The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface.
• Advertisement.
• Letters, &c.
• Letter I.
• Letter II.
• Letter III.
• Letter IV.
• Letter V.
• Advertisement.
• Catechism of Political Economy; Or, Familiar Conversations On the Manner In Which Wealth Is Produced, Distributed, and Consumed.
• Chapter the First.: On the Composition of Wealth and the Use of Money.
• Chapter II.: On the Utility and Value of Products.
• Chapter III.: On Production.
• Chapter IV.: On the Operations Common to All the Species of Industry.
• Chapter V.: On Capital and Land.
• Chapter VI.: On the Formation of Capital.
• Chapter VII.: On the Manner In Which the Value of Products Is Established, and of the Charges of Production.
• Chapter VIII.: On the Profits of Industry, Capital, and Land; That Is, Income.
• Chapter IX.: On Wages, Interest, and Rent.
• Chapter X.: On Incomes Founded On Immaterial Products.
• Chapter XI.: On Consumption In General.
• Chapter XII.: On Private Consumption.
• Chapter XIII.: On Public Consumption.
• Chapter XIV.: On Public Property and Taxes.
• Chapter XV.: On Public Loans.
• Chapter XVI.: On Property, and the Nature of Riches.
• Chapter XVII.: On the Real and Nominal Price.
• Chapter XVIII.: On Money.
• Chapter XIX.: On Signs Representing Money.
• Chapter XX.: On Markets.
• Chapter XXI.: On Regulations Or Restraints of Industry.
• Chapter XXII.: On Importations, Duties, and Prohibitions.
• Chapter XXIII.: On Exportation.
• Chapter XXIV.: On Population.
• Chapter XXV.: On Colonies.
• Erratum.

LETTERS, &c.

LETTER I.

Sir,

Every person who takes an interest in the new and interesting science of political economy, will certainly read the work with which you have lately enriched it. You are not one of those authors who claim the attention of the public, without having any information to communicate; and when the celebrity of the writer is added to the importance of the subject, when the question in debate is that momentous one to civilized society, namely, what are its means of existence and enjoyment? the curiosity of readers will undoubtedly be excited in an extraordinary degree.

I shall not attempt, Sir, to add my suffrage to that of the public, in pointing out the just and ingenious observations in your book; the undertaking would be too laborious. Nor shall I here discuss with you some points, to which, I think, you attach an importance which does not belong to them: I should be sorry to annoy either you or the public with dull and unprofitable disputes. But, I regret to say, that I find in your doctrines some fundamental principles which, if admitted under the imposing sanction of your authority, would occasion a retrograde movement in a science of which your extensive information and great talents are so well calculated to assist the progress.

In the first place my attention is fixed by the inquiry, so important to the present interests of society: What is the cause of the general glut of all the markets in the world, to which merchandize is incessantly carried to be sold at a loss? What is the reason that in the interior of every state, notwithstanding a desire of action adapted to all the developements of industry, there exists universally a difficulty of finding lucrative employments? And when the cause of this chronic disease is found, by what means is it to be remedied? On these questions depend the tranquillity and happiness of nations. A discussion therefore which tends to their illustration, I have not thought unworthy of your attention, or that of the enlightened public.

Since the time of Adam Smith, political economists have agreed that we do not in reality buy the objects we consume, with the money or circulating coin which we pay for them. We must in the first place have bought this money itself by the sale of productions of our own. To the proprietor of the mines whence this money is obtained, it is a production with which he purchases such commodities as he may have occasion for: to all those into whose hands this money afterwards passes, it is only the price of the productions which they have themselves created by means of their lands, capital, or industry. In selling these, they exchange first their productions for money; and they afterwards exchange this money for objects of consumption. It is then in strict reality with their productions that they make their purchases; it is impossible for them to buy any articles whatever to a greater amount than that which they have produced either by themselves, or by means of their capitals and lands.

From these premises I had drawn a conclusion which appeared to me evident, but which seems to have startled you. I had said, “As each of us can only purchase the productions of others with his own productions—as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase.” Thence follows the other conclusion, which you refuse to admit: “that if certain goods remain unsold, it is because other goods are not produced; and that it is production alone which opens markets to produce.”

I am aware that this proposition has a paradoxical appearance, which creates prejudices against it; I know that common prejudices are more likely to support the opinions of those who maintain that there is too much produce, because every body is engaged in creating it: that instead of constantly producing, we ought to increase unproductive consumption, and devour our old capitals instead of accumulating new ones. This doctrine has indeed appearances on its side: it may be supported by arguments; and may interpret facts in its favour. But, Sir, when Copernicus and Galileo first taught that the sun (although it was daily seen to rise in the east, ascend majestically to the meridian, and decline at evening in the west) never moved from its station, they also had to contend with universal prejudice, the opinion of antiquity, the evidence of the senses: ought they to have renounced the demonstrations resulting from sound philosophy? I should wrong you, were I to doubt of your answer.

To proceed. When I advance that produce opens a vent for produce; that the means of industry, whatever they may be, when unshackled, always apply themselves to the objects most necessary to nations, and that these necessary objects create at once new populations and new enjoyments for those populations, all appearances are not against me. Let us only look back two hundred years, and suppose that a trader had carried a rich cargo to the places where New York and Philadelphia now stand; could he have sold it? Let us suppose even, that he had succeeded in founding there an agricultural or manufacturing establishment; could he have there sold a single article of his produce? No, undoubtedly. He must have consumed them himself. Why do we now see the contrary? Why is the merchandize carried to, or made at Philadelphia or New York, sure to be sold at the current price? It seems to me evident that it is because the cultivators, the traders, and now even the manufacturers of New York, Philadelphia, and the adjacent provinces, create, or send there, some productions, by means of which they purchase what is brought to them from other quarters.

Perhaps it will be said that “what is true with respect to a new state, may not be applicable to an old one: that there was in America room for new producers and new consumers; but in a country which already contains more producers than sufficient, additional consumers only are wanting.” Permit me to answer, that the only true consumers are those who on their side produce, because they alone can buy the produce of others; and that unproductive consumers can buy nothing, unless by means of the value created by those who produce.

It is probable that so early as the time of Queen Elizabeth, when England was not half so populous as at present, it was already found that the number of hands exceeded the quantity of employment: I desire no other proof of it than the poor law of that period, the consequences of which constitute one of the plagues of England. The principal object of it is to furnish work to the unfortunate who cannot obtain employment. They had no employment, in a country which has since been able to employ twice or thrice the number of workmen! How happens it, Sir, how happens it that, however unfortunate the situation of Great Britain may now be, much greater quantities of various kinds of goods are now sold there than in the time of Elizabeth? Whence can this arise, unless from the fact that the produce of that country is now greater? One man produces an article which he exchanges for another article produced by his neighbour. The means of subsistence having become greater, the population has increased, yet every one has been better provided for. It is the power of producing which makes the difference between a country and a desert; and a country is so much the more advanced, so much the more populous, and so much the better provisioned, as it increases in productions.

You will probably not object to this observation, which appears so obvious; but you deny the consequences which I draw from it. I have advanced that whenever there is a glut, a superabundance, of several sorts of merchandize, it is because other articles are not produced in sufficient quantities to be exchanged for the former; and if those who produce the latter could provide more of them, or of other goods, the former would then find the vent which they required: in short, that the superabundance of goods of one description arises from the deficiency of goods of another description. You, on the contrary, assert that there may be a superabundance of goods of all sorts at once; and you adduce several facts in favour of your opinion. M. Sismondi had already opposed my doctrine; and I am happy to quote here his strongest expressions, that I may not deprive you of any of your advantages, and that I may answer you and M. Sismondi at once.

“Europe,” says that ingenious author, “has in every part arrived at the point of possessing industry and manufacturing power superior to its wants.” He adds that the glut which results from it begins to affect the rest of the world: That, “In reading the commercial reports, the journals and accounts of travellers, we see on every side proofs of the superabundant production which exceeds consumption; of the manufacturing industry which is proportioned, not to the demand, but to the capital employed; of that mercantile activity which impels the merchants in crowds to every new market, and exposes them by turns to ruinous losses, in every branch of commerce from which they looked for profit. We have seen merchandize of every description, but above all that of England, the great manufacturing power, abounding in all the markets of Italy in a proportion so far exceeding the demand, that the merchants, in order to realize even a part of their capital, have been obliged to dispose of them at a loss of a fourth or a third, instead of obtaining any profit. The torrent of commerce repelled from Italy, flowed upon Germany, Russia, and Brazil, and soon found in those countries similar obstacles.

“The latest journals announce similar losses in new countries. In August 1818, they complained at the Cape of Good Hope that all the warehouses were filled with European merchandize, which, although offered at lower prices than in Europe, could not be sold. Similar complaints were made in June at Calcutta. Presently a strange phenomenon was seen, that of England sending her cotton goods, &c. to India, and consequently succeeding in working cheaper than the half-naked people of Hindostan, by reducing her workmen to a still more miserable existence! But the extraordinary direction thus given to commerce has not lasted long: even now, English manufactures are cheaper in the Indies than in England itself. In May, it it was found necessary to re-export from New Holland European merchandize which had been carried thither in excessive quantities. Buenos Ayres, New Granada, and Chili, are already sending back goods in a similar way.

“Mr. Fearon’s journey in the United States, concluded only in the spring of 1818, presents the same spectacle in a manner still more striking. From one extremity of that vast and prosperous continent to the other, there is not even a village where the quantity of merchandize offered for sale is not infinitely superior to the means of the buyers, although the merchants labour to allure them by very long credits, and facilities of every kind for the payments, which they receive by instalments and in goods of every description.

“There are no facts which present themselves to us in so many places, and so many forms, as the disproportion between the means of consumption and the means of production—the inability of those who produce to abandon an employment when it becomes unprofitable,—and the certainty that their numbers are never reduced but by failures. How does it happen that philosophers refuse to perceive what meets the eyes of the vulgar in every direction?

“The error into which they have fallen arises entirely from the false principle that production is the same thing as revenue. Mr. Ricardo, following M. Say, thus repeats and confirms it. ‘M. Say has proved in the most satisfactory manner,’ he says, ‘that there is no capital, however considerable, which cannot be employed, because the demand for production is limited only by production. No one produces any thing but with the intention of consuming or selling the thing produced; and nothing is ever sold but for the purpose of buying some other product, either of immediate utility, or calculated to contribute to future production. The producer therefore becomes the consumer of his own produce, or the purchaser and consumer of the produce of some other person.’ Upon this principle,” says M. Sismondi, “it becomes absolutely impossible to comprehend or explain the most established fact in the history of commerce—the glut of markets.”*

I must remark to those to whom the facts which M. Sismondi justly regrets appear conclusive, that they are indeed conclusive, but that they are conclusive against himself. The quantity of English merchandize offered for sale in Italy and elsewhere is too great, because there is not sufficient Italian or other produce suitable to the English market. A country purchases only that for which it can pay; for, if it did not pay, people would soon tire of selling to it. But with what articles can the Italians pay the English? with oils, silks, and raisins; and besides those and a few other articles, if they would still acquire English produce, how are they to pay for them? With money! But they must first acquire the money itself with which they are to pay for the English produce. You perceive, Sir, that to acquire foreign productions, a nation must, like an individual, have recourse to its own productions.

It is said that the English sell at a loss in those places which they inundate with their merchandize. This I believe to be true: they multiply the goods offered, which depreciates them; and they demand in return, as far as it is practicable, money only, which therefore becomes more rare and valuable. Being thus enhanced in value, money is given in smaller quantities in every exchange; and this is the reason why they are people obliged to sell at a loss. But suppose for an instant that the Italians possessed more capital; that they employed their lands and their industrious faculties to greater advantage; in short that they produced more; and suppose, at the same time, that the English laws, instead of having been modelled upon the absurd principles of the balance of trade, had admitted on moderate terms all that the Italians had been capable of furnishing in payment for the English productions; can you doubt that the English merchandize which incumbers the ports of Italy, and great quantities of other merchandize besides, would have been disposed of with facility?

Brazil, that vast country, so favoured by nature, might absorb a hundred times as much English merchandize as is now vainly sent there without finding a market; but it would first be requisite that Brazil should produce all that it is capable of producing; and how is that wretched country to attain that desirable object? All the efforts of the citizens are paralyzed by the government. If any branch of industry offers there the prospect of gain, it is instantly seized and stifled by the hand of power. Does any one find a precious stone, it is taken from him. Fine encouragement this to exert productive industry for the purpose of buying with its produce European merchandize!

The English government, on its part, by custom and import duties, refuses admission to the productions which the English might obtain by exchanges with foreigners; and even to the articles of food of which their manufacturers stand so much in need; and this because it is necessary that the English farmers should sell their corn at more than 80s. the quarter, to enable them to pay their excessive taxes. All these nations complain of a state of suffering into which they have been brought by their own fault; like diseased persons who bewail their maladies, and at the same time obstinately refuse to abandon the excesses which have caused them.

I know that it is not so easy to root up an oak as to pull up a weed; I know that old fences, however rotten, cannot be overthrown when they are supported by the heaps of filth which have accumulated beneath their shelter; I know that certain governments, corrupted and corrupting, stand in need of monopolies, and of custom duties, to pay for the votes of the honourable majorities which pretend to represent nations: I am not so unreasonable as to expect them to govern so entirely according to the general interest, as to be able to obtain the votes without paying for them; but, at the same time, why should I be astonished that such vicious systems have deplorable consequences?

You will, I presume, readily agree with me, as to the injuries which nations mutually sustain by their mutual jealousies, by the sordid interest or the inexperience of those who take upon themselves to be their organs; but you maintain, that even supposing they possessed more liberal institutions, the goods produced might exceed the wants of the consumers. Well, Sir, on this ground I am willing to rest my defence. Let us leave out of the question the war carried on between nations by means of their revenue officers; let us consider each nation in its relations with itself; and let us inquire, once for all, whether we have not the means of consuming what we have the means of producing.

