The Online Library of Liberty

A project of Liberty Fund, Inc.

• Advertisement By the American Editor, to the Sixth Edition.
• Advertisement By the American Editor, to the Fifth Edition.
• Introduction
• Book I: Of the Production of Wealth.
• Book I, Chapter I.: Of What Is to Be Understood By the Term, Production.
• Book I, Chapter II.: Of the Different Kinds of Industry, and the Mode In Which They Concur In Production.
• Book I, Chapter III: Of the Nature of Capital, and the Mode In Which It Concurs In the Business of Production.
• Book I, Chapter IV: On Natural Agents That Assist In the Production of Wealth, and Specially of Land.
• Book I, Chapter V: On the Mode In Which Industry, Capital, and Natural Agents Unite In Production.
• Book I, Chapter VI: Of Operations Alike Common to All Branches of Industry.
• Book I, Chapter VII: Of the Labour of Mankind, of Nature, and of Machinery Respectively.
• Book I, Chapter VIII: Of the Advantages and Disadvantages Resulting From Division of Labour, and of the Extent to Which It May Be Carried.
• Book I, Chapter IX: Of the Different Methods of Employing Commercial Industry, and the Mode In Which They Concur In Production.
• Book I, Chapter X: Of the Transformations Undergone By Capital In the Progress of Production
• Book I, Chapter XI: Of the Formation and Multiplication of Capital.
• Book I, Chapter XII: Of Unproductive Capital
• Book I, Chapter XIII: Of Immaterial Products, Or Values Consumed At the Moment of Production.
• Book I, Chapter XIV: Of the Right of Property.
• Book I, Chapter XV: Of the Demand Or Market For Products.
• Book I, Chapter XVI: Of the Benefits Resulting From the Quick Circulation of Money and Commodities.
• Book I, Chapter XVII: Of the Effect of Government Regulations Intended to Influence Production.
• Book I, Chapter XVIII: Of the Effect Upon National Wealth, Resulting From the Productive Efforts of Public Authority.
• Book I, Chapter XIX: Of Colonies and Their Products.
• Book I, Chapter XX: Of Temporary and Permanent Emigration, Considered In Reference to National Wealth.
• Book I, Chapter XXI: Of the Nature and Uses of Money.
• Book I, Chapter XXII: Of Signs Or Representatives of Money.
• Book II: Of the Distribution of Wealth
• Book Ii, Chapter I: Of the Basis of Value; and of Supply and Demand.
• Book Ii, Chapter II: The Sources of Revenue.
• Book Ii, Chapter III: Of Real and Relative Variation of Price.
• Book Ii, Chapter IV: Of Nominal Variation of Price, and of the Peculiar Value of Bullion and of Coin.
• Book Ii, Chapter V: Of the Manner In Which Revenue Is Distributed Amongst Society.
• Book Ii, Chapter VI: Of What Branches of Production Yield the Most Liberal Recompense to Productive Agency.
• Book Ii, Chapter VII: Of the Revenue of Industry
• Book Ii, Chapter VIII: Of the Revenue of Capital.
• Book Ii, Chapter IX: Of the Revenue of Land.
• Book Ii, Chapter X: Of the Effect of Revenue Derived By One Nation From Another.
• Book Ii, Chapter XI: Of the Mode In Which the Quantity of the Product Affects Population.
• Book III: Of the Consumption of Wealth
• Book Iii, Chapter I: Of the Different Kinds of Consumption.
• Book Iii, Chapter II: Of the Effect of Consumption In General.
• Book Iii, Chapter III: Of the Effect of Productive Consumption.
• Book Iii, Chapter IV: Of the Effect of Unproductive Consumption In General.
• Book Iii, Chapter V: Of Individual Consumption—its Motives and Its Effects.
• Book Iii, Chapter VI: On Public Consumption
• Book Iii, Chapter VII: Of the Actual Contributors to Public Consumption.
• Book Iii, Chapter VIII: Of Taxation.
• Book Iii, Chapter IX: Of National Debt.
• Appendix A: a Table, Showing the Result of Value Lent to the State.

BOOK III

OF THE CONSUMPTION OF WEALTH

BOOK III, CHAPTER I

OF THE DIFFERENT KINDS OF CONSUMPTION.

In the course of my work, I have frequently been obliged to anticipate the explanation of terms and notions which in the natural order should have been postponed to a later period of the investigation. Thus I was obliged in the first book to explain the sense, in which I used the term, consumption, because production cannot be effected without consumption.

My reader will have seen from the explanation there given, that, in like manner as by production is meant the creation, not of substance, but of utility, so by consumption is meant the destruction of utility, and not of substance, or matter. When once the utility of a thing is destroyed, there is an end of the source and basis of its value;—an extinction of that, which made it an object of desire and of demand. It thenceforward ceases to possess value, and is no longer an item of wealth.

Thus, the terms, to consume, to destroy the utility, to annihilate the value of any thing, are as strictly synonymous as the opposite terms to produce, to communicate utility, to create value, and convey to the mind precisely the same idea. Consumption, then, being the destruction of value, is commensurate, not with the bulk, the weight, or the number of the products consumed, but with their value. Large consumption is the destruction of large value, whatever form that value may happen to have assumed.

Every product is liable to be consumed; because the value, which can be added to, can likewise be subtracted from, any object. If it has been added by human exertion or industry, it may be subtracted by human use, or a variety of accidents. But it cannot be more than once consumed; value once destroyed cannot be destroyed a second time. Consumption is sometimes rapid, sometimes gradual. A house, a ship, an implement of iron, are equally consumable as a loaf, a joint of meat, or a coat. Consumption again may be but partial. A horse, an article of furniture, or a house when re-sold by the possessor, has been but partially consumed; there is still a residue of value, for which an equivalent is received in exchange on the re-sale. Sometimes consumption is involuntary, and either accidental, as when a house is burnt, or a vessel shipwrecked, or contrary to the consumer's intention, as when a cargo is thrown overboard, or stores set on fire to prevent their falling into enemies' hands.

Value may be consumed, either long after its production, or at the very moment, and in the very act of production, as in the case of the pleasure afforded by a concert, or theatrical exhibition. Time and labour may be consumed; for labour, applicable to an useful purpose, is an object of value, and when once consumed, can never be consumed again.

Whatever cannot possibly lose its value is not liable to consumption. A landed estate cannot be consumed; but its annual productive agency may; for when once that agency has been exerted, it cannot be exerted again. The improvements of an estate may be consumed, although their value may possibly exceed that of the estate itself; for these improvements are the effect of human exertion and industry; but the land itself is inconsumable.1

So likewise it is with any industrious faculty. One may consume a labourer's day's work, but not his faculty of working; which, however, is liable to destruction by the death of the person possessing it.

All products are consumed sooner or later; indeed they are produced solely for the purpose of consumption, and, whenever the consumption of a product is delayed after it has reached the point of absolute maturity, it is value inert and neutralized for the time. For as all value may be employed re-productively, and made to yield a profit to the possessor, the withholding a product from consumption is a loss of the possible profit, in other words, of the interest its value would have yielded, if usefully employed.2

But, products being universally destined for consumption, and that too in the quickest way, how, it may be asked, can there be ever an accumulation of capital, that is to say, of values produced?

I answer—that value may be accumulated, without being necessarily vested all the while in the same identical product, provided only it be perpetuated in some product or other. Now, values employed as capital are perpetuated by reproduction; the various products of which capital consists, are consumed like all other products: but their value is no sooner destroyed by consumption, than it re-appears in another, or a similar substance. A manufactory can not be kept up, without a consumption of victuals and clothes for the workmen, as well as of the raw material of manufacture; but, while value in those forms is undergoing consumption, new value is communicated to the object of manufacture. The items that composed the capital so expended, are consumed and gone; but the capital, the accumulated value, still exists and re-appears under a new form, applicable to a second course of consumption. Whereas, if consumed unproductively, it never re-appears at all.

The annual consumption of an individual, is, the aggregate of all the values consumed by that individual within the year. The annual consumption of a nation is, the aggregate of values consumed within the year by all the individuals and communities, whereof the nation consists.

