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Subject Area: Economics
Topic: Free Trade

ESSAY No. LXXXV. - Condy Raguet, The Principles of Free Trade [1835]

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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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Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


ESSAY No. LXXXV.

march 2, 1831.

Importance of the study of Political Economy as the means of removing the prejudice of the working classes against the capitalists. Such prejudices shewn to be injurious to the former.

THOSE persons who fancy that a dissemination of the true principles of political economy, at this particular day, can have no reference to the general interests of society, except as regards the tariff and internal improvement questions, are in great error. There has been lately awakened amongst the working-men, in different parts of the country, a spirit of inquiry, having for its object the most praiseworthy measures—and, whilst in some quarters it is highly gratifying to observe that sound and sensible views of the true interests of the community are entertained, yet, in others, we regret to say, the most pernicious doctrines are advanced, and such as, if permitted to gain strength, by the apathy of those who are bound to interpose, may bring incalculable mischief on the country.

One of the doctrines which has struck us as being peculiarly destructive of the happiness and prosperity of the nation, is that so strongly urged of late, that the labourer does not get, in the ordinary distribution of wealth, as society is organized, his proper reward. In other words, that the owner of the capital which furnishes the means of employing labour, gets more than his proper share. Now, it is very manifest, that, if this sentiment should become widely diffused, it will lay the foundation for the bitterest animosities and jealousies between those who are designed, by the natural order of things, to be the best friends of each other: and it is the duty, as it is clearly the interest, of all who understand this subject, to assist in the circulation of proper views concerning it. Can any man reflect for a moment upon the condition of things that would exist, if the great mass of the mechanics and other working people were to be made really to believe that they were deprived of their rights by the arbitrary power of the rich, without perceiving the necessity of endeavouring to arrest it? And how is this to be done? By a study of the science which teaches how to explain the relations between the capitalist and the labourer; or, if time or taste is wanted for such a study, by contributing towards the support of editors and lecturers who are qualified for the task, and in no other way.

Our attention has recently been drawn to this subject, by noticing, in the “Practical Politician,” published at Boston, a correspondence between the Corresponding Secretary of the Dorchester Working-Men’s Association, and Stephen Simpson, Esq., of Philadelphia, which first appeared in the “Mechanics’ Free Press,” of the latter city, in relation to this subject. The former gentleman addressed to Mr. Simpson a letter, asking his opinion as to the best means of remedying the evil of deficient rewards for labour. From Mr. Simpson’s reply, dated on the 31st December, 1830, the following is extracted:

“ ‘The relation between the prices of labour, and of real property, or land,’ is fraught with important queries and deductions. This question embraces rents, the rates of interest, and other topics of great interest. Property, lands, rents, interest, &c., have all been rated too high, from the prevalence of an opinion that the capitalist, the land proprietor, &c., were more meritorious and honourable than the humble bee who fills the hive with honey. It was, no doubt, on this feeling, that labour was originally depressed, and the scanty pittance of bare livelihood allowed by the lord to his vassal. It is self-evident that justice never ordained the present relation between the labourer and the capitalist. Its origin was feudal barbarism. Land derives its value from the labour bestowed on it; and reason and equity decree a due proportion to him who toils, of its fruits. When the labourer can barely live, after paying his rent, and accumulates nothing—it shows that the rent is extortionate, and lands bear a disproportionate value to labour. So with interest, and the cost of land on sale. These species of capital are all too high, as is proved by the poverty of the producer and the opulence of the capitalist. Effects like these at once proclaim the radical injustice of the principles that enter into the distribution of wealth. The man whose labour imparts its value to the land, should receive a proportion of the profits, which, accumulated judiciously, would enable him to purchase the same in a certain number of years—not remain for ever a slave and a beggar, whilst the proprietor is daily adding acre to acre, and thousands to thousands, without stirring from his easy chair. Under existing regulations, I need not remark, to one of your habits of observation, that the son of industry is almost forever the slave of penury—whilst the capitalist swallows all the fruits of his toil, in rent, interest, &c. How shall this be corrected? The man of industry is under the necessity of working to live—but the capitalist will only employ him on his own terms; the former has no remedy, therefore, but at the polls—to vote for men who will bring society to its first principles of sound constitutional justice, and decree to merit its reward—not reward idle wealth at the expense of merit.

“As it is labour that gives value to every commodity—to land, houses, mines, &c., &c.,—so have I ever held it a just principle, in regard to the wages of labour, that skill and industry should ever be to their possessor as much a source of competency, as capital; in other words, industry and skill ought to be real capital to the working-man, which should yield him as large a share of profits as the money-capital of the stockholder does, through the man who produces his interest and rent.”