“M. Say, Mr. Mill, and Mr. Ricardo,” you say, “the principal authors of the new doctrines on profits, appear to me to have fallen into some fundamental errors on this subject. In the first place they have considered commodities as if they were so many mathematical figures, or arithmetical characters, the relations of which were to be compared, instead of articles of consumption, which must of course be referred to the numbers and wants of the consumers.”*

I know not, Sir, at least so far as I am concerned, upon what foundation you have built this assertion. I have repeated, in a great variety of forms, this idea, that the value of things (the only quality by which they become wealth) is founded on their utility; on the aptitude which they possess to satisfy our wants. “The want which we have for any thing,” I have said,* “depends on the physical and moral nature of man, on the climate which he inhabits, and the manners and laws of his country. He is subject to bodily wants, to mental and spiritual wants; some things he wants on his own account, others for his family; and others he requires as a member of society. A bear-skin and a rein-deer are to a Laplander objects of the first necessity; whilst the very names of them are wholly unknown to a lazzarone of Naples. The latter, for his part, can dispense with every other thing, if he is plentifully supplied with macaroni. In like manner, courts of justice, in Europe, are considered the strongest bonds of civil society; while the natives of America, the Arabs, and the Tartars, do very well without them - - -

“Of these wants, some are satisfied by the use which we make of certain things with which nature furnishes us gratuitously; as air, water, and the light of the sun. We may call these things natural riches, because the charges of their production is defrayed by nature herself. As she gives them without distinction to all, nobody is obliged to purchase them at the price of any sacrifice whatever. They have therefore no exchangeable value.

“Other wants can only be satisfied by the use which we make of certain things to which their utility could not have been given, without having subjected them to a modification, without having produced a change in their condition; without having, for this purpose, surmounted a difficulty of some kind. Such are the various goods which we can only obtain by the processes of agriculture, commerce, or the arts. These only have an exchangeable value. The reason of this is evident: they are, by the mere fact of their production, the result of an exchange, in which the producer has given his productive services, in order to receive this product. They cannot therefore be obtained from him, except by virtue of another exchange, in which some other product is given to him, which he may consider of equal value with his own.

“These things may therefore be called social riches, because no exchange can take place without a social relation, and because it is only in a state of society that the right of possessing exclusively what has been obtained by production or exchange, can be guaranteed.”

I add, “Let us observe at the same time, that social riches are, as riches, the only ones which can become the object of scientific study; first, because they are the only ones which can be appreciated, or at least the only ones of which the appreciation is not arbitrary; and, secondly, because they alone are formed, distributed, and destroyed, according to laws which we are able to assign.”

Is this to consider productions as algebraic signs, by abstracting them from the number of consumers and the nature of their wants? On the contrary, does not this doctrine establish that our wants alone induce us to make the sacrifices by means of which we obtain productions? These sacrifices are the price which we pay to procure them; you, like Smith, call these sacrifices by the name of labour, an inadequate expression, for they are partly composed of the use derived from land and capital. I call them productive services. They have everywhere a current price. When that price exceeds the value of the thing produced, the result is a disadvantageous exchange, in which the value consumed is greater than the value created. When a production has been created equal to the value of the services employed, those services are paid by the production, the value of which, distributed among the producers, forms their revenues. You see that the existence of these revenues depends upon the production having an exchangeable value, which it can only have in consequence of the want which there is for such production in the actual state of society. Therefore I do not abstract this want, or give it an arbitrary appreciation; I take it for what it is, for what the consumers make it to be. I could have cited, had it been necessary, the whole of my third book, which details the different modes, motives, and results of consumption, but I will not trifle with your time and attention:—let us proceed.

You say,* “It is by no means true, as a matter of fact, that commodities are always exchanged for commodities. The great mass of commodities is exchanged directly for labour, either productive or unproductive; and it is quite obvious that this mass of commodities, compared with the labour with which it is to be exchanged, may fall in value from a glut just as any one commodity falls in value, from an excess of supply, compared either with labour or money.” Permit me to remark, in the first place, that I never said, commodities are always exchanged for commodities; but that productions can only be purchased by productions.

Secondly, that even those who admit this expression of commodities might answer you, that when commodities are given in exchange for labour, these commodities are in reality given in exchange for other commodities, that is to say, for those which result from the labour which has been purchased. But this answer is insufficient for those who embrace in a more extended and complete view, the phenomenon of the production of our riches. Allow me to place it before your eyes in a striking form. The public, which is to judge between us, will, I think, be thus materially assisted in appreciating your objections and my answers.

To obtain a better view of the operations of industry, capital, and land, in the work of production, I personify them: and I discover that all these personages sell their services, which I call productive services, to a speculator, who may be either a trader, a manufacturer, or a farmer. This speculator having purchased the services of a landed estate, by paying a rent to the proprietor; the services of a capital, by paying interest to the capitalist; and the industrious services of workmen, factors, agents of whatever description, by the payment of salaries;—consumes all these productive services, annihilates them; and out of this consumption comes a production which has a value.

The value of this production, provided it be equal to the costs of production, that is to say, to the sum necessarily advanced for all the productive services, suffices to pay the profits of all those who have concurred directly or indirectly in this production. The profit of the speculator on whose account this operation has been effected, deducting the interest of the capital which he may have employed, represents the remuneration for his time and talents; that is to say, his own productive services employed in his own behalf. If his abilities be great, and his calculations well made, his profit will be considerable. If instead of talent he evinces inexperience in his affairs, he may gain nothing; he may very probably be a loser. All the risks attach to the speculator; but on the other hand he takes the advantage of all the favourable chances.

Every production which we see, or which our imagination conceives, is formed by operations which resolve themselves, without exception, into those which I have described, but combined in an infinity of different manners. What some speculators are doing for one sort of production, others perform for another sort. Now, it is the exchanging of these articles one for another which constitutes a market for each. The greater or less want that exists for one of these productions, compared with the others, determines the greater or less price which is given to obtain it; that is to say, the greater or less quantity of any other production. Money is in these transactions only a transient agent, which, when once the exchange is completed, is no farther concerned in it, and flies to effect other exchanges.

It is with the rent, interest, and wages, which form the profits resulting from this production, that the producers buy the objects of their consumption. These producers are at the same time consumers; and the nature of their wants, influencing in different degrees the demand for different kinds of produce, is always favourable, where liberty exists, to the most necessary kind of production; because that, being the most in demand, affords to those who produce it the greatest profits.

I said that in order to see how industry, capital, and land respectively act in productive operations, I personified them, and observed them in the services they rendered. But this is not a gratuitous fiction; it is a fact. Industry is represented by the industrious of all classes; capital, by capitalists; land by its proprietors. These are the three orders of persons who sell the productive services of the instrument they possess, and stipulate the remuneration for its employment. My expressions may perhaps be objected to; but it will then be incumbent on those who find fault with them, to propose better, for it is impossible to deny that this is the course of the transactions. I have stated the fact. The manner of the painter may be criticized, but the facts represented defy contradiction; there they are, and they will defend themselves.

To return to your assertion. You say, Sir, that many commodities are purchased with labour; and I go farther than you: I say, they are all purchased with labour, extending that expression to the services rendered by capital and land.* I say that they cannot be purchased by any other means; that the value and utility of things in all cases are produced by such services; and that the alternative is thus presented to us: either to consume ourselves the utility, and consequently the value which we have produced, or to employ it in the purchase of the utility and value produced by others; that in both cases we purchase commodities with productive services, and that the more productive services we carry to market, the more we can buy in return.

You assert that there are no immaterial productions.* Why, Sir, originally there were no other. A field, for instance, furnishes towards production only its service, which is an immaterial product. It serves as a crucible into which you put a mineral, and extract metal and dross. Is there any part of the crucible in these products? No; the crucible serves for a new productive operation. Is there any portion of the field in the harvest which is obtained from it? I answer likewise, No; for if land were thus gradually consumed, it would cease to exist in a few years: the land only returns what is put into it; but returns it after an elaboration, which I call the productive service of the field. Possibly some people may quibble on the word. I do not apprehend any quibbles that may be attempted as to the thing, because that is undeniable, and wherever political economy shall be studied, will be acknowledged as the fact, whatever name people may think proper to give it.

The service rendered by capital in any undertaking whatever, commercial, agricultural, or manufactoral, is likewise an immaterial product. He who consumes a capital unproductively destroys the capital itself; he who consumes it reproductively, consumes the material capital, and also the service of that capital, which is an immaterialproduct. When a dyer puts indigo, to the value of a thousand francs, into his copper, he consumes material produce worth a thousand francs; and, besides, he consumes the hire of this capital, its interest. The dye which he obtains, returns to him the value of the material capital employed, and also the value of the immaterial service of the same capital. The service of the workman is likewise an immaterial product. The workman comes out of the manufactory at night with the ten fingers which he carried into it in the morning. He has left nothing material in the workshop. It is then an immaterial service which he has furnished towards the productive operation. This service is the daily or annual produce of a fund or estate which I call his industrious faculties, and which compose his riches: miserable riches! particularly in England; - - and I know the reason.

All these are immaterial productions, which, call them as you please, will still be immaterial productions, exchangeable mutually one with another, exchangeable for material productions; and which, in all exchanges, will still seek their market-price, founded, like every market-price in the world, upon the proportion between the supply and demand.

These services, of industry, capital, and land, which are products independent of all matter, form all our revenues, much as we are - - - - What! all our revenues immaterial!!! Yes, Sir, All: otherwise the mass of matter which composes the globe would increase every year; it must happen so, for we should every year have new material revenues. We neither create nor destroy a single atom. All that we do is to change the combinations of things; and all that we add is immaterial. It is value; and it is this value which is immaterial also, that we daily, annually consume, and upon which we live; for consumption is a change of form given to matter, or, if you prefer the expression, a derangement, as production is an arrangement of form. If you find a paradoxical appearance in these propositions, examine the things which they express, and I have no doubt they will appear very simple and reasonable.

Without this analysis, I defy you to explain the whole of the facts; for instance, how the same capital is twice consumed: productively, by a speculator, and unproductively, by his workman. By means of the foregoing analysis, it may be seen how the workman brings to market his labour, the fruits of his ability; he sells it to the master, carries home with him his wages, which forms his revenue, and consumes it unproductively. But the master, who has bought the labour of the workman with a part of his capital consumes it reproductively, as the dyer consumes reproductively the indigo thrown into his copper. These values having been consumed reproductively, reappear in the production which comes out of the hands of the master. It is not the capital of the master which forms [Editor: illegible word] revenue of the workman, as M. Sismondi pretends. The capital of the master is consumed in the workshops. and not in the maintenance of the workman. The value consumed by the latter has another source; it is the produce of his industrious faculties. The master devotes to the purchase of the workman’s labour a part of his capital. Having purchased it, he consumes it; and the workman consumes, on his part, the value which he has obtained in exchange for his labour. Wherever there is exchange, there are two values created and bartered one for the other; and wherever two values are created, there must be, and there are, in effect, two consumptions.*

It is the same with the productive service rendered by capital. The capitalist who lends, sells the service, the labour of his instrument; the daily or annual hire, which a speculator pays him for it, is called interest. The terms of the exchange are, on one side, the service of the capital, on the other, the interest. The speculator, while he consumes reproductively the capital, also consumes reproductively the service of the capital. The lender, on the other hand, who has sold the service of the capital, consumes the interest unproductively, which is a material value given in exchange for the immaterial service of the capital. Ought we to wonder that there should be a double consumption, that of the speculator to make his production, and that of the capitalist to satisfy his wants, since there are the two terms of an exchange, two values drawn from two different funds, bartered for each other, and both capable of consumption?

You say, Sir, that the distinction between productive and unproductive labour is the corner-stone of Adam Smith’s work; that to recognise as productive, labours which are not fixed in any material object (as I do) is to overturn that work from top to bottom.* No, Sir; that is not the corner-stone of Smith’s work; for when that stone is removed, the edifice, although imperfect, remains as solid as before. What will eternally sustain that excellent book is, that it proclaims in every page that the exchangeable value of things is the foundation of all riches. From the publication of that important truth, political economy became a positive science; for the market-price of every thing is a determinate quantity of which the elements may be analysed, the causes assigned, the relations studied, and the consequences foreseen. Permit me, Sir, to say that to separate this essential character from the definition of wealth, is to plunge the science again into the depths of obscurity—to drive it back.

Instead of weakening the authority of the celebrated Inquiry into the Wealth of Nations, I support it in the most essential part; but at the same time I think Adam Smith has forgotten some real exchangeable values, in omitting those which are attached to such productive services as leave no trace because they are totally consumed; I think that he has likewise misunderstood services unquestionably real, which even leave their traces in material produce; such are the services of capital, consumed independently of the consumption of the capital itself; I think that he fell into infinite obscurities through omitting to distinguish, in the course of production, the consumption of the industrious services of a speculator from the services of his capital; a distinction which nevertheless is so real, that there is scarcely any commercial association whose regulations do not contain clauses relative to it.

I revere Adam Smith—he is my master. When I took the first steps in political economy, and when still tottering I was pushed by the advocates of the balance of commerce on the one side, and the advocates of net produce on the other, I stumbled at every move—he shewed me the true path. Supported by his Wealth of Nations, which shews at the same time his own intellectual wealth, I learned to go alone. Now I have ceased to belong to any school, and I shall escape the sort of ridicule which attached to the reverend father Jesuits who translated the Elements of Newton with annotations. They were sensible that physical laws would not square very well with those of Loyola; they therefore took care to inform the public by an advertisement, that, although they had apparently demonstrated the motion of the earth to complete the theory of celestial physics, they nevertheless bowed with submissive acquiescence to the decrees of the Pope, who did not acknowledge this motion. I submit only to the decrees of eternal reason, and am not afraid to declare it: Adam Smith has not embraced all the phenomena of the production and consumption of wealth; but he has done so much that we ought to feel the deepest gratitude for his exertions. The most vague and obscure of all the sciences, will, thanks to his researches, soon become the most precise, and leave fewer facts unexplained than any of the others.