In the estimate of individual or national consumption, must be included every kind of consumption, whatever be its motive or consequence, whether productive of new value or not; in like manner, as the estimate of the annual production of a nation comprises the total value of its products raised within the year. Thus, a soap manufactory is said to consume such or such a quantity or value of alkali in a year, although this value be re-produced from the manufactory in the shape of soap; on the other hand, it is said to produce annually such and such a quantity or value of soap, although the production may have cost the destruction of a great variety of values, which, if deducted, would vastly reduce the apparent product. By annual production, or consumption, national or individual, is therefore meant, the gross and not the net amount.3

Whence it naturally follows, that all the commodities, which a nation imports, must be reckoned as a part of its annual product, and all its exports as part of its annual consumption. The trade of France consumes the total value of the silk it exports to the United States; and produces, on the other hand, the total value of cotton received in return. And, in like manner, the manufacture of France consumes the value of alkali employed by the soap-boiler, and produces the value of soap derived from the concern.

The total annual consumption of a nation, or an individual, is a very different thing from the aggregate of capital. A capital may be wholly or partially consumed several times a year. When a shoemaker buys leather, and cuts and works it up into shoes, there is so much capital consumed and reproduced. Every time he repeats the operation, there is so much more capital consumed. Suppose the leather purchased to amount to 40 dollars, and the operation to be repeated 12 times in the year, there will have been an annual consumption of 480 dollars upon a capital of 40 dollars. On the other hand, there may be portions of his capital, implements of trade, for instance, which it may take several years to consume. Of this part of his capital he may consume annually but 1-4 or 1-10 perhaps.

In each country the wants of the consumer determine the quality of the product. The product most wanted is most in demand; and that which is most in demand yields the largest profit to industry, capital, and land, which are therefore employed in raising this particular product in preference; and, vice versâ, when a product becomes less in demand, there is a less profit to be got by its production; it is, therefore, no longer produced. All the stock on hand falls in price; the low price encourages the consumption, which soon absorbs the stock on hand.

The total national consumption may be divided into the heads of public consumption, and private consumption; the former is effected by the public, or in its service; the latter by individuals or families. Either class may be productive or unproductive.

In every community each member is a consumer; for no one can subsist, without the satisfaction of some necessary wants, however confined and limited; on the other hand, all, who do not live on mere charity, or gratuitous bounty, contribute somehow to production, by their industry, their capital, or their land; wherefore, the consumers may be said to be themselves the producers; and the great bulk of consumption takes place amongst the middling and poorer classes, whose numbers more than counterbalance the smallness of the share allotted to each.4

Opulent, civilised, and industrious nations, are greater consumers than poor ones, because they are infinitely greater producers. They annually, and in some cases, several times in the course of the year, re-consume their productive capital, which is thus continually renovated; and consume unproductively, the greater part of their revenues, whether derived from industry, from capital, or from land.

It is not uncommon to find authors proposing, as the model for imitation, those nations whose wants are few; whereas, it is far preferable to have numerous wants, along with the power to gratify them. This is the way at once to multiply the human species, and to give to each a more enlarged existence.

Stewart5 extols the Lacedæmonian policy, which consisted in practising the art of self-denial in the extreme, without aiming at progressive advancement in the art of production. But herein the Spartans were rivalled by the rudest tribes of savages, which are commonly neither numerous nor amply provided. Upon this principle, it would be the very acme of perfection to produce nothing and to have no wants; that is to say, to annihilate human existence.

BOOK III, CHAPTER II

OF THE EFFECT OF CONSUMPTION IN GENERAL.

The immediate effect of consumption of every kind is, the loss of value, consequently, of wealth, to the owner of the article consumed. This is the invariable and inevitable consequence, and should never be lost sight of in reasoning on this matter. A product consumed is a value lost to all the world and to all eternity; but the further consequence, that may follow, will depend upon the circumstances and nature of the consumption.

If the consumption be unproductive, there usually results the gratification of some want, but no reproduction of value whatever; if productive, there results the satisfaction of no want, but a creation of new value, equal, inferior, or superior in amount to that consumed, and profitable or unprofitable to the adventurer accordingly.6

Thus, consumption may be regarded as an act of barter, wherein the owner of the value consumed gives up that value on the one hand, and receives in return, either the satisfaction of a personal want, or a fresh value, equivalent to the value consumed.

It may be proper here to remark, that consumption, productive of nothing beyond a present gratification, requires no skill or talent in the consumer. It requires neither labour nor ingenuity to eat a good dinner, or dress in fine clothes.7 On the contrary, productive consumption, besides yielding no immediate or present gratification, requires an exertion of combined labour and skill, or, of what has all along been denominated, industry.

When the owner of a product ready for consumption has himself no industrious faculty, and wishes, but knows not how to consume it productively, he lends it to some one more industrious than himself, who commences by destroying it, but in such a way, as to reproduce another, and thereby enable himself to make a full restitution to the lender, after retaining the profit of his own skill and labour. The value returned consists of different objects from that lent, it is true; indeed, the condition of a loan is in substance this; to replace the value lent, of whatever amount, say 2000 dollars, at a time specified, by other value, equivalent to the same amount of silver coin of the like weight and quality at the time of repayment. An object, lent on condition of specific restitution, cannot be available for reproduction; because, by the terms of the loan, it is not to be consumed.

Sometimes a producer is the consumer of his own product; as when the farmer eats his own poultry or vegetables; or the clothier wears his own cloth. But, the objects of human consumption being far more varied and numerous, than the objects of each person's production respectively, most operations of consumption are preceded by a process of barter. He first turns into money, or receives in that shape, the values composing his individual revenue; and then changes again that money for the articles he purposes to consume. Wherefore, in common parlance, to spend and to consume have become nearly synonymous. Yet, by the mere act of buying, the value expended is not lost; for the article purchased has likewise a value, which may be parted with again for what it cost, if it has not been bought over-dear. The loss of value does not happen till the actual consumption, after which the value is destroyed; it then ceases to exist, and is not the object of a second consumption. For this reason it is, that in domestic life, the bad management of the wife soon runs through a moderate fortune; for she in general regulates the daily consumption of the family, which is the chief source of expense, and one that is always recurring.

This will serve to expose the error of the notion, that where there is no loss of money, there can be no loss of wealth. It is the commonest thing in the world to hear it roundly asserted, that the money spent is not lost, but remains in the country; and, therefore, that the country cannot be impoverished by its internal expenditure. It is true, the value of the money remains as before; but the object, or the hundred objects, perhaps, that have been successively bought with the same money, have been consumed, and their value destroyed.

Wherefore, it is superfluous, I had almost said ridiculous, to confine at home the national money, for the purpose of preserving national wealth. Money by no means prevents the consumption of value, and the consequent diminution of wealth; on the contrary, it facilitates the arrival of consumable objects at their ultimate destination; which is a most beneficial act, when the end is well chosen, and the result satisfactory. Nor would it be correct even to maintain, that the export of specie is at all events a loss, although its presence in the country may be no hindrance to consumption or to the diminution of wealth. For unless it be made without any view to a return, which is rarely the case, it is in fact the same thing as productive consumption; being merely a sacrifice of one value, for the purpose of obtaining another. Where no return whatever is in view, there indeed is so much loss of national capital; but the loss would be quite as great, were goods, and not money, so exported.

BOOK III, CHAPTER III

OF THE EFFECT OF PRODUCTIVE CONSUMPTION.

The nature of productive consumption has been explained above in Book I. The value absorbed by it is what has been called Capital. The trader, manufacturer, and cultivator, purchase the raw material8 and productive agency, which they consume in the preparation of new products; and the immediate effect is precisely the same as that of unproductive consumption, namely, to create a demand for the objects of their consumption, which operates upon their price, and upon their production; and to cause a destruction of value. But the ultimate effect is different; there is no satisfaction of a human want, and no resulting gratification, except that accruing to the adventurer from the possession of the fresh product the value which replaces that of the products consumed, and commonly affords him a profit into the bargain.

