labor of
paupers in producing those great staples, the demand
for which is so large, that their competition will produce
no appreciable eft'ect on price. Such a public provision
for the pour or the unfortunate should never be permitted
'•■) underbid independent individual labor.

3l8 ECONOMICS.

§ 231. The reason for confining the relief of the poor tc
public establishments is ^ that multitudes would apply for
and accept relief at their own houses or in begging from
door to door, who would never ask for it if they could
receive it only at the poor-house. We would be glad
to be considerate of the feelings of the poor. Christian
charity will find innumerable cases, in which the duty of
soothing and sparing the feelings of the sufferer is just
as imperative, as the duty of supplying food and clothing.
15ut we are speaking of public provisions for the relief
of paupers, and in constructing a system for this purpose,
the poor must consent and be content to receive aid in
ways consistent with the greatest good of the whole,
and not in disregard of it. Society must not make such
provisions for the relief of the poor, as to take from
poverty all its terrors. The sufferings of poverty are
nature's penalty for idleness, and no community has any
right to repeal that penalty. Out-door relief, that is re-
lief of the poor at their own homes removes all limits,
and speedily introduces into practice the vicious prin-
ciple, that every necessitous person, no matter how his
necessity may have been caused, has a right to be re-
lieved. This is the fundamental principle of The Eng:
lish Poor Law, and it is admitted by economists and
philanthropists to have fearfully extended the area of
English pauperism, and to have produced a state of
things which sometimes occasions serious apprehension
for the future of English society. Let the principle once
be established, that every one who is really necessitous
has a right to be relieved at public expense, and may
obtain the relief he needs by simply making his neces-
sities known, and disastrous consequences are inevita-
ble. As soon as the times are hard and the procuring
of the necessaries of life becomes difficult, application
will at once be made for aid at the public expense.

PAUPERISM. '319

This application once made and granted will be repeated
and urged as long and as often as the difficulty of living
continues. Having found a source of supply easier than
industry and frugality, a man will cease to depend on
these or to practice them, and his demands on the pub-
lic treasury will be more frequent, larger in amount, and
more urgent. Soon he is a pauper for life with his fam-
ily. If there had been no relief short of the poor-house,
he would have increased his efforts, and gotten by the
hard place without ever becoming a pauper at all.

The influence of every such rase is very bad upon
neighbors, whose circumstances are about equally hard.
Seeing one neighbor relieved at public expense they in-
quire why they should not have such help as well as he,
especially seeing that their labor is taxed for his supr-
port. One such seed of pauperism dropped in a neigh-
borhood soon yields a large harvest. We do not desire
to swell this volume with the statistics of English pauper-
ism. But we advise every one to look into them and
take warning. English pauperism sometimes puts on
aspects so grave, that it seems to threaten to engulf
the wealth of England, great as it is. The subject is re-
garded with solem.n apprehension by all thoughtful Eng-
lishmen. English poor relief has not only tended to
increase the number of paupers, but it has actually in-
creased it on a vast scale. It is an experiment which
ought not to be lost sight of in this country. It is bet-
ter for all, rich and poor, that some should perish of
want, than that such a cancer should fasten itself upon
the nation.

This view of the subject assumes peculiar importance
and seriousness in a country which is governed by uni-
versal suffrage. In many of our states, perhaps in all, a
man does not cease to be a voter by becoming a pauper.
He not only contributes nothing to the support of the

320 ECONOMICS.

government, but his daily bread is drawn by taxation
from the fruits of other men's labor ; yet his vote has
just as much weight as that of the most industrious,
frugal and thrifty citizen. He votes the appropriation
of other men's earnings to his own maintenance. We
suspect any intelligent foreigner, on first becoming ac-
quainted with this fact, would regard it with astonish-
ment. It is humiliating to acknowledge, that in some
states at least our poor laws are so constructed, as to
admit of and favor the distribution of bribes to the voter
under pretense of relieving the necessitous. It cannot
be denied, that there are some cases in which municipal
authorities incur the just suspicion of administering the
poor laws in this manner, for the purpose of securing
their own reelection. It needs no prophet to foretell, that
under poor laws so constructed and administered, pau
perism will be likely to increase with alarming rapidity.
This evil has not as yet, in most parts of our country,
grown to alarming dimensions. But principles have
found their way into our legislation, which are produc-
ing serious inconvenience in some localities, and are
fitted to awaken grave apprehension as to what may
happen, when our population shall become dense and
the means of subsistence difficult to be obtained. The
law should surely be so constructed, as to set no tempta-
tion before public officers to encourage pauperism by
bribing voters, and the time to arrest such an evil is
while it is yet in its infancy.