Let us then figure to ourselves the producers (by which name I mean as well the possessors of capital and of land, as the possessors of industrious faculties); let us imagine them pressing forwards with emulation to offer their productive services, or the utility derived from them, (an immaterial quality). This utility is their production. Sometimes it is fixed in a material object, which passes with the immaterial produce, but which in itself is of no importance, is nothing in political economy; for matter deprived of value is not wealth. Sometimes it passes, sold by one and bought by another, without being fixed in any substance—as the advice of the physician, that of the lawyer, the service of the soldier, and of the public functionary. All these exchange the utility which they produce for that which is produced by others; and in as many of these exchanges as are abandoned to free competition, according as the utility offered by Paul is more or less in demand than the utility offered by James, it is sold more or less dear, that is to say, it obtains in exchange, more or less of the utility produced by the latter. It is in this sense that we should understand the influence of demand and supply.

This, Sir, is not a doctrine retrospectively made for the occasion; it is delivered in several parts of my Traité d’Economic Politique;* and by means of my Epitome, its concordance with all the other principles of the science, and with all the facts which form its basis is firmly established. It is already professed in several parts of Europe; but I ardently wish to see you convinced of its truth, and that you may think it worthy of the support of that chair which you fill with so much credit.

After these necessary explanations, you will not accuse me of vain subleties, if I rely on the laws which I have shewn to be founded on the nature of things, and the facts which flow from that source.

Commodities, you say, are not exchanged for commodities only; they are also exchanged for labour. If this labour be a product which some sell and others buy and consume, I shall find little difficulty in calling it a commodity, and you will find little in assimilating other commodities to this, for they are also productions. If you will apply to each of them indiscriminately the generic name of production, you will probably agree with me that productions can only be purchased with productions.

LETTER II.

Sir,

I think I have proved in my first letter that productions can only be purchased with productions: I do not therefore yet see any reason to abandon the doctrine, that it is production which opens a market to production. I have indeed considered as productions all the services arising from our personal capacities, from our capitals, and our lands; which has obliged me to sketch anew, and in other terms, the doctrine of production, which Smith evidently did not comprehend, and has not completely described.

But on reading again the third section of your 7th chapter (p. 351) I feel that there is still a point on which you will not agree with me. You will probably grant that productions can only be bought with productions; but you will persist in maintaining that people may create a quantity of produce in the whole exceeding their wants, and that consequently part of this produce can not be used; that there may be a superabundance and glut of all commodities at once. In order to present your objection in its full force, I shall transform it into a sensible image, by saying: Mr. Malthus will readily allow that 100 sacks of corn will buy 100 pieces of stuff, in a society which has occasion for those quantities of stuff and corn for its raiment and food; but if the same society should happen to produce 200 sacks of corn and 200 pieces of stuff, although these two commodities may still be exchangeable for each other, he will maintain that a part of each of them will no longer find purchasers. It is therefore necessary for me to prove, first, that whatever may be the quantity produced, and the consequent depression of price, a quantity produced of one species always suffices to enable those who have produced it to acquire the quantity produced of another species; and after proving that the possibility of acquiring exists, I shall endeavour to shew how the superabundance of productions creates a demand for it, for the purpose of consumption.

The farmer who produces corn, after having purchased the productive services of the land and capital which he employs, as well as those of his labourers, and added to these services that of his own personal labour, has consumed all those values to convert them into sacks of corn; let us suppose that each sack stands him in thirty shillings, including the value of his own labour, that is to say, his profit. On the other hand the manufacturer who produces stuffs of linen, woollen, or cotton, after having consumed in like manner the services of his capital, those of his workmen and himself, has produced stuffs which stand him also in thirty shillings the piece. If I may be permitted to jump at once to the main point of the inquiry, I will premise that this manufacturer of stuffs represents in my mind the producers of all manufactured produce, and this grower of corn the producers of all provisions and raw materials. The question is, whether their two articles of produce, to whatever quantities they may be multiplied, and whatever depression of price may result from that multiplication, can be wholly purchased by the producers, who are also at the same time the consumers; and how wants arise always in proportion to the quantity of productions.

We must first inquire into the course of things upon the hypothesis of a perfect liberty, permitting the indefinite multiplication of all productions; and we will afterwards examine the obstacles which the nature of things, or the imperfection of society opposes to this unrestricted freedom of production; but you will remark that the hypothesis of unrestricted production is more favourable to your cause, because it is much more difficult to dispose of unlimited produce than of that which is restricted; and that the hypothesis of production restricted sometimes by one cause and sometimes by another, is more favourable to mine, which supports the doctrine that these restrictions are the very causes which, by restraining certain productions, impede the purchases which might be made of the only productions which can be indefinitely multiplied.

Upon the hypothesis, then, of perfect liberty, suppose the grower brings to market a sack of corn, which including his profit, comes to thirty shillings, and the manufacturer brings a piece of stuff which comes to the same price, and consequently these productions will be exchangeable at par.* Of these two dealers, if one have gained more than his costs of production, he will draw into his line of business a part of the persons occupied in the production of the other article, until in both parts productive services shall be equally well paid: this is an effect generally allowed.

Here we ought to observe, that upon this supposition, the producers of the piece of stuff have altogether gained wherewith to repurchase that entire piece, or to buy any other product of equal value. If, for instance, it amounts to thirty shillings, including all expenses, as well as the profit of the manufacturer at the current rate, this sum is distributed amongst all the persons concerned in the production of the piece of stuff; but in unequal shares, according to the nature and amount of the services which they have rendered in the operation of its production. If the piece contain ten yards, he who has received six shillings can buy two yards of it; he who has received eighteen pence can only buy half a yard: but all of them together can certainly buy the whole piece. But if instead of the stuff, they wish to buy the corn, they are able, together, to purchase the whole quantity, since its value is the same with that of the stuff; so each of them can purchase, according to their respective occasions, either a part of the piece of stuff, or an equivalent portion of the sack of corn. He who has received for his services in either of these productions six shillings, may use three shillings in the purchase of a tenth part of the piece of stuff, and three shillings in buying a tenth of the corn; in all cases it is clear that all the producers possess collectively the means of acquiring the whole of the productions.

Now, Sir, come your objections. If commodities increase, or wants diminish, you say, commodities will fall to a price too low to pay the labour requisite for their production.*

In proceeding to answer this objection, I wish to premise, that if I consent to employ your word labour, which, according to the explanation given in my former letter, is incomplete, I shall comprehend under that denomination, not only the productive services of the workman and his master, but the productive services rendered by capital and land; services which have their price, as well as personal labour, and a price so strictly real, that the capitalist and the landholder live upon it.

This point being understood, I answer you in the first place, that the depression of the price of productions, does not prevent the producers from purchasing the labour which has created them, or any other equivalent labour. In our hypothesis, the grower of corn will, by an improved process, produce a double quantity of corn, and the manufacturer a double quantity of stuffs; and the corn and stuffs will fall to half their prices. What then? The producers of corn will receive for the same services as before, two sacks worth only what one sack was before worth, and the producers of stuffs will have two pieces together of the same value, as one piece had formerly been: In the exchange called production, the same services will have respectively obtained a double quantity of produce; but these double quantities may be acquired by each other as before, and as easily as ever; so that without a greater expense in productive services, a nation in which this productive faculty should be thus developed, would have double the quantity of commodities for consumption, in corn or stuffs, or even in other articles; as we have agreed to represent by corn and stuffs, all things of which men stand in need for their support and accommodation. Productions in such an exchange are valued against productive services; now as in every exchange, the value of one of the terms is greater in proportion to the greater quantity of the other which it obtains, it follows that productive services are increased in value in proportion as productions are increased in quantity, and diminished in price.* This is the reason why the reduction of the price of productions, by increasing the value of the productive funds of a nation and of the income derived therefrom, augments the national wealth. I think this demonstration, which may be seen at length in my Traité d’Economic Politique, 4th edition, book ii. ch. 3, has done some service to science, by elucidating what previously had been felt, but not explained; that is to say, that although wealth is an exchangeable value, the general wealth is increased by the low price of commodities and productions of all sorts.†

Probably it never happened that the productive power of labour was suddenly doubled; and for all productions at once; but a gradual augmentation with respect to many articles, and in various proportions, has undoubtedly occurred. Among the antients, a scarlet mantle of equal fineness and size, solidity of texture and beauty of colour, to one of ours, cost unquestionably more than double the price it would cost amongst us; and I have no doubt that the corn, paid in labour, fell in value at least half at the unknown period of the invention of the plough. These articles, costing less labour, were, in consequence of the competition, given for what they cost, without any one being a loser; while all gained in their revenues by the event.

But to return to the first part of your objection: Thegrowers of corn and makers of stuffs will then produce more corn and stuffs than they can consume. Ah! my good Sir, after having proved that notwithstanding a fall of one half in the value of productions, the same labour may purchase the whole of them, and thereby procure an increase of as much again in the necessaries and luxuries of life, can it be necessary for me to prove to the justly celebrated author of the Essay on Population, that whatever is produced will find consumers, and that among the enjoyments procured by the quantity of productions which men can command, they do not place in the inferior ranks the comforts of a home, and the increase and preservation of their children? After having written three justly admired volumes, to prove that population always rises to the level of the means of subsistence, can you possibly have admitted the supposition of a great augmentation of produce, with a stationary number of consumers, and wants diminished by parsimony? (p. 355.)

Either the author of the “Essay on Population,” or the author of “Principles of Political Economy,” must be in the wrong. But every thing convinces us that it is not the former who is mistaken. Experience, as well as reasoning, demonstrates that a production, an article necessary or agreeable to man, is only rejected when people have not the means of paying for it. These means of purchasing are precisely those which establish the demand for a production, and give it a price. Not to want an useful thing is not to be able to pay for it. And what occasions this inability to pay for it? The being deprived of that which constitutes wealth: the being deprived of industry, land, or capital.

As soon as men are provided with the means of producing, they appropriate their productions to their wants; for production itself is an exchange, in which we offer (or supply) productive means, and demand in return the thing of which we feel the greatest want. To create a thing which no one wanted, would be to create a thing without value: it would not be to produce. But the moment it has a value, its producer may exchange it for other commodities which he may wish to procure.

This faculty of exchange, peculiar to man alone, among all the animals, adapts all productions to all wants; and permits him to depend, for his subsistence, not upon the kind of his production (for he can exchange it when he pleases, if it has value,) but upon its value.

The difficulty, you will say, is to create productions which shall be worth the costs of production. This I well know; and, in my next letter, you will find what I think on the subject. But upon the hypothesis which we have already supposed, of the freedom of industry, permit me to point out that the only difficulty we find in creating productions worth the costs of production, arises from the high demands of the vendors of productive services. Now the high price of productive services denotes that what is required exists; namely, that there are employments, the productions of which suffice to repay the costs of production.

You charge those who entertain the same opinions with me, with “not taking into consideration the influence of so general and important a principle in human nature, as indolence, or the love of case.” (p. 358.) You suppose the case that men, after having produced the means of satisfying their primary and most urgent wants, would prefer doing nothing more; the love of repose overbalancing in their minds the desire of enjoyment. This supposition is all in my favour. What do I say? That things are only sold to those who produce. Why are objects of luxury not sold to a farmer who chooses to lead a homely life? Because he prefers ease to the trouble of producing the means of purchasing objects of luxury. Whatever be the cause which limits production, whether the want of capital or of population, of diligence or liberty, the effect is, in my opinion, the same; the productions which are offered on one side are not sold, because sufficient commodities are not produced on the other.

You consider the indolence which refuses to produce as directly impeding the sale of productions, and I entirely agree with you on that point. But then, how can you look on the indolence of those whom you call unproductive consumers, as favourable to such sales. (c. vii. sect. 9.) “It is absolutely necessary,” you say, (page 463,) “that a country with great powers of production should possess a body of unproductive consumers.” How comes it that the indolence that refuses to produce is prejudicial to the markets in the former case, and favourable to them in the latter?

The fact is, this indolence is injurious to them in both cases. Whom do you designate by this numerous body of unproductive consumers, so necessary, according to you, to the producers? Is it the proprietors of lands and capitals? Undoubtedly they do not directly produce, but their instrument (their property) does it for them. They consume the value to the creation of which their lands and capitals have contributed. They therefore assist in production, and can only make purchases in consequence of this assistance. If they also contribute their personal services, and join to their profits as capitalists and landholders other profits as labourers, they can, by thus producing more, consume more; but it is not in their non-productive capacity that they increase the markets for the sale of productions.

Do you allude to public functionaries, the military, and fundholders? Still it is not on account of their non-productive quality that they increase the demand for produce. I am far from disputing the legitimacy of the emoluments which they receive; but I cannot believe that those who are taxed would be very much embarrassed by their money, even if these receivers of contributions did not come to their assistance: either their wants would be more amply satisfied, or they would employ this same money in a reproductive manner. In either case the money would be expended, and would promote the sale of some productions of equal value to what is now bought by those whom you call unproductive consumers. Confess then, Sir, that it is not through the unproductive consumers that sales are promoted, but by the productions of those who provide the means for their expenditure; and that even should all the unproductive consumers vanish, which heaven forbid, there would not be a pennyworth the less sold.

Nor do I know on what better foundation you decide (page 356,) that production cannot continue if the value of the commodities pays for but little labour beyond what they cost. It is by no means necessary to the continuance of production that a commodity should be worth more than the costs of its production. When an undertaking is begun with a capital of a hundred thousand pounds, it is sufficient to enable the proprietors to re-commence their operations, that the production which results from it should be worth a hundred thousand pounds. Where then, say you, are the profits of the producers? The whole capital has served to pay them;* and it is the price which it has paid to them which has formed the incomes of all the producers. If the produce which has been obtained be worth only one hundred thousand pounds, there is the capital reestablished, and all the producers are paid.*

I do not hesitate to strengthen your objection, by expressing it thus:—“Though each commodity may have cost the same quantity of labour and capital in its production, and they may be exactly equivalent to each other, yet they may both be so abundant, that they will not purchase more labour than they have cost. In this case, can production go on? Unquestionably not.”