To this position, that productive consumption does not immediately satisfy any human want, a cursory observer may possibly object, that the wages of labour, though a productive outlay, go to satisfy the wants of the labourer, in food, raiment, and amusement perhaps. But, in this operation, there is a double consumption; 1. Of the capital consumed productively in the purchase of productive agency, wherefrom results no human gratification; 2. Of the daily or weekly revenue of the labourer, i.e. of his productive agency, the recompense for which is consumed unproductively by himself and his family, in like manner as the rent of the manufactory, which forms the revenue of the landlord, is by him consumed unproductively. And this does not imply the consumption of the same value twice over, first productively, and afterwards unproductively; for the values consumed are two distinct values resting on bases altogether different. The first, the productive agency of the labourer, is the effect of his muscular power and skill, which is itself a positive product, bearing value like any other. The second is a portion of capital, given by the adventurer in exchange for that productive agency. After the act of exchange is once completed, the consumption of the value given on either side is contemporaneous, but with a different object in view; the one being intended to create a new product, the other to satisfy the wants of the productive agent and his family. Thus, the object, expended and consumed by the adventurer, is the equivalent he receives for his capital; and that, consumed unproductively by the labourer, is the equivalent for his revenue. The interchange of these two values by no means makes them one and the same.

So likewise, the intellectual industry of superintendence is reproductively consumed in the concern; and the profits, accruing to the adventurer as its recompense, are consumed unproductively by himself and his family.

In short, this double consumption is precisely analogous to that of the raw material used in the concern. The clothier presents himself to the wool-dealer, with 1000 crowns in his hand; there are, at this moment, two values in existence, on the one side, that of the 1000 crowns, which is the result of previous production, and now forms a part of the capital of the clothier; on the other, the wool constituting a part of the annual product of a grazing farm. These products are interchanged, and each is separately consumed: the capital converted into wool, in a way to produce cloth; the product of the farm, converted into crown-pieces, in the satisfaction of the wants of the farmer, or his landlord.

Since every thing consumed is so much lost, the gain of reproductive consumption is equal, whether proceeding from reduced consumption, or from enlarged production. In China, they make a great saving, in the consumption of seed-corn, by following the drilling in lieu of the broad-cast, method. The effect of this saving is precisely the same, as if the land were, in China, proportionately more productive than in Europe.9

In manufacture, when the raw material used is of no value whatever, it is not to be reckoned as forming any part of the requisite consumption of the concern; thus, the stone used by the lime-burner, and the sand employed by the glass-blower, are no part of their respective consumption, whenever they have cost them nothing.

A saving of productive agency, whether of industry, of land, or of capital, is equally real and effectual, as a saving of raw material; and it is practicable in two ways; either by making the same productive means yield more agency; or by obtaining, the same result from a smaller quantity of productive means.

Such savings generally operate in a very short time to the benefit of the community at large; they reduce the charges of production; and in proportion as the economical process becomes better understood, and more generally practised, the competition of producers brings the price of the product gradually to a level with the charges of production. But for this very reason, all, who do not learn to economise like their neighbours, must necessarily lose, while others are gaining. Manufacturers have been ruined by hundreds, because they would go to work in a grand style with too costly and complex an apparatus, provided of course at an excessive expense of capital.

Fortunately, in the great majority of cases, self-interest is most sensibly and immediately affected by a loss of this kind; and in the concerns of business, like pain in the human frame, gives timely warning of injuries, that require care and reparation. If the rash or ignorant adventurer in production were not the first to suffer the punishment of his own errors or misconduct, we should find it far more common than it is to dash into improvident speculation; which is quite as fatal to public prosperity, as profusion and extravagance. A merchant, that spends 10,000 dollars in the acquisition of 6000 dollars, stands, in respect to his private concerns and to the general wealth of the community, upon exactly the same footing, as a man of fashion, who spends 4000 dollars in horses, mistresses, gluttony, or ostentation; except, perhaps, that the latter has more pleasure and personal gratification for his money.10

What has been said on this subject in Book I, of this work, makes it needless to enlarge here on the head of productive consumption. I shall, therefore, henceforward direct my reader's attention to the subject of unproductive consumption, its motives, and consequences; premising, that in what I am about to say, the word consumption, used alone, will import unproductive consumption, as it does in common conversation.

BOOK III, CHAPTER IV

OF THE EFFECT OF UNPRODUCTIVE CONSUMPTION IN GENERAL.

Having just considered the nature and effect of consumption in general, as well as the general effect of productive consumption in particular, it remains only to consider, in this and the following chapters, such consumption as is effected with no other end or object in view, than the mere satisfaction of a want, or the enjoyment of some pleasurable sensation.

Whoever has thoroughly comprehended the nature of consumption and production, as displayed in the preceding pages, will have arrived at the conviction, that no consumption of the class denominated unproductive, has any ulterior effect, beyond the satisfaction of a want by the destruction of existing value. It is a mere exchange of a portion of existing wealth on the one side, for human gratification on the other, and nothing more. Beyond this, what can be expected?—reproduction? how can the same identical utility be afforded a second time? Wine can not be both drunk and distilled into brandy too. Neither can the object consumed serve to establish a fresh demand, and thus indirectly to stimulate future productive exertion; for it has already been explained that the only effectual demand is created by the possession of wherewithal to purchase,—of something to give in exchange; and what can that be, except a product, which, before the act of exchange and consumption, must have been an item, either of revenue or of capital? The existence and intensity of the demand must invariably depend upon the amount of revenue and of capital: the bare existence of revenue and of capital is all that is necessary for the stimulus of production, which nothing else can stimulate. The choice of one object of consumption necessarily precludes that of another; what is consumed in the shape of silks cannot be consumed in the shape of linens or woollens; nor can what has once been devoted to pleasure or amusement, be made productive also of more positive or substantial utility.

Wherefore, the sole object of inquiry, with regard to unproductive consumption, is, the degree of gratification resulting from the act of consumption itself: and this inquiry will, in the remainder of this chapter, be pursued in respect of unproductive consumption in general, after which we shall give in the following chapters, a separate consideration to that of individuals, and that of the public, or community at large. The sole point is, to weigh the loss, occasioned to the consumer by his consumption, against the satisfaction it affords him. The degree of correctness, with which the balance of loss and gain is struck, will determine whether the consumption be judicious or otherwise; which is a point that next to the actual production of wealth, has the most powerful influence upon the well or ill-being of families and of nations.

In this point of view, the most judicious kinds of consumption seem to be:—

1. Such as conduce to the satisfaction of positive wants; by which term I mean those, upon the satisfaction of which depends the existence, the health, and the contentment of the generality of mankind; being the very reverse of such as are generated by refined sensuality, pride, and caprice. Thus, the national consumption will, on the whole, be judicious, if it absorb the articles rather of convenience than of display: the more linen and the less lace; the more plain and wholesome dishes, and the fewer dainties; the more warm clothing, and the less embroidery, the better. In a nation whose consumption is so directed, the public establishments will be remarkable rather for utility than splendour, its hospitals will be less magnificent than salutary and extensive; its roads well furnished with inns, rather than unnecessarily wide and spacious, and its towns well paved, though with few palaces to attract the gaze of strangers.

The luxury of ostentation affords a much less substantial and solid gratification, than the luxury of comfort, if I may be allowed the expression. Besides, the latter is less costly, that is to say, involves the necessity of a smaller consumption; whereas the former is insatiable; it spreads from one to another, from the mere proneness to imitation; and the extent to which it may reach, is as absolutely unlimited.11 "Pride," says Franklin, "is a beggar quite as clamorous as want, but infinitely more insatiable."

Taking society in the aggregate, it will be found that, one with another, the gratification of real wants is more important to the community, than the gratification of artificial ones. The wants of the rich man occasion the production and consumption of an exquisite perfume, perhaps those of the poor man, the production and consumption of a good warm winter cloak; supposing the value to be equal, the diminution of the general wealth is the same in both cases; but the resulting gratification will, in the one case, be trifling, transient, and scarcely perceptible; in the other, solid, ample, and of long duration.12

2. Such as are the most gradual, and absorb products of the best quality. A nation or an individual, will do wisely to direct consumption chiefly to those articles, that are the longest time in wearing out, and the most frequently in use. Good houses and furniture are, therefore, objects of judicious preference; for there are few products that take longer time to consume than a house, or that are of more frequent utility; in fact, the best part of one's life is passed in it. Frequent changes of fashion are unwise; for fashion takes upon itself to throw things away long before they have lost their utility, and sometimes before they have lost even the freshness of novelty, thus multiplying consumption exceedingly, and rejecting as good for nothing what is perhaps still useful, convenient, or even elegant. So that a rapid succession of fashions impoverishes a state, as well by the consumption it occasions, as by that which it arrests.

