Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section of the individual titles, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
Liberty Fund Staff
Liberty Fund, Inc., Indianapolis, Indiana
These articles first appeared in the Dictionnaire d’Économie Politique, ed. Guillaumin and Charles Coquelin (Paris: Guillaumin, 1852) and were translated into English and included in Lalor’s Cyclopedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (Chicago: M.B. Carey, 1899) in 3 vols.
The French political economists of the the 19th century, or “the economists” as they liked to call themselves, are less well known than the classical school which appeared in England at the same time. The French political economists differed from their English counterparts on a number of grounds: the radicalism of their support for free markets, the founding of their beliefs on doctrines of natural rights and natural law, and the intellectual debt they owed to Jean-Baptiste Say (1767-1832). Some of their leading figures were Say, Charles Comte, Charles Dunoyer, Frédéric Bastiat (1801-1850), Charles Coquelin, Joseph Garnier, Hippolyte Passy, Gustave de Molinari (1819-1912), and Léon Faucher.
Charles Coquelin (1805-1852) studied literature and economics before working in the linen textile business between 1839 and 1844 which resulted in a book Traité de la filature du lin (1845). He was active in free trade circles in Paris, becoming an advisor to the newly formed Free Trade Association and was one of the principal contributors to the journal Libre-Échange. Coquelin also wrote articles for the Revue des Deux Mondes and the Journal des Économistes on many economic topics, especially on free banking and currency matters. He is best known for his book on free banking, Du crédit et des banques (1848), and for editing the magisterial Dictionnaire d’Économie Politique.
For additional reading see the following in the Library:
In the Forum:
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: AGENTS
Accessed from oll.libertyfund.org/title/1679/2621 on 2009-05-07
The text is in the public domain.
AGENTS, Natural, a politico-economical term. The earlier economists were wont to say that three distinct elements concur in the production of wealth, to wit: land, labor and capital, the last being nothing else than previous labor accumulated. But this nomenclature soon seemed too narrow, at least in regard to the first of the terms composing it, in that it appeared to imply that land, properly speaking, is the only one of the natural forces which associates itself with human labor. It is evident that such is not the truth. Man finds agents everywhere in nature to second his efforts. The sea spontaneously yields to him a number of products which he needs only to gather up. The air, the wind, water courses, electricity, all the powers of the physical world, supply him with force of which he makes useful employment in the series of his industrial labors.
—The need has been felt, therefore, of putting in the place of land, words of more general meaning, applicable to all the powers of nature whose existence is useful to man. To-day the term natural agents is almost universally accepted.
—Natural agents are of various kinds. Some, like arable land, mines and quarries, furnish both the materials and the workshop of production. They constitute the foundation of all industry. To the arable land, the mines and the quarries may be added the sea, lakes and rivers, in so far as they are considered productive of fish; the others are merely simple agents, aids which second the labor of man either of themselves and naturally, or after they have been, so to speak, tamed and conquered. Such, for example, are the heat of the sun, which develops and ripens plants; the rains which make them fruitful; the water courses which turn hydraulic wheels; the wind which moves ships at sea, or whirls the windmill's arms on land; the seas, lakes and rivers, in so far as they are navigable routes; the weight of bodies, electricity, the force of expansion or contraction of metals, and generally, all the forces which man has found the means of bending to his service.
—At no time has human industry been entirely deprived of the aid of natural agents; otherwise it would have produced nothing. But the number of forces which come to man's aid goes on increasing in proportion as his knowledge extends and his means of action grow. Man taxes his brain to conquer the powers of nature and shape them to his use, making them work to his profit, and he gradually succeeds in getting from them the better service. There is scarcely a discovery in science, or at least in the industrial arts, whose object it is not either to put some natural power hitherto unknown at the service of man or to make a new use of an agent already known. It is thus that the discovery of Daguerre compelled the rays of light to trace the image of external objects with a marvellous truth which the pencil of the painter will never attain. It is thus that electricity, that power hitherto so mysterious and disobedient, is forced to furnish us with the means of instant communication with most distant places. The admirable discovery of the steam engine is nothing else than putting a natural agent at the service of man, a natural agent of incalculable power which has been successfully mastered. From day to day the number of natural agents in our service increases, and we obtain from them better work. This is one of the aspects of human progress, and not the one least worthy of interest.
—This progress is visible in all directions. New mines and new quarries are constantly being discovered. On the other hand, the extent of arable land increases, either by the clearing up of forests, the draining of morasses or the converting of plains and heather into cultivated fields. In the meanwhile new seas are discovered by navigators, their surfaces are explored more exactly and their depths are sounded with increasing accuracy. Lakes by degrees disclose the wealth which they conceal. Rivers and lakes are confined within their beds, and, freed from the obstacles which barred their course, they become, thanks to the labor of engineers, channels of navigation which grow more perfect every day. The force of gravitation, which human ingenuity at first knew so little how to use, and which was even an obstacle to it in most cases, has become, owing to the discoveries of science, one of our most powerful auxiliaries at the present day. Again, the most mysterious forces of nature, as well as the most hidden properties of bodies, formerly rebellious to such a degree that frequently they were a source of trouble to man in his labors, but now conquered and pliant, have been put under contribution, and have become useful instruments in our hands. This is one of the chief causes of the relative fruitfulness of modern industry as compared with the industry of ancient times. "Analyze the progress made by industry," says J. B. Say, "and you will find that it can be reduced to having turned to best advantage the forces and the things which nature has placed at the disposal of man."
—Among the natural agents of industry some are capable of being appropriated, others not. And this is true not only of those which constitute the ground-work itself on which industry operates, but also of those which act only as simple auxiliaries. Thus arable land, mines and quarries can be and are almost always appropriated. But the sea, which is productive as well as the land, though not in the same degree, since it produces fish, coral, pearls, salt, etc., the sea, we repeat, is not capable of appropriation, unless perhaps in some of its interior bays. A waterfall considered as a motive power can be appropriated, and we see in practice that most waterfalls have become private property in civilized countries. But the wind, which fills, very nearly, the same office either for windmills on land or vessels which sail on the seas, is not susceptible of appropriation, and there are really but rare and very exceptional cases in which we may say that it was appropriated to a certain extent.
—This distinction is important because of the serious consequences which it involves. It has therefore been laid down carefully by all economists.
—The services of unappropriated natural agents is always gratuitous, in this sense, at least, that all men are free to use them gratuitously, on the sole condition of assuming whatever care and expense may be necessary to reap a benefit from them. On the contrary, the service of natural agents already appropriated, is generally burdened with certain dues for the benefit of those who have become their owners. It can be readily understood that he who has succeeded in obtaining exclusive possession of a productive force, should not wish to yield the use of it to others without compensation. If he lends or rents it he is paid for its use. If he uses it himself for the purpose of selling the products which he obtains from it, he charges a little more for these products than the ordinary cost of production.
—Looking at things from this point of view we are tempted to believe at first that the appropriation of natural agents is always an evil. But reflection is not slow in correcting this first impression. If it be true that the man who has become master of a productive force of nature to the exclusion of his fellows generally exacts a price for its use, it must be remarked also that he is impelled by his own interest to increase its power when he can do so by his labor and his pains. There are certain natural agents which work for man spontaneously, but the greater number need to be constrained by various means which science suggests, and which are sometimes very costly. Who would burden himself with these costs, if he were not sure of reaping a benefit? The appropriation of these agents therefore is often necessary, since, without it, we should not obtain the services which they can render, and in this case it is surely beneficial to all.
—Let us hear J. B. Say on this subject. "If the instruments furnished by nature were all private property, the use of them would not be gratuitous, the man who became master of the winds would let their service to us for money; carriage of goods by sea would be more expensive and products consequently would be dearer.
—On the other hand, if natural instruments capable of becoming property, as tracts of land, had not become such, no one would run the risk of making them useful lest he might not enjoy the fruit of his labors. We could not have at any price commodities in the production of which and has a part, which would be equivalent to excessive dearness. Thus, although the product of a field may be made dearer by the rental of the field which must be paid to its owner, this product is less dear than if the field had not become property."
—These words sum up sufficiently well the two aspects of the question.
—It must be said, nevertheless, that certain questions of another order are connected with this subject, which it suffices to refer to here. Can the appropriation of natural agents, useful or not, be justified in law? Is it legitimate in its origin, leaving out of consideration the advantages admitted to result from it?
—To what point may this appropriation be extended? It has long been applied to arable lands, mines and quarries, to water courses, and a great number of other tangible natural agents. Can it also be applied legitimately and with the same advantage to those intangible natural agents whose services industry is enlisting every day by aid of new methods which it invents?
—There remains a last question raised by some distinguished economists, and which merits a solution. It is: Are the services of appropriated natural agents really paid for, if the price which one is obliged to give the proprietors for their use is anything else in reality than the just remuneration for their actual labor or for their accumulated previous labor? (See APPROPRIATION, LAND, RENT.)
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: AGIO
Accessed from oll.libertyfund.org/title/1679/2622 on 2009-05-07
The text is in the public domain.
AGIO. Agio is the corruption of an Italian word which signifies additional value. It meant at first a price exceeding the ordinary or natural value of a thing. Later, it was used more especially to designate the difference in value between metallic money and paper money, or between one metallic money and another. And it is with this latter signification that it has come down to us. In the old banks of deposit, such as those of Amsterdam and Hamburg, bank money (banco) had generally a value a little different from that of the same denomination which circulated in the country. Thus, at Amsterdam the ducatoon (banco) had almost always a little greater value than the current ducatoon. At Hamburg the crown (banco) was sometimes more and sometimes less in value than the crown of the empire which circulated in the country. This difference was called and is still called by the name of agio. Several economists have thought it worth while to seek the cause of this agio, and the question was really not without interest. But they had not at hand all the data necessary to solve it. Some have adopted without examination the explanation given by Adam Smith. Unfortunately this explanation is more ingenious than correct. It is not astonishing that the author of the "Wealth of Nations" should have been deceived as to certain details relative to a foreign institution little known at that time, and concerning which he had only imperfect information. Adam Smith supposes that the money deposited in the bank of Amsterdam was always received there at its intrinsic value, and that it acquired there a superior value from the fact, that, being put in a secure place, it was sheltered from changes to which current money was constantly exposed. "The money of such banks," he says, "being better than the common currency of the country, necessarily bore an agio, which was greater or smaller according as the currency was supposed to be more or less degraded below the standard of the state. The agio of the bank of Hamburg, for example, which is said to be commonly about 14 per cent., is the supposed difference between the good standard money of the state and the clipped, worn and diminished currency poured into it from all the neighboring states." Speaking, afterward, of the credit which the bank opens for every depositor on its books, "this credit." he says, "was called bank money, which, as it represented money exactly according to the standard of the mint, was always of the same real value, and intrinsically worth more than current money."
—And further on he adds: "Bank money, over and above both its intrinsic superiority to currency, and the additional value which this demand necessarily gives it, has likewise some other advantages. It is secure from fire, robbery and other accidents; the city of Amsterdam is bound for it; it can be paid away by a simple transfer, without the trouble of counting, or the risk of transporting it from one place to another. In consequence of those different advantages, it seems from the beginning to have borne an agio."
—All the advantages which Adam Smith here enumerates are real; but, as every one could make these advantages his own to the extent that he desired, it does not appear why this would have sufficed to secure to the bank money a value always superior to that of current money, if there had not been some other cause for it. When he adds, further on, that depositors avoided drawing their money from the bank, through fear of having to pay for its safe keeping, and finds therein a new reason for the superiority in value of the bank money, he errs; for the deposits were never made for more than six months, and when they were renewed at the end of that time, it was necessary to pay again for their safe keeping. The fact is, that there were exceptional dues to pay when a new account was opened.
—The exact facts are as follows: From the beginning the bank of Amsterdam laid it down as a rule not to receive money deposited with it at its full value, and to attribute to it a value always 5 per cent, less than its real value. Thus, the ducatoon of Holland, which had a current value of 63 stubers (3 florius and 3 stubers) was received at the bank for only 60 stubers, or 3 florins, and the individual who deposited it was credited for every ducatoon according to this scale. Every depositor had, therefore, 5 per cent. more than he was credited with by the books. This did not prevent the bank from restoring to him the full amount when he withdrew his deposit, with the exception of a small charge which the bank claimed. This was a method of counting, and nothing more. But it suffices to explain why the money of the bank was always worth something more than current money. It was not, as Adam Smith thought, on account of the preference given to the money of the bank; it was only because the bank, while adopting the denominations of the current money, applied them to values really greater.
—The bank money, far from being held in very high favor, was, we are inclined to think, looked upon with some slight discredit, either on account of the difficulty of withdrawal or of some other cause. In fact, as we have just seen, the bank money had always a real advantage of about 5 per cent. over the current money. The agio, therefore, should have risen to 5 to represent par. Now, it was almost always under that figure, generally between 3 and 4, although the variations were sometimes greater. In certain extraordinary cases, it disappeared altogether, and the value of the bank money fell below that of the current money. This happened, for example, in 1672. It is true that it was on the occasion of the approach of the armies of Louis XIV. But this situation did not last long, the bank having immediately resolved to restore all deposits.
—At Hamburg the circumstances were different. At first the bank of this city did not wish to establish, as at Amsterdam, a difference between its own and the current money. It had adopted as a type the crown of the empire, which was worth 540 ases of Holland, and had accepted it at this rate; but later it was constrained to depart from this rule, in consequence of alterations of the coinage undertaken by certain sovereigns. In the 17th century, the emperor Leopold I., and in the 18th century Maria Theresa, of Austria, over-turned the plan of the Hamburg people by coining, as Busch says, crowns of the empire, which were really worth only 516 ases.
—A certain number of these new crowns having slipped into the bank, unknown to its administrators, a great embarrassment in making payments was the result. As it was not known who should bear the loss, they wished to distribute it among all the depositors, by paying them partly in crowns of standard quality and partly in adulterated crowns. To straighten the accounts an average was sought between the old and the new crown; it was found that this mean was 528 ases to each crown. This is how the crown banco of Hamburg was fixed at this time at 528 ases, an ideal value inferior to that of the ancient crown of the empire, but greater than that of the new crown, and which has remained unchanged in the midst of the variations upward and downward, which the current money underwent.
—Thus, at Amsterdam on account of a premeditated design of the founders of the bank, at Hamburg through circumstances more potent than the will of the administration, an actual difference in value was established between the money of the bank and the current money. This naturally explains the agio. It should be added, however, that the agio fell or rose according as the money of the bank was more or less in demand. If there was a great number of payments to make in bank money, certificates of deposit delivered by the bank were more sought for, and the agio rose. In the opposite case it fell. But these are natural fluctuations which we need not stop to analyze. It is exactly like the varying relations established between the respective values of gold and silver.
—At Amsterdam the course of the agio was quoted every day, and known by all interested parties. It is probably the variations to which it was subject, and the speculations of which these variations became the object, that gave birth to the word Agiotage.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: APPROPRIATION.
Accessed from oll.libertyfund.org/title/1679/2667 on 2009-05-07
The text is in the public domain.
APPROPRIATION. Appropriation is the reduction to private property of an object which belonged or might belong to all. Thus, arable land which, as we may suppose, was primarily the property of the whole human race, was appropriated when it was first divided into parts, each one of which had its distinct owner.—the word appropriation can hardly be applied to things other than those given by nature; for, as to those which are the fruit of the labor of man, they so naturally and necessarily belong to him who has produced them that they are, so to speak, incorporated in him, until he disposes of them by exchange, or voluntarily destroys them. But the word appropriation does not apply equally to all natural objects. It can hardly be properly applied to the simple consumable products which the earth or the sea may furnish man with. It is rather applied to productive original stock, that is, to the natural instruments of production, such as arable land, mines, water-courses, etc., in a word to all the natural elements which constantly assist us in our labors.
—Among the natural instruments of production, some are susceptible of appropriation, others are not. For instance, arable land and mines have been almost entirely converted into private property in all civilized countries; but the sea which, like the earth, is productive, since it produces fish, mollusks, coral, pearls, salt, etc., has not been appropriated and scarcely can be, except some very limited portion of it near the shore.
—All economists admit that the appropriation of arable land has singularly increased its fecundity, and made it truly a benefit not only to the actual possessors of the soil, but also to those who believe they have been unjustly deprived of it. "We have examples," says J. B. Say, "of what happens where there are no landed proprietors. Where there are no such proprietors, people are in the condition of the Hurons and Iroquois. Among them the soil belongs to nobody; and the only product that their agricultural industry, which is the chase, procures from this soil, consists of the furs which they sometimes secure at the cost of untold fatigue, though at times their labor goes unrewarded. The produce of the chase does not always crown their efforts, and they and their families are exposed to most frightful privations."
—In countries where the land does not belong to anybody, nobody cultivates it, and men obtain from it only the meagre fruits which it produces spontaneously.
—In all countries, even the most civilized, there still are lands which are not absolutely appropriated, in the sense that the state or communes have reserved their possession to themselves. This is always a beginning of appropriation, and it can not be said in this case that nobody is interested in improving the natural resources of such land; but as the proprietor is a collective person, his interest is not sufficiently direct and urgent to induce him to endeavor to draw from the land all that it can be made to yield. Hence it is that in all the countries of the world, the lands belonging to the state and municipalities are by far the worst managed and least productive.
—Mines and quarries may be appropriated just as arable land may be, and, it is evident, may gain fully as much by it. Their appropriation is, however, rarely as complete and absolute as that of land. In many countries, the state makes certain reservations in this respect. In some of them the government retains the mines in its own possession, and works them itself. This is the case in Germany for instance, with the iron and salt mines, and in some other parts of Europe and America, with gold and silver mines. In France, the government while granting to private individuals the right to work mines, reserves to itself the ownership of them in principle; so that, leaving out the consideration, the labor, the expenses, and the losses to which it subjects its grantees, it constantly holds over them the threat of a withdrawal of their grant. Theirs is a sort of conditional and precarious appropriation, which does not offer the advantages of an absolute and irrevocable appropriation. (See AGENTS, NATURAL; LAND, MINES, OCCUPATION, PROPERTY.)
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: ARBITRAGE
Accessed from oll.libertyfund.org/title/1679/2669 on 2009-05-07
The text is in the public domain.
ARBITRAGE. In banking and commercial matters, arbitrage or arbitration of exchange is resorted to in order to discover, by comparison and calculation the profit which may result from the negotiation of bills of exchange on different places—This process is either simple or complex. The simple process is of more general application, because there is little speculation in money changes which extend to more than three places.
—Simple arbitrage is a comparison of the course of exchange between two places, relatively to the course established between these two places and a third; that is to say, the rate of exchange between two places being known, arbitrage consists in comparing this rate with that prevailing at the third place, in order to ascertain to which of the three it is most advantageous to make the remittances to be made.
—A complex arbitrage consists in comparing the course of exchange of more than three places, with a view to ascertain what a remittance shall cost in the last which has passed through all the others. In fact, a complex arbitrage is the repetition of several simple arbitrages, and can be solved only through a series of operations in the rule of three.
—Arbitrage in the case of goods takes place especially when the price of a certain commodity at a certain place being known, it is sought to ascertain what price the commodity will bring in another market; and consequently what price should be asked for it there, so as to realize a profit. In this case, there are charges made for handling and transferring the goods to be taken into account. The merchant who is not in a position himself to reckon these expenses, particularly when his business relations extend to markets far distant from his place of residence, usually has these expenses estimated by his correspondents.
—Arbitrages are very useful, as they tend more and more to keep in balance the rate of values between different countries.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: ARTISANS
Accessed from oll.libertyfund.org/title/1679/2685 on 2009-05-07
The text is in the public domain.
ARTISANS. An artisan is a tradesman who works at one of the mechanical arts, as a carpenter, a locksmith, or a shoemaker. The artisan is sometimes confounded with the workingman, because both labor with their hands. They differ however in this, that the artisan works on his own account and solely at his own risk, while the workingman works for another for a fixed amount of wages. In this respect the artisan more resembles the capitalist: he is a small capitalist.
—In ordinary thought and language, we may make of artisans a separate class, midway, in a certain sense, between the laboring class and the capitalist-employers. But from a politico-economical point of view, this distinction is of little use, the more so because it is so difficult to establish the line of demarcation. In their quality of capitalists, artisans are subject, just as the manufacturer or the capitalist in general, to the laws which regulate the profits of capital. We should remark, however, that their profit generally is, or appears to be, larger in proportion to their capital, because they add to it the product of their personal labor, without clearly distinguishing these two sources of revenue. They combine, so to speak, the profit of the employer and the wages of the workman.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: ASSIGNATS
Accessed from oll.libertyfund.org/title/1679/2690 on 2009-05-07
The text is in the public domain.
ASSIGNATS. Every one knows what the assignats were during the French revolution. We shall limit ourselves here to a brief review of the historical facts relating to them. As to the economical questions connected with this subject, they will be amply treated of under the term. PAPER MONEY. When the French revolution broke out in 1789, the state succumbed under the weight of its debts. The total, which would seem light enough to-day, surpassed, by far, all the resources the state then possessed. The reforms effected by the constituent assembly, reforms salutary in themselves, far from decreasing the burthen immediately, tended rather to increase it. Such was especially the effect of the laws, which, while abolishing the sale of offices, accorded indemnities to former incumbents. The ordinary resources were, therefore, far from meeting the demands upon them. It was necessary to have resort to extraordinary means to provide for them.
—It was then thought to make use of the immense estates formerly possessed by the clergy, and which a recent decree had added to the public domain. The sale of these estates was ordered, and the communes were intrusted with the task of selling them in their respective districts. But the sales could not be effected quickly, because of the scarcity of capital; and the fear of a counter-revolution, which might restore their property to the clergy, considerably diminished the number of purchasers. And as the need was pressing, it was decreed to issue immediately paper money, representing the value of this property, which the communes were to be obliged to receive as payment in all the sales which they might make. By reason of this last provision the bills issued were first called municipal paper, but this name was soon changed to that of assignats, which they afterward retained.
—The first issue, decreed April 1, 1790, was for 400,000,000 francs.
—It is evident that at first the assignats were nothing but an assignment of national property which served as security for them. They were apparently intended to be received only in payment for these estates from those who had acquired them. On this basis, they would have preserved a pretty stable value, in spite of the depreciation of the security, but they would have had but a small circulation; they would have found no other purchasers than those who had the real intention of buying some of the land offered for sale. The greatness and urgency of the need, probably also the scarcity of coin, an ordinary result of political agitation, caused a decree to be made that the assignats should circulate as money, and they consequently had compulsory circulation. From this time these bills assumed the character of paper money and partook of its variations in value.
—The issues were successively increased afterward in proportion to the increase of the wants of the state. In September, 1792, they were 2,700,000,000 francs, a year later they went as high as 5,000,000,000. The convention tried, for a certain time, to reduce their amount and a forced loan to which it had recourse, having procured it extraordinary resources, it called into the treasury and burned 840,000,000 francs. But this system of reduction was not long-lived. The issues of assignats soon began again, and they were larger in proportion as the assignats became more and more depreciated in value. At the commencement of 1794, the issue again exceeded 5,000,000,000. Another 1,000,000,000 was issued in the month of June following. The issues became then so rapid, that in March, 1795, they attained 8,000,000,000, and reached the sum of more than 20,000,000,000 in the same year. At the commencement of 1796, when the assignats were finally abandoned and replaced partly by territorial mandats, the sum total put in circulation up to that period was not less than 45,000,000,000 francs. Therefore, in the month of February of that same year, the engraved plates were broken by order of the government.
—We can well understand that the state had not really received more than a small part of the sum represented by this enormous amount of paper. The assignats which had never been received in public for their face value, depreciated from day to day, in proportion as the institution was abused. As early as the month of August, 1793, they were accepted for only a sixth part of their value. Vainly did the convention try to keep them in circulation by violent and despotic means, such as the proscription of coin, fixing a maximum price of goods, and imposing, under severe penalties, the obligation on all private citizens, to take the assignats at a fixed rate. All these measures and others, more violent still, were powerless to arrest the depreciation which kept on increasing. For a moment their value rose, when, in 1793 a part of the bills were called in, but it fell again soon after to such an extent that in March, 1795, they represented only the ninth part of their nominal value, and this was not the limit of their depreciation.
—More than once the government, although it struggled with all its strength against this depreciation, was obliged to recognize and sanction it. The most significant fact in this connection was that which happened in 1795. In the new forced loan to which it had recourse in that year, the assignats were received only for a hundredth part of their nominal value. At this point it would seem that the use of paper, thus de graded even by those who issued it, would have been abandoned; and yet at this very juncture, there were issues still more numerous than those which preceded. Thus the assignats fell to a half a hundredth part of their value, and soon after became entirely worthless.
—The history of the assignats is as significant as it is sad; but it is necessary to treat it in conjunction with other facts of the same nature, in order to draw the legitimate consequences which flow from it, with proper force. (See BANKS; BANKRUPTCY, NATIONAL, PAPER MONEY.)
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: ATELIERS NATIONAUX
Accessed from oll.libertyfund.org/title/1679/2693 on 2009-05-07
The text is in the public domain.
ATELIERS NATIONAUX. An atelier means in French, a place where workmen or artists, such as masons, carpenters, painters, sculptors, etc., work under a common direction. The same term is applied sometimes to a collection of workingmen. An atelier can be established in the open air; nevertheless the place of labor for ship-carpenters, stone-cutters, for instance, whose work is almost always performed in the open air, is more generally called in French a chantier, that is, a yard.
—We have nothing to say here of ateliers or French workshops in general, in so far as they are subject to the ordinary law. Since the law of March 17, 1791, which abolished the old régime of corporations in France, there have been no special regulations in that country for private workshops. The regulations which limit the hours of labor for children in factories, do not concern us now. We have here some observations to make on certain public ateliers, organized by the French government with a view of aiding unemployed workmen, and which have been designated by the name of ateliers nationaux.
—This last expression recalls nothing to-day but the organized movement of workmen which took place after the revolution of 1848, and which became so threatening to the public peace. Nevertheless it was not the first attempt of this kind made. In ancient times ateliers of charity, so called, had been established in France, with the object now of furnishing employment to unoccupied workmen especially during dull seasons, and now to put an end to mendicancy, by employing the indigent in various kinds of labor appropriate to their age and sex.
—The establishment of ateliers of charity in France goes back to rather a remote period. An edict of 1545 ordered the employment of able-bodied mendicants in public works. Ordinances of the 13th of April, 1685, of the 10th of February, 1699, and of Aug. 6, 1709, regulated the conduct of these ateliers. Louis XVI. extended this mode of assistance to the whole kingdom; he caused public works to be opened in every province during the dull season, and encouraged them by immunities and exemptions—In 1790, the beginning of the public troubles having caused a great number of private establishments to be closed, and left many laborers without work, vast public ateliers in the environs of the capital were opened. Besides, a capital of 30,000 francs was placed at the disposal of each of the departments, to give employment to the people everywhere according to the plan adopted for Paris. It was a very small amount in view of the object proposed, and apparently this sum of 30,000 francs was merely a sort of premium offered to encourage the departmental authorities who should enter on the path indicated by the legislature of the country. The law of July 12-22, 1791, regulated, by precise directions and strict orders, work in the public ateliers as well as the wages of the workmen. In addition, the organization of ateliers of charity was brought into the vast plan proposed to the constituent assembly for the suppression of mendicancy.
—It does not appear that these plans, executed in an imperfect manner, it is true, attained their object at that time. In spite of the opening of public ateliers, the misery of the poor and the enforced idleness of the workmen went on increasing. Still the convention did not hesitate to adopt the same method of public aid which fitted but too well into its general plan. It had often promised to come to the relief of every form of human misery, and the organization of public ateliers was one of the principal means which it proposed to adopt to make good its promises. But it was with these measures as with so many others announced by this stormy assembly; the time of putting them into execution did not come.
—Later, the law of the 24th Vendemiaire, year XII., gave a more regular and constant organization to ateliers of charity. The question was then, as it had been formerly, how to succeed in remedying enforced idleness and how to suppress mendicancy. Without entering into the details of this law, which was precise and foreseeing enough in its provisions, it suffices us to say that it did not attain the object which it proposed to itself any better than those which preceded it. Perhaps it might have been concluded, from this experience, that this method of public assistance is not so rational or efficacious as was supposed; but it appears so natural to want to obtain labor for those who need it, and compel those to labor who refuse to labor through misconduct or idleness, and so natural for men to flatter themselves that they can realize at small cost this double advantage, that they could not renounce the employment of the same means again.
—Recourse was had to it again in 1830, as in all critical periods; but the greatest as well as the most unsuccessful trial made in this direction was that which took place in 1848, in the establishment of the ateliers nationaux.
—The disturbance produced by the revolution of February having curtailed credit, diminished the demand for labor and thrown a large number of laborers into the street, the thought immediately occurred to men, as it had before, to organize public workshops in order to give employment to workmen during the stop-page of private establishments; and, in organizing these ateliers on a vaster scale, a more ambitious name was given them. At this period the ideas of certain socialist schools were spread generally among the people, who received them favorably. Various systems were current, having in view to substitute in a general way, for private establishments, public ateliers organized under the control of the state, and to which the name of ateliers nationaux was given in advance. Then, in order to aid laborers without work, it was resolved to employ them temporarily at the expense of the state. The ateliers which were established with this intent, naturally received in advance the name of ateliers nationaux. People seemed to consider them as a first attempt at applying the socialistic systems then in favor. And it is thus that real ateliers of assistance, very similar in substance to those that had been organized in 1790, 1830, and at so many previous periods, received a designation altogether new, which general usage in France has sanctioned.
—Not that in the minds of those who established the ateliers nationaux in 1848, there was really an attempt at realizing socialistic utopias. Those who took part in that work have defended themselves against having had such a thought, and we have no right to ascribe it to them in spite of themselves. It is certain, however, that the ideas which were current at that time, and even the ambitious name adopted, gave to the ateliers of assistance established in 1848 a special character and a new importance, very much greater than they had at any previous time. The organization of these ateliers produced most lamentable results, well fitted to disgust men forever with any attempt of the kind. They became a place of refuge not only for workmen reduced to involuntary idleness, but also for those who refused to labor of their own accord, through a spirit of turbulence or of idleness, and who found it convenient to obtain, at the expense of the state, a harmful leisure, too often devoted to fomenting civil commotion. It is thus that while completing the disorganization of private ateliers, they contributed, in no small degree, to extend the evils of enforced idleness, which they seemed destined to cure. At the same time they became a standing menace to the public peace.
—It is proper to add that, in 1848, less discretion and reserve were used than at other times in the admission of men to employment on account of the state. None of the precautions recommended, for example, by the law of the 24th Vendemiaire, year XII., were then observed. All who presented themselves were admitted, almost without distinction and without choice, especially in the first period; and it was only when the number admitted had attained colossal proportions that this course had to be abandoned. It was a corollary to this idea, almost officially admitted at that time, that the state owed labor to all who needed it. Moreover, either through negligence, want of care, or the real difficulty of the circumstances, poor provision, we might say none at all, was made for the effective employment of the men whom the state was supposed to put to labor for its own advantage. Both tools and work were wanting. During several months an enormous number of workmen were seen, estimated by some at 110,000 or 120,000 men, and whose number has never been exactly known now occupied in simply stirring the earth without any object, but more frequently in doing nothing at all, or in devising ways among themselves to direct tumultuous movements on the public square. This whole mass of humanity was seen hovering over the boundaries of Paris like a cloud, threatening general destruction. This was perhaps the most cruel and terrible of the embarrassments of this unsettled time.
—We shall leave to others the task of treating the questions of principle involved in this important subject. It is enough for us to have presented a short resumé of the facts. However we can not conclude without remarking how dangerous in itself is the method of assistance which consists in establishing public works to give employment to unoccupied workmen, and with what difficulty it answers the object proposed. It is not so easy as some think for a government to create at once extraordinary works in time of crisis and dearth of employment. A commercial crisis which influences in so unfortunate a manner the credit of private men, and which often forces them to restrict or suspend their work, influences in a manner no less disastrous public credit and the finances.
—It is besides in the very nature of things, that works improvised in this manner, especially in times of agitation and trouble, should be always badly organized and badly conducted. Therefore, even when unfortunately, critical times appear, when honest workmen are forced to stop work, if the government is in a condition to dispose of any extraordinary funds to aid them, perhaps it is better to devote it to a wise distribution of assistance to them at their homes than in works ill conceived, the least inconvenience of which is always to devour in useless outlay a good part of the means in hand.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: BANK NOTES.
Accessed from oll.libertyfund.org/title/1679/2710 on 2009-05-07
The text is in the public domain.
BANK NOTES. We do not propose here to examine the part which bank notes play in the circulation of wealth, nor to inquire how far and in what cases they deserve the name of paper money which is sometimes given to them. We purpose only to show what constitutes a bank note, and how it may be recognized.
—A bank note is made payable to the bearer, whoever he may be; it is also payable at sight or on presentation, no time being set when it shall fall due.
—Such are the two requisites of a bank note which essentially distinguish it from all other classes of commercial paper. All other paper falls due at a fixed date stated on its face, and can be transferred only by indorsement, so that the actual bearer is always required to show the signature of the transferer. A bank note may pass from one hand to another without indorsement, and is made payable any day.
—It has been contended, however, that a bank note should bear on its face something more. Emile Vincans, a distinguished French lawyer, says that a note made payable to the bearer and at sight, requires something else to make it a bank note. It would not, he says, be entitled to this designation, if it were issued by a private house or a simple merchant. There is some truth in this statement.
—It is certain that the bank note, viewed in its material conditions, has no other distinctive character than that which we have described; but it is none the less true that the bank note derives part of its power, and consequently part of its virtue, as a circulating medium, from the character of the establishment whence it is issued. If it were issued by a private citizen, it would hardly be accepted by the public; it could not be made to pass for ready money, and it would always be returned to the office whence it was issued, to be converted into specie. It would then but poorly answer the purpose intended by it. The attempt has been made in some countries, especially in Scotland, where the issuance of so-called bank notes is optional with everybody; and it has proved that an operation of this nature is not safe for individuals or private business firms, however wealthy they may be. It is not safe even for corporations organized on a small scale. In England, by virtue of a clause introduced in the charter of the bank of London, in 1708, the issue of bank notes was forbidden to companies composed of more than six partners. The consequence was that small companies which engaged in these operations were exposed to frequent disasters. But this does not affect the character of a bank note the essential requisites of which, that it be payable to the bearer and at sight, always remain the same.
—We may inquire whether it is a great advantage to a banking house to possess the exclusive power to issue notes of this kind, and whether this exclusive right is an important privilege of the bank. There can be no doubt about this. No other form of obligation presents the same advantages to the company which issues it. Notes made payable to the bearer and at sight, are the only ones which can circulate everywhere without any drawback or disadvantage, and which, therefore, can remain in circulation for an indefinite time, answering the same purpose as specie. The exclusive right to issue notes payable to the bearer and at sight, is therefore equivalent to the exclusive right to raise a public loan, by substituting notes for coin in the circulation.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: CAPITAL
Accessed from oll.libertyfund.org/title/1679/2781 on 2009-05-07
The text is in the public domain.
CAPITAL, a politico-economical term. It may be said, in a general way, that capital is the result of accumulation. It is the sum total of values withdrawn from unproductive consumption, and bequeathed to the present by the past.
—This definition is exact enough. and is, strictly speaking, sufficient. It agrees with that of J. B. Say, which is as follows: "Capital, in the broadest sense, is an accumulation of values withdrawn from unproductive consumption." It differs, however, in some respects—if not in substance, at least as to the number and variety of the objects it embraces—from that given by some other economists, and, in certain cases, from that given by J.B. Say himself.
—With the exception of certain writers who are not authority in the science, all economists are agreed in not comprising under the term capital, either land or the instruments of production furnished by nature, but only such values as are created by man and which are the result of previous accumulation. Thus, in treating of the great agents of production, economists always enumerate three: land, labor and capital; drawing a clear distinction between land, the primitive basis of production given by nature, and the total of the values or products which man has successively added to it by his labor, and which is called capital.
—But does capital comprise all the values previously produced by man, or only those which are used for purposes of reproduction? Here economists are not all agreed; for some consider all accumulated products as capital, whatever their nature or use, even articles reserved for the immediate consumption of man; while others consider as capital only such objects as are directly devoted to reproduction, such as raw materials, tools, machinery, buildings, etc.
—What is most remarkable is, that in the minds of all economists, without distinction, the idea of reproduction is inseparably associated with the idea of capital. However great their disagreement may seem, all conceive capital to be not only wealth acquired to society by its previous labor and saving, but also a lever to increase the energy, the power and the fruitfulness of its future labor. But some accord the reproductive faculty to a greater number of objects than others. Some grant it to all acquired wealth, even to things reserved for the immediate satisfaction of human wants, now considering them as a necessary reserve to facilitate future labor, sometimes as productive of utility or pleasure. Others recognize this productive faculty only in instruments of labor, properly speaking, to the exclusion of articles intended for immediate consumption.
—This disagreement is more apparent than real, in this sense, at least, that it is more about words than things, and does not modify substantially the final conclusions of economists. As it tends nevertheless to introduce an element of uncertainty into economic reasoning, we shall endeavor to put an end to it, so far as in us lies; or at least to show the real cause of the disagreement, which is the insufficiency of the language economists are forced to use.
—To understand the exact nature of capital, says Rossi, is one of the most difficult things in political economy. However this may be, we shall endeavor, first, to define precisely the nature of capital. We shall then show what are the functions of capital in human society, the nature and the extent of the services which it renders, the manner in which it is distributed and employed, the necessity of its alliance with labor, and the manner in which it divides with labor the new wealth produced. This is one of the most important parts of economic science.
—I. What is capital? Of what does it consist? We have just seen that there are two very different definitions of capital. In the one, all accumulated values are comprehended under the term; in the other, it applies exclusively to those which are directly devoted to purposes of reproduction, such as raw materials, tools, machinery, etc. Between these extreme opinions there are intermediate ones; but we take them in their absolute formularization, better to estimate their respective value.
—Among French economists this difference is most marked between J. B. Say and Rossi. Among English economists we find the difference at least as great between Adam Smith and Malthus on the one hand, and M'Culloch on the other. Garnier, in his Eléments de l'Economie Politique, thus sums up the divergent opinions of Say and Rossi: "According to the same economist," says he, speaking of Rossi, "we must define capital, a product saved and intended for reproduction. This definition includes three notions, the notion of product, of saving, and of reproduction. J. B. Say has frequently introduced into his definition only the first two. He understands by capital, the simple accumulation of products. Rossi, to explain his thought clearly, analyzes the labor of the savage who, having killed a beast, divides its carcass into three parts: one of them he eats, one he lays by for the next day, and one he uses in hunting—the horns of the animal for instance, which thus become an instrument of labor or of production, in other words, capital. Rossi does not consider as capital what is laid by to be consumed on the following day. If it were capital, then it might be said that even the ant accumulated capital."
—Such is the difference of opinion found in the writings of these two men. The difference is even more marked than it seems here; for although he does not always say so, and attaches the idea of capital inseparably to the idea of reproduction, J. B. Say certainly includes in the term all objects of consumption which Rossi just as certainly excludes from it.
—The English economists we have mentioned differ in about the same way. M'Culloch agrees with J. B. Say, whose views he sometimes carries to an extreme; while Adam Smith and Malthus seem to have suggested Rossi's views to him.
—Whichever one of these views we adopt it is proper to remark that the principles of political economy are not seriously involved here. It is a question of nomenclature and nothing more. But nomenclature has its importance, for, if it is not science, it serves at least to make science accessible to those who do not know it. There is nothing more annoying than the endless discussion of the use of words. It uselessly taxes the minds of men who might make better use of their faculties. It tends even to discredit science in the eyes of those who only follow it at a distance.
—In political economy it is useful, nay almost necessary, for the explanation and demonstration of certain great truths of science, to posses a word to designate and include generally the sum total of the values which the past has bequeathed to the present, which are the fruit of previous labor, of saving, of accumulation, and which add so much to the power of mankind In the beginning man found himself alone, with only his natural faculties, face to face with brute nature. In this condition, his existence was very precarious, his influence over nature small, and his power of production extremely limited. But owing to the peculiar foresight with which he was gifted, he, by degrees, invented for himself instruments fitted to second the labor of his hands. He built dwellings to shelter him from the inclemency of the weather. He stored up provisions, reserve stores, which enabled him to devote himself to more continued labor by assuring him sustenance for the morrow. In a word, he adapted the earth to his own use, while he continually increased his means of turning it to account. The values with which he surrounded himself in order to better his condition, assumed a thousand different forms, and ministered to a thousand wants. These are instruments, tools, dwellings, domestic animals, seeds, clothing, provisions of every kind; but they all have this in common, that they elevate the condition of man and increase his power over nature. It is desirable that we should be able to designate by a single word this immense stock of values which has been added in a thousand forms to man's original domain, and to distinguish it from the primitive basis of production furnished by nature, to which it is only an addition The word capital has been used by political economists to perform this service.
—The broad meaning given to the word capital by J. B. Say, is rejected by Rossi, who considers as capital only that part of accumulated values which is so employed as to produce a revenue. He thinks that he is thus more faithful to the definition and classification adopted by the English economists, Adam Smith, Malthus and others. We shall see directly if he is right on this point. But when he refuses to apply the term capital to the total of accumulated values, has Rossi found any other word to take its place? He has not. In his vocabulary all this mass of wealth previously acquired, has no special appellation, and can only be designated by means of a circumlocution. This seems to us decisive. J. B. Say's vocabulary appears to us decidedly preferable, in this, that it is not irreparably defective.
—Shall we therefore say with M'Culloch, that accumulated values should always be considered as a whole; that there is no distinction to be drawn between those reserved for the immediate satisfaction of the wants, or even the fancies, or the caprices of men, and those which are specially intended for production? Assuredly not. To pretend that all these values are equally productive, and productive in the same sense, is to go counter to reason which bears witness to the contrary. J. B. Say has perhaps fallen into this error sometimes, but it is especially peculiar to M'Culloch, who, in his extreme desire to place all accumulated values on the same level, goes so far as to pretend that articles of luxury which merely satisfy the desire of ostentation of the rich, contribute as much as anything else to production, as much as agricultural implements, for instance.
—But it does not follow necessarily that, because these values should not be confounded with one another, they may not receive the same designation, especially since there are not two names equally fitted to apply to them separately. All that follows is, that there is a good reason to divide and to classify different kinds of capital, and to distinguish them from one another by adding to the general and common appellation qualifying terms to indicate the difference between them. Rossi believes that values intended for purposes of reproduction are distinct from others. We believe so, too, though the distinction does not appear to us always easy to make. Let them, therefore, be called productive capital, to distinguish them from other values called simply, capital. Thus, whatever meaning be attached to the word, we must admit that there are several kinds of capital, and classify them. This merely necessitates our drawing a distinction the more, a first and general distinction which will serve as a point of departure for all other distinctions. In this way there need be no defect in the vocabulary of political economy, and all the demands of science may be met.
—Rossi, in restricting the sense of the word capital as he has, believed he was following the thought or the method of Adam Smith and Malthus. He was mistaken. It is very true that these two economists understand by capital only values used for purposes of reproduction, but they have another and broader word by which they designate the total of values produced and accumulated by man: stock is the word.
—The nomenclature of these writers is satisfactory and complete. They use the word stock to designate the total of accumulated values, and the word capital to express that portion of the values accumulated which is specially devoted to reproduction.
—This is capital as Rossi understands it. Thus, stock is the total of accumulated values, of whatsoever nature they may be, and to whatsoever use they are applied, whether they serve solely to support men or are used in reproduction. Capital is a part of stock, that part which is specially employed in reproduction, that is to say, in the creation of revenue. Owing to the use of these two words, the nomenclature is complete; the whole and the part being designated by special terms.
—Let no one suppose that these definitions are peculiar to Malthus. They are literally conformable to those followed by Adam Smith. In book II. of his work, where he treats specially of accumulated wealth and the employment of capital, he establishes very precisely the distinction just made, first in the introduction to his work; then in the commencement of chapter 1, he writes as follows: "When the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of putting it out to interest. He consumes it as sparingly as he can, and endeavors by his labor to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labor only. This is the state of the greater part of the laboring poor in all countries.
—But when he possesses stock sufficient to maintain him for months or years, he naturally endeavors to derive a revenue from the greater part of it; reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in His whole stock, therefore, is distinguished into two parts. That part which he expects is to afford him this revenue, is called the capital. The other is that which supplies his immediate consumption, and which consists either, first, in that portion of his whole stock which was originally reserved for this purpose; or, secondly, in his revenue, from whatever source derived, as it gradually comes in, or, thirdly, in such things as had been purchased by either of these in former years and which are not yet entirely consumed; such as a stock of clothes, household furniture, and the like. In one, or other, or all of these three articles, consists the stock which men commonly reserve for their own immediate consumption."