§ 232. JEstablishments for the relief of the poor should
be public reformatories. Vice is incomparably the most
fruitful of all the causes of poverty. So soon as any one
throws himself upon the public for relief, no time should
be lost in resorting to all known appliances tending to
moral reformation and self-government. No one should
continue to receive either public or private charity

PAUPERISM, 321

while persisting in the practice of those vices and self-
indulgences which have reduced him to poverty. A
great deal of poverty is caused by indulgences of the ap-
petites, which are so common as hardly to be considered
criminal. Many a man who has spent his life in compara-
tive plenty, will find on examination, that if he had added
to his necessary expenses the unnecessary expense of
tobacco, he must have spent his life on the very verge of
want. Houses for the relief of the poor should be so con-
ducted, as to cultivate in the highest degree habits and
principles of frugal self-government.

Nor is this enough. The men who are obviously living
such lives of vicious self-indulgence as must necessarily re-
duce them and their families to want, should be arrested in
the midst of their career, and placed at once tinder such re-
straints as will save the living of their families from
further waste, and under such reformatory influences as
may tend to restore them to the paths of virtue. The
most common and perhaps the most destructive of all
the vices which are multiplying and aggravating pauper-
ism among us is drunkenness. For half a century the
best portion of American society has been well aware of
the prevalence and destructive character of this vice,
especially of its tendency to increase the amount of hope-
less povert}'. Many plans have been proposed and
many experiments made, to restrain and eradicate the
evil. These efforts have certainly not been without
some success, but it must be admitted that the degree
of success which has attended them has fallen far short
of the wishes and even of the hopes of the philanthropist.
We suggest that in one very important particular, they
have been fundamentally defective. They have not held
the inebriate himself to a due responsibility for the con-
sequences of his life. We have no wish to screen from
censure the men who obtain their own Jiving by know-
14*

32 2 ECONOMICS.

ingly selling to their neighbors the means of ruining
their families and bringing destruction on themselves.
But after all the primary responsibility is on the inebriate
himself No community should allow its members to
waste their earnings and destroy their own power to
labor by lives of vicious sensuality, and then throw their
families and perhaps at last the miserable remnant of
themselves upon public or private charity for support.
The men who are living such lives should be arrested in
them at once by the friendly hand of society, pronounced
by a legal process incapable of self-care, and placed
under a conservator with power to protect and restrain
them, save their property from waste and apply it for the
support of their families. Any prohibitory legislation
which treats the inebriate as a mere victim to be pitied,
and throws the whole responsibility of the evil upon the
seller, is radically defective. A community that allows
inebriates to go unrestrained, till they have reduced
themselves and their families to pauperism, should bear
the burden of supporting them without a murmur. We
place the men who have become insane through the in-
evitable providence of God under effectual restraint, so
that they may neither harm themselves nor others.
How much more then should we impose restraints no
less effectual, upon persons who are almost daily making
themselves insane, objects of disgust and terror to the
families they ought to protect.

§ 233. The aspect of the subject just presented sug-
gests another, the consideration of which must not be
omitted. Society often, by its toleration of vices which
it ought to prohibit, by lending its countenance to prac-
tices on which it ought to frown, becomes responsible for
their existence, and incurs a moral obligation to relieve the
poverty which they occasion, even though in affording such
relief it violates public policy. If the community deals

PAUPERISM. 323

with a traffic in spirituous liquors or with incitements to
any other vice by legislation that tends to countenance
and encourage it, instead of discountenancing and re-
straining it, that community becomes thereby morally
bound to support the widows and orphans that have thus
been reduced to poverty. Let every such traffic receive
from the community the frown of indignant rebuke, and
feel the hand of rigorous restraint and repression. Ex-
terminate such a traffic if you can ; if you cannot, restrain
it as much as possible.

This consideration has a special force in relation to
all those systems of legislation which construct society
on a false principle, and place large classes of men in
conditions so disadvantageous, as necessarily to reduce
them to hereditary pauperism. We regard for example
the English system for the relief of the poor, with ex-
treme disapprobation, as dangerous to all her future.
But we should grieve to see provisions for the relief of
the poor abolished, while the agricultural laborer remains
in his present unfavorable condition. We should say,
abolish your poor rate if you must, but in the name of
humanity abolish your land monopoly at the same time.
If the land monopoly is to be retained and perpetuated,
surely those interested in its perpetuity should not refuse
to support the agricultural poor.

Before leaving this painful subject we must remind
the reader, that the mere economist cannot deal with it
in its totality. Its deepest roots are not in our science,
but in the sister science of ethics. Men are pressed
down into the morasses of society far more by moral
than by economic causes. And even when some mal-
adjustment of the economies of society is the primary
cause of the evil, the cure must still be chiefly moral.
Adjust and re-adjust our economic machinery as we mr.y,
it is still morality that makes and unmakes humanity.

^24 ECONOMICS.

CHAPTER XVI.

Wasteful Expenditure.

§ 234. It has already been remarked, that the laws
which regulate the application of the products of indus-
try to their appropriate uses belong rather to the depart-
ment of ethics than of economics. Yet there are two topics
the consideration of which perhaps more properly belongs
to the moralist than to the economist, but which are so
related to the whole economic system, and so vitally im
portant to it, that we cannot with propriety neglect all
consideration of them. They will therefore form the
subjects of the two concluding chapters of this treatise.