There is an advantage in consuming articles of superior quality, although somewhat dearer, and for this reason: in every kind of manufacture, there are some charges that are always the same, whether the product be of good or bad quality. Coarse linen will have cost, in weaving, packing, storing, retailing, and carriage, before it comes to the ultimate consumer, quite as much trouble and labour, as linen of the finest quality, therefore in purchasing an inferior quality, the only saving is the cost of the raw material: the labour and trouble must always be paid in full, and at the same rate; yet the product of that labour and trouble are much quicker consumed, when the linen is of inferior, than when it is of superior quality.

This reasoning is applicable indifferently to every class of product; for in every one there are some kinds of productive agency, that are paid equally without reference to quality; and that agency is more profitably bestowed in the raising of products of good than of bad quality; therefore, it is generally more advantageous for a nation to consume the former. But this can not be done, unless the nation can discern between good and bad, and have acquired taste for the former; wherein again appears the necessity of knowledge13 to the furtherance of national prosperity; and unless, besides, the bulk of the population be so far removed above penury, as not to be obliged to buy whatever is the cheapest in the first instance, although it be in the long-run the dearest to the consumer.

It is evident, that the interference of public authority in regulating the details of the manufacture, supposing it to succeed in making the manufacturer produce goods of the best quality, which is very problematical, must be quite ineffectual in promoting their consumption; for it can give the consumer, neither the taste of what is of the better quality, nor the ability to purchase. The difficulty lies, not in finding a producer, but in finding a consumer. It will be no hard matter to supply good and elegant commodities, if there be consumers both willing and able to purchase them. But such a demand can exist only in nations enjoying comparative affluence; it is affluence, that both furnishes the means of buying articles of good quality, and gives a taste for them. Now the interference of authority is not the road to affluence, which results from activity of production, seconded by the spirit of frugality;—from habits of industry pervading every channel of occupation, and of frugality tending to accumulation of capital. In a country, where these qualities are prevalent, and in no other, can individuals be at all nice or fastidious in what they consume. On the contrary, profusion and embarrassment are inseparable companions; there is no choice when necessity drives.

The pleasures of the table, of play, of pyrotechnic exhibitions, and the like, are to be reckoned amongst those of shortest duration. I have seen villages, that, although in want of good water, yet do not hesitate to spend in a wake or festival, that lasts but one day, as much money as would suffice to construct a conduit for the supply of that necessary of life, and a fountain or public cistern on the village green; the inhabitants preferring to get once drunk in honour of the squire or saint, and to go day after day with the greatest inconvenience, and bring muddy water from half a league distance. The filth and discomfort prevalent in rustic habitations are attributable, partly to poverty, and partly to injudicious consumption.

In most countries, if a part of what is squandered in frivolous and hazardous amusements, whether in town or country, were spent in the embellishment and convenience of the habitations, in suitable clothing, in neat and useful furniture, or in the instruction of the population, the whole community would soon assume an appearance of improvement, civilization, and affluence, infinitely more attractive to strangers, as well as more gratifying to the people themselves.

3. The collective consumption of numbers. There are some kinds of agency, that need not be multiplied in proportion to the increased consumption. One cook can dress dinner for ten as easily as for one; the same grate will roast a dozen joints as well as one; and this is the reason, why there is so much economy in the mess-table of a college, a monastery, a regiment, or a large manufactory, in the supply of great numbers from a common kettle or kitchen, and in the dispensaries of cheap soups.

4. And lastly, on grounds entirely different, those kinds of consumption are judicious, which are consistent with moral rectitude; and, on the contrary, those, which infringe its laws, generally end in public, as well as private calamity. But it would be too wide a digression from my subject to attempt the illustration of this position.

It is observable, that great inequality of private fortune is hostile to those kinds of consumption, that must be regarded as most judicious. In proportion as that inequality is more marked, the artificial wants of the population are more numerous, the real ones more scantily supplied, and the rapid consumption more common and destructive. The patrician spendthrifts and imperial gluttons of ancient Rome thought they never could squander enough. Besides, immoral kinds of consumption are infinitely more general, where the extremes of wealth and poverty are found blended together. In such a state of society, there are few, who can indulge in the refinement of luxury, but a vast number, who look on their enjoyments with envy, and are ever impatient to imitate them. To get into the privileged class is the grand object, be the means ever so questionable; and those who are little scrupulous in the acquirement, are seldom more so in the employment of wealth.14

The government has, in all countries, a vast influence, in determining the character of the national consumption; not only because it absolutely directs the consumption of the state itself, but because a great proportion of the consumption of individuals is gained by its will and example. If the government indulge a taste for splendour and ostentation, splendour and ostentation will be the order of the day, with the whole host of imitators; and even those of better judgment and discretion must, in some measure, yield to the torrent. For, how seldom are they independent of that consideration and good opinion, which, under such circumstances, are to be earned, not by personal qualities, but by a course of extravagance they can not approve?

First and foremost in the list of injudicious kinds of consumption stand those which yield disgust and displeasure, in lieu of the gratification anticipated. Under this class may be ranged, excess and intemperance in private individuals; and, in the state, wars undertaken with the motive of pure vengeance, like that of Louis XIV. in revenge for the attacks of a Dutch newspaper, or with that of empty glory, which leads commonly to disgrace and odium. Yet such wars are even less to be deplored for the waste of national wealth and resources, than for the irremediable loss of personal virtue and talent sacrificed in the struggle; a loss which involves families in distress enough, when exacted by the public good, and by the pressure of inexorable necessity; but must be doubly shocking and afflicting, when it originates in the caprice, the wickedness, the folly, or the ungovernable passions of national rulers.

BOOK III, CHAPTER V

OF INDIVIDUAL CONSUMPTION—ITS MOTIVES AND ITS EFFECTS.

The consumption of individuals, as contrasted with that of the public or community at large, is such as is made with the object of satisfying the wants of families and individuals. These wants chiefly consist in those of food, raiment, lodging, and amusement. They are supplied with the necessary articles of consumption in each department, out of the respective revenue of each family or individual, whether derived from personal industry, from capital, or from land. The wealth of a family advances, declines, or remains stationary, according as its consumption equals, exceeds, or falls short of its revenue. The aggregate of the consumption of all the individuals, added to that of the government for public purposes, forms the grand total of national consumption.

A family, or indeed a community, or nation, may certainly consume the whole of its revenue, without being thereby impoverished; but it by no means follows, that it either must, or would act wisely, in so doing. Common prudence would counsel to provide against casualties. Who can say with certainty, that his income will not fall off, or that his fortune is exempt from the injustice, the fraud, or the violence of mankind? Lands may be confiscated; ships may be wrecked; litigation may involve him in its expenses and uncertainties. The richest merchant is liable to be ruined by one unlucky speculation, or by the failure of others. Were he to spend his whole income, his capital might, and in all probability would, be continually on the decline.

But, supposing it to remain stationary, should one be content with keeping it so? A fortune, however large, will seem little enough, when it comes to be divided amongst a number of children. And, even if there be no occasion to divide it, what harm is there in enlarging it; so it be done by honourable means? what else is it, but the desire of each individual to better his situation, that suggests the frugality that accumulates capital, and thereby assists the progress of industry, and leads to national opulence and civilisation? Had not previous generations been actuated by this stimulus, the present one would now be in the savage state; and it is impossible to say, how much farther it may yet be possible to carry civilization. It has never been proved to my satisfaction, that nine-tenths of the population must inevitably remain in that degree of misery and semi-barbarism, which they are found in at present in most countries of Europe.