—Since in the English language, there are two words well fitted to designate, the one the genus stock, the other the species capital, why should writers confound the two under a common designation? The English nomenclature is a good one. Besides, it is sanctioned by the authority of the first masters of the science. We are, therefore, very far from approving the attempt made by M'Culloch to change the old vocabulary, by giving to the word capital a meaning broader than that given by J. B. Say. Malthus is right in accusing him on this account of introducing obscurity into the science, breaking with traditions without any valid cause. The arguments by which he undertakes to justify his new theory are of still less value than the theory itself. English economists will do well to preserve their nomenclature as it is fixed by Adam Smith and his immediate successors.
—II. Division or Classification of Capital. Capital may be divided or classed in different ways. There is no absolute or unvarying rule in this matter. This alone is important, that no kind of value produced should be omitted, and that the classification should be from generals to particulars.
—Adam Smith has given a classification of capital which seems to us satisfactory enough, and which has been adopted as he gave it, or only slightly modified, by a great number of his successors. It is true that he uses the word capital to designate only such values as are directly intended for purposes of production, but his classification embraces, none the less, values put aside for purpose of consumption. He was far from ignoring the importance of the latter.
—It is not capital only as he conceived it, but the general stock of accumulated values which he divided and classified. We may advantageously adopt his classification of capital.
—Adam Smith divides the general stock of accumulated values into three parts: the first comprising all the objects which serve only for the maintenance of man; the second, that part of productive capital which is stationary and which he terms fixed capital; the third, that part of productive capital which is not fixed, and which he calls circulating capital. He thus illustrates his division of capital: "The general stock of any country or society," he says, "is the same with that of all its inhabitants or members, and therefore, naturally divides itself into the same three portions, each of which has a distinct function or office.
—The first is that portion which is reserved for immediate consumption, and of which the characteristic is that it affords no revenue or profit. It consists in the stock of food, clothes, household furniture, etc., which have been purchased by their proper consumers, but which are not yet entirely consumed. The whole stock of mere dwelling houses, too, subsisting at any one time in the country, make a part of this first portion. The stock that is laid out in a house, if it is to be the dwelling house of the proprietor, ceases from that moment to serve in the function of a capital, or to afford any revenue to its owner. A dwelling house, as such, contributes nothing to the revenue of its inhabitants; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, make a part of his expense, and not of his revenue."
—Passing then to the specifically productive part of capital which he calls fixed capital, he describes it in the following manner, with his subdivisions, in which he does not fail to include that which afterward has been called immaterial capital, that is to say, useful talents and varieties of knowledge acquired by man.
—"The second of the three portions into which the general stock of the society divides itself, is the fixed capital; of which the characteristic is, that it affords a revenue or profit without circulating or changing masters. It consists chiefly of the four following articles: 1. Of all useful machines and instruments of trade which facilitate and abridge labor. 2. Of all those profitable buildings which are the means of procuring a revenue, not only to their proprietor who lets them for a rent, but to the person who possesses them and pays that rent for them; such as shops, warehouses, workhouses, farm houses, with all their necessary buildings; stables, granaries, etc. These are very different from mere dwelling houses. They are a sort of instruments of trade, and may be considered in the same light. 3. Of the improvements of land, of what has been profitably laid out in clearing, draining, inclosing, manuring, and reducing it into the condition most proper for tillage and culture. An improved farm may very justly be regarded in the same light as those useful machines which facilitate and abridge labor, and by means of which, an equal circulating capital can afford a much greater revenue to its employer. An improved farm is equally advantageous and more durable than any of those machines, frequently requiring no other repairs than the most profitable application of the farmer's capital employed in cultivating it. 4. Of the acquired and useful abilities of all the inhabitants or members of society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise of that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expense, repays that expense with a profit."
—We have next, the other part of productive capital circulating capital, with its three principal subdivisions.
—"The third and last of the three portions into which the general stock of the society naturally divides itself, is the circulating capital; of which the characteristic is, that it affords a revenue only by circulating, or changing masters. It is composed likewise of four parts: 1. Of the money by means of which all the other three are circulated and distributed to the proper consumers. 2. Of the stock of provisions which are in the possession of the butcher, the grazier, the farmer, the corn merchant, the brewer, etc., and from the sale of which they expect to derive a profit. 3. Of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and buildings, which are not yet made up into any of those three shapes, but which remain in the hands of the growers, the manufacturers, the mercers and drapers, the timber merchant, the carpenters and joiners, the brick makers, etc. 4. And lastly, of the work which is made up and completed, but which is still in the hands of the merchant or manufacturer. and not yet disposed of or distributed to the proper consumers; such as the finished work which we frequently find ready-made in the shops of the smith, the cabinet maker, the gold-smith, the jeweler, the china merchant, etc. The circulating capital consists in this manner, of the provisions, materials, and finished work of all kinds that are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them to those who are finally to use or to consume them."
—This classification leaves little to be desired. It comprises capital in the broadest acceptation of the term. Besides, it enumerates all the species of capital, while putting each one in its own place. It is to be wished, perhaps, that Adam Smith had drawn a distinction in the case of values reserved for the immediate consumption of man, similar to that which he drew in the case of capital specially devoted to reproduction. The latter is divided, as we have seen, into fixed and circulating capital; into fixed capital which renders continual service in the hands of its possessors, and circulating capital which renders no service except in so far as it is exchanged or transformed. In like manner, of objects destined for immediate consumption there are some which are consumed altogether, and are of use only because they are thus consumed: such are eatables generally. There are others, on the contrary, which last, at least for a time, and only their use is consumed: such are furniture and especially dwelling houses. But we do not insist on this distinction which is much less important than the other.
—III. Formation and Increase of Capital. There is scarcely an economist who has not devoted a special chapter of his work to explain the manner in which capital is acquired and increased. The different kinds of capital are the fruits of saving and accumulation. (See SAVING, ACCUMULATION.)
—IV. Necessity of Capital as an Auxiliary to Labor. Whatever difference of opinion may exist among economists, on the definition of capital, there is none on the necessity of capital as auxiliary to labor. Here all disagreement disappears. From Adam Smith's time all adepts in the science are at one on this point, that without the assistance of capital in production man can do nothing and his labor is even fruitless.
—How could so simple a truth be ignored? The cultivator of the soil can not till his land without the plow or spade. He can not utilize the fruits of the harvest without wagons, beasts of burden, granaries, threshing machines and other implements. The black-smith can not work without his hammer and his anvil. He needs, besides these instruments, a bellows, a furnace, fuel and iron, not to speak of his shop which is also capital. A weaver can not weave his cloth without a loom. He also needs thread. He must buy it or it must be furnished him; not to mention many other necessary things. There is no industry, no trade, in which certain instruments are not needed, although the importance of these instruments varies much with the kind of labor.
—"This part, however," writes Adam Smith, "is very small in some, and very great in others. A master tailor requires no other instrument of trade but a parcel of needles, to which should be added, however, scissors and a board. Those of the master shoemaker are very little more expensive. Those of the weaver rise a good deal above those of the shoemaker." But, considerable or not, instruments are always necessary, and the difference relates only to their number. And this is only a small part of the capital required in every trade. It is necessary, moreover, to have raw material, which is sometimes more costly than the tools. If a tailor's tools are of little account, the cloth, on the other hand, which he makes into clothes, and which he generally pays for in advance, is higher in price. The case is the same with the leather which the shoemaker uses, and both one and the other must have a certain supply of material to enable them to live while waiting for the price of their labor. Tools, raw material, supplies of every kind, are indispensable in different degrees, whatever the trade may be; and all these are capital.
—It is certain then that in all production, capital is the companion, the indispensable auxiliary of labor, so that it may be truly said that without capital there is no labor. This is true, even in the savage state, such as it has always been known, where man does not go to hunt without a bow and arrows, or some other instrument to take their place This for a more cogent reason is strictly true in civilized life, where labor is always more complicated and never gives such speedy results.
—This truth, we say, is so simple that it almost flows from the simple definition of the words. It does not seem to need any demonstration. However it is denied daily, not by economists, it is true, but by eccentric writers, whose pens, unfortunately, do not fail to exercise great influence on a considerable part of the public. They declaim against capital which is supposed to be, not the servant, but the lord of labor; they wish to free labor and workmen from the yoke which this alleged tyrant imposes on them. They go further: they pretend that capital is really unnecessary and that they can do without its assistance. It seems almost useless, at first sight, to refute propositions of this kind which refute themselves. But it is necessary to pause when it is seen that they find a great number of adherents among a misled public. It is well, moreover, to go to the source of these errors which generally originate from the false idea formed of capital. Let us first look at an example of this kind of eccentricity.
—We find it in an extract from a so-called democratic journal, one reproduced with approval in Proudhon's last work.39 Although he had only imperfect ideas of economic matters, frequently disfigured by the eccentricities with which he associated them, Proudhon knew enough when it suited him not to be mistaken on the nature of capital, which he defined sometimes in rather exact terms. But it often suited him to depart from the definitions which he himself had given, or to accept the grossest errors of his disciples, when these errors seemed to prop up his system. Thus he approved the vagaries of which we here make mention.
—A certain number of journeymen tailors come together and associate for the purpose of making clothing, and profess to be without capital; that is to say, they work on their own account, without the intervention of any employer. These workmen, as it appears, succeed in their endeavor, which is nothing very surprising. The writer cited by Proudhon concludes from this that they have refuted an axiom of political economy and dethroned capital. He thus sets forth and justifies this singular proposition. "Here are workmen who deny altogether this saying of the old economists, No capital, no Labor, a saying, which, if it were true in principle, would condemn to slavery and misery without hope and without end, a numberless class of laborers who live from hand to mouth, and have no capital whatever. These journeymen tailors could not admit the truth of this terrible conclusion of official science. Seeking for the rational laws for the production and consumption of wealth, they discovered that capital which was supposed to be a generative element in labor, has only a conventional utility; that the only agents of production are man's intellect and muscles; that hence it is possible to produce and to guarantee the normal circulation and consumption of commodities, by the sole fact of the direct communication of producers and consumers with one another. That by the doing away of a burdensome intermediary, and the establishment of new relations, producers and consumers would reap the profits now given to capital, that sovereign lord of the labor, life and wants of all."
—According to this theory the emancipation of workmen is possible by the union, in groups, of individual powers and wants; in other words, by the association of producers and consumers, who, ceasing to have opposing interests, escape forever the domination of capital.
—The wants of consumption being permanent, if producers and consumers enter into direct relation, associate together, and give credit to each other, it is clear that the rise or the fall, the artificial increase or the arbitrary decrease which speculation forces upon labor and production, would no longer have a cause.
—It is scarcely necessary to say, as we shall see presently, that the maxim, No capital, no labor does not in any manner condemn to endless servitude and wretchedness, that numerous class of workmen who have no capital. Capital may indeed come to the assistance, in different ways, of those who have none; and this necessarily happens every day. But to the principal question: How have the workmen above referred to, refuted the truth of the axiom, No capital, no labor? Have they, perchance, discovered how to sew without needles, to cut cloth without scissors? They probably have not been able to do without a shop and a press-board. Now the needles, scissors, shop and press-board used by the tailors are capital. Further, these workmen could not have made the clothing without the use of cloth, which is also capital. In fact, they have been satisfied to work on cloth, that is to say on capital, which did not belong to them but was furnished by others. But this capital was none the less an indispensable auxiliary to their labor. and if it be true that it was put at their disposition by third parties, it is only a proof of the truth of what we have just said, that it is not always necessary to be the owner of capital in order to make use of it. Moreover, these workmen, whatever be the manner in which they did it, were obliged to provide for their own maintenance, until they had received the price of their labor; and they could thus provide for their maintenance, only by means of capital possessed by themselves or borrowed from others. They, therefore, have had recourse to capital. But they did not, we are told, submit to conditions imposed by an employer. Furthermore, they found means of dispensing with the agency of merchants in dealing with consumers. This is apparently what the unknown author of the strange dissertation just quoted, wished to say, and this is what he calls destroying the tyranny of capital. If the workmen found a way of doing without an employer, or took his place themselves, they did well, especially if any real advantage resulted to them therefore. They did well also to dispense with the aid of merchants, if they were able to do so without prejudice to the sale or circulation of their products. But what has all this to do with the truth of the economic proposition? The workmen in question, no more than other men, discovered the means of dispensing with capital. They simply worked with their own capital instead of working with the capital of others, a thing done every day, for the majority of employers who have come from the working class have acted in this manner. After accumulating their savings as workmen, they used them to begin business with on their own account, and to become employers of labor. The workmen whose example is cited here did the same, with this difference, that as the savings of each man were probably not large enough alone, they united them in a common stock. They called to their aid the power of association, which is not to be despised when a good use is made of it; thus forming, by the union of several small savings, a capital sufficient to found an establishment of their own. From workmen, which they were, they become employers. There is nothing in this which strikes at the dignity of capital. On the contrary, it is in many respects a new proof of its productiveness, since by its aid the workmen in question succeeded in changing, if not in bettering their condition.
—We have noted the preceding passage, which is really unworthy to appear here, for the sole purpose of showing by an example, the kind of ideas that are current in certain circles, and how the simplest truths of science are interpreted in them. Surely if those who wrote these strange lines had given themselves the trouble of opening any work on political economy, they would have easily found in it a correction of their error. But what is their idea of capital?
—At first one would be tempted to believe they have simply confounded capital with money—a very common error. Money, as we know, is only a fraction, and rather a small fraction, of capital. But even if this were their point of departure, would they be justified in saying, in the case they mention, that capital has been dethroned? The workmen of whom they speak have not succeeded in dispensing with money, more than with any other article. They have been obliged to make use of it, at least to buy provisions while awaiting the completion of their work. All they can mean to claim is that the workmen, through association, succeeded in freeing themselves from the rule of a master, from that inconvenient and annoying person whom they looked upon as a tyrant, and who in their eyes is the personification of capital.
—J. B. Say has shown the necessity of capital in these terms: "We shall soon see, by observing its processes, that industry alone and unaided is not able to give value to things. It is necessary that the person engaged in industry should possess products already existing, without which his labor, however skilled, would remain inactive. These things are: 1. Tools, implements of the various arts. The cultivator of the soil can do nothing without his pick and spade, the weaver without his loom, nor the sailor without his ship. 2. The products which are to support the workman engaged in industry, until he has completed his part in the work of production. The product on which he is busied, or the price which it will bring, ought in reality to bring back the expense of keeping him; but he is obliged continually to advance what is necessary for his support. 3. The raw material which his industry has to change into finished products. It is true that these materials are often furnished him gratuitously by nature; but more frequently they are industrial products already existing, such as seeds furnished by agriculture, metals furnished by the miner and founder, etc. The manufacturer who uses them in his industry is obliged to advance their value. The value of all these articles constitutes what is called productive capital." All economists are agreed on this subject. Here, for example, is another quotation taken from the "Theory of Social Wealth," by Fredrick Skarbek, professor of political economy at Warsaw: "When we observe man occupied in collecting primitive values, or in producing new ones, we see that, in both cases, he can not act without having in his possession a certain stock which furnishes him the means of subsistence, or the objects necessary to fit him to work. A hunter needs some kind of weapon to strike down the wild beast that is to furnish him with food or clothing. Uncertain of the result of the chase, he must be supplied with a certain amount of provisions to enable him to endure one day's or several days' fatigue. If, later, with more developed means, he wishes to construct a dwelling he can not do so without first having the necessary tools for the purpose, without having felled the trees to be used in its construction, without having such a supply of provisions as will free him from the care of procuring a subsistence while he is building his house; in one word, he can neither collect the values which he finds ready in nature, nor produce new ones, without possessing a stock which will enable him to work by giving him the means of existence and the objects of labor."
—These are exactly the same ideas which we found in the works of J. B. Say. Both are agreed in considering as necessary for the execution of any labor whatever, not only the preliminary possession of tools and raw materials, but also a certain supply of food which enables the laborer to live till his work is finished and its product sold; thus considering such supply as an essential part of the capital. Although Rossi and some other economists deny this last, they have really the same views; since they consider the stock of provisions necessary to the laborer, as well as the raw materials and tools.
—Earlier than any of these economists, Adam Smith had established the same principles. He first supposes, it is true, that capital is not necessary in a barbarous or savage state. This we must not take too literally, for it is sure, and Adam Smith is not mistaken here, that the savage himself has need of tools. But he shows later, which is strictly true, that the necessity of capital increases in proportion as civilization advances and the division of labor extends.
—"In that rude state of society in which there is no division of labor, in which exchanges are seldom made, and in which every man provides everything for himself, it is not necessary that any stock should be accumulated or stored up beforehand in order to carry on the business of the society. Every man endeavors to supply by his own industry his own occasional wants as they occur. When he is hungry he goes to the forest to hunt; when his coat is worn out, he clothes himself with the skin of the first large animal he kills; and when his but begins to go to ruin he repairs it, as well as he can, with the trees and the turf that are nearest. But when the division of labor has once been thoroughly introduced, the produce of a man's own labor can supply but a very small part of his occasional wants. The far greater part of them are supplied by the produce of other men's labor, which he purchases with the produce, or, what is the same thing, with the price of the produce of his own. But this purchase can not be made till such time as the produce of his own labor has not only been completed, but sold. A stock of goods of different kinds, therefore, must be stored up somewhere sufficient to maintain him, and to supply him with the materials and tools of his work till such time, at least, as both these events can be brought about. A weaver can not apply himself entirely to his peculiar business, unless there is beforehand stored up somewhere, either in his own possession or in that of some other person, a stock sufficient to maintain him, and to supply him with the materials and tools of his work, till he has not only completed, but sold his web. This accumulation must, evidently, be previous to his applying his industry for so long a time to such a peculiar business."
—We have underlined in the text the words maintain materials and tools, in order to call attention to the fact that Adam Smith, although he does not include the stock for maintenance in his definition of capital, does not fail to consider it as an indispensable condition precedent of production.
—Capital being necessary, in different degrees, in all the employments of labor, we may conclude, first, that the number of these employments naturally increases in proportion as capital increases; then, that labor becomes more productive in the same proportion in the sense that it gives more abundant results for the same amount of labor and effort, consequences equally favorable to the progress of society and the well being of the masses.
—We say that the increase of capital increases the employment of labor. Just as man can produce nothing without capital, capital can not act without the assistance of man. If the agricultural laborer can do nothing without his plow and his spade, the plow and the spade can do nothing unless the arm of the laborer puts them in operation. Dependence is reciprocal; it is even greater in the case of the instrument than of the hand and the intelligence which urges it on. It is easy to understand from this, that every increase of capital, every creation of a new capital, affords man new opportunities to utilize his power or his intelligence. As soon as there is formed anywhere, by saving and accumulation, by an excess of production over consumption, any amount whatever of capital—unless the owner hides it away, which happily is becoming rarer every day—that capital seeks employment in production, and it can not find that employment unless an ampler field for the employment of human labor be found. It is very true, moreover, that the sphere of possible labor widens in proportion as capital increases, because if there are many kinds of labor like those of the tailor and shoemaker, which can be carried on successfully on small capital, there are many others. which can not be completed or even undertaken, except by the aid of enormous advances.
—If we wish to appreciate this truth in its broadest bearings, we have but to follow humanity in its principal stages, from the savage or barbarous state to the condition of civilization to which it has advanced.
—In the savage state there is scarcely anything but the chase, the most elementary and fruitless of all kinds of work. The soil can not yet be cultivated. Even if the savage had the idea, which he has not, of cultivating the soil, which he occupies, to increase its natural fertility, he would be unable to carry out this idea in practice from want of capital. Having neither plow nor spade to break the earth, he would be reduced to stirring it up with the branch of a tree. And even if he should succeed in this, which would be very difficult, he would be stopped in the course of his work for want of seed. Let us add, besides, that the cultivation of the soil which hardly repays the laborer after a year's waiting, is not suitable to a man whose stock of provisions can last only a few days. The vast circle of agricultural labor is closed to him by this fact. All that he can do in this direction is to collect here and there, in a very small number, such fruits as the earth produces spontaneously.
—When, thanks to the accumulation of capital, the cultivation of the earth becomes possible, the circle of agricultural labor enlarges, but it does not reach at once its greatest extent. With a few tools, such as the spade and the plow, the harrow and a small number of draught animals, and with seeds and provisions for a year, a man can doubtless set about the cultivation of some lands, but not of all kinds of land, at first. Tools being imperfect, as always happens when capital is not abundant, only the lighter soils are cultivated, those which offer the least resistance and yield the least. Even on them, all the labor necessary to make them as productive as they might be, is not expended. Men abstain from the working of the heavier soils which are the most fertile but which require more powerful implements. Especially lands are avoided which present obstacles that must be removed before they can be cultivated at all, and which are not susceptible of giving immediate results. Such are lands covered with forests or swamps. In a state which we shall not call savage but only barbarous, man is merely able to cultivate bare or prairie land which responds to the touch of the feeblest instrument in his possession, and which at most presents no other obstacles but the long weeds that fire can destroy. As soon as he meets greater obstacles, such as forests or marshes, he halts. It would be necessary previous to the cultivation of such lands, to fell the forests and drain the swamps. But these operations require time, tools, etc., and can be performed only with the assistance of a large amount of capital. In this state of things the sphere of the agricultural laborer is still quite restricted. It widens only in proportion as the amount of capital increases.
—It is the same in almost all the paths of production. A nascent people, or one which is not sufficiently provided with capital, can not begin the working of mines and quarries. All that such a people ask of the mines and quarries is what can be got from them with little effort and labor. Later, when the amount of their capital becomes greater, they explore its depth to wrest from the earth the riches hidden in its bosom. Here is a vast career closed almost entirely during the earlier ages to the labors of man, which is opened and developed only by degrees, through the increase of capital. No monuments or edifices are constructed in a barbarous state; men scarcely build houses. They are content with the most modest dwellings, built at the smallest cost possible. The great building industries, which play so great a part in civilized countries, in which they give employment to so much intelligence and so many hands, are here reduced to their simplest expression. What shall we say of navigation, ship-building, preparing, transporting, collecting materials, lading and unlading, the piloting of ships, building and management of harbors, etc.? Much more might be said on manufacturing industry, which scarcely exists in barbarous states. It is almost always the last to follow in the path of civilization, for, more than any other, it requires a large appliance of acquired knowledge and a considerable development of capital. Still what a vast career this industry opens to the activity of man, when we consider it in its various branches. And what a lively impulse it gives through its contact with them to all the others! It is true, therefore, that in a barbarous state human labor is restricted on every side, and that it multiplies and extends at once in all directions in proportion as the increase of capital furnishes men with the means of action which they need.
—It is proper to remark that if capital, generally speaking, increases the employment of labor by the opening up of new careers to the activity of men, it sometimes diminishes also their number in certain special branches of industry, since by the introduction of machinery it dispenses with the labor of many hands. This is a reproach directed especially against machines, which have, it is said, the great drawback of depriving workmen of work by doing a great part of that which was theirs. It is true that a steam engine, under the care of a single man, is able to replace the muscular power of a great number of men. It is none the less true that a spinning machine, for example, managed by one or two persons at most, can do the work of many women, and it may be said that in this sense it takes a part of their work from the women. These are facts. The error consists solely in the general consequences drawn from them.
—We do not intend to anticipate here what will be said in the article MACHINES. We may be permitted, however, some brief reflections on this subject, which are very naturally related to the subject of capital.
—The object of industry is not to furnish occupation to man, but to provide for his wants. Labor is but a means; the satisfaction of his wants is the end. When, thanks to the increase of capital, industry enters new paths, it is to satisfy these wants that it enters them. In this way it offers, it is true, more numerous employments to the activity of man, but this is only accessorily. Its final aim is the extension of production and the increase of the number of products. Even when by simplifying its methods, by increasing the power of its means, by subjecting a greater number of natural agents to its empire, industry increases production with a less expenditure of force, or assists the labor of man by natural forces which it yokes to labor, it merely remains faithful to its chief mission. In this way it continually increases the mass of our wealth. Does it result from this that the amount of labor which man performs is really decreased? By no means. Capital, by increasing, always creates more labor than it destroys. If, thanks to the power of the agents set at work, it does away with part of the labor of man in special branches, it communicates a great activity to all the other branches; it opens in other directions so many new paths to industry, that for one employment it destroys it creates ten.
—If men were well convinced of this truth, they would have given the great question of machinery a solution different from what they have sometimes given it. Does the invention of new machines increase or diminish the employment of labor? It diminishes it, say some economists, at least in certain cases, by satisfying the demand for commodities by a much smaller amount of labor. Others say it does not diminish it, except temporarily, for the simplification of the process of production by lowering the price of products, increases the demand for them, and industry grows in the same proportion. Taken in this sense, the question does not appear to us susceptible of a general decision. There are facts in support of both sides of it. There are today more printers than there were formerly copyists: this is an undoubted fact. Cotton spinning also employs more persons now that it is done by machinery, than it employed when it was done by hand. But again, are there more printers of music than there were formerly copyists of music? Does paper making by machinery employ as many workmen, notwithstanding the real increase of the demand, than paper making by hand employed some years ago? Does linen spinning by machinery employ, in France, as many men, and especially women, as hand spinning employed some time ago? Here we can boldly answer, no. But this is not the real question at issue. What should be asked is this: Is it not true that the introduction of machines—which in certain directions supplant the labor of man—is the result of the increase of capital and would not have taken place without such increase? Is it not true, on the other hand, that this increase of capital has given to all the other branches of industry a greater impetus, to say nothing of the new industries which it has called forth; and that, in consequence, the small number of employments which have been done away with on one side have been amply replaced by new ones? Thus put, the question will not appear to us subject to the least doubt. It will always be objected, it is true, that if labor has not been decreased, it has been at least displaced. But displacements of this kind which are less annoying than is generally supposed, would be almost imperceptible were they not too frequently sudden, produced as they are by artificial means, and if the distribution and handling of capital were less subject to restrictions.
—It is true that capital, by increasing, tends unceasingly to produce a wider development of human labor. This truth is strikingly evident when we compare two nations placed at a great distance from each other with respect to the accumulation of wealth. A sparse population may be seen to languish in inaction for want of employment, while another and a dense population works and is active. But even when the contrast is not so strongly marked, this truth is none the less apparent.
—As to the advantages which the increase of wealth yields to society in other regards, by augmenting, in ever-increasing proportions, the sum of the products which it can dispose of, they are so evident that it is scarcely necessary to dwell on them.
—V. By what Methods is the Co-operation of Capital and Labor effected in a Nation. Since capital and labor can do nothing alone, they always seek each other. They have been represented as necessarily in conflict. Nothing falser can be imagined. The fact is, that placed by the law of their nature in reciprocal dependence, they tend constantly to association. It is true that the conditions of this alliance vary, as we shall soon see, according to circumstances, and these are not always equally favorable to labor. But association is none the less necessary to them in all cases. We have here to explain the different methods by which this association is effected.
—When capital is in the hands of a man who can use it, there is nothing simpler than this association. The man who possesses an amount of capital sufficient to engage in some industry, and strength enough to employ this entire capital, has no need of inquiring further as to the manner in which he shall utilize the one and the other, nor to have recourse to outside aid in this matter. He works and calls his own capital to his assistance. A water-carrier whose capital consists in a barrel and a few pails, goes for water to the public well every day, and distributes the water to his customers himself. In this work he needs no outside aid: capital and labor are naturally allied in his hands. It is the same with most itinerant vendors who travel the streets of great cities, and even of some small hawkers. In general they own an amount of capital sufficient to buy in the morning the wares which they dispose of during the day. Sometimes, it is true, the capital which they use does not belong to them; they are forced to borrow it from others. In this case the alliance between capital and labor is not so simple; but if we suppose that they are really owners of the merchandise which they sell, capital and labor are combined, so to speak, in their persons, and work without difficulty side by side. It is the same with certain small artisans who carry on a trade on their own account, without employing workmen, their personal labor being sufficient to accomplish the work they have to do.
—But these simple combinations of capital and labor are rare. They are moreover only applicable to very small industries, which require only the strength of a single man. The moment an owner of capital possesses a greater amount than he can utilize in his own work, he is forced to call in, in some way, the labor of another person. He must then either undertake an industry, by associating with his labor assistance, under the name of workmen, with whom he will naturally share the fruits of their common toil, by paying them a remuneration freely agreed upon between them, or turn over a portion of his capital as a loan, as stock or in some other form at a stipulated price to a master of an industry who will make it effective in his stead. On the other hand, when a man does not possess the amount of capital necessary to employ his mind and his hands usefully, he is forced to associate his labor in some way with the capital of another. This is the condition of the greater number of those who belong to what is called the working class We have here various situations, in which capital and labor, not being at first united in proper proportions in the same hands, men are obliged to bring them together. How is this done? The preceding suffices to give an idea of the operations, it only remains to enumerate and define the several ways.
—An owner of an amount of capital which he can not utilize himself, or of an amount of capital so great that he is unable to utilize it at all, has three principal means of calling to his assistance the labor of others: 1. He can engage in some industry by setting up an establishment answering to the amount of the capital which he possesses. and calling to his assistance men who, under the name of workmen, and for fixed wages, will give him the co-operation of their labor. 2. He can lend his capital to a man of enterprise who engages in some branch of industry, and who will use the capital at his own risk and peril, on condition of returning it later, and in consideration of the payment of a yearly percentage, under the name of interest, during the time he keeps it. 3. He can become interested in an industrial enterprise, by investing his capital in it as a shareholder, that is to say, by associating his capital with all the chances of the enterprise in order to share its profits or losses. In each of these cases, which comprise, in their general expression, nearly all the possible combinations, the owner of capital, in reality, but associates his capital with the labor of another. Whether he makes it of avail directly, through the co-operation of his workmen, or gives it, in consideration of a yearly interest, to another proprietor who will make it available at his own risk and peril, or invests it in an outside enterprise by exposing it to all the risks of that enterprise, it is always true, that this capital is put at work, in whole or in part, by the hands of other men. There is here, therefore, a real alliance of the capital of the one with the labor of the other. These two necessary instruments of production, capital and labor, placed in different hands, are brought together, combined, united, and owing to this alliance they work from that time forward together.
—The man who possesses only his labor has also three methods of obtaining what he wants by joining this labor to the capital of another; and these methods correspond exactly to those which we have just examined. He can either offer his services to the proprietor of an industry, or try to obtain by a loan and for a given interest the capital which he lacks, or he can call upon money-lenders who will consent to risk their capital in his enterprise. Of the three methods, the first is undoubtedly the least favorable to workmen, in this sense at least, that if they run no risk of loss, neither can they hope for very great advantages. The returns which they get vary doubtless according to places and times. They also vary frequently with individuals, on account of their activity or respective capacity; but in general they are very much inferior to those which men may hope for who succeed, either by means of a loan, or in any other way, in putting the capital of others at work for their own profit, and at their own risk. But the reasons for this are so easily understood that it is scarcely worth while to set them forth. The man who obtains the capital of others in the form of a loan, to make it available on his own account, is in an altogether special position. The very fact of the loan which he has contracted, proves that special confidence is placed in his morality or capacity, which all workmen do not inspire in the same degree. He is besides weighted with a heavier responsibility than comes upon others, and is exposed to greater risks. It is therefore quite natural that he should aspire to make greater profits. It is the same with him who has been able to induce capitalists to interest themselves in his undertaking, by investing their money in his enterprise.
—VI. Effects of the Scarcity or Abundance of Capital—Absolute and Relative Abundance—Actire Capital and Dormant Capital. We have seen how, in proportion as capital develops in a country, industry opens up new paths for itself, daily extending the dominion of man and daily satisfying new wants. But this is not all. Even in the branches already cultivated, industry operates more profitably and on a larger scale in countries where capital abounds than in countries where it is rare.
—"Nations with small capital," says J. B. Say, "are at a disadvantage in selling their products; they are unable to grant their customers at home or abroad long terms of credit, or easy payments. Those with still less capital are not always in a condition to make even the advances of their raw materials and labor. This is why men are obliged, in India and Russia, to send the price of what is bought six months and even a year before their commissions can be executed. These nations must be greatly favored in other regards in order to make such considerable sales in spite of this disadvantage."
—The total of their sales is considerable, it is true, but not proportionate to the territory they occupy, nor nearly such as they might make if they possessed a greater amount of capital. Besides they always operate at a relative disadvantage, in this, that they scarcely ever realize the amount of profit to which they might lay claim; the greater part of it always comes to those nations who traffic with them, and who, so to speak, lay down the law to them.
—This disadvantage, however great, is not the only, nor even the greatest which they have to bear. A nation poor in capital knows little of the spirit of enterprise. It reaps small advantage of favorable occasions which present themselves and which another better provided nation always seizes. It also derives but a medium advantage from new inventions, through lack of power or boldness to put them to use. It drags along painfully in the old ruts, hesitating always to depart from the beaten track. If by chance it takes a risk in some new enterprise, it does so almost always with insufficient capital, and reaps disappointment. It may be that in such a nation the greater part of its land is cultivated; but the cultivation is ill managed, for want of capital sufficient to second the efforts of man, and the results are not proportionate to the energy of the laborers' work. It may be also that in such a nation the chief branches of manufacturing industry are carried on, but as they are only carried on with defective machinery, because proprietors either dare not or can not renew them in time, industry vegetates instead of flourishing. Their products are almost always imperfect, except when they depend more particularly on the labor of man. Moreover, these products are naturally dearer, at least they would be were it not for an almost fatal necessity which in this case throws the loss, resulting from lack or imperfection of tools, on the workmen, by reducing their wages.
—These truths appear in all their prominence when we compare the people of England and the United States, so rich in capital, with the majority of the nations on the European continent, which are so generally devoid of it. The spirit of enterprise is active in England; it is still more active in the United States. Every favorable chance to realize a profit is seized upon there with eagerness. Besides, an enterprise generally obtains all the capital necessary to its success. The agricultural and manufacturing industries are commonly provided with the best instruments, the best tools known, so that they are carried on under the most favorable conditions possible; and the sweat of man, his talents and his acquired knowledge are never spent in vain.
—The most serious matter, perhaps, is that the decrease of wages is the inevitable consequence of scarcity of capital. There are two decisive reasons for this. The first is, that where the spirit of enterprise is not much encouraged, there are fewer careers open to the activity of man; consequently there are a greater number of idle men, either voluntary or constrained. The second is, that fewer products are obtained with the same amount of labor. Where there is less labor, where, besides, fewer results are obtained with the same amount of labor, is it not inevitable that each man's share shall be smaller? We say that in this case wages fall, and it must indeed be so: but this is not all. The general level of wealth falls; the sum total of consumption is reduced, together with the sum total of production. And this is true not only with reference to the laboring classes, but with reference to all classes of society, with a few rare exceptions. The poor become poorer in consequence and the rich less rich, in this sense, at least, that all are obliged to be satisfied with a smaller number of products.
—Protests are often raised against these results, in so far as the working classes are particularly concerned. Why is it not seen that they are inevitable under certain circumstances? When the sum total of production is small, is it possible to distribute to each one a large part? Doubtless that of the workmen is relatively very small. There are here and there certain men who obtain much more and whose situation presents a striking contrast to that of their fellows: but if we reduce the part belonging to these latter would that of the workmen be much increased? But the strangest thing is, that men on this account declaim against capital, to which they impute the distress of the working classes. There can be no greater folly. The truth is, that the cause of this evil lies in the absence or in the scarcity of capital. But the abundance of capital is absolute or relative; and this is a truth ignored, upon which we should insist more were it not sufficiently dwelt on elsewhere.
—It is not always the relative importance of the values which it has accumulated that constitutes the superiority of one people over another; it is sometimes, and more frequently, its superiority in making use of these values. As to England it may be admitted as very sure that the sum of its actual capital is greater than that of any other nation in Europe. But is the same true of the United States of America? It is more than permitted to doubt it. North America, a new country, which in great part is still almost unexplored, can not possess an amount of capital equal to that which some European countries, France, for example, owe to the labors of past generations and the slow accumulations of many centuries. Nevertheless it is true, in fact, that capital is much more abundant in the United States than in France, in the sense at least that it lends itself more easily and with indefinitely greater profusion to the requirements of labor. Whence comes this? From several causes, which are summed up in one, to wit, that in the United States capital always goes to its real destination and there is never inactive. One would be alarmed if it were possible to give an account, in France, of the amount of capital daily turned away from fruitful employment to be dragged into sterile uses. One would perhaps be still more astonished could an exact calculation be made of the amount of capital lying idle, not only in the form of money, but in the form of merchandise and values of every kind. This evil, though not altogether unknown, is far less in the United States than in France, and this is the reason that with perhaps a smaller amount of actual capital there is relatively a much greater abundance. There is perhaps more capital in France, but in the United States there is much more active capital.
—And if it is asked whence comes the inferiority of France in this regard, we shall answer that it comes, first, from the almost total absence of those institutions of credit whose chief object is to distribute and dispose of capital; that it depends, also, on the vices of French legislation on commercial associations, and on the presence of certain ill-planned institutions, which have no other effect than to strike the greater part of social wealth with sterility.
[39.]Ideée générale de la révolution au dix-neuvième siècle.
Footnotes for CENTRALIZATION and DECENTRALIZATION
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: CIRCULATION OF WEALTH.
Accessed from oll.libertyfund.org/title/1679/2823 on 2009-05-07
The text is in the public domain.
CIRCULATION OF WEALTH. The word circulation (of wealth) is one of those politico-economical terms which has been most misused. The framers of systems have often employed it to build upon the data which it expresses airy castles in which nothing was wanting to make the world supremely happy but a basis on which the structure might rest. But the circulation of wealth is none the less an important fact well worthy of being observed, and one which has not been studied, perhaps, as much as it deserves. If utopists, while mistaking its law, have too often exaggerated its importance, this is no reason for extimating it below its real significance.
—The circulation of wealth, says J.B. Say, "is the passage of a thing having value from one hand to another."
—The passage merchandise from one hand to another is the first elementary fact which constitutes, by its repetition, the general phenomenon of the circulation of wealth. But it is necessary to give circulation a broader sense, and J B Say himself, in the sentence which immediately follows that which we have just quoted, gives it a broader one. He says: "Every article of merchandise is in circulation when it is ready to pass into another hand, that is to say, when it is offered for sale." It is evidence that here circulation means not merely the passage of merchandise from one hand to another, but the general movement of goods or values. It is even more than this; it is the readiness of merchandise to be moved. Mr. Fr. Skarbek, who has treated this subject at much length and with care in his Theory of Social Wealth, understands by circulation the general movement of wealth passing from one hand to another; but he adds that it is less the movement of things than the movement of values.
—Circulation, he says, is not a movement of the mass but a movement of the value of things; just as production is not a creation of things but a creation of values. Things which have value may undergo a rapid and continuous movement without circulation taking place. A sum of money, for example, sent by mail may pass through many hands without circu7lating; for then it is only transmitted or confided to several persons consecutively in order that it may be made to reach the one who has the right to dispose of it. The effect is the same as if the person who sends the money should deliver it to him to whom it is sent. All those who have served as intermediaries to facilitate the transmission of this sum have had no profit from the sum itself, and could not have been able to employ it as a productive force. Value may circulate rapidly and the thing which contains it remain motionless. Such is the circulation of the value of real property, the ownership and the enjoyment of which may pass from one to another, although it is not capable of undergoing any movement whatever. Even personal property may circulate without any change of place. A merchant who has paid a landed proprietor the price of wheat stored up in the granary of the latter, may resell this wheat without moving it. Thus this value will have circulated twice without taking the wheat from one place to another.
—In a savage state, when man works only for himself and is limited to the consumption of what he produces himself, there are no exchanges, consequently no circulation, though certain products may sometimes be transported from one place to another by a person who is both a producer and consumer. Circulation begins when men commence to exchange what they possess over and above what they possess sufficient to supply their own wants; but as long as they confine themselves to simple exchange of their superfluities, it is still inclosed within very narrow bounds. It is only really active and great when the division of labor, having become the common law of industry, brings men to exchange not only their superfluities, that is to say, the excess of what they produce respectively above their own wants, but almost all the values which they produce, for almost all those which they consume.
—In the state of civilization to which the greatest part of the peoples of Europe have advanced, division of labor having been introduced everywhere, circulation has become an important fact. There are few values in reality consumed on the spot and by those who produced them. They pass from hand to hand by successive exchanges, and sometimes it is only after a great number of transmissions or migrations of this nature that they arrive at their final destination. It is not only to pass from the hands of the producer to those of the consumers that products are exchanged and circulated. They circulate still and sometimes for a considerable period among their producers, when they need, as is generally the case, several successive preparations before being entirely finished. To say that in virtue of the division of labor each man connects himself with a particular industry the fruits of which he afterward exchanges, is not to say enough. It should be added that there is scarcely a producer from whose hands a finished product comes. Men confine themselves for the greater part to the execution of one or another of the articles which the product requires, turning it over afterward to other manufacturers who are to continue the work or finish it. Through how many changes has cloth passed, through how many hands has it gone, before the tailor converts it into clothing? A bale of cotton does not become printed cloth in a moment. It must first be converted into thread, then into texture, and between these principal manipulations how many intermediate ones there are; each one of these is performed not only by different hands but also in different places. The bookmaker, no matter how simple his work may appear, does not make a boot until the tanner has prepared the leather. A boot then is the result of several kinds of successive labor; it reaches its final condition only after several exchanges. It is the same with the greater part of other products and particularly with manufactured articles, some of which undergo so many different modifications and become the object of so many exchanges before coming to the condition of consumable values that it would be difficult to follow tem in their migrations. Thus, in a state of civilization exchanges are multiplied and circulation is widened, not only by reason of the various products which industry gives birth to, but also by reason of the vastly greater number of processes which these products demand.
—This circulation, we say then, becomes so important a fact that none of the particulars connected with it should be overlooked.
—It is, in the first place, easy to understand how important it is to society in general that this circulation should be carried on without trouble, without confusion, without disorder, and that no foreign obstacle should stop its course. Should its stoppage really take place for a moment, production, one of the essential conditions of which it has become, itself would stop, and society would find its very existence in peril. It is true that an absolute stoppage of circulation is almost impossible, for this reason alone, that it would be fatal; since if any cause should tend to produce it, there would be immediately, on the part of threatened society, such a general and powerful reaction against this cause that the obstacle would recede or at least behalf removed. But if it is not to be feared that circulation will ever be stopped entirely, it may sometimes be disturbed or retarded in its course. This happens in practice almost always in consequence of civil troubles, political revolutions, foreign invasions, and all serious disorders, whatever their nature may be. At such times there is generally a twofold obstacle to the easy circulation of products, one physical, the other moral. The first arises from material disorders which prevent products from journeying peaceably toward their respective destinations; the second, more serious and difficult to overcome, arises from the mistrust of producers toward others and the lack of credit which affects every one. In all these cases, if society does not perish it endures at least cruel suffering. Production is retarded for want of nutrition; consumption is narrowed, savings previously accumulated are consumed: in addition to the present evils endure men see the accumulated fruits of several years of labor lost in a few days.
—Commercial crises which so often afflict modern nations, and particularly those in which industry exhibits its greatest power, are nothing else, considered in themselves, than checks if not absolute stoppages of circulation. There may be a difference of opinion as to the causes, perhaps yet ill defined, of these calamitous accidents, but whatever their origin they have always the same character at bottom, that of retardation, more or less great, in the exchange and circulation of products. From this, and from this alone, come all the evils which these crises give birth to: so true is it that circulation is the life of modern nations.
—Without speaking of the accidental troubles to which circulation is sometimes subject, and which will be particularly treated under the words COMMERCIAL CRISES, looking at it only under its ordinary conditions, in that which forms in each country its normal condition, it still gives occasion to a large number of observations full of interest. Its conditions are not the same in every country; it is more or less general, more or less active according as local circumstances are more or less favorable to it; and we should hasten to add that it is the relative activity of circulation which constitutes, more than any other circumstance, the industrial superiority of this or that country.
—Under the word CAPITAL we spoke of the importance of the increase of capital to the industrial activity of nations; but at the same time we took care to distinguish active from dormant capital by adding, that the industrial superiority of one nation over another depends much less on the sum total of the capital which it possesses than the relative sum of its active capital. This is the place to insist on this distinction, which most economists have neglected, and which appears to us fundamental.
—If capital is useful, it is only in so far as it passes into the hands of those who can put it to work. While it lies idle, or, what comes to the same thing, while it remains in the hands of those who can not make use of it, it is of no real utility; it aids in no way the increase of production. M. Ganith, going a little further in this direction, says that idle capital is not capital at all, since it is useful to no man, not even to him who possesses it. He was wrong, no doubt. Idle capital is always capital, for it is at least a reserve, which can be of use later; often it needs but an insignificant circumstance to rouse it from its torpor. But it is true that a value at rest renders no actual service, and if there is much of such capital in a country no matter how great the sum of this real capital which the country possesses, labor will show little activity there.
—To say nothing of actual stoppages, if it happens that in a given country capital, or values intended for reproduction, occupy twice as much time in passing from one hand to another as would be necessary in a well ordered state of things, it is easy to understand that production would be less by one-half than it might be. It is important, therefore, that circulation be at once general in the sense of embracing all products, and of being active in the sense of causing products to pass rapidly from the hands which possess them to the hands of those who can give them useful employment.