§ 235. From what has already been said it is obvious,
that all the uses to which the products of human labor
can be applied are divisible into two classes. One class is
composed of all which is expended for the necessaries
of life. This class we shall call necessary expenditure.
The other clas:s consists of all which is devoted to the
gratification of desires, the satisfaction of which is not
necessary to the preservation of life and health and the
continued power to labor, and the preservation of the
race. This class we shall call disposable expenditure.
All expenditure of the first class is so determined and
fixed by the natural laws of life and health, that it is little
dependent on human intelligence or choice. There is
indeed opportunity for the exercise of much wisdom in
the selection of materials, and of much skill in preparing
them for use. But food, clothing and shelter must be
enjoyed alike by rich and poor, noble and peasant. The
rich may incur much expense in the preparation of neces-
saries which the poor cannot afford, but the necessities

WASTEFUL EXPENDITURE. 325

of the case are universal and poverty itself is no ex-
emption. But in the use which is made of that portion
of the products of labor which we have called dispos-
able, men differ very widely, and on the use which they
make of them the prosperity and happiness of society
very largely depend.

§ 236. Almost immediately after the strictly necessary
wants of men are supplied, we find in almost all com-
munities a vast demand for a few articles of diet, which
certainly are not 7iecessaries of life, and of which some ap-
pear to be in ordinary circumstances injurious. They do
not minister to nutrition, but produce their effect on
comfort and happiness, by operating directly upon the
nervous system, by exciting, tranquilizing and narcotic
influences. The demand for them, in a great number of
cases, is so imperative and urgent, that for the sake of
obtaining them men will often sacrifice the food and
clothing necessary for themselves and their families.
The proportion of all the results of human labor, in all
the civilized countries of the world, which is expended
for spirituous liquors, tobacco, tea, coffee and opium almost
surpasses belief It is hard for science to demonstrate
what beneficial influence they exert on the human econ-
omy. Some of them are certainly employed by great
numbers in such a manner as to be destructive of reputa-
tion, impair health, shorten life, render men incapable of
labor or self control, waste property and wreck the whole
man. These sad phenomena are exhibited not in a few
occasional instances, but in great numbers, in all classes
of society and in all the conditions of life. Yet the ex-
penditure of our country for these articles nearly ap-
proaches if it does not equal or exceed the cost of bread
or necessary clothing. Those substances belonging to
this class which are most in demand, and most open to
the charge of being far more injurious than beneficial

326 ECONOMICS.

are, under our present revenue system, subjected to a tax
which, if enforced against almost'any other article not a
necessary of life, would be prohibitory, without any
perceptible diminution of the demand. Many of the
most enlightened, virtuous and philanthropic men among
us believe, that at least the traffic in intoxicating liquors
's destructive of public health and morals, and ought to
be suppressed as a public nuisance. Yet under all these
discouragements and burdens, the traffic is openly pur-
sued, and the consumption seems to be increasing with
all its evil consequences.

§ 237. It is not our business to deal with the ques-
tion of the relation of these substances to the human
constitution, and to the laws of life and health. That
question belongs to the chemist, the physiologist and the
physician. But the existence of an expenditure so vast,
and in some of its aspects so destructive, yi;r which science
can render so little account, and funiish so little Justifica-
tion, is not creditable to our civilization. The same re-
mark may be made with very litde modification in rela-
tion to the whole civilized world. Civilized men should
surely act more intelligently and reasonably in relation
to a subject of such importance. U intoxicating drinks
render some service to the human constitution, which
justifies the enormous expense incurred by the use of
them, and the risks encountered, certainly science should
be able to demonstrate it, and relieve the conscience of
the nation, which evidently at present is ill at ease on
the subject. If these substances, especially intoxicating
drinks, have no such beneficial relation, the whole en-
ergy of a civilized people should be exerted, to arrest so
wasteful and destructive an expenditure. If we can place
any reliance on statistics, a very few years of the con-
sumption of intoxicating drinks alone at the present rate,
will equal the whole cost of the four years war of the

WASTEFUL EXPENDITURE. 327

great rebellion. We think this a field of inquiry, in
which scientific research should be prosecuted with ut-
most earnestness. Whence this craving for stimulus?
Whence this appetite, not for food, but for destruction?
The life we are living as a nation in relation to this mat-
ter, and to a great extent the same is true of other civ-
ilized nations, is more brutal than human. We are obey-
ing ihe blind impulse of appetite instead of being guided
by enlightened reason.

§ 238. There is another branch of expenditure, which,
though less destructive, is scarcely less wasteful or more
rational. We refer to the passion for excessive personal
oniamentation. It has already been clearly shown, that
a true economy enters no protest against the love of the
beautiful. The resources of the world and the powers
of man are evidently so adjusted to human want, that
ample provision has been made for the ornamental as
well as for the necessary ; and the latter must be culti-
vated or a large amount of human power must be quite
useless to mankind. Beauty is a real good, and humanity
fitly adorned is a far nobler thing than if unadorned.