The observance of the rules of private economy keeps the consumption of a family within reasonable bounds: that is to say, the bounds prescribed in each instance by a judicious comparison of the value sacrificed in consumption, with the satisfaction it affords. None but the individual himself, can fairly and correctly estimate the loss and gain, resulting to himself or family from each particular act of consumption; for the balance will depend upon the fortune, the rank, and the wants of himself and family; and, in some degree, perhaps, upon personal taste and feelings. To restrain consumption within too narrow limits, would involve the privation of gratification that fortune has placed within reach; and, on the other hand, a too profuse consumption might trench upon resources, that it might be but common prudence to husband.15

Individual consumption has constant reference to the character and passions of the consumer. It is influenced alternately by the noblest and the vilest propensities of our nature; at one time it is stimulated by sensuality; at another by vanity, by generosity, by revenge, or even by covetousness. It is checked by prudence or foresight, by groundless apprehension, by distrust, or by selfishness. As these various qualities happen in turn to predominate, they direct mankind in the use they make of their wealth. In this, as in every other action of life, the line of true wisdom is the most difficult to observe. Human infirmity is perpetually deviating to the one side or the other, and seldom steers altogether clear of excess.16

In respect to consumption, prodigality and avarice are the two faults to be avoided: both of them neutralize the benefits that wealth is calculated to confer on its possessor; prodigality by exhausting, avarice by not using, the means of enjoyment. Prodigality is, indeed, the more amiable of the two, because it is allied to many amiable and social qualities. It is regarded with more indulgence, because it imparts its pleasures to others; yet it is of the two the more mischievous to society; for it squanders and makes away with the capital that should be the support of industry; it destroys industry, the grand agent of production, by the destruction of the other agent, capital. If, by expense and consumption, are meant those kinds only which minister to our pleasures and luxuries, it is a great mistake to say that money is good for nothing but to be spent, and that products are only raised to be consumed. Money may be employed in the work of re-production; when so employed, it must be productive of great benefit; and, every time that a fixed capital is squandered, a corresponding quantity of industry must be extinguished, in some quarter or other. The spendthrift, in running through his fortune, is at the same time exhausting, pro tanto, the source of the profits upon industry.

The miser, who, in the dread of losing his money, hesitates to turn it to account, does, indeed, nothing to promote the progress of industry; but at least he can not be said to reduce the means of production. His hoard is scraped together by the abridgment of his personal gratifications, not at the expense of the public, according to the vulgar notion; it has been withdrawn from no productive occupation, and will at any rate re-appear at his death, and be available for the purpose of extending the operations of industry, if it be not squandered by his heirs, or so effectually concealed, as to evade all search or recovery.

It is absurd in spendthrifts to boast of their prodigality, which is quite as unworthy the nobleness of our nature, as the sordid meanness of the opposite character. There is no merit in consuming all one can lay hands upon, and desisting only when one can get no more to consume; every animal can do as much; nay, there are some animals that set a better example of provident management. It is more becoming the character of a being gifted with reason and foresight, never to consume, in any instance, without some reasonable object in view. At least, this is the course that economy would prescribe.

In short, economy is nothing more than the direction of human consumption with judgment and discretion,—the knowledge of our means, and the best mode of employing them. There is no fixed rule of economy; it must be guided by a reference to the fortune, condition, and wants of the consumer. An expense, that may be authorized by the strictest economy in a person of moderate fortune, would, perhaps, be pitiful in a rich man, and absolute extravagance in a poor one. In a state of sickness, a man must allow himself indulgences, that he would not think of in health. An act of beneficence, that trenches on the personal enjoyments of the benefactor, is deserving of the highest praise; but it would be highly blamable, if done at the expense of his children's subsistence.

Economy is equally distant from avarice and profusion. Avarice hoards,not for the purpose of consuming or re-producing, but for the mere sake of hoarding; it is a kind of instinct, or mechanical impulse, much to the discredit of those in whom it is detected; whereas, true economy is the offspring of prudence and sound reason and does not sacrifice necessaries to superfluities, like the miser when he denies himself present comforts, in the view of luxury, ever prospective and never to be enjoyed. The most sumptuous entertainment may be conducted with economy, without diminishing, but rather adding to its splendour, which the slightest appearance of avarice would tarnish and deface. The economical man balances his means against his present or future wants, and those of his family and friends, not forgetting the calls of humanity. The miser regards neither family nor friends; scarcely attends to his own personal wants, and is an utter stranger to those of mankind at large. Economy never consumes without an object; avarice never willingly consumes at all; the one is a sober and rational study, the only one that supplies the means of fulfilling our duties, and being at the same time just and generous; the other, a vile propensity to sacrifice every thing to the sordid consideration of self.

Economy has not unreasonably been ranked among the virtues of mankind; for, like the other virtues, it implies self-command and control; and is productive of the happiest consequences; the good education of children, physical and moral; the careful attendance of old age; the calmness of mind, so necessary to the good conduct of middle life; and that independence of circumstances which alone can secure against mercenary motives, are all referable to this quality. Without it there can be no liberality, none at least of a permanent and wholesome kind; for, when it degenerates into prodigality, it is an indiscriminate largess, alike to deserving and undeserving; stinting those who have claims in favour of those who have none. It is common to see the spendthrift reduced to beg a favour from people that he has loaded with his bounty; for what he gives now, one expects a return will some day be called for; whereas, the gifts of the economical man are purely gratuitous; for he never gives except from his superfluities. The latter is rich with a moderate fortune; but the miser and the prodigal are poor, though in possession of the largest resources.

Economy is inconsistent with disorder, which stumbles blindfold over wealth, sometimes missing what it most desires, although close within its reach, and sometimes seizing and devouring what it is most interested in preserving; ever impelled by the occurrences of the moment, which it either can not foresee, or can not emancipate itself from; and always unconscious of its own position, and utterly incapable of choosing the proper course for the future. A household, conducted without order, is preyed upon by all the world: neither the fidelity of the servants, nor even the parsimony of the master, can save it from ultimate ruin. For it is exposed to the perpetual recurrence of a variety of little outgoings, on every occasion, however trivial.17

Among the motives that operate to determine the consumption of individuals, the most prominent is luxury, that frequent theme of declamation, which, however, I should probably not have dwelt upon, could I expect that every body would take the trouble of applying the principles I have been labouring to establish; and were it not always useful to substitute reason for declamation.

Luxury has been defined to be, the use of superfluities.18 For my own part, I am at a loss to draw the line between superfluities and necessaries; the shades of difference are as indistinct and completely blended as the colours of the rainbow.

Taste, education, temperament, bodily health, make the degrees of utility and necessity infinitely variable, and render it impossible to employ in an absolute sense, terms, which always of necessity convey an idea of relation and comparison.

The line of demarcation between necessaries and superfluities shifts with the fluctuating condition of society. Strictly speaking, mankind might exist upon roots and herbs, with a sheepskin for clothing, and a wigwam for lodging; yet, in the present state of European society, we cannot look upon bread or butcher's meat, woolien-clothes or houses of masonry, as luxuries. For the same reason, the line varies also according to the varying circumstances of individual fortune; what is a necessary in a large town, or in a particular line of life, may, in another line of life, or in the country, be a mere superfluity. Wherefore, it is impossible exactly to define the boundary between the one and the other. Smith has fixed it a little in advance of Stewart; including in the rank of necessaries, besides natural wants, such as the established rules of decency and propriety have made necessary in the lower classes of society. But Smith was wrong in attempting to fix at all what must, in the nature of things, be ever varying.

Luxury may be said, in a general way, to be, the use or consumption of dear articles; for the term dear is one of relation, and therefore may be properly enough applied in the definition of another term, whose sense is likewise relative. Luxury19 with us in France conveys the idea rather of ostentation than of sensuality; applied to dress, it denotes rather the superior beauty and impression upon the beholder, than superior convenience and comfort to the wearer; applied to the table, it means rather the splendour of a sumptuous banquet, than the exquisite farce of the solitary epicure. The grand aim of luxury in this sense is to attract admiration by the rarity, the costliness, and the magnificence of the objects displayed, recommended probably neither by utility, nor convenience, nor pleasurable qualities, but merely by their dazzling exterior and effect upon the opinions of mankind at large. Luxury conveys the idea of ostentation; but ostentation has itself a far more extensive meaning, and comprehends every quality assumed for the purpose of display. A man may be ostentatiously virtuous, but is never luxuriously so; for luxury implies expense. Thus, luxury of with or genius is a metaphorical expression, implying a profuse display or expenditure, if it may be so called, of those qualities of the intellect, which it is the characteristic of good taste to deal out with a sparing hand.