—This truth, we say, has not always been adequately understood by economists. It must not be thought, however that they have entirely misunderstood it. Their only fault is in not having brought out its importance, nor given it all the attention which it merits. This, for example, is how J. B. Say expresses himself on the subject: "Values employed in the course of production, can not be realized in money and be employed in a new production until they have arrived at the state of a complete product and are sold to the consumer. The sooner a product is finished and sold, the sooner also can it, as capital, be applied to a fresh productive use. Capital used for a shorter time pays less interest; there is economy in the cost of production. Next it is of advantage that the transaction which takes place during the production should take place quickly. Let us follow the effects of this activity of circulation, in the case of a piece of printed calico. A merchant of Lisbon imports cotton from Brazil. It is of moment to him that his agents in America should make his purchases and shipments quickly; it is also important for him to send his cotton to a French merchant promptly, in order to be reimbursed for his outlay as soon as possible, that he may begin a new and equally profitable operation. Portugal, up to this point, has reaped the benefit of this activity of circulation. Now it will be France; and if the French merchant does not keep this Brazilian cotton in his storehouse long, but sends it promptly to the spinner; if the spinner, after having made it into thread, sends it promptly to the weaver, and if the latter sends the cloth without delay to the calico printer, and if he sends it to the retail merchant quickly, and the retailer to the consumer, this active circulation will have occupied for a less time that portion of the capital employed by the producers. Consequently there will be less interest lost, less expense, and the capital can be employed in new production."
—The utility of an active circulation is certainly indicated in the preceding lines, but we do not believe that it is felt strongly enough; and we are the more authorized to believe so, since the passage just quoted is the only one which J. B. Say has devoted to this important subject, at least in his treatise. There is certainly more to say on such a subject. It is true, that the relative activity of circulation is that which constitutes, more than any other circumstance, the industrial superiority of a people? This should have been examined first of all. Then it should have been inquired what the principal causes are which influence the rapidity or the retardation of circulation.
—Mr. Fr. Skarbek, who has treated this subject more at length and with care, is more explicit on all these questions. Instead of a few lines he devotes several chapters to the subject. He concludes the first chapter thus, "What we have stated up to the present concerning social wealth, authorize us to lay down the principle, that the mass of values and bases or sources of wealth possessed by a nation, do not in themselves constitute its wealth, because they are inert by nature and do not turn into a cause of well-being and improvement of a people, except in so far as circulation imposes on them a productive movement capable of bringing out all the advantages which society extracts from the values, before they become objects of consumption."
—The lines we have underscored in the preceding are also underscored in the original text, and it can be seen that the author there justly makes the circulation of products the sine qua non of their utility. Nothing is truer with regard to industry at the present time when exchanges and division of labor have become universal. It is not enough, however, that products should circulate; it is necessary, also, that circulation be as rapid as the work of production will permit, in order that there may be no interruption in the service they render. This, Mr. Fr. Skarbek brings out with much force in the following passage: "The advantage which society gets from circulation consists, as we have seen above, in this, that by each transfer of value, from one hand to another, a profit is gained by him who disposes of it, and a power of working is attained by him who acquires it. This advantage is all the more considerable in proportion as circulation becomes more extensive and rapid. From the moment that all exchangeable values are put in circulation, and circulate with the greatest rapidly possible, the inhabitants of a country make as much profit as they can possibly make from them. They are able to give continual employment to all the productive forces which they are able to put to work; and whatever be the mass of value produced by a nation, it is evident that in this case it returns all the advantages and all the services which can be expected of it. This is why national wealth consists not only in the great mass of values which can be produced in a country, but in the general productive movement, continuous and rapid, of these values."
—In the lines which precede, the activity of circulation is presented in all its importance, but it is perhaps still better done in the passage which follows, where the author supports his assertions by an example. We only regret that he has taken as his example the circulation of a piece of money; and we believe it our duty to remark in advance, that the same reasoning would apply to every productive value of whatever nature it might be. "Let us suppose that a one franc piece is given in the morning of the first day, by an inhabitant of the capital, to a milkwoman, in exchange for milk which she is taking to market; that she uses it immediately in buying an ell of cloth; that the cloth dealer lays in with this same piece of money his stock of meat at the butcher's shop; that the butcher spends it at a wine store; that the wine merchant employs it in buying bottles; that the bottle dealer spends it for bread; the baker for wood; and the timber merchant lays it up for future expenses and leaves it without employment during the next day. The difference of the services rendered by this piece of money in the course of two days is very considerable and may be expressed by figures; for it is as 7 to 1. During the first day the one franc piece performed the function of 7 francs because it served to make seven consecutive purchases, whereas on the second day, it represented only a unit in the hands of the timber merchant. If the latter made no use of it in the course of the second day, it might be said with truth that, for society in general, the differences of services rendered by the piece of money in the two days is as 7 to 0, because, having remained inactive in the hands of the timber merchant, it did not fill its office as an instrument of exchange, and the effect is the same as if it had not existed at all. Its value the first day is equal in services rendered to that of 7 francs, and it is easy to become convinced of this by collecting all the products which were brought by its means; for by estimating the value of the milk, the cloth, the meat, the wine, the bottles, the bread and the wood bought consecutively with the same one franc piece, we can easily see that it would be necessary to spend 7 francs in order to buy all these things at once."
—This reasoning, certainly exact in reference to a piece of money, is just as exact, as we have said, with reference to any other kind of value. Let us suppose, indeed, that any kind of raw material, iron, for example, which must pass, we will suppose, through the hands of 20 or 30 different producers, in order to receive as many different modifications before arriving at its final form, accomplishes this series of migrations in one month instead of 12; it is evident that in the 30 days it will have rendered all the services that it could have rendered in a year. It is not less evident, that if all the capital of a nation could be employed in this manner and with this relative activity, that the nation would have an immense advantage over all others. With an equal capital it would create 12 times as much wealth; or even with a much smaller capital, it would still succeed in surpassing them in the labor of production.
—But are such great differences in the relative value of circulation possible? Why not? In theory there is nothing simpler. As a general rule, for each producer, the work of production, which, properly speaking, consists almost always in a single modification to be given the material submitted to him, does not take long to accomplish. Generally he requires more time to sell his products than to finish them. The spinner who makes his thread in a few days, keeps it sometimes for several months in his storehouse before selling it to the weaver, who is to make it into cloth, and this is the case with nearly all other productions. Now these periods of stopping and waiting between the finishing and the sale of products being so many accidental stagnations, so many interruptions in the service of capital, it is easy to see that they may be and are more or less frequent according to the country; and in this way is explained in theory the enormous difference which may exist between one country and another in the productiveness of capital. As a matter of fact it is certain that these differences exist, as great at least as we have just supposed them to be. It seems to us beyond doubt, that capital acts more than 12 times as fast, for example, either in the United States, or in England, as in Turkey. Why? Because there are fewer delays in sales, as there is also an incomparably greater rapidity in the transportation or transmission of products; and it is this circumstance which explains, to our thinking, much more than the real abundance of capital, the extreme superiority of the first two countries over the other.
—Now what are the two chief causes which influence the activity or the slowness of circulation? Here again we find in the work of Mr. Fr. Skarbek more satisfaction than we have met elsewhere. Among the causes which, according to this writer, contribute to render circulation active may be mentioned the following, which are the principal: the extent of production and the abundance of products; the density of population and the concentration of population in a certain number of cities; the number and convenience of means of communication, such as roads, railways, canals, etc.; freedom of trade under all its forms, as well at home as abroad; security in all transactions; and, above all, confidence and credit, which alone render possible a rapid transfer of products for sale, and without which even all the other conditions are present in vain.
—That the extent of production contributes to hasten the circulation of products, is a truism. But this signifies particularly—and it is a truth which it is well to note—that activity of circulation does not increase simply in proportion to the extent of production, but in a greater proportion still, in the sense that it is always much greater where production is abundant and large than where production languishes. It is true that it is difficult, in this case, to distinguish the effect from the cause. If the abundance of production influences the activity of circulation, which is not at all doubtful, the activity of circulation in turn, and in a very energetic manner, influences the increase of production. The two circumstances are connected; they are at once cause and effect. But all this amounts to saying what is literally true, that products circulate in a more general manner and more rapidly in wealthy countries, provided with large capital, and which work on a large scale, than in poor countries which operate with small means and for medium results.
—That the density of population, and above all the concentration of population, in certain cities contribute also to quicken circulation, and consequently to increase the services which products may render, is another truth much less generally understood than the first, and consequently very proper to be mentioned. It is all the more important since it must be taken into account in the theory of population in which it is often ignored. It is beyond doubt, to our thinking, that dense populations, that is to say, those grouped in considerable masses on narrow spaces, have certain great disadvantages in comparison with scattered populations, and this especially that they obtain in less abundance, with less ease and at a higher price, certain products, and particularly raw material. But they enjoy this great advantage which compensates for many drawbacks, that the circulation of products among them is easier, more active, quicker, and that consequently every product which they obtain renders them incomparably greater service. This is rather a new view in political economy, which has not been sufficiently examined by men devoted to the science, and which merits, nevertheless, the most serious consideration. Mr. Fr. Skarbek seems to have realized it more than the greater number of economists before him, but perhaps no writer has thrown more light on it than Mr. H. Carey, of Philadelphia, in an important work published in 1848, (The Past, the Present and the Future; by H. Carey, Philadelphia, 1848). In this work the American publicist tries to prove, and in this he has succeeded in a certain measure, that the condensation of population in certain countries, far from creating for the men who inhabit these countries a relative disadvantage, is for them, on the contrary, extremely advantageous, through the facility and multiplicity of relations which it engenders; and that, taking everything into consideration, a dense population, other conditions being equal, should be richer and better supplied than one which is scattered over a vast space of land. We will not enter here into a minute examination of this question which would require a separate study, but in whatever way it be solved, the influence of the density of population on the activity of the circulation of products is none the less a demonstrated fact. As to the influence exercised by the number and convenience of the ways of communication, it is so easy to understand it that it suffices almost to mention it. Let us merely say that a good system of roads, canals and railways is itself the first fruit of an industry already powerful; that if it contributes to stimulate circulation, it is nevertheless the fruit of a pre-existing circulation, and that it supposes in the country where it is established a well understood public administration, well directed, well managed. It supposes also a great store of wealth previously acquired.
—Freedom of trade under all its forms is not less necessary to the activity of circulation than the other conditions.—"No matter what the primitive sources of a country's wealth may be, no matter what its population and its capital may be, no matter how powerful may be the influence of these bases of its wealth on circulation, the latter can be neither extensive nor rapid if there are not in the country circumstances favorable to exchange; or if the power of exchange is limited either by prohibitive regulations or the lack of outlets. For it is this power of exchange which exercises the most potent influence on circulation, since values circulate for the most part by means of exchange. Supposing then in a country a concurrence of circumstances favorable to the production of value, they will not be able to constitute the well-being of the inhabitants if there are causes which limit or hinder the exchange of products." The causes which may limit or hinder exchange are varied. Restrictive or prohibitive regulations at home and abroad, form one of the most serious. The absence of credit is another, not less powerful though less easy to define.
—Finally, we have as the last cause of the circulation of products, confidence or credit, which renders exchange possible whenever it is useful and can be carried on without danger. Let us hear again Mr. Fr. Skarbek, whose ideas on this matter fit in perfectly with ours.—"In order that exchange should become the motor of circulation, it is necessary, other things being equal, that it be accomplished with the greatest facility, that is to say, that all goods should find an easy and instant sale, and that all the inhabitants of a country should sell their goods on the shortest time possible. The sale of goods depends on three circumstances: first, a demand corresponding to the amount of goods offered; in the second place, on the facility and freedom of delivering the goods where they are demanded; and last, the power possessed by the purchaser to give always the equivalent of the merchandise demanded by him. Demand is more considerable in proportion as there are more purchasers, and as they are richer; the facility of sale becomes greater in proportion as commerce enjoys greater liberty and as there are easier means of transport and communication between the countries which maintain commercial relations with one another. But all this is not yet sufficient to give circulation the extent and degree of rapidity of which it is susceptible, for it is necessary besides that every value offered for exchange should be really exchanged at the moment it is offered and demanded: for this purpose it is necessary that the purchaser should possess a value which the seller consents to receive, in exchange for this merchandise, and that he should be in a condition to give it immediately and as often as he desires to make an exchange. As exchange is generally effected by means of money, it follows that if sale is to hasten circulation, it is necessary that the power of paying should always equal the extent of the demand. Now, as the value of the goods of every country surpass by far the value of the money which is found therein, it may often happen that a man who possesses a considerable fortune finds it impossible to make an immediate payment for the values which these means allow him to demand. The result of this is a species of stagnation which takes place in the circulation of values. The value of the merchandise demanded will remain inert until the person demanding it shall have acquired the power of paying, or he will be deprived of an enjoyment or of a means of employing his productive powers profitably. However, there is always a decrease of activity in the circulation and a loss of time and values to the national wealth. To remedy this drawback, to obviate a default in power of payment which does not come from a lack of revenue and fortune, and to facilitate exchange as much as possible, men have had recourse to a social virtue, confidence, which, applied to exchange, has given birth to credit; and credit to-day is the most powerful motor of exchange and the circulation of social wealth.
—By a sort of ultra reaction against the exaggerations of the utopists, many distinguished economists are only too much inclined to misunderstand the admirable power of credit. It is well therefore to put it before them whenever a natural occasion presents itself.
—Unfortunately these are the same ideas which have been misapplied to build up vain projects. Foreseeing vaguely the power of credit as well as the advantages of an active circulation, but without rendering to themselves an exact account of the nature of these two phenomena, a great number of men have endeavored to inflate credit, if it be permitted to say so, and to hasten circulation by artificial means.
—They did not consider, that after all, the practice of credit supposes confidence, and that circulation, no matter how active they may wish to have it, should not and can not run ahead of production. To complete the misfortune they have never imagined a better way to arrive at their end than to multiply without measure the instrument of exchange, money, or, in default of money, that which they call representative signs of its value, in other words, paper. The general examination of these different projects will find its place under the heads CREDIT and PAPER MONEY. Let us hasten to say, in a few words, that they rest ordinarily on a two-fold error, in this that, on the one hand, credit, such as they pretend to establish, would crumble quickly for want of a basis, and, on the other, circulation, such as they conceive it, even supposing that it could be established, would be still barren circulation. (See CRISES, COMMERCIAL.)
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: COMPETITION.
Accessed from oll.libertyfund.org/title/1679/2855 on 2009-05-07
The text is in the public domain.
COMPETITION. The word competition has been thus defined by a French lexicographer: "The aspiration of two or more persons to the same office, dignity or any other advantage." This is, indeed, in harmony with its etymological meaning. Two or more individuals aspire at the same time to the same position, to the same dignity, to the same advantage, no matter what; they vie with each other to obtain it; there is competition between them for its possession. But after thus giving the general meaning of the word, this same lexicographer attempts to give what he calls its commercial meaning, and here he seems to us less happy. He calls it: "The rivalry which exists between manufacturers, merchants, etc., whether concerning the quality of their products, their merchandise, etc, or concerning prices, with a view to sharing the profits of the same branch of commerce, industry, etc." What is rivalry concerning the quality of goods or their price? It is not true that in commerce and industry, competition always has these characteristics; and even if it were, they would not constitute its essence. The writer confounds the substance with the form, the principle with the changeable circumstances under which it is produced. Our lexicographer here seems to us misled by the desire to establish between commercial competitions and competition in its ordinary acceptation an essential and generic difference, which does not really exist. In reality they are the same thing. In commerce, as in everything else, by the word competition is meant the struggle of two or more individuals who aspire to the same advantage, and vie with each other to obtain it; the end to be attained is different, and in many respects, the means of attaining it are different also. For instance, what a man is in search of in public life is an employment or dignity, from which he hopes to derive honor or profit; in industrial or commercial pursuits, it is the sale of his products from which he expects a profit. There is a difference in the manner, in the circumstances, but not in the principle. There is a still greater difference in the means employed to obtain the end proposed, because the positions are different. Whoever aspires to a public office which another man disputes with him, lays stress on his personal merit, his talent, and the services which he has rendered. He curries favor with the ministers, in whose gift the offices are; he obtains recommendations to them from some of his supporters; and it is thus that he endeavors to defeat his rivals. In commerce or industry the competitors no longer court power, because it is not on power that the sale of their goods depends. They court buyers, and the means they employ consist, less in proving their personal merits, than in laying stress on the cheapness or the quality of their products. Aside from this, all competition is the same. The endeavor always is to obtain an advantage which is disputed by competitors. To say that commercial competition is a rivalry between merchants as to either the price or the quality of their products, is as if we were to say, that competition in public life consists in the rivalry which exists between aspirants to office, in respect to either their personal qualities or the services which they have rendered. We have from the beginning of this article endeavored to establish the identity of commercial competition with that general competition which is found in all human activity, because there is in them a common principle. In whatever way it may be produced, competition has always the same point of departure, the same motive, although it has not always the same mode of action, nor the same effects. It is universal competition among men which, everywhere and in all the ways of life, prompts men to vie with one another to obtain advantages which are not equally and superabundantly given to all. This competition results everywhere from this fact alone, that mankind have not at their disposal a fund of inexhaustible wealth, a fountain of happiness, fortune and honor, from which each individual may draw at his pleasure, without ever exhausting it. In public life, as the number of offices, especially of easy and lucrative ones, is not as great as the number of men who aspire to them, there is naturally a competition among these men for their possession. In commerce, likewise, as the number of buyers never equals the number of things to be sold, there is competition between the sellers to obtain the preference in the market. Who does not clearly perceive here the identity of principle? In both cases competition is caused by the insufficient quantity of the goods wished for, and the natural desire of each one to obtain as many as he can of them. It is born with men, and it will not cease to exist until men discover the means of infinitely increasing all the objects of their desires.
—But competition, as we have already seen, proceeds differently according to the course it follows and the end it has in view. In all cases, and in whatever manner it appears, it has its useful effects, to which, considering the imperfections of human nature, are attached certain inevitable inconveniences. Because of the competition which exists between those who aspire to public offices, they vie with one another in making themselves more deserving of them, by rendering better service to the government which employs them. If there were always only one man fit to fill each of the offices dependent upon the government, we may be sure that this one man would take his ease, and that public duties would, in general, be very badly performed. It is because each employé feels that he has competitors, either actual or possible, that he endeavors to perform his duties well, and especially to furnish no just cause of complaint. In commerce, likewise, it is because of the competition among sellers, that each one of them endeavors better to satisfy the public, by giving them products of a better quality, or at a lower price. If there were but one producer of each of the objects of human consumption, this one producer would also take his ease, and would hardly dream of improving either the conditions of his production or the quality of his products. This is but too often the case wherever there exists a monopoly. Competition is, therefore, here as elsewhere, a necessary condition that industry may be kept up and the public well served.
—Connected with these advantages there are inconveniences, some of which are inevitable, because they result from the very nature of man, while others, sometimes more serious still, result accidentally from the unfavorable circumstances in which certain countries are placed.
—In the case of government employés it sometimes happens that the competitors, instead of vieing with one another solely in talent, merit or services rendered, make use of deceit and intrigue, striving to obtain by favor, or by means still less reputable, what should belong to merit alone. They strive to win over, to overreach, and to deceive the men who control the patronage; they seek to influence them by recommendations they have obtained by begging, and sometimes even to bribe them. In like manner, in commerce or industry, intrigue, imposition and fraud too often usurp the favor which is due to real merit. The public are deceived by gaudy sign-boards or by fallacious announcements; they are attracted by the bait of cheapness, and are cheated with adulterated products. Nor are they deceived in the quality of the merchandise only, but sometimes in weight and measure as well. Thus it is, that in this common pursuit of public favor, the most crafty, the most intriguing, the most deceitful, frequently get the better of the most skillful or the most deserving. If there be any difference to be made in this regard between commercial competition and that which occurs in public life, it is all in favor of the former; for the public, who, in the purchases they make from merchants, always act on their own account, and with a view to their own most immediate interests, are much less easily deceived than a government which never acts but through the medium of its chief agents, who have no direct interest in the selection which they have to make, and with whom petty considerations of vanity or personal ambition frequently take precedence of the public interest, which it is their duty to serve.
—Although the disadvantages which attend competition are, to a certain extent, inevitable, since they proceed from the imperfection of human nature, and, in this sense, are almost the same everywhere, we must admit that they are more or less serious, more or less apparent, according as society is in an embarrassed or a prosperous condition. When society is prosperous, when there is abundant employment for labor, so that every individual easily finds an opportunity to use his faculties, competition, without being entirely stripped of its excesses, is everywhere more moral and keeps more within proper bounds. As every man is almost sure of receiving his share of prosperity, and of obtaining in return for the performance of his duties toward society a share of the goods which it distributes, he is less severe upon his competitors. Each one still strives to obtain as much as he can of social advantage, and competition never ceases to be earnest; but, after all, it is only a question of more or less; competition is generally confined within its proper limits. If a person has the least feeling of his dignity as a man, he disdains to resort to dishonest means; it is by real merit that he endeavors to excel his competitors. This is no longer the case in a society that is disturbed, constrained, and ill at ease, and that can give employment to only a portion of those who crave it. In this society, as there is no longer enough for all, competition between individuals, whether in public life or in commercial pursuits, is no longer a simple question of pre-eminence; it is oftener a question of life and death. A man then must get the better of his rivals or perish. Here it is that competition becomes, at one time fierce and cruel, at another immoral and perfidious, and that we find everywhere, as well in public life as elsewhere, a great number of men, to whom all means seem good. In these critical situations, competition, under whatever form, and in whatever way of life it appears, often presents, we must admit, to the eye of the philanthropic observer, a very distressing spectacle. Nor must we judge too severely those men of a weak and unphilosophic spirit, who, witnessing these scandals, the causes of which they could not fathom, conceived the senseless, and besides impracticable project of suppressing competition itself. They did not see, blinded as they were, that, even if they had succeeded in their plans, they would not have destroyed competition; they would merely have removed it, without in the least correcting its abuses. Still less were they in a condition to understand to what degree this simple removal would have been, in other respects, unfortunate for the human race, all of whose resources it would have lessened, and all of whose labors it would have disorganized.
—We would not have the reader imagine that in what we have just said our object was to defend industrial or commercial competition against the puerile attacks which have so frequently been made on it. It has always seemed to us as ill becoming economists to stop to defend such a principle; it is too entirely inherent in the primary conditions of social life; it is, at the same time, too great, too elevated, too holy, and, in its general application, too far above the attempts of the pigmies who threaten it, to need any defense. We do not defend the sun, although it sometimes burns the earth, which it should only illumine and warm, neither is there any need to defend competition, which is to the industrial world what the sun is to the physical world. The economist's task is merely to explain its action in the industrial sphere, and to show its marvelous effects. This is the best defense of it we can offer, and it is the only one which becomes it.
—If industrial competition does not differ in principle from the competition to be found everywhere else, and especially in public life, it signally differs from it in its consequences which are far richer in results. Looking at it in the first instance only as a necessary stimulant of general activity, although it acts, in this sense upon government employés as well as upon merchants and those engaged in industry, it has incomparably greater effects upon this latter class.
—The task of public officials generally consists in obeying, to the best of their power, the instructions they have received from those above them. They move in a circle traced out for them in advance, and which they can not leave, even to do more or to do better. The only effect of competition among them is, therefore, to render them more punctual, more exact in the performance of the orders given them by those above them. They can perform them, it is true, with greater or less intelligence, but they can not, as a rule, add anything to them of their own accord, nor, consequently, invent or change anything for the sake of improvement. Besides, in spite of this competition, of which we were just speaking, the administration of all the governments of the world are in their nature stationary, and almost inaccessible to progress. Their accepted forms and methods, no matter what vices they may conceal, are almost invariable. Hardly anything less than a revolution can change them. If a change in the way of progress is sometimes made, which rarely occurs, it can come only from those who are intrusted with the general direction of the government, and who inspire its entire policy. It is unnecessary to add, that innovations fertile in results are at all times very rare.
—It is not so with industrial pursuits, in which every individual, or at least every man of enterprise, acts on his own account and with entire independence. Here competition no longer appears merely as a prompter of activity, exactness, punctuality and order, although it produces these useful results here as well as elsewhere; it here appears also and especially as the principal agent of progress. And all these manufacturers, masters of their actions and responsible for their works, stimulated as they are by the incessant competition of their rivals, contrive how they may more and more simplify labor, improve its methods, perfect known processes and invent new ones. One man invents a machine to lessen labor and diminish the cost of production; another invents a chemical compound to improve the quality of his products; a third, a form of the division of labor so as to simplify its workings; a fourth, a system of accounts more convenient than the old ones; a fifth, a quicker or better way for transporting and distributing products; and so on. The question is, which one will surpass his rivals by the abundance and usefulness of his improvements. In this way, besides, application of these improvements generally follows close upon their invention, which is different from what is remarked in other pursuits: because here competition always makes itself felt. Progress, therefore, is here uninterrupted and lasting. If in the sphere of governmental administration useful improvements can come only from those in power, and occur but rarely; in the industrial sphere they come from all sources, and occur every day in all branches of labor. And what is it that prompts them? Always the same cause—competition. It is the first, we might say the only, cause of this upward march of mankind, and of the continued progress so visible in history, which would have continued ever uninterrupted were it not for the grave political disturbances which have at times broken its course.
—Competition is, therefore, in fact, the true motive power of progress in human society. Suppress this necessary stimulant, and at once the movement slackens, activity dies out, progress ends. Much could still be said to bring this great truth into full relief; but it has been often explained, and is generally admitted by every one who examines and reflects. It is better, therefore, to insist upon another truth, no less important and much less generally understood, namely, that competition is, in the industrial world, which embraces the entire, or almost the entire social world, the principal cause of order. It here plainly takes leave of that other competition of which we spoke above. In the world of governmental administration everything moves, everything is regulated and ordered in obedience to the decisions of superior authority. In industry there is nothing of the sort: there are no orders to be received from higher authority. What then takes the place of this superior absent authority? Who governs this industrial world, in default of a directing power? Chance, some say. It is not chance but competition, which is here the one sovereign regulator. Men often believe they have said everything in favor of this immortal principle when they have recognized that it is a necessary stimulant for producers; but even then they are far from understanding its marvelous effects. Competition is the supreme guide, the infallible regulator of the industrial world; it is the first source of the providential laws by which this world is directed and governed; it is, if we may be allowed to say so, the legislator, invisible but always present, who introduces order and rule into industrial relations so extended, so varied, so multiplied, where, without it, would be but confusion, disorder, chaos.
—Let us picture to ourselves this industrial world in its multiple and complex organization, as it has existed since the exchange of product for product and of service for service became its general law, and since the division of labor was everywhere established. In virtue of this division of labor no one in this industrial world produces, for himself, that is, to consume the fruits of his own production. Each man in it, on the contrary, chooses a special branch of production to which he applies himself, and which, taken in itself and isolated from the rest, would answer frequently to a very small proportion of his needs. In the savage state every man labors directly for himself, and consumes what he himself produces: he pursues a wild animal; he knocks it down with weapons which he himself has made; he tears it up with instruments which are of his own workmanship: he roasts it, with wood which he has gathered with his own hands, and devours it. The entire labor of production is performed by the same hands, and, moreover, the producer and the consumer are one. This savage may, it is true, associate himself with others in his work; but even this association does not effect unity of production, nor the identity of the producer with the consumer. This is no longer the case in our more or less civilized condition, which, thank God, is not of yesterday. In it each man works for his fellow men; he takes his products or his services to the general market; he offers them to all who ask for them, and counts only upon exchange to obtain in return the different objects he requires for his own consumption. One man is a boot maker, and produces boots only; another is a hatter, and makes nothing but hats. This man is a butcher; that one a baker; another is a smith, a distiller, a lamp maker, or a druggist. Of the thousands and thousands of things which human consumption constantly demands, each man produces but one, and adheres to that. He gives his services to whoever demands them, relying, for his own personal consumption, upon what he will obtain by means of exchange from all other producers. Still it rarely happens that any of these different individual labors produces a complete product. There is scarcely a product which is not the result of several successive elaborations, and generally each of those who have concurred in making it can claim but a small portion of it; not to speak of those who never put their hand to any special production whatever, and therefore concur only in an indirect manner in general production. In this state of things, as is readily seen, each man is dependent upon the rest; as a producer, he is bound to an immense chain, of which he forms, so to speak, but one link; as a consumer, he expects everything from his fellowmen, and can obtain the satisfaction of his wants only by a great many exchanges. It is this division of labor which constitutes the strength, the wealth and the greatness of civilized nations, and raises them so far above the savage tribes of the new world; but from it also flow infinite social complications—complications such that it would be impossible for human foresight to unravel them, if they did not unravel themselves, in virtue of a higher pre-existing principle. What is this principle? Competition, which is, in this, truly the light, the guide and the providence of the civilized world.
—And, first of all, since there is in the industrial world as it exists, a necessary, universal and constant exchange of products and services, all these products, all these services must be weighed and measured in some way, in order that we may know on what terms an exchange of them can be effected. Who can weigh them? Who can determine their measure? When we consider the infinite variety of the products which are every day displayed in the great market of the world, all different in their form, in their texture, and in the conditions of their manufacture; when we consider, besides, how many different hands have concurred in such unequal proportions, and in a thousand different places, in the manufacture of each of these products; when we take into account the still greater variety of services rendered which have not resulted in any material product whatever, and which must, nevertheless, be exchanged for real products; when we reflect that we must compare and measure all these products, all these labors, all these services, in order to establish an equivalence among them, we ask ourselves by what superhuman prodigy can this equivalence ever be determined? Is there a human power which would dare, we will not say to establish it, or even to undertake it, but merely to conceive the idea of formulating its laws?
—We are told that men dared to do it at the time of the French revolution. They dared to do it, but under what conditions, and at what price? It was established, in the first place, only for a limited number of the commonest products, and those whose value seemed easy to estimate, without entering into the detailed appreciation of the thousand different kinds of labor which had contributed to their production. And even for these products they did not establish any precise value, but only a maximum, determined from their former value as fixed by competition. Besides, who does not know the results to which these senseless measures led? Incomplete as they were, and although scarcely ever carried into execution, they were none the less the cause of frightful disorder in all commercial relations. If they had been pushed any further, they would have plunged all society into chaos.
—In spite of the inevitable failure of these disastrous endeavors there are still in the world, we know, some discontented spirits, some crazed brains, which dream from time to time of a fixation of relative values by governmental regulation; but even those who cherish these chimerical projects in their unfortunate moments, would recoil, we may be sure, before the difficulties of the task, if they were ever bound by law to accomplish it. Every man possessed of common sense must clearly perceive that it is an undertaking far above the endeavor of any human power, to determine the relative value of all the products and of all the services which are daily exchanged in the world's markets. Who then will establish this regulation? Who will work this wonder? Who? Competition, which alone is able to accomplish it.—"It is competition," says Montesquieu, "which puts a just price upon goods." It is competition, and competition alone, which can put upon goods their just price. But it does this, not only for goods properly so called; it does it also for the thousand different labors which have contributed immediately or remotely to the production of these goods, as well as for the innumerable services which have not entered into any product whatever.
—We should perhaps remark here, in passing, that when economists explain the laws by means of which the prices of everything that is bought and sold are determined, they do not ordinarily point to competition; they point to the principle of supply and demand, and we would by no means find fault with them for doing so. But the principle of supply and demand, as it is here understood, presupposes the action of competition; it supposes this action both in the sellers and in the buyers; for if we leave competition out of consideration, the principle of supply and demand has no longer any meaning; it ceases to produce any of the good results which are justly attributed to it.
—The price which competition puts upon merchandise is, in general, equivalent to the cost of production, in which we must include the necessary profit of the producers. What is the cost of production? Of what does it consist? It consists of the sum of all the expenses, small or great, which have been incurred in a thousand different ways by a thousand different hands, and perhaps in as many different places, to bring a product to the point it reaches at the moment of sale. Who can compute exactly the cost of production? Nobody, not even the seller, who will give you, at most, an exact account of the expenses which he has personally incurred on account of this product, but who will never be able to tell you what it cost, before coming into his hands. If it were necessary to determine, in an official manner, the cost price of only one of the products which are daily offered for sale in the market, a pretty thing it would be to see all the officers of the various governments at work! In vain would they assemble for this purpose the wisest statisticians, the most expert merchants, the most skilled manufacturers, and the ablest administrators; in vain would they add to these a re-enforcement of real economists: all these lights united could not accomplish such a task; there would necessarily occur a great number of errors in their calculations. But, what all the science of such a council could not do for one single product, competition does without an effort for the millions of products in circulation. It does it so well, according to principles so sure, and with a precision so infallible, that there is not anywhere, where competition exerts its full power, a single product which sells regularly either for more or for less than it really cost from the time of its first formation to its entire completion.
—Not that it has not, in this respect, inequalities and variations, some accidental, others permanent. But even these inequalities have also their raison d'être. They are not determined by chance; far from it: they are governed by laws and rules, and all tend to the better ordering of this industrial world, which we have described.
—When there are—as is usually the case, and as it is even essential that there should be—a certain number of producers who are engaged in the same kind of production, the price which competition puts upon their merchandise is not determined for each one of them by the cost price of the merchandise to him, which may and almost always does vary with different producers. The price which competition puts upon their merchandise, is the common or medium cost price. If there are among them some more skillful than the rest, who have been able, by means of better processes or greater attention, to economize more or less in the cost of production, these gain a little more by selling at the same price; they grow rich, and it is only just that they should; it is the legitimate reward of their skill. It is, at the same time, an incentive to all other producers. If there are, on the other hand, producers who, less attentive or less skillful, have allowed their cost price to exceed the medium, they suffer loss and rain; it is the necessary penalty of their carelessness or their incapacity. Most producers keep their cost price at the ordinary level, and these maintain themselves; these do not grow rich, but then they are not ruined.
—Besides these inequalities between producer and producer, which are a necessary stimulant to the activity of all, there are others consisting in variations of the selling price, which frequently occur without any corresponding change in the cost price. These variations are the fluctuations of the market. There is no product which is not subject to fluctuations of this kind; the difference between them, in this regard, is merely a question of more or less. Some are, it is true, for the convenience of consumers, marked at fixed prices in the stores where they are sold at retail, but they have, nevertheless, in the general market and at whole-sale, prices which vary more or less according to times and circumstances. Why, it will be asked, these fluctuations in the selling price which should always be regulated by the cost price? Is not this a game of chance which destroys the equilibrium of things, and overturns the general law we have just stated? Is there not at least an inaccuracy, a defect in the picture? It is not a game of chance, there is no inaccuracy or defect; it is, on the contrary, one of the simple but providential means which competition employs to regulate the world. But to make this clear we must consider another phase of the marvelous order which it establishes.
—It is something great to determine the relative value of products. Without it, as we have said, the industrial world would not last a day. But it is not enough to determine this value. If it is necessary that products be exchanged according to stated conditions, it is no less necessary that producers or workmen be regularly supplied to the innumerable sources of production; in other words, that labor producers be distributed exactly in proportion as they are needed. Here is another problem, as grave and important as the first, and which human wisdom would find itself powerless to solve, if there were not always present this mysterious power, which guides men without their knowledge. If in the industrial world products are innumerable and of infinite variety, the different kinds of labor which concur in the formation of these products are neither less varied nor less numerous. All these labors are, besides, necessary, and in almost the same degree. Their dependence one upon another is such that no one of them can be neglected without the others suffering thereby. How, for instance, could the baker make his bread if the miller had forgotten to grind his wheat? And how could the miller give the baker his flour, if the farmer had forgotten to sow, to reap, and to thresh his grain? How could the farmer, in turn, give the miller his grain, if the plowwright and the blacksmith had not made in time the necessary implements for plowing, harvesting and threshing this grain? The work of the blacksmith is no less dependent upon that of the miner who takes the iron from the mine, than that of the plowman is upon the work of the blacksmith. In addition, all are equally dependent upon the work of the carrier, who transports their respective products, as well as upon the services of the public agents who provide for the security of these products while being transported. Human industry is like an immense chain, all the links of which are united. Let one of these links be broken, and the whole chain gives way. It must, therefore, be so arranged that none of its works will ever be abandoned or omitted; that they will all be accomplished exactly at their proper time, and in proportion to the needs of every day. Who is charged to provide for such a want in society? Nobody; and we may add that nobody could do it. The different employments of industry, the labors of all kinds which are performed in all the different degrees of production, are so numerous that no person could even count them, much less provide for them. To see that every one of these innumerable forces is kept daily at work, is a task so far above all human foresight that it would be absurd to dream of intrusting it to man.
—It has, however, been dreamt of at times. Under the pretext that the satisfaction of the wants of society was abandoned to chance, it was seriously proposed to confide to a self-styled social power the duty of regulating the different employments, and methodically dividing all available forces among them. But before disposing of these forces, and apportioning them, let this power determine to attempt merely to name them exactly or completely; the sight of the insurmountable difficulties of this first task, will perhaps convince it that it has hardly understood, until the present moment, the incalculable extent of what it has dared to undertake.
—Some have compared the organization of industry to the organization of an army, and thought that, as men had succeeded perfectly in regulating the movements of an army, they could, in like manner and just as easily, regulate the movements of industry. How pitiable a comparison! As if the organization of an army, where their occupations are all alike, and vary, at most, from one branch of the service to the other; which has but one object for all; which can and must be divided regularly and systematically into regiments, battalions, companies, etc.; which always resides in certain chosen places, and under the control of chiefs; as if the organization of such an assemblage, we say, could be for an instant compared to the organization of industry, whose employments are so numerous; which uses different processes and instruments in each of these employments; which must be divided among an infinite number of different places, so as to be at all the sources of production, and distribute its forces everywhere in unequal groups, according to the needs and resources of the respective localities; which, by its very nature, refuses all regular division and uniform movement; and for which unity of direction would be death. To compare these two things, is to compare an atom to a whole world.
—We repeat, therefore, there is no human power which can foresee and know all the work to be performed in the different channels of industry, or which, for a still stronger reason, can provide for its doing. What then will do it? The same mysterious and sovereign power that has already regulated the relative value of exchangeable products, competition—a power much more enlightened, and much more active and vigilant than any of those to which the care of public interests is ordinarily confided.
—The means which it employs are, moreover, very simple. The first is, to keep all its particular interests constantly on the alert, by according the favors of fortune in all things only to the most vigilant, the most active and the most skillful. The second is, to direct the particular interest of each man to the satisfaction of the wants of his fellowmen. As long, in fact, as competition acts alone, and violence or fraud do not interfere, the only way for a man to get the better of his rivals is to provide better than they the means of satisfying in a more prompt, more suitable and more complete manner the wants of those around him. Thus, by the aid of competition, if there are in society such as civilization has made it for us a million different wants, there are also several millions of eyes incessantly open to discover these wants, several millions of minds incessantly occupied in studying and understanding them, and several millions of arms ever eager to supply them. The duties to be performed in the various branches of industry are very numerous, it is true; but the eyes which watch them are still more numerous. There is no danger that any necessary or even useful employment will escape this active and general vigilance; no sooner does a branch strike or languish, than a crowd of competitors offer to take its place. Thus it is that in this long and multiple chain of industry, which coils about itself in a thousand different ways, and which is made up of innumerable links, there is never any break or gap. Thus it is that this incredible prodigy, before which human nature must how, is accomplished in a manner so natural and so simple that we are no longer even surprised at it.
—But it is not enough, however, that all the occupations of industry be filled continuously and completely, they must also be filled in the proper proportion, that is, the number of men who labor at them, and the amount of energy or capital consecrated to them, must always be proportioned to the real extent of the work to be done. Here again we propound ourselves this eternally recurring question: Who in the world could furnish this just proportion? And we are forced to reply once more. No one, not even the producers. Competition alone can do it, and competition alone does do it, competition alone instructs the world in this regard, beginning with the workmen themselves, who could not determine, without its and, the amount of labor necessary even in the special branch of production in which they are engaged. And how does competition instruct them? By increasing or diminishing the mean profits in each branch of production, according as the labor applied to this branch more or less fully corresponds to the extent of its wants. If there be too much labor applied to any certain production, at once, thanks to competition, wages decline, and the laborers are thereby warned to seek employment elsewhere. If, on the contrary, there be a scarcity of labor, wages go up, and this is a warning to those who are engaged elsewhere to betake themselves in greater numbers to where the scarcity exists. Thus, by the sole influence of high or low wages, labor is distributed and divided with an almost infallible precision among the different branches of production, according to the measure of their needs, and equilibrium is always maintained between the work to be done and the labor assigned to it. Here it is that we most recognize the necessary and providential effect of those fluctuations of the market of which we spoke above.
—The wants of society are not ever the same; on the contrary, they vary from day to day, in regard to most objects of consumption. Suppose, therefore, that by a marvelous effort of some public power, the equilibrium of the different branches of labor had been exactly established to a given day, so that, for each piece of work to be done there would be at hand a corresponding amount of labor; still nothing would have been done, if allowance had not been made for the fact that this amount of labor varies for each occupation, according to the variable measure of its wants. To day, for instance, a capital of 10,000,000 francs and a force of 1,000 workmen are applied to a particular branch of production, and they are nearly the exact measure of what it needs at present; but to-morrow its needs change; the product which this branch of industry supplies is most in demand where there is least of it, this is what happens every day, not only for articles of fashion, but for many others. The capital and labor devoted to this kind of production find themselves, therefore, all at once neither insufficient or superabundant; they must be increased or diminished in order to preserve the equilibrium. Who will regulate these frequent and rapid variations? Sometimes, even without the wants being diminished, production may, with the same amount of capital and labor, become all at once superabundant, simply because the processes of manufacture have been simplified. Who will restore it to its proper proportion? Always the same principle, competition; and the means which it employs for this end consist precisely in these variations in price, in these fluctuations of the market of which we are speaking.
—They are necessary and daily warnings for the producers. If prices rise, they understand that the merchandise is becoming rare, and that they must hasten to supply themselves with more of it; if, on the contrary, prices fall, they understand that the market is overstocked, and that they must slacken production. Thus production is constantly kept within bounds, and taught to limit itself in all its branches by the extent of man's wants. Hence that marvelous equilibrium of disposable resources and wants to be satisfied, which is the normal state of civilized societies, and at which we might well be surprised if we could experience surprise at anything we see every day. When the changes in the extent of the demand are considerable and sudden, as sometimes happens, it is not always possible, it is true, to reduce or increase the production instantly in the measure desired, and hence some accidental disturbances occur here and there; but in this case the change in the selling price, which continues as long as the derangement exists, does not cease to warn and annoy the producers, and to urge them to reduce or increase their labor to the desired proportion.
—Economists generally say too little about competition, at least in express terms. They rarely even pronounce its name. They are incessantly invoking the principle, however, in disguised terms. It is impossible, in fact, to establish or to carry out any of the laws which political economy has produced, without the intervention of competition, for all these laws are based upon it. In the work of production, as in the distribution of wealth, competition appears throughout, not as an accidental fact, but as the sovereign regulator. It is competition that regulates the price of goods; determines salaries and profits; that fixes a ground rent when there should be one; which, in a word, establishes the rate of remunerations and values of all sorts. They say, and say truly, that it stimulates producers; but it does much more; it distributes, classifies and arranges them. If it is the stimulant of production, it is also its check. It is a light and a guide still more than an incentive. We may truly say that industrial order, as it exists, is its work. Imagine, if you can, even one economic truth, even one of the rules and laws which the science promulgates, of which it is not the source. Economists, it is true, invoke it incessantly, but they do so nearly always without naming it.
—In some respects this matters but little. Whether they appeal to this principle by name, or designate it by the circumstances it implies, by its action and effects, it is ever in reality the same thing. It does not on this account lose any of its essential truths. In consequence of this reserve or forgetfulness of the masters of the science of economy, however, competition has not in their works the place, which is due to it; this immortal principle is not as clearly manifested as it should be, nor is its grandeur sufficiently understood. It is this, perhaps, which has given a certain credit to the puerile declamations of those who attack it; and this also explains how even the adepts in the science have sometimes dishonored it by the unworthy capitulations to which they have submitted it, or by the incredible feebleness of the arguments which they have used in its defense.
—It has sometimes been said that industrial competition was a new principle, inaugurated in 1789, and one of the fruits of the French revolution. As if humanity could have reached the point of civilization, which it had reached at this epoch, without knowing this powerful lever, this sovereign guide, so necessary to the development of its activity. After what we have just said, it seems to us superfluous to demonstrate the error of such an hypothesis. Competition was not born in 1789; it was born in the very cradle of human society, which it has led step by step, from its state of primitive barbarity to the point of civilization which it has now reached. The truth in the case is, that competition, although it has never ceased to enlighten and govern the world, has been submitted at all times to restrictions of more than one kind, the sad effects of the errors or evil passions of men; these restrictions were more numerous previous to 1789, at which period some of them were suppressed, though they did not, alas, entirely disappear.
