In a society composed of a natural gradation of ranks, some must be poor; i.e. have nothing more than the means of present subsistence.
Any suspension of these means of subsistence, whether through disaster, sickness, or decrepitude, converts the poor into the indigent.
Since indigence occasions misery, and disposes to vice, the welfare of society requires the greatest possible reduction of the number of the indigent.
Charity, public and private, or an arbitrary distribution of the subsistence-fund, has hitherto failed to effect this object; the proportion of the indigent to the rest of the population having increased from age to age.
This is not surprising, since an arbitrary distribution of the subsistence-fund, besides rendering consumption unproductive, and encouraging a multiplication of consumers, does not meet the difficulty arising from the disproportion of numbers to the means of subsistence.
The small unproductive consumption occasioned by the relief of sudden accidents and rare infirmities is necessary, and may be justifiably provided for by charity, since such charity does not tend to the increase of numbers; but, with this exception, all arbitrary distribution of the necessaries of life is injurious to society, whether in the form of private almsgiving, public charitable institutions, or a legal pauper-system.
The tendency of all such modes of distribution having been found to be to encourage improvidence with all its attendant evils,—to injure the good while relieving the bad,—to extinguish the spirit of independence on one side, and of charity on the other,—to encourage peculation, tyranny, and fraud,—and to increase perpetually the evil they are meant to remedy,—but one plea is now commonly urged in favour of a legal provision for the indigent.
This plea is, that every individual born into a state has a right to subsistence from the state.
This plea, in its general application, is grounded on a false analogy between a state and its members, and a parent and his family.
A parent has a considerable influence over the subsistence-fund of his family, and an absolute control over the numbers to be supported by that fund; whereas the rulers of a state, from whom a legal provision emanates, have little influence over its subsistence-fund, and no control whatever over the number of its members.
If the plea of right to subsistence be grounded on the faults of national institutions, the right ought rather to be superseded by the rectification of those institutions, than admitted at the cost of perpetuating an institution more hurtful than all the others combined.
What then must be done to lessen the number of the indigent now so frightfully increasing?
The subsistence-fund must be employed productively, and capital and labour be allowed to take their natural course; i. e. the pauper system must, by some means or other, be extinguished.
The number of consumers must be proportioned to the subsistence-fund. To this end, encouragements to the increase of population should be withdrawn, and every sanction given to the preventive check; i. e. charity must be directed to the enlightenment of the mind instead of to the relief of bodily wants.
If not adopted speedily, all measures will be too late to prevent the universal prevalence of poverty in this kingdom, the legal provision for the indigent now operating the extinction of our national resources at a perpetually increasing rate.
The objects of voluntary emigration, directed by the state, are three-fold:—
1. To improve the condition of those who emigrate, by placing them where they may obtain subsistence at less cost than at home.
2. To improve the condition of those who remain, by increasing the ratio of capital to population.
3. To improve the condition of the colonized region.
To fulfil the first of these objects, the colony must be so located as to insure health and abundance to its members; and it must be so organized as to secure the due co-operation of labour and capital.
To fulfil the second object, the removal of each individual must be less costly than his maintenance at home would be; and the selection must be made with a view to lessening the amount of human productiveness at home.
To fulfil the third object, the colonists must be selected with a view to their productiveness, both as regards capital and population; which includes a moral fitness to compose an orderly society.
It follows from all these considerations that a new settlement should be composed of young, healthy, and moral persons; that all should not be labourers, nor all capitalists; and that there should be a sufficient concentration of their numbers on the new lands to ensure a facility of exchanges.
All other proposed remedies must be subjected to, as this must be regulated by, the test, whether they assist in proportioning labour and capital. The Home Colonization system here fails, on the double ground that it ensures a smaller return to capital and labour than could be had abroad, and serves as a direct premium on population.
Home colonies may afford a temporary relief to a redundant population, and also increase the productiveness of the lands which they appropriate; but this is done by alienating capital from its natural channels; and with the certainty of ultimately injuring society by increasing the redundancy of population over capital.
Home colonization then, though less injurious than the unproductive distribution of the charity-fund, is inferior to foreign colonization, inasmuch as the one yields temporary benefit to a few at the expense of ultimate injury to many; and the other produces permanent benefit to all.