But the methods in which the ornamental is pursued
and applied deserve attention. Every one knows that
in the real world around us, the use of ornament is not reg-
ulated by any permanent canons of beauty, and that in this
whole department fashion rules with an undisputed
supremac}'. We are not going to attempt a scientific
definition of fashion, yet it is obvious that a certain
capricious thing known by that name has, in respect to
ail that is designed to be ornamental, more influence
than reason. It is our duty here as everywhere to hear
the voices of nature, and there are teachings of nature in
this department, which lead to the regulation of the
ornamental on principles which perhaps we could not
have anticipated. There is a natural taste for rank.

32 S ECONOMICS.

Society tends to arrange itself in grades one above an-
other. Against the aristocracy which intrenches itself
in legislation, all Americans protest. But after all we
are not less devoted to the conventional aristocracy of
custom than other peoples, and the classes esteemed the
higher are not less jealous than other aristocracies of the
peculiar privileges and honors which they claim for them-
selves. They cannot be, in such a society as ours,
permanent, but are as changing as drifting masses of
sand. Men go up to-day and down to-morrow, but this
makes them by no means less desirous to render the
boundary lines of the high rank to which they claim to
belong as clearly drawn as possible.

§ 239. In this social rivalry there is a constant en-
deavor so to employ personal ornaynent^ as to make it dis-
tinctive of that rank in which one claims a place. The
style of dress and equipage which is for the time being
the badge of the highest social position, is eagerly emu-
lated by all that are below. No costliness is spared by
the prosperous merchant, mechanic or farmer, to array
his household, especially his wife and daughters, in the
style that is recognized as the badge of high society. In
a short time any style that is thus emulated will cease to
be a badge of distinction ; it will have descended to the
multitude, and the leaders of fashion must invent some
new mark of distinction. This soon shares the same fate.
Thus new costumes of gentility follow each other almost
with the rapidity and capriciousnessof the changes of the
wind, and a burden of expense is brought upon the com-
munity almost unlimited. The love of the beautiful is to
a great extent supplanted by the love of the fashionable,
and the expense of living is increased beyond all reason-
able limits.

§ 240. This cause of the expensiveness of living
operates even more powerfully in a democratic community

WASTEFUL EXPENDITURE. 329

than any other. In aristocratic communities, the social
pyramid is divided into portions quite definitely distin-
guished from each other by parallel planes, and those in
the lower strata accept rather contentedly the social
position assigned them, and do not so much emulate the
style of ornamentation which is the badge of a rank
higher than their own. Rivalship in dress is in some
degree limited to those in the same rank. But in a
democratic society no such recognized social planes
exist. Those in every social condition emulate, to the
best of their ability, the external symbols of the highest
gentility, and will spare no expense in their power to
incur, to attain to them. An element of expensiveness
is thus introduced into the whole life of a democratic
people, more burdensome to many families than the
entire cost of necessary food and clothing, far more bur-
densome than the taxation imposed on us by our national
debt. When we were bearing the burden of the income
tax, exemption was made, even in our time of extreme
necessity, for all whose income did not exceed six hun-
dred dollars. But this is a tax that knows no exemption.
It is levied on a father's and a mother s pride in the
social position of their daughters, and is therefore sure
to be paid, even at the expense of bankruptcy at no dis-
tant day, and not seldom of a widowhood and orphanage
of uncomforted want and poverty. This picture will be
found to be true to the life in instances sadly numerous.
If we are to have, at no distant day, a mass of pauperism
as fearfully vast and hopeless as older civilized countries,
the cause of which we are speaking will bear a most im-
portant part in bringing it upon us, and in pressing down
our own sons and daughters into it.

We are not denouncing fashion. We have adinitted
ihut it grows out of certain principles in human nature,
which cannot be eliminated. But it is well for us all to be

330 ECONOMICS.

aware of the destructive excesses and perversions to which
those principles are liable, and to be put on our guard
against them. It is not beneath the dignity of science,
to point out the influence of this cause on the expendi-
tures of a community, and to show how much safer guide
to true prosperity is found in the cultivation of a taste
for the really beautiful, the fittingly ornamental, than in
following the ever shifting caprices of fashion. Is the
elevation of a free community to this nobler standard of
life a thing to be despaired oU

This subject is worthy of grave consideration, not
only in the homes of those whose resources are scanty,
but in the mansions of the rich. The latter may be able
to bear the exactions of fashion without being distressed
by them. But they might easily learn, that these fash-
ionable follies render their lives much less dignified and
honored than they might be, and that the sums that
could easily be redeemed from this waste could be de-
voted to the accomplishment of objects which would
afford them much more rational and enduring happiness.
Perhaps they are not aware of the profound pleasure
which many cultivated persons experience in visiting an
attractive home of wealth, where good taste has dictated
everything, fashion nothing. If such persons will break
away from this bondage, they will not only have a de-
lightful sense of freedom, but they will do a great deal
to protect those in less favored conditions of life from
the destructive fascination of fashionable folly. If the
canons of taste instead of the canons of fashion can
once make their authority respected in the homes of the
wealthy, there is hope we may yet be a truly economical
people.