—If competition had always reigned without opposition, if it had been able to develop itself in all its plenitude in the midst of human society, such is the virtual strength, the power and inexhaustible fecundity of this principle that humanity would have marched from progress to progress, and with unceasing rapidity, toward a future, of prosperity, wealth and general well-being, of which at present, perhaps, it has not the least conception. We can judge of this from the progress it made in certain countries during the intervals, always too brief, in which it enjoyed a satisfactory, if not complete, liberty. But this liberty was needed in the past, and is needed in the present. The action of competition supposes the liberty of man at least in his industrial relations. In fact, it supposes, first, absolute spontaneity and freedom between the contracting parties, between the seller and the buyer of an article, between him who offers a product and him who accepts it; for if one of the parties can impose his conditions on the other there is no longer any competition, there is no longer even a contract. It supposes, moreover—and this is also an essential condition—that each one be free to go to a third party, when he is not satisfied with the conditions offered him. Now, who does not know to how many obstacles this two-fold liberty has been subjected at all times? These obstacles arise sometimes from the spirit of anarchy and disorder, and from the absence of a tutelary authority able to protect the contracting parties, and sometimes from abuses of this authority.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: DEBT
Accessed from oll.libertyfund.org/title/1679/2948 on 2009-05-07
The text is in the public domain.
DEBT, Imprisonment for, the right granted to a creditor to have his debtor arrested and imprisoned in order to force him to pay his debt. In another sense it is the mere act of arrest and imprisonment for debt.
—It is frequently supposed that the custom of imprisoning men for debt is very ancient. It is traced back, at the very least, to the law of the twelve tables which granted to the creditor an absolute right over the person and the property of his debtor. But the entirely different character of these two things, apparently similar, has not been sufficiently recognized. What the Roman law and the laws of the majority of nations of antiquity granted to the creditor was, a positive right against the person of the debtor; while modern law never accorded him more than a means of constraint, supposed necessary in certain cases to insure to him the recovery of what was due him.
—When slavery existed, man was considered in some respects as a thing, a transmissible value; for in becoming a slave he was liable to be bought and sold. Consequently the person of a debtor might be considered as forming a part of his property, against which the creditor might assert certain rights. It is acting on this principle, that, when the goods of a man were not sufficient to pay his debts, his person was delivered to his creditor. And this was a real taking of possession by the creditor, granted him for the payment of the debt due him; so much so that he was not only empowered to seize his debtor but also to sell him. Roman legislation on this subject was modified several times, now in a severer and now in a more lenient way; but it always remained, as far as we can see, faithful to the same principle. It is also in this sense, we think, that the laws on imprisonment for debt which were in force in France during the first centuries of the French monarchy must be interpreted.
—Still, nothing similar can have existed in Europe since the abolition of slavery. At the present time the creditor has no right except against the goods of his debtor; he has no right against his person. When, in certain cases, the creditor is authorized to have his debtor arrested, the object is merely to force the debtor to employ all the means possible to discharge the debt he owes. Probably imprisonment for debt as practiced in certain countries in our days, is connected by tradition with the custom of antiquity we have just mentioned, and it may be a sort of imitation of it; but it is none the less true that it essentially differs from the ancient law, both in its nature and in its object.
—The question is often asked whether imprisonment for debt, such as is practiced in modern times, is a good and useful measure; whether it be conformable to sound morals, and whether the true interests of society demand it; in a word, whether it should be continued. Opinion on this question has been and still is divided. It is contended, on the one hand, in favor of imprisonment for debt, that not the interest of creditors only, but the interest of commerce in general, demands it, so that credit away be strengthened by granting creditors every possible means of having the debts due them paid. On the other hand, the rights of humanity are appealed to, as well as the interest of public morality, which do not allow that a man should be arrested and imprisoned at the good pleasure of another man, nor that the liberty of the former should be sacrificed to the pecuniary interests of the latter—Unfortunately, political economy does not furnish any principle from which the absolute solution of the question can be drawn, which is more a question of morals and of fact than of political economy Political economy says merely that it is of importance to society that the payment of debts be guaranteed; that this concerns lenders less than borrowers, who would soon find all doors closed against them the moment lenders could no longer rely upon being paid. But should care for this go so far as to sacrifice men's liberty? And, on the other hand, is imprisonment for debt really as good a means to guarantee the payment of debts as is supposed? These are questions which political economy does not solve.
—On this latter point many facts have been alleged, and many contradictory arguments have been produced, without satisfactory results. It has been argued, on the one hand, that the mere threat of imprisonment for debt has often resulted in the debtor's discharging a debt, who without this threat would never have paid it; and this seems to be unquestionable. But it has been objected, and not without reason, that imprisonment for debt has often enabled the hardest creditor to obtain payment, to the detriment of all other creditors, because the imprisonment to which he had recourse compelled his debtor to employ his last resources to satisfy him, while it thus made it impossible for him to discharge his debts to others. Another and apparently still more forcible objection has been raised; it is that imprisonment for debt is, in fact, very rarely resorted to in really commercial matters. When a merchant, it is said, can no longer meet his engagements, he is declared a bankrupt, and he makes an assignment. In such a case, if he has been detected in fraud or bad faith, in France, for instance, he is not subjected to imprisonment for debt, but he is punished according to the bankrupt penal code. If, on the contrary, the bankruptcy is only the result of unfortunate operations, an arrangement is made which frees the debtor, or which gives him time to discharge his debts. In all cases he escapes imprisonment for debt. It is therefore only against non-commercial people that the mode of coercion should be employed. This would answer very imperfectly to the object the law has in view, viz., to render commercial relations more safe, and to favor the development of credit.
—In France, for instance, the question which occupies us has been solved in different ways, according to the times: but never, as it seems to us, with a perfect maturity of investigation. The convention had abolished imprisonment for debt by a decree of March 9, 1793; but it was re-introduced in the year V., by a resolution of the council of the five hundred, and confirmed soon after by the conseil des anciens. It was again abolished, in 1848, under the provisional government; but re established once more in the course of the same year, by the constituent assembly. Those who point to these contradictory solutions do not fail to say, when in favor of imprisonment for debt, that experience at once showed the evil effects of the abolition of imprisonment for debt. The fact is, that experience had been consulted neither in the case of its abolition nor in that of its restoration. In both cases enthusiasm and passion had operated as incentives to action, rather than solid motives.
—In our opinion the question of the legitimacy or the utility of imprisonment for debt is still an open one. Perhaps it will never be solved in a proper manner until a serious inquiry shall have proved exactly how this means has ordinarily been employed, and what have been its effects. The facts which have been gathered up to the present are not in favor of the measure. It results, in fact, from a statistical investigation in the city of Paris undertaken during the administration of M. de Chabrol, that, from 1817 to 1827, almost all the individuals detained for debt in the prison of Sainte-Pélagie, were not merchants, and, moreover, that the greater portion of them had been incarcerated for very small amounts. Parliamentary documents show a similar state of facts for the city of London. It always remains to be discovered, it is true, whether, even with regard to non-commercial persons, the preservation of imprisonment for debt is at all useful; but it will be admitted, at least, that the question is one deserving of a serious examination.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: DISTRIBUTION OF WEALTH
Accessed from oll.libertyfund.org/title/1679/2977 on 2009-05-07
The text is in the public domain.
DISTRIBUTION OF WEALTH. The study of the principles which determine the distribution of wealth, of the means by which that distribution is effected, and of the phenomena pertaining to it, constitutes one of the great divisions of political economy. This science is commonly divided into two or three parts; the first treating of the production, the second of the distribution, and the third, when a third is admitted, of the consumption of wealth. Hence, this is not a special subject, but a vast field of study embracing a great number of different subjects. To discuss the whole subject a volume would be necessary. It will suffice here merely to give some general notions of the subject, and to point out its principal subdivisions. We refer, for each of these subdivisions, to the special articles which treat of them.
—It is well understood that under the head of distribution of wealth we only mean here, and can only mean, the distribution or the division of the revenue of society, such as regularly takes place among all its members. To understand this distribution it is necessary to consider, in the first place, of what this revenue consists, and what are the principal agents which have concurred in its formation.—"The whole amount of profit," says J. B. Say, "derived by an individual from his land, capital and industry, within a month, or within the year, is called, respectively, his monthly and his annual revenue. The aggregate of the revenues of all the individuals, whereof a nation consists, is its national revenue."
—Some writers on this subject have fallen into a grievous error, an error which has led them to the strangest conclusions. They imagined that in the revenue of a country was to be included only the net profit of the capital employed in the country, that is to say, in other words, the net profit of those engaged in industry, who are especially charged with turning capital to account. Thus, in an industrial enterprise, it would not be proper, according to these writers, to consider as gain to the community at large, at the end of the year, anything beyond the net annual revenue realized by persons engaged in industry themselves. They have not taken pains to observe, that the expenses incurred by the persons thus engaged in industry during the course of the year in order to attain their object. consist in great measure of wages distributed under various forms, and that these wages constitute the revenue of the workmen who receive them. The sums, too, which have been expended in the purchase of raw material or implements have been, in like manner, diverted into other channels for the support of labor, and have become sources of revenue for other workers. That which is to one man outlay, or an advance made to production, is revenue in the case of another. It is not, therefore, the net product but the gross product of industrial enterprises which constitutes the revenue of society or of a nation, and which, under various forms, is distributed among the individuals who compose the nation.
—In order to know how or among whom this revenue is to be distributed, it is necessary to know who those are who have concurred in its formation; in other words, who have been the agents of production in general.
—Production is generally the result of the co-operation of three principal agents, namely: 1. Land capable of cultivation, mines, quarries, and all natural agents. 2. Capital, which includes the implements of labor (among which are to be reckoned farms, factories, workshops, etc.), materials to which present labor is to be applied, means of subsistence for workmen, and generally all kinds of value, the fruits of past labor, which may serve to facilitate present or future labor. 3. Labor, meaning by this term not merely physical labor, but every exercise of the intellectual or physical faculties of man, which tend directly or indirectly to the production of revenue.
—All production is, we say, the result of the co-operation of these three agents, or of these three productive forces. They are combined in very different proportions, according to the kind of product sought to be obtained, but each is indispensable in the general work of production Without land capable of cultivation, mines and quarries, raw material could not be obtained, without capital, it would be impossible either to obtain it from the earth, or to work it; without labor, capital and land would be idle.
—Since, then, each of these agents is indispensable to production, it seems natural that each should share in the results, according to the measure of the service it has rendered This, in fact, is what actually takes place. There are, however, certain observations to be made on this subject.
—When natural agents are not appropriated, they have no claim on the result of production. The services they render are in such a case gratuitous. But when they are appropriated, as land capable of cultivation, mines, quarries, waterfalls, etc., generally are, their possessors naturally claim a part in the products due to their co-operation. These possessors exact payment for the services rendered by the natural agents which belong to them. It is very clear, of course, that it is not these inanimate natural agents which claim their share, but the men who have the services of these agents at their disposal because they have become the owners of them. With the question of the right of thus deriving a revenue from the services of inanimate agents we have here nothing to do; that subject will be treated of in its proper place. (See PRODUCTION.) It suffices for the present to state it as a fact, as being the natural and necessary result of the appropriation of these natural agents. As to capital, which is always appropriated, since it belongs of right to those who have brought it into existence or to their successors, it always claims its share; and this is equally true, and with greater reason, of labor which, excepting in certain rare cases, is not and never can be gratuitous.
—It is, therefore, between these three great agents of production that revenue is divided. To each of them there corresponds, besides, a distinct form of compensation, suited to the nature of its services.
—Rent corresponds to the services rendered by land or by other natural agents.
—Profit is the term used to denote the ordinary remunerations paid for the use of capital, either when the holder of the capital uses it at his own risk, whether alone or in association with the capital of others; or interest, when the holder of capital, instead of employing it himself and at his own risk, lends it to another in consideration of a fixed rate of remuneration.
—The compensation of labor is generally expressed by the term wages, a term capable of universal application, although other terms may be employed according to the kind of labor referred to. But whatever term is used, and to whatever kind of labor applied, remuneration remains essentially the same, and is as much wages, as when used to express the compensation of the common laborer.
—It sometimes happens that the same individual participates in all three kinds of remuneration, rent, interest and wages, as the farmer, when he is at once, land owner, capitalist and workman. As proprietor of the land, he receives rent; as capitalist, profit or interest; and finally, as remuneration for his personal care and attention, he receives wages.
—The case of the same individual participating in two of these kinds of remuneration is much more usual. Such, for instance, is the case with a great number of landed proprietors, who commonly receive in rent remuneration for the use of the land, and, in interest or profit, remuneration for the use of the capital expended upon it. This is more especially the case with men in industrial enterprises who, without exception, receive, in addition to the remuneration of their labor, the profit on the capital to which that labor is applied. This is the case, too, with a great number of people who constitute the so-called wage-paid classes, such as laborers, servants, soldiers, sailors, etc.; for among these individuals there are many, who, besides the wages they receive for their labor, receive also interest on some amount of capital placed either in savings banks or elsewhere.
—There are also, however, a great number of individuals who receive but one kind of remuneration. In this category may be ranked, in the first place, the great mass of the wage-paid classes who have no other source of revenue than their wages; and many simple workmen, soldiers, sailors, even employes and public officials, are in this position; and there may also be included in it capitalists who live exclusively on the interest or the profit of their capital, invested either in the public funds, or in industrial companies, or elsewhere. But in whatever way these different kinds of remuneration are divided among men, the principle of the distribution of revenue is not changed, and the relation which we have established between remuneration and service remains intact.
—In consequence of the action of competition where that competition operates unopposed, these different kinds of remuneration constantly tend to become regular, being reduced to a common level for equal services. Thus, two pieces of land yielding equal advantages to those working them, will generally rent for the same amount. Two separate amounts of capital employed or invested in the same place but by different persons, will also usually bring the same profit or the same interest. In like manner, the labor of two men equally strong, equally active, equally skillful, will commonly obtain, under given circumstances, equal wages. There are, however, in respect to each of these species of remuneration, various causes which, under the action of competition itself, may produce great inequalities, quite as natural, too, as the general equality which we have just mentioned.
—In the first place, as regards arable land, it is very natural that more fertile or better situated land should bring a higher rental than land of less fertility or less well situated. As it is here the inequality of the services rendered which determines the inequality of remuneration, this circumstance does not in the least invalidate the general law which we have just established. As regards capital, there are inequalities as great, perhaps even greater, which are due to other causes. If it is a question of the profit to be realized by one employing his own capital, it is easily understood that this profit is in many respects aleatory, that is to say, subject to a great many risks, which may in certain cases transform it into a loss. It is therefore natural that this profit, in case of success, should sometimes be very great. The interest of invested capital seems more fixed, and in fact it is so; and yet it is susceptible of great variation due to the position of the borrower. and of the risks run by the lender. Finally, as regards wages, considerable variations may be noticed, but nearly all are explained and justified by the greater or less skill of the workmen, that is to say, by the inequality of the services rendered. Two manual laborers working under similar conditions, and with like energy, generally get the same wages, and the skillful workman gets higher wages simply on account of his skill. For the same reason the foreman of a workshop, the draftsman, the architect, and the public officer, although merely workmen too, yet commonly receive better wages than the best laborer, because to the labor of their hands they add also an intellectual labor, rarer and more precious. But we do not want to dwell upon these considerations; we merely wished to point them out briefly, referring for additional information to special articles, namely: on the subject of the remuneration of services rendered by natural agents, to the word RENT; on the subject of capital, to the words INTEREST and PROFIT; and on the subject of labor in general, to the word WAGES.
—There only remains for us to make two observations, one relative to the mechanism of the distribution of revenue, the other relative to the tax received by the state. The mechanism of the distribution of revenue is as simple as the principle itself. This distribution takes place everywhere through the intermediation of those engaged in industry, because these latter centralize in their hands, each in his own sphere, the means necessary to production. and because the results of production are realized in their hands also. Thus, the farmer who cultivates a piece of land, frequently the property of another, pays in the first place to the owner the rent of the land, plus the interest or the profit of the capital invested in it. He distributes, besides, among his regularly employed workmen. as also among those whose services he requires from time to time, wages for their labor. Sometimes, too, when he employs borrowed capital he pays to the lenders the interest due them. And all this comes from what his working of the land has produced. That which remains over and above this is his personal profit, and he keeps it as the wages of his own labor, and the profit of his own capital Thus, within the range of his occupation, rent, profit, interest, wages, are distributed by him. The same is true of all others engaged in industrial enterprises, each of whom is, in his sphere, the distributor of the products which he has realized. What he must distribute to others is ordinarily fixed and determinate; what he may keep for himself is variable, on account of the risks he runs, and of the greater or less success that may attend his operations; but this does not in the least affect the order of distribution. All that results from this is, that the person engaged in industrial enterprise, instead of finding a surplus at the end of the year which he takes as his own share, may be confronted sometimes with a deficit, and that as a consequence there should be some defect in distribution.
—Some economists have regarded the state as a fourth party sharing in the results of production, and the tax which the state receives as a particular form of remuneration to be added to the others. This manner of regarding the state and the taxes received by it, does not appear reasonable to us, inasmuch as it would completely disturb the simple order and mechanism of the distribution of revenue. It appears to us more consonant with the true principles of political economy to consider the state as a great business concern, and the government as a man of enterprise who renders to the nation which he governs certain services demanding, in return for them, a certain remuneration like any other entrepreneur; which remuneration he afterward distributes among his servants in the shape of wages. The state is indeed a business concern of a peculiar kind, which does not admit of competition within the sphere which it embraces, and the tax which it receives in payment for its services, instead of being freely debated about and voluntarily paid, is on the contrary, and as the nature of things requires it, imposed by itself. But these differences which are without doubt characteristic in other respects, and which constitute government an entrepreneur (undertaker) of a special kind, change in nothing the nature of things.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 2 East India Co. - Nullification Chapter: ENCOURAGEMENT OF INDUSTRY BY THE STATE
Accessed from oll.libertyfund.org/title/970/29504 on 2009-05-07
The text is in the public domain.
ENCOURAGEMENT OF INDUSTRY BY THE STATE—Bounties, etc., General Principles. The word encouragement as here used includes the favors accorded by public administrations in the shape of bounties, money grants, loans or advances, freedom from taxation, etc., to foster any branch of industry, to facilitate any operation or encourage any work that may be considered particularly useful to a country. Bounties, then, are means of incitement used by government, or generally by public administration, in view of certain definite results. It would be a difficult matter to name them all, the more so that the shape they take is very variable, according to the object it is proposed to attain, the country and the times: but what we have to slay will suffice to give a general idea of the subject.
—Great confidence was formerly felt in the efficacy of bounties given by the public authorities. They were even believed in many cases to be a necessity, it might be to induce the commencement of industries altogether new, it might be to give others already existing greater development, it might finally be to give labor in general a salutary activity. Thus governments seldom hesitated when the interests of the country they guided were really the object of their solicitude, to lavish bounties indifferent shapes to the utmost extent of their financial ability. Colbert was a strong advocate of this course, and would have been stronger had he consulted only his love of the public weal and the advice given by some of the first minds of his age.
—People at that time did not sufficiently take into account the natural tendencies of industry and the potential energy of which it is possessed. It was thought necessary to encourage it to produce useful things, whereas the production of such is its natural tendency, its constant pre-occupation, its daily care. It was thought, at the very least, necessary to stimulate it in the paths it was following; and yet the stimulants it brings in its train are incomparably more powerful than those at the disposal of any government. Nor were the resources which it possesses thought of either, nor the magnificent recompense it bestows itself on whoever assists it in its progress. It is but just to add that the potential energies of industry and its internal resources were not as great formerly as they have become in our days, and that it might sometimes be necessary to supplement them.
—As industry and its tendencies have become better known, so has the confidence once felt in the beneficial effect of artificial inducements singularly diminished. It still exists, it is true, in many minds, but no longer with the same life, as generally or as absolutely as it did once. This may easily be seen by the conduct of most European governments. Although these governments are in general much more occupied with the interests of industry than were those which preceded them, because they much better understand their importance, they show themselves much less prodigal of material encouragement. We do not speak here, let it be understood, of that sort of indirect encouragement which they give, or believe they give, at the expense of consumers, by the increase of customs duties, but only of money bounties directly drawn from the public treasury. Bounties of this sort are to-day much less frequent than they have been at certain periods, regard being had to the relative interest displayed by governments in industry and the comparative extent of their resources. No government could be seen now-a-days, unless in exceptional cases, doing for industry what Colbert did with no little regularity: paying with state funds for the importation of certain products or certain industries; drawing by bounties foreign workmen to the country; subsidizing growing establishments; advancing money to silk manufacturers at the rate of 2,000 francs for every loom working, etc. No more could there be seen a government paying about 500,000 francs annually of a gratuity for the exportation of grain alone, with no other special object than then of encouraging agriculture, as for a long time during the last century the English government did1 More credit is given at the present time to that spontaneous activity of industry, whose energy and resources are much better understood than they were formerly. Except in certain special cases where action is taken in view of some great public interest, the direct assistance given to industry is limited to a few honorary rewards or insignificant pecuniary help.
—As for economists, it is scarcely necessary to say that they are for the most part but little in favor of bounties, even when they are not directly hostile to it. Knowing better than other men, because it is the object of their special study, the natural activity of industry, the soundness of its tendencies and the extent of its own resources, they believe that it is always best to leave it to itself, that is to say, to its inborn energy, limiting all help to securing for it freedom, order and security; and that there is often a risk of hindering its advance by interposing in its operations with untimely subsidies.
—However, although this belief is in a certain measure universal among economists, it must be confessed that they do not all possess it in the same degree, or at least that they are more or less absolute in the conclusions which they draw form it. Some seem to condemn subsidies utterly, as being invariably injurious except when they are totally ineffective and useless; others admit them as an exception in certain cases. Without discussing all the different opinions on this point, we shall try to sum up the principles, as they seem to us to result from economic works as a whole, and from the very nature of things.
—As a general rule it may be said, without hesitation, that the system of subsidies given by the state is a bad one. When any sort of work is really useful, that is to slay, demanded by the wants of society, general industry has no need of artificial stimulus to direct its attention to it, the natural stimulus which arises from the demand being sufficient. The encouragement to which it has a right springs, then, from its very source, that is to say, from the satisfaction of the demands to which it has come in answer. It consists in the recompense which it requires and obtains in return for the products which it delivers or the services it renders. The more valuable these services are, the more certain the reward. The more necessary the industry then, by so much the more effective is this natural encouragement. It is perfectly useless for a government to intervene to guarantee it or strengthen it.
—On the other hand, government intervention may sometimes have troublesome results. If the help is extended to an industry the produce of which has already been tried and accepted by consumers, it can only appear superfluous: but besides the impropriety of uselessly expending public money, there is also the risk of stimulating the industry beyond bounds, in such a manner as to drive it sometimes to exceed, in its production, the just limit of the demand. If, on the contrary, the help be given to a failing industry, the product of which seems to be abandoned by the public, it appears in every way to be merely sustaining, very unseasonably, a kind of labor which had better be given up; because it fails to return either to the country or to those who work at it what it costs them. In this case the damage done is twofold; and unproductive industry is being maintained at the expense of the public treasury, the extinction of which would be a benefit.
—We do not even admit that it would be ad advisable and good thing, in the present state of industrial relations, to favor, by money subsidies, the introduction into a country of a kind of work hitherto new to it. The resources of general industry are in our own times sufficiently extensive, and the facilities for communication between peoples sufficiently great, for it to be left to the care of private persons to introduce into their country any foreign industry capable of being acclimatized there. They are at least as interested in that as their government can be, and they are much better judges of the suitability of transplanting the new industry as well as of the fittest means of accomplishing it. As to the necessary resources, if they are wanting to some they will not be wanting to others. Their sum total is already a very sufficient one, and the tendency is still for it to increase from day to day.
—Is it then to be said on that account that official bounties ought to be prescribed in every case? Certainly not. Circumstances could be named in which it is scarcely permitted to doubt their necessity, and it which they have been productive of nothing but good. No writer known to us, for example, has pretended generally and absolutely to deny to the subsidies lavished by Colbert in France, all utility whatsoever. All are agreed, on the contrary, that France owes to them the birth or the development of some of the industries which have made its wealth. Very few will deny that it has been, if not absolutely necessary at least every useful, to subsidize the establishment and spread of savings banks.2 Deprived of all assistance from external sources at their commencement these banks would with difficulty have been established, and yet every one is eger to recognize the immense services they have rendered.
—The necessity or utility of bounties must then be admitted in certain cases. But what are these cases? It would be perfectly impossible to detail them all. All we shall attempt to do is to reduce them to certain principal ones.
—It seems to us at first proper to consider in this matter the country and the times. The necessity for official bounties is greater in a country the less advanced it is in civilization and wealth, and the more imperfect is its social or political organization. It is, to begin with, obvious that the greater the vigor and resources which local industry possesses they less need it has for external assistance, because it is able to undertake more for itself. This consideration would, however, be insufficient if it were not remembered that the countries where industry is least advanced and least rich, are also usually those in which it encounters the greatest obstacles from imperfect laws or vices in social order.
—If a state could be imagined in which freedom of industry was established in its entirety, without restriction or reserve; where the rights of all were, in addition, perfectly and completely guaranteed; we believe that it would be possible then without danger, nay, even with great advantage, to dispense altogether with official bounties of every description. Industry would always be equal to the task of supplying its own wants, it would launch without effort into every sort of useful labor, and would, besides, create for itself all the kindred institutions of which it stood in need. But this condition of perfect industrial liberty is not, unfortunately, that of any people on earth; on the contrary, nations are still, for the most part, far distant from it. Among almost all, the development of industry is retarded by trammels more or less strong; and often also the establishment of the appendant institutions of which industry may stand in need to second its efforts, is forbidden. If attention is paid to it, it will be seen that it is almost invariably some imperfection in social order which has rendered necessary, when it has been really necessary, the active intervention of public authority.
—The bounties lavished by Colbert were, we believe, very useful in some cases. Several very interesting branches of industry would not have been created without them, or, at all events, not till a much later period. But at the same time the utility of these bounties was only relative. It originated at first in the existence of privileged corporations which put in the way of a general development of industry, and particularly the starting of any new business, so many obstacles that private individuals scarcely dared face them, if dependent solely on their own resources, and would in any case have had the greatest difficulty in overcoming them. It sprang also from the absence of any institution of credit capable of aiding the efforts of the pioneers of industry by placing at their disposal the capital they lacked.
—In more recent times, if the savings banks could not be started in France without some special encouragement, it seems to us still to be the imperfections of social order which are to blame. They would not have needed those artificial stimulants if the establishment of companies generally, and joint stock companies in particular, had been less interfered with by the law; and if, on the other hand, there had existed in the country the vast net work of banking institutions which spring up so readily wherever men are free to establish them. In taking notice, then, of the majority of instances where official or external bounties have been necessary to industry, it will be seen that this need arose from an analogous if not an identical cause. It was perfectly just, to our thinking, and perhaps necessary, that in the times of Louis XIV, good writers, those whose works were an honor to their country, should have been rewarded or encouraged by pensions from the public treasury or the privy purse, because the right of property in their works held by those authors was then very little recognized and still less guaranteed them. This was another imperfection in the laws, different from those of which we have just spoken, but producing substantially the same effects. The exercise of their legitimate rights either could not be, or was not wished to be, secured to those authors, and it was more or less made good to them by pensions. Similarly it was but right during all the last century, as the rights of inventors were not secured to them by patents, and as in addition privileged corporations barred their advance at every step—it was but right, we say, nay, even necessary, that government should either grant those inventors some special privileges or subsidies, to assist them. In this latter case, as in the former, it was a sort of making good or indemnifying the wrong done. We do not say, however, that the government of those days reasoned thus, that it recognized the wrongs done and that its precise intention was to atone for them. Not so, but it realized that here had been services rendered which had not been paid for, and it paid for them in its own way when it was well inspired.
—It will be said that it would have been more logical to reform the abuses which were the obstacle to the normal development of industry, or which deprived certain private persons of the exercise of their legitimate rights. Doubtless it would have been more logical, but it would have been less simple and often more difficult to carry out. It is unhappily a matter of experience that in all countries the reform of abuses is slow, wearisome, and almost always bristling with the gravest difficulties, even for those who hold the power in their hands. Was it necessary, while awaiting the disappearance of all these abuses, to abstain from removing here and there, when it was possible, some of their most distressing consequences by bounties or subsidies properly given? We do not believe so. We will only say that official bounties scarcely appear to us to be useful except in similar circumstances, and that in all cases great circumspection should be used in their distribution to avoid interfering with the progress of the very industry which they are designed to assist. In our own days the British government has on several occasions made use of the system of bounties on a grand scale, to repair, as far as lay within its power, the injury caused by great errors formerly committed.
—When the negroes were emancipated in the British colonies there immediately arose there a great scarcity of manual labor. The freed negroes either refused to work, or turned to other employments than those they had formerly been engaged in, to such an extent that the workrooms of the colonists were almost deserted. To supply the want it became necessary to call in all haste free workmen from the countries nearest, and as the colonists had not perhaps all the means necessary to accelerate to the needful extent this movement of immigration, the British government undertook to help it on by powerful bounties. In a certain measure it succeeded. But the bounties it scattered broadcast did not fail to give rise to frightful abuses, which obliged it soon afterward to reconsider on short notice its former measures, to the great injury of all parties interested; so true is it that in following this path of official subsidies, even when the action is taken in view of a clear and pressing necessity, the evil is always found side by side with the good.
—More recently, English agriculture seeming to be hard pressed in its present interests, as it might be to a certain extent, on account of the sudden repeal of the corn laws, which had for so long assured it an artificial price for its production, it was resolved to lessen the damage done, if damage there were, by giving bounties here and there. This was done, notably, by voting a pretty considerable sum destined for distribution in the shape of bounties to aid draining operations.
—In France one of the last trials of the system which has been made on a large scale, was the vote of the constituent assembly, in 1848, of a sum of three million frames to aid the formation of workmen's associations. There was no question then of redressing an injury, the result of former legislative blunders, but a sacrifice to a then dominant prejudice, this sacrifice could not have and had not any but trifling results; therefore we merely remind the reader of it. More recently still, the state was at some expense, which it undertook, however, more circumspectly than it had formerly done, in aiding the establishment of superannuation funds for workmen.
—To sum up: the bounties given by government have rarely been productive of the good effects hoped for by their projectors; they have sometimes hindered the progress of industry and have seldom stimulated it efficiently. Their usefulness and expediency in certain exceptional cases may, however, be admitted. In equity they are only justifiable when they are a species of reparation for an injury formerly done; for otherwise they are a sacrifice unjustly imposed on the tax payers for the benefit of a few. In public economy they are equally unjustifiable except as a sort of makeshift to correct in certain cases the imperfections of the laws.
[1.]By an act of the first year of the reign of William and Mary (1689) there was given a bounty or gratuity of three shillings per quarter of grain exported. The amount of bounty was, as may be surmised, very variable according to the year. We are making a very low estimate here in giving it an average of only £20,000. In 1748 and in 1749 it exceeded £200,000, and in 1750 it reached no less than £323,405.
[2.]The subsidies which savings banks received in France on their commencement were given by wealthy private individuals rather than by the government, which at first did little more than sanction them, although it afterward took upon itself the task of directing them when they had no longer any need of its help. But this fact does not seem to us to alter the correctness of our conclusions.
Footnotes for EXPOSITIONS
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 2 East India Co. - Nullification Chapter: EXCHANGE OF WEALTH
Accessed from oll.libertyfund.org/title/970/29519 on 2009-05-07
The text is in the public domain.
EXCHANGE OF WEALTH. Human society was organized originally in accordance with the restricted principle of the community. The community whose essential characteristics are labor in common and the division of its fruits, is, in fact, the simplest and most elementary form of human society. It is a suitable form so long as the men who compose the same group are engaged exclusively in one and the same kind of labor. This is the case with the savage tribes whose only labor is the chase. Animals which work in common, such as the bee, the ant, the beaver, etc., also adopt or conform to this form of society. But it ceases to be sufficient for man the moment he extends his sphere of action, and employs his labor in different ways. Thus it gradually disappeared, as communities enlarged and civilization began; it reappeared afterward only accidentally, and remained always and necessarily confined to small groups of individuals engaged in some one kind of labor.
—This first form of society was succeeded by another, in which men divided among themselves the different kinds of labor, the result of the wants of a growing civilization. In this new system, the germ of which was contained in the primitive communities, production was not in common. Each person chose for himself the kind of work which suited him, and devoted his energies to that alone. He may indeed have associated himself with a few others when the work which he proposed to undertake exceeded the powers of a single man; but all the different kinds of labor in the production of wealth were none the less performed separately. Does this mean that men hereby renounced society and social ties? On the contrary, man became in consequence more than ever a social animal; but the association of men changed in character; it assumed a form at once freer, more varied, and skillful. Instead of working in common, as they could and should have done when the work of production was one and simple, they divided the different kinds of the labor of production which had become more complex, among them. This was a new and more extensive mode of associating and combining their different kinds of labor; then they exchanged the results of these different kinds of labor, which served to complete one another. To the rudimentary system of laboring in common, and sharing the fruits of the common labor, succeeded the superior system of separate kinds of labor, and of the exchange of the products of that labor.
—The adoption of this system, gradually supplanting that of the primitive community, is the true source of man's greatness and power. So long as man is obliged to labor in a community, like the bee, the ant and the beaver, and to share the fruit of this common labor, he does not rise much above these animals, which have, like him—and perhaps in a higher degree than he possessed them in his state of primitive ignorance—the gifts of order and foresight. The savage tribes would perhaps be lower than the troops of beavers and swarms of bees, were it not for the fact that they bore within them, even in the community, the germs of the higher organization which humanity was afterward to attain. From that time onward we find men manifesting a propensity for bartering, trading, and exchanging one thing for another; a propensity which, as Adam Smith justly remarks, is not observable in other animals, and which by degrees produced the division of labor with all its consequences.
—But the disappearance of the system of the community, and the establishment of the system of divided labor which succeeded it, together with the exchange of products, which is at once its point of departure and its necessary complement, were not effected all at once. The change has been slow and gradual.
—We have just seen that the propensity of man for bartering and trading appears even among the savage tribes. The community subsists to divide among its members the much greater part of production and consumption, but exchange takes place in the case of things which are only accessory. The chase is engaged in in common, and is the great industry of the tribe; and the flesh, skin, horns, etc., of the animals killed are divided among the members of the tribe. War, which is at times another branch of industry, is waged in common, and the booty taken from the enemy is divided; but barter is carried on, elsewhere, in the objects of which the separate members of the tribe have acquired exclusive possession. One warrior, who is skilled in making bows and arrows, exchanges the weapons he has made for the skin of a wild beast, which another warrior offers him. A third gives his share of the booty for an ornament, which he intends for his wife. And owing to these exceptional cases of exchange, which become more and more frequent in proportion as the tribe becomes richer and its products more varied, there was some attempt at that division of labor which in time became general.
—Among nations which are simply barbarous, that is to say, which are no longer savage and yet not civilized, the community of production and its fruits is not so absolute as among the primitive tribes, but it is still very great. Whether it be a pastoral and nomadic people, or a people who have already begun to cultivate the soil, the chief wealth is always in common, and their chief labor collective labor. They possess a common herd, which furnishes wool and milk for all; they cultivate the soil in common, and divide the fruits it produces. And this must necessarily be so, for, in this stage of civilization, man is so weak in the presence of the obstacles of all kinds which brute nature puts in his way, that divided labor is impossible.
—"Wherever it has been possible," says Charles Comte, "to observe nations when they began to emerge from barbarism, it has been noticed that they cultivated the soil in common; that its products were placed in public storehouses, and that each family then received a part of them proportionate to its wants. This community of labor and of goods the Romans found in practice among several of the German nations; it was likewise observed among the tribes of North America by the first explorers who visited them; the English who founded the state of Virginia were obliged to have recourse to the same means to bring the soil under cultivation, * * * *," a fact which Charles Comte rightly explains by the powerlessness of man at such a time to subdue the earth, except by the united and energetic efforts of all.
—But even in this barbarous state the system of exchange, which embraces all products of secondary importance, is more extended than it was among the savage tribes, because production is more varied. It afterward extends by degrees, according as civilization progresses and the power of man increases, itself contributing largely to the increase of that power. The system of the community becomes restricted and contracted in the same proportion, without, however, disappearing entirely, even in the most advanced state of civilization. Some primary attempts at exchange are observed in the nascent societies which we see organized into close communities, and some remnants of the primitive community are found even in the most civilized nations.
—It is not, as Adam Smith remarks, a blind instinct that determines men to barter, trade and exchange, but a clear conception of the actual advantages which result from it. In fact, it is no very difficult matter to perceive that it is an advantage for each one to be able to part with his surplus, or that of which he has no present need, and receive in return what he is wanting in. This is what even the most untutored savage can understand. Exchange in early times scarcely extended beyond the things which each had in greater quantity than he needed; it was not until later, that, after having produced the division of labor, it embraced in most cases the sum total of production. The smallest intellect can understand the idea of exchange within these narrow limits. Nor could we understand why the practice of exchange did not spread more rapidly from the very first, did we not reflect that in primitive society it met with many obstacles which impeded its course.
—The practice of exchange as Skarbek well says, in his Théorie des richesses sociales, is subject to three essential conditions: the appropriation, the transmissibility and the diversity of things. To these three conditions we may add a fourth, the liberty and security of trade transactions. But let us first consider the three given by Skarbek.
—If when exchange takes place, "there is always one thing given by one party as compensation for another thing or equivalent value, these values must be previously possessed by the two parties who enter into a contract of exchange. This same principle of equity, which is the basis of exchange, does not admit as legal the exchange of a thing which the party exchanging does not possess by virtue of the right of property: the existence of this right, therefore, forms the first indispensable condition to the introduction and existence of exchange, for if all values were common to all men, if all had the same right to enjoy them, and no person could be excluded from their possession and their enjoyment, there would be no exchange, as ad would have the same right to the values capable of satisfying our wants. The existence of the exclusive right to property is, therefore, indispensable to the establishment of exchange among men."
—The transmissibility of things is no less necessary than their appropriation, and this quality all values do not possess. "A man's talents, intellectual faculties, or his ability to perform some special task, are goods, are real values, which can not be parted with to any one else, giving to the latter the right of ownership in them, for it is impossible for their possessor to divest himself of these goods in favor of another. The light and heat diffused through the atmosphere are also real goods and values indispensable to our existence, but they can not be appropriated by any one because they can not become the exclusive property of any one. This line of reasoning and these examples lead us to the conviction that even the values most precious to man can not become objects of exchange if not transmissible, if they can not be transferred by one man to another in virtue of the right of ownership. The second condition of exchange is the property inherent in things of passing from hand to hand, and of being transmissible, with the right of property."
—Finally, there must be diversity of values, or of exchangeable objects, without which exchange change itself would have no object. "If all the individuals who compose society were equally provided with the things able to satisfy their wants, if all possessed the same values, no one would desire to possess what belonged to others, being sufficiently provided with all things necessary to his existence. There must, therefore, be a diversity of exchangeable things, and men must possess different values, in order that exchange may be practiced among them. This diversity constitutes the third condition indispensable to the existence of all exchange.
—The idea of appropriation, even of individual appropriation, is so natural to man that it is found in all stages of civilization, even among savage tribes. But if private property exists in the earliest society, at least in the case of a certain number of objects, it is, as a general thing, very little respected. The stronger violates the private property of the weaker, even in the same tribe; and à fortiori is it thus outside the limits of the tribe. Under such conditions it is evident that exchange can not easily extend very far. As to transmissibility, although, strictly speaking, it exists in the case of all material values, it is in fact limited, among savage nations, by the general insecurity of circulation and of transportation. War being almost the permanent condition of primitive nations, it is only within their respective limits that the transmission of products can take place. What is true of savage tribes, is also true, though in a less degree, of barbarous nations. In this state of things, there may be a virtual but there can hardly be an effective transmissibility of products, since transmission is impossible except within a very small circle. For the same reason, there is no great diversity. So far as natural products are concerned, diversity can be great only when the nation extends over a large surface, for it is only then that the fruits of the earth are varied; and in the case of the products of human industry great diversity supposes a rather extensive division of labor, which can scarcely be realized within such narrow limits. Thus is exchange limited on all sides in this first stage of civilization. The spirit of violence, hostility and war reigns everywhere, and the general insecurity that results from this hostile spirit is the chief obstacle to the progress of exchange.
—But as soon as security begins to be established among men, the practice of exchange spreads rapidly. It is generally understood, however, that its development may be either favored or impeded by certain advantages or inconveniences of position. The particular circumstances which favor it among certain peoples are well indicated by Adam Smith in the passage which follows. After having shown, by several examples, the advantages of transportation by water over transportation by water over transportation by land, he thus continues: "Since such, therefore, are the advantages of water carriage, it is natural that the first improvements of art and industry should be made where this conveniency opens the whole world for a market to the produce of every sort of labor, and that they should always be much later in extending themselves into the inland parts of the country. The inland parts of the country can for a long time have no other market for the greater part of their goods but the country which lies about them and separates them from the seacoast and the great navigable rivers. The extent of this market, therefore, must for a long time be in proportion to the riches and populousness of that country, and consequently their improvement must always be posterior to the improvement of that country. In our North American colonies the plantations have constantly followed either the seacoast or the banks of the navigable rivers, and have scarce anywhere extended themselves to any considerable distance from both. The nations that, according to the best authenticated history, appear to have been first civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the greatest inlet that is known in the world, having no tides, nor consequently any waves, except such as are caused by the wind only, was, by the smoothness of its surface, as well as by the multitude of its islands and the proximity of its neighboring shores, extremely favorable to the infant navigation of the world, when, from their ignorance of the compass, men were afraid to quit the view of the coast, and from the imperfection of the art of ship building, to abandon themselves to the boisterous waves of the ocean. * * * *." "Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. Upper Egypt extends itself nowhere above a few miles from the Nile, and in lower Egypt that great river breaks itself into many different canals, which, with the assistance of a little art, seem to have afforded communication by water carriage not only between all the great towns, but between all the considerable villages, and even to many farm houses in the country; nearly in the same manner as the Rhine and the Meuse do in Holland at present. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt."
—These natural advantages lose, however, something of their original value, now that human industry has discovered so many means of supplying their place.
—However this may be, with the progress of time and civilization exchange has grown to be almost universally practiced among men. It has, in turn, introduced the division of labor, which is at once its consequence and complement, and which takes place more or less in all branches of industry. These two phenomena, which are intimately connected, constitute the fundamental basis of the industrial order existing in the world to-day. We shall not enlarge upon the advantages which result therefrom with regard to the relative productivity of labor, for these advantages have been sufficiently explained already while treating of the division of labor; but it remains for us here to show some general consequences that particularly belong to this part of the subject.
—Exchange, and the division of labor which flows from it, create between men relations as necessary, and ties as strong and as numerous, to say nothing more, as those which existed between them under the primitive system of the community. It is sometimes said that in society as it now is, man isolates himself—that he separates himself from his fellow-men, to with draw himself into his own individuality. But is he not, on the contrary, because of this division of labor, and of the law of exchange which is connected with it, in a constant and very restricted dependence upon everything that surrounds him? He works for his fellow-men, and they work for him; when the work of production is terminated by each, they exchange its products among themselves. Is there any closer bond of dependence than this? The difference between this new bond and the primitive one is, that the new one is more complex, and incomparably more favorable to the increase of production. There is, however, still another difference in its favor; it is much more susceptible of extension.
—In society in its primitive state production in common and the division of its fruits were necessarily confined within a very restricted circle. By its very nature, which was opposed to expansion, such a system could not extend beyond the limits of one tribe. Thus all social relations of man with his fellows ended here. Everything outside this limit was foreign to him, if not hostile. But from the moment that industry felt the influence of the division of labor and of exchange, the social bonds which it created among men were susceptible of indefinite increase. Provided peace reigns between different nations, exchange may take place from one to the other, just as it takes place within each one of them, and the division of labor may follow the same line of progress. Thus human sociability extends, it does not even stop now at the conventional limits of states; it crosses, if we may say so, mountains and seas, and aims at forming, little by little, upon the earth one immense society, varied in its forms, but always one, embracing the whole human race. Exchange could never have reached the point to which it has come, without the fulfillment of certain necessary conditions. (See CIRCULATION, DIVISION of LABOR, and MONEY; see also COMMERCE, and FREE TRADE.)
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 2 East India Co. - Nullification Chapter: HISTORICAL SUMS
Accessed from oll.libertyfund.org/title/970/29633 on 2009-05-07
The text is in the public domain.
HISTORICAL SUMS, Valuation of. It is often a matter of great interest, as much from an historical point of view as for the solution of certain economic questions, to obtain an approximately correct idea of the relative values of things at different epochs, and to ascertain as nearly as may be the importance of certain amounts given by historians in the money of their times. It is on this account that some of the best known economists have devoted several pages of their works to what they term the "valuation of historical sums," while at the same time the subject is itself possessed of sufficient interest to furnish matter for several special treatises. What examination seems necessary will be given here, without, however, intrenching on the subject of money, which will be treated of in its own place.