Although, with us in France, what we term luxury is chiefly directed to ostentatious indulgence, the excess and refinement of sensuality are equally unjustifiable, and of precisely similar effect: that is to say, of a frivolous and inconsiderable enjoyment or satisfaction, obtained by a large consumption, calculated to satisfy more urgent and extensive wants. But I should not stigmatise as luxury that degree of variety or abundance, which a prudent and well-informed person in a civilised community would like to see upon his table upon domestic and common occasions, or aim at in his dress and abode, when under no compulsion to keep up an appearance. I should call this degree of indulgence judicious and suitable to his condition, but not an instance of luxury.

Having thus defined the term luxury, we may go on to investigate its effect upon the well-ordering or economy of nations.

Under the head of unproductive consumption is comprised the satisfaction of many actual and urgent wants, which is a purpose of sufficient consequence to outweigh the mischief, that must ensue from the destruction of values. But what is there to compensate that mischief, where such consumption has not for its object the satisfaction of such wants? where money is spent for the mere sake of spending, and the value destroyed without any object beyond its destruction?

It is supposed to be beneficial, at all events, to the producers of the articles consumed. But it is to be considered, that the same expenditure must take place, though not, perhaps, upon objects quite so frivolous; for the money withheld from luxurious indulgences is not absolutely thrown into the sea; it is sure to be spent either upon more judicious gratifications or upon reproduction. In one way or other, all the revenue, not absolutely sunk or buried, is consumed by the receiver of it, or by some one in his stead; and in all cases whatever, the encouragement held out by consumption to the producer is co-extensive with the total amount of revenue to be expended. Whence it follows:

• 1. That the encouragement which ostentatious extravagance affords to one class of production is necessarily withdrawn from another.
• 2. That the encouragement resulting from this kind of consumption cannot increase, except in the event of an increase in the revenue of the consumers: which revenue, as we can not but know by this time, is not to be increased by luxurious, but solely by reproductive consumption.

How great, then, must be the mistake of those, who, on observing the obvious fact, that the production always equals the consumption, as it must necessarily do, since a thing can not be consumed before it is produced, have confounded the cause with the effect, and laid it down as a maxim, that consumption originates production; therefore that frugality is directly adverse to public prosperity, and that the most useful citizen is the one who spends the most.

The partisans of the two opposite systems above adverted to, the economists, and the advocates of exclusive commerce, or the balance of trade, have made this maxim a fundamental article of their creed. The merchants and manufacturers, who seldom look beyond the actual sale of their products, or inquire into the causes which may operate to extend their sale, have warmly supported a position, apparently so consistent with their interests; the poets, who are ever apt to be seduced by appearances, and do not consider themselves bound to be wiser than politicians and men of business, have been loud in the praise of luxury;20 and the rich have not been backward in adopting principles, that exalt their ostentation into a virtue, and their self-gratification into benevolence.21

This prejudice, however, must vanish as the increasing knowledge of political economy begins to reveal the real sources of wealth, the means of production, and the effect of consumption. Vanity may take pride in idle expense, but will ever be held in no less contempt by the wise, on account of its pernicious effects, than it has been all along, for the motives by which it is actuated.

These conclusions of theory have been confirmed by experience. Misery is the inseparable companion of luxury. The man of wealth and ostentation squanders upon costly trinkets, sumptuous repasts, magnificent mansions, dogs, horses, and mistresses, a portion of value, which, vested in productive occupation, would enable a multitude of willing labourers, whom his extravagance now consigns to idleness and misery, to provide themselves with warm clothing nourishing food, and household conveniences. The gold buckles of the rich man leave the poor one without shoes to his feet; and the labourer will want a shirt to his back, while his rich neighbour glitters in velvet and embroidery.

It is vain to resist the nature of things. Magnificence may do what it will to keep poverty out of sight, yet it will cross it at every turn, still haunting, as if to reproach it for its excesses. This contrast was to be met with at Versailles, at Rome, at Madrid, and in every seat of royal residence. In a recent instance, it occurred in France in an afflicting degree, after a long series of extravagant and ostentatious administration; yet the principle is so undeniable, that one would not suppose it had required so terrible an illustration.22

Those who are little in the habit of looking through the appearance to the reality of things, are apt to be seduced by the glitter and the bustle of ostentatious luxury. They take the display of consumption as conclusive evidence of national prosperity. If they could open their eyes, they would see, that a nation verging towards decline will for some time continue to preserve a show of opulence; like the establishment of a spendthrift on the high road to ruin. But this false glare can not last long; the effort dries up the sources of reproduction, and, therefore, must infallibly be followed by a state of apathy and exhaustion of the political frame, which is only to be remedied by slow degrees, and by the adoption of a regimen the very reverse of that, by which it has thus been reduced.

It is distressing to see the fatal habits and customs of the nation one is attached to by birth, fortune, and social affection, extending their influence over the wisest individuals, and those best able to appreciate this danger and foresee its disastrous consequences. The number of persons, who have sufficient spirit and independence of fortune to act up to their principles, and set themselves forward as an example, is extremely small. Most men yield to the torrent, and rush on ruin with their eyes open, in search of happiness; although it requires a very small share of philosophy to see the madness of this course, and to perceive, that, when once the common wants of nature are satisfied, happiness is to be found, not in the frivolous enjoyments of luxurious vanity, but in the moderate exercise of our physical and moral faculties.

Wherefore, those, who abuse great power, or talent, by exerting it in diffusing a taste for luxury, are the worst enemies of social happiness. If there is one habit, that deserves more encouragement than another, in monarchies as well as republics, in great as well as small, it is this of economy. Yet, after all, no encouragement is wanted; it is quite enough to withdraw favour and honour from habits of profusion; to afford inviolable security to all savings and acquirements; to give perfect freedom to their investment and occupation in every branch of industry, that is not absolutely criminal.

It is alleged, that, to excite mankind to spend or consume, is to excite them to produce, inasmuch as they can only spend what they may acquire. This fallacy is grounded on the assumption, that production is equally within the ability of mankind as consumption; that it is as easy to augment as to expend one's revenue. But, supposing it were so, nay further, that the desire to spend, begets a liking for labour, although experience by no means warrants such a conclusion, yet there can be no enlargement of production, without an augmentation of capital, which is one of the necessary elements of production; but it is clear, that capital can only be accumulated by frugality; and how can that be expected from those, whose only stimulus to production is the desire of enjoyment.

Moreover, when the desire of acquirement is stimulated by the love of display, how can the slow and limited progress of real production keep pace with the ardour of that motive? Will it not find a shorter road to its object, in the rapid and disreputable profits of jobbing and intrigue, classes of industry most fatal to national welfare, because they produce nothing themselves, but only aim at appropriating a share of the produce of other people? It is this motive, that sets in motion the despicable art and cunning of the knave, leads the pettifogger to speculate on the obscurity of the laws, and the man of authority to sell to folly and wickedness that patronage which it is his duty to dispense gratuitously to merit and to right. Pliny mentions having seen Paulina at a supper, dressed in a network of pearls and emeralds, that cost 40 millions of sestertii,23 as she was ready to prove by her jeweller's bills. It was bought with the fruit of her ancestor's speculations. "Thus," says the Roman writer, "it was to dress out his grand-daughter in jewels at an entertainment, that Lollius forgot himself so far, as to lay waste whole provinces, to become the object of detestation to the Asiatics he governed, to forfeit the favour of Cæsar, and end his life by poison."

This is the kind of industry generated by love of display.