§ 241. The prevalence of this unwise style of expend-
iture is the more to be deplored, on account of \X?> power-
ful tendency to prevent the formation 0/ a taste for the really

WASTEFUL EXPENDITURE. 33!

'leautiful. There are a great many homes in which
fashion exacts an untold amount of costliness, where
there is yet a sad lack of almost everything that is really
beautiful, or even convenient and comfortable. Costly
gentility in public and before the world, the merest hum-
drum in their ordinary routine in private, make up life.
Such a tendency is unfavorably affecting our national
character. Of course expenditure imposes its law on
production. Labor and capital can only be made to
yield profit, when they are employed in producing what
the people desire to purchase. If the people are dis-
posed to expend their resources chiefly upon the latest
fantastic productions of the tailor, the milliner and the
dressmaker, little will be left for the genuine artist.
True art must be expected to languish very much in
proportion as the arts which fashion patronizes are en-
couraged and rewarded. The question has been much
discussed, whether the fine arts are likely to flourish in
our country. That must depend, not upon our political
institutions, but on the dominant ideas and prevailing
tastes of our people. The character of our people is to
make this country great, or to belittle it. Art did pre-
vail in democratic Athens more than among any other
people on earth, and prevailed most when she was most
democratic. If a democratic people loves beauty and
has a true taste for it. cities and villages and rural homes
will be full of the productions of true art. But if it loves
nervous stimulation and follows blindly the caprices of
fashion, its public gatherings may be full of meretri-
cious magnificence, but both its public and its private
places will ht dolefully barren of all the grandest pro-
ductions of- genius.

§ 242. To give the law of competition free course is
to make the people the arbiters of their own destiny. Men
who are really free to buy and to sell, to employ and to

332 ECONOMICS.

be employed, to own land and to sell land, will also be
free to expend their disposable resources according to
their own tastes ; and by their folly to make themselves
mean, or by their wisdom to make themselves great and
renowned in the earih. We have unequaled advantages
for accumulating wealth, and unlimited freedom in ex-
pending it. By the very abundance of our resources and
the freedom which we enjoy, it is placed in our own
hands to become the greatest or the meanest of nations.
That momentous question turns on the single hinge of
private expenditure. If our prevailing tastes are low,
vulgar, and sensual, the world will minister to our grati-
fication and our ruin. If our tastes are pure and rational
and wise, the world will no less contribute to our gratifi-
cation, and to our growth in all that is noblest in man-
hood, and worthiest of our privileges and our freedom.

§ 243. The question bow men expend their power to
labor, is no less interesting, than the use they make of its
results. The common human patrimony is equally af-
fected by the waste or misapplication of the one or the
other. It has been shown in its proper place, that the
increase of human i^ower by the use of labor-saving ma-
chinery does not, as might have been anticipated, minister
to idleness, by dispensing with the necessity of labor, but
on the contrary greatly increases the demand for it in
every department But while this is true, it does never-
theless tend to the rapid increase of capital, and by increas-
ing capital increases the number of those who are not
compelled to labor by any necessity. Will it not then di-
minish the amount of labor actually performed .-' That it
does to some extent relieve the rich from the pressure of
necessity to work is certainly true. But if the rich man
himself would remain rich, his life must be pretty indus-
triously employed in managing his estate, with a view to
its preservation, enlargement and right use. It must

WASTEFUL EXPENDITURE. 333

however be admitted, that there are not a few deriving
their subsistence from the incomes of the rich, who do
spend aimless lives, devoted only to the enjoyment of
each gratification of desire which for the present mo-
ment seems most attractive. In just so far as the pos-
session of wealth induces those who subsist by it to lead
such lives, it is ruinous in its influence. It makes those
lives worthless, which it was intended to render more
efficient and useful. The conception with which we
began this treatise, that every human being is a laborer,
is accordant with the only true manhood. He who in
the enjoyment of wealth leads a life without any aim to
achieve something worth living for, falls out of the true
human life into the life of an irrational animal. His
wealth has deprived him of his manhood. All who are
entrusted with riches should use their utmost endeavor,
that they be not thus perverted to the injury of any who
subsist by them. There are innumerable ends which a
rich man may pursue, which greatly ennoble and adorn
life, and yield an abundant reward. It is the privilege
of those who are relieved from the necessity of toil, to
aim at and achieve results which are beyond the reach
of the utmost endeavors of those who must labor for
their daily bread. That is a very unfortunate rich man,
who on being relieved from the necessity of toiling for
subsistence, knows not how to employ himself in any-
thing which will be of service to mankind.

334 ECONOMICS.

CHAPTER XVIL

Public Liberality.