All provisions for rewarding forethought and economy, and especially all for the diffusion of sound moral and political knowledge, approve themselves by this test. All contrivance and care in the production and economy of capital approve themselves also; but Emigration is conspicuous in its merits, since it not only immediately reaches the seat of the evil in the mother country, but affords the greatest of blessings to the colonized regions. If regulated by a due regard to the infallible test, it is scarcely possible to conceive of an arrangement more apt to all the purposes of society. Where it has failed, the reason of failure has commonly been that one link in the chain of operating causes has been wanting. Land and labourers cannot mutually prosper without the capital which has too often been deficient. We have not yet made the experiment of sending out small societies completely organized, and amply provided to settle down at once in a state of sufficient civilization to spare the mother-country all further anxiety about the expedition. It can be no objection to this that it abstracts capital and the most useful species of labour from the mother-country: since the capital so sent out will yield a more rapid and ample increase to us in a new market for commerce than it could have done at home; and the labour is that which we least want at home,—however good its quality may be,—and that which we most want in our possessions on the other side the world. Such an organized society, however, would be able to bear a much larger proportion of children than a similar society could take charge of at home,—the labour of children being of as much more value than their maintenance abroad, as it is less at home. If for every old person naturally belonging to such a company, left behind, two children were taken out, this country would be immediately compensated for the abstraction of prime labour, and a provision would be made for the future contraction of the population. All details, however, from the greatest to the least, will be arranged with infinitely less trouble than our parochial mismanagements have cost us when we have once, as a nation, surveyed the dreary haunts of our pauperized classes, and then taken a flight in spirit to the fair regions abroad which invite their labour with a sure promise of rich recompense. The time must come when it will be a matter of wonder how we could so long be oppressed with a redundancy of labour at home, while our foreign lands were dreary only for want of labour, while an open sea lay between, while we had shipping to spare to traverse it, and while we were spending nine millions a year in the fruitless support of our paupers, and as a premium on the production of yet more and more labour. The best plea for us in that day will be that we did not understand our own case. By the time we have spent nine millions, or the half of nine millions, in relieving our labour market, we may have discovered how inferior is that superstitious, spurious charity which doles out bread at its own door to an unlawful petitioner because to give bread was once charity, and that enlightened, genuine benevolence which causes plenty to spring in the far corners of the world, nourishing at home the ancient household virtues which have been well nigh starved among us, but which are not dead.
What decision does our test give out in regard to Ireland? That, as a redundancy of population is her universally acknowledged curse, it is unreasonable to expect relief from the introduction of a legal charity,—the most efficacious of all premiums on population. The conclusion is so obvious, that it can be got rid of only by proving either that a redundant population is not the great grievance of Ireland, or that there may be a legal charity which does not act as a premium on population. Where are the materials for either the one proof or the other?
Whatever affects the security of property, or intercepts the due reward of labour, impairs the subsistence-fund by discouraging industry and forethought.
Partnership tenantcies affect the security of property by rendering one tenant answerable for the obligations of all his partners, while he has no control over the management of their portions.
A gradation of landlords on one estate has the same effect, by rendering one tenant liable to the claims of more than one landlord.
The levying of fines on a whole district for an illegal practice going on in one part of it has the same effect, by rendering the honest man liable for the malpractices of the knave.
The imposition of a church establishment on those who already support another church, intercepts the due reward of labour, by taking from the labourer a portion of his earnings for an object from which he derives no benefit.
The practice of letting land to the highest bidder, without regard to former service, or to the merits of the applicants, intercepts the due reward of the labourer, by decreeing his gains to expire with his lease.
All these practices having prevailed in Ireland, her subsistence-fund is proportionably impaired, though the reduction is somewhat more than compensated by the natural growth of capital.
While capital has been growing much more slowly than it ought, population has been increasing much more rapidly than the circumstances of the country have warranted; the consequences of which are, extensive and appalling indigence, and a wide spread of the moral evils which attend it.
An immediate palliation of this indigence would be the result of introducing a legal pauper-system into Ireland; but it would be at the expense of an incalculable permanent increase of the evil.
To levy a poor-rate on the country at large would be impolitic, since it would only increase the primary grievance of an insufficiency of capital, by causing a further unproductive consumption of it.
To throw the burthen of a pauper-system on absentees would be especially unjust, since they bear precisely the same relation to the wealth of their country as its resident capitalists.
In the case of Ireland, as in all analogous cases, permanent relief can be effected only by adjusting the proportions of capital and population; and this must be attempted by means suited to her peculiar circumstances.
The growth of capital should be aided by improvements in agricultural and domestic economy, and by the removal of political grievances; from which would follow a union in place of an opposition of interests.
Population should be reduced within due limits,
In the present emergency, by well-conducted schemes of emigration; and
Permanently, by educating the people till they shall have become qualified for the guardianship of their own interests.