And why not, I pray? Why could not farmers and manufacturers, who had produced together to the amount of sixty shillings in corn and stuffs, and would, as I have demonstrated, be able to purchase the whole of those commodities, sufficient for their wants—why could they not recommence their operations after making such purchases, and consuming the articles bought? They would have the same lands, the same capitals, the same industry as before; they would be precisely where they began; and they would have lived and been supported by their incomes, by the sale of their productive services. What more is requisite for the preservation of society? The great phenomenon of production analyzed and viewed in its proper light, explains all.

After the fear which you have testified, Sir, lest the produce of society should exceed in quantity what it can and will consume, it is natural that you should behold with terror its capitals increasing by parsimony; for the endeavour to employ capital causes an augmentation of productions,—new sources of accumulation—whence new productions arise: in short, you seem to fear that we should be suffocated beneath the overwhelming mass of our riches. This fear, I confess, does not torment me at all.

Was it for you, Sir, to renew the popular prejudices against those who do not expend their incomes in objects of luxury? You allow (page 351,) that no permanent increase of wealth can take place without a previous increase of capital; you allow (page 352), that those who labour are consumers, as well as the unproductive consumers; and yet you fear that if accumulation goes on, it will be impossible to consume the still increasing quantity of commodities produced by these new labourers (p. 353).

We must remove your vain terrors; but first permit me one reflection on the subject of modern political economy. It is of a nature to guide us on our way.

What is it that distinguishes us from the economists of the school of Quesnay? It is the scrupulous care with which we observe the concatenation of the facts which relate to wealth: it is the rigorous exactness which we impose on ourselves in describing them. Now, in order to see and to describe clearly, one must to the utmost of one’s power remain a passive spectator. Not that we may not, ought not, indeed, sometimes to sigh at those operations, pregnant with ruinous effects, of which we are often the sad and impotent witnesses. The philanthropic historian is not prohibited from indulging in the mournful reflections which political iniquity frequently draws from him. But opinions and advice are not history; and, I insist, are not political economy. Our duty to the public is to inform it how and why one fact is the consequence of another. If it approves or fears the consequence, that is sufficient; it knows what it has to do: but let us avoid exhortations.

It appears, therefore, to me, that I ought not, after Adam Smith, to preach up parsimony; and that you should not, after Lord Lauderdale, extol dissipation. Let us confine ourselves to observing the manner in which things succeed, and are connected with each other in the accumulation of capitals.

In the first place, it is to be observed that the greater number of accumulations are necessarily slow. Every one, whatever be his income, has to live before he can save; and what I here call living, is, in general, so much the more expensive as the party is richer. In most cases and in professions, the support of a family and its establishment in life demands the whole income, and often the capital besides; and when there are some yearly savings, they are generally in a very small proportion to the capital actually employed. A man of business, with ten thousand pounds and a calling, gains, in ordinary cases, from twelve to fifteen hundred pounds per annum. Now with that capital, and a business of equal value, that is to say, with a fortune of twenty thousand pounds, he is economical if he only spends one thousand; he then saves annually only five hundred pounds or the twentieth part of his capital.

If this fortune be divided, as it often is, between two persons, one of whom supplies the capital, the other the industry, the saving will be still much less; because in this case two families are to live upon the united profits of the capital and industry, instead of one.* None but very great fortunes, of whatever nature, can allow great savings; and very great fortunes are rare in all countries. Therefore capital can never augment with a rapidity capable of producing sudden revolutions in industrious pursuits.

I am not sensible of the fears which caused you to say (p. 357), “That a country is always liable to an increase of the funds for the maintenance of labour faster than the increase of population.” Neither am I afraid of the enormous surplus of productions to result from an augmentation of capital so slow in its nature. On the contrary, I see these new capitals, and the revenues which issue out of them, distribute themselves in the most advantageous way, amongst the producers. First, the capitalist, by augmenting his capital, increases his income, which invites him to multiply his enjoyments. A capital increased in the course of the year, purchases the following year a few more industrious services than before. These services being thus more in demand, are a little better paid; a greater number of the industrious find employment and reward for their faculties. They labour, and consume unproductively the produce of their labour; so that, if there is more produce created in consequence of this augmentation of capital, there are also more productions consumed. Now what is this but an increase of prosperity?

You say (p. 352, 360), “That if savings are made only with a view to increase capital—if capitalists do not add to their enjoyments by augmenting their incomes, they have no sufficient motive to save; for men do not save merely through philanthropy, and to make industry prosper.” This is true, but what conclusion do you desire to draw from hence? If they save, I say, that they promote industry and production, and that this increase of production is distributed in the most advantageous manner to the public. If they do not save, I know not how to help it: but you cannot conclude from this that producers will be better off, for what the capitalists would have saved would nevertheless have been equally expended. In expending it unproductively, the expenditure has not been increased in amount. As to riches accumulated, without being reproductively consumed, such as the sums amassed in the miser’s coffers, neither Smith nor I, nor any one, undertakes their defence; but they cause very little alarm; first, because they are always very inconsiderable, compared with the productive capital of a nation; and secondly, because their consumption is only suspended. All treasures get spent at last, productively or otherwise.

I cannot perceive on what account you look upon reproductive expenditure, such as that which is occasioned by digging canals, building shipping, erecting manufactories or barns, constructing machines, paying artists and artisans, as less favourable to producers than unproductive expenditure, or that which has for its object only the personal gratification of the prodigal. You say (p. 363), “While the farmers were disposed to consume the luxuries produced by the manufacturers, and the manufacturers those produced by the farmers, all would go on smoothly; but if either one or both the parties were disposed to save, with a view of bettering their condition and providing for their families in future, the state of things would be very different.” That is to say, I presume, that all would go wrong! “The farmer, instead of indulging himself in ribbons, lace, and velvets, would be disposed to be satisfied with more simple clothing; but by this economy he would disable the manufacturer from purchasing the same amount of his produce: and for the returns of so much labour employed upon the land, and all greatly increased in productive power, there would evidently be no market. The manufacturer, in like manner, instead of indulging himself in sugar, grapes, and tobacco, might be disposed to save, with a view to the future, but would be totally unable to do so, owing to the parsimony of the farmers and the want of a demand for manufactures.”

And a little farther on (p. 365), “The population required to provide simple clothing to such a society, with the assistance of good machinery, would be inconsiderable, and would absorb but a small portion of the proper surplus of rich and well-cultivated land. There would evidently therefore be a general want of demand both for produce and population: and while it is quite certain that an adequate passion for consumption (unproductive) may fully keep up the proper proportion between supply and demand, whatever may be the powers of production, it appears to be quite certain that a passion for accumulation must inevitably lead to a supply of commodities beyond what the structure and habits of such a society will permit to be consumed.”

You go so far as to ask “what would become of the demand for commodities, if all consumption, except bread and water, were suspended for the next half year?”* and it is to me, by name, that you address this question.

In this passage and the foregoing, you assume implicitly as fact, that a production saved is abstracted from every species of consumption; although in all these discussions, in all the writings you attack, in those of Adam Smith, of Mr. Ricardo, in mine, and even in your own,† it is laid down that a production saved is so much substracted from unproductive consumption to be added to capital, that is to say, to the value that is consumed reproductively. “What would become of commodities, if every species of consumption, except that of bread and water, were suspended for six months?” Why, Sir, they would be sold for a value every bit as great; for, after all, what would be thereby added to the sum of capital, would buy meat, beer, coats, shirts, shoes, furniture, for that class of producers whose savings had so enabled them to make purchases. But if they were to live on bread and water in order not to use their savings? - - - That is to say, you suppose that they would generally bind themselves to an extravagant fast from mere wantonness, and without any object whatever!

What would you reply, Sir, to him who should place among the derangements that might happen in society, the case of the moon’s falling on the earth? - - - - The thing is not physically impossible; it would only be requisite that the course of that planet in its orbit should be suspended, or even merely slackened by the approach of a comet. Nevertheless, I suspect you would be apt to discover something like impertinence in such a proposition; and I must own I think you would be very excusable.

Philosophy, indeed, does not reject the method of carrying principles to their extreme consequences, in order to exaggerate and discover their errors; but this exaggeration itself is an error when the nature of things itself presents continually increasing obstacles to the supposed excess, and thus renders the supposition inadmissible. To the disciples of Adam Smith, who think that saving is beneficial, you oppose the inconveniences of an excessive saving; but here the excess carries its remedy along with it. Wherever capital becomes too abundant, the interest which capitalists derive from it becomes too small to balance the privations which they impose upon themselves by their economy. It becomes more and more difficult to find good securities for investing money, which is then placed in foreign securities. The simple course of nature stops many accumulations. A great part of those which occur in families in good circumstances are stopped the moment it becomes necessary to provide for the establishment of children. The incomes of the fathers being reduced by this circumstance, they lose the means of accumulating at the same time that they lose part of the motives which induced them to save. Many accumulations are also stopped at the decease of the proprietor. An estate is divided amongst the heirs and legatees, whose situation is different from that of the deceased, and who often dissipate part of the inheritance instead of increasing it. That portion which the fiscal department seizes, is very sure to be dissipated, for the state does not employ it reproductively.

The prodigality and inexperience of many individuals, who lose part of their capitals in ill-concerted schemes, require to be balanced by the economy of many others. Every thing tends to convince us, that in what respects accumulation, as well as other matters, there is much less danger in leaving things to take their natural course, than in endeavouring to give them a forced direction.

You say (p. 495), “That in some cases it is contrary to sound principles of political economy to advise saving.” I repeat, Sir, that sound political economy is not apt to advise; it shews what a capital judiciously employed adds to the power of industry, in the same manner as sound agricultural knowledge teaches what a well-managed irrigation adds to the power of the soil; and after this it leaves to the world the truths which it demonstrates; of which every one is to avail himself according to his intelligence and capacity.

All that is required, Sir, of a man so enlightened as yourself, is, not to propagate the popular error, that prodigality is more favourable to producers than economy.* Mankind is already but too much disposed to sacrifice the future to the present. The principle of all amelioration is, on the contrary, the sacrifice of momentary temptations to future welfare. This is the first foundation of all virtue as well as of all wealth. The man who loses his character by violating a trust; he who ruins his health by giving way to his desires; and he who spends to-day his means of gain for to-morrow, are all equally deficient in economy: hence it has been said, with much reason, that vice is nothing, at the end of the account, but a bad calculation.

LETTER III.

Sir,

We have hitherto founded our discussions upon the supposition of an indefinite liberty, allowing a nation to carry to the utmost extent production of every description; and it appears to me that I have proved that if this hypothesis could be realized, a nation so circumstanced would be able to purchase all that it could produce. From this faculty, and from the natural and perpetual desire of men to ameliorate their condition, an infinite multiplication of individuals and of gratifications would infallibly arise.

But the course of events is different. Nature and the abuses of social order have set limits to this faculty of production; and the examination of those limits, by leading us back into the existing world, will serve to prove the truth of the doctrine established in my treatise on political economy, that the obstacles to production are the real and sole impediments to the sale and disposal of produce.

I do not pretend to point out the whole of the obstacles by which production is impeded. Many of these impediments will manifest themselves during the progress of the science of political economy; others, perhaps, will never be ascertained, but many of great influence may already be observed, both in the natural or political order of things.

In the natural order, the production of alimentary commodities is more rigidly limited than that of furniture and clothing. Although mankind stand in need of a much greater quantity, in weight and value, of alimentary goods, than of all other sorts of produce together, yet commodities of this description cannot be brought from any considerable distance, for they are difficult to transport, and the care of them is expensive. As to those which may grow upon the territory of a nation, they are confined within boundaries, which the improvement of agriculture, and increase of capitals engaged therein may certainly extend,* but which will always be sure to exist. Arthur Young thinks that France does not produce more than half the alimentary produce which she is capable of producing. Suppose he is right in this; suppose even that with a more perfect agricultural system, France were to obtain double her present quantity of rural produce, without employing more agricultural labourers,† she would then possess 45 millions of inhabitants at liberty to devote themselves to other occupations. Her manufactures would find better markets in the country than at present, because the country would be more productive, and the surplus would be sold among the manufacturing population itself. People would not be worse fed than at present, but they would in general be better provided with articles of manufacture; with better dwellings, more furniture, finer clothing, and with objects of utility, instruction, and entertainment, which are now reserved for a very small number of people. The rest of the population is still rude and barbarous.

But in proportion as the manufacturing class increased, alimentary produce would become more in demand and dearer with relation to manufactures. The latter would produce diminished profits and wages, which would discourage those engaged in such branches of industry; hence it is easy to conceive how the restrictions which nature imposes on agricultural production, limit the produce of manufacture. But this effect, like all which happens naturally and results from the nature of things, would be very gradual, and attended with fewer inconveniences than any other possible combination.

Admitting the limits thus set by nature to the production of provisions, and, indirectly, of all other commodities, it may be asked how it happens that very industrious countries, such as England, where capital abounds and communications are easy, find the sale of their goods impeded long before their agricultural produce has attained its utmost limit. Is there then some unsoundness—some concealed disease, which preys upon them? - - - - There are probably several, which will successively show themselves; but I already perceive one—immense—fatal—and deserving the most serious attention.

Suppose some individual, a collector of public revenue for instance, were to take up his residence in the neighbourhood of each commercial, manufacturing, or agricultural establishment; and that this man without increasing the goodness of the produce, its utility, or the quality by which it becomes an object of desire and demand, were nevertheless to increase the costs of its production: what, I ask, would be the consequence? The value which is set on a commodity, even where the means of obtaining it exist,* depends on the enjoyment and utility which it is expected to afford. In proportion as its price rises, many persons cease to think it worth the expense which it occasions, and thus the number of its purchasers is diminished.