§ 244. In the view of many, this topic is entirely out-
side of our science. Several recent writers have accepted
the definition of the science proposed by Archbishop
Whately, — The Science of Exchange, — and have thus
reduced the science to a mere "quid pro quo." Our
readers are already well aware that we by no means ac-
cept this definition. We believe that the word wealth
may be so defined as to be accurately expressive of the
whole group of phenomena of which the economist is to
treat, and comprehensive of all the uses of the thing
defined. In this view of the case all the original desires
of man which impel him to labor are natural forces with
which the science is concerned.

One of these is the love of social prosperity and well-
being. It is one of the noblest impulses of humanity, and
an exceedingly important element in the economic sys-
tem of the present age. Man's power to render the
universe helpful to human well being by the exertion of
his labor was designed to minister to the gratification of
every natural desire of the human soul. Man may not only
exert his powers to procure what he desires by exchange,
but for the production of beauty which all may enjoy, and
none can appropriate, and for that perfected civilization
which is the common inheritance of mankind.

There are common watits of cojnmunities, ivhich the desire
of gain and the direct expectation of profits will never suf-
ficiently provide for. Men will build machines, railways
and ocean steamers under the influence of the hope of
gain, and they will realize the profits the hope of which

PUBLIC LIBERALITY. 335

Stimulated them to these undertakings. But (here are
some of the very highest wants of men of whicli they
never become in masses sufficiently conscious to provide
for them on principles of exchange. Of this character
are hospitals for the sick and suffering stranger or un-
fortunate, monuments appropriately to record the great
events of a nation's history, and to honor the memory
of the founders of states, the discoverers of science and
art, and the benefactors of their race, colleges and uni-
versities for the highest culture in all the various depart-
ments of knowledge, and libraries in which the thought
and wisdom of the ages shall be garnered up for the in-
struction of successive generations, and made accessible
to all the curious and the studious.

Governmeftts cannot he relied on to supply these ivants
of society. In no country has the government, as a
general rule and in the long course of its history, cm-
braced within itself the highest thought and the most
perfect culture of the successive generations. Force, not
thought or argument is the weapon of a government, and
it can therefore never be relied on for quickly and keenly
appreciating those moral and spiritual forces, which are
most of all potent and beneficent in the formation of the
character of a people ; and of course it cannot safely be
trusted, promptly and efficiently to apply such forces.
The sword is in all ages the emblem of civil power, and
an agency adapted to wield the sword with effect can
hardly be expected to be eminently fitted for the intel-
lectual, moral and spiritual culture of society. Certainly
the experience of the ages has shown that it is not.
Here then is a wide field for the exertion of beneficent
influence on all the future of society, which must always
invite individual effort. Here are most important wants
of communities, nations and the race that can be sup-
plied only by individual liberality.

336 ECONOMICS.

§ 245. It has been shown in the foregoing treatise,
that with the increase of capital, its rate of profit con-
stantly declines. With this decline the motive to ac-
cumulation is di:ninished also, and some have their ap-
prehensions, that in the wealthier countries of the world,
this motive may become sufficiently enfeebled to arrest
the increase of capital. Should the whole civilized world
approach such a plethora of capital, there would be a
liability to rash and hazardous speculation, in which
much capital would be wasted, and the rate of profit of
what remained would be thereby raised. But the same
state of things would also be favorable to the investment
of capitalin enterprises of public liberality without any direct
expectation of profit in return. When capital is super-
abundant and profits are small, it may be expected that
the owners of capital will incline more toward the side
of prodigality than of frugality. All their desires are
likely to be more freely gratified. But if the moral cul-
ture of society has not been neglected, it is to be hoped
that all would not be swept along on this current of self-
indulgent folly. Many we might reasonably hope would
gratify the highest impulses of our nature in the enjoy-
ment of their wealth, rather than the lowest and most
debased. As a true civilization attains to a more abun-
dant supply of capital, it may be expected, that as there
will be increased ability, so there will be increased dis-
position, to perform acts of generous liberality; and that
men will find more pleasure in expending their accumu-
lations for the benefit of mankind, than for sensual or
even esthetic gratifications.

Men of wealth can never afford entirely to ficglect such
outlays of capital, even if they have regard only to their
highest prosperity in trade. The sound and healthy con-
dition of trade always depends much upon the intelli-
gence of the community, and especially of men of lead-

PUBLIC LIBERALITY. 337

ing influence in it. Men of wealth are in their own
private affairs deeply interested in the higher education —
that education which forms the character of the leaders
of society. For example the doctrines of currency and
freedom of exchange which are defended in this treatise
are either true or false. If they are false it is exceed-
ingly desirable to all the capital of the country, that our
schools for the higher education should not favor them,
nor give them currency among the leading minds of the
nation. If they are false, science can demonstrate their
fallacy, and effectually guard our young men that are
growing into public influence from adopting them. But
if they are true, it is more important than can well be ex-
pressed, that all nations as well as our own people should
as rapidly as possible be persuaded to adopt such free-
dom of exchange in all things, and between the inhabi
tants of all countries, as will give to the labor and capi
tal of the world all the advantages to which they are
naturally entitled. According as men of wealth believe
these doctrines to be true or fiilse, they should vie with
each other, in securing for the hopeful young men of
our country, a true knowledge of the scientific princi-
ples which underlie all production and all exchange of
values. It is the present misfortune of our country, that
many of our public men have never considered these
matters at all, and are discharging public functions of the
gravest importance to all the interests of trade, without
having received any education in the scieniitic principles
which underlie all such questions. This cannot be a
healthy condition of affairs. It is impossible in such a
country as ours to detach individual prosperity from pub-
lic intelligence.