A sameness in the natural laws of distribution exactly reverses the order of possession in new countries, i. e., in those where capital abounds in proportion to population. There the landowner (if any one finds it worth his while to be a landowner without being either a capitalist or a labourer at the same time) gains no real rent till the best land is all under cultivation, and then very little till a third degree is resorted to. The capitalist, meanwhile, makes less than the labourer; or would gain less if he were not, like the landowner, a labourer also. Where labour is so dear, all are labourers; and the labourer, by a very natural process, soon becomes a capitalist and a landowner; and then he may chance to learn what a strange thing it seems to a man from the mother-country to let land of a fine quality for no better rent than a small share of the produce; and how vexatious it is, after having reaped splendid returns to capital, to have to pay away, in the purchase of labour, all but little more than the ordinary profits of stock.
The want of a due consideration of the difference in relative condition of labourers at home and labourers in new countries has led to some serious errors[E] in the formation and execution of some of our plans of colonization. Such a scheme as that of penal colonization could never have been adopted if the case of the working class in both countries had been understood. Besides the many other objections which might be and have been forcibly urged, there must remain the insurmountable one that labour is better rewarded in a new colony than at home. It does not appear that any arbitrary severity, short of the infliction of such life-long misery as no crime can deserve, can counteract the natural law by which the labourer is more prosperous in our penal colonies than in England. They are places of privilege, and the carrying him there is putting him in a condition of privilege, sooner or later, however severely we may punish him for any terminable period. This is so notoriously the case, that it has become matter of very serious consideration how the lot of the convict can be rendered harder, and be made known at home to be so; and arrangements have been made, within a short period, by which the disproportion in the lot of the innocent and the guilty is considerably lessened. Still, however far the convict may be placed below the virtuous emigrant in the scale of comfort, no power can, in the present state of our labour-market, prevent his being much better off than the independent labourer at home. The power of rulers may ordain chains, whipping, and other penalties to the convict; but it cannot prevent his having, during a pressing demand for his labour, that abundance of the necessaries of life which the virtuous labourer cannot obtain at home. Bob Castle[F] would not now, perhaps, be able to purchase an estate on which his honest brother Frank was a labourer; but Bob, however he might have been punished for seven or fourteen years, could not but have a fairer prospect before him at the end of that time than honest Frank would have had in England. This necessity forms, of itself, a conclusive argument against penal colonization as a secondary punishment. That mode of punishment can never command respect or success which wanders so far from the principle of retribution as to inflict studied miseries as a set-off against advantages which cannot be excluded.
The objects of penal colonization are—
1. The security of society by the removal of the offender.
2. The security of society by the effect of his example.
3. The reformation of the offender.
There has hitherto been an entire failure of all these objects: and no wonder; since,—
1. The offender is only transferred from one portion of society to another; and besides, frequently returns to his old haunts.
2. His punishment, as far as it is punishment, takes place at too great a distance to be conspicuous as a warning; and in as far as his lot does not involve punishment, the effect of his example is precisely the reverse of what is desired.
3. Our convict arrangements tend to the further corruption of the offender, by letting him experience a great improvement in his condition as a direct consequence of his crimes.
The junction of penal with voluntary emigration tends equally to disappoint the purposes of the one, and to extinguish the benefits of the other; since convict labourers find themselves in a state of privilege, in a region where their labour procures them large rewards; and new settlers find their community deeply injured by the vice and disease consequent on the introduction of a convict population.
Before closing this part, it may be well to observe that much vain reluctance to acknowledge the two grand principles which primarily regulate the distribution of wealth, arises from too small an allowance having been asked for subordinate influences, which may justify a much greater degree of hopefulness respecting the condition of an advanced country than some economists have ventured to indulge. It is no wonder that the kind-hearted turn away, and refuse to listen to a doctrine which is thought to forbid much hope that the whole of any society can be comfortably provided with the necessaries of life. It is no wonder that the timid cease from trying to lop off evils, if they must believe that every head of the social hydra will grow again,—that for every redundancy drawn off there will be a speedy over-filling. All experience of humanity contradicts such forebodings: and, though it would assuredly be our duty to make our own generation happier than the last, even under the certainty that the next must fall back again, it is much more animating to believe, as we are justified in doing, that every advance is a pledge of a further advance; that every taste of comfort, generated to the poor man by his own exertions, stimulates the appetite for more. It has ever been found that, when men have learned to prefer wheaten bread to potatoes, it is more likely that their children should be taught to seek butchers’ meat than allowed to fall back to potatoes. The father who has worked his way up into a glazed and tiled cottage, brings up his children to fear the mud hovel in which they were born. If we do but apply ourselves to nourish the taste for comfort in the poor,—to take for granted the most, instead of the least, that they ought to require, there is little fear but that, whenever circumstances allow, they will fall into our way of thinking, and prefer a home of comfort, earned by forethought and self-denial, to herding together in a state of reckless pauperism. With every increase of resources, let a vigorous exertion be made to rouse the complacency and exalt the tastes of the labouring class, and it will assuredly be found, in the interval before a new access of labour can be brought into the market, that the condition of the class has improved as a matter of theory, as well as practice, and that it must go hard with them but they will keep it up.