Besides, taxes do not augment the profits of the producer, although they increase the price of every production: the incomes of the producers become insufficient to purchase the produce, the moment its price is raised by the circumstance which I have just described.

Let us represent this effect by numbers, in order to pursue it to its remotest consequences. It will be well worth the trouble of examination, if it enable us to discern one of the principal causes of the evil which menances every industrious nation of the earth. Already the distresses of England forewarn other countries of the miseries which are reserved for them. They will be more painful wherever a more robust temperament excites to a greater developement of industry; the happiest effects will result from this, if it be left at full liberty; if it be restrained, then terrible convulsions will be the consequence.

If the manufacturer who produces a piece of stuff, after dividing between his assistants and himself a sum of thirty shillings for the productive services which have been employed in the production of the piece, is moreover compelled to pay six shillings to the receiver of taxes, either he must cease to make stuffs, or he must sell them for 36 shillings the piece.* But when this piece of stuff comes thus to be valued at 36 shillings, those who produced it, and have only received altogether 30 shillings, will only be able to buy five-sixths of the same article of which they could have previously purchased the whole; he who before could purchase a yard, must now be restricted to five-sixths of a yard, and so on.

The producer of corn who pays to another receiver a tax of six shillings on a sack of corn, of which the productive services have cost 30, must now obtain 36 for his sack instead of 30. It follows that the producers of corn and stuffs, when in want of either of those articles, can only acquire by their gains five-sixths of their productions.

As this effect is seen in these two commodities reciprocally, it may also take place in other articles. Without changing the state of the question, it is easy to suppose that producers, in whatever species of production they may be occupied, have occasion for liquors, colonial produce, lodgings, amusements, and objects of convenience and of luxury. These commodities they will find dearer than they can afford, with incomes such as they now enjoy, according to the rank which they occupy among the producers. Upon the hypothesis which we have taken for our example, there will always remain a sixth part of the produce unsold.

True it is, that the six shillings taken by the collector go to some one, and that those whom the collector represents (public functionaries, military men, or public creditors) may employ this money in obtaining the remaining sixth part, either of the sack of corn, or the piece of stuff, or of any other production. This indeed is what actually happens. But let it be observed that this consumption is entirely at the expense of the producers; and that if the collector, or those by whom he is authorized, consume a sixth part of the produce, the producers are thereby compelled to live upon the remaining five-sixths.

This you will allow; but, at the same time, I shall be told that any one may live upon five-sixths of what he produces. I am willing to admit that; but permit me to ask whether you think the producer could live equally well if two-sixths, instead of one, or one-third of his produce, were demanded from him?—No; but still he would live. - - - Ah! you think he would live! Then would he still live in case two-thirds were wrested from him?—then three-fourths?—But I perceive you do not attempt to reply.

Now, Sir, I flatter myself that my answers to the most urgent objections offered by you and M. Sismondi will be easily comprehended. “If, by creating new productions, (say you,) we are enabled to consume them, or to exchange them for others of which there exists a superabundance, and thus to procure markets for both, why then are not such new productions created? Is capital wanting? Capital abounds: every where undertakings are sought for in which it may be advantageously employed: it is evident (you affirm) that there are no longer any such,” (p. 499); “that all kinds of commerce are already overstocked with capital and labourers, who all offer their produce under prime cost,” M. Sismondi assures us.*

I am not quite prepared to say, that to follow the useful arts is a fool’s trade; but you will allow, gentlemen, that if ever it should become so, the consequence would not be different from that which you are lamenting. To buy the superabundant produce, it would be requisite to create other produce: but if the producers were placed in too disadvantageous a situation; if, after exerting the productive means sufficient for producing an ox, they were to produce only a sheep, and for this sheep, in exchange for any other kind of produce, were only to gain the same quantity of utility which exists in a sheep, who would go on producing under such disadvantages? The persons engaged in such an undertaking would have made a bad business of it: they would have expended a value which the utility of their produce would not suffice to reimburse; whoever should be silly enough to create another production sufficient to purchase the former, would have to contend with the same disadvantages, and would involve himself in the same difficulties. The benefit which he might derive from his production would not indemnify him for its expenses; and whatever he might buy with this production would be of no greater value. Then, indeed, the workman would no longer be able to live by his labour, and would become burthensome to his parish;* then the manufacturer, unable to live on his profits, would renounce his business. He would buy annuities, or go abroad in search of a better situation, a more lucrative employment, or, what is exactly equivalent, a production at less expense.† If he were there to meet with other inconveniences, he would again seek another theatre for his talents; and different nations would be seen pouring forth upon each other their capitals and their labourers; that is to say, all that is requisite to raise human society to the highest pitch of prosperity, if it understood its true interests, and the means by which they may be promoted.

I shall not attempt to point out the parts of this picture which apply more particularly to your country, Sir, or to any other; but I leave it for your consideration, and that of all well-meaning men who exert themselves to promote the welfare of the interesting, laborious, and useful part of mankind. Why do the savages of the new world, whose precarious subsistence depends on the flight of an arrow, neglect to build villages, and to inclose and cultivate lands? Because this kind of life demands labour too assiduous and painful. They are in the wrong; they calculate ill, for the privations they endure are far less tolerable than the constraints which a well-regulated social life would impose upon them. But if this social life were a galley, in which, after rowing with all their strength for sixteen hours out of the twenty-four, they were able to obtain only a piece of bread insufficient to feed them, they might indeed be excused for disliking social life. Now whatever renders the condition of the producer, the essential party in every society, more painful, tends to destroy the vital principle of the social body; to reduce a civilized people to a savage state; to introduce a state of things in which less is produced and less consumed; to destroy civilization, which is extended in proportion to the increase of the quantity of production and consumption. You observe, in several places, “that man is naturally indolent, and that it betrays great ignorance of his nature to suppose that he will always consume all he can produce” (p. 503). You are right, indeed; but I maintain no other doctrine when I say that the utility of productions is no longer worth the productive services, at the rate at which we are compelled to pay for them.

You appear convinced of this truth where you say, on another occasion (p. 342), “A tax will entirely put an end to the production of a commodity, if no one of the society is disposed to value it at a price equal to the new conditions of its supply.” And this inherent vice (of costing in charges of production more than it is worth) the commodity carries with it to the ends of the earth. It is every where too dear to command what it has cost, because it must be purchased by productive services equivalent to those employed in its production.

Another consideration, by no means unimportant is, that the costs of production are augmented not only by multiplied duties, by the dearness of articles of every sort, but by the habits which are produced by a vicious political system. If the progress of luxury and enormous emoluments—if the facility of obtaining illegitimate profits through favour and influence in contracts and financial operations, force the manufacturer, the merchant, the real producer, to require profits disproportioned to the services which they render to the production, in order to maintain their rank in society, then all these abuses tend to raise, from other causes, the costs of production, and consequently the price of productions, above the value of their actual utility. The consumption of commodities consequently becomes more limited; in order to acquire them, a greater quantity of productive services must be employed in the creation of another production: the charges of production must be increased. Consider then, Sir, how extensive are the evils produced by encouraging useless expenses, and multiplying unproductive consumers.

The rapid sale of articles offered at a cheap rate by means of expeditious methods of production, proves how truly the cost of production is the real impediment to the sale of goods. If the price be reduced one fourth, it is found that a double quantity is sold. The reason is, that every one is then enabled to acquire it with less labour, less costs of production. When under the Continental system it was necessary to pay five francs for a pound of sugar, whether the money were applied to the production of the sugar, or of any other commodity to be exchanged for it, France was able to purchase only fourteen millions of pounds.* Now that sugar is cheap, we consume eighty millions of pounds per annum, being about three pounds for each person. At Cuba, where sugar is still cheaper, they consume above thirty pounds for every free person.†

Let us then agree upon a truth which on every side presses on our notice. To levy excessive duties, with or without the participation of a national representation, or by means of a mock representation, no matter which, is to augment the costs of production without increasing the utility of the produce, without adding any thing to the satisfaction which the consumer may derive from it, and to impose a fine on production—on that which enables society to exist. And as among producers some are more advantageously situated than others for throwing upon their competitors all the burthen of circumstances, they fall heavier on some classes than on others. A capitalist can often withdraw his capital from one employment to place it in another, or to send it abroad. The proprietor of a concern may often be rich enough to be able to suspend his operations for a time. Besides, as long as the capitalist and the master can make their own terms with the workman, the latter is obliged to work constantly, and at any price, even when the employment does not procure him a subsistence. Thus do the excessive charges of production reduce several classes of certain nations to the necessity of confining their consumption to articles the most indispensable to their existence, and the lowest classes of all to die of want. Now, Sir, is not this, upon your own principle,* the most shocking and barbarous of all the methods of reducing the numbers of mankind?†

We now come to the objection in which there is, perhaps, the greatest force, because it is supported by an imposing example. In the United States, the obstacles to production are few, the taxes are light; and there, as in all other places, merchandize abounds, for which there exists no demand. “These difficulties,” you say,‡ “cannot be attributed to the cultivation of poor land, restrictions upon commerce, and excess of taxation. Something else, therefore, is necessary to the continued increase of wealth, besides an increase in the power of producing.”

Well! will you believe it, Sir? it is the very power of production itself, at least for the present, of which the Americans are in want, to enable them to dispose of the overflowing productions of their commerce to advantage.

The favourable situation of this people, during a long war, in which they have almost always enjoyed the advantage of neutrality, has turned their industry, and capitals, far too exclusively to external and maritime commerce. The Americans are enterprising; their voyages are cheaply performed; they have introduced into navigation long courses, and various accelerating manœuvres, which by shortening voyages, reduce their expense, and correspond with those improvements in the arts which diminish the costs of production; in short, the Americans have drawn to themselves all the maritime commerce which the English have not been able to engross; they have, for many years, been the intermediate agents between all the Continental powers of Europe and the rest of the world. Their success has even exceeded that of the English wherever those nations have been competitors, as in China.

What has been the result? An excessive abundance of those commodities which are obtained by commercial and maritime industry; and when the general peace at length opened the highway of the ocean to all nations, the French and Dutch ships rushed with a kind of madness into the midst of a career thus newly opened to them; and in their ignorance of the actual state of countries beyond sea—of their agriculture, arts, population, and resources for buying and consuming—these ships, escaped from a tedious detention, carried in abundance the produce of the Continent of Europe to all ports, presuming that the other nations of the globe would be eager to possess those commodities after their long separation from Europe.

But in order to purchase this extraordinary supply, it would have been requisite for these countries to create immediately extraordinary quantities of produce of their own; for, once more I repeat it, the difficulty at New York, at Baltimore, the Havannah, Rio-Janeiro, or Buenos-Ayres, is not to consume European manufactures. They would consume them very willingly if they could pay for them. But the Europeans required payment in cottons, tobaccos, sugars, and rice; but this demand even enhanced their prices: and as, notwithstanding the dearness of these commodities, and of money, which is also merchandize, it was necessary to take them or return without payment, these very articles, thus rendered scarce in their original country, became more abundant in Europe, and at length so completely overstocked the European markets, that a sufficient price could not be obtained for them, although the consumption of Europe had greatly increased since the peace: hence the disadvantageous returns which we have witnessed. But suppose for an instant that the agricultural and manufactured produce of both North and South America had suddenly become very considerable at the time of the peace, in that case the people of those countries, being more numerous, and producing more, would easily have purchased all the European cargoes, and furnished a variety of returns at a cheap rate.

This effect will, I doubt not, take place with respect to the United States, when they are enabled to add to the objects of exchange furnished by their maritime commerce, a greater quantity of their agricultural produce,* and perhaps some articles of manufacture also. Their cultivation is extending; their manufactures multiply; and as a natural consequence their population increases with astonishing rapidity. In a few years the whole of their varied industry will form a mass of produce, amongst which will be found more articles calculated to furnish profitable returns, or at least profits of which the Americans will employ a part in the purchase of European merchandize.

Merchandize produced by Europeans at a less expense than it can be made for in America will be carried to the United States; and goods which the soil and industry of America produce cheaper than they can be had elsewhere, will be carried home in exchange. The nature of demands will determine the nature of productions; each nation will prefer engaging in that kind of production in which it has the greatest success, that is, which it produces at the smallest expense; and the result will be exchanges mutually and permanently advantageous. But these commercial ameliorations can only be brought about by time. The talents and experience which the arts require are not acquired in a few months; years are necessary. The Americans will not discover in what manufactures they can succeed until after several attempts.* Then those particular manufactures will no longer be carried to them; but the profits which they will derive from this production will enable them to purchase other European produce.

On the other hand, agricultural speculations, however rapid may be their extension, can only by very slow degrees, present by their produce markets to the productions of Europe. As fast as culture and civilization extend beyond the Allegany mountains, into Kentucky and the territories of Indiana and the Illinois, the first gains are employed in the subsistence of the colonists as they arrive from the states more anciently peopled, and in building their habitations. The profits which exceed these first wants, enable them to clear a greater quantity of land; the next gains are employed in manufacturing their own produce for local consumption: and only the savings of a fourth order can be applied to the manufacture and fabrication of the produce of the soil for distant consumption. It is not until this latter state of things takes place that new states begin to offer markets for Europeans; this cannot be in their earliest infancy: their population must have had time to increase, and their agricultural produce must have become sufficiently abundant to oblige them to exchange it at a distance for other value. Afterwards, and by the natural progress of things, instead of exporting raw produce, they export produce which has received some preparation, and which consequently, comprising a greater value in a less bulk, is adapted to bear the expense of carriage. Such produce will one day come to Europe from New Orleans, a city destined to become one of the greatest marts in the world.

This point has not yet been attained; is it then wonderful that the productions of the United States have not yet afforded markets sufficient for the commercial efforts which followed the peace? Is it extraordinary that the commercial produce brought by the Americans themselves into their ports, at the conclusion of an excessive developement of their nautical industry, should yet remain there in superabundance?