—There are two points to be looked at in considering the subject of historical sums. It must first be determined what they represent in gold or fine silver, that they may be reduced to moneys of the present date, metal for metal and weight for weight. This reduction made, there remains to obtain the best idea possible of the relative values of the precious metals at the dates in question. With regard to the first point we possess at the present time tolerably exact data, at least with regard to certain countries and certain periods. The medals which remain to us in great numbers from the Greeks, the Romans, and European peoples of the middle ages, medals which for the most part are simply the moneys of those dates, have given us the opportunity, although they were often greatly altered by rust, of measuring with fair precision the actual weight of those coins and the proportion of fine metal which they contained. This material testimony has in addition been corroborated by the researches of antiquarians and savants. It is, however, only fair to admit that on this very subject grave differences of opinion exist. A savant whose name is well known to every economist, Count Germain Garnier, has advocated a new system, plausible enough even if it be not correct, which would wonderfully modify the deductions claiming to be derived from the inspection of ancient medals. According to his theory all or nearly all the sums mentioned in ancient history were given in an imaginary or counting currency, entirely different from the actual currency as it appears in the medals. Hence it would follow that the estimates made formerly would be misleading. We will recur presently to this assertion, if not for the purpose of determining its value, at least to show what would result from it. Meanwhile we may assume that the calculations based on the study of ancient medals are justified, and starting with this hypothesis we may affirm that the reduction of some ancient moneys to modern coinages presents at the present time no serious difficulties.
—The same can not altogether be said with respect to the relative values of those moneys at the dates when they were current. Like everything else that is bought and sold, the precious metals are liable to fluctuations in value from time to time, in accordance with their greater or lesser abundance in circulation. These variations, although but slight at any given time, may, however, become very considerable after the lapse of several centuries. We know as a fact that between the times of the ancients and our own times, nay, even since the middle ages, the values of gold and silver have fallen considerably, so much so that the sums of money mentioned in the history of those times are invariably of an importance greatly superior to what might be attributed to them, were regard to be had merely to the actual quantity of the precious metals they represent. It would be of the greatest importance to know the exact extent of this depreciation, but unfortunately it can only be estimated by valuations at best somewhat vague and constantly subject to revision.
—We will inquire presently into how the resolution of this last problem, so far as it has been resolved, has been set about. But we must first state, following the statistics of the most trust-worthy authors, the relation borne by money of the present date to the most interesting and best known coinages of ancient times.
—In ancient Greece the money best known to us is that of the Athenians. It is also the most interesting, both on account of the importance of the republic to which it belonged, and because, according to Xenophon, it was sought after by the merchants of all countries, and was used as a common medium of exchange in the international relations of that time. Beginning with the last century, minute and profound research has been made into the subject of Athenian money, and its value has been successfully determined with almost absolute accuracy. Mention must be made in particular of the works of the Abbé Barthélemy, who, in his Voyage du jeune Anacharsis, leaves little to be desired with regard to this. We prefer, however, to rely on the more recent works of Boeckh, who, in his "Political Economy of the Athenians," a large work and one of high reputation, has made a happy selection from the investigations of his predecessors, to which he has added the results of his own. Besides, the data given and the values arrived at by Boeckh vary but little from those of the Abbé Barthélemy, whose point of departure he adopts.
—The monetary unit of Athens was the drachma, a silver piece of slightly inferior value to the French franc. The multiples of this monetary unit were the mina, which was worth 100 drachmas, and the talent, which was worth 6,000. The mina and talent were, however, only nominal money, for no coins of those values were struck. The circulating medium was then the drachma, although any calculation of large amount was made in minas and talents. In addition to this, the Athenians occasionally coined four-drachma pieces, named, consequently, tetradrachmas; but this circumstance did not alter the system. Of lesser value than the drachma, there were used in Athens, as small change and for the necessities of everyday life, the chalchus and the obolus, which were fractions of the unit. It would appear that this simple and fairly well organized monetary system underwent but slight variation during the time of Greece; and as the Athenian money had then, as we have said, an almost world-wide circulation, it is possible with a little attention to make use of it in most of the valuations which relate to those times. According to the Abbé Barthélemy, whose valuation is adopted by Boeckh, the weight of the ancient drachma ought to be, after making allowance for what it may have lost in the passage of centuries, 82 grains, which he reduced, however, on several considerations, to 79. Its standard of fineness was very high, seeing that it only contained 1/72 of alloy. On this basis it is easy to compare this money with French money. 79 grains, ancient weight, correspond to 4.197 grammes, or, in round numbers, 4.20 grammes; deduct 1/72 for alloy,.06 grammes, and there remains, in fine silver, 4.14 grammes. Supposing the franc to contain 4.5 grammes of fine silver, the Attic drachma is then to the franc as 414 to 450; giving as the value of the drachma, 92 centimes, or, to be exact, 91.66 centimes—Without entering further into the details of the comparison we will give in a short table the relation borne by the Attic money to French.
ATTIC MONEY CONVERTED INTO FRENCH MONEY.
The practice of computing amounts by talents, says Boeckh, was not confined to Attica; it spread over almost the whole of Greece and even beyond it. The talent was worth 60 minas; the mina, 100 drachmas; and the drachma, 6 oboli. In Athens the obolus was divided into 8 chalchi; and the chalchus into 7 lepta. It may be said in passing that this last mentioned coin has no equivalent in French money, as it is of greatly inferior value to the centime.
—With the assistance of the preceding comparative tables it is generally easy enough to convert into French money the sums mentioned in the history of ancient Greece. Attention must be paid to the fact that if the use of the talent was almost universal it was not everywhere of the same value. The talent of Eubœa, which was also greatly used in Greece, differed from the Attic talent, although not to a great extent. There was a wider difference between the Attic talent and the talents of Babylon and Alexandria, although the exact amount has not been accurately established. The last named, although mentioned sometimes in history, figure there less than the first two, about which more precise knowledge is fortunately possessed. Attic money, reformed in Solon's time, has scarcely varied since, and the talent of Eubœa is referable to a still more distant date.
—The Roman monetary system was reformed or modified several times. This was first done in the year 490 after the foundation of Rome. Silver money coming into use about that time, it was judged expedient to reform, in consequence, the copper coinage with which the Romans had till then been content. At a later period two other reforms were made successively in the course of the sixth century, but these latter were mainly in regard to silver coin. As some differences of opinion exist among savants as to the nature and extent of these reforms the money current in Rome previous to those dates will not be spoken of, nor has it any particular interest.—"After the establishment of silver money," correctly says M. Germain Garnier, "the sesterce was the chief coin of the Romans, and it was in sesterces that they expressed all sums small or great, from two or three even to the highest numbers; tens, hundreds, thousands or millions." It then remains to settle what the sesterce represented in fine silver. Unfortunately, although the sources of information with respect to Roman money are very abundant, they are far from being in accord on this primary question.
—Although the sesterce was the numerical term generally employed in calculations, it was not, for all that, the unit employed in the Roman monetary system. The monetary unit was the denarius, of the value of four sesterces, and which was besides more frequently a sum in computation than an actual coin. It is certain, and on this point all the savants are pretty nearly agreed, that the Roman denarius approximated closely to the Attic drachma. According to M. Germain Garnier, these two monetary values were absolutely identical, the object of the Romans in reforming their money system during the sixth century being to bring it into unison with that of Greece. According to other writers, who in this respect seem to us more accurate, although the Roman denarius and the Attic drachma were so closely allied that ancient historians when not speaking with rigid exactitude used the terms indifferently, there was, nevertheless, a distinct difference, the denarius being to the drachma nearly in the ratio of 8 to 9. But it is with respect to the actual intrinsic value of the two monetary units that there is a wide divergence.
—It has just been said that Boeckh, agreeing in this with the Abbé Barthélemy and almost all other savants, gives the weight of the Attic drachma as 79 grains of fine silver. Admitting the proportion given for the two coins as correct, namely, as 8 to 9, the Roman denarius ought then to contain about 70 grains weight of fine silver. This closely approaches the value as given by several savants. M. Germain Garnier, however, values the denarius at only 31½ grains of fine silver, which, according to his system, would also be the exact weight of the Attic drachma. This is a wide departure from the former estimate. The difference would be more than half, and is sufficiently great to render hopeless all efforts at adjustment which it might be proposed to effect on such a basis. It is not for us to choose a side in the controversy. Political economy has to take note of the results only when they seem to be sufficiently established, and draw from them their proper sequences. We may, however, mention briefly how this extraordinary divergence of opinion which we have just mentioned is caused. According to M. Germain Garnier, savants until his time went astray through confounding the nominal money of the ancients with the current money which was of much higher value. With the Romans, the denarius, which was during their first centuries a current coin, became after the reforms mentioned above almost entirely a nominal sum whose value remained invariable. The silver coin in actual circulation was the argenteus, which was worth 2½ denarii. "The silver coin actually current was the argenteus, which some Latin authors have called the silver sesterce, argenti sestertia, because it consisted of two and a half denarii and formed literally the sesterce of the denarius as the first sesterce was of the as." Now it is this argenteus, worth 2½ denarii or 10 sesterces, which antiquarians have constantly mistaken for the denarius mentioned by the ancient historians. A similar error, on the same authority, that of M. Germain Garnier, was made with respect to Attic money, antiquarians having taken for a tetradrachma or piece of 4 drachmas, a coin which really represented 10 drachmas. In each case, therefore, the savants were in error in a ratio of 2½ to 1. By multiplying by 2½ the value given by M. Germain Garnier, i.e., 31½ grains, a result of 78 8/4 grains is obtained, which is almost identical with that previously given as the value of the Attic drachma.
—The middle ages next claim our attention. Here, although there is still great cause for uncertainty, we are treading on firmer ground, for the history of modern coinages is, after all, better known than that of ancient times. We only intend to deal with French moneys, refer ring the reader for those of other countries to the works which treat of them in particular, and with respect to French money our purpose is merely to point out the principal changes it has undergone, leaving all details to works specially written on the subject.
—In France, from the end of the eleventh century until the revolution of 1789, which completely altered the old monetary system, silver was always weighed and uttered by the mark. There were marks of different weights; but that of Paris, to which ancient prices are referred, was of eight ounces or 4,608 grains. The mark since the same period has also always been divided into livres and the livres into sous and deniers. But on account of the successive deteriorations of the coinage, often reduced in weight by the kings, the number of livres contained in the mark has gradually increased; at the end of the thirteenth century, for example, it but slightly exceeded 2(2 livres 18 sous), and it was more than 54 at the end of the eighteenth; a fact which gives a general idea of the alteration which money underwent during that period. To know what the livre represented at each intermediate epoch it is necessary to determine into how many livres the mark was then divided. Tables have been compiled on this subject, for the most part fairly complete and satisfactory, although here and there are met with, if not positive errors, at least gaps and omissions. We will only give here the principal results, beginning at the end of the thirteenth century:
—The information possessed in respect to the condition of the coinages during the tenth, eleventh and twelfth centuries is very incomplete, but more is known of it at the end of the eighth century in the time of Charlemagne. The Carlovingian livre was, according to historians, of 13½ flue silver, and was subdivided into 20 sous. It remained pretty nearly the same during the ninth century, then the traces of this Carlovingian livre disappear, and the livre is recovered at the end of the thirteenth century considerably diminished, and it continues to lessen from century to century till 1789.
—The preceding observations give an idea of the comparison possible between ancient and modern money. But to follow the parallel more closely, recourse must be had to special works of which we have here only given a glimpse. Let us suppose now that it is desired to know what a sum of money mentioned by the historians (in drachmas if Greek, in denarii or sesterces if Roman, in livres, sous and deniers if French) of the middle ages represents as a commercial value. The first step, as we said at the beginning of the article, is to determine the value of the sum in current specie, weight for weight, only fine metal, of course, being taken into account. It has been shown by the foregoing remarks what means are at hand for the solution of this first problem, and what reasons for uncertain ty and doubt present themselves in certain cases. Let us suppose it solved. We should then know sufficiently accurately with what weight of fine metal we had to deal. But all would not then be said on the matter. There would remain still to be considered what this weight of metal represented in commercial value at the date in question. Here then is another side of the problem, and it is certainly not the least difficult of solution.
—Whatever the value adopted, in fine silver, for the Attic drachma and the Roman denarius; whether adherence is given to the views of Boeckh, the Abbé Barthélemy, and almost all the savants who have given the subject their attention, or the preference is shown to those of M. Germain Garnier, the fact remains that that denarius and that drachma represented in ancient times a greater commercial value than the same weight of silver would have at the present time. But wherein lies the difference? That is what we have to determine.
—To make at least an approximately correct estimate it has been usual to take as a standard of comparison certain marketable articles in common and regular use, whose commercial value during the course of centuries is supposed to be less subject to change than that of any other commercial articles, whether because they always represent a constant force expenditure or because the need of them is the same at all times. Thus, the daily pay of a common man, a day laborer, has sometimes been taken as the measure. It has been supposed that at all times the pay of an ordinary laborer, that is, of one with no special qualification, would be measured by what was necessary for a man's support; a value subject, it is true, to variations, but not to any of great moment. At other times a soldier's pay has been taken, when it could be ascertained, the theory being that his pay was more regular and better gauged to the ordinary needs of life than even workmen's wages. Others again have taken as their test the price of wheat, which although occasionally very variable at a given time yet seemed to them more than anything else apt to return constantly to a given level.
—Let us examine shortly the merits of each of these data. It need scarcely be said that no one has thought of giving these standards as absolute. There is no possibility of attaining by their means a rigorously exact estimate of the relative values of the precious metals in ancient times; all that can be hoped for is a satisfactory approximation, and it is to this end solely that the data must be considered. Even with this limitation it seems to us that each of these standards taken by itself is far from being adequate to the purpose in view, and the economists who have taken as the sole basis of their calculation one or other of these values seem to us to be liable to grave errors in their work.
—J. B. Say adopts as his basis of valuation, wheat, which he supposes to have changed its real value very little during the course of centuries, except temporarily, because it is a necessary food substance whose scarcity or abundance has a powerful effect on population. But wheat, whatever may be said to the contrary, is liable to very marked oscillations and those not merely temporary but of considerable duration, in proof of which it is not necessary to have recourse to ancient times. Is wheat, for example, at the same price in Russia or America as it is in France or England? Far from it; the difference is great, going from once to twice as much, and even beyond that. But there is no need to leave France, in different parts of which will be found notable variations. Thus the price of the hectolitre of wheat is usually from 24 to 26 francs at Marseilles, while it is only from 13 to 15 francs in other parts of France, for example, in the Haute Marne. In old times, when communication was far from being as easy or as safe as it now is, the variations in price between one locality and another must have been even more marked than now. It may perhaps be said that Marseilles is a great centre of consumption, and that these centres of consumption ought to be compared with each other. Paris is a much greater centre of consumption than Marseilles, and yet wheat is usually cheaper there than in the last named place. Why so? Simply because the position of Paris, which has in its immediate neighborhood on one side the vast plains of Picardy and on the other the plains of La Beauce, is with regard to a wheat supply much more favorable than that of Marseilles.
—It is manifest that in the study of ancient affairs account may to a certain extent be taken of similar circumstances. It will be said, for example, that Athens, obliged as it was to draw part of its wheat supply from abroad, and that too from great distances, through many difficulties and perils; obliged at times even to resort to force to obtain the necessary quantity,—that Athens in this situation would have to pay greatly in excess of the average cost of wheat. Those considerations have doubtless some weight, yet who could, after the lapse of so many centuries, estimate correctly the influence of these local circumstances? Could any one determine precisely the average cost of wheat at any given time or place, a thing very unlikely to happen, it would be but a very untrustworthy, very irregular test of the relative values of the precious metals at the same time.
—The average rate of wages does not seem to us a much safer standard. Whatever may have been said about it, it is not the case that the wages of ordinary laboring men are measured everywhere by their bare needs, and therefore are based with fair accuracy on the actual cost of the means of subsistence. All that can be admitted with respect to this is, that the cost of the absolute necessaries of life forms, so to speak, the extreme limit below which wages can not fall, at least for long. But nothing prevents them rising far above it. Do we not see in our own times, that the average pay in the United States (and it has been so for a long time) is at least double what it is throughout the most of Germany, and yet the cost of subsistence in the former is not greater than it is in the latter? If we refer to the figures of M. Moreau de Jonnès, even in France the pay of farm laborers, which would seem to be less subject than any other to be acted upon and altered by external influences, is shown to be at present, due regard being had to the difference in the cost of living, at least double what it was in the reigns of Louis XIV. and Louis XV. And why should these differences that we see so distinctly in modern times not have existed in ancient times? It is besides very difficult to find the real rate of wages among the ancients, as the work then was generally done by slaves. We know, it is true, on the authority of certain ancient writers, what a slave brought in certain cases to his master when the latter hired out his services to strangers. But what a slave brought back to his master formed only a part of the real remuneration of his work. It was still necessary that this slave should be lodged and fed, and however trifling may have been the expense of so doing, it certainly consumed no inconsiderable part of the value of his labor. What he brought his master was in reality only the surplus. Now who can say what proportion this surplus bore to the total pay? In every respect, then, the rate of wages, as a criterion of the relative value of money, is at least as uncertain as the price of wheat.
—As to placing any reliance on the pay of a soldier, as is done notably by M. Germain Garnier, we regard it as simply folly. It is perhaps true, as this author says, that as the pay of its soldiery constituted one of the principal expenses of every state, especially when the army was numerous, it has always been necessary through mere stress of circumstances to reduce it to no more than was absolutely necessary, giving the soldier only what was imperatively demanded by his pressing needs. But, apart from the fact that these needs themselves vary, it is not easy always to establish the exact figure to which the actual pay of the soldier amounted. There almost always enter into the calculation, several different elements. It is a very unusual thing for a government to leave its soldiers to provide out of the pay given them, for all the expenses of their keep. It almost invariably charges itself directly with a part of the expense, and that part one that varies greatly according to the times. Sometimes it is contented with furnishing them their arms; at other times it adds to that, all or part of their clothing; at others it goes so far as to furnish them, in addition, with lodging, food and fuel. How, in such a case, is their real pay to be computed, as it is evident that what is then distributed to them in hard cash can be but a small portion of it?
—The more closely this subject is examined, the more we are forced to admit that if it be desired to obtain an approximately correct estimate of the relative value of the precious metals in ancient times it will not suffice to take as the standard of comparison any one object, be it what it may. Neither the price of wheat nor the rate of wages can lead to any satisfactory conclusion. Still less can it be derived from the pay of a soldier. What then remains to be done that we may obtain as nearly as possible the desired result? What seems to us to be necessary is to find out, with reference to the time under consideration, the prices of a great number of the commonest articles and those subject to great variations in value wheat or bread, meat, fish, common wine, the daily pay of a laborer when it can be ascertained, etc. However, it is not to economists, in their capacity as economists, that it belongs to make researches of this sort. Their part is limited to pointing out the necessity for them and the direction in which they should be made, that they may be profitable when made. They must rely for the execution of the work on scholars.
—Such work has been done and well done for the France of the middle ages. Dupréde Saint Maur went far on the way in 1746, and he has been followed in it by a great number of deeply-read men, who have made their inquiries more precise and more searching. Among works of this sort we may mention specially that of M. C. Leber, published in 1847. He gives in it very extensive tables, showing satisfactorily the prices of a great many of the articles in common use at different times in French history since the thirteenth century, with comparisons showing what M. Leber happily terms the power of money at those times, that is to say, the relative value of the precious metals.
—Unfortunately nothing similar exists in regard to ancient times. No one has yet had, so far as we know, the happy idea of giving, in connected tables, the prices of common things among the Greeks and Romans. It does not, however, seem to us impossible of accomplishment. "The knowledge of antiquity," says Boeckh, at the commencement of his great work, "is still in its cradle." We willingly believe it. And yet in Boeckh's own work there is already abundance of precious material for the execution of the work of which we speak. One first question would remain, it is true, to be solved, the actual weight of the current money of the ancients. Did the Attic drachma and the Roman denarius contain 79 grains of fine silver, as is held by Boeckh, the Abbé Barthélemy and the majority of scholars, or only 31½ grains, as M. Germain Garnier maintains? Without first having solved this main question it is easily seen that all other research is futile. But once suppose it solved and it seems to us that it would not be impossible, with the assistance of carefully compiled price tables, to arrive at a fairly satisfactory determination of the power of the precious metals in ancient times. Then also, in a general way, the importance of the majority of the sums of which mention is made in history would, by means of a most simple calculation, be arrived at.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 2 East India Co. - Nullification Chapter: INDUSTRY. I. DEFINITION OF THE WORD; EXPLANATION OF THE SUBJECT.
Accessed from oll.libertyfund.org/title/970/29668 on 2009-05-07
The text is in the public domain.
INDUSTRY. I. DEFINITION OF THE WORD; EXPLANATION OF THE SUBJECT. The meaning of this word, at first quite restricted, has gradually extended, in proportion as the importance of the phenomena to which it relates and the connection of the various labors of man were better understood. It may be recognized, however, as having at present three distinct acceptations.
—In common language, the word industry most frequently means nothing more than manufacturing industry, whose special object it is to transform, in the working, the raw materials furnished by agriculture or mining. We usually say, for example, commerce and industry, when we wish to distinguish the shop from the workshop, the store from the factory. We also say agriculture and industry when we wish to compare farming with the activity of cities. This popular acceptation is moreover the one which long prevailed, and which still prevails quite frequently in official language and law.
—Nevertheless, a broader meaning is sometimes given, in ordinary speech, to the word industry. It is used in a general way to describe all material labors, agricultural as well as manufacturing or commercial, in distinction from those which appear to have a more elevated character, such as the labors of scholars, artists, public functionaries, etc. In this case, industry forms in a certain way an antithesis to all that is embraced under the term liberal professions. We say, for instance, that a man begins an industry when he becomes an agriculturist, a manufacturer or a merchant, and that he abandons industry, when he exchanges one of these occupations for that of an artist, an advocate, a physician or a public functionary. This interpretation, like the first, has gone into official language and law, in which the restricted meaning which we have just mentioned, or the broader one to which we call attention, is given to the word industry according as it is desired to express one sense or the other.
—Though neither of these acceptations of the word belongs really to economic language, for the reason that each one of them seems to create an absolute separation between labors which are only distinguished by differences of kind or species, still they are both found in the works of the principal economists. Adam Smith uses no other, and they appear frequently enough in the writings of his successors. It is difficult, moreover, to reject either of them absolutely, since they are sanctioned by use, and there is perhaps no inconvenience in adopting them sometimes, provided that care be taken clearly to define their application. But we must hasten to say that, in proportion as the field of economic science extended, while being cleared from obscurity, in proportion as the resemblances between human labors as well as the force of the ties which connect them were more clearly explained, the necessity was felt of giving a broader meaning to the word. The distinction so frequently established between the industrial arts and the professions called liberal, seems false or empty, at least when taken in an absolute sense. It was understood that these labors, no matter how different they may be in their processes and in their relations to their immediate object, are connected, bound together, lend each other a mutual support; that they are governed by the same laws, and lead in reality to the same ends; that there is, consequently, a reason to include them under a common designation. In this way, by the natural movement of economic studies, men came, gradually, to include under the general name of industry, all labors, of whatever nature, which contribute directly or indirectly to satisfy the wants of man.
—So that, in genuine economic language, industry is human labor, without distinction of kind; labor considered in the infinite variety of its applications. The word industry would even be the exact synonym of labor, were it not necessary to recognize for it a higher meaning in some respects. But, while we can scarcely understand by the term labor, only the exercise pure and simple of the physical forces, or the intellectual faculties of man, we must include under the term industry the employment of these same forces, these same faculties, with all the social combinations which increase their power, and the concurrence of all the physical agents which favor their action. It is, in one word, labor but labor raised, if it be permitted to say so to a higher power, both by the agency and combination of individual forces, and the aid of auxiliary agents which man has been able to gather around himself.
—Considered from this broad and general point of view, industry is, as we shall see in the article POLITICAL ECONOMY the real object of the investigations of economic science, which studies its organization and explains its laws. By taking it up in this way we are evidently relieved from exalting its importance. We have no need of dwelling on those commonplace considerations which are usually brought forward to extol its advantages and merits; considerations which to our thinking are always of meagre fitness, since they lower what they pretend to exalt, and which would be particularly out of place here. Industry, as we look upon it, is not a secondary fact seeking its place; it is the active life of man; it is, in some respects, the man altogether. When addressing men there is no need of wasting eloquence to heighten the importance of such a fact.
—But if we are freed from insisting on this point, we have another task to fulfill, that of showing at a rough estimate how industry is organized as a whole; to present a miniature picture of this organization, and indicate at least its principal features. This is the place to group and collect the general phenomena presented to us in the field of industry, and which form the ordinary text of economic studies. It is necessary to show, as far as is possible in a summary analysis, how these phenomena are arranged and connected, in order to point out the place which each one of them occupies in the industrial order; this is the best way of showing, at the same time, the extent of the field which economic science must cover.
—To attain this object successfully, it is well understood that what we have to consider is industry as it exists, such as civilization has made it, that is to say, with all the organic elements developed in it by time. Still, as industry, considered with reference to the organization of the labors which it embraces, is an essentially progressive phenomenon, which though subject to certain invariable laws derived from the nature of man itself, is built up in a gradual and progressive manner; since it begins in a rude state and rises gradually to the miracles of organization, which we witness to day, like the tree which, contained at first in the germ, develops only with time, and throws out its branches successively, it seems to us useful to consider it in its rudimentary and primitive state. This is the more important since it is not developed regularly, in the sense that its organization is equally advanced everywhere; it is, on the contrary, very unequally developed according to locality, and we find here and there, in places even far advanced in civilization, remnants of its primitive organization.
—II. PRIMITIVE AND RUDIMENTARY CONDITION OF INDUSTRY. The condition of industry which we call rudimentary consists essentially in this, that the most varied functions are united in the same hands; that exchange is almost unknown, and consequently the division of labor also, which is induced by exchange. All those occupations, so numerous and diversified, which are carried on separately in society as it now exists, opening a field to so many professions or different careers, were then in a certain way mingled and confounded, in the sense that they were exercised in turn by the same individuals, though in a very imperfect and rude manner. Another distinctive trait of this primitive organization is, that a sort of intimate community existed in it among men, at least among those forming the same society, in such a manner that they performed the greater part of their labors in common, and made a direct division of the fruits of these labors.
—We have tried to give an idea of this state of things in several articles in this Cyclopædia, especially under the word EXCHANGE; but we think it our duty, in order to preserve the connection of ideas, to recall it in a few words here. In order to find its traces it is not absolutely necessary to go back, as we have done previously, to the infancy of society, or to follow man in the savage state; we can find a more or less faithful picture of it, even to-day, wherever a small group of men live separate from the rest of society, or without ordinary communication with it. If, for example, we go to the remote frontier of the United States, we shall find here and there isolated farms, on which a small number of men, belonging in most cases to the same family, live together, and satisfy all their own wants themselves without contact with the rest of the human race. This picture of primitive society is not complete, it is true, but it is near enough to the type which it represents. No matter how remote these men may be from the great society of mankind, they do not cease to borrow from it largely: first, they obtain their arms from it, as well as most of the implements which they use in their labor. Besides, having issued from that society themselves, they took from it at their departure a portion of the enlightenment and acquired knowledge which it had accumulated for the use of all. This gives them a decided advantage over their savage neighbors. With this exception, they embody the type of primitive industry, in the sense that all labors necessary to their support are carried on by themselves, and all the functions of social life are united and concentrated in the little group which they form.
—A truer picture of this primitive constitution of industry can be found, perhaps, in the lives of the patriarchs, as presented to us in the Scriptures. Abraham and his earlier successors lived alone with their families and their servants by isolated agriculture, and without ordinary contact with the rest of the world. These patriarchs, it is true, knew the use of money, which shows that exchange was practiced among them to a certain extent; but it is evident that they had recourse to exchange only at long intervals, in exceptional cases, and that in general they themselves supplied everything which was needed to satisfy their daily wants. In their activity, as in that of the farmers of the American border, all industrial labors were united, all social functions brought together, with this additional circumstance, that as the patriarchs recognized no superior authority to which they owed obedience, they held besides the functions of the government in their hands.
—On considering industry in this primary stage we perceive clearly the intimate connection of all its branches. On close examination all the functions of social life are found there united, though many of them appeared only in germ. Around agricultural industry, which in a certain way formed the basis of the common labors, were gradually grouped manufacturing industry, commercial industry, the fine arts, which were not unknown there, as well as the labors which to-day form the appanage of the professions called liberal, including even the functions pertaining to public authority. Land was cultivated and flocks were raised; this was the chief occupation of the tribe an occupation altogether agricultural. But the fruits of the earth once gathered, it was necessary to prepare them for common use. It was necessary also to collect the wool of the flocks, to spin and weave it, to make garments for each one. This was manufacturing industry with all the distinguishing characteristics which belong to it, but closely connected with agricultural industry, of which it was merely the accessory, so to speak. Next, it was necessary to distribute all these products among the different members of the tribe; and what is this but the foundation itself of those occupations which constitute commercial industry? The fine arts were cultivated, even if only in the song and dance at leisure moments. Man observed the stars, while cultivating the earth, or watching his flocks; this was the beginning of science, which was connected with the advancement of the most common labors. At intervals, also, the properties of certain medicinal plants were studied, plants suited to the cure of certain diseases; medicine took its place side by side with the plow of the laborer. Arms were sometimes taken up in self-defense, either against wild animals, or against other enemies more dangerous, and the art of war was practiced by the same hands which were devoted to the arts of peace. Those who had committed crimes were judged and punished; and thus, in the midst of so many other labors the solemn functions of justice were performed. Finally, there was a government, a chief to direct, and agents to serve it, and a police of some kind. It is true, therefore, that in this small group, composed of so few men, all the essential functions of the social order were united. It was a small picture of the world, as it exists in its present condition; with this sole difference that, in the world of the tribe, all these functions were mingled, confounded, exercised by the same agents, while in the world of to-day they are separated and intrusted to different agents, without ceasing on that account to be united and dependent on each other, as much as they could possibly be the first day. We shall now see how, in consequence of the progress of exchange, all these elements, mingled at first, became detached from each other, and what the new order was which was established.
—III. ORGANIZATION OF INDUSTRY. Exchange; division of labor; subordination of labors; money. In proportion as the number of exchanges increases, under the influence of causes which we have enumerated elsewhere (see EXCHANGE), a division of labor takes place, in the sense that each individual chooses a distinct occupation to which he devotes himself exclusively, leaving to others the task of carrying on those which he has abandoned. In this way the functions of industry, at first closely connected, and executed by the same hand, separate; the mingled elements become detached from each other, and a new organization is established with exchange and division of labor as essential bases.
—The first general effect of this movement of division is to set free manufacturing industry, which settles into a distinct branch of labor, through separation from agricultural industry, with which it was at first confounded and of which it formed, so to speak, merely an appendage. We have seen that, in the primitive organization, agriculturists themselves prepared the wool of their flocks, or the flax which they had harvested, in order to turn them into clothing; just as they also produced every change required by the other products of the earth. This part of labor, which consisted in fashioning and working up all the raw products of the soil, in order to adapt them more completely to our wants, was at that time only a kind of accessory of the first; in appearance, as well as in reality, there was at that period but one industry: agriculture, with its dependencies. But gradually, in proportion as exchanges became more frequent, these accessory labors separated sharply from agricultural industry, where they were always out of place and imperfectly executed. They acquired a greater importance by the separation itself, and tended to constitute, under the name of manufacturing arts, or manufacturing industry, a perfectly distinct branch of industry which, feeble at first and in the infancy of society, now occupies a high position among civilized nations. We are indebted to it in general for the creation of cities; for it is the nature of the manufacturing arts, which are not, like agriculture, fastened to the soil, to associate in groups, to concentrate and form by their union those masses of population which are called cities. Once established, they become still more special, through separation into a great number of distinct branches. Exchanges consequently multiply more than ever, and by their increase lend a new importance to that other branch of general labor, whose object it is to facilitate exchanges, and which is known as commerce. At the same time several other labors, previously without distinct character and confounded in the general mass, are detached from the common trunk: labors of art, of science, those relating to government, the police, and in general all those which form the object of what is called at present the liberal professions. Thus, everything which was formerly united now tends to separation, specialty is introduced everywhere, and exchange, originally the exception, becomes the universal law.
—Exchange and the division of labor are therefore the fundamental bases of the new organization of industry; to speak more correctly, they are the points of departure for every genuine organization. In truth, it can not be said that this primitive condition which we have endeavored to describe had really an organized industry. All these isolated groups of men appearing on different parts of a territory, each one working indifferently the tract of territory which fell to its lot, were too unconnected to exhibit any general order in their relations. They formed, perhaps, industrial workshops, but workshops without connection, without tie, among which, therefore, no trace of general organization could be noted; and as to the particular organization of each one of them, it was the ruder and more imperfect since the most varied functions of labor were mingled and confounded, and no assistance from without could be expected to favor its action; it was, besides, unstable, depending essentially on the changing views of those who directed it. It was only when exchange became more frequent, that regular relations were established between these workshops, and it was then also that general organization began to appear. This was completed by the division of labor, which freed each one of these workshops from the parasitic functions with which it was overburdened, confined it to its own specialty, and made every separate workshop an integral part of a great whole—An imperfect idea would, however, be formed of the general order of industry unless to these two essential conditions, exchange and a division of labor, a third and no less important one be joined, which completes them, namely, the connection, the mutual dependence in which the various functions separated by the division of labor are placed with regard to each other. To say, as is often said, that labor is divided in the progress of industry, is not enough; this is to omit another important phenomenon, which beyond a doubt has an intimate connection with that of the division of labor, but which in many respects is distinct from it, and would on this account deserve a separate title. We wish to speak precisely of this principle by virtue of which the various labors of industry, though separated from each other and executed independently, continue nevertheless in such a reciprocal dependence and subordination that they all seem to form the different links of an endless chain. Economists in general do not, perhaps, dwell sufficiently on this phenomenon, to which, as appears to us, they do not attach due importance. But what other phenomenon shows more clearly the elevated character, the eminently social character of industry, so different from that which so many unjust detractors attribute to it? In virtue of the division of labor, different kinds of labor are separated in view of more convenient and better execution; it might be believed that they continue thus without relations; nothing of the kind; once separated, they come together again, and are reconnected; without being confounded, however, as they were before, they are subordinated to each other, but solely for purposes of mutual support. There is not, therefore, a single one of the great functions of industry which is not connected with a thousand others, from which it obtains the materials which it works up, the instruments which it uses, the buildings which it occupies, or the technical processes which it employs. This is what we shall permit ourselves to call the subordination of labors; the necessary crowning of the division of labor, from which, however, it is distinct; an interesting phenomenon which characterizes, better than any other, this organization at once simple and complex, to which human industry lends itself. Another no less interesting phenomenon, which completes the foregoing, is the use of money, without which any active system of exchanges would be impracticable.
—Exchange, the division of labor or the separation of tasks, the subordination of the different kinds of labor, and the use of money: these are the four essential elements which constitute the industrial order as it exists; they are the fundamental bases on which the whole edifice rests. It will be understood that this is not the place to dwell on these elements, which will be more properly explained elsewhere. It is sufficient for us to call brief attention to them, to assign them their proper place in the industrial system. Let us merely repeat that together they form the whole industrial order, and it is not necessary to go outside this circle to include the total of economic phenomena. It remains, however, to see what results from the action of these elementary phenomena, and how in the movement of affairs originated by exchange, order is introduced among all these industrial elements separated by the division of labor.
—IV. CONSEQUENCES OF THE PRECEDING. The industrial world constitutes a great society. In the primitive state of things, a feeble sketch of which we have tried to present, there was, properly speaking, no human society; the world was divided into a certain number of isolated groups of close communities, little disposed, as a general thing, to come together, and between which a state of war often created a gulf. But when exchanges increased and the division of labor began, all these isolated groups dissolved, they became merged into each other, and finished by forming together a great society, whose tendency, as we shall point out in the article POLITICAL ECONOMY, is to become universal. This is human society, very different from political society, with which it is sometimes improperly confounded, and which is never greater than a more or less considerable fraction of it.
—Now what are the bonds of this society? Precisely those which we have just enumerated: exchange, division of labor, subordination of the different kinds of labor, and money. By exchange, men supply each other with the fruits of their labors, products for products, services for services. By the division of labor, they share the different parts of a common task. This is enough to create between them a social tie so intimate that no human power can break it, and from which no individual can free himself. The subordination of the different kinds of labor strengthens this bond, which the use of money cements, by making it general. The existence of this great human society has often been denied or ignored. Some look on it merely as a promise of the future. They are mistaken; it is a reality of the present. This society exists to day, though it has not yet arrived at the last stage of its development, and continues to extend and multiply its bonds daily. Its existence is shown clearly enough, it appears, by that intimate solidarity of interests which becomes more and more evident, which is established especially between all parts of the civilized world, and which makes them all sensitive to the same accidents, to the same catastrophes. It is shown by the simple fact, that any individual hidden away in a corner of this civilized world may deliver the fruits of his labors to his neighbors, and, provided that he has them accepted, may receive their equivalent in any other part of this habitable world. He has worked for the French, the Germans or the Russians; he can be paid the price of his labor by Americans, Indians or Chinese. Its existence is shown further by this other no less significant fact, that nations most different from each other, not only agree to effect an exchange of products, but, in addition, aid each other in a certain way in completing the successive processes which certain products require, and bearing them by a series of uninterrupted labors to their final termination. Thus the cotton fabrics which we wear are the combined result of the labor of North Americans and Europeans; leaving out the fact that several other nations have contributed to their manufacture, some by furnishing dye-stuffs which color them, others by furnishing the instruments which were used in their manufacture. The wool of flocks raised by Australians is brought to Europe by English seamen; it is distributed by English merchants over the European continent; where it is converted into thread and cloth by German, Belgian or French laborers, dyed with stuffs furnished by Central America; again it is transported, in the form of manufactured cloth, by the sailors of every country, into every part of the world, including that in which it grew. Is it possible to fail to recognize in such movements the intimate community of interests which is established between the inhabitants of countries most different from each other, and the existence of a social bond which connects the whole world?
—Our intention, however, was not so much to prove this great fact here as to mention it. We shall say simply, in passing, that it is just this human society, thus formed and constructed of the elements which we have just examined, whose laws are studied by political economists. It remains now to see what the principles and general facts are from which these same laws are derived.
—V. MOTIVES AND REGULATORS OF INDUSTRY. Personal interest; supply and demand; competition. The great motive of industry is personal interest, which is besides the essential motive of all human actions. When God created animated beings he endowed them with a profound and indestructible sentiment: love of self, as necessary to their preservation. It is his will, however, that this sentiment, too exclusive, should be tempered in each individual by a more or less pronounced sentiment of sympathy for his fellow-men. This same sentiment, personal interest, love of self, imparts movement to the whole industrial machine; but it finds here an additional moderator, the balance of opposing interests, which confine each individual interest within its limits, and from this, final harmony results.
—The pretense has sometimes been made of substituting another motive for this natural one: devotion to others. This was a desire to interfere in the work of the Creator, who assigned its place to each sentiment, when he admitted sympathy or devotion merely as a corrective. Suppose this project to have been successful (an impossible thing), its success would have merely enervated man, by depriving him of his most active principle. For what other sentiment can rival self-interest in energy and perseverance? What other, inherent in man from the cradle to the grave, could apply the same spur to his activity? Happily these absurd projects have never had a chance of success. Personal interest may sometimes be perverted or corrupted, by turning it from its path, but it can never be destroyed.
—The great motive of industry is, therefore, the same which has determined human activity in all directions and at all times: personal interest. But it would be a mistake to suppose that from the movement and conflict of diverging individual interests anarchy or disorder must necessarily result. This would have doubtless been true in those systems of an absolute community of labor and wealth which existed at the beginning of human society, and which certain misguided minds have sometimes been bold enough to propose to us as an improvement on our present condition. With such an arrangement personal interest, without ceasing to be as active as in our present society, would be absolutely deprived of a rule of action: therefore it would become lawless at every moment through brutal violence, passionate disputes over places, by a rivalry of slothfulness in labor, and a culpable disregard of the service of the community, unless continually reproved, directed and restrained by the all-powerful and despotic will of a director. But this is not the case in the industrial system founded on exchange, in which order springs from the very principle in virtue of which society moves. As soon as exchange has become in practice the universal law, as each individual is forced to count on others for the satisfaction of his wants, and as he has no right to their services except in so far as he brings them to accept his, he is led by his own interest to labor for his fellow-men, to study their wants, their tastes, and to make the satisfaction of these wants the sole object of his activity. Thus, in this system, personal interest, without losing any of its native energy, tends unceasingly toward order, while subordinating itself in each of its manifestations to the interests of all.
—In the midst of this extreme complication of phenomena, which exchange and the division of labor produce, there remain nevertheless certain grave questions to be solved, which touch upon the very existence of the industrial order; that of knowing, for instance, on what basis products and services are to be exchanged, and how equal values are to be established. This is the great problem of value. This problem is solved by the beautiful law of supply and demand, which has been explained before (see DEMAND AND SUPPLY), and by competition which is its complement. Let each man be obliged to offer his services to his neighbors, and have them accepted by those who demand them before being able to claim a part of the fruit of their labors in his turn; this arrangement suffices to make the personal interest of each individual tend to satisfy the wants of all the others; but it is inadequate to effect a balance and equilibrium between all the individual interests which are put in movement, and give to each one in a just measure the satisfaction due it. What would happen, for instance, if each individual, when he offered his products and his services to others, were able to fix his price arbitrarily according to his will? Another rule is needed. Where does it come from? The decrease of the demand suffices, in a certain measure, to moderate the claims of those who offer the supply; it is the commencement of a rule. But it would still be insufficient, if competition which grows up naturally between the latter did not impose on them a more rigorous law, by forcing them to be satisfied with the lowest price which the exigencies of production can admit. It is competition then, finally, which determines the relative price of things. It renders many other services, and in the last analysis it may be considered as the supreme regulator of the industrial world. But having already explained this truth, in some of its developments, under the word COMPETITION, we shall not return to it here. It only remains for us to do what we have omitted elsewhere: to determine the conditions of competition and the limitations to which it is naturally subject.
—VI. CONDITIONS AND LIMITS OF COMPETITION. Interference of political authority; necessity and danger of this interference; natural monopolies. Such is the power of the principles of order which we have just mentioned, and especially of competition, that sovereign regulator of industrial affairs, that if the action of these principles were never opposed or limited, if it were not submitted to conditions which frequently distort its effect, all the functions of the industrial world would be carried on without trouble, and with perfect regularity. We have stated elsewhere that, if competition had always ruled without obstacle, if it could have fully developed in the midst of human societies, such is the power, the inexhaustible fruitfulness of this principle, that humanity would have advanced, and with an incessantly increasing rapidity, toward a future of prosperity, of wealth and of general well-being, of which it has perhaps yet no idea. More than this: the industrial mechanism, so admirable already, would be free from all the disorders which impede its action.
—The action of competition supposes the reign of justice and right; it supposes that, in every operation of exchange, the contracting parties will be free to refuse or accept the conditions proposed them, and even to apply elsewhere if such is their good pleasure; it supposes, in a word, the absence of constraint, of fraud, of violence in human transactions; for if one of the parties may, in any manner, impose his conditions on the other without the latter being free to weigh, to measure and reject these conditions, there is no longer any competition, and equilibrium between the respective interests of the parties ceases to exist. Under the empire of the law of exchange, personal interests continually tend toward order, since no one can pretend to obtain values which he seeks, unless at the cost of furnishing equivalent values to his fellow-men, and of subordinating his labors to their wants. But it is always under this essential condition, that no one of these interests in question should prevail over the others through violence and injustice; that, on the contrary, each man should be bound to respect in all other men the free manifestation of their wants. Otherwise, the tendency of individual interests toward order immediately changes into a contrary tendency. Now, it is precisely this essential condition, this necessary condition of order, which is almost never completely realized.
—In view of the evil passions of men, which but too easily incline to violence and injustice, when urged by personal interests, and when they have force on their side, justice and right can prevail in human transactions only so far as there is a superior power above individuals, which holds the balance between them, and which has both the force and the will to prevent all their deviations from justice; this is the political power, whose interference, understood in this way, is always necessary. The task of this power is a great and admirable one. It consists essentially in holding the balance between individuals, to make the liberty of each one of them respected, and to keep them within the limits of their respective rights, without speaking of the corresponding mission which is intrusted to it, of defending the population of the country which it governs against foreign attacks—a negative rôle, when properly considered, since it consists almost entirely in repressing violence and preventing evil, but which is nevertheless of considerable importance. It is owing to the continual interference of this power, an interference altogether salutary and beneficial when it does not exceed proper limits, that freedom reigns in private transactions, and it is in this case alone that competition becomes possible. If the political power is not the creator of the industrial order, whose principle lies elsewhere, it is at least its guarantee, and the necessary guarantee. Under its wing, so to speak, individual interests are secured, and competition gains its vigor. We can therefore consider the different political powers which divide the world between them as so many indispensable wheels in the great industrial mechanism.