All experience warrants this statement. There can be no question that the preventive check has largely superseded the positive in all advancing societies. There can be no doubt of the increased providence of the middling classes, and the enlargement of the domestic requirements of the poor, even though wars, famine, and pestilence have nearly ceased to make the awful vacancies in which the wants and desires of the survivors could expand. Though in some unhappy districts where the visitations of want have extinguished the moral check, multitudes still herd together, more like brutes than human beings, it is certain that there is a larger demand among the working classes of England for better food, clothing, habitations, and furniture, than their fathers thought of requiring. If this has taken place notwithstanding all the bad policy, public and private, with which we have weakened the spirit and the power of independence, there is ample reason for confidence in an accelerated progress in proportion as public and private influence shall work in an opposite direction. Since every one can, many will assist in this noble work; assured that not a single effort can be lost, and that its successful result will extend far beyond the present generation. Few are now found to advocate that species of prospective benevolence which acts by long-reaching pecuniary bequests; but it does not follow that benevolence may not be prospective. Let it extend its view to the remotest ages within ken of the human imagination. Let it do this by promoting the welfare of the parents of future generations;—a wide field enough, if we lived but for charity.
PART III.
The total wealth of society being distributed among three classes, according to the principles above announced, the next process is the exchange of commodities by individuals for purposes of individual enjoyment.
The complication of this process arises chiefly from the diversity of production which takes place on the earth, occasioning not only a wide difference in the amount of labour required to produce the same results in different regions, but a perpetual variegation and augmentation of commodities, which affect the demand, and render uncertain the transactions of trade.
This complication, however, involves no disastrous perplexity, unless meddled with by powers which bear no relation to it. All commodities will declare their own value, and obtain equivalents, to the ultimate satisfaction of the exchanging parties, if they are left to themselves; but when any power, which cannot regulate human wants and wishes, interferes to prescribe what provision shall be made for those wants and wishes, there is not only a certainty that the relative values of commodities will be temporarily deranged, to the disadvantage of one of the exchanging parties, but an uncertainty when the natural relation of values will be restored, and whether disorder will not first spread into every other department of exchange. Since human labour is the universal commodity which is brought to market, to be given and taken under all forms, (since capital is only hoarded labour,) there is no safety in ticketing any one commodity as containing more labour than it naturally includes, and thus destroying its balance with the rest, to the injury of its seller’s credit, and its buyer’s interest. This is what is done by every government which presumes to interfere with the barter of individuals, or authorizes such interference. The duty of government is precisely the reverse;—to secure the freedom of exchange as carefully as the freedom of labour, in the full assurance that it cannot determine relative values till it can determine the amount of labour and the extent of human wants in every region of the earth. This it may do when it has mastered the chemical and mechanical constitution of the globe, when it may not only gauge the rain in every region, but appoint the proportion of its fall.
There are two kinds of Value: value in use, and value in exchange.
Articles of the greatest value in use may have none in exchange: as they may be enjoyed without labour; and it is labour which confers exchangeable value.
This is not the less true for capital as well as labour being employed in production; for capital is hoarded labour.
When equal quantities of any two articles require an equal amount of labour to produce them, they exchange exactly against one another. If one requires more labour than the other, a smaller quantity of the one exchanges against a larger quantity of the other.
If it were otherwise, no one would bestow a larger quantity of labour for a less return; and the article requiring the most labour would cease to be produced.
Exchangeable value, therefore, naturally depends on cost of production.
Naturally, but not universally; for there are influences which cause temporary variations in exchangeable value.
These are, whatever circumstances affect demand and supply. But these can act only temporarily; because the demand of any procurable article creates supply; and the factitious value conferred by scarcity soon has an end.
When this end has arrived, cost of production again determines exchangeable value.
Its doing so may, therefore, stand as a general rule.
Though labour, immediate and hoarded, is the regulator, it is not the measure of exchangeable value; for the sufficient reason, that labour itself is perpetually varying in quality and quantity, from there being no fixed proportion between immediate and hoarded labour.
Since labour, the primary regulator, cannot serve as a measure of exchangeable value, none of the products of labour can serve as such a measure.
There is, therefore, no measure of exchangeable value.
Such a measure is not needed; as a due regulation of the supply of labour, and the allowance of free scope to the principle of competition ensure sufficient stability of exchangeable value for all practical purposes.