You see, Sir, that there is nothing in this fact but what is quite conformable to the doctrine of your antagonists.

Returning to the painful situation in which all kinds of industry is at present placed in Europe, I might add to the discouragement resulting from the excessive increase of the charges of production, the disorders which such charges occasion in the production, distribution, and consumption of the values produced; disorders which frequently bring into the market a supply superior to the demand, and at the same time drive out of it much which might have been sold, and the prices of which would have been employed in the purchase of the former. Certain producers endeavour to recover by the quantity of what they produce a part of the value consumed by the revenue. Some productive services are able to escape from the avidity of the fiscal agents, as often happens with the productive services of capital, which frequently contrives to obtain the same interest, while lands, buildings, and industry are oppressed. Sometimes a workman who finds it difficult to maintain his family, endeavours by excessive toil to make up for the low price of his labour. Are not these causes which derange the natural order of production, and which occasion productions of some kinds to exceed what would have taken place, if the wants of the consumers alone had been considered? All objects of consumption are not necessary to us in the same degree. Before we reduce our consumption of corn to one half, we reduce our consumption of meat to a fourth, and our consumption of sugar to nothing. There are capitals so engaged in certain undertakings, particularly in manufactures, that the proprietors often consent to lose the interest, and sacrifice the profits of their industry, and continue to labour merely to support the establishment until more favourable times, and to preserve their utensils and connexions: sometimes they are apprehensive of losing good workmen, whom the suspension of employment would compel to disperse; the humanity of the proprietors is sufficient, in some instances, to carry on a manufacture which is no longer in demand. Hence arise disorders in the progress of production and consumption, still more grievous than those which originate in the prohibitions of the revenue or the vicissitudes of the seasons. Hence we see inconsiderate productions—hence recourse is had to rainous means—hence commercial establishments are overthrown.

At the same time I must remark, that although the evil is great, it probably seems greater than it is. The commodities which overstock all the markets in the world, may strike the eye by their magnitude in a mass, terrify the commercial world by their depreciation in value, and yet constitute only a very small part of the merchandizes of every sort made and consumed. There is no warehouse but would speedily be emptied, if every species of production of which its contents are made up, were to cease simultaneously in every part of the world. Besides, it has been observed, that the slightest excess of supply beyond the demand is sufficient to produce a considerable alteration in price. It is remarked in the Spectator (No. 200), that when the harvest exceeds by a tenth what is ordinarily consumed, the corn falls to half its price. Dalrymple* makes an analogous observation. We must not then be surprised if a slight excess should be frequently represented as an excessive superabundance.

This superabundance, as I have already remarked, is also occasioned in part by the ignorance of producers or traders on the nature and extent of the demand in the places to which goods are consigned. Of late years there have been many speculations hazarded, because there have been many new relations between different nations. Data were every where wanting to serve as the foundation of good calculations; but does it follow that because many affairs have been unprofitable, that others with better information may not succeed? I venture to predict that as new relations shall grow old, and reciprocal wants be more justly appreciated, the markets will cease to be glutted, and permanent connexions of mutual profit will be established.

But at the same time it is expedient to diminish gradually, and as far as the circumstances of every state will allow, the general and permanent inconveniencies which spring from too expensive a productive system. We ought to be firmly convinced that the more others gain, the more easily we shall sell our produce; that there is only one way to gain, namely, to produce, either by our own labour, or by that of the capital or lands we possess; that unproductive consumers are only substitutes for productive consumers; that the more producers, the more consumers there are; that, by the same rule, every nation is interested in the prosperity of every other nation, and that all are interested in having the easiest communications with each other, for every difficulty is equivalent to an increase of expense.

Such is the doctrine established in my writings, and which, I acknowledge, does not appear to me to have been shaken. I took up my pen to defend it, not because it is mine (the self-love of an author would be contemptible where such great interests are concerned), but because it is eminently social, and points out to mankind the sources of true wealth and the danger of drying them up. The rest of this doctrine is no less useful, because it teaches that capital and land are only productive when they are become respected property; that the poor man is interested in defending the property of the rich; that he is consequently interested in the preservation of good order, because a subversion, which could only yield him a temporary plunder, would deprive him of a permanent income. When we study political economy as it ought to be studied; when we have once perceived that the most useful truths rest on the most certain principles; we have nothing so much at heart as to place these principles within the reach of every understanding. Let us not augment their difficulties by useless abstraction; let us not recommence the folly of the economists of the 18th century by endless discussions on the net produce of lands; let us describe the manner in which facts occur, and expose the chain which connects them; it is then that our writings will acquire a great practical utility, and the public will be truly indebted to writers who are, like you, Sir, possessed of such ample means of enlightening them.

LETTER IV.

Sir,

I expected to have found in your “Principles of Political Economy,” something calculated to settle public opinion on the subject of machinery, and all those inventions for facilitating production by which manual labour is saved, and the quantity of produce is increased without any addition to the costs of production. I was in hopes to meet with such definite principles, such exact reasoning, as would command conviction; to which your Essay on Population has accustomed the public; - - - - but the present is not the Essay on Population.

It seems to me, (for I am sometimes reduced to the necessity of using this form of expression after having read your demonstrations)—it appears to me that you recognize only one advantage in the use of expeditious methods of production; namely, that of multiplying produce to such a degree, that even when its selling price is diminished, the total value of the quantity produced still exceeds the value of the quantity produced before the introduction of the improvements.* The advantage which you particularize is incontestable; and it had previously been observed, that the total value of the cotton manufactures, as well as the number of workmen employed in that pursuit, was singularly increased since the introduction of the improved methods of manufacture. An analogous observation had been made with respect to the printing-press, the machine employed in the multiplication of books, a branch of produce which now employs (besides authors) a much greater number of industrious persons than formerly, when books were copied by hand, and produces a sum far greater than when books were more expensive.

But this very substantial advantage is only one amongst many which nations have derived from the use of machines. It only refers to certain articles of produce, the consumption of which was capable of sufficient extension to counterbalance the diminution of price; but there is in the introduction of machinery an advantage common to every economical and expeditive process; an advantage which would be felt, even where the consumption of the article produced was not susceptible of any increase; an advantage which ought to be fully appreciated in the principles of political economy. You will excuse my returning to some elementary notions for the purpose of clearly explaining myself on this point.

Machines and tools are both productions which, as soon as they are produced, become capital, and are employed in the production of other articles. The only difference which exists between machines and tools is, that the former are complex tools, and the latter are simple machines. As there are neither tools nor machines which create power, they must be considered as means by which we transmit an action, a vivid force, which we have the power of directing to an object intended to be modified by that force. Thus a hand-hammer is a tool by means whereof we employ the muscular force of a man, in certain cases to beat out a leaf of gold; and the hammers of a great forge are likewise tools by means whereof we employ a fall of water in flattening iron bars.

The employment of a power gratuitously furnished by nature, does not take away from a machine its quality as a tool. Weight multiplied by quickness, which constitutes the power of a goldbeater’s hammer, is no less a physical power of nature, than the weight of the water which falls from a mountain.

What is the whole of our industry, but the employment of the laws of nature? It is by obeying nature, says Bacon, that we learn to command her. What difference do you perceive between knitting-needles and a stocking-frame, but that the latter is a tool more complex and more efficient than the needles, but, in fact, applying, to greater or less advantage, the properties of metal, and the power of the lever, to fabricate the vestments with which we cover our feet and legs?

The question is, therefore, reduced to this:—Is it advantageous for man to take into his hands a tool more powerful, capable of doing a much greater quantity of work, or of doing it much better, in preference to another tool of a gross and imperfect construction, with which he must work more slowly, with greater toil, and less perfection?

I should be doing injustice to your good sense and that of our readers, were I to doubt of the universal answer.

The perfection of our tools is connected with the perfection of our species. It is this which constitutes the difference which we observe between ourselves and the savages of the South Seas, who have hatchets of flint, and sewing-needles made of fish-bones. It is no longer permitted to a writer on political economy to recommend the prohibition of such means as chance or genius may furnish us with; even for the express purpose of reserving more labour for our workmen: he would soon find all his own reasoning employed to prove that we ought, retrograding instead of advancing in the career of civilization, to relinquish, successively, all the discoveries we have made, and render our arts more imperfect for the purpose of multiplying our toils, and of lessening our enjoyments.

Undoubtedly there are inconveniences inseparable from the transition from one order of things to another, even from an imperfect order to one which is better. What wise man would wish to abolish, all at once, the prohibitions which oppress industry, and the customs and duties which impede the intercourse of nations, prejudicial as they are to general prosperity? On these subjects, the duty of well-informed persons consists, not in suggesting motives for preventing and proscribing every species of change, under pretext of the inconveniences which it may produce; but in appreciating those inconveniences; in pointing out the practicable means of averting or mitigating them, in order to facilitate the adoption of a desirable amelioration.

The inconvenience, in this case, is a shifting of income, which, when sudden, is always more or less distressing to that class whose revenues are diminished. The introduction of machines diminishes (sometimes, but not always) the income of the classes who derive their subsistence from their corporeal and manual faculties, and augments the revenues of those whose resources consist in their intellectual faculties and their capitals. In other terms, machines which abridge labour, being, in general, more complex, demand more considerable capitals. The person who uses them is, therefore, obliged to purchase more of what we call the productive services of capital, and requires less of what we call the productive services of labourers. At the same time, as they require in their general and particular management perhaps more extensive combinations and more sedulous attention, they require more of that species of service whence the profit of the proprietor is derived. Cotton-spinning, by means of the small wheel as it was formerly carried on by many families in Normandy, scarcely merits the name of a factory; whilst a cotton-mill on a large scale is a factory of the first consequence.

But the most important, though not the most generally perceived, effect resulting from the use of machinery, and, in general, from every expediting process, is the increase of income which is thereby acquired by the consumers of the articles produced; an increase which costs nothing to anybody, and merits some more detailed examination.

instead of 16,000, which it would have cost if the process of the ancients had been still in use.

The same population is nevertheless fed; for the mill does not diminish the quantity of meal produced; the profits gained in society still suffice to pay for the new produce; for as soon as the 6000 francs are paid for expenses of production, that moment 6000 francs are gained in profit; and society enjoys this essential advantage, that the individuals of whom it consists, whatever be their means of existence, their incomes—whether they live by their labour, their capitals, or their landed possessions, reduce the portion of their expenses devoted to paying for the making of meal, in the proportion of sixteen to six, or by five-eights. Where a man must formerly have expended eight francs a year for this purpose, he will now have to lay out only three, which is exactly equivalent to an increase of income: for the five francs saved in this article may be spent on any other. If equal improvements took place in every article of produce in which we expend our incomes, those incomes would actually have been increased by five-eights; and a man who gets 3000 francs a year, whether by grinding corn, or in any other manner, would really be as rich as if he had gained 8000 before these improvements were made.

These considerations must have escaped the attention of M. Sismondi, when he wrote the following passage:—“* Whenever the demand for consumption exceeds the means of producing, every new discovery in mechanics or the arts is a benefit to society, because it furnishes the means of satisfying existing wants. But when the production is fully equal to the consumption, every such discovery is a calamity, because it only adds to the enjoyments of the consumers the opportunity of obtaining them at a cheaper rate, while it deprives the producers even of life itself. It would be odious to weigh the value of cheapness against that of existence.”

It is plain that M. Sismondi does not adequately appreciate the advantages of cheapness, or conceive that what is saved in the expense of one article, may be laid out in additional purchases of another commodity, beginning with the most indispensable.

Hitherto no inconvenience has been known to arise from the invention of corn-mills; and their beneficial operation is seen in the diminished price of produce, which is equivalent to an increase of income to all those who make use of the invention.

But it is said that this increase of income obtained by the consumers, is taken from the profits of the nineteen unfortunate persons whom the mill has deprived of employment. This I deny. The nineteen labourers retain the possession of their industrious faculties, with the same strength, the same capacity, the same means of working, as before. The mill does not place them under the necessity of remaining without occupation, but only of finding another employment. Many circumstances are attended with this inconvenience, without producing similar advantages to compensate for it. A fashion which passes away, a war which closes a market, a change in the course of commerce, are a hundred times more ruinous to the labouring class than any new invention whatever.

It may still be insisted that, supposing the nineteen discarded labourers were instantly to find capitals to set them to work in some new branch of industry, they would not be able to sell their produce, because the mass of the productions of the society would be thereby increased, while the sum of its revenues would remain without addition. Is it then forgotten that the revenues of the society are increased by the very circumstance that there are nineteen new labourers? The wages of their labour form a revenue which enables them to acquire the produce of their labour, or to exchange it for any other equivalent commodities. This is sufficiently established by my preceding letters.

Strictly speaking, then, one disadvantage only remains—the necessity for these men to find a new occupation. Now the progress which is made in a particular department of industry, is favourable to industry in general. The increase of income which is derived from a saving in the expense of one article of consumption, tends to an expenditure on other objects. Nineteen men accustomed to grind corn have been deprived of that employment alone; a hundred new occupations, or extensions of the old branches of industry, have been thrown open to their exertions. I desire no better proof of this than the increase which has taken place in the works and population of every place in which the arts have attained a high degree of cultivation. We are so much accustomed to see the productions of new arts, that we scarcely remark them; but how forcibly would they strike the ancient inhabitants of Europe, could they revisit the earth! Let us imagine for a moment some, even of the most enlightened, such as Pliny or Archimedes, walking about one of our modern towns; they would think themselves surrounded by miracles. The abundance of our crystals and glasses, the magnitude and number of our mirrors, our clocks, our watches, the variety of our stuffs, our iron bridges, our engines of war, our ships, would astonish them beyond expression. And if they were to visit our workshops, what a multitude of occupations of which they could not have the least idea! Would they ever imagine that thirty thousand men are constantly employed all night, in Europe, in printing newspapers which people read the next morning while they are taking tea, coffee, chocolate, and other refreshments, as new to them as the newspapers themselves? Doubt not, Sir, that if the arts, as I find pleasure in thinking they will, continue to improve; that is to say, to produce more at less cost, new millions of men will, in a few ages, produce things which, could we rise up to see them, would excite in our minds no less surprise than Archimedes and Pliny would feel if they were to revive amongst us. We who scribble paper in search of truth, must be on our guard: if our writings should go down to our grandchildren, the terror with which we contemplate improvements which they will have greatly excelled, may probably appear to them somewhat laughable. And as to the workmen of your country, at once so ingenious and so miserable, our descendants may, perhaps, look upon them as persons, who were forced, in order to get their livelihood, to dance upon a rope with a weight fastened to their feet. They will read in history that some new plan was every day proposed to enable them to continue dancing, but unluckily the only one which could have been efficacious was omitted—the simple expedient of taking off the weight. Then our descendants, after having laughed at, may, perhaps, see reason to pity us.