In these remarks, advanced, we are quite sure, in sincerity, and with a laudable zeal for the interests of the working classes, we are sorry to say, that there lie the seeds of great mischief, such as we are persuaded Mr. Simpson would not voluntarily be the means of occasioning. They have already appeared in two papers, and perhaps will be extended to more, and thus will a heresy be widely diffused, under the sanction of a gentleman who received a very considerable vote as a candidate for Congress, last October, in the district composed of a part of Philadelphia and the Southern Liberties. With Mr. Simpson we have been personally acquainted from early life, and we have no feelings towards him but those of kindness—but, as we most decidedly object to his doctrines as above put forth, we will offer a few remarks, with the view of pointing out what we conceive to be their error.

The first unsound position in the above quotation is contained in these words: “Property, lands, rents, interests, &c., have all been rated too high.” This we understand to mean, that the man who has property to sell can get more for it than it is worth; that the man who has lands and houses to rent can get more for them than they are worth; that the man who has money to lend can get more for it than it is worth. Now, what evidence is there that this is the fact? The value of any species of property and commodity is, and can only be determined by the competition of the market. If a house will sell for ten thousand dollars, it is because the purchaser prefers the house to ten thousand dollars, and it is just as fair for the seller to argue that the ten thousand dollars are rated too high, as it is for the purchaser to argue that the house is rated too high. The same is true of a tract of land. The buyer and seller each prefers the article he has acquired by the exchange—the one prefers the money, the other prefers the land. So in the case of rent. The man who wants a house has the choice of all the empty houses. If A asks too much rent, he may apply to B—if B asks too much, he may apply to C. To all these people it is just as desirable to have a tenant, as it is for the man to have a house, and the price that must be paid for the rent will depend upon the competition of the market, and the tenant will have no more right to say that the landlord charges too much, than the landlord will have a right to say that the tenant pays too little. The case is the same in reference to the interest of money. There are hundreds of lenders, and there are hundreds of borrowers, and the interest of money, in any given place, upon undoubted security, will always be determined by the competition that is carried on between them. Where, however, the security is doubtful, or where laws interfere to prevent the natural competition of the market, by imposing penalties upon loans made at a rate exceeding a fixed per centage, there, indeed, an additional charge will be made for the increased risk, and for the odium and hazard incurred by taking more than the legal rate. But, in neither case has the borrower any more right to complain that the lender fixes the interest too high, than the lender has to complain that the borrower fixes it too low. Indeed, there is no possible mode of determining the exchangeable value of a thing, but the price it will bring; and, to pretend to say that any article is rated too high, is tantamount to saying that there is another law which ought to regulate prices, than the laws of competition. Such a law it would puzzle a wiser man than those who reason thus to find out, and we doubt if there is a working-man so ignorant of his own interests as to consent to have the value of his labour determined by any other principle than would be afforded by the competition of the whole community.

If the foregoing positions be true, Mr. Simpson is not correct in the doctrine, that the actual rates of property, land, rent, and interest, are owing to “the prevalence of an opinion that the capitalist, the land proprietor, &c., were more meritorious and honourable than the humble bee who fills the hive with honey.” For, amongst whom could the opinion here referred to have been so prevalent as to settle the rates? Surely it will not be pretended that tenants and borrowers, a body vastly more numerous than landlords and capitalists, could have been so silly as to give more for rent and interest than a fair rate, because they considered the latter more meritorious and honourable than themselves. This could never have been the case; and it is very manifest, that, as it takes two to make a bargain, it is not possible that the landlords and capitalists, from any notions they entertained of their own merit or honour, could have settled the question. And yet Mr. Simpson says, “it was no doubt on this feeling that labour was originally depressed, and the scanty pittance of bare livelihood allotted by the lord to his vassal.” If Mr. Simpson can see, in the condition of the free labouring population of this country, any similarity to that of the vassals of the feudal lords, he sees what we have never discovered, and what we doubt if any working freeman in this land has ever yet discovered. The laws which regulate the rate of wages, where each one of the contracting parties has an equal right to stipulate for terms, is as distinct from those which prevail where one party alone has the power to decide, as liberty is distinct from slavery—and there is between them such incongruity, that the one system never could have had its origin in the other. The laws of competition would have existed if there had never been a vassal in the world, and the wages of labour in this country are neither higher nor lower than they would have been if no feudal system had ever been heard of.