In these requisites are included security of property, and freedom of exchange, to which political tranquillity and legislative impartiality are essential.
Price is the exponent of exchangeable value.
Natural or necessary price,—regulated by cost of production,—includes the wages of the labourer, and the profits of the capitalist.
Market price varies from natural price with variations of demand and supply, and in proportion to the oppressiveness of public burdens and commercial restrictions.
The more nearly and permanently market prices approach natural prices, the more prosperous is the state of commerce; and the two most essential requisites to this prosperity are social tranquillity and legislative impartiality.
The ancient error, that some mysterious quality inherent in gold and silver money constituted it wealth, almost to the exclusion of every other commodity, is now so universally dismissed by all who know anything of our science, that there is no occasion to controvert it further than by presenting the appropriate Summary of Principles; and the kindred modern error, that an enlargement of its quantity can do more than give a temporary, and probably hurtful, stimulus to industry, requires now no more than a similar exposure. The sense of the country has lately been taken on this question; and the result proves that there is prevalent a sufficient knowledge of the philosophy and fact of the case to encourage a hope that no such hazardous sport with the circulating medium as the country has previously suffered from will be again attempted. The fate of the Berkeley[G] family, in consequence of actions on the currency, is only one instance from one class. A long series of sad stories might be told of sufferers of every rank, whose partial prosperity, enjoyed at the expense of one another’s ruin, was soon swallowed up in the destruction which universally attends a shock to public credit. The injured might be found dispersed through every dwelling in the land; and, however loudly the richer might complain of the magnitude of their losses, the most cruelly injured were those who had the least opportunity of accounting for their gains and their losses, and therefore the least power of meeting the pressure of circumstances by prudence and forethought.
To stimulate the production of labour by the increase of the circulating medium, the fruits of which must be wrested away by an inevitable contraction, is a policy whose glory is not to be coveted; and surely no statesman will be found to adventure it till the last tradition of the consequent woes of our working-classes shall have died away. By that time, it is probable that the danger of such recurrence will be obviated by the adoption of some principle of security, which will give society the advantage of a free trade in money. It must be long before this can take place; for it must be long before the values of commodities are allowed to adjust themselves; and money must, from its importance, be very cautiously and gradually committed to the equalizing influences of the natural laws of demand. But, however long it may be, the woes of past convulsions will not till then be forgotten. That the time of arbitrary interference will, however, cease, can scarcely be doubted, if the following be true principles.
In exchanging commodities for one another directly, that is, in the way of barter, much time is lost, and trouble incurred, before the respective wants of the exchanging parties can be supplied.
This trouble and waste may be avoided by the adoption of a medium of exchange,—that is, a commodity generally agreed upon, which, in order to effect an exchange between two other commodities, is first received in exchange for the one, and then given in exchange for the other.
This commodity is Money.
The great requisites in a medium of exchange are, that it should be—
What all sellers are willing to receive;—
Capable of division into convenient portions;—
Portable, from including great value in small bulk;—
Indestructible, and little liable to fluctuations of value.
Gold and silver unite these requisites in an unequalled degree, and have also the desirable quality of beauty; gold and silver have therefore formed the principal medium of exchange hitherto adopted; usually prepared, by an appointed authority, in the form most suitable for the purposes of exchange, in order to avoid the inconveniences of ascertaining the value of the medium on every occasion of purchase.
Where the supply of money is left unrestricted, its exchangeable value will be ultimately determined, like that of all other commodities, by the cost of production.
Where the supply is restricted, its exchangeable value depends on the proportion of the demand to the supply.
In the former case, it retains its character of a commodity, serving as a standard of value in preference to other commodities only in virtue of its superior natural requisites to that object.
In the latter case, it ceases to be a commodity, and becomes a mere ticket of transference, or arbitrary sign of value; and then the natural requisites above described become of comparatively little importance.
The quality by which money passes from hand to hand with little injury enables it to compensate inequalities of supply by the slackened or accelerated speed of its circulation.
The rate of circulation serves as an index of the state of supply, and therefore tends, where no restriction exists, to an adjustment of the supply to the demand.
Where restriction exists, the rate of circulation indicates the degree of derangement introduced among the elements of exchangeable value, but has no permanent influence in its rectification.
In proportion as the processes of exchange become extensive and complicated, all practicable economy of time, trouble, and expense, in the use of a circulating medium, becomes desirable.
Such economy is accomplished by making acknowledgment of debt circulate in place of the actual payment,—that is, substituting credit, as represented by bank paper, for gold money.
The adoption of paper money saves time, by making the largest sums as easily payable as the smallest.
It saves trouble, by being more easily transferable than metal money.