—But these political powers are exercised also by men who are no more exempt than others from the evil passions which it is their duty to restrain; this is the weak side of human society; it is the gate through which every evil enters. In addition to the fact that those who wield power in each country (we mean here governments in general) do not always show themselves sufficiently active in repressing excesses, and thus fail in their exalted mission, they too frequently permit themselves to commit like excesses. Subject to all the impulses of human nature, they often yield, like other men, to their evil inclinations, and the unjust acts which they commit at such times have consequences all the graver since they have a loftier origin. To find a government which makes justice respected and which respects it scrupulously itself, is the political problem, but a problem which still awaits solution. This is why the industrial system, in spite of its admirable structure and the regulating principles which it possesses, forced as it is to lean on the political order, which does not enjoy the same advantages, still finds itself tainted with a great number of partial disorders from which perhaps it will never be entirely exempt.
—Thus in the industrial order, everything is good in so far as we consider it governed by the economic law; but this law, more general in its application than the political law, is nevertheless subject to it, in certain respects, within the territory embraced by the latter, since it is everywhere incomplete without its co-operation. From this arises disorder wherever disorder reigns; from this come the vexatious imperfections to which the industrial system is still subject. The mass of men have no reason to complain, since the primary cause of the evil is in the violence of their own evil passions. It must be said, however, that independently of this severe condition to which competition is subject, of being unable to act except under the protection and guarantee of the political powers, it meets also here and there necessary limits, which the nature of things imposes on it.
—It is evident, to begin with, that competition can not act in all its completeness except when the number of men occupied in the field of industry is so large that each one of those who offer in bulk services of a certain kind should meet competitors or rivals. It is evident that where population is sparse, or the groups of men are few and far between, this beneficent principle is scarcely felt. It is almost entirely absent in that primitive condition of society which we mentioned above; and this is one of the causes which explain why progress is generally so slow in nascent societies. It only begins to exhibit all its effects when men collect on narrow spaces, or when among sparse populations means have been found to establish numerous and easy communications, which bring producers into contact with consumers.
—But even where the population is dense, competition always meets certain limits, if nowhere else, in the existence of certain absolute monopolies which arrest its activity. We do not speak here of artificial monopolies, of those which the negligence of governments has allowed to spring up, or which they have by design unjustly established. We speak of natural monopolies, of those which are necessary, unavoidable, and which the most careful vigilance of the political power could not remove. There is in every country a certain number of this kind of monopolies; and though inevitable and necessary, they do not in general fail to produce certain disorders followed by pernicious effects. The first and most considerable of all these monopolies, the most unfortunate perhaps, but surely the most inevitable, is precisely that which is enjoyed by these same political powers just mentioned. In every country, the established government, whatever it be, acts alone in its sphere, and suffers no competition of any kind in the exercise of the functions intrusted to it. This is inevitable, we say, and results from the truths which we have just explained. Since in fact competition even between one individual and another is only possible on condition of equal freedom for the contracting parties; since it supposes, consequently, the existence of a superior power, which holds the balance of justice between the contracting parties, and forces each to respect the rights of the other, how could it be practiced with reference to a government which knows no superior, and which could accept one only by abdicating? Contracts are made between individuals under the guarantee of public authority which prevents violence; this is what produces freedom of agreements and makes competition possible. But under what guarantee can a contract be made between a government and an individual? There can be none. In this case the strongest carries the day and imposes the law. The strongest is the government, which, instead of bargaining, of discussing as individuals do in their affairs, dictates and imposes its conditions. This is what has been seen in all times and which will always be seen, since the nature of things has thus ordained it.
—But if this monopoly of political powers is inevitable, it nevertheless produces very annoying results. Since they never feel the spur of competition, which alone is able to enforce activity, economy and order on men of whatever condition, all the governments of the world grow slack. Consider what really happens in every state, and you will see that of all industrial enterprises undertaken, the enterprise of government—and we can call it that—is, beyond comparison, the worst administered. There are doubtless differences between states, but they are merely differences of degree. Besides, these same governments always sell their services too dearly. The price of these services, not being determined by the general laws which determine the relative value of things, is arbitrarily raised, with no other certain limit than the resources of the people. We are not criticising one particular government or another, since, on the contrary, we are establishing a general law. We simply say it results from the very nature of things that the functions peculiar to governments are always badly executed and paid for at too high a price. It is another consequence of this same fact, that the remuneration of services rendered by governments always assumes a particular form, that of a tax or impost—an annoying form, for more than one reason, though it is, in some respects, inevitable. Taxes are nothing else in principle than the remuneration for services rendered by those who govern; but they are a remuneration which, instead of being voluntarily and freely paid like all others, is exacted and collected with authority by those who receive the remuneration. From this there results both an underhand resistance on the part of those who pay, and who endeavor by various means to escape from the burden imposed on them, and a want of equilibrium in the assessment of taxes, which scarcely ever are proportioned to the importance of the services received by each individual, and besides a considerable increase in the cost of collection, aggravated by the resistance of tax payers; without considering that the precautions taken to insure this collection almost always become serious hindrances to industry, and nearly as oppressive as the taxes themselves.
—Thus from the natural monopoly which governments enjoy, it results that the functions belonging to these governments are badly executed, that their services are always too highly remunerated, though there are great differences of degree between them. Besides the natural monopoly of political powers, there are others, which always involve consequences more or less lamentable. But it is not our intention to enumerate them here, still less to analyze all their effects, this subject being specially treated, like all others, in its own place. It is sufficient here to point out the principle, in order to compare it with the other principles which govern the industrial world and indicate in what sense it modifies the action of this world.
—VII. INSTRUMENTS OF INDUSTRY. In the preceding pages, we have passed in rapid review the series of great industrial phenomena, stopping only at the chief points. We showed first that industry, in its general expression, embraces all human labors, of whatever nature they may be. We then stated that when scarcely out of its cradle, this industry tended toward ordering itself by exchange, division of labor and subordination of the different kinds of labor, by the aid of money which favored their action; that thus organized it constitutes a great society, the tendency of which is to become universal; that its principal motive is personal interest, the same that directs all human actions, but subordinate in this case, in virtue of the law of exchange, to the general interest; that the great principle governing it, and from which all its laws spring, is competition, a principle both of progress and order, which directs it incessantly toward an organization more and more satisfactory and perfect. We added that if this principle reigned in the industrial world alone and without division, all would be for the best, and that the wealth or general well-being would be as great as the degree of civilization at which nations have arrived would permit; but that competition has its conditions and its limits, which arrest its action and neutralize in a certain measure its beneficial effects; that it is subordinated, for example, to the action of governments, which not being subject themselves to its influence, do not subordinate themselves to the general order; that it is, besides, limited by a certain number of artificial or natural monopolies; that this is the weak or vulnerable side of human society; that by this, that is to say, the irregular action of governments, and by the disastrous influence of monopolies, disorder is introduced into the world; and that this explains why the organization of industry, so beautiful and marvelous as a whole, still continues to be tainted with numerous imperfections.
—We have in a certain fashion summed up all the economic truths in this miniature picture. It must be understood, of course, that each one of these truths would require lengthy explanations, necessary to illustrate and bring out all its applications, but which we refrain from making because they will be found elsewhere. There would be a lack, however, in this general picture, if we should pass over, without mentioning them, the instruments of industry, that is to say, the agents of different kinds which are of assistance to man in his labor.
—Man does not labor alone; he calls to his aid, as far as possible, all the forces of nature, all the powers of the physical world. Among the instruments which he uses, some, created by his own hands, were slowly accumulated by saving; others, given by nature, were merely conquered and subjected by him. But all lend him a powerful aid, without which the most energetic development of his activity would remain comparatively barren. This is a great and general fact, which could not be omitted, and whose place it was necessary at least to indicate.
—There is really no particular law to be established in regard to the instruments of labor. Considered in their general bearings, the principles which we have already laid down apply to everything, to the simple agents of labor as well as to men. Men and capital are subject to the great law of competition, which arranges and classifies all things, which fixes every where the value of services rendered. Everything is subject in like manner to the influence of monopolies, which are connected with things as well as with men, and everywhere produce the same effects. The only difference is in the applications, which still offer, it is true, a vast field of study, but into which we can not enter at present. But if there is no particular law to establish here concerning instruments of labor, there are at least a few observations to make—To begin with, it is not uninteresting to see what kind of assistance is furnished to man by tools and machines in general, how far they are necessary to the development of his productive faculties, and how their increasing multiplication raises the level of humanity every day. So far as various kinds of capital are particularly concerned, the accumulated fruits of the labor of man, it is of interest to see how they are formed and accumulated by saving; in what conditions this accumulation is quickest, and what are the circumstances which favor it most—an important subject in itself, with which many others are connected, which are not devoid of importance either. There is less to be said, it appears, about appropriated natural agents. As they are given by nature, they do not increase by saving: though saving almost always adds something to them by means of the capital which it connects with them. They are purely and simply conquests of man over nature, conquests which are happily extended from day to day. There is, however, an important observation to be made on this subject, it is that appropriated natural instruments are more subject to monopoly than capital, and to monopolies frequently complicated, whose effects are not always easily analyzed. As to agents not appropriated, however valuable be their aid, we may omit them entirely, since, their services being always gratuitous, they do not enter into the current of exchanges, and thus escape all the effects of economic law.
—Moreover in all we have just stated, though here and there a glimpse may be had of a vast series of interesting studies, no new principle appears; at least none of those primordial principles, those generative principles, so to speak, like those which we laid down earlier in this article, and to the explanation of which we desired to confine ourselves. In fact, since the instruments of labor, those at least which are appropriated, follow, as we may say, the fortunes of the human race, and are subject, saving a few differences and restrictions, to the same general laws, what principle could be appealed to concerning them which would not be simply derived from these same laws?
—VIII. CLASSIFICATION OF INDUSTRIES. Industry is one in this sense, that all its parts are connected, and that it would not be possible to suppress a single one of them without leaving an evident breach in the whole. Nothing, however, prevents our dividing it into several branches, for the convenience and facility of the studies of which it is the subject; there is no difficulty in doing this, provided the necessary connection of all the branches with each other is never lost sight of.—"There is but a single industry," says J. B. Say (Cours, part i., chap. vii.), "if we consider its object and general results; and there are a thousand, if we consider the variety of their methods and the materials on which they act. In other words, there is but a single industry and a multitude of different arts." Though J. B. Say takes the word industry here in a more restricted sense than that which we have given it, since he applies it only to that kind of labor which acts on matter, his observation is correct. It has even a higher significance than he gives it, and we can apply it to universal industry with the same authority. "Nevertheless," adds the same author, "it has been found convenient, in studying industrial action, to classify its operations, to unite in the same group all those which have a certain analogy among them. Thus, we say that the industry which brings products from the hands of nature, whether it has promoted their production, or whether that production has been spontaneous, would be called agricultural industry or agriculture; that the industry which takes products from the hand of their first producer, and subjects them to any change whatever, by chemical or mechanical processes, should be called manufacturing industry; and that the industry which takes products from one place to transport them to another, where they are nearer the consumer, should be called commercial industry, or simply commerce." This classification is, in fact, that which is most generally followed. It has passed from everyday language into books, and nothing prevents its adoption, since after all, as the writer we have just quoted very aptly says, every classification is arbitrary, having no other object than to direct study or simplify operations of the mind. Still, it is necessary to remark how insufficient and incomplete this classification is in certain respects. It comprises under the same denomination, that of agricultural industry, several kinds of labor, which have without doubt an analogy to each other, as all human labors have, but which surely differ for many reasons; for instance, the venturesome labors of the man who is engaged in whale fishing and the uneventful occupation of the laborer who cultivates his field in peace. The man engaged in the whale fisheries in the southern seas, would surely be astonished to learn that he exercises an industry similar to that of the gardener who furnishes the market of Paris with fruits or vegetables. On the other hand, how many industries remain outside of this classification, even it we give it every possible extension. We find here, for example, no place for the labors of scholars, physicians, advocates, artists, professors, public functionaries, nor for those of the men devoted to the professions called liberal; for all these men, each one of whom exercises an industry, and often a very active one, could not be considered as merchants, manufacturers or agriculturists.
—Struck with these considerations and some others in addition which he has developed with much force, Ch. Dunoyer has endeavored to establish a new classification, more scientific and complete, in his excellent work, Sur la Liberté du Travail. He begins by dividing industry into two categories or two orders; embracing in the first category those which act on things, and in the second those which act on men. The industries which act on things, are: 1, extractive industry, that is to say, that which wrests from nature spontaneous productions, and in which must be comprised fisheries, the chase, and the working of mines; 2, the industry of transportation, that is to say, that industry which transports objects by land or by water; 3, manufacturing industry; 4, and last, agricultural industry. The last two, the author defines very nearly as they are defined everywhere. In the category of industries or arts which are exercised on men, Ch. Dunoyer includes: 1, those occupied in the perfecting of our physical nature; 2, those which have for special object the cultivation of our imagination and sentiments; 3, those whose office it is to educate our intelligence; and 4, those which contribute to the perfecting of our moral habits. This classification, more regular than the other, more satisfactory, perhaps, and surely more complete, has nevertheless the great drawback of not being usual, and not presenting, in the terms used, a meaning understood with sufficient ease; a serious drawback, especially in a publication like the present, which should, by the simplicity of its nomenclature, make itself easily understood at once by every one. Is Dunoyer's classification itself complete? Is it satisfactory, speaking in the language of science, in the sense that it comprises without distinction, while ranging them in their real order, all kinds of labor? We need not examine this question here; we shall merely say that, satisfactory or not, it may be considered at least, as a new elaboration of a subject which still leaves much to be desired—a rational, judicious elaboration, always very useful to consult.
—Notwithstanding the relative merit of this classification, we are forced by the decisive consideration which we have just mentioned to return to the other. We adopt, then, the distinction established between the agricultural, manufacturing and commercial industries; but we would remark that this classification, which only applies to the great divisions of industry, does not comprise everything. In the first place we can not permit ourselves to confound under a common denomination agriculture, fisheries, working of mines, or even the chase, which we consider rather as special industries, and very important ones. It seems to us necessary, besides, to make another reservation in favor of the industries connected with the professions called liberal, which we have already enumerated.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 2 East India Co. - Nullification Chapter: INHERITANCE.
Accessed from oll.libertyfund.org/title/970/29673 on 2009-05-07
The text is in the public domain.
INHERITANCE. The right of inheritance is the right by virtue of which goods of every kind are transmitted, after the death of those who possessed them, to their heirs or descendants. The person who succeeds to another's goods is called his heir; heritage is either the fact of transmission, or the thing transmitted, the right of inheritance is the principle by virtue of which the transmission is made. We shall here treat only of the right of inheritance.
—The right of inheritance flows naturally from the right of property itself. "The right to dispose of what one owns," Charles Comte justly remarks, "is one of the essential elements of property." In fact, the owner's right over what he possesses is absolute, so that no one else can have any pretension thereto, either in the present or in the future, so long as he has not transferred it by his own act. This is a consequence of the very nature of property, and of the original causes of the institution of property. Hence the owner has the right to dispose of his goods in favor of whomsoever he pleases in the present, and, for the same reason, to dispose of them also after his death. This is a natural and simple conclusion, so simple and so natural that it has been sanctioned by the unanimous consent of all nations.
—Nevertheless this conclusion has been contested at different times by certain adventurous and frivolous spirits, who have pretended to oppose the rights of nature, such as they understood them, to what they have been pleased to style a mere social convention. "Can a man who is dead," asks Raynal, "have any rights? By ceasing to exist has he not lost all his powers? Did not the great Being, in depriving him of life, deprive him also of everything that was dependent on his last wishes? Can these wishes have any influence over succeeding generations? They can not. As long as he lived, he enjoyed, and rightly, the land he cultivated. Upon his death it belongs to the first person who takes possession of it and chooses to cultivate it. Such is nature."
—It will be noticed, and is evident from the words which we have underscored, that Raynal here refers only to landed property, apparently not suspecting that there is any other kind of property. It is scarcely necessary to say that we give to the word property a much larger scope, applying it to goods of any kind that men can possess. If Raynal had taken it in this sense, which is the only one in which it should be taken, he would perhaps have realized, from the first, the injustice of his proposition. But what must we think of the singular plan which this writer proposes, even considering it from his own standpoint? After the death of a landowner, the first comer takes up his land, and cultivates it in his place; but he probably would not do this, without taking at the same time his plow, his oxen, his barn, his farm house, the unharvested crops, and those already gathered; for men do not labor with their hands alone, nor do they sow without seed, nor live upon air from seed-time to harvest. It is plain from the inconsistency and frivolousness of his proposition that Raynal did not even ask himself, if a landowner or farmer would take much pains to gather together all these things upon his place, when he knew that they would become, after his death, the booty of the first comer. Would he not, in this case, rather consume in his lifetime all he possessed, and leave after him but the bare land? Our author did not stop to inquire whether there would not always be, on his hypothesis, a number of new comers every ready to quarrel over the dead man's spoils; he did not think of informing us how their rival pretensions could be reconciled. It is truly astonishing to find so much inconsistency in a man who, in the last century enjoyed considerable reputation as a philosopher and writer.
—The plan which he afterward proposed seems not quite so thoughtless. He says: "Among the different possible methods of inheritance to citizens after their death, there is one which might perhaps find some supporters: it is that the possessions of the dead man should form part of the mass of public goods, to be employed first in relieving the indigent; next in continually restoring an approximate equality in private fortunes; and, these two important points accomplished, in rewarding virtue and encouraging talent."
—This plan, which is not quite so absurd as the former one, has found supporters. It has been adopted, with some modifications, by a certain number of modern sectarians, who believed they were making a discovery in bringing it to light, and were astonished at the fertility of their own brains. Although it has become utterly impossible of application to landed property in modern society in its present state of civilization, this was not always the case, nor is it equally the case in all nations even at the present day. In fact, we find an institution somewhat similar to this in many barbarous nations, among whom the possession of the land is only for life, and this land, after the death of the titular owner, reverts to the public domain. This was the case in France, at least for certain landed estates, under the first French dynasty; and it is the case to-day in some very remote countries of the east. Applied to landed property, therefore, this system is not impossible of realization. The only strange feature about it is, that any one should dare to propose to us as progress, this practice, borrowed from barbarous countries and times, beyond which we have, most happily, so far advanced. As to personal property, which is by far the most important in our times, this system has been found impracticable in all countries and at all times. It would be, in the first place, a revolting injustice. Personal property, which constitutes what is called capital in political economy, is essentially the fruit of the possessors' labor. It has in some sort been created by them. By what right, therefore, can it be disposed of, even after their death, without their approval? To whom would the right of thus disposing of it belong? Do not our natural feelings tell us that property of this kind can legitimately go only to the natural heirs of those who produced it, or to those whom they themselves designated? Besides, even if we should refuse to recognize the force of these considerations, the system must inevitably fail, through the obstinate resistance of those interested, who would easily find means of saving their personal property from the hands of the usurpers. We may remark, moreover, that the most violent enemies of the right of inheritance have been themselves so strongly impressed by the evidence of this right, when considering the question, that they have rarely attacked the right of inheritance to personal property. They almost always limit the application of their system to landed property.
—But within these limits, it is evident that the system is applicable only as long as the land remains unimproved, that is to say, as long as the owner has not collected and placed there the capital necessary to improve it: barns, stables, cattle, farming implements, etc., not to speak of the innumerable works of improvement which all lands require. This capital once collected and these improvements made, as both are almost always inseparably connected with the land itself, the same difficulties of fact and right arise as in the case of capital. The truth is, therefore, that this system is applicable only in the infancy of nations, when men content themselves with performing on their land the transitory work of to-day, without establishing anything permanent thereon. The country which would undertake to perpetuate such a system would remain forever in that infant state in which alone it is possible.—"If I wished," says Charles Comte, "to refute the errors, borrowed from the Abbé Raynal, concerning the right of children to enjoy the goods left by their parents when dying, I could not help calling attention to the fact that the family spirit is one of the principal causes of the production and preservation of wealth; that a man, to insure his children a living, performs labor and undergoes privations, to which no other consideration would induce him to submit. I would point out to my readers that families conform their manner of living to their means, while, if the wealth of a man were not to pass to his descendants, he should accustom his children to the severest privations, and himself set them the example; that, consequently, he could derive scarcely any real advantage from his property, even during his lifetime. I would show to them, finally, that a nation in which children were excluded from succeeding to their parents, would, in a very few years, fall a great deal lower than the inhabitants of Egypt under the domination of the mamelukes, or the Greeks under the domination of the Turks."
—We will not here insist too strongly upon these considerations, which will naturally recur under the word PROPERTY, where they more properly belong. But we must add a few words upon another phase of the question.
—Although the right of inheritance, like the right of property itself, is absolute, it can and ought to be equally regulated by law. The provisions of the law are not, however, more arbitrary in this matter than they are on many other points. Their general object should be, in the first place, in some sort to force the dying man to fulfill the formal or moral obligations contracted in his lifetime; next, to avoid possible embarrassments and litigation.
—Since every man can dispose of his own goods, it is an undoubted principle that a dying man has the power to determine by will what division he will make of the fortune which he leaves after him. But if this man leaves children, shall he have the right to dispose of this fortune to the exclusion of his children? This does not appear to us as a logical consequence of the right which he enjoys. By bringing into the world beings who depend upon him, he has contracted toward these beings and toward society itself, the obligation to support them, to educate them, and to leave them, after his death, as far as his means will allow, in a position corresponding to that which he assured them in his lifetime. His right, therefore, here finds a natural limit in the obligations which he may have contracted. There are others of a different nature, equally deserving of notice, but which we shall not enumerate here, because it is the principle alone that we have here undertaken to lay down.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 2 East India Co. - Nullification Chapter: NAVIGATION ACT.
Accessed from oll.libertyfund.org/title/970/29849 on 2009-05-07
The text is in the public domain.
NAVIGATION ACT. The famous navigation act promulgated for the first time under Cromwell's administration, and which was perpetuated with various modifications in England up to very recent times, is to-day only a matter of history. But it has occupied so large a place there, it was considered for so long a time as the chief foundation of British greatness, it has been the object of so many commentaries, debates and quarrels, as well within as without Great Britain, that it still merits our attention.
—We shall, therefore, after having summarily indicated the object of this act, analyze it in its essential provisions, and relate its history. We shall then see whether it really accomplished, during its existence, the object had in view in passing it.
—Object of the Navigation Act. The avowed and recognized object of the navigation act was to encourage the British merchant marine, by reserving to it, by restrictive measures against foreign ships, the best part of the carrying trade. Its object in the beginning was also to discourage the Dutch marine, which then acted as carrier for most of the nations of Europe, and the ascendency of which England feared. All the provisions of the act were framed with this double motive. Let us examine the substance of them.
—Analysis of the Original Act. It would be useless, as well as tedious, to recall here the terms of the original act, which was passed in 1651, an informal and very obscure act, written in the tortuous style which the English laws seemed to affect at that time; or even to quote the wording of that more explicit and clearer act which was substituted for it in 1660, during the reign of Charles II. A concise analysis, accompanied by a few comments, will give a more exact idea of the act than the reproduction of the text itself would give.
—This law related to five different subjects, which are ordinarily classified in the following manner: 1, coasting trade; 2, Fisheries; 3, Commerce with the colonies; 4, Commerce with the countries of Europe; 5, Commerce with Asia, Africa and America. The following is the way in which these different subjects were regulated by the law.
—The coasting trade, that is to say, the navigation from one port to another of Great Britain, was exclusively reserved for English vessels.
—As regards the fisheries, the law was less exclusive. It did not absolutely exclude from British ports the products of foreign fisheries, it only imposed upon them double duties. This was sufficient, however, to drive away, little by little, foreign fishermen from the market of the country.
—The commerce of the mother country with the colonies and of the colonies with each other was, like the coasting trade, exclusively reserved for English vessels. In this respect the navigation act did not differ from the principles generally admitted at that time, and which have unhappily prevailed until the present time, among most commercial nations. It was a recognized maxim, that all mother countries could and should exclude all foreigners from all commerce with their colonies. This maxim England had already followed previously, when she had the power to do so, and the navigation act merely sanctioned it anew. Let us only add, that, unlike France, which has always reserved colonial commerce for ships of the mother country alone, England granted from that time, to her own colonies, a sort of reciprocity.
—As regards commerce with the countries of Europe, the navigation act provided that the importation of merchandise into England coming from those countries should be effected only upon English ships, or upon ships belonging either to the country which produced such merchandise or to the country which forwarded it, that is to say, England excluded from this commerce the intervention of a third party. The exclusion of a third party was not absolutely, however; it was enforced only as to a certain number of articles, specially designated in the act, and which have since been called enumerated goods. The number as well as the kind of these goods often varied. In the act of 1660 there were eighteen kinds of these enumerated goods; but, after 1792, others were successively added to the list, so that in the law of 1825, which took the place of the old act, there were twenty-eight. This is the number also found in the later acts, and notably in the last, which was passes in 1845; only, the enumerated goods in the act of 1845 are not all the same as those which figured in the act of 1825. It is probable that at all times it was the intention to reserve specially for national vessels the kinds of merchandise which then appeared to be most encumbering. Perhaps, also, in the original law, some of those kinds which the Dutch marine most usually carried were named in preference. To consider, then, only the terms of the navigation act, it would seem that the exclusion of a third party was the only object then had in view in European international navigation. In fact, no provision is found in this law which specially taxed the importation of merchandise by foreign vessels, provided these vessels belonged to the country which produced such merchandise or to the country which forwarded it; according to this, the law of that time was much more liberal than any of those which followed it. But it must be remarked, that as a complement to the act there was the customs bill or customs tariff, adopted about the same time, in 1652, and by virtue of which the merchandise imported by foreign ships was, in all cases, even when the ships belonged to the country producing the merchandise, subject to an additional tax, which most frequently constituted a double customs duty. It is this last provision, foreign to the navigation act properly so called, which gave rise to most complaints on the part of foreigners, and provoked the greatest number of reprisals. It was this provision, too, as we shall presently see, which was destined to disappear first by the successive adoption of reciprocity treaties.
—The fifth and last subject regulated by the navigation act was commerce with Asia, Africa and America. In this respect the regulation was simple; it was the absolute exclusion of every foreign vessel. It must not, however, be believed that this last exclusion was more severe than all the others. On the contrary, it was nothing else than the application of the principle previously adopted, of the exclusion of a third party. As there did not exist at that time any nation in Asia, Africa or America which had a national marine, or at least a marine capable of carrying merchandise to the ports of Great Britain, third nations alone would have been able to dispute this carriage with the British marine. By reserving it for English vessels, the law, therefore, merely remained true to its principle; only it applied it here with much greater rigor, by making the exclusion bear upon all merchandise, without distinction of kind. It was for the same reason, and because they had not then any marine of their own, that Muscovy and Turkey, although situated in Europe, were placed on the same footing as the countries situated in the three other parts of the world. Let us add to this, that the native merchandise of Asia, Africa or America could not in any case be imported into England from any country in Europe, even by English ships, unless they had undergone the process of manufacture in that country; a provision, whose purpose it was to discourage in rival nations, and especially in Holland, the system of entrepôts. Such was the navigation act in its essential provisions. The enforcement of these provisions necessitated, however, many others, which were so to speak, natural corollaries of the former. From the moment that their treatment varied according to the nationality of the ships, it became necessary to define that nationality and to regulate the conditions of it. It was therefore established that a ship should only be considered as English and should only enjoy the privileges attached to that title, when it had been duly registered, when it belonged wholly to English subjects, and when the captain and three fourths of the crew were English. In the beginning, it was admitted that such ship might have been built in a foreign country, provided it had become the legitimate property of Englishmen; but this toleration afterward ceased, and it was necessary that all ships, with the exception of those which might be taken from the enemy in time of war, should be entirely built in British ports. Similar conditions were imposed upon foreign ships to establish their respective nationalities.
—As regards the coast navigation, the law was still more severe. It was necessary here that the crews should be wholly composed of English subjects.
—Whatever we may think of this act and the influence which it exercised upon the development of the British marine, if we compare it with the legislation adopted by most modern nations, we shall find nothing exactly exceptional in its rigorous measures. It is nothing else, at bottom, than the system which we have seen established almost everywhere, with this difference, however, that this system has been greatly modified, since 1825, by the adoption of treaties of reciprocity.
—Successive Alterations of the Navigation Act. The navigation act, as we have just analyzed it, continued in force without material alteration until after the American revolution, that is to say, during 120-130 years after its publication. It was not even till from 1823 to 1825 that it was replaced by a new law. It was always respected, moreover, even under the new form which it received then. At this last epoch, however, it had already received severe attacks. Let us go back to the time when its first modifications were introduced.
—During 130 years England had carried on by means of her own ships all her trade with Asia, Africa and America, without allowing in any case, in this trade, the intervention of foreign vessels. However, war broke out between herself and her colonies in North America; the independence of the United States was declared, and, in 1782, that independence was recognized by the mother country. This produced a new situation, which the navigation act had not foreseen. Henceforth, separated from the mother country, North America could no longer pretend to carry on navigation with the British ports by virtue of its former colonial privileges; and, on the other hand, the act formally excluded, in the commerce with America, all foreign vessels. It was impossible, however, that the United States should remain under the ban of such an exclusion: it would never have consented to abandon all transportation to English ships; it was necessary that the navigation act should yield. After long negotiations between the United States and England, in which different systems were proposed and debated, it was agreed that the ships of the United States, although coming from America, should be allowed, contrary to the tenor of the law, to frequent the ports of Great Britain on the same conditions as those of the old states of Europe. This modification was the first of any importance. Later, similar ones were allowed in favor of the old Spanish and Portuguese colonies of South America, when they became independent of their mother countries; as well as in favor of the black republic of Hayti; so that, the part of the act which related to the commerce with the new world fell gradually to pieces. It must be acknowledged, however, that these successive modifications attacked rather the letter than the spirit of the law, since, in the midst of them all, the prevailing principle of the act, the sacred principle of the exclusion of third parties, was maintained intact.
—But the emancipation of the United States had other and very different consequences. The colonial system, a system so severe up to that time, was shaken by it. Although most of the states of Europe had in this regard been almost as rigorous as England, they, considering the great distance between the places, and the uncertainty of supplies coming from the mother country, nevertheless allowed their colonies to receive, in case of need, from ships of foreign countries nearer to them, the things necessary for their subsistence, such, for example, as flour and meat; England alone had refused this toleration, of which she had not till that time felt the absolute necessity. Thanks to the great number of her colonies, to the importance of some of them, and to their proximity to each other, she had been able, strictly speaking, to deprive them of all foreign assistance, by forcing them to rely upon themselves. But from the moment the colonies of North America, the most important of all, were emancipated, this state of things changed. The English Antilles, accustomed to rely upon supplies coming from these former colonies, found themselves left suddenly in the lurch; it was necessary, therefore, to allow, in their interest, new modifications of the navigation act, modifications more grave than the former ones, because they altered the very principle of the law.
—At this time commenced, between the government of Great Britain and that of the United States, a sullen struggle, rarely interrupted, and which could end only when the last vestiges of the old system should have entirely disappeared. The people of the United States, accustomed up to that time to carry on trade only with Great Britain and her colonial possessions, and desirous of continuing in this the usual field of their activity, solicited at first of England, as a favor, the preservation of their former relations offering in return to the British marine exceptional advantages in their ports. This proposal having been refused, despite what there was tempting in it to England herself, the American people changed their tactics: they demanded that at least their ships should be admitted into the ports of the mother country on a footing of perfect equality, that is to say, that the additional tax established by the tariff of duties should no longer be applied to the merchandise imported by these ships. From 1782 to 1792 this very natural demand was incessantly renewed by them, with solicitations even more pressing, sometimes even with threats followed by action; but it could not prevail against the restrictive and jealous spirit which then ruled in English councils. Finally, weary of these vain solicitations and diplomatic struggles without results, after having tried all means of conciliation, the American government resolutely adopted reprisal measures. Congress passed, in 1792, a navigation act, corresponding in certain respects to the English act; more elastic, however, as it authorized the government to suspend its effects, whenever arrangements concluded with other nations required it. From this moment there commenced, between the United States and England, a veritable tariff war, continued without interruption, in spite of many unforeseen events which changed the state of things, until 1815. Hence, the commercial and maritime relations between the two countries became exceedingly difficult. This can be judged of by the following comparisons: The tonnage of English vessels admitted to American ports was, in 1790, 218,914 tons; in 1791, 210,618; in 1794 it fell to 37,058, in 1795, to 27,097, and in 1796, to 19,669. After having risen a little during the first years of the nineteenth century, it commenced to decline again from the year 1805, and in 1811 and 1812 it was reduced to almost nothing.
—Having reached this degree of intensity, the struggle could no longer be prolonged; it had to come either to open war, or to an amicable arrangement, which should put an end to the differences between the two countries. In 1812, in fact, war was declared; a war, determined perhaps by political motives, but the original cause of which was these commercial quarrels. Fortunately, this war did not last long, and it finally led, in 1815, to the conclusion of a treaty of commerce and navigation, founded upon reciprocity and equality of rights.
—This treaty of 1815 may be considered as the point of departure of the new policy, successively adopted by the greater part of the states of Europe. Still this treaty did not end all quarrels. Besides the fact that it was not always faithfully carried out, it made scarcely any concessions except as regards the intercourse between the United States and the United Kingdom, leaving the colonial commerce, at which the American people had not ceased to cast longing glances, as it had formerly been. This second point, therefore, remained to be settled. It was the object of fresh debates, which were prolonged with more or less acrimony for many years, and to which the definite repeal of the navigation act alone could put an end.
—The example given by the United States was not lost. Some years after 1815, Prussia exacted the advantages which had been accorded to the American Union, and showed herself disposed to use the same means to obtain them. England was tempted again to respond by a formal refusal, for the prestige of the navigation act was not yet, by any means, destroyed. But the government and parliament, much as they were devoted to the protective law, did not care to recommence a fatiguing and ruinous war similar to that which they had just gone through, nor to repeat the experience which had shown them its uselessness. It was to be feared, besides, that other nations would join Prussia, and that they would league together to resist the British monopoly. This consideration prevailed over all the others, and England understood soon enough that it was necessary to yield again. The treaty with Prussia was concluded in 1823; but already the question appeared under another aspect; England had taken a great step in advance.
—On the proposition of the ministry, of which Mr. Huskisson was then a member, parliament passed, in 1822, not without dread nor without casting a desperate look backward, a bill which authorized the government, in a general manner, to conclude similar treaties with all foreign nations. This was to throw down with a single blow one of the supports of the system, which rested on the tariff of duties. By virtue of this bill a great number of treaties were successively concluded with all the independent states of Europe and America.
—In the following years many new provisions were adopted, all modifying the original law, like that, for example, which extended to the nations of Europe the power, previously accorded to the American people, of trading, on certain conditions, with the English colonies. It was at this time also that for the first time the exportation to foreign countries of certain kinds of colonial merchandise, and particularly of sugar, was authorized. From this moment it may be said that the navigation act was battered in all its parts.
—In 1725 it was entirely remodeled, to make a new act of it, in which an effort was made to take into account the principal modifications which it had undergone. After that time it was twice revised, in 1833 and in 1845. The last draft, that of 1845, recalls, in its essential provisions, the original act, to such a degree, that if we were to judge only from a comparison of the text of the two laws, we might think that from the one epoch to the other the system had undergone little change. But the last authorizes the government, in consequence of treaties concluded with foreign powers, to make so many and such notable exceptions, that these exceptions have almost destroyed the rule. Let us see what was the real state of the law before the definite repeal of the act.
—State of the Law before the Repeal of the Act. We have just seen that even before the repeal of the law, differential duties, in direct international navigation, had ceased almost everywhere by virtue of the treaties of reciprocity. However, it seemed that the exclusion of third parties had been strictly maintained: this exclusion continued, indeed, in principle. But even in this respect there were already numerous exceptions, resulting principally from a sort of artificial extension of nationalities. After 1838 a large number of the states of Europe had been successively authorized to consider as ports belonging to them, so far as their maritime relations with Great Britain were concerned, the ports situated at the mouths of rivers which flowed through any part of their territory. It was in this way that Austria, the first power to profit by this exception, could consider as hers the ports situated at the mouths of the Danube and the Vistula, and that her ships could sail from them to Great Britain with the same privileges as if they had set out from Austrian ports. It was in this way, also, that the ships of the zollverein could make use, under the same conditions, of the ports situated at the mouths of the streams or rivers which crossed any one of the associated states. Hanover, the two Mecklenburgs, the duchy of Oldenburg, Holland, Russia, and many other states, had successively obtained similar privileges, which became more and more extensive; so that all central and northern Germany, as well as a good part of the north of Europe, formed scarcely more, in the eyes of the English law, than one and the same country. There was now no nation which had not obtained the privilege of trading with the English colonies. Yet this privilege remained subject to many reservations. Granted to each power separately, by orders in council, it was more or less extended, according to the case in question, that is to say, according as the power which obtained it granted greater or less reciprocity. France and Spain were in this respect the least favored of Europe, because they had maintained more than the others their system of restriction. In any case, foreign ships were admitted only into certain ports of the English colonies called free ports. It is proper to add, that these free ports were very numerous, so much so that Jamaica alone had fourteen. Finally, in colonial commerce, the carriage of certain kinds of merchandise specially designated, and, besides, few in number, remained the exclusive privilege of English ships; and it was not permitted to foreigners to sail from one colony to another, that sort of navigation being likened to the coasting trade. Nothing had been changed in the provisions relative to the registration of ships and the conditions of their nationality.
—Repeal of the Act in 1849; what remains of it. After the numerous and powerful attacks, which it had already been subjected to, the moment had come when the navigation act had finally to disappear. The time when it had been surrounded by a respect almost religious, and when it was considered as the palladium of British power, was past. It still had, it is true, a very great number of partisans, above all among those directly interested in the merchant marine. But each of the alterations it had undergone since 1815 had so little justified the fears and sinister predictions of the sectaries of the past, these alterations had been followed, on the contrary, by such favorable consequences, that the old faith in the efficacy of the act had been extinguished in some and strongly shaken in others. At the time when the first changes were introduced into it, changes necessitated by circumstances, the sacred ark was touched only with trembling, and in obedience to a fatal necessity. But later, after the unexpected success of the first trials, changes were made with a more cheerful spirit, and it was easy to foresee thenceforth that the moment would soon come when the navigation act would receive its death blow. The commercial reforms brought about in England, from 1842 to 1846, only hastened this moment by preparing the way. It is from 1815, or at least from 1822, that the first serious attacks made against the navigation act date, and since that time it may be said that the old edifice of restrictions, barriers and monopolies, which it established, only advanced from day to day towards an inevitable and fatal downfall.
—To Mr. Huskisson belongs the honour of having commenced, from 1822 to 1825, the work of its destruction: to Sir Robert Peel, that of having prosecuted it, from 1842 to 1846, by ruining all that protected the edifice; and to Lord John Russell, the honor of having finished it, in 1849. In this latter year the navigation act was definitively repealed.
—By virtue of the new law, which went into force Jan. 1, 1850, all the old restrictions are abolished. Since then, the ports of Great Britain have been open to all foreign vessels, from whatever country, and such vessels are received there, in whatever touches the laws of navigation, on the same footing as English vessels. Foreign vessels are also received upon the same conditions as English vessels in all the British colonies, and may import into and export from them such merchandise as they please.
—Nevertheless the act of 1849, after having proclaimed the virtual abolition of the old restrictions, retains some of them, few in number, the maintenance of which appeared necessary, or which it was not thought should be entirely done away with. In the first place, it retains those restrictions in what concern the coasting trade, that is, the navigation from one port of Great Britain to another, as well as in regard to the navigation between Great Britain and the Channel islands: Guernsey, Jersey, etc. In the second place, it retains them also in regard to the navigation from one colony to another, and from one of the ports of a colony to another port of the same colony. Still upon this point, the interdiction of foreign ships is not absolute. It is allowable for the colonies themselves to put an end to it, by addressing to the queen a request that they may be authorized to regulate their coast navigation themselves. Finally, no change has been effected by the new law in the provisions relative to the constitution of the crews of English vessels, and to the recognition of their nationality. These restrictions are the only ones which continue. They have not been maintained with a view of favoring the British marine, that system of protection having been condemned as harmful and vain, but only because their repeal would have given new facilities for smuggling, and therefore have reduced the public revenues.
—Did the Navigation Act accomplish, during its existence, the good which was expected of it? There is no doubt but that, in the early periods of its promulgation, the navigation act must have dealt a heavy blow at the Dutch merchant marine, which was then the general carrier between all the nations of Europe. Excluded, or almost so, from the ports of Great Britain, by reason of the severe prescriptions which forbade, in international navigation, all intervention of third parties, the Dutch ships lost at once one of their best customers. The damage was so much the more serious because the example given by England was not slow in being followed, at least in a certain measure, by some other states,(notably by France), which strove, as if in rivalry, to make their ports less accessible to foreigners. The Dutch merchant marine, therefore, saw the circle of its activity visibly narrowing from day to day. And as at this time, even more than to day,68 . the merchant marine was the real nursery of the naval army, the maritime power of Holland, which had been heretofore without a rival, was greatly influenced by it. The navigation act may therefore be considered as the first check given to the maritime greatness of Holland, although this artificial greatness must sooner or later have passed away, and although many other causes, both internal and external, contributed to its decay.
—There can no longer be any doubt that the immediate effect of the navigation act was to give a certain impulse to the English marine. If commerce and industry had to suffer enormously from the severe restrictions imposed upon them all at once, and to experience a great injury from them, it is easy to understand that the merchant marine could and must increase, in a certain measure, at the expense of everything else. Did the advantage obtained on the one side furnish a sufficient compensation for the injury experienced on the other? Without doubt it did not, if we look at it from the point of view of the commercial interests of the country; for certainly the marine did not gain so much from this innovation as commerce and industry lost by it. But if, leaving the interests of industry and commerce out of the question, we consider the effect produced only from the point of view of maritime power, it appears to us certain that the navigation act fulfilled, at least up to a certain point, the intentions of those who were its authors. In a word, from the economical point of view, the measure was detestable in all respects, even at that time.
—From the political point of view, and as a war measure, it can be justified or explained, and for a certain length of time it certainly produced the results which were expected of it. It is in this way that Adam Smith regarded it, when, despite his just horror for all restrictive measures, he made an exception in favor of the navigation act, which he considered a patriotic and wise act. He did not and could not ignore the injury this law had caused to the national wealth, but he thought it justified by considerations of another order. It was in his eyes a measure of public safety. The damage which it must have caused to industry and commerce he considered as a sacrifice imposed upon the country in the interest of its security.
—But if such were the first effects produced by the navigation act, it was not the case afterward. The first impulse once given to the British marine, it suffered itself, almost as much as foreign marines, from the restrictions established in its sole interest. These restrictions, in fact, traced a circle about it, and forbade it in a certain manner to overstep it. A proof of this truth is found in the fact that later, as the severe prescriptions of the act had to be relaxed, by the force of circumstances, the English marine prospered and increased much more than it had before. Thus, in 1815, a treaty of reciprocity was concluded with the United States, and, as a consequence of this treaty, so far from English ships being excluded from the ports of the United States, as had been feared at first and as shipowners had jealously predicted, it was found that the British tonnage in its ports increased from year to year, and finally rose far above what it had ever been. We have seen that, from 1792 to 1815, the tonnage did not exceed, in the best years, 210,000 tons; in 1844, before the great commercial reforms brought about by Sir Robert Peel, it had already gradually increased to more than 700,000 tons. All the other alterations which the navigation act successively underwent had like consequences; if the measure had had its useful side in the first moments of its existence, its day had gone by. Such is, moreover, the ordinary effect of restrictive measures established for the profit of any industry. They exalt it, they raise it up and increase it for a short time at the expense of all others; but later they become fetters even for that industry, by inclosing it, so to speak, in the narrow circle which they have made for it.
—Freed henceforth from the inextricable network of its restrictive laws, England will become, without any doubt, the general rendezvous of the marine of the world. Its principal maritime cities, London and Liverpool, are destined to become the great entrepôts of Europe. Already colonial commodities flow there, to be distributed thence throughout the whole of northern Europe. Truly, other nations would have little ground to complain of this. They should not envy the English people these advantage, which are not acquired at their expense.
[68.]We say, even more than to-day, because at that time the seas being generally infested with pirates, almost all merchant vessels were armed as for war, so that sailors commenced really an apprenticeship of maritime war on board merchant vessels
Footnotes for NAVIGATION LAWS
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 3 Oath - Zollverein Chapter: POLITICAL ECONOMY.
Accessed from oll.libertyfund.org/title/971/63485 on 2009-05-07
The text is in the public domain.
POLITICAL ECONOMY. I. Preliminary Considerations. In a Cyclopædia like the present it would seem that the article "Political Economy" should form one of the central points of the whole work. It would perhaps be such, if we desired to embrace under this term the various considerations which commend the study of economic science to those whom it interests, and to set forth the many advantages which may be derived from it. It would be so likewise, if in the article "Political Economy" we attempted to touch upon all the subjects which the science embraces, either for the purpose of showing their importance or their connection. We can not enter into such detail here. We wish simply to define political economy, to give it a point of departure, a formula; to determine its character and object, and to indicate, as far as possible, its extent and limits.