If it be pretended, that a system, which encourages profusion, operates only upon the wealthy, and thus tends to a beneficial end, inasmuch as it reduces the evil of the inequality of fortune, there can be little difficulty in showing, that profusion in the higher, begets a similar spirit in the middling and lower classes of society, which last must, of course, the soonest arrive at the limits of their income; so that, in fact, the universal profusion has the effect of increasing, instead of reducing, that inequality. Besides, the profusion of the wealthier class is always preceded, or followed, by that of the government, which must be fed and supplied by taxation, that is always sure to fall more heavily upon small incomes than on large ones.24

The apologists of luxury have sometimes gone so far as to cry up the advantages of misery and indigence; on the ground, that, without the stimulus of want, the lower classes of mankind could never be impelled to labour, so that neither the upper classes, nor society at large, could have the benefit of their exertions.

Happily, this position is as false in principle as it would be cruel in practice. Were nakedness a sufficient motive of exertion, the savage would be the most diligent and laborious, for he is the nearest to nakedness, of his species. Yet his indolence is equally notorious and incurable. Savages will often fret themselves to death, if compelled to work. It is observable throughout Europe, that the laziest nations are those nearest approaching to the savage state; a mechanic in good circumstances, at London or Paris, would execute twice as much work in a given time, as the rude mechanic of a poor district. Wants multiply as fast as they are satisfied; a man who has a jacket is for having a coat; and, when he has his coat, he must have a greatcoat too. The artisan, that is lodged in an apartment by himself, extends his views to a second; if he has two shirts, he soon wants a dozen, for the comforts of more frequent change of linen; whereas, if he has none at all, he never feels the want of it. No man feels any disinclination to make a further acquisition, in consequence of having made one already.

The comforts of the lower classes are, therefore, by no means incompatible with the existence of society, as too many have maintained. The shoemaker will make quite as good shoes in a warm room, with a good coat to his back, and wholesome food for himself and his family, as when perishing with cold in an open stall; he is not less skilful or inclined to work, because he has the reasonable conveniences of life. Linen is washed as well in England, where washing is carried on comfortably within doors, as where it is executed in the nearest stream in the neighbourhood.

It is time for the rich to abandon the puerile apprehension of losing the objects of their sensuality, if the poor man's comforts be promoted. On the contrary, reason and experience concur in teaching, that the greatest variety, abundance, and refinement of enjoyment are to be found in those countries, where wealth abounds most, and is the most widely diffused.

BOOK III, CHAPTER VI

ON PUBLIC CONSUMPTION

SECTION I.

Of the Nature and general Effect of Public Consumption.

Besides the wants of individuals and of families which it is the object of private consumption to satisfy, the collection of many individuals into a community gives rise to a new class of wants, the wants of the society in its aggregate capacity, the satisfaction of which is the object of public consumption. The public buys and consumes the personal service of the minister, that directs its affairs, the soldier, that protects it from external violence, the civil or criminal judge, that protects the rights and interests of each member against the aggression of the rest. All these different vocations have their use, although they may often be unnecessarily multiplied or overpaid; but that arises from a defective political organization, which it does not fall within the scope of this work to investigate.

We shall see presently whence it is, that the public derives all the values, wherewith it purchases the services of its agents, as well as the articles its wants require. All we have to consider in this chapter is, the mode in which its consumption is effected, and the consequences resulting from it.

If I have made myself understood in the commencement of this third book, my readers will have no difficulty in comprehending, that public consumption, or that which takes place for the general utility of the whole community, is precisely analogous to that consumption, which goes to satisfy the wants of individuals or families. In either case, there is a destruction of values, and a loss of wealth; although, perhaps, not a shilling of specie goes out of the country.

By way of insuring conviction of the truth of this position, let us trace from first to last the passage of a product towards ultimate consumption on the public account.

The government exacts from a tax-payer the payment of a given tax in the shape of money. To meet this demand, the tax-payer exchanges part of the products at his disposal for coin, which he pays to the tax-gatherer:25 a second set of government agents is busied in buying with that coin, cloth and other necessaries for the soldiery. Up to this point, there is no value lost or consumed: there has only been a gratuitous transfer of value, and a subsequent act of barter: but the value contributed by the subject still exists in the shape of stores and supplies in the military depôt. In the end, however, this value is consumed; and then the portion of wealth, which passes from the hands of the tax-payer into those of the tax-gatherer, is destroyed and annihilated.

Yet it is not the sum of money that is destroyed: that has only passed from one hand to another, either without any return, as when it passed from the tax-payer to the tax-gatherer; or in exchange for an equivalent, as when it passed from the government agent to the contractor for clothing and supplies. The value of the money survives the whole operation, and goes through three, four, or a dozen hands, without any sensible alteration; it is the value of the clothing and necessaries that disappears, with precisely the same effect, as if the tax-payer had, with the same money, purchased clothing and necessaries for his own private consumption. The sole difference is, that the individual in the one case, and the state in the other enjoys the satisfaction resulting from that consumption.

The same reasoning may be easily applied to all other kinds of public consumption. When the money of the tax-payer goes to pay the salary of a public officer, that officer sells his time, his talents, and his exertions, to the public, all of which are consumed for public purposes. On the other hand, that officer consumes, instead of the tax-payer, the value he receives in lieu of his services; in the same manner as any clerk or person in the private employ of the tax-payer would do.

There has been long a prevalent notion, that the values, paid by the community for the public service, return to it again in some shape or other; in the vulgar phrase, that what government and its agents receive, is refunded again by their expenditure. This is a gross fallacy; but one that has been productive of infinite mischief, inasmuch as it has been the pretext for a great deal of shameless waste and dilapidation. The value paid to government by the tax-payer is given without equivalent or return: it is expended by the government in the purchase of personal service, of objects of consumption; in one word, of products of equivalent value, which are actually transferred. Purchase or exchange is a very different thing from restitution.26

Turn it which way you will, this operation, though often very complex in the execution, must always be reducible by analysis to this plain statement. A product consumed must always be a product lost, be the consumer who he may; lost without return, whenever no value or advantage is received in return; but, to the tax-payer, the advantage derived from the services of the public functionary, or from the consumption effected in the prosecution of public objects, is a positive return.

If, then, public and private expenditure affect social wealth in the same manner, the principles of economy, by which it should be regulated, must be the same in both cases. There are not two kinds of economy, any more than two kinds of honesty, or of morality. If a government or an individual consume in such a way, as to give birth to a product larger than that consumed, a successful effort of productive industry will be made. If no product result from the act of consumption, there is a loss of value, whether to the state or to the individual; yet, probably, that loss of value may have been productive of all the good anticipated. Military stores and supplies, and the time and labour of civil and military functionaries, engaged in the effectual defence of the state, are well bestowed, though consumed and annihilated; it is the same with them, as with the commodities and personal service, that have been consumed in a private establishment. The sole benefit resulting in the latter case is, the satisfaction of a want; if the want had no existence, the expense or consumption is a positive mischief, incurred without an object. So likewise of the public consumption; consumption for the mere purpose of consumption, systematic profusion, the creation of an office for the sole purpose of giving a salary, the destruction of an article for the mere pleasure of paying for it, are acts of extravagance either in a government or an individual, in a small state or a large one, a republic or a monarchy. Nay, there is more criminality in public, than in private extravagance and profusion; inasmuch as the individual squanders only what belongs to him; but the government has nothing of its own to squander, being, in fact, a mere trustee of the public treasure.27

What, then, are we to think of the principles laid down by those writers, who have laboured to draw an essential distinction between public and private wealth; to show, that economy is the way to increase private fortune, but, on the contrary, that public wealth increases with the increase of public consumption: inferring thence this false and dangerous conclusion, that the rules of conduct in the management of private fortune and of public treasure, are not only different, but in direct opposition?