§ 246. Apart however from all considerations of per-
sonal interest, it is ^i that the hope of achieving something
for the lasting benefit of one's country and of mankind
15

338 ECONOMICS.

should be a powerful stimulus to art industrious and frugal
life. The man who seeks to obtain, by the use which he
makes of wealth, the exalted pleasures of beneficence,
will insure for himself, in addition to that deference which
wealth itself is apt to inspire, that affectionate reverence
while living, and that grateful remembrance in after
years, which men are accustomed to accord to eminent
wisdom and goodness.

It has been shown elsewhere that by the very law of
ownership, the rich are made the treasurers of a portion of
the common patrimony of the race. Of this relationship
men are apt to be entirely unconscious, and to live just
as they would if they only were interested in the capital
which they control. Their lives would be much wiser
and happier if they would recognize this fiduciary relation
in which they stand to the rest of the world, and seek to
promote, by wisely directed effort, that general well-
being to which they cannot help ministering by their
efforts to increase their own wealth. They would thus
become public benefactors, as well by intelligent purpose
as by the necessity which is imposed on them by the law
of ownership. We cannot forbear the suggestion, that
when capitalists show themselves to be in spirit and in-
tention what the very structure of the economic system
compels them to be, they will accomplish much towards
putting an end to that dangerous feud between capital
and labor, which is awakening so much just apprehension
in the minds of all thoughtful men. When all men see
that capital is, not only by a necessary law of nature,
but with voluntary intention and purpose, held in trust
for the general good, the laborer and his employer will
feel themselves to be in fraternal and not in hostile rela-
tions to each other. The employer will feel that the
laborer is a natural partner in the business in which
.hey are co-operating, and will gladly recognize his right-

PUBLIC LIBERALITY.

339

ful claim to considerate regard. The laborer on his part
will feel that he has an interest in all the products he is
helping to create. We do not believe this unnatural and
ruinous conflict ever can be terminated, except on such
terms as these. All must come to recognize that com-
munity of interest which has been shown to pervade the
economies of the world.

§ 247. Great care must be taken that such acts of
public liberality should be performed in such a manner
and under such conditions, as to violate no economic law.
For this reason no public institution of charity or educa-
tion should b€ permitted to hold lands by an inalienable
tenure. We are aware that the great universities of Eng-
land largely owe their present magnificent endowments
to the fact, that centuries ago they were endowed with
lands which they could not alienate, the rent of which
has steadily increased with the progress of the nation in
wealth and population. It may be asked why we should
not provide our public institutions in the same mannei
with permanent and ever increasing resources. We
answer, because such endowments would interfere with
that free trade in land which is most fundamental to
American, and it seems to us to all truly free society.
One great obstacle which stands in the way of the speedy
abolition of the English land monopoly will be found to
lie in the vast landed estates held by great, permanent
and noble institutions of learning and beneficence. All
those who are most intimately related to those institu-
tions would be apt vehemently to resist the change.
But the permanent prosperity and beneficent power of
those institutions would not be really at stake ; to us on
the contrary it seems, that the change would be very
happy in its influence on them, so far as they are really
rendering important service to the society. Endow-
ments in land held by inalienable tenure, acquired while

340 ECONOMICS.

society was j'et in its infancy render such institutions in-
dependent of the thought and progress of each living
generation, and too often blindly conservative of an
antiquated and dead past. Public funds will always pro-
duce greater present income at interest, than in real es-
tate. If therefore all real estate held by such institutions
is made alienable at the discretion of trustees, they will
be under a strong inducement to dispose of it in order
to obtain a greater revenue available for immediate uses.
Thus the freedom of exchange will not be interfered
with, and the immediate productiveness of the fund will
be increased. But the farther increase of the fund from
the rise of real estate will be arrested, and for its grow-
ing necessities as wealth and population increase, the
institution will be thrown upon the liberality of each suc-
ceeding generation. As capital is rapidly increasing, if
the institution is performing well its high function, the
experience of this country shows, that that liberality will
be adequate to all exigencies as they arise. Institutions
founded on such a basis may always be expected to
stand abreast, not of the whims of capricious faction, but
of the sound thought and healthful progress of a living
civilization. Funds thus invested in public institutions
of beneficence are not withdrawn from the active capital
of the future. It makes no difference to one who wishes
to borrow money, whether he obtains it from a private
capitalist, a bank directory, or the trustees of some fund
devoted to an object of public munificence. Such funds
are far more likely to be preserved from loss or waste
than they would be if transmitted to uncertain heirs, and
are always available for (he practical use of the age, by
the payment of the current rate of interest. Institutions
thus endowed will represent the highest culiure of the
present, as they should do, if they are to educate the
leading minds of the generation that is to succeed.