But “Land derives its value from the labour bestowed upon it, and reason and equity decree a due proportion to him who toils, of its fruits.” There can be nothing more true than the latter branch of this proposition, nor is there any thing more true than that he who toils on the land does get “a due proportion of its fruits.” Were this due proportion not received by farmers and agricultural labourers, they would very soon abandon the land in the old settled countries, and go to the West, where they can procure land for a dollar and a quarter an acre—or, if they have not the means to purchase, where they can rent a farm for a very low sum, or where they can command, for a week’s work, as much of the fruits of the land as they can consume in a month. The illustration of land was badly chosen on this occasion. No man, who reflects upon the toil, and labour, and expense, of clearing a farm, of fencing it, of erecting a dwelling-house, a barn, stables, and out-houses upon it, and planting an orchard, would consider the rent which the landlord usually receives for it as too great a share of the joint produce of the land and labour; for, let it never be forgotten, in an argument of this sort, that the land does its share of the work of production. That land is rated too high, Mr. Simpson undertakes to argue, from “the poverty of the producer, and the opulence of the capitalist.” But, where is the evidence of the poverty of the producer? Is there any class of people in the world so happy, so independent, so exempt from the misfortune of poverty, as the American agriculturist? We believe there is none. But it may be said, they do not rent their farms, they are themselves the owners. If this be so, they are then the very capitalists to whom all this opulence is ascribed. But where does this opulence show itself? Is it to be found in splendid mansions, gorgeous equipages, luxurious living, magnificent furniture and apparel? No. We see no such emblems of wealth throughout our republican country. But we do see comfortable and substantial dwellings, fertile and highly cultivated fields, strong teams, comfortable firesides, warm apparel, and abundant tables loaded with wholesome food. These, however, are the fruits of the industry of the working-man, united to the profits of the capitalist, and this happy combination proves, most incontestibly, that the interests of the two are so fairly and advantageously blended, that the working-man could not do without the capitalist, nor the capitalist without the working-man. But, of all countries on earth, this is the one in which the least odium should attach to land owners—and we are at a loss to conceive how Mr. Simpson could have permitted himself to indulge in a reflection against three-fourths of our farmers, for at least that proportion are capitalists—that is, the owners of their farms.

But Mr. Simpson thinks that those who rent farms, and who, perhaps, by paying an annual rent of one or two hundred dollars, are furnished with the means of maintaining their families in comfort and respectability, pay too much. He thinks that “the man whose labour imparts value to the land”—(he should rather have said imparts value to the seed which he sows for the joint benefit of himself and the landlord)—ought to get enough to purchase the same “in a certain number of years.” Now, we can assure Mr. Simpson, that this is most generally the case. This “certain number,” however, is not very definite. He certainly cannot do it in five years, but may in ten, fifteen, or twenty; and there is no reason why a man who works on a farm, should be able, in less time, to buy out his landlord, than that a sailor on board a ship should, in the same time, be able to buy out the owner of the vessel. The accumulation of capital is a very slow process, and it can only be accomplished with great economy and prudence by those who have nothing but their labour to begin with. But by no people is it more effectually or more extensively accomplished, in this country, than by those who labour. Look at the value of the capital, in farms, and houses, created by labour, within thirty years, in our Western country, and say whether all the fortunes amassed by commerce and speculation, on the sea-board, are to be compared to it, and then say whether there is any foundation for the remark that “the son of industry is almost forever the slave of penury.”

But, “How shall this be corrected?” Aye, that is the question. It is one, however, that is easily answered: Abolish restrictions on industry—keep in mind the fable of the boys and the frogs, and never leave out of sight, that, if you protect one class of people in pelting another, you inflict upon the injured class a greater evil than can be compensated for by all the good which is conferred upon the favoured one. Electing to public stations men who hold the doctrines put forth by Mr. Simpson, is the worst of all possible modes of remedying any of the existing evils. They will only make it worse. They do not see where the disease lies. Like Doctor Sangrado, they ascribe the derangement of the body politic to too little blood having been drawn, when it owes its debility to too free a use of the lancet, and thus, in attempting to cure, they kill.

Mr. Simpson, finally, to sum up his argument, says—“In other words, industry and skill ought to be real capital to the working-man, which should yield him as large a share of profits as the money-capital of the stockholder does, through the man who produces his interest and rent.” From this remark it would appear, that Mr. Simpson does not believe that industry and skill do yield the working-man as large a share of profits as the money-capital of the stockholder. But do we not see that this is the case uniformly? Farms are let out on the shares very often—the landlord and tenant each taking one half. Very often farms are rented, and the tenant, at the end of the year, after maintaining his family better than he could do if they were hired out at wages, lays up as much as he pays rent to the landlord. We see it also in other pursuits, in regard to the owner of money. A man possesses $100, which he lends to a mechanic for $6 for a year. The mechanic converts it into wood, and makes furniture of it, which he sells for $ $150—into leather, and makes boots and shoes of it, which he sells for $175—into furs, and makes hats of it, which he sells for $200, and so on. We do not believe there is a single article, upon which the labour of a mechanic or working-man is brought to operate, in regard to which the capitalist gets any thing like one-half of the additional value imparted to it by the labour.