It saves expense, by its production being less costly than that of metal money, and by its setting free a quantity of gold to be used in other articles of production.
A further advantage of paper money is, that its destruction causes no diminution of real wealth, like the destruction of gold and silver coin; the one being only a representative of value, the other also a commodity.
The remaining requisites of a medium of exchange—viz., that it should be what all sellers are willing to receive, and little liable to fluctuations of value, are not inherent in paper as they are in metallic money.
But they may be obtained by rendering paper money convertible into metallic money, by limiting in other ways the quantity issued, and by guarding against forgery.
Great evils, in the midst of many advantages, have arisen out of the use of paper money, from the neglect of measures of security, or from the adoption of such as have proved false. Issues of inconvertible paper money have been allowed to a large extent, unguarded by any restrictions as to the quantity issued.
As the issuing of paper money is a profitable business, the issue naturally became excessive when the check of convertibility was removed, while banking credit was not backed by sufficient security.
The immediate consequences of a superabundance of money are, a rise of prices, an alteration in the conditions of contracts, and a consequent injury to commercial credit.
Its ulterior consequences are, a still stronger shock to commercial credit, the extensive ruin of individuals, and an excessive contraction of the currency, yet more injurious than its excessive expansion.
These evils arise from buyers and sellers bearing an unequal relation to the quantity of money in the market.
If all sold as much as they bought, and no more, and if the prices of all commodities rose and fell in exact proportion, all exchanges would be affected alike by the increase or diminution of the supply of money. But this is an impossible case; and therefore any action on the currency involves injury to some, while it affords advantage to others.
A sudden or excessive contraction of the currency produces some effects exactly the reverse of the effects of a sudden or excessive expansion. It lowers prices and vitiates contracts, to the loss of the opposite contracting party.
But the infliction of reverse evils does not compensate for the former infliction. A second action on the currency, though unavoidably following the first, is not a reparation, but a new misfortune.
Because the parties who are now enriched are seldom the same that were impoverished by a former change, and vice versâ; while all suffer from the injury to commercial credit which follows upon every arbitrary change.
All the evils which have arisen from acting arbitrarily upon the currency prove that no such arbitrary action can repair past injuries; while it must inevitably produce further mischief.
They do not prove that liability to fluctuation is an inherent quality of paper money, and that a metallic currency is therefore the best circulating medium.
They do prove that commercial prosperity depends on the natural laws of demand and supply being allowed to work freely in relation to the circulating medium.
The means of securing their full operation remain to be decided upon and tried.
Nations exchange commodities as individuals do, for mutual accommodation, each imparting of its superfluity to obtain that in which it is deficient.
The imparting is therefore only a means of obtaining: exportation is the means of obtaining importation—the end for which the traffic is instituted.
The importation of money into a country where money is deficient is desirable on the same principle which renders desirable the supply of any deficient commodity.
The importation of money into a country where money is not deficient is no more desirable than it is to create an excess of any other commodity.
That money is the commodity most generally bought and sold is no reason for its being a more desirable article of importation than commodities which are as much wanted in the country which imports it.
That money is the commodity most generally bought and sold is a reason for its being the commodity fixed upon for measuring the relative amounts of other articles of national interchange.
Money bearing different denominations in the different trading countries, a computation of the relative values of these denominations was made in the infancy of commerce, and the result expressed in terms which are retained through all changes in the value of these denominations.
The term by which, in each country, the original equal proportion was expressed is adopted as the fixed point of measurement, called the par of exchange; and any variation in the relative amount of the total money debts of trading nations is called a variation from par.
This variation is of two kinds—nominal and real.
The nominal variation from par is caused by an alteration in the value of the currency of any country, which, of course, destroys the relative proportion of its denominations to the denominations of the currency of other countries; but it does not affect the amount of commodities exchanged.
The real variation from par takes place when any two countries import respectively more money and less of other commodities, or less money and more of other commodities.
This kind of variation is sure to correct itself, since the country which receives the larger proportion of money will return it for other commodities when it becomes a superfluity; and the country which receives the smaller proportion of money will gladly import more as it becomes deficient.
The real variation from par can never, therefore, exceed a certain limit.
This limit is determined by the cost of substituting for each other metal money and one of its representatives—viz., that species of paper currency which is called Bills of Exchange.
When this representative becomes scarce in proportion to commodities, and thereby mounts up to a higher value than the represented metal money, with the cost of transmission added, metal money is transmitted as a substitute for bills of exchange, and the course of exchange is reversed, and restored to par.
Even the range of variation above described is much contracted by the operations of dealers in bills of exchange, who equalize their value by transmitting those of all countries from places where they are abundant to places where they are scarce.
