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Subject Area: Economics
Topic: Free Trade

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

Edition used:

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. XCIX.

may 4, 1831.

Influence of a judicious expenditure of capital upon the welfare of society. Comparison of the three modes in which incomes are usually expended.

IN our paper of to-day will be found an Address, delivered before the Agricultural Society of Berkshire county, in Massachusetts, in October last. It contains many sensible reflections, conveyed in agreeable language, adapted to the comprehension of every one, and displays, on the part of the orator, an intimate acquaintance with the operation of a judicious expenditure of capital, upon the welfare of a community.

This subject is one which is not sufficiently adverted to by the great mass of the people. Every body knows, that employment promotes the general prosperity, but few take the trouble of thinking upon the radical difference which exists between different sorts of employment. And yet there is as much diversity in the ultimate effects produced by different species of employment, as there is in those resulting from different climates or soils. We shall illustrate what we mean, by drawing the outlines of three distinct individual characters, each of whom we will suppose to be possessed of a clear income of ten thousand dollars per annum.

Tom is a gay fashionable man, who lives in a house which costs him two thousand dollars per annum rent. A further sum of three thousand dollars per annum is expended in the substantial objects which belong to the support and comfort of every wealthy family—leaving him a surplus of five thousand dollars, which he may expend as his fancy inclines him. With this sum he pays the wages and maintenance of a house full of servants. He has his footman, butler, and French cook—he has a barber to shave him, and a valet to brush his coat. He gives dinner parties and balls, and by his expenditure gives abundant employment to the manufacturers of pastry, confectionary, and ice-creams. He frequents concerts and theatres, and thus encourages the industry of musicians and play-actors—and, at the end of the year, he felicitates himself upon the benefit his expenditures have been to society, by reflecting that he has given employment to a great many people; and that he has done so, no one can doubt.

Dick is a plain domestic man, but, being wealthy, and considering himself bound to live like a gentleman, he also expends in rent and substantials his five thousand dollars a year. But he differs from Tom in his mode of expenditure of the balance. He chooses to employ cabinet-makers to add new articles to his furniture, painters to furnish pictures for his rooms, printers and book-binders to increase his library, carpenters and masons to extend his buildings. He also consoles himself with the reflection that he has given employment to a great many people, although to people of a different description from those maintained by Tom.

Harry is also a liberal gentleman, and, like the two others, expends the one-half of his income in rent and substantial comforts. He differs, however, from both, in regard to his expenditure of the other half. He too gives employment to a great number of people, but it is by setting them at work in ploughing his land, or in navigating his ships.

Now, if it be supposed that each of these persons shall have given employment, throughout the year, by the expenditure of the second five thousand dollars a piece, to the same number of individuals, it will follow, that, as regards the immediate effect produced upon the condition of the latter, the result is the same; and hence it is that those who do not look further than immediate effects, are not able to discover wherein the one mode of employment has been less beneficial than another. That there is, however, a vast difference in the ultimate condition of these very people, as well as of all the rest of the community, according as the one or the other system of expenditure is adopted, can easily be shown, and we shall proceed to point it out.

In the first place, as regards Tom. Of his five thousand dollars there is not a vestige remaining. It is true that the actual money which he paid away, in coin or bank notes, has not been destroyed, but is still in existence, in the hands of somebody else, in the same manner that the money expended by Dick and Harry is still in existence; but the quid pro quo which he received in exchange for his money has entirely vanished. It is impossible to accumulate the product of that sort of industry which consists in riding behind a coach, drawing bottles of wine, standing behind one’s chair at table, cooking savoury dishes, shaving a grizly beard, or brushing a gentleman’s coat. It is impossible to accumulate, for future use, the products of the industry of musicians or play-actors—and what has become of his dinners, his pastry, his confectionary, and his ice-creams? All, all annihilated—so that it is plain, that, for all his vast expenditure, he has nothing to show for it; and, if he wants to carry on the same course for another year, he can only do it by means of another five thousand dollars.

Let us now examine into Dick’s circumstances at the end of the year. He will be found to be better off than Tom—he has something to show for his money, which is capable of administering to his future gratification—he has a larger house, more extensively furnished and ornamented with paintings, which every time they are looked at infuse a degree of satisfaction—he has his library enlarged by a new stock of books, and his mind of course furnished with fresh sources of knowledge. It is true he cannot apply these articles to the maintenance of the same people another year, but he must do this with another five thousand dollars; but any one may see that he is better off than Tom, precisely to the extent of the value, whatever that may be, of what he has to show for his money.

Lastly, we come to examine the result of Harry’s expenditure. It will be recollected that he expended precisely the same sum as Tom and Dick, and contributed to the support of exactly as many people. His money, too, is still in the hands of others, undestroyed; and what has he to show for it? Why, a barn full of grain, or a ship full of merchandise, worth more than the five thousand dollars which he expended, and constituting a fund, capable, by its being annually applied in the same way, and its being annually reproduced, to maintain forever the same or a greater number of people—leaving his income of each future year free, to be applied to the employment and support of another set of labourers.

From this statement of the case, it may be easily seen how important it is to a community, whether money be expended in one mode or another. But, in presenting the question, we are far from wishing to be understood as laying down fixed rules for the expenditure of capital. Every man has an undoubted right to do as he pleases with what is his own, and we are not unaware that, in a wealthy and complicated state of society, there must needs be vast expenditures, where the equivalent given in exchange is consumed at the very moment of production, without the possibility of ever again appearing in any other form. Our illustration was mainly designed to show that that prejudice which exists against some rich men of economical habits, because they do not live in style and expend large sums in entertainments, equipages, and retinues, is ill-founded, however honest it may be, if it have for its basis a belief that such individuals do not contribute as much towards the support of the poor as their more liberal and fashionable neighbours.