But let us take a case, which will present the question most fairly. A mechanic is able to apply his industry upon a raw material, in the course of a year, to a certain extent, which requires a capital of $1000, we will suppose. Without this capital he would be unable to employ his industry. Now, if he borrows it of a capitalist, he must pay for the use of it $60 for a year; and we will ask any man if that sum is any thing near the share of profits which he himself is enabled to derive from the possession of that capital? In many branches of business the labourer gets nine-tenths of the increased value imparted to a raw material, and the capitalist but one; and yet the one is represented as an extortioner, who can demand his own terms, and the other as a victim to rapacity, who has no share in making the bargain.

We cannot suppose that Mr. Simpson meant to say, that a working-man, whose labour is worth $300 a year, ought to have as large an income as a man who owns $10,000. If he chooses that skill and industry shall stand in the place of capital, (for they never can be capital itself, seeing that capital and industry are as distinct as a value already created and the mere power to create a value,) he must fix some rule for the adjustment. He certainly would not attach the same capital-value to the industry of a rag-man that he would to that of a hod-carrier—nor would he place the industry of this latter on a par with that of a mechanic—nor would he place that of all mechanics upon the same footing, seeing that some branches of business require more intelligence, bodily strength, genius, and a longer term of apprenticeship, to learn, than others, and that some are more unhealthy, and more confining than others—whilst, between individuals, even of the same trade, there is a great difference, in physical power, in skill, dexterity, industry, and moral conduct, which of themselves confer claims to superior reward. Where, then, shall we find a standard by which to ascertain the precise quantum of skill and industry which is to be regarded as the equivalent of a given amount of capital? Where shall we find it? Nowhere but in the market rate of wages and of interest, for it exists nowhere else. And when a labourer, in a state of free competition, gets a dollar a day for his work, he receives the precise proportion, neither more nor less, that he ought to receive, in the most equitable of all possible modes of dividing the profits which his labour and the capital of the capitalist have, by their joint co-operation, produced. In like manner, the owner of the capital, who receives his six dollars, for the use, for a whole year, of one hundred dollars, receives the precise proportion to which he is entitled, under the most equitable distribution. All attempts to disturb the law of competition must be attended with mischief to the labourer. If it be attempted to lower the rate of interest, by law, below the market rate, capital will fly to some other place, to seek more profitable employment, and the labourer will find, that, as he has fewer capitalists to deal with, the rate of interest will be increased upon him.

After writing the principal part of the foregoing comments, a friend placed in our hands a work, published in London, in December last, very intimately connected with the same subject. It consists of three Lectures upon Wages, delivered, at the University of Oxford, by Mr. Senior, formerly Professor of Political Economy in that Institution, and whose Lectures upon the transmission of the precious metals from one country to another, were so deservedly admired by the readers of the Free Trade Advocate, in which they were published by us. These Lectures, which are not long, are preceded by a preface, containing much instructive matter; and, as we do not know how we could fill up an equal portion of our paper to as much advantage as by giving the whole to our readers, it is our intention to do so. The theory of wages is in itself an abstract subject, and, although one which will not be interesting to all of our readers, we know it will be acceptable to many.

The copy placed in our hands, as above mentioned, and of which we commence the publication this day, was accompanied by a short note, which, as it contains some facts known to the writer, who has lately visited England, we take the liberty of transcribing. The testimony he bears to the services which Mr. Senior has rendered to the cause of science, corresponds with the general sentiment of our friends on this side the Atlantic, who have made political economy a study, and whose opinions are known to us, and we feel well pursuaded that they will rejoice to hear that an opportunity will be soon afforded of seeing a complete edition of his Lectures.

“In England the study of Political Economy, as a science, is rapidly spreading, and the principles of the liberal system proportionably extending. The young are growing up imbued with its truths, and reflecting men of every age in the community, uniting in their support, so that we may, ere long, look with confidence for their practical influence in the policy of that government. It is the conquest of reason over prejudice, and, in proportion to the diffusion of sound knowledge, it must and will go on. Nothing has tended more to this improvement, than the introduction of Political Economy as an academic study, into the University of Oxford, and the ability with which the duties of that department have been performed by its late Professor, Nassau W. Senior, Esq., of Gray’s Inn, London. This gentleman, uniting the precision and knowledge of the lawyer to the enlarged views of the economist, has not only shown how happily such studies may be blended, but, by applying to his new duties the nice discrimination and rigid analysis which belong to his actual profession, has added to the strength and clearness of its conclusions. The tenure of the Professorship being limited to five years, he has now yielded it to a worthy successor, Dr. Whately, Principal of St. Alban’s Hall, Oxford, whose merits, as a sound and logical reasoner, are well known. The conditions of the endowment require an annual publication of at least two lectures. Those of Mr. Senior’s, published under this provision, are already well known; and it is understood that the whole course delivered by him, will, ere long, be given to the public. Three Lectures upon the subject of Wages, he has recently republished, as having a bearing upon the present distress of England; the preface to which, now added, points out with great truth, as appears to me, both the causes and the remedies of the evil.”