Front Page Titles (by Subject) ESSAY No. III. - The Principles of Free Trade
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ESSAY No. III. - Condy Raguet, The Principles of Free Trade 
The Principles of Free Trade illustrated in a series of short and familiar Essays originally published in the Banner of the Constitution, 2nd ed. (Philadelphia, 1840).
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ESSAY No. III.
january 13, 1830.
Rail roads and Canals. Impolicy of constructing them prematurely. Principles on which expenditures should be regulated. Pennsylvania will be obliged to resort to direct taxation to sustain her internal improvement.
THE mania for rail-roads and canals, which has latterly seized upon the public mind in all parts of the United States, as the banking mania did in 1814, cannot but be attended with the most deleterious effects. In this country, it seems, nothing is done upon system, and the great mass of the nation actually believe that, the more we have of a good thing, the better. Now, although this be true, of the moral virtues, yet it is not true of roads and canals. One rail-road, or one canal, may be beneficial to the community, whilst a dozen may ruin it. This position, we are aware, will be regarded by many, as paradoxical, and therefore needs explanation.
An artificial road or canal, is never created by magic. It can only result from the expenditure of capital, and the extent therefore to which roads and canals can be made, without encroaching upon the fund required to keep in constant employment the various branches of industry which unitedly produce the wealth of the nation, must be a limited extent. If, therefore, the existing wealth of a state be such as to bear an abtraction of ten millions of dollars, for example, without touching upon the agricultural, commercial and manufacturing capital, which can be profitably employed by the farmers, the merchants, and the manufacturers in their respective pursuits, such abstraction may be made with great advantage to the public towards the construction of a road or canal, the location of which is such, that the diminution of the expense in the transportation of the merchandize and produce which pass along its surface, will be annually equal to the revenue which could be derived from the employment of the same capital in other pursuits. But if such capital cannot be spared without depriving existing occupations of the fund requisite to enable them to carry on their business to the extent to which it could be profitably conducted, it may happen, that more injury shall be sustained by the society from this source, than can be compensated by the road or canal.
A proper understanding of this principle, is essential for all sound legislation, but its particular application must be left to the judgment of those individuals whose capitals are to be devoted to the work. They, and they alone, are the best judges of the most profitable direction of their capitals, and if they err in their calculations, they have nobody to blame but themselves. Although it be true, that individual speculations of this sort have often failed, yet we apprehend that this has been principally owing to the facilities afforded by the state governments, in the granting of charters to companies, without a guarantee that the requisite amount of capital stock to complete the undertaking, could be raised by the parties applying for incorporation. In some instances the work has been commenced before a third of the sum required to accomplish it has been subscribed, and the consequence has been that a delay in its execution has annihilated for years all income from the expenditure, which is, pro tanto, a sinking of capital—or, that it has been abandoned, subject to a total loss of the outlay—or, that the original subscribers have advanced additional sums, not upon the principle of a profitable investment, but upon the principle of sending good money after bad, in the vain hopes of its overtaking and bringing it back.
In cases where the state itself undertakes the work, as in New York and Pennsylvania, the same reasoning, precisely, is applicable; but owing to the greater number of individuals who contribute to all public works, in the form of taxes, direct or indirect, and to the power which a government possesses of compelling posterity to pay for its follies, the evil is not so manifest, and indeed, if it were, there are politicians enough to be found, who, for the present improvement of their particular county, would not hesitate to saddle their great-grandchildren with the expense of making it.
The time must arrive, as it did with the banking mania, when the people will feel the effects of an improvident expenditure of capital in roads and canals. Many of them have not been called for by the actual state of population and wealth. Nor can they ever be productive to their proprietors, to an extent equal to the interest of the money expended, until after the lapse of many years. And we need hardly here say, that an expenditure of capital in the construction of a road or canal before it is wanted, is just as injudicious as it would be for a farmer to appropriate a part of his active agricultural capital to the construction of a wagon, many years before he would have any thing to transport to market.
The state of Pennsylvania is now beginning to feel the effects of improvident undertakings. She authorized too many improvements at a time, and, instead of completing one object before she commenced another, she involved herself in liabilities, from which nothing, we think, can extricate her but a direct tax.*
[* ] This direct tax was laid on the 25th of March, 1831.