A self-balancing power being thus inherent in the entire system of commercial exchange, all apprehensions about the results of its unimpeded operation are absurd.
The crying philosophers of all times have mourned over the pertinacity of men and of nations in clinging to errors through all the sufferings thence arising; the suffering being ascribed to "fate, or Providence, or something,"—to any thing rather than to their favourite errors. The laughing philosophers cannot deny this; but, looking farther, they see that, error by error being exploded at length, there is no return to that which is clearly seen to be the cause of suffering,—unless such an experimental brief return as can only serve to confirm the truth. Commerce has now been instituted for a longer succession of ages than we have any distinct knowledge of;—ever since the first root-digger exchanged his vegetable food for the game of the first sportsman. From that time till now, an error has subsisted among all classes of exchangers which has caused enough of privation, of ill-will, of oppression and fraud, of war, pestilence and famine, to justify the tears of a long train of crying philosophers. But the error has been detected. Philosophers have laid their finger upon it; the press has denounced it; senates are preparing to excommunicate it; and its doom is sealed. This error is,—that commerce is directly productive. Hence arises the belief, that if one party gains by commerce, another must lose; and hence have arisen the efforts of clansmen to confine their exchanges within their own clan; of villagers within their own village; of citizens within their own state; of a nation within its own empire. Hence it arises that the inhabitants of one district have been afraid to enjoy the productions of any other district, and that they have been doomed by their rulers to pine and die in occasional dearth, and to quarrel with occasional superabundance when they might have had plenty in the one case, and an influx of new enjoyments in the other. Hence have arisen some of the most humbling scenes of human vice which have disgraced the species.
The atrocious practice of wrecking was formerly pursued, not only as a method of robbery, but as a means of impairing the commercial resources of foreigners. There was connivance at pilots who ran a rich vessel upon rocks; and protection for the country people who gave their exertions to destroy instead of to save. If the cargo went to the bottom, something was supposed to be gained to the country, though those who looked upon the disaster were disappointed of their plunder. Next came the ridiculous and cruel practice of making aliens engaged in commerce answerable for the debts and offences of each other; and as a kind of set-off against the advantages which they were supposed to take from the people among whom they lived, they were compelled to pay much heavier duties than natives for all articles of import and export.
The necessity thus arose for commercial treaties which should ensure the safety and proper treatment of commercial agents when any two powers agreed to exchange good offices. Edward II. made an agreement with Venice that its merchants and mariners should be permitted, for ten years, to come and go, and sell their merchandise in security, without having either their persons or goods stopped on account of other people’s crimes or debts. From the time of such partial relaxation,—such narrow openings to a foreign trade,—the wants of the multitude of each civilized people have forced one after another of the barriers raised by national jealousy, while all parties remained under the influence of the error that commerce is directly productive, and of course an advantage to be denied to enemies, except when a very hard bargain can be driven with them. Perhaps the most curious specimens in existence of attempts at mutual overreaching, of laborious arrangement to secure what must naturally happen, and of an expensive and tyrannical apparatus for achieving what is impossible, may be found in the commercial treaties from the infancy of commerce till now. The only idea which never seems to have struck the negotiators is, that commerce is valuable,—not because production takes place in the mere exchange of commodities,—but because systematic exchange facilitates the most extensive division of labour and the closest economy of capital,—advantages which must be shared by both if experienced by either of the exchanging parties. On the same principle that the shoemaker makes no hats, and the hatter no shoes, and that both find an advantage in supplying each other, without any new product arising from the mere act of exchange, the growers of tea and the makers of hardware respectively profit by supplying each other; and they can afford to employ an intermediate class, the merchants,—to conduct their traffic, since they can go on preparing their tea and grinding their cutlery, while the process of exchange is being transacted. The saving of capital is mutual also. It must be mutual and incalculable as long as the regions of the earth differ in their productions, yielding a superabundance in one place of some necessary or comfort which is rare in another. No commercial treaty bears the least reference to the obvious final purpose of all commerce;—that the greatest number shall obtain the largest amount of enjoyment at the least cost. Such a recognition of the ultimate principle would, indeed, be inconsistent with the very existence of commercial treaties, except as far as they relate to the personal protection of traders. But, while the people of each country have shown the most decided inclination to obtain more and more of what they cannot produce at home, the aim of governments, and generally of merchants, has been to sell as much as possible to other nations; to take from them as little as possible but money; and to get the greatest possible quantity of that. In furtherance of this view, money has been taken from the people at large, and given to their merchants to tempt them to go and sell at a loss, rather than not get hold of foreign money; and again, money has been exacted from foreigners who come to sell their goods in our ports. Nothing is gained by this to the nation, as the foreigners must be repaid these duties as well as the cost of their articles; and it is clear to every observer how much is lost to all the parties concerned. Yet such is the false principle on which commercial treaties have hitherto been founded. This child’s-play of universal circumvention is pursued less vigorously than it was; and some of the players are so tired of the wasteful and wearying sport as to be ready to give it up: but, owing to the false belief that no one could yield without the rest, the absurdity has endured longer than might have been expected.