—It would be mistaking the nature of such a task to suppose that it can be performed in a few lines. It is not as easy as one might think at first to give an exact definition of political economy, or at least a satisfactory one, one around which all adepts in the science might rally. Many authors, beginning with Adam Smith, have attempted it, but no one seems to have succeeded. Whatever may be the real merit of certain definitions hitherto given, it is certain that, up to the present time, not a single one has been accepted without dispute. It has even frequently happened (and this is a more serious matter) that the very ones who furnished them, subsequently contradicted or modified them in the course of their works. It would perhaps be more correct to say that there is not one of these definitions to which its author himself remained faithful in the manner in which be conceived and treated his subject. This has caused some of the later teachers of the science to say, that political economy has yet to be defined. "Even if we must blush for the science," says Rossi, "the economist must confess that the first question still to be examined is this: 'What is political economy? what is its object, its extent, its limits?'" There is no reason to blush, we think, for being still obliged to put such a question, when we consider the natural difficulties it presents; but we must agree, with Rossi, that it is still awaiting a solution. A Belgian writer, Arrivabene, has called attention to this truth in his introduction to a translation of Senior's "Lectures on Political Economy," in terms more emphatic than those used by Rossi, bitterly deploring the vagueness, the obscurity, the incoherence, and especially the insufficiency, of all the definitions hazarded by the masters of the science, and calling loudly for a more satisfactory and precise formula. To make this clear, we here reproduce some of the definitions furnished by economists generally considered to be of the highest authority.
—Adam Smith was usually very sparing of definitions. He, however, gave a few here and there, and they characterized or defined, in the course of his work, the science which he treated. "Political economy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to supply a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign." ("Wealth of Nations," book iv., introduction.) Without discussing the relative merit of this definition, we shall simply remark that it has in view much less a science than an art, although the idea of a science is put forward in it, and although the word "science" is to be found in it. The author, in fact, appears to enunciate a series of precepts which would indeed constitute an art; but not an exposition or an explanation of certain natural phenomena, which alone can constitute a science. In substance, if not in form, Adam Smith's definition is nearly like that given by J. J. Rousseau under the term économie politique, in the Encyclopédie. We know, however, how widely Adam Smith differed from Rousseau, not only in his conclusions, but especially in his manner of treating his subject. On the other hand, his definition differs greatly, as we shall see, from that of J. B. Say, who followed in his footsteps, and looked on the science as Smith himself had done.
—J. B. Say, in the beginning of his treatise, and even as title to this treatise, gave his principal definition of political economy, the one which has since been most frequently reproduced: "A Treatise on Political Economy, or a simple exposition of the manner in which wealth is produced, distributed and consumed." Whatever may be thought of this formula, it is at least very much superior to that of Adam Smith, in this especially, that it suggests the idea of a real science, and not merely of an art, since it describes an exposition or explanation of certain phenomena presented to our observation. But is this formula really satisfactory? and will it be final? Assuredly not. Men may still disagree as to the nature of the phenomena which it presents for the study of economists, as well as to the extent of the field which it opens to their exploration. And this all the more, since on this last point especially J. B. Say has not always been consistent with himself. In the formula which we have just quoted, he seems to confine the economist to a study of the material facts relating to the production and distribution of wealth; but elsewhere, notably in his Cours, he brings into its domain all facts relating to social life. "The object of political economy," he says, "seems till now to have been restricted to a knowledge of the laws which govern the production, distribution and consumption of wealth. This is how I considered it myself in my Traité d'Economie Politique." "Still," he adds, "it may be seen, even in that work, that the science touches everything in human society, and embraces the whole social system." (Cours d'économie politique, p. 4.) We might add, that in other parts of his works J. B. Say again defines political economy in a way altogether different from that in which he defined it in his Traité and his Cours. The following, for instance, taken from manuscript notes found after his death, has sometimes been quoted: "Political economy is the science of the interests of society, and like every real science is founded on experience, the results of which, grouped and arranged methodically, are principles and general truths." But it is evident that this is less a definition than a qualification, such as every author has the right to introduce in the course of his works, in order to bring out the dignity and importance of the subject he is treating.
—According to Sismondi, "the physical well-being of man, so far as it can be the work of his government, is the object of political economy." This is very different from J. B. Say's first definition. In the first place, it takes us out of the realm of science into the realm of art; for, according to this formula, political economy must be merely a series of rules intended to instruct governments how to insure the physical well-being of man; it is therefore an art, a branch of the art of government. Very much limited, from a certain point of view, since governments alone can practice it, this art is, in other respects, without assignable limits; for what are the acts of a government that have not to do, more or less, with the physical well-being of man?
—According to Storch, "Political economy is the science of the natural laws which determine the prosperity of nations, that is to say, their wealth and their civilization." Preferable to Sismondi's, because it suggests at least the idea of a science, this definition is still very imperfect. "The natural laws which determine the prosperity of nations," present, to our thinking, too complex an idea, and, in any case, a very vague one; and as to civilization, it certainly includes, in its general expression, things with which an economist, as such, has nothing to do.
—There is nothing in Malthus or Ricardo which can be taken as a precise definition of political economy. In the case of Ricardo the reason may be, that in his "Principles of Political Economy and Taxation," being confined, as he says himself in his preface, to defining the laws regulating the distribution of revenue among the various classes of society, he did not consider the science as a whole. It may, however, be inferred from these words, that, if he had had to define science in a general manner, he would have defined it very nearly as J. B. Say had done in his Traité.
—As to Rossi, after he had discussed and rejected, one after another, all the definitions given before his time, he, absolutely speaking, gave nothing in their stead. He contents himself with saying that there are phenomena of a certain order relating to wealth which are not confounded with those of any other order, and that these are just what economic science should study. Political economy is, therefore, in his eyes, as he says elsewhere, purely and simply the "science of wealth." Hence, he thinks, that, setting aside the strangeness of the words, one might call economists chrysologists, chrematisticians or divitiaries, without giving them cause of complaint.
—We may here close our review of the definitions of political economy. What we have stated suffices to show how far the definition of economic science, or the general formula which covers it, is from being finally fixed.
—Now, should we be ashamed of this uncertainty, as Rossi seemed to think? Must we lament it, with Arrivabene and some other writers? We do not think so. A science does not depend on the definition given of it; it is not regulated by an arbitrary formula which may be more or less happy, more or less exact; on the contrary, it is the definition which should come after, mould itself, so to speak, to the science as it exists. So much the worse for writers who cultivate a certain branch of human knowledge, if they are unable to grasp its general data and clothe these data with a fitting expression; but this does not in any way impair the stock of truth which they have to bring to light.—"A science," says J. B. Say, "makes real progress only when its masters have succeeded in determining the territory over which they may extend their researches, and what should be the object of their research." (Traité, Discours Préliminaire.) There is doubtless some truth in this statement. It is well, perhaps even necessary, that the object of a science and the field it covers should be properly determined; but it is not absolutely necessary that this determination should result from definitions hazarded by authors: it is enough if it results from the very nature of their labors. Now, it may well happen that the nature of these labors may be essentially the same for all, while the definitions are different; each author having been led by a kind of instinct to confine himself to a certain order of phenomena, without afterward being able to render an account to himself of the precise object of his researches, or to measure exactly the field he has gone over. And this is really what takes place. We have just seen how much the authors cited differ in regard to the definition of the science, and still the sum and substance of their works are always the same. Who does not know that this is the case with Adam Smith and J. B. Say? It is the case, too, with all the others, in spite of a few slight differences as to the greater or less extent of the ground they embrace.
—It is one thing to feel or express, and another to conceive or define. It is sometimes very difficult to clothe a single thought in a just expression or a fitting formula; the difficulty is much greater when there is question of including a great number of ideas and facts in a single formula. It is not to be wondered at that many writers have failed in this task, in this sense, that the definitions which they give are nothing but more or less unfaithful translations of their own conceptions. J. B. Say acknowledges that this is true in his own case, since he recognizes that his Traité went everywhere beyond the limits, if the expression be allowed, marked out by his definition. And still he is, perhaps, of all economists, the one who has remained the most faithful to the formula which he had adopted. There is much more to be reprehended in Adam Smith and Sismondi in this regard. If we look, for example, at the manner in which the latter defines the science, we might think he was going to confine himself, as J. J. Rousseau had done, to laying down the rules which governments should observe in regard to the material interests of the people; and still, like all other economists since Quesnay, Turgot and Adam Smith, he has discussed the questions of exchange, division of labor, accumulation, savings, the production and distribution of wealth, the laws regulating the value of things, those determining the rate of wages, profits, etc., etc.: things in which governments have almost nothing to do. So true is it that his definition is simply an error, and an error of no consequence, an ill-chosen but empty formula, which in no way influences the real character of his labors.
—It would be very desirable, however, to find for political economy a more satisfactory definition than those hitherto given, a formula at once more comprehensive and more precise, in which the whole science might, so to speak, be reflected in a few words. Will this formula be found? Perhaps. Without flattering ourselves with having found it, we shall try to point out the road to its formulation by determining, as far as possible, the real object which the science proposes to itself, and the extent of its domain.
—The first question to be solved is, whether political economy belongs to the category of science, or merely to the category of art. We have already seen, from what precedes, that the question is not an idle one, especially not idle since the distinction to be made between science and art does not appear to be generally understood.
—II. To what order does Political Economy belong? Is it a Science or an Art? "An art," says Destutt de Tracy, "is a collection of maxims or practical precepts, the observance of which leads to success in doing a thing, no matter what it may be; a science consists in the truths resulting from the examination of any subject whatever. Art consists, therefore, in a series of precepts or rules to be followed; science, in the knowledge of certain phenomena or certain observed and revealed relations." We are not concerned here with examining which of the two is superior to the other, art or science; both may have equal merits, each in its place; it is solely a question of showing in what they differ as to their object and methods of procedure. Art counsels, prescribes, directs; science observes, exposes, explains. When an astronomer observes and describes the course of the stars, he cultivates science; but when, his observations made, he deduces from them rules to be applied in navigation, he is engaged in art. He may be equally right in the two cases; but his object is different, as well as his method of working. Hence, observing and describing real phenomena is science; dictating precepts, laying down rules, is art.
—Art and science often have close connections, in this sense especially, that the precepts of art must be derived as far as possible from the observations of science, but they are none the less different from it on that account. Notwithstanding this, they are confounded every day. A man striving to build up an art gives it emphatically the name of science, believing that by doing so he gives a high idea of the correctness of its precepts. It is notoriously the weak side of physicians to call medicine a science. They are mistaken in the use of the word. If medicine were as certain in its prescriptions as it is uncertain, it would still be no more than an art,38 the art of healing, since it consists in a collection of rules applicable to the cure of human diseases. But anatomy is a science; physiology is a science; because anatomy and physiology both have as their object a knowledge of the human body, which they study, the one in its structure, the other in the play of its organs.
—Rossi grasped this distinction between science and art well, though he abused it by improperly confounding it with the distinction which is made frequently enough between theory and practice.39 "Properly speaking," he says, "science has no object. The moment we try to discover what use can be made of it, what profit may be drawn from it, we leave science and come to art. Science is in all cases nothing more or less than the possession of truth, the well-considered knowledge of relations inherent in the nature of things." Here we have, under another form, the same thought so accurately expressed by Destutt de Tracy.
—This distinction being well drawn between science and art, we may now ask, to which of the two orders of ideas does political economy belong? Is it a collection of precepts, a theory of action, or only an assemblage of truths borrowed from the observation of actual phenomena? Does it show us how to do something? or does it explain what takes place? In other words, is it a science, or an art? We need not hesitate to answer that, in its present condition, political economy is both the one and the other; that is to say, in the direction of economic labors and studies a common name is still given to things which might and should be kept distinct. It is evident, in fact, that in the general treatises on political economy, composed since Adam Smith's time, a great number of really scientific observations are met with, that is to say, observations whose sole object is to tell us what takes place, or what exists. One might even say that observations of this kind predominate. But the directions, precepts, rules to be followed, are also met with in such treatises very frequently. Art is therefore constantly mixed up with science. But it is very different with a multitude of special treatises, or those particular dissertations whose object is to solve certain questions relating to industry, commerce or the economic administration of states: questions of taxation, credit, finance, foreign commerce, etc. Here it is always art that predominates. Counsels, precepts, rules to be followed, all things that pertain by their nature to the domain of art, follow each other in quick succession, while really scientific observations scarcely appear at long intervals. And still all this, without distinction, bears the name of political economy. So true is it that the name still belongs to two orders of labor, and of very different kinds.
—We are far from complaining or finding it strange that from scientific truth once clearly established men should endeavor to draw rules applicable to the conduct of human affairs. It is not well that scientific truths should remain fruitless, and the only way of utilizing them is to base art upon them. There are close ties of relationship, as we have already said, between science and art. Science lends its lights to art, corrects its processes, enlightens and directs its course. Without the aid of science, art would have to feel its way, stumbling at every step. On the other hand, art gives a value to the truths which science has discovered, and science without art would be barren. Art is almost always the principal motor in the labors of science. Man rarely studies for the sole pleasure of knowledge; in general, his research and labor have generally a useful end in view, and it is through art alone that he finds that end.
—In view of all this, who can fail to see how different art is from science? The distance is great between a truth discovered by observation, and a rule deduced from that truth with the intent of giving it an application; the one belongs to nature, to God; man only discovers and states it; the other is the act of man, and it always retains something of him. Everything is absolute in scientific data; they are either false or true, there is no half way; this simply means that the student of science has observed either well or ill, has seen correctly or incorrectly what he communicates. There are, it is true, incomplete data, exact on one side, inexact on the other; but, even then, the true side is true, the false side is false. On the contrary, everything is relative in the rules and the methods of art. As something human is always involved in them, they can not pretend to infallibility, they are always susceptible of more or less variation between the two extreme limits of radical vice and absolute perfection. Finally, scientific truths are immutable as the laws of nature whose revelation they are; while rules of art are changeable, either by reason of the wants they have in view or by reason of the changing views of the men who apply them.
—There is so much the more reason to insist on the distinction which we have just established, viz., that if science and art have frequently many points of contact, their radii and their circumferences are far from being identical. The data furnished by a science may sometimes be utilized in many different arts. Thus, geometry, or the science of the relations of extension, enlightens and directs the work of the surveyor, the engineer, the artillery officer, the navigator, the shipbuilder, the architect, etc., etc. Chemistry comes to the aid of the druggist as well as the dyer, and to a great number of the industrial professions. Who can tell how many different arts make use of the general data of physics? And, so, an art may gain information from the data furnished by many sciences; and it is in this way, to cite but one example, that medicine, or the art of healing, simultaneously consults anatomy, physiology, chemistry, physics, botany, etc.
—It is necessary, therefore, in every respect to distinguish art from science, and to indicate clearly the line separating them. This has been carefully done in certain branches of human knowledge. Mathematicians, for example, distinguish carefully pure mathematics, or science properly speaking, from its various applications. So do physicists and chemists. And the distinction exists not in books alone, it is transferred even to instruction, where the study of science and that of the arts depending on it have different chairs. It is thus that a polytechnic school is, if we be permitted to say so, the sanctuary of pure science. It is only after graduating from it that the students, each in his specialty, study the art to which they are to apply the scientific knowledge acquired.
—We could wish that what has been so well done in so many other divisions of study might also be done in the order of economic studies and labors. But, it must be confessed, it has not been done up to the present. The labors of art and the studies of science continue to be, if not altogether mingled, at least embraced, under a common denomination. Sometimes it has been attempted to separate them by giving certain labors, which belong especially to art, the name of public economy, to distinguish them from others. But these attempts, ill directed, and made, in the majority of cases, without a clear view of the results to be obtained, have not succeeded thus far, so that at present, in the order of economic studies, art and science are still mingled and confounded. Whence comes this confusion? It comes, first of all, from the immaturity of the science, which has not yet had time to disengage itself from the art or arts connected with it. It results also, in a certain measure, from the pressing and ever present interest of the subjects than economic science embraces, an interest which has not allowed those who study it to devote themselves entirely to the contemplation of scientific truths, neglecting, for the moment, the artistical deductions, that is to say, the practical maxims, which they might draw from it.
—Political economy was an art before it became a science, and even the etymology of its name shows this; furthermore, before it was an art, that is to say, before it was formulated in general maxims and precepts, it was blind practice in the hands of governments. Such is, however, the course of human things. In the logical order, science precedes art, which should be only a deduction from science; and art precedes practice, which should be only a more or less exact application of the general rules of art. This is the ordinary course followed in our schools, in which the logical order is followed. But in their historic sequence, things take another course: they are generally found there in an inverse order. There practice precedes art, and art science. This is true of almost all the branches of knowledge, and particularly of that which interests us most. Hurried to act, because he must act, man goes straight to action, to practice, without studying deeply that which he undertakes, and with no other guide than his instinct. It is only later, that, by rectifying and correcting the errors of this practice, with the aid of a little acquired experience, he forms rules or general maxims which he erects into an art; and it is later still that the idea comes to him of correcting the errors of this art itself, by the aid of a scientific study of the subject which he has in view. There were physicians before there was an art of healing; men acted at hazard, inspired most frequently by blind superstition, and the art of healing, based at first on a certain acquired experience, existed much earlier than anatomy, physiology, therapeutics, that is to say, earlier than a scientific knowledge of the subject on which it was desired to operate, and of the remedies employed for his cure. Huts were built before the art of building was reduced to rules, and the art of building was subjected to rules, if not written, at least transmitted from mouth to mouth, before it received the mathematical and physical sciences as a foundation. Political economy advanced in the same way. The most ancient governments, as Blanqui very justly says in his history, treated political economy after their own fashion, long before they knew what they did, or were able to give an account of the result of their measures. Later, it was attempted to give an account of these results by the aid of acquired experience, and with the data of these experiences, well or ill understood, an art was created. Sully and Colbert had reached this stage. It was only in the last resort that men undertook to study scientifically this subject, that is to say, general industry, on which they were to operate.
—Now, this liberation of economic science is quite recent; it scarcely dates from the middle of the last century. It was the school of Quesnay which first endeavored to construct in this order of ideas a real science; up to his time there were merely scattered observations, and even final success in building up the science belongs only to Adam Smith. It is not very surprising, therefore, that the science of political economy has not yet been able to free itself entirely from the restrictions of the art from which it sprung.
—It was our wish and duty to state, as we have done, that under the general name of political economy two things are at present understood, things very different in their nature, though tending in many respects to the same end. It has seemed to us all the more important to note this confusion of ideas, since, to our thinking, it is the real cause of the incoherence in the definitions of the science, of the deviations to which it is subject in its course, and the species of discord which reigns almost always in its beginnings. Shall we attempt, on that account, henceforth to make a clearer division between the science and the art, by giving them different names? We confine ourselves to drawing the distinction clearly, time and a better knowledge of the subject will do the rest.
—III. First Idea or General Conception of Economic Science. Do the Facts of Human Industry afford Material for the formation of a real Science? It will doubtless be asked, with some astonishment, how economic science was born so late, how political economy in action could exist so long without a systematic, scientific study of the subject itself on which men had to operate. This astonishment will cease, perhaps, if we consider for a moment the internal nature of a science, and the point of view at which men place themselves on all subjects before the light of science appears.
—A science does not consist merely in a knowledge of certain external facts isolated from each other, for it is an abuse of words to give the name science to a simple collection of facts. Science consists rather in the knowledge of the relations which connect these facts with one another, and of the laws which govern them. A tie, a connection, is necessary, a linking of the phenomena which it takes up and observes, and it is the knowledge of this connection which is its principal study. An incoherent collection of facts without connection may constitute the baggage of a man of erudition, but can never constitute a science. Astronomy would not merit the name if it merely limited itself to noting and naming, one by one, the stars which wander in the deserts of space; it is worthy of the name only because it renders an account of the movements of the stars and the constancy of their evolution. Similarly, in all the other branches of human knowledge, a collection of facts does not constitute a science; we must, further, be able to tell the constant relations which connect, and the general laws which govern, them.
—But the first condition of the study of the laws governing certain phenomena is to suspect their existence; to believe that these phenomena are not governed by chance, and that certain constant relations exist between them. Now, on all subjects, the first impression of men who have not yet submitted facts to continuous observation or patient analysis, is to see in them merely the play of blind chance. It is only much later that they come to suspect that these facts may be subject to a certain order; and it is then only that the idea is gained of studying the laws that govern them. Let us take the ignorant and rude man of primitive ages. All the phenomena of nature are to him disordered and capricious. Wherever he looks, he sees merely accidents without cause, facts without connection or relation. If he looks at the heavens, he sees the stars scattered at hazard, as he thinks, like thistles in a field. In all things that strike him he sees nothing but the play of blind chance, unless, indeed, he supposes the mysterious influence of some occult power. Later, as he gains in knowledge, natural phenomena, at least those of a certain order, range themselves before his eyes; he sees that they are subject to certain rules, he observes the constancy of their relations; here he recognizes law. But always, even in the course of time, and ages of enlightenment, the first impression of men is the same in relation to facts which they have not yet observed. If they come, therefore, so late to study the natural laws which govern phenomena, it is because they had not previously even suspected that there were natural laws to be studied.
—A remarkable example of this is to be found in the case of geological facts. Why did geology, a science so interesting and beautiful, appear so late in the world? Was it impossible to discover and study it sooner? Were the ancients less capable of pursuing that study than the moderns? They were not: geological facts are not of the nature of those which hide themselves from attentive examination, or which demand a distant search. The ancients were as well able to discover and analyze them as we, and they had, besides, almost an equal interest in doing so. This analysis supposes, it is true, certain other preliminary studies, but these studies they could either have pursued themselves or made up for without too much labor. Why did they not do so? Only, as it seems to us, because they did not even suspect that there were in the bowels of the earth which we inhabit natural laws to be studied. During many centuries men had lived in the idea that the earth, whose surface they occupied, was in its composition merely a formless and confused mass, rudis indigestaque moles, whose materials were piled up pell-mell, without order and without law. They did not suspect that there was any order there to be found, any scientific study to be made of the earth; and this is the reason they did not even think of attempting that study. The same thing has taken place with regard to industry, concerning which similar ideas were for a long time held. It was not suspected in ancient times, nor even in the middle ages, that there was any order in the industrial world, the centre of economic facts, the focus of labor, at that time relegated to so low a place. At first view, everything there seemed to be surrendered to the struggle of individual and opposing wills. Only a disordered combination of heterogeneous elements was perceived, a sort of confused conflict, a rudis indigestaque moles; and how could any one conceive the idea of searching there for rules, principles, laws, the ordinary outfit of a real science? In all subjects, we repeat, the first step toward building up a science is to gain the idea that the elements of that science exist, and this idea had not yet suggested itself. It was born only much later, when, by dint of occupation, from the governmental point of view, with industry whose importance men began to understand, they remarked, almost involuntarily, sometimes in one direction and sometimes in another, the regularity of its movements and the constancy of its relations.
—And why should we be astonished that this was the case in the past, when even to-day, after the labors of Quesnay, Adam Smith and his successors, we see that many people misunderstand this industrial order, to which science has already borne witness. Not infrequently we hear at the present time men of some weight, and fairly well informed on other points, assert that industry is a prey to disorder and anarchy. Such, in general, is the rallying cry of the schools called socialistic. They all declare that the industrial world is given up to the struggle of individual wills, conflicting with and crossing each other in terrible confusion, with no trace of organization and order. All rule is absent from the circle in which industry works, and chance alone controls everything. On this account all the socialistic sects conclude, naturally enough, that the industrial world needs some organization imposed by a power above it. Thus, they vie with each other in drawing up and proposing plans of social reconstruction.
—If the premises of this reasoning were correct, if it were true that industry, in its present condition, were given up to anarchy, having no trace of organization and order, political economy, considered as a science, would indeed have little to do; it would not even have a raison d'être. This would not suffice to make us adopt or even discuss seriously any one of these plans of organization proposed to us, persuaded, as we shall always be, that it is not in the power of human intelligence to regulate, even in a tolerable manner, so many interests, and labors so varied; but it would suffice to make us conclude, at least, that science, properly speaking, had no place in such a field. The rôle of the economist, if he had still a rôle to fill, would be limited, in this case, to a barren registration of disconnected facts, without his being able to deduce any principle from them. In vain would he seek to ascend from effects to causes, where chance alone governed everything. Vainly would he endeavor to establish relations between observed phenomena, and discover the laws that ruled them; for how could he find constant relations in disorder, or law in chaos? Happily, we already know our position with reference to these assertions thrown out a priori by men still unenlightened by science. We know that for them all is confusion and disorder. To the man who knows not the discoveries of geology, even from hearsay, the earth is still that confused mass which the ancients called rudis indigestaque moles. To the savage, who has never observed the course of the stars, anarchy reigns in the vault of heaven.
—After all, it must be confessed that the illusion is a natural one. When we cast our eyes at hazard on the moving picture of the industrial world, it is difficult indeed to perceive, at first sight, anything but a confused struggle. A consideration, plausible enough, seems even to justify this first view; it is thus that in industry everything seems abandoned to the arbitrary and capricious impulses of individual wills, without any common principle governing and uniting these wills. And how, it is asked, can anything but disorder and chaos result from the shock of so many divergent, if not opposing, wills? When we see so many millions of stars moving in the deserts of space with perfect harmony and unchangeable constancy, nothing prevents our admitting that a single and sovereign will presides over their movements, and imposes on them its laws. But where is the principle which forces so many free beings to move in unison, each one of whom feels the motive of his action in himself? This is a strong consideration, it must be confessed; it would force economists themselves to doubt the reality of industrial order, if this order were not for them already established and demonstrated.
—And still, even without the aid of science, if we look at industry with a more serious and attentive eye, it is difficult not to recognize in it at once, under the cover of apparent disorder, certain characteristics of harmony and order. Phenomena appear, whose regularity strikes and astonishes us. We gradually catch glimpses, vague at first and then more definite, of constant relations, of invariable movements. As the stars fail not to subordinate themselves to each other in their evolutions, though they seem to wander at chance, and to hasten on without order, so we see that the myriads of individuals moving in the field of industry also connect, arrange and subordinate their labors to each other, in such a way that, in spite of their apparent confusion, they all concur, each in his own way, to produce certain given results. Little by little, chaos is seen not to exist; order appears; laws are recognized.
—Even if economic science had not for a long time noted the existence of certain regulating laws in the industrial world, it would seem that the appearance alone of the results offered would cause us at least to suspect their existence. An immense multitude of human beings, some scattered here and there over the surface of the earth, others grouped in irregular masses in towns, wait every day for general industry to bring them what is necessary for the infinite variety of their wants; and every day industry, active and watchful, answers without fail to all the wants which call upon it: millions of kinds of labor, all different from one another, call on every side, and at all the sources of production, for workmen, and nowhere are the hands of workmen wanting for the kind of labor which calls them; all these different kinds of labor cross each other; more than that, they are corrected and held in union; they complete each other; they form together an immense chain, not a single link of which can be broken without injury to the whole; but nowhere does the chain break or stop; it seems that a mysterious power watches unceasingly to keep in repair its invisible links. Then, by virtue of the principle of exchange, an infinite variety of products circulates continually in every direction over the surface of the earth, and all these products go direct, without loss of time, and without sensible deviation, through countless hands, to the consumers waiting for them. All this takes place under our eyes and is renewed every day, and it is in presence of such a spectacle that men are unaware of the regularity of industrial movements subject to law. In presence of this daily miracle of regularity and order, men talk about industrial anarchy and disorder! What, then, are harmony, and order? Even if certain partial disorders, the causes of which are almost always easily assigned, happen here and there to disturb this beautiful mechanism, would that be sufficient to warrant us to deny the harmony of the whole? Would it not suffice to justify us in concluding triumphantly, that, after all, industry taken as a whole accomplishes with regularity the complex task with which it is charged?
—There is really little philosophy in denying, even a priori, the existence of industrial order. Remember how many surprises nature reserves for man, who is always too ready to appeal to chance. The empire of chance is narrower than is supposed; every day its boundaries become smaller in proportion as our knowledge extends; those boundaries will become still narrower in the future. But, it is asked, is there anything in industry but divergent individual wills? and what is that but confusion or chance? We answer, that individual wills, no matter how free they may appear in the domain of language, or in the domain of industry, are bound to conform to a certain order. In the work of forming languages the initiative and invention may belong to individuals; but supreme control belongs to the masses. Individuals invent words, particular forms or expressions; each one brings his contribution to the language; hence the inexhaustible wealth and the admirable variety of form which are the property of human language. But the mass controls, purifies, corrects; it rejects, with that sure instinct which controls it, everything not conformable to certain analogies or certain laws, and every one is bound to submit to its decisions under pain of not being understood. Hence, the regularity and harmony impressed on all human languages. In like manner the initiative belongs to individuals in industry, but control to the masses. Every one is at liberty to work after his own fashion, but on condition, first, of fitting the result of his labors, which is the first condition of order, to his surroundings; then, to adjust his labors to those of other men, without whose aid he can do nothing; and lastly, on condition of submitting to the whole, and yielding in all things to the decisions of the sovereign public. From the initiative of the individual and the sovereign control of the masses, arises, on the one hand, the infinity of detail, and, on the other, the harmony of the whole, which constitute the two essential characteristics of human industry. If, by supposing the impossible, confusion should be established in language, no two men would be able any longer to understand each other. An assembly of men would then be but a repetition of the confusion of the tower of Babel. If, in like manner, this anarchy should come upon industry, for merely a few days, the irregularity of production would put the very existence of men in peril. No one being able to count upon another for the satisfaction of his wants, each would work for himself and refuse to take part in the division of labor and exchange, and humanity would quickly return to the barbarism of primitive times.
—But the existence of laws governing the industrial world is no longer a mystery. Industrial science has for a long time noted and verified a great number of them. We have ourselves tried to show in the article COMPETITION, the general principle from which they spring. If among those which men have tried to explain, there are some which may still be a matter of discussion or misunderstood, there are others which no one, not even those who deny in principle the regularity of industrial movements, would dare to call in question. We can therefore conclude boldly that the field of the science of political economy is open, and that the elements of that science exist.
—Since, then, human industry is subject to laws; since it discloses to us constant relations, a regular movement, in a word, order, it is this order, these relations, these laws, which we must study. This is the peculiar field of political economy as a science. To explain how industry is organized in its whole and in its parts; to describe the order of its evolutions and its progress; to refer its movements to their principle, and deduce from it their immediate consequences: such is the object which economic science, carefully distinguished from art, should always propose to itself. What, in this order of ideas, should be the extent of its investigations, and what their limits? We shall examine this directly. But we must first justify the preceding definition, if it is one, in so far as it does not conform to those most frequently given of political economy.
—IV. Is Wealth the Object of Economic Science, or Industry the Source of Wealth? In defining or characterizing economic science as we have above, we have spoken of industry and the general laws which govern it. It is evident that in this we have departed, if not in essence, at least in form, from the definitions generally received, and which relate, more or less, not to industry, but to the wealth which industry produces. Which of the two formulæ is the more truthful? We think that wealth is continually put forward as the subject of political economy, without reason. Wealth is merely a result; and in reality it is labor, human industry, the source of wealth, which is the true subject of investigation in political economy. It must be understood, however, that in saying this we have no idea of changing the basis of the science, which we accept as it exists.
—We have already seen that J. B. Say defines political economy, even in the title of his work, as "a simple exposition of the manner in which wealth is produced, distributed and consumed." Still, he draws a distinction from the very beginning of his book, which we must note. There are, he says, two kinds of wealth: one natural, that is to say, that which man receives from nature itself, without his being obliged to produce it, and which does not appear in the market, because nature gives it to all; the other is industrial or social wealth; and he declares that this last is the only one which economic science should consider. Why this distinction, if the definition is correct? If it is really wealth with which we are concerned, what do we care from whence it comes? Is what nature gives us for nothing, and gives to all, less real, of less value, than other wealth? Why should we not take account of it too? The distinction established by J. B. Say is nevertheless correct, whatever Rossi may say of it. Why? Because it is not true that political economy studies wealth as its subject; because it has only industry in view, and consequently it should not touch upon wealth, except in so far as it is a product of industry, in so far as it is either produced or distributed by industry. All this portion of J. B. Say's work is very painful, because his starting point is not correct. Still, the author displays a wonderful sagacity in coming back, by force of attention and correctness of judgment, to the real subject from which he departed in his definition. But the subtle distinctions to which he has been obliged to have recourse could not fail to lead to controversy, as the sequel has shown.
—What is true of J. B. Say is equally true of all those economists, and their number is great, who have expressly admitted with him that political economy has only to do with exchangeable value. It is different with Adam Smith, who did not commence his work, like most of his successors, by a dissertation on the nature of wealth and value. He prefers in the beginning to speak of industry, of man; in which, as it appears to us, he was very happy, although he too thinks, and says frequently, that wealth is the chief subject of his studies. In the course of his work he states nowhere, in an absolute manner, that the only wealth with which he is concerned is that which is convertible into exchangeable value; but when, at the end of chapter iv. of book i., he remarks that the word "value" has a double meaning, or that there are two kinds of values, and calls one "value in use," and the other "salable or exchangeable value," without declaring expressly that the latter is the only one which it is his mission to study, he contents himself with saying that he will examine "the principles which regulate the exchangeable values of merchandise," and as to its value in use he is silent. He has followed, in this, the same path that J. B. Say, his successor, traced out afterward in a more systematic manner.
—Some economists, however, at whose head we must place Rossi, have protested loudly against this view. They contend that the utility of things, or what they call their value in use, is in itself too considerable, too important a fact, to allow an economist to omit taking account of it. Let us remark just here, that no one has said, no one can say, that the real utility of things can be despised. It is, first of all, the original basis of exchangeable value; it is, besides, the principal motive or the final object of the labors of man; for men labor only to procure what is of use to them, that is to say, what contributes to the satisfaction of their wants. It has only been said, which is true, that utility alone, when not transformed into exchangeable value, no matter how interesting it may be in other regards, is not an economic fact, and only becomes such in so far as it gives things a value, a price. But it is precisely against this conclusion that Rossi protests. The opinion of such a man has too much weight not to delay us a moment in order to examine its motives.—"There are many authors," he says, "for whom value in exchange is the only economic fact; they regard the notion of value in use as a pure generality, to which, at most, the honor of mentioning it may be given in passing without paying any attention to it afterward. For them, political economy is more the science of exchange than the science of wealth." We have underlined these last words, because they correspond exactly to what we have said above. It is very true, that, to the authors of whom Rossi speaks, as well as to us, and we shall add directly to Rossi himself, political economy is not the science of wealth, although the word "wealth" is inscribed in large letters on their banners. We have defined it, provisionally, as the science of the laws of the industrial world. One may say, however, if he wishes, shortening the expression a little, that it is the science of exchanges; for exchanges are, in the industrial system, the primordial fact which engenders all the others; but the expression which we have used seems to us at once more noble, more comprehensive, and more exact.
—But to return to Rossi's argument.
—First of all, it is not correct to say that the authors of whom he speaks merely mention the utility of things in passing. On the contrary, they maintain that the utility of things is the first if not the only condition of value in exchange; that things not useful in any respect would be neither asked for nor accepted by any one; and in consequence they would have no value, no price. But they add also that this utility, necessary everywhere, does not become an economic fact until, combining with other conditions, it is changed into exchangeable value. This is precisely what Rossi does not admit. "It is an error," he says, "which attacks the science in its very bases, which mutilates it, and destroys its nature." Why? This is his answer: "Value in use," he continues, "is the expression of a relation which belongs to all times and all places. Value in exchange is in its nature eventual. Not only it can not exist unless the wants of men cease, in a certain measure at least, to be satisfied, but it will disappear completely when the wants of all find unlimited means of satisfaction. No one will then have recourse to exchange." We shall soon find this last argument under another form. Rossi considers it very conclusive in his favor, and consequently reproduces it again. We shall see directly how conclusive it is against him. Now, let us continue our quotation. "I say, that in the system of those who pretend to occupy themselves only with value in exchange, science is mutilated: a great number of economic facts remain without explanation. Why are certain markets glutted with articles which never meet a demand for them? Only because the producers have not studied sufficiently what could be, in a given country, the value in use of such or such kinds of merchandise. The man who sent a cargo of skates to Brazil had forgotten that their value in use, arising from the pleasure which is felt in gliding over an icy surface, is nothing in a country where there is no ice. When publishers prepared immense shiploads of books for South America, they should have remembered that the want of books is only felt by those who know how to read. It is in the absence of value in use that these economic facts find their explanation." Without doubt, it is in the absence of value in use, or of utility, that these facts find their explanation. But how can this embarrass the authors whom Rossi is combating? What difficulty is there in accounting for such facts according to their system? None. They have said, and repeated, that the utility of things is the first condition of their exchangeable value; this condition had been omitted in the cases mentioned above, and consequently the products could not be exchanged. What more simple? The authors in question account for these facts quite as well as Rossi. Only they add that the condition of utility, though primary and essential, is not the only one which gives objects an exchangeable value; that, in addition, a certain degree of scarcity is required; that things found in profusion in nature, such as air, will have no exchangeable value, no matter how useful they may be; and that in this case economists need not busy themselves with them.
—Among the arguments which Rossi heaps up at pleasure against this last conclusion, with very remarkable dialectic power, there are many which square exactly with the one which we have just noted. They merely reproduce the same thought under other forms. We may therefore omit them. But here is one which seems to differ from the others. "The study of value in use, is the study of the wants of men in their relations to economic facts." The study of value in use is the study of the wants of men; this we admit: but is the study of the wants of men the object of political economy? It is not. In the eyes of the economist every man is the judge of his own wants, which he expresses in his own way by the demand which he makes for certain products. It is the sole fact of this demand that the economist meets by following it in its consequences. He sees, on one side, men expressing their wants; on the other, workers studying to divine these wants, and to satisfy them by supplying such articles as they produce; and he studies the very extensive and complex relations arising from this demand and supply. The study of the demand, considered in itself, in its nature and principle, is perhaps the affair of the moralist; but the economist, as an economist, has nothing to do with it.
—If, in the course of his laborious argument, Rossi triumphs in places, it is when he lays stress on the meaning and the use of the word "wealth." He has the advantage, we admit, when he reproaches those with whom he argues, with abusing the term. "Wealth," he rightly says, "is a generic word, which includes all objects in which this relation can be verified. If an object is capable of satisfying our desires, there is a value in it. The object itself is wealth." Rossi is certainly right here; he is right again when he adds, further on: "Ask any sensible man if, in such or such circumstances, such a man or such a country is rich or not, if it is less rich than a certain other country; ask him if the soil of the kingdom of Naples is more or less rich than the soil of Lapland; all will give you the same answer. Economists also, when they do not use the language of their particular systems, call the country rich in which natural goods abound, and in which natural agents are most active. They extend the word wealth to something more than what they call wealth when they give us their systematic definitions." All this is quite correct; but what does it all prove? Only one thing: that the word "wealth" has been very inaptly employed to designate the object of economic science. Let us say what is true, that economic science studies industry, or the relations which industry produces, and all these difficulties will disappear.
—What, in fact, is wealth? A result, and nothing more. It is a fruit of the liberality of nature, or of the labor of man; a fruit which has only to be enjoyed, and which affords no aliment to observation. What is there to be studied in such a fact? Nothing. But the means that men employ to acquire that wealth, when nature does not give it in sufficient quantity, are another matter entirely. This is a great, an important fact, worthy of all the attention of the philosopher, and it is the only one the study of which political economy can dwell upon.
—If a decisive proof of this is required, we shall find it in this last argument of Rossi's, of which we have already spoken. After having laid down this principle, that general wealth is increased by the low price of merchandise and all kinds of products, he adds: "If the price falls to zero, evidently the general wealth will be infinite; there will be no more exchanges; each having all that he can desire, exchange becomes impossible. How, then, could wealth be an exchangeable value, since it would be infinite, if there were no value in exchange?" This, we believe, is decisive against those economists who do not wish to consider wealth as anything else than exchangeable value.40 But does it prove in the same way that political economy should occupy itself with value in use, devoid of exchangeable value? Let us suppose Rossi's somewhat forced hypothesis realized, the prices of everything at zero, and general wealth infinite. What would happen? It is true there would be no exchangeable value, but neither would there be any political economy. Value in exchange, as Rossi correctly says, would disappear completely as soon as the wants of each one found unlimited means of satisfaction. No one would then have recourse to exchange. Nothing is truer; no one would have recourse to exchange, nor even to labor; but neither would any one think of studying political economy, because political economy itself would not have anything to study. The entire earth would present the picture of the Elysian fields described by Fenelon, in his "Adventures of Telemachus." All the wants of men would be satisfied. There would be no wants to express, and consequently no efforts to be made to provide for them. But what would the economist have to do in such an environment? Nothing, but to survey at his ease a picture of universal happiness, and thank God for his goodness. Political economy would disappear with exchangeable value and the realization of universal wealth: so true is it that it is not wealth that it studies, but exchange, with the division of labor and all the important phenomena that accompany it.
—Rossi himself, as we have said, has not studied anything else. And, in reality, once out of these discussions on wealth and value, which embarrass him in the commencement of his work, he goes through the same route already passed over by his predecessors. He follows, in their developments, the phenomena of exchange, the division of labor, the combination and subordination of the different kinds of labor, as well as the complex relations which these phenomena engender. He investigates the laws which determine the exchangeable value of things: those which regulate the rate of wages, the rate of profits, and revenues of every sort. He does not stop a moment, whatever he may have stated at the outset, to consider the absolute and inherent utility of things, or what he calls their value in use, independent of the relative value which they acquire in the great market of labor. Neither does he stop to consider the reason of our wants, admitting, with all economists, that individuals are the only judges of their respective wants, and that they express them sufficiently by the demand which they make for certain products.
—We can, then, say of Rossi what we have said of all the other economists, that it is the industrial movement which he studies, with all its developments and all its consequences, and by no means the simple result, wealth, which would offer no material to his observations. When he frees himself for a moment from the too great anxiety which the word "wealth" causes him, he defines the subject as we ourselves have done. For example, after explaining the series of economic phenomena, he adds: "They appear in all this continued action of men on the material world; they are all embraced in this incessant rotation of labor, of consumption, of reproduction and of exchange." Yes, it is in the continual action of men on the material world that all economic phenomena are included, and it is precisely on this account that the wealth which is not derived from this action of man, or which has not felt that action, that is to say, which does not enter into the current of exchanges, is not an economic fact.
—We should have dwelt less upon this error if it related only to words; but it has had its consequences. It has not precisely changed the basis of economic studies, since, after all, economists have generally continued unfaithful to the definition which they have adopted; but it has given an ambiguous character to the science, which has produced distrust in the minds of those who only half understood it, and it has given too much advantage to the adversaries of political economy. It has, besides, overloaded, especially in the outset, the science with subtle distinctions and vain abstractions, which have become, for economists themselves, an inexhaustible source of barren debates. We shall soon return to these consequences, but it is proper to go first to the source itself of the error which we have just pointed out.
—V. Why Wealth rather than Human Industry has been assigned to Political Economy as a Study. Consequences of this Error. We have already seen that political economy, before it became a science, was, for a long time, an art. It was a branch of the art of governing, an art which concerned especially the material interests of nations. Hence its name, which evidently designates an art. Hence, also, the formula which serves to designate the special object of its labors. Things have changed, the art has given birth to a science; it has been transformed itself, changing in character and object; but the name and formula have been preserved. This is why political economy bears to-day names so inappropriate to its real character.
—The chief tendency of this ancient art, which preceded the science, was, whenever it had not the regulation of taxes and the finances of the state as its sole object, to act directly on the public wealth; to create wealth, if it is permitted to say so, by means of governmental measures or by the mechanism of legislation. All writers who pretended to be economists, therefore, thought themselves called on to furnish methods or receipes calculated to enrich the nation for whose benefit they wrote. We find a curious and sad example of this in the system so unfortunately applied, in France, by the Scotchman, John Law, and which had been preceded, in England, Spain and France, by many other systems, which, if not similar, were at least conceived in the same spirit. Some wished to enrich their country by specially favoring agriculture, considering the direct products of the soil as more abundant and reliable than all the wealth procured by manufacturing industry or commerce; others, generally infected by the idea that people become rich only at the expense of others, placed all the hope of a nation, either in the forced extension of foreign markets or in the exclusion of foreign products; and these last turned their attention mainly toward manufacturing industry and commerce. In other respects they differed from each other, in the nature of the means proposed; some only thought of acting on foreign commerce through the tariff, while others were occupied with the internal management, the organization itself, of industry; but whatever might have been the difference in their principles or their methods, they invariably tended toward the same end, the immediate increase of public wealth. They would have considered that they had done nothing if they had not invented some sovereign recipe, some speedy and marvelous method. Thus, in 1664, one of the most celebrated economists of the seventeenth century, Thomas Mun, published in England a work under the following title, which indicates clearly enough its object and tendency: "England's Treasure by Foreign Trade; or, the balance of our foreign trade is the rule of our treasure." Another writer, Davenant, published in 1699 a book under the no less significant title of "An Essay on the probable method of making the people gainers in the balance of trade." In another style, but guided by the same spirit, W. Potter published, in London, in 1659, a work entitled "The Tradesman's Jewel; or, a safe, easy, speedy and effectual means for the incredible advancement of trade and multiplication of riches, etc., by making bills become current instead of money." The seventeenth century, and even the commencement of the eighteenth, abounded in similar writings, in France, as well as in England and Spain. Projects of this kind are not rare, even in our day; but they are at present merely eccentricities, while then they formed the only basis of economic works. Thus, wealth was the direct object of these works, to such a degree that all writings on political economy which date from that period might be summed up in this general formula: "How must we proceed to enrich a people?" It is true, then, that political economy had wealth as its direct object, and so many economists did not deceive themselves as to the real tendency of their studies when they inscribed the word "wealth" on their banners.