I have said that beneficial improvements may be attended with transient inconveniences. Those which are produced by the invention of expeditious methods, are fortunately mitigated by circumstances which have been already described, and by others to which I have not yet alluded. It has been said that the cheapness resulting from an economical process, promotes the consumption of the article produced in such a manner, that a greater number of people are employed in its production than before; as has been observed in the spinning and weaving of cotton: and you yourself consider this circumstance alone as capable of more than compensating for the injury. I will add, that in proportion as machines and accelerating methods become more numerous, the difficulty of still discovering new improvements is increased; particularly in an old art in which the workmen are already formed. The most simple machines were first invented; afterwards came others more complex; but as they grow more complex, they are more expensive to establish, and require more human labour in their formation, which, in some degree, indemnifies the labouring classes for the work which they lose through the use of the new machine. The complication and dearness of a machine are obstacles to its being too suddenly adopted. The machine for dressing cloth by means of a rotary movement, cost, originally from 25,000 to 30,000 francs. Many manufacturers were at first unable to lay out such a sum; others hesitated, and still hesitate to adopt it, waiting for a satisfactory confirmation of its success. When machines are thus slowly introduced, almost all the inconveniences of such inventions are avoided. In short, I have always found, practically, that new machines produce more alarm than injury. As to the benefit arising from them, it is constant and durable.

M. de Sismondi raises an objection founded on what would happen supposing a hundred thousand knitters to make with their needles ten million pair of stockings, and a thousand workmen with stocking-frames to produce the same quantity. The result, according to him, would be, that the consumers of the stockings would only save fifty centimes (or half a franc) per pair, and yet that a manufacture which formerly maintained a hundred thousand persons, would now support only twelve hundred. But he obtains this result only by suppositions which are inadmissible.

To prove that the consumers of stockings would only pay fifty centimes less than before, he supposes that the costs of production would be, in the first case, as follows:—

And in the second case, he sets down the expenses thus:

Now I observe in this account thirty millions for the interest of capital sunk, and the profit of the proprietors; which is to suppose a capital of two hundred millions for an undertaking capable of supporting twelve hundred men, and paying fifteen per cent for capital: a supposition truly extravagant.

A workman cannot use two frames at once; a thousand workmen would therefore require a thousand frames. A good stocking-frame costs six hundred francs; the thousand would consequently cost six hundred thousand francs. Add to this capital, a like capital for other utensils, workshops, &c., still the capital required will be only twelve hundred thousand francs. Admit that the interest and profits of the proprietors should be fifteen per cent on this capital, which is very fair; for a permanent business, which should produce more, would be reduced by competition to this rate of profit. This being allowed, we shall find for interest and profits of the proprietors one hundred and eighty thousand francs, instead of thirty millions.

A like observation applies to the two millions for the expenses of repairs, &c.; for even if new machines were to be bought every year instead of repairing the old ones, still they would only cost six hundred thousand francs. Nor would the circulating capital cost any think like two millions; for of what is this sum composed, according to M. Sismondi’s hypothesis? Of the raw materials, which he estimates at ten millions, and the wages, for which he allows one million; altogether eleven millions: the interest whereof at five per cent is five hundred and fifty thousand francs. But as in this business the manufactures may be completed and sold in less than six months, the capital, for which interest is to be allowed for the year, may be employed twice, and would cost each time only two hundred and seventy-five thousand francs, instead of two millions.

All these expenses together make only twelve millions fifty-five thousand francs, instead of fifty millions, which, according to M. de Sismondi’s suppositions, would be the cost of the stockings made by the knitting-needles. I am far from supposing that the saving would be so enormous, for while the author has greatly exaggerated the capital requisite for the machines, he has attributed to them too great a degree of efficacy in supposing they would enable twelve hundred workmen to do the work of a hundred thousand; but I say, that if the saving in this production were really so great, the low price of the stockings, or any other article of clothing produced under similar circumstances, would operate so favourably in extending the consumption, that instead of the hundred thousand supposed workmen being reduced to twelve hundred, their number would, in all probability, be doubled.

And if the consumption of this particular article would not admit of so excessive a multiplication of the same commodity, the demand for other kinds of produce would be increased in proportion; for observe, that after the introduction of the machines, society retains the same revenues as before; that is to say, the same number of workmen, the same amount of capital, the same land. Now, if instead of devoting, out of this mass of revenue, fifty millions to the purchase of stockings, the introduction of the frames should make it no longer necessary to lay out more than twelve in this article, the thirty-eight millions remaining would be applicable to the purchase of other articles of consumption, if not to the extended consumption of the same.

These arguments we learn from principles, and they are confirmed by experience. The distress endured by the population of England, which M. de Sismondi laments with the feeling of a true philanthropist, originates in other causes: it is chiefly caused by the poor laws of that country; and, as I have before observed, by a mass of taxes, which renders production too expensive; so that, when goods are offered for sale, the incomes of a great proportion of consumers are insufficient to enable them to pay the prices which the manufacturer or producer is absolutely compelled to demand.

LETTER V.

Sir,

On reading your Principles of Political Economy, the first object which excited my attention, was that great malady which at present afflicts mankind, and which prevents their living upon their productions. Although in the order of things, a discussion on the nature of riches ought to precede it, to assist the mind in comprehending all the phenomena which relate to their formation and distribution; I did not think it necessary to give it precedence, because it appeared more especially to interest those only who cultivate political economy as a science, and without any view to practical application. However, I cannot lay down my pen without giving you my opinion on this point. You authorize me to do this by the noble frankness with which you invite discussions which may enlighten the public. “It is extremely desirable,” you say (p. 4), “that those who are considered by the public the most competent judges, should agree on the principal propositions.” We cannot therefore make them too plain.

You object to the definition which Lord Lauderdale gives of riches when he says that they are all that man desires as being useful or agreeable to him, as too vague; and I think you have great reason. I look for that which you think ought to be substituted for it; and I find that you give the name of riches to all the material objects which are necessary, useful, or agreeable to man (p. 28). The only difference which I observe between these two definitions consists in the word material which you add to that of Lord Lauderdale; and I confess this word appears to me any thing but the truth.

You must be aware of my reasons. The great discovery of political economy, that which will ever render it invaluable, is the having shewn that every thing is convertible into riches. Man has learnt from thence how he must conduct himself to possess the happy means of satisfying his desires. But, as I have already had occasion to observe, it is beyond the power of man, to add a single atom to the mass of matter of which the world is composed. If he then creates riches, riches are not material: there is no middle point. Man can only, by means of his capital and his lands, change the combinations of matter, and thus make it useful to him; but utility is an immaterial quality.

This is not all, Sir. I fear that your definition does not comprise the essential quality of riches. Permit me to explain.

Adam Smith, as well as every body else, has remarked that a glass of water, which may be a very desirable thing when one is dry, is not riches. It is, however, a material object, it is necessary, useful, and agreeable to man. It possesses all the conditions of your definition: but yet it is not riches. It is not that however which is the subject of our investigation and the matter of your book. What does it require to become so?—to have value.

There are then things which are natural riches, which are most precious to man; but are not such riches as political economy can interfere with. Can they be increased? Can they be consumed? No: they are regulated by other laws than those of political economy. A glass of water is subject to the laws of natural philosophy; the attachment of our friends and our reputation in the world are governed by the moral law; but are not within the compass of political economy. Which then are the riches within the jurisdiction of that science?—Those which are susceptible of creation and destruction, of more and of less; and what, I again ask, is this more, this less, but value?

You are yourself, Sir, compelled to admit this in many places. You say (p. 340), “It appears then that the wealth of a country depends partly upon the quantity of produce obtained by its labour” (it depends entirely upon it), “and partly upon such an adaptation of it to the wants and power of the exerting population as is calculated to give it value.” And in the following page you are still more positive. After having advanced further into the discussion, you confess that “it is obvious that, in the actual state of things, the value of commodities - - - - may be said to be the sole cause of the existence of wealth.” How then has it happened that a condition so essential as value has been left out of your definition?

But this is not sufficient. The nature of riches will be very imperfectly known to us if we are not able to fix some precise meaning to this word value. In order to be possessed of great wealth will it be enough that we estimate at a high rate the goods we possess? If I build a house, with which I am delighted, and which I choose to estimate at ten thousand pounds, does this house make me really worth ten thousand pounds? We receive a present from one who is dear to us; it is inestimable in our eyes; does it follow that it has made us immensely rich? You cannot think so. In order to constitute riches, the value must be recognised, not by the possessor merely, but by other persons. But what more irrefragable proof that its value is recognised can be given than that other persons are ready to give for it a certain quantity of other things which are valuable. Notwithstanding the value of ten thousand pounds which I set upon my house, yet if I cannot find any body who will give me more than five thousand pounds for it, I cannot say that it is worth ten thousand pounds: it is really worth no more than five thousand pounds; it will produce me no greater amount than five thousand pounds, or whatever value may be had for that sum.

Adam Smith also (b. i. c.4) immediately after having observed that there are two kinds of value, and having, very improperly in my opinion, called one of them value in use, and the other value in exchange, abandons entirely the former, and is solely occupied throughout his work with exchangeable value. This is what you have done yourself, Sir;* what Mr. Ricardo has done; what I have done; what all of us have done; for the plain reason, that there is no other value in political economy; that that alone is subject to fixed laws; that that alone can be created, distributed, and destroyed, according to rules which are invariable, and which are capable of becoming an object of scientific inquiry. It is a necessary consequence, the price of every thing being its exchangeable value estimated in money, that there is no other price in political economy than market price: that that which Smith calls the natural price, is no more natural than any other; it is the cost of production; it is the market price of productive services.

I will not deny, Sir, that you have, in Mr. Ricardo, a powerful and respectable ally. He is against you in the subject of markets, and fights on your side in the question of value; but notwithstanding my connexion with him, and the reciprocal esteem we bear for each other, I have not hesitated to combat his arguments:† the first object of both of us, and of you too, Sir, I am sure, is the love of truth, and the happiness of mankind.

These are Mr. Ricardo’s words: (2d edit. c. 20) “Value differs essentially from riches; for value does not depend on the abundance (of things necessary or agreeable) but on the difficulty or facility of their production. The labour of a million of men in manufactories will always produce the same value, but not the same riches. By the invention of machinery, by improvement in skill, by a better division of labour, or by the discovery of new markets, where more advantageous exchanges may be made, a million of men may produce double or treble the amount of riches, of necessaries, conveniences, and amusements, in one state of society, that they could produce in another; but they will not on that account add any thing to value.” (c. 20. 2d. edit.)

This argument, founded on facts which are not contested, appears to accord perfectly with the opinions you maintain. The question whether these facts confirm or destroy that doctrine of value which teaches that riches are composed of the value of the things we possess, applying the word value to those values only which are recognized and exchangeable. What is there, in fact, but value, but that quality capable of appreciation, capable of being more or less, which exists in the things we possess? It is the quality which enables us to obtain, in exchange for the things we have, those of which we are in want. This value is so much the greater, as the thing we have will procure a greater quantity of the thing we want. Thus if I desire to exchange a horse which I possess, for corn that I want; that is to say, if I desire to sell my horse to buy corn, if my horse is worth sixty pounds, I have twice as much value to convert into corn as if my horse was only worth thirty pounds: I should have twice as many bushels of corn, and this portion of my property will be twice as great. And as the same reasoning may be applied generally to all that I possess, it follows that our riches must be measured by the value of the things we possess. This is a consequence that none can reasonably dispute.

You cannot deny, says Mr. Ricardo to me, that we are the more rich, the more agreeable and necessary things we have to consume, whatever may otherwise be their value. I do not deny it: but have we not more things to consume when we have the power of acquiring them in greater quantity? To have in one’s hands the power of purchasing a greater quantity of useful things, a greater quantity of utility, extending this expression to whatever is necessary and agreeable, is to possess more riches. But this proposition does not contradict whatever there is of truth in the definition of riches given by Mr. Ricardo and yourself. You say that riches consists in the quantity of necessary and agreeable things we possess. I say so too; but these words, quantity of things necessary and agreeable, have a very vague and arbitrary meaning, unfit to enter into a perfect definition: I render them precise and clear by the idea of their exchangeable value. The condition of utility then is the being equal to another utility, which men are willing to give in exchange for that which you possess. It becomes then an equation. We can compare one with another by means of a third. A sack of corn is equal in value to a piece of stuff, when each of them can be exchanged for the same number of shillings. This then serves as a basis for all comparisons; what enables us to measure an increase, or a diminution; in a word, this is the foundation of a science. Political economy is nothing without it: it is this consideration alone which has taken it out of the dominion of fancy; it is so essential that you have been compelled to do homage to it yourself without intending it; and that there is not one of your arguments in which it is not either expressed or understood. If it had not been so, you would have caused the science to retrograde, instead of enriching it with new truths.