It was not perceived, till lately, that it is a good thing to any nation, as it would be to any man, to get what it wants, even if it be compelled to pay in money when it had rather pay in goods: especially when it is certain, from the ascertained self-balancing quality of money, that it will soon flow in from some other quarter in exchange for the goods wanted to be sold. When so plain a truth as this is once experienced, it cannot but spread; and fewer examples will be henceforth seen of nations keeping themselves poor, lest their neighbouring customers should grow rich. How rapidly such truth runs, when once sent off on its career, may be seen from the following facts: it being borne in mind that nations are educated by the experience of centuries, as men are of years.
In 1703, a commercial treaty was concluded between Great Britain and Portugal, which was for many years lauded by the British as being in the highest degree favourable to the interests of her manufacturing classes, at a very slight expense. Our woollens were then excluded from Portugal. Mr. Methuen, who managed the treaty, obtained a free admission for them, in return for a concession which was considered a mere nothing in comparison with the advantage obtained. It was merely promised that port-wine should be admitted into Great Britain at one-third less duty than French wines. As for the woollens, their admission into Portugal duty-free was a much greater advantage to the Portuguese than to us. They obtained cheap an article which they very much wanted, and which we were sure of selling in one quarter or another, if we could produce it at such a cost as made its production worth while. As for the wine,—the Portuguese and the British have both been suffering ever since for the arbitrary preference given to that of Portugal over that of France. Portugal has, and has always had, too little capital for the capabilities of the country and the wants of the people. By the monopoly of the British market being given to Portugal, too large a proportion of its small capital has been devoted to the growth of wine, and the whole country is in a more backward state than it would have been if its capital had been allowed to find its own channels. We, meanwhile, lost the French market for our woollens, brought upon ourselves retaliatory restrictions on other articles, and were compelled to drink inferior wine at a greater cost than if the trade had been left to itself. France grew more pettish; we grew resentful, and raised the duties again, and again, and again. Thousands, who had been fond of French wines, found that they could afford the indulgence no longer, and took to port. Thousands more, who had drunk port because they could not afford French wines, left off drinking wine at all. In three years the revenue from the wine-duties fell off by more than 350,000l., while the naturally wine-drinking population was increasing. The richest of our citizens, to whom the price of wine is not a very important consideration, had their cause of complaint. Guernsey was all this time receiving small quantities of wine, and sending out large quantities. A prosperous manufacture of wines was carried on there; and no gentleman could tell how much sloe-juice, apple-juice, and brandy he might be drinking under the name of wine. There is no good reason why a day-labourer should not drink French wines at his dinner instead of beer, if they are equally cheap; and no one knows how cheap they might have been by this time, if they had been allowed their fair chance; and the cheaper, and therefore the more abundant, those wines, the larger must be the quantity of our goods taken by the French in exchange. As it is, the Portuguese have profited where we meant they should not, and suffered where we meant they should be permitted to profit. Our Government has suffered a diminution of revenue; our rich men have drunk adulterated wines; our middling classes have been obliged to put up with dear port-wine or none; our working classes have been debarred from having wine at all, and have been shut out for more than a hundred years from one of the largest markets where their labour might have found its recompense.
Such are some of the consequences of the famous Methuen treaty, which was, for a considerable length of years, extolled as a model of commercial negotiation. These consequences, and others which followed similar blunders, wrought at length their natural effect upon the minds of those primarily interested in the principles and methods of commercial policy. On the 8th of May, 1820, the following petition from the merchants of London was presented to the House of Commons. It was signed by all the principal merchants of London;—a class whose opinions on this question could not but be respectfully regarded, if they had been announced with less dignity and precision than we find in this memorable address. The time may and will come when its propositions will be regarded as a set of truisms scarcely worthy of announcement under such circumstances of formality; but it should in fairness be remembered in those days that it was drawn up at the very period when silk and tobacco were being smuggled into hundreds of creeks along our shores; when bread and wine were taxed for purposes of unjust protection at home, and wicked oppression abroad; and when our houses and ships were being built of bad wood at a higher cost than need have been paid for the best, in order to favour a colony which, after all, would flourish much more through our prosperity than at our expense. No change of times and convictions can impair the honour due to those who concurred in the following petition:—