PUBLIC LIBERALITY. 34I

They will still be conservative rather than radical in
their tastes and tendencies ; but they will not be rock-
bound islands in the stream of progress, which the cur-
rent has no power to shake or to wear away, bringing
the cultured intellect of each passing age into hopeless
and perpetual conflict with its living practical thought.

§ 248. A government so purely democratic as ours
will always represent the average thought of the nation^ and
never its highest and most cultured thought. Yet it is
evidently most desirable, that such a nation should have
an efficient system of culture, representing its highest
thought, and controlled by it. Such a system it can
hardly be expected to have under purely popular control.
Our own country is at the present time and in its past
history able to furnish ample illustration of this. It is
for the most part through the liberality of the wealthy, that
such a system of liberal culture has been originated and
sustained. The most cultivated intellect of the nation,
cooperating with its liberal capitalists has a duty to per-
form, and always will have, which cannot be neglected
without imminent peril. Thus far in our history such an
alliance between the intellect and the capital of the
country has always existed, and has produced results
most eminently satisfactory. They seek no alliance with
the state, they ask no privileges from the state, they
desire to lay no burden upon the taxpayer ; they only
ask freedom of opportunity, to found and to perpetuate
the highest civilization, by the exertion of intellectual
and moral forces only. It is greatly to the honor of our
tree institutions, that the public liberality of individuals
acting only on the voluntary principle has laid founda-
tions so ample, and reared superstructures so creditable
to our civilization. Nor is there any reason to appre-
hend, that the voluntary principle will be inadequate to
the much larger necessities of the future.

342 ECONOMICS.

§ 249. In another point of view this subject seems
invested with very important relations to interests whicfl
are directly economic. It is obvious to any one, that
in such a country as ours, there is a liability that the ac-
cumulation of capital may be prematurely arrested. We
have spoken freely in the foregoing chapters of land
monopoly, and have very earnestly deprecated it. We
have no intentions of retracting or modifying anything
which we have maintained on that subject. But we wish
to deal fairly with the whole question. There is but one
known way in which the name and honors of a family
can be handed down through successive generations.
It must be done, if done at all, through a landed estate,
which descends inalienably in the family and bears its
name. When such facilities are afforded by the laws for
perpetuating a great family interest, men are induced to
accumulate wealth not only for themselves and their
children, but for their remote posterity. Under such
circumstances there will always be a strong motive to
acquire for the purpose of founding and improving a
family estate, and adorning a family mansion. But
under such a law of descent as ours, no such motive can
exist. One may lay up for his children, but there can be
little hope that any estate which he can accumulate will
reach his distant posterity. The temptation therefore is
to live more for the present and less for the future. It
cannot be denied, that one of the dangers of American
society is, that each generation will live for itself alone, and
that we shall be characterized alike, by the greed and
rapidity of our acquisition, and the profusion of our ex-
penditure. We seriously ask the thoughtful, if there are
no indications of the development of such a national
character. Have we not some real reason to apprehend a
growth of sensuality and fashionable ostentation, limited
only by our success in the prosecution of gain ?

PU1;LIC LIBEIiALITY. 343

It is then eminently desirable on grounds purely eco-
nomic, that in the absence of the possibility of men's
calling their lands by their own names, they should seek
to perpetuate their names by the permanent public institu-
tions of learning arid philanthropy which they found and
foster. The names of Yale and Harvard and Phillips
are not likely to be forgotten. It is also not improba-
ble that foundations which have been laid in the great
interior of our country may confer a like honor on their
founders. A prevailing disposition among the capital-
ists of this country to employ their capital for such pur-
poses would do much to arrest these tendencies towards
wasteful prodigality, to raise families above a life of
sensuality and fantastic display, and would redeem from
waste a great amount of capital to be securely held at
the current rate of interest, and just as available to
assist and reward labor, as though it was still owned by
a private capitalist. This subject is worthy of the most
serious attention, on account of its economic relations,
over and above all its relations to the higher culture.
It is the natural and proper substitute for that ambition
of family, which can only be gratified by the aristocratic
tenure of land. It is by far the nobler sentiment of the
two, it is in perfect harmony with democratic institu-
tions, and can be freely indulged without any interfer-
ence with the helpfulness of capital to labor, or with
that perfect freedom of exchange, which must sooner or
later pervade the economies of the world. All capital
thus disposed of will fall into a succession in which
it will probably have the best chance that can be de-
vised of being protected from waste and loss, and pre-
served for the distant future. In presenting this topic,
we therefore believe that we have not at all overstepped
the limits prescribed to a grave scientific treatise.

Y

m

UC SOUTHERN REGIONAL LIBRARY FACILITY

v,*-»;