While your definition, and that of Mr. Ricardo, is wanting in precision, it is also wanting in extent: it does not embrace the whole of what constitutes our riches. What! are our riches limited to objects which are material, necessary, and agreeable? What then do you think of our talents? Do they not belong to the productive powers? Do we not draw revenues from them? Revenues more or less large, in the same manner as we draw a greater revenue from an acre of good land than from an acre of heath? I know some admirable artists who have no other income than what they derive from their talents, and who yet live in opulence. According to you, they ought to be no richer than a dauber of signs.

It is impossible for you to deny, that whatever has an exchangeable value makes part of our wealth. It is composed entirely of the productive powers which we possess; our lands, our capitals, and our personal faculties. Of these, land is alienable, but not consumable—capital is both alienable and consumable; while talents, though incapable of alienation, are consumable; they perish with those who possess them. From these funds, all the revenues upon which society subsists are derived; and (what may appear paradoxical, although it is perfectly true) all these revenues are immaterial; for they are derived from an immaterial quality—utility. The different kinds of utility are derived from our productive powers, and are comparable with each other by their value, which I have no need here to denominate exchangeable, because I can not recognize any value in political economy which is not exchangeable.

As to the difficulty raised by Mr. Ricardo, that by improved processes a million of people might produce twice or thrice as much riches, without producing more values, it vanishes when we consider, as we ought, production as an exchange in which the productive services of labour, land, and capital is given, in order to obtain the production. It is by means of these services that we obtain all the productions which exists in the world; and this, by the bye, is what gives value to productions; for after having acquired them by dint of labour or expense, we do not part from them for nothing. Now, since our first riches are the productive powers we possess, and our first revenues are the productive services which emanate from them, we are so much the richer; our productive services have so much the greater value, as they may be able to obtain in the exchange called production, a greater quantity of useful things. And as a greater quantity of useful things, and their greater cheapness, are expressions perfectly synonymous, the producers are richer when productions are more abundant, and less dear. I say the producers generally, because competition compels them to give their productions for what they have cost;* so that when the producers of corn or stuffs have succeeded, with the same quantity of productive services, to produce twice the quantity of corn or stuff, all other producers will be able to purchase double the quantity of corn or stuff with the same quantity of productive services, or, which is the same thing, with the productions which result from them.

This, Sir, is the well-founded doctrine, without which I consider it impossible to explain the very great difficulties of political economy, and particularly how it is that a nation can become richer while its productions diminish in value, although riches consist in value. You see that I do not fear to lay down my pretended paradoxes in their simplest form. I strip them completely naked, and submit them to the candour of Mr. Ricardo and yourself, and to the good sense of the public. I shall however hold myself at liberty to explain them if they are misunderstood, and to defend them with perseverance if they are unjustly attacked.

the end.

J. M’Creery, Tooks-Court, Chancery-Lane, London.

[* ]Nouveaux Principes d’Economie Politique, de Sismondi, tom. i. p. 337.

[* ]Malthus’s “Principles of Political Economy,” p. 354.

[* ]Traité d’Economie Politique, &c. 4e édition, tom. ii. p. 5. See also, Catechism of Political Economy.

[* ]Malthus’s Principles of Political Economy, p. 153.

[* ]The English authors are often obscure through their confounding, like Smith, under the denomination of labour, the services rendered by men, by capital, and by land.

[* ]Page 49.

[* ]A domestic produces personal services which are wholly consumed unproductively by his master, as soon as produced. The service of the public functionary is in like manner wholly consumed by the public, as fast as it is produced. That is the reason why these different services contribute nothing to the augmentation of riches. The consumer enjoys these services, but cannot accumulate them. This is explained in detail in my “Traité d’Economie Politique,” 4e edition, tom. i. p. 124; and also in my Catechism of Political Economy. After that it is difficult to conceive how M. Malthus could print (p. 35.), “I am hardly aware how the causes of the increasing riches and prosperity of Europe since the feudal times could be traced, if we were to consider personal services as equally productive of wealth with the labour of merchants and manufacturers.” It is with these services as with the labour of the gardener, who has cultivated salads or strawberries. The wealth of Europe certainly does not arise from the strawberries which have been produced, because they must, like personal services, have been consumed unproductively as fast as they ripened, although less quickly than personal services.

I have instanced strawberries as a very perishable product; but it is not the durability of a production which particularly facilitates accumulation. It is because it is consumed in a manner adapted to reproduce its value in another object. For whether durable or not, every product is devoted to consumption, and answers no purpose whatever except by its consumption; this purpose is either to satisfy a want, or to reproduce a new value. When people undertake to write on political economy, they should dismiss from their minds the notion that durable produce accumulates better than what is perishable.

[* ]Malthus on Political Economy, p. 37.

[* ]4e edit. L. i. ch. 15; L. ii. ch. 1, 2, 3, & 5; and also the Epitome at the end, at the words, Productive Services, Charges of Production, Income, Utility, Value.

[* ]Does not the farmer, who sells a sack of corn for thirty shillings, and buys a piece of calico at thirty shillings, exchange his corn for the stuff? and does not the manufacturer, who buys a sack of corn at thirty shillings, being the price of his piece of stuff, exchange that piece for a sack of corn?

[* ]That I may not incur the charge of misrepresentation, while I am merely endeavouring to compress and render more perspicuous the meaning of the worthy professor, I copy the exact passages. “If commodities were only to be compared and exchanged with each other, then, indeed, it would be true that, if they were all increased in their proper proportions to any extent, they would continue to bear among themselves the same relative value; but if we compare them, as we certainly ought to do, with the numbers and wants of the consumers, then a great increase of produce with comparatively stationary numbers, and with wants diminished by parsimony, must necessarily occasion a great fall of value estimated in labour, so that the same produce, though it might have cost the same quantity of labour, would no longer command the same quantity”. . . .p. 355. “It is asserted that effectual demand is nothing more than the offering one commodity in exchange for another. But is this all that is necessary to effectual demand? Though each commodity may have cost the same quantity of labour and capital in its production, and they may be exactly equivalent to each other in exchange, yet why may not both be so plentiful as not to command more labour, or but very little more than they have cost; and in this case, would the demand for them be effectual? Would it be such as to encourage their continued production? Unquestionably not.” p. 355, 356.

[* ]That is, according to the English expression: when they (productions) do not command the same quantity of labour as before.

[† ]This demonstration, by the bye, completely overthrows an assertion of Mr. Malthus, that cheapness is always (must be) at the expense of profits (p. 370), and consequently all the reasoning which he has built on this foundation. It is also fatal to all that part of Mr. Ricardo’s doctrine, in which he flatters himself that he has proved, that the costs of production, and not the proportion of supply and demand, regulates the prices of goods. He identifies the costs of production with the production itself, whereas they are completely opposed to each other, and the former are diminished in proportion to the increase of the latter.

[* ]Some people imagine that when capital is employed in an undertaking the portion of this capital which is employed in purchasing raw materials, is not employed in purchasing productive services. This is an error. Raw material itself is a product, which has no other value than that which has been imparted to it by productive services, which have made it a product; have given it a value. When raw material is of no value, it employs no part of capital: when it must be paid for, this payment is only to reimburse the productive services which have created its value.

[* ]The profits which are made by a person who carries on any undertaking, are the reward of the labour and talents which he exerts in his business. He only continues this business while it produces such an income that he cannot expect a better in any other employment. He is one of the necessary producers, and his profits form part of the necessary charges of production.

[* ]This happens in France much more frequently than in England, where the rate of the profits of industry and interest of capital is too low in ordinary employments for the former to suffice for the support of a family who have no capital.

[* ]“What an accumulation of commodities! what a prodigious market, according to M. Say (says Mr. Malthus), would this event occasion!” The learned professor here totally mistakes the meaning of the word accumulation: accumulation is not non-consumption; it is the substitution of reproductive consumption for that which is unproductive. Besides, I never said that a product saved was a market opened; I said that a product made was a market opened for another product; and that is true, whether the value of it be unproductively consumed, or whether it be added to the savings of its proprietor, that is to say, to the reproductive expenditure which he intends to make.

[† ]“It must be allowed that the produce annually saved is as regularly consumed as that which is annually spent, but that it is consumed by a different set of people.”—Malthus’s Principles of Political Economy, p. 31.

[* ]“When there is more capital than is necessary in a country, to recommend saving is contrary to all principles of political economy. It is like recommending marriage to a people perishing with famine.”—Principles of Political Economy, p. 495. How came Mr. Malthus not to perceive that marriage gives birth to children, and consequently to new wants; whilst capitals have no wants, but, on the contrary, possess the means of satisfying them?

[* ]The principal obstacles to agricultural improvement in France are, first, the residence of the rich proprietors and great capitalists in towns, and particularly in an immense capital; they cannot acquire a knowledge of the ameliorations in which their capitals might be employed; nor can they watch over the application of those funds so as to obtain a corresponding increase of income. Secondly, it would be in vain for any particular secluded canton to double its produce; it can now scarcely get rid of what it already produces, for want of good cross roads, and industrious neighbouring towns. Industrious towns consume rural produce, and fabricate in exchange articles of manufacture, which containing greater value in a less compass can be carried to a greater distance. This is the principal impediment to the increase of French agriculture. The multiplication of small navigable canals, and cross-roads well maintained, would greatly augment the value of rural produce. But these objects would require local administrations chosen by the inhabitants, and intent only on the good of the country. The possibility of markets exists, but nothing is done to secure the benefit of them. Magistrates chosen in the interest of the central authority, become almost invariably fiscal or political agents, or what is still worse, agents of police.

[† ]This supposition is very admissible, since in England three fourths of the population inhabit towns, and consequently are not employed in agricultural pursuits. A country supporting 60 millions of inhabitants, might therefore be well cultivated by 15 millions of agricultural labourers; at which number the cultivators of France are now actually estimated.

[* ]The means of acquisition are the profits which each individual derives from his industry, his capital, and his lands. Consumers who have neither industry, capital, nor land, spend only what they are able to obtain from the profits of those who have. In every case, the income of each individual has a limit; and thoughthe possessors of very large incomes can sacrifice a great quantity of money for very trivial enjoyments, it must be allowed that the dearer any gratification is, the less it is considered indispensable.

[* ]If he reduce the quality, it will be equivalent to an increase in the price.

[* ]Nouveaux Principes, liv. iv. chap. 4.

[* ]The workman can only labour constantly whilst his work pays for his subsistence; and when his subsistence becomes too dear, it no longer suits the master to employ him. It may then be said, in the language of political economy, that the workman no longer offers (or supplies) his productive services, although in fact he is most anxious for employment; but his offer is not acceptable on the only lasting conditions on which it can be made.

[† ]Mr. Ricardo insists that, notwithstanding taxes and other charges, there is always as much industry as capital employed; and that all capital saved is always employed, because the interest is not suffered to be lost. On the contrary, many savings are not invested, when it is difficult to find employment for them, and many which are employed are dissipated in ill-calculated undertakings. Besides, Mr. Ricardo is completely refuted, not only by what happened to us in 1813, when the errors of Government ruined all commerce, and when the interest of money fell very low, for want of good opportunities of employing it; but by our present circumstances, when capitals are quietly sleeping in the coffers of their proprietors. The bank of France alone possesses 223 millions of specie (about nine millions of pounds sterling) in its chests, which is more than double the amount of its notes in circulation, and six times what prudence would consider necessary to reserve for the ordinary course of its payments.

[* ]See the Report on the Situation of France, made in 1813, by the then Minister of the Interior. He was interested in concealing this diminution of commerce.

[† ]Humbolt, Essai sur la Nouvelle Espague, tom. iii. p. 183.

[* ]Malthus on Population, book ii. ch. 13, 5th ed.

[† ]Mr. Malthus, convinced that certain classes are serviceable to society on account of what they consume alone, without producing any thing, would look upon the payment of the whole, or a great part of the English national debt, as a misfortune. On the contrary, this operation would, in my opinion, be very desirable for England; for the consequence would be, that the public creditors, being paid off, would find means to derive an income from their capitals; that the payers of taxes would themselves spend the 40 millions sterling which they now pay to the public creditors; that the taxes being diminished by 40 millions sterling, all productions would be cheaper; that consumption would consequently be greatly extended, and would afford employment to the workmen instead of the sabre blows which are now dealt out to them; and I own I see nothing in these results to alarm the friends of the public weal.

[‡ ]P. 498.

[* ]The commercial productions with which they furnish France, are sugar from India, China, and the Havannah, coffee, tea, nankeens, indigo, ginger, rhubarb, cinnamon, raw silk, and pepper.—Those of their soil and their arts are, cotton, tobacco, potash, rice, bark, whale oil, and dye woods.

[* ]The manufactures which a new nation may execute to the greatest advantage, are, in general, those which consist in preparing raw materials of their own growth, or imported at a small expense. It is not probable that the United States will ever supply Europe with cloth; but they will perhaps furnish her with manufactured tobaccos, and refined sugars; perhaps they may even establish cotton-manufactories on better terms than England.

[* ]Considerations on the Policy of Entails, p. 14.

[* ]“When a machine is invented, which, by saving labour, will bring goods into the market at a much cheaper rate than before, the most usual effort is such an extension of the demand for the commodity, that the value of the whole mass of goods made by the new machinery greatly exceeds their former value; and notwithstanding the saving of labour, more hands instead of fewer, are required in the manufacture.—P. 402.

“But we must allow that the preeminent advantages derived from the substitution of machinery for manual labour, depend upon the extension of the market for the commodities produced, and the increased stimulus given to consumption; and that, without this extension of market, and increase of consumption, they must be in a great degree lost.”—P. 412.

[* ]Nouveaux Principes, &c. tom. ii. p. 317.

[* ]“It is obviously therefore the value of commodities, or” (that is to say) “the sacrifice of labour, and of other articles which people are willing to make in order to obtain them” in exchange, &c. p. 341.

[† ]In notes which I have added to the French translation of Mr. Ricardo’s Principles of Political Economy.

[* ]It is always to be remembered that the profits of the manufacturer are considered as part of the cost, or charges of production.—Tr.