—It was from these unfortunate attempts that the real science came. By force of studying industry and commerce in order to subject them to adventurous plans and govern them according to their views, publicists became accustomed by degrees to observe industry and commerce. They remarked their most striking peculiarities and their most ordinary characteristics. Struck by the regularity of some of the phenomena which took place in this then new world, they caught a glimpse of the existence of certain laws, which they half noted. In this way scientific observations slipped insensibly into these artificial combinations, the unfortunate fruits of the imagination of their authors, and these observations increasing by degrees, in proportion as attention was directed to the subject, ended by impregnating, so to speak, with rather a strong dose of science, the very works composed in view of an art. This infusion of science into art is very evident in some of the writings which date from the end of the seventeenth century and the commencement of the eighteenth. If precepts still abound in them, to the point of predominating everywhere, scientific observations, and observations sometimes very correct, are not rare in them. In this way the science began. But, as the invention of an art was always the fixed idea of writers, and as this art had always the increase of wealth in view, the preconceived notion that the direct object of political economy was wealth, remained.
—It was then that the school of Quesnay arose. It was the first to renounce the discovery of this deceptive and false art, which had been so vainly sought for up to that time. By proclaiming the great principle, Laissez faire, laissez passer, it boldly announced, from the very start, that it did not appear in order to give people special rules to increase their fortune, but to set forth the scientific explanation of that imposing mechanism which human industry presents for the reflection of philosophers. This formula, too little understood, had, in their mouths, a profound significance, which it is well to recall. It was not pure science, as Rossi has wrongly stated; it was art since it was still a precept. But it was a precept which carried with it the negation of all others in this, that it rejected all the artificial combinations which had been imagined up to that time; it was the revelation of science, and was itself the first fruit of this revelation. It might be translated thus: "You have believed up to the present time that the industrial world was a kind of body without soul, an irregular assemblage of incoherent forces, without a principle of conduct, without cohesion, without a bond. You have believed that this world floated about at hazard, and that it needed the hand of an organizer to regulate and conduct it. You have outrivaled each other in striving to propose for it, or impose on it, your artificial combinations and your preconceived systems. Undeceive yourself: this industrial world does not move at hazard; under the apparent disorder of its course is hidden a profound order; it is governed by natural laws, admirable laws, in some regards inflexible laws, which it is necessary to know and respect. Avoid disturbing, by your arbitrary combinations, these natural laws which are superior to man. Respect this providential order; let the work of God alone."
—This did not mean that governments had nothing to do but fold their arms; for governments have their rôle marked out for them in the natural order of society, such as it was understood by the physiocrates; but it did mean that governments should limit themselves to accomplishing their real task without undertaking to substitute an arbitrary system for the natural order of society. Thus understood, this maxim, Laissez faire, laissez passer, is one of the most beautiful, most profoundly philosophical, and at the same time one of the most correct, which had ever been enunciated. It brought with it, we say, the revelation of a science, and asserted the existence of these natural laws, whose study is the mission of science, and without whose existence our science would be without any object to study. It was at the same time the first fruit of this revelation; for, although men may differ yet as to the extension which should be given to governmental action, the maxim, Laissez faire, laissez passer, must always be accepted, in its general expression, by every one who even admits that there is a science of economy. Either the natural order of industry exists, or it does not exist. If it does not exist, you can fill the void by your arbitrary combinations; you can fashion and direct the industrial world according to your pleasure; you may even imagine for it an artificial organization of labor; but in such case speak no more of science. If, on the contrary, you admit that this order exists, your first duty is to respect it.
—Nevertheless, this announcement of science, in which the school of Quesnay had the initiative and the chief glory, by changing at once the tendency and direction of economic study, necessarily involved a change of ancient formulæ and definitions. There was no longer a question, as there was formerly, of inventing an art which would have as its immediate result the creation of wealth by means of legislative enactments. The school of Quesnay admitted, on the contrary, that the true source of wealth is in the industry of man, in the spontaneous activity of individuals, and that the best thing to be done is to let that activity have the greatest possible freedom. It was no longer a question of considering wealth directly, but rather to study the activity of individuals in its natural relations and in its laws. Not that the school of Quesnay absolutely renounced the formulation of an art: it could not renounce it, under pain of leaving science itself barren. But this new art, more rational than the old, in this, above all, that it was deduced from truths observed by science, instead of tending as formerly to the immediate creation of wealth, was forced to have as its sole object the restriction of governmental action within its natural limits, and to regulate it within these limits in conformity with the natural laws of industry. Thenceforth, wealth was no longer the direct object either of science or art. Thenceforth, these changed studies needed new names and new definitions.
—Quesnay's school understood the exigencies of this transformation, and the very titles of the principal works which are due to it attest this fact: physiocracy, natural order of societies; two different titles, but which have nearly the same sense or the same bearing, in that they both announce the scientific statement of certain natural laws, and no longer the invention of an art; more scientific titles surely, and more satisfactory in this regard, than those afterward imagined. Unfortunately, the school of Quesnay committed two capital errors in the erection of its system, which caused its attempts at renewal to fail, and weakened its decisions. The first of these errors consisted in the exaggerated importance which it attributed to the net product of the soil, what we now call the rent of land, which it put forward as the only or main source of the real revenue of a people; the second, in the unnatural mingling of economic phenomena and political facts, between which it was unable to establish the necessary line of demarcation.
—When Adam Smith, who first placed the science on its true foundation, appeared, he returned, unfortunately, in so far as formulæ and titles were concerned, to the old errors. While he exposed the grave mistakes into which the school of physiocrates had fallen, Adam Smith permitted himself to react perhaps too strongly against that school. He repudiated even the spirit of the new formulæ which it had adopted. These formulæ, as we have seen, were generally too ambitious, too broad, in that they seemed always to embrace at once the economic and the political order. It was proper, it was even necessary, to narrow them in a certain sense; but it was neither necessary nor proper to change their spirit, which was perfectly in harmony with the new tendency of economic studies. Instead of saying, as the physiocrates had done, "natural order of societies," and interpreting this formula as they had done, he might have said, "the natural order of industry," or used any other equivalent phrase, which would have preserved to economic studies the scientific character which they had received. Instead of this, in his desire to repudiate what there was excessive, from the point of view at which the physiocrates had placed themselves, Adam Smith returned purely and simply to the errors of his predecessors. The old prejudice remained—the prejudice that the economist is charged with furnishing recipes, the methods necessary to build up the fortune of nations—and Adam Smith himself was not able to guard against it. What was expected of him was the exposition of an art, tending to the creation of wealth, and he believed himself obliged to satisfy this expectation! The man who had left the business, the care of enriching nations altogether to private industry or the spontaneous activity of individuals, and who believed firmly, as his work proves, that it does not belong to governments to add anything to it from their own resources, still believed it incumbent on him to construct a system intended to create national wealth, and to announce it formally, not only in the title of his work, but also, as we have seen, in his definition. It is true that his system is different from those which preceded it; it is the same as that of the physiocrates, Laissez faire, laissez passer, which is the device of every one who understands and practices the science: a system so different from others, and so peculiar in this regard, that those who in our day still take the old point of view ask, with a naïve astonishment, what is the meaning of a system which involves a negation of all systems? But Adam Smith at last proposes, like all the other economists, his method, his means of enriching nations, and this means consists in employing none. It is in this way that, from a point of view altogether new, he preserves the old forms. A man of science, he adopted the formulæ of his predecessors who only wished to invent an art. Devoted to the study of certain natural phenomena, he gives us lessons and precepts at every moment, and in truth gives a great number of them, though these lessons and these precepts only tend in general to show the vanity of those given before him, and that they are merely a negation. In substance the work of Adam Smith is a work of science, since he explains the industrial order in its natural and spontaneous formation; but his work, in form, is almost always a work of art, where all the old formulæ are reproduced. Since the publication of Adam Smith's great work, which founded, and was worthy of founding, a school, these annoying traditions have been maintained. Political economy, though rejuvenated and transformed, has preserved in many respects its old dress.
—Appearing after Adam Smith, and when the science was already freeing itself from the obscurity in which it had been involved, J. B. Say understood, better than his predecessor, the nature of his labors and their real object. He felt very clearly that it was not a means of fortune which he taught to nations, and he was very careful not to say it was; he declared, on the contrary, repeatedly, and under various forms, that it was a simple exposition which he wished to make. "Political economy," be says expressly, "teaches what happens and what is." In this he had a clearer understanding than Adam Smith of the tendencies of the new economic era, and freed himself, more than Adam Smith had done, from old prejudices. Carried away, however, by the same considerations as Adam Smith; wishing, like Adam Smith, to free himself from the physiocrates, who had given the field of the science limits altogether too extensive; and believing that he was thereby merely reducing the science within its limits, he also inscribed the word "wealth" on his banner. Since that time it seems admitted as an article of faith among economists that wealth is the special object of their studies. There is no longer any appeal from this decision. In spite of some isolated and barren protests, here and there, all the labors of economists are supposed to be concerned with wealth.
—We have just seen what were the causes of this deviation. We shall now see what its consequences are. And, first of all, if we suppose that political economy has to do exclusively or primarily with wealth, it is utterly impossible to give it even a partially satisfactory definition; and we are obliged to say, with Rossi, that it is the science of wealth. But what is the science of wealth? Is there, can there be, a science of wealth? Strictly speaking, we can understand an art of producing wealth; but can we conceive a science connected with the analysis or study of such a fact? What is it to study wealth? is it the fact itself, the result, or the means employed to produce it? If it is the fact itself, it will be necessary to limit ourselves to analyzing the elements of which wealth is composed; and what is the object, what the utility, of such a labor? To study wealth in the means employed to produce it, is quite another thing: here there may be material for a vast series of observation; but, then, it is not properly wealth which is studied, for we must not confound the means with the end: it is either human industry, if there be question of wealth produced by the labor of man; or it is the operation of nature, if there be question of the benefits which we receive from nature without labor.
—It is useless for Rossi, in order to give a sort of consistency to his definition, to say that there are phenomena of a certain order, which are distinct from all other phenomena and relate to wealth, and that it is these which political economy should study, All these explanations, in which the embarrassment of the writer is betrayed at every word, in spite of his undoubted talent, only thicken the cloud with which he surrounds us. What are these phenomena of which you speak? They relate to wealth, you say, but apparently they are not wealth itself. Well, describe them, analyze them, indicate at least their character or nature; sum them up, if it is possible, in some definition or formula; perhaps then these phenomena will of themselves form an object worthy of our scientific investigation; but do not tell us that the object of these investigations is wealth, for evidently it is not.
—In his definition, which we have already quoted, J. B. Say was more precise without being happier. In saying that political economy describes how wealth "is produced, distributed and consumed," he escaped the vagueness into which Rossi has fallen, and he has given some body to his formula, but he has not succeeded for all that in being more correct. It will be noted, first of all, that this formula is more than a definition, it is, besides, a classification of materials; to divide one's subject in this way, is to draw a plan, not to define it. And what is the use of it all? The divisions of a subject, the classifications of materials, whatever they may be, belong always to the writer, and depend more or less upon the point of view he assumes; it is, therefore, an error to present them, though the best possible, as being so essential to the subject as to form a part of its definition. Why did J. B. Say commit this error? Only, as it appears to us, because in binding himself to the word "wealth" as the basis of his definition, he had no other means of rendering his thought sensibly clear; he had then either to say too much, as he has done, or to be content with the vague formula of Rossi, which tells us nothing at all. What is this wealth which is produced, distributed and consumed?. Is wealth, perchance, self-producing and self-distributing? Apparently not; save, perhaps, that which nature produces and dispenses without the aid of man, as the air, the light, the heat of the sun, etc. J. B. Say carefully excludes these from his domain. Wealth is not produced by itself; we say, it results from human effort, or from several such efforts combined. Why, then, instead of the result, do you not much rather first take up, as the object of the science, the combination of human efforts that produce it? Why not openly, clearly announce in your formula that it is this combination of the different kinds of human labor which forms the object of your studies, since, after all, this is the only thing that can constitute the object of serious studies? To read the definitions in which wealth is made the subject of which political economy treats, we would suppose that matter acted and moved of itself, and that man counted for nothing. This, it is true, is only appearance; but this appearance is annoying, giving rise to many mistakes; it has often caused it to be said, by men who are strangers to the science, that the economist is devoted exclusively to the worship of matter, while in reality it is man, and man alone, that is the constant object of his labors.
—These formulæ, besides being vicious, have become the source of endless discussions, as tiresome as they are barren in results. Starting from the principle that the object of political economy is the study of wealth, the conclusion is drawn, with a certain appearance of reason, that its first care should be to define and characterize wealth; for how can we reason about wealth if we do not know what it is? and taking this specious reasoning as basis, each economist has made it a duty to place an interminable dissertation on this subject at the beginning of his work. They vie with each other, losing themselves in endless discussions and distinctions on utility, the first attribute of wealth, on value which is its complement, the nature of this value, the conditions of its creation, its existence, its extent, etc. Thus the science is made to bristle with abstractions; a terror to those who do not know it, and an object of disgust even for those who have cultivated it for a long time. The worst of all is, that, after so many long dissertations, these writers have not been able to agree whether it is value in use or value in exchange which constitutes wealth.
—What must men who are strangers to political economy, or who are only half acquainted with it, think of these endless discussions? They must think, and in reality do think, that there is nothing fixed or constant in a science in which its very point of departure, that which is or appears to be the foundation of all the rest, is a matter of dispute.
—Suppose that, instead of taking wealth as the subject or text of political economy, human industry had been taken, as is required by the nature and logic of things, it appears to us that things would have taken another course. The substance of the science would have remained the same, but the formulæ would have changed, and thenceforth the difficulties which we have just noticed would have disappeared of themselves. It would have become very easy to give a satisfactory definition of the science, not vague and incomprehensible, like that of Rossi, or complicated, detailed, and, after all, unsatisfactory, like that of J. B. Say, but which would be at once general and simple, comprehensive and clear. It would have been sufficient to say that political economy is the science of the general laws of the industrial world; or that it had as its object the study of labor, not in its technical methods, but in the relations which it produces and the laws which govern it. These formulæ, or equivalent ones, would have been sufficient to indicate the object of the science and its tendencies. Then, fully to define its meaning and bearing, it would have sufficed to prove, by a clear and precise exposition, the reality of the laws which they declare. On the other hand, by starting with such formulæ, the long dissertations on wealth, which obstruct the avenues of the science and render its approaches so difficult, might have been dispensed with. And what use is there in adhering so closely to the definition and description of wealth, since it is man, man as a worker, whom the science has in view? Wealth, it is true, should be the result of the labor of man, as it is its object, and it must consequently appear sometime; but it should appear in its proper place, as the fruit of labor, and then it would not be necessary to define it, since the definition would naturally result from the explanation itself of the labors which man has performed in order to obtain it. There would then be no distinction to be made between value in use and value in exchange; or rather, that distinction, which results from the very nature of things, would appear under another aspect.
—By the labors to which he devotes himself, man tends unceasingly to convert all things to his use, both the material objects which he finds at hand, and the immaterial truths which he discovers. Value in use is, therefore, the constant object of his care. It is wealth, taking the term wealth in its broadest acceptation. But this wealth is to be divided into two parts: one which man is obliged to win from nature every day by continually renewed labor; the other, which is acquired once and forever, and which he enjoys without labor. In this last category may be ranged, not only the advantages or the goods liberally dispensed by nature to all men, such as air, light, and the heat of the sun, but also all those which man has won by previous labor, and which are acquired once and forever to the race, and enjoyed by all without labor. Such, for example, is the stock of knowledge grown common to all in civilized countries, the improvement of the climate by cultivation, the possession of an incalculable number of processes in the arts, which have become habitual and the property of all. This last part of the wealth of man is surely not the least interesting; but as it has been definitively acquired, as man enjoys it henceforth without effort or sacrifice, he need no longer concern himself with it, unless perhaps to endeavor to increase it. The economist, in like manner, need not busy himself with it, except to state its extent and its benefits. It is only the other part, that which is the object of incessant labor, that really enters into his domain, for it is only here that there are real phenomena to observe.
—We have not said all that can be said concerning the annoying results of economic formulæ. The necessity of being continually occupied with wealth, which it has made its special text, has forced political economy to construct a language of its own, an obscure, involved language, full of subtleties and abstractions. Hence, for example, the expression "immaterial products," to designate simple services rendered, or labor which is not realized in any product, and many others of the same kind: annoying expressions, to say nothing of the outrages which they commit on language in this, that they seem to transport us to an unknown world, lying outside of nature.
—To sum up, political economy, turning on an abstraction, wealth, has become, in its forms at least, an abstract science. Taking matter as its text, it has become a material rather than a moral science, in the eyes of those at least who do not see into its depths. Besides, it has borrowed from inanimate matter all the appearances of a dead science, while it could and should be full of life. It is not, moreover, in appearance alone that it experiences this; it has been grievously troubled by it even in its expositions and in the connection of the truths which it teaches. If, instead of a barren and laborious dissertation upon wealth, with which it always sets out, and from which afterward flow, with such difficulty and trouble, the solid truths which constitute its substance, political economy had taken as its point of departure, or its text, human labor, what it would have accomplished! It would have begun with a broad, animated, living picture of the industrial world as it exists; it would have exhibited the general organization of human industry as it results from exchange, from the division of labor, from the subordination of the tasks which connect the labor of some with the labor of other men, and the use of metallic money, which establishes among all the separate kinds of labor a universal connection. It would have next explained the conditions of the existence of these kinds of labor and their principal motives; then, descending by degrees into the details of the structure of industry, it would have unfolded successively all its springs and declared its laws. All the truths which constitute the substance of political economy would have found their place in this grand structure. What a difference there would be in the animation of the subject, the facility, the order, ease and clearness of the deductions! It would have been possible even to introduce, if judged necessary, those subtle distinctions, those abstractions, with which the rudiments of the science are at present actually bristling, with this difference, however, that, taking their places only after an explanation of the primary truths of which they are really but the consequences, those abstractions would have flowed from these truths as easily as corollaries flow from a geometric proposition. We leave it to be considered, if, with such a point of departure and explained in this order, the science of political economy would not wear a different appearance, and be broader, more animated, more living, and even easier than it is to-day.
—VI. Definitive Character of Economic Science: it is a branch of the Natural History of Man. Its Extent and its Limits. When economic science is defined as the science of wealth, it is very difficult to say to what genus of science it belongs. Is it a moral science? It is not; for it seems to be devoted exclusively to the study of matter. Is it a natural science? Still less; for it is concerned almost entirely with an abstraction. It may be pretended that it is the science of matter, or the science of abstractions; and it is in this way that those who judge only by formulæ speak of it. In this case one is very much embarrassed to know where to class it. But this embarrassment ceases the moment it is brought back to its real subject, the labor of man.
—Political economy has been ranged in the category of moral sciences. We accept that title for it, which contains nothing but what is very honorable, and which is correct. It studies the acts and deeds of men, and there is always a certain morality in human actions; but this title, however honorable, is not the only one due to political economy, which is, besides, a natural science, for in its essence it is but a branch of the natural history of man. The anatomist studies man in the physical constitution of his being; the physiologist, in the action of his organs; natural history, properly speaking, in his habits, his instincts, his wants, and in relation to the place which he occupies in the scale of beings; as to political economy, it observes and studies him in the combination of his labors. Is it not a part of the study of a naturalist, and one of the most interesting, to observe the labor of bees in a hive, to study their order, combinations and movements? The economist, in so far as he simply cultivates the science without troubling himself about its applications, does precisely the same thing for that intelligent bee, man: he observes the order, the movements and the combinations of his labors. The two studies are absolutely of the same nature; with this difference only, that the field occupied by the economist is incomparably broader, the combinations which he observes more subtle, more extended and more complex. The theatre of his observations is the great stage of the world. The order which he describes has, besides, a more elevated character, and, although less apparent and more difficult to understand, that order is much more wonderful also than the order of a beehive. The difference is measured by that between an insignificant insect and man.
—We have now determined the character and object of political economy, of that almost intangible science, the definition of which has caused so much embarrassment to those who cultivate it, and given such advantage to its enemies. It is simply a branch of the natural history of man, and surely not the least interesting nor the least beautiful. It only remains to us now to fix its extent and limits.
—For a long time, and during the whole period in which political economy was considered a branch of the art of government, industry itself appeared merely as a fact subordinate to the political order, occupying in each state a fixed and rather narrow place. As it was submitted to the supreme action of the political powers, which were looked upon as its guardians and natural directors, it was examined only in its relations to the state. It was looked upon then as a national fact in politics, and it is from this point of view that it was considered by all the early writers. But, in proportion as men closely observed industry, they were not slow to find that in no place did it stop at the conventional limits of states. They recognized in it an invincible tendency to extend, to spread outward, to go from one people to another, without respect even for the barriers which political power had established. It was seen to possess a sympathetic virtue which impelled it to clear away every barrier and to overturn or avoid every obstacle, to draw together nations the most different, and to rally them all into the great community of labor by a universal exchange of products and services. Such is the essential character of industry. Universal by nature, it has always been so in principle, and tends every day to become so in practice. The relations which it engenders extend from pole to pole; the species of community among men which it creates, already embraces the whole earth; and if certain feeble fractions of the human race appear still to escape its influence, it tends unceasingly and with an invincible force to draw them into its net.
—As the field which economic science explores should be as extended as that of industry itself, whose laws it studies, it can evidently have no other limits in space than the limits of the globe itself. Certain economists, however, have been deceived here. They have tried to give their studies a more real or precise character by confining them, or rather by trying to confine them, within the limits of a given country. Such a tendency is remarked among certain writers of North Germany. But, try as they might, they have not been able to remain faithful to the law which they pretended to impose on themselves. "The theory of social wealth," says Fr. Skarbek, "may comprise the whole earth if we look at it as the patrimony of the human race; from this point of view, as broad as it is elevated, its investigation would, without doubt, offer to the mind many philanthropic ideas which would be shared by all the friends of humanity; but it would not lead to any important result in the science, and would not advance us in the knowledge of the principles of the wealth of nations." (Théorie des richesses sociales, 2d part, introduction.) We beg pardon of the estimable writer, but this point of view, "as broad as it is elevated," which he sets aside through caution, is the only true one. In order that political economy, or, as Fr. Skarbek calls it, "the theory of social wealth," should comprehend the whole earth, it is not at all necessary that economists should be given up to philanthropic ideas, or form wishes more or less realizable for a general union among all nations. It is sufficient that the science be exact and true. Strictly speaking, it is sufficient that it should be occupied with the phenomena which are peculiarly within its domain. Among these phenomena the first place is occupied by exchange, the division of labor, the subordination or the connection of the various kinds of labor, the circulation of products, the use of money. These are in industry the great arterial lines, the primordial facts which engender all the others; and this is true to Fr. Skarbek himself, who, like all other economists, accords them the first rank. Now, of all these phenomena, there is not a single one which stops at the limits of any state. They do not stop even in countries which surround themselves with a triple line of custom houses, and which reject foreign products as far as they can. Everywhere, no matter what is done, exchange extends more or less beyond these artificial barriers, and the labor of each country has its branches outside. The very efforts made at the frontiers of certain states to stop the circulation of products, only show more clearly the expansive tendencies of industrial facts. As to the circulation of money, nothing stops it, and here, with the full force of the term, we have a universal fact. But if all the principal economic phenomena extend beyond the limits of individual states, how can the science itself be confined within them? Fr. Skarbek errs, therefore, in this, for want of rendering an account to himself of the nature of the facts with which he deals. Rossi was in this respect much more in the right when he said that economic science, when carefully considered, had the world for its theatre. Does this mean that political economy should take no account of nationalities? Most assuredly not. On the contrary, it makes great account of them, but it does not confine itself to them; it could not, without mutilating itself or abdicating its place. "We must," says Fr. Skarbek, "look on the human race as it is, that is to say, divided into a great number of societies different from each other in the degrees of civilization and power at which they have severally arrived." (Ibid.) Doubtless it is necessary to look at the human race as it exists, but if this human race is divided into a great number of political societies, it is not specially comprised in any one of them; to speak more clearly, it should comprehend them all. The only question is, whether the facts which political economy considers are political facts, that is to say, peculiar to one or the other of these societies, or facts of humanity, that is to say, common to all the human race. Now, the answer to this question can not be doubtful, at least as regards the science strictly speaking; it is not doubtful even in the writings of Skarbek, who could not have deceived himself on this subject if he had not reasoned on science, as unfortunately so many other economists do, with the preconceived notions of an art.
—Nevertheless, nationalities, states, and the governments which manage them, are also, from a certain point of view, economic facts, and facts of considerable importance; the more considerable since it is through them that order, security and justice, so necessary in the great workshop of labor, are enforced. They should therefore not be forgotten. But to consider the human race in its totality, with regard to the general phenomena which concern it, it is not necessary to forget, nor to lessen, the particular facts which concern each one of the great fractions of which it is composed. Here, then, we have the field of political economy marked out so far as space is concerned. Its observations should not and can not be concentrated in a particular state; they should embrace the earth. To see what takes place in this or that country, is not to study industry, but fractions of industry. Even this partial survey is impossible, since any one who examines closely what passes in his own country, will recognize without difficulty that each of the phenomena which he has observed has its prolongation elsewhere. It may be of use, doubtless, to show the local influence of the particular kinds of legislation of each state, and the manner in which they modify the action of general laws; it is even necessary, in all cases, to take account of this salutary influence which every government exercises in its sphere, by the single fact of maintaining order and security. All these particular facts have their place in the vast circle of studies which political economy embraces, but it is none the less true that the ground of all these studies is in a sum total of phenomena which includes the human race in its entirety.
—If, as to space, political economy knows no other limits than those of the earth itself, we can also say that it includes in its domain all men without distinction, to whatever class they belong or whatever their occupation. It would, indeed, be a great error to suppose that the industrial phenomena from which economic science draws its life concern only men actually engaged in industry, merchants, manufacturers, and all those commonly included under the name of workingmen; it comprehends all without exception. We are all interested in exploiting this globe of ours, and this is enough to bind us to the scene of our labor. If we are not all bound to it by our labor, we are at least so bound by our wants; and nearly all of us, it must be said, aid in this exploitation of the globe, even without knowing it, in a direct or indirect manner. This is not at all doubtful in the case of men who hold the reins of power in nations, or who govern them; it is by their ministry that order, security and justice reign in the great workshop of industry. From this point of view, functionaries, judges, officials of all kinds, assist in the common labor, by the fact alone that they defend it against acts of violence which might disturb it. This is also true in the case of scholars, who, without taking part in industrial labor properly speaking, throw light on the path of progress. If there is in the world a sufficient number of men of whom one can not say absolutely that they assist, directly or indirectly, in the common labor, they at least render certain services to their equals, and this is enough to warrant us in including them in the grand army of labor. It would, in fact, singularly lessen the scope of human industry to consider it as exclusively devoted to the material exploitation of the terrestial globe; it has a more general object, that of answering to all the wants of man of whatever nature they may be. Thus, whoever renders a service to his fellows, whatever be the occupation to which he is devoted, is connected with general industry by his labor. Who, then, are the men who are not engaged in industry in some way? Apparently only those who live at the expense of their neighbors, by theft, robbery or beggary, but even these, if they do not belong to the industrial order by their labor, are still connected with it indissolubly by their wants.
—In the stage of civilization which humanity has reached, every man, in whatever position he may be, in whatever degree of the social scale he may be placed, depends on exchange, at least so far as his wants are concerned, which he can only satisfy through it. Now, exchange is the first of the general conditions of industry, and the chief source of all the others. He is also connected with the division of labor by the functions which he performs, if he performs any, or, in default of any, by the rank alone which he occupies. There is no person who does not use money, at least in certain cases, and money is one of the principal agents of the industrial order. In fine, we are all obliged to accept the value of things which the general condition of the markets has established. In all this we are irrevocably bound to the industrial order, and we submit to its laws. If a few men escape it, they are mere savages, and the last among savages, those who, lost in some corner of a desert land, have no relations with the rest of the world; for in regard to other savages, they make, after all, some exchanges, and generally devote themselves to some special occupation adapted to their support. Thus, the industrial order not only extends over the whole earth, it embraces, besides, all men, without distinction. Thus, too, the field of political economy, considered as a science, being no other than that of industry itself, whose laws it studies, it is clear that it comprehends in its domain the totality of mankind.
—From this point of view we can say that economic science has no limits; but if it has not, so far as the extent of the circle it embraces is concerned, it has them marked out clearly enough as to the object with which it is concerned. Though connected exclusively with man, it does not take all of man into consideration; that which it studies specially is human industry, comprising under this general denomination the sum of labors which men perform, or the mutual services which they render each other for the satisfaction of their respective wants. Further, it does not consider these special services except in so far as they are rendered under the law of exchange, that is to say, in consideration of a return. Man, living in society, has his duties to fulfill to his neighbors, his duties as a son, a father, husband, citizen; he has others to fulfill to his Creator. These duties political economy considers as foreign to its domain: it leaves the care of determining them and regulating them to religion, to morality, and the law. Besides the strict duties which religion, morality and law impose on him, man has feelings of sympathy which often decide him to come to the assistance of his neighbors without any hope of repayment. This is also an order of things with which political economy has nothing to do. It examines only those positive and strictly definable relations which are established between men, when each of them, while rendering services to others, counts on a just remuneration for these services, and works in reality for himself.
—All this is easily understood, because it all results sufficiently from the single general enunciation of the object which economic science proposes to itself: the study of human industry. But what should be brought out more clearly is this, that political economy does not study even industry under all its phases; that, for example, it never considers industry in the processes which it employs in the technic or scientific means which it uses, but only in the relations which it engenders, and in the general laws by which it is governed. Thus, every industrial worker, manufacturer or merchant comes under the observation of political economy. This is not doubtful with regard to the labors which he executes. But political economy does not consider these labors in themselves and in their technical processes; it only considers them in their connection with the labors which are executed elsewhere and in regard to their relations with the whole. What is seen in an artisan is the place which he occupies in the great workshop of labor, the office which he fills there; but it does not inquire how he fills that office, or at least it only judges by results. It sees the products which he delivers to his neighbors, the condition under which he delivers them, and the remuneration which he obtains. It sees at the same time the action exercised upon him by all of his surroundings, the influences which he undergoes, and the necessities by which he is held to submit to them. But it takes no note of the processes which he uses in the branch of labor with which he is occupied.
—Political economy is in this respect, then, perfectly distinct from technology, and in general from all the arts and sciences which men apply in the particular labors to which each one devotes himself. It takes account of all these arts and sciences, it gives them a place, but always considers them only in regard to their relations with the whole, only in the function which they fulfill, in the action which they exercise, but never in themselves, and in their processes. The reason of this is easily understood. If we admit, in fact, that there is in the industrial world, as it exists, certain constant relations between workmen, invariable laws, a fixed and regular order which can be settled and defined, it is this order, these relations, these laws, which political economy should study, and nothing more; it could go no further, to observe, for example, the particular processes of the labors whose relations it studies, without losing its way. Thus, the field of economic science is limited on all sides. It halts everywhere, if it is permitted to say so, at the very portals of the sanctuary in which the arts are carried on. It touches all these sciences and all these arts, but without interfering with any, examining them only in their relations to the whole.
—This last consideration should establish a clear dividing line between political economy and politics proper. Politics is an art, the art of governing a political society or a nation, in view of certain ends; in view, notably, of establishing order, security and justice therein, of maintaining and making the rights of all respected. Political economy looks on this art, as on all others, in its relations with the total of economic facts, but in no way in its ordinary processes. It makes known, for instance, the salutary influence which a government exercises on the development of industry, when it maintains perfect security for all interests, absolute respect for all rights, and calls attention to the wrong which it inflicts on industry when it suffers these rights to be violated or when it violates them itself; but it does not discuss on what principles or what bases a government should be instituted in order to accomplish its mission in the best manner possible. This is a task which it leaves to politics as it leaves to technology that of determining the best possible methods of manufacturing in one branch of industry or another.
—VII. Actual or Possible Applications of Economic Science. No science is destined to remain barren forever. Considered in itself, a science only studies what takes place and what exists, without inquiring what use may be made of the truths which it establishes. "From the moment that we busy ourselves," says Rossi, justly, "with the employment which may be made, or the profit that may be drawn, from science, we leave science and fall into art." Still, as the profit which may be derived from it is, after all, the final object proposed in studying science, it is not forbidden, even to the scholar, to examine what are or would be its possible applications. This is the more necessary here, since in this Cyclopædia economic art and science are in many regards mingled and confounded. What, then, are the useful applications which may be made of political economy in the present, or those which may be made of it in the future? The study of economic science will not lead, we may be sure, to the discovery of that chimera, that sort of philosopher's stone, so long sought for: the art of enriching nations by means of legislative combinations; on the contrary, the first fruit of this study is to make it clearly understood that the creation of such an art is impossible. Political economy shows, indeed, in the first place, that all wealth is derived from the energy of individual labor or the spontaneous activity of men; it shows, in the second place, that this spontaneous activity obeys, of itself, or by the force of things alone, certain regular laws which direct it unceasingly toward the most fruitful results, toward results the best that human industry can produce. In the presence of these two capital truths, the first that flow from the total of economic investigation, we are convinced that every artificial combination imposed on human labor is capable only of troubling its natural order, and diminishing its fruits. Neither will this study lead to the discovery of that other art so vainly sought for by certain modern sectaries, that of dividing the fruits of labor among the different classes or the different members of society according to conventional laws, to render this division more equal among men, or, as is supposed, more conformable to equity. It shows, and this is another of the capital truths which it gives to the world, that the partition or distribution of the fruits of labor effected by the natural laws of industry, is, when no artificial system intervenes to trouble the action of these natural laws, or when violence does not prevent their effect, the most equitable and the best possible. It proves that this division is continually effected according to the grand principle which men have pretended to inaugurate by other means: to each one according to his capacity, and to each capacity according to its works—a principle of rigorous justice, which does not reduce men to an impossible level, but which leaves to each one a share of enjoyment corresponding to the sum of the labors which he has furnished, or the services which he has rendered.
—In all this, then, the study of political economy leads us, and this is its first fruit, to renounce in an absolute manner the discovery of all those artificial combinations, in the search for which so many distinguished men have wasted their powers. It conducts us to this without effort, by the sole revelation of the natural order which it brings to light. After this revelation, all arbitrary combinations should vanish, because they have no longer any raison d'être, and because they can only trouble the pre-existing natural order. And this is why political economy, from the first, necessarily enunciated this great principle, Laissez faire, laissez passer, a principle which may be called a system if you will, but which has no value but this, that it is the negation of all artificial systems. Is this saying that political economy can not be applied usefully, that it can not reach any practical result? Decidedly not. On the contrary, there are many practical results, whose realization it can help to effect.
—It is, to begin with, a first and very great practical result to have caused the abandonment of all artificial systems, the unhappy fruits of the errors of men, some of which have already brought many evils on humanity, while others have sometimes menaced it with still greater evils. Political economy has shaken these systems to their foundations, beginning with that which consisted in regulating the labors of men, subjecting them to hindrances; including those which strove for nothing less than to substitute a new organization of industry sprung all armed from the head of some excited enthusiast, for that admirable natural organization which human genius has produced. This is the first service which economic science has rendered, and if it had done nothing else, it surely could not be said that it is barren of results. But it can render others still more direct and of a more positive nature.
—If from political economy we can not deduce the art of enriching nations, we can at least deduce from it another art, more rational and truer, that of governing them, in everything touching the interests of labor, in the manner most conformable to their natural tendencies. This still tends to enrich them, but by a different and much surer method, which is to desist from harassing their industry and diminishing its fruits. And if political economy, without interfering in politics, meaning by that whatever relates to the form itself of government, takes into consideration the state, or the power which directs the state in reference to the influence which it exercises and should exercise on the industrial circle which it embraces, it should also, for the same reason, say how far that influence ought to extend in order to protect the industrial order without troubling it. It is, then, its office to determine the real attributes of the state and the limits of these attributes.
—It does more. Even within the limits of these attributes it indicates the best measures to be adopted, keeping always in view the industrial order which it studies, and the spontaneous development of human activity. Among the legitimate attributes of political power, is, beyond doubt, that of levying and collecting taxes, in order to satisfy its own wants. Without examining whose province it is to levy or collect these taxes, a question which belongs to the domain of politics, political economy examines according to what principles and in what form they should be levied and collected in order to obtain the sum of contributions necessary, with the least possible damage to the people. The theory of taxation is therefore one of the first arts which spring from political economy.
—It does not stop here. Although the essential and primitive function of political power is to establish security, justice and law, there are certain other functions which can not be denied it, that, notably, of directing in each state certain interests which can not, without danger, be left to the action of individuals, and which imperatively demand the interference of public power. The state should interfere more or less, for example, in whatever concerns the management of waters, the system of roads, etc. There are still other objects which are evidently within its jurisdiction. Men may discuss, and they will often discuss, the greater or less extension which it is proper to give to these accessory attributes of political power, but no one will deny that there are some which it can not and should not abandon. In all this, it is still economic science that has to furnish the general rules by which the mode and extent of the intervention should be regulated. In all countries, general legislation is necessary to regulate the rights of individuals among themselves, and those of individuals in their relations to the public. Commonly this legislation becomes complicated in proportion as the progress of civilization has created more numerous and complex interests. It is essentially important to the happiness of the human species that in its totality and in its details this legislation should always be in perfect accord with that natural order which political economy reveals. It is true that to establish this accord it is very often sufficient to have recourse to good sense and the common principles of equity, for political economy itself does not demand anything but the triumph of equity; yet this is not sufficient in all cases. Besides the fact that it is not always easy in the complication of various interests to distinguish what is truly equitable from that which is merely specious, there are in all the legislations of the world a great number of provisions which are merely formal, and which belong to what might be called civil police provisions; and which are necessary sometimes to establish the rights of individuals, and sometimes to guarantee their enjoyment and preservation. It is especially in this part of legislation that there is a risk of going astray when one is not aided by the lights of economic science. It often happens in such cases, either that the guarantees offered are not sufficient for the preservation of the rights which it is wished to protect, or that they are superabundant, and stifle the action of these same rights under the weight of the formalities which they impose upon those rights. The legislation of civilized nations is, in our enlightened age, far from being exempt in this regard from all reproach. There is, on the contrary, not one which is not overburdened with annoying provisions and ill-conceived formalities, prejudicial to the public, and opposed to the very interests which they are intended to serve. How is legislation to be purged of these imperfections? By a more careful and general study of that natural order which political economy reveals and whose conditions it explains. Science has already rendered brilliant services in this direction. To it, above all, is due the relative merit of modern legislation, which, though very imperfect, is still far superior, on the whole, to that in force in the past. It will render still greater services here in the future, and we may hope that the world will be indebted to it, sooner or later, for a system of civil laws exactly appropriate to the real wants of human society.
—But it is not to legislators and governments alone that economic science has useful directions to give. Individuals may consult it with profit for the conduct of their private affairs, at least when these affairs extend beyond a certain limit. Individuals are forced, and more so than legislators and governments, to bend in all things to the industrial order to which they are essentially subordinate. They can scarcely, it is true, trouble it by their acts; for they have not the power to do so; at most, they are able to cause, by their errors or their faults, certain transient and altogether local disturbances in it. But the errors into which they allow themselves to be drawn, become fatal by hurrying them to their own ruin. They have, therefore, the greatest interest to avoid these errors, for on that their personal existence depends. Now, the best means of avoiding these errors is to study the industrial order in its essential constitution, in its natural tendencies and its normal development. If this study is not precisely necessary to the artisan and the retail merchant, who address themselves only to a small number of neighboring consumers, it is almost always necessary to those who work on a large scale, and especially to those who intend to embark in new enterprises. The majority of false steps taken on this road, and the disasters which they involve, when they are not purely the result of negligence or incapacity, arise from false ideas concerning the wants of society and its real tendencies.
—Political economy has often been given names different from that which it usually bears, and there is nothing very astonishing in this, for this name, as we have seen, is not very appropriate to it, and has scarcely any merit but that of having been sanctioned by long usage. Of these names we shall recall but a few. First, as to the present and ordinary name of the science: its origin is very ancient, since it is found at the head of a French treatise dated 1615, due to one Montchrestien de Watteville. The publicists of the school of Quesnay, who perhaps contributed more than others to sanction this ancient title, have nevertheless sometimes substituted another, that of physiocracy, which still serves to designate their school and their doctrine. Adam Smith, who cared more for things than for words, adopted the received titles without examination. J. B. Say, though he also accepted them, did not do so, at least in his later works and in the last editions of his Traité, without repugnance and regret. He would have preferred to be able to give another more fitting name to political economy, and he would have doubtless done so had he not feared to change the ideas of the public as to the real character of his labors. The name which he would have adopted in this case would have been social economy or social physiology, as he has himself declared several times. This last title would seem to us the most proper were it not likely to give rise to troublesome misunderstandings. The word physiology would, in every way, be very appropriate to economic science, since its object is to explain the action of the natural organs of industry. As to the word social, it would not be fitting except in so far as it should be well explained and well understood that the word relates to the great human society and that species of universal association which industrial relations create among men, and in no way to political society, which is only a fraction of that great society. Moreover, the word social has been so much abused in recent years, it has been made to serve as a cloak to so many foolish things, to so many anti-social and anti-human doctrines, that it will perhaps be necessary to avoid its employment for a long time to come.
—Fr. Skarbek has entitled his treatise, "Theory of Social Wealth," another name for political economy, less acceptable than those we have just noted, and which, after all that has preceded, we need not discuss.
—When there was created at the conservatory of arts and trades, at Paris, a chair of political economy, occupied at first by J. B. Say, and subsequently by Blanqui, it was called the chair of industrial economy. It may be that this name of industrial economy, imposed officially on a public chair, borrows from this circumstance a certain value, a certain authority. It has already served as title to a work founded on the first lectures of Blanqui, by two of his disciples.
—Some persons, strangers to the science, have also tried to impose on political economy the name of chrematistics, or other names stranger still. But these ill-sounding titles have never been seriously considered by any economist or even by the public.
—Whatever be the relative or absolute merit of some of these titles which we have passed in review, none has been able, up to the present, to prevail over that which long usage has sanctioned. After all, however incorrect this last may be, when it is considered in its etymological sense, perhaps it is better to adhere to it at least for the present. It is always dangerous, in the case of a science cultivated by so many minds, and in so many places, to alter or change received terms. And what importance has the etymological sense here? It is not the first time that a word has been deflected from its primitive sense, either by usage or by a change in the things themselves to which it refers; and we do not see that people who use it understand it the less on this account. If the future offers an opportunity to change the name which political economy still bears, it will be only when its 'general notions are more fully popularized and explained. The public mind will thus be prepared for the change of name.
[38.]We may use the expression medical sciences, because medicine, the art of healing, is aided by several sciences, specially cultivated for its use: anatomy, physiology, pathology, therapeutics; but we should not say the science of medicine.
[39.]The very real distinction which we establish between science and art has nothing in common with that which, rightly or wrongly, is made between theory and practice. There are theories of art, as there are of science, and it is only of the former that we may say, they are sometimes in opposition to practice. Art dictates rules, but general rules; and it is not unreasonable to suppose that these general rules, though correct, may sometimes disagree with the practice in certain particular instances. But this is not the case with science, which neither ordains, counsels nor prescribes anything, which limits itself to observing and explaining. In what sense, then, can it be in opposition to practice? There is, to our thinking, a double error in the following passage from Rossi: "The school of Quesnay has been too much reproached with its laissez faire, laissez passer. It was pure science." No, it was not pure science; it was art, since it was a maxim, a precept, a rule to follow. As to the maxim itself, although susceptible, like all general rules, of many restrictions in practice, instead of saying, like Rossi, that it approached too nearly the school of Quesnay, we should say that it has not been sufficiently landed, because not sufficiently understood.
[40.]It is, however, proper to remark that these economists do not say precisely that there is no wealth except exchangeable values, but that exchangeable value is the only wealth which political economy can take into account.
Footnotes for POLITICS