If such principles were to be found only in books, and had never crept into practice, one might suffer them without care or regret to swell the monstrous heap of printed absurdity; but it must excite our compassion and indignation to hear them professed by men of eminent rank, talents, and intelligence; and still more to see them reduced into practice by the agents of public authority, who can enforce error and absurdity at the point of the bayonet or mouth of the cannon.28

Madame de Maintenon mentions in a letter to the Cardinal de Noailles, that, when she one day urged Louis XIV. to be more liberal in charitable donations, he replied, that royalty dispenses charity by its profuse expenditure; a truly alarming dogma, and one that shows the ruin of France to have been reduced to principle.29 False principles are more fatal than even intentional misconduct; because they are followed up with erroneous notions of self-interest, and are long persevered in without remorse or reserve. If Louis XIV. had believed his extravagant ostentation to have been a mere gratification of his personal vanity, and his conquests the satisfaction of personal ambition alone, his good sense and proper feeling would probably, in a short time, have made it a matter of conscience to desist, or at any rate, he would have stopped short for his own sake; but he was firmly persuaded, that his prodigality was for the public good as well as his own; so that nothing could stop him, but misfortune and humiliation.30

So little were the true principles of political economy understood, even by men of the greatest science, so late as the 18th century, that Frederick II. of Prussia, with all his anxiety in search of truth, his sagacity, and his merit, writes thus to D'Alembert, in justification of his wars: "My numerous armies promote the circulation of money, and disburse impartially amongst the provinces the taxes paid by the people to the state." Again I repeat, this is not the fact; the taxes paid to the government by the subject are not refunded by its expenditure. Whether paid in money or in kind, they are converted into provisions and supplies, and in that shape consumed and destroyed by persons, that never can replace the value, because they produce no value whatever.31 It was well for Prussia that Frederick II. did not square his conduct to his principles. The good he did to his people, by the economy of his internal administration, more than compensated for the mischief of his wars.

Since the consumption of nations or the governments which represent them, occasions a loss of value, and consequently, of wealth, it is only so far justifiable, as there results from it some national advantage, equivalent to the sacrifice of value. The whole skill of government, therefore, consists in the continual and judicious comparison of the sacrifice about to be incurred, with the expected benefit to the community; for I have no hesitation in pronouncing every instance, where the benefit is not equivalent to the loss, to be an instance of folly, or of criminality, in the government.

It is yet more monstrous, then, to see how frequently governments, not content with squandering the substance of the people32 in folly and absurdity, instead of aiming at any return of value, actually spend that substance in bringing down upon the nation calamities innumerable; practise exactions the most cruel and arbitrary, to forward schemes the most extravagant and wicked; first rifle the pockets of the subject, to enable them afterwards to urge him to the further sacrifice of his blood. Nothing, but the obstinacy of human passion and weakness, could induce me again and again to repeat these unpalatable truths, at the risk of incurring the charge of declamation.

The consumption effected by the government33 forms so large a portion of the total national consumption, amounting sometimes to a sixth, a fifth, or even a fourth part34 of the total consumption of the community, that the system acted upon by the government, must needs have a vast influence upon the advance or decline of the national prosperity. Should an individual take it into his head, that the more he spends the more he gets, or that his profusion is a virtue; or should he yield to the powerful attractions of pleasure, or the suggestions of perhaps a reasonable resentment, he will in all probability be ruined, and his example will operate upon a very small circle of his neighbours. But a mistake of this kind in the government, will entail misery upon millions, and possibly end in the national downfal or degradation. It is doubtless very desirable, that private persons should have a correct knowledge of their personal interests; but it must be infinitely more so, that governments should possess that knowledge. Economy and order are virtues in a private station; but, in a public station, their influence upon national happiness is so immense, that one hardly knows how sufficiently to extol and honour them in the guides and rulers of national conduct.

An individual is fully sensible of the value of the article he is consuming; it has probably cost him a world of labour, perseverance, and economy; he can easily balance the satisfaction he derives from its consumption against the loss it will involve. But a government is not so immediately interested in regularity and economy, nor does it so soon feel the ill consequences of the opposite qualities. Besides, private persons have a further motive than even self-interest; their feelings are concerned; their economy may be a benefit to the objects of their affection; whereas, the economy of a ruler accrues to the benefit of those he knows very little of; and perhaps he is but husbanding for an extravagant and rival successor.

Nor is this evil remedied, by adopting the principle of hereditary rule. The monarch has little of the feelings common to other men in this respect. He is taught to consider the fortune of his descendants as secure, if they have ever so little assurance of the succession. Besides, the far greater part of the public consumption is not personally directed by himself; contracts are not made by himself, but by his generals and ministers; the experience of the world hitherto all tends to show, that aristocratical republics are more economical, than either monarchies or democracies.

Neither are we to suppose, that the genius which prompts and excites great national undertakings, is incompatible with the spirit of public order and economy. The name of Charlemagne stands among the foremost in the records of renown; he achieved the conquest of Italy, Hungary, and Austria; repulsed the Saracens; broke the Saxon confederacy; and obtained at length the honours of the purple. Yet Montesquieu has thought it not derogatory to say of him, that "the father of a family might take a lesson of good housekeeping from the ordinances of Charlemagne. His expenditure was conducted with admirable system; he had his demesnes valued with care, skill, and minuteness. We find detailed in his capitularies the pure and legitimate sources of his wealth. In a word, such were his regularity and thrift, that he gave orders for the eggs of his poultry-yards, and the surplus vegetables of his garden, to be brought to market."35 The celebrated Prince Eugene, who displayed equal talent in negotiation and administration as in the field, advised the Emperor Charles VI. to take the advice of merchants and men of business, in matters of finance.36 Leopold, when Grand Duke of Tuscany, towards the close of the 18th century, gave an eminent example of the resources, to be derived from a rigid adherence to the principles of private economy, in the administration of a state of very limited extent. In a few years, he made Tuscany one of the most flourishing states of Europe.

The most successful financiers of France, Suger, Abbé de St. Dennis, the Cardinal D'Amboise, Sully, Colbert, and Necker, have all acted on the same principle. All found means of carrying into effect the grandest operations by adhering to the dictates of private economy. The Abbé de St. Dennis furnished the outfit of the second crusade; a scheme that required very large supplies, although one I am far from approving. The Cardinal furnished Louis XII. with the means of making his conquest of the Milanese. Sully accumulated the resources, that afterwards humbled the house of Austria.—Colbert supplied the splendid operations of Louis XIV. Necker provided the ways and means of the only successful war waged by France in the 18th century.37

Those governments, on the contrary, that have been perpetually pressed with the want of money, have been obliged, like individuals, to have recourse to the most ruinous, and sometimes the most disgraceful, expedients to extricate themselves. Charles the Bald put his titles and safe-conducts up to sale. Thus, too, Charles II. of England sold Dunkirk to the French king, and took a bribe of 80,000l. from the Dutch, to delay the sailing of the English expedition to the East Indies, 1680, intended to protect their settlements in that quarter, which, in consequence, fell into the hands of the Dutchmen.38 Thus, too, have governments committed frequent acts of bankruptcy, sometimes in the shape of adulteration of their coin, and sometimes by open breach of their engagements.

Louis XIV. towards the close of his reign, having utterly exhausted the resources of a noble territory, was reduced to the paltry shift of creating the most ridiculous offices, making his counsellors of state, one an inspector of fagots, another a licenser of barber-wig-makers, another, visiting inspector of fresh, or taster of salt, butter, and the like. Such paltry and mischievous expedients can never long defer the hour of calamities, that must sooner or later befal the extravagant and spendthrift governments. "When a man will not listen to reason," says Franklin, "she is sure to make herself felt."

Fortunately, an economical administration soon repairs the mischiefs of one of an opposite character. Sound health can not be restored all at once; but there is a gradual and perceptible improvement; every day some cause of complaint disappears, and some new faculty comes again into play. Half the remaining resources of a nation, impoverished by an extravagant administration, are neutralized by alarm and uncertainty; whereas, credit39 doubles those of a nation, blessed with one of a frugal character. It would seem, that there exists in the politic, to a stronger degree than even in the natural, body a principle of vitality and elasticity, which can not be extinguished without the most violent pressure. One can not look into the pages of history, without being struck with the rapidity, with which this principle has operated. It has nowhere been more strikingly exemplified, than in the frequent vicissitudes that our own France has experienced since the commencement of the revolution. Prussia has afforded another illustration in our time. The successor of Frederick the Great squandered the accumulations of that monarch, which were estimated at no less a sum than 42 millions of dollars, and left behind him, besides, a debt of 27 millions. In less than eight years, Frederick William III. had not only paid off his father's debts, but actually began a fresh accumulation; such is the power of economy, even in a country of limited extent and resources.

SECTION II.

Of the principal Objects of National Expenditure.

In the preceding section, it has been endeavoured to show, that, since all consumption by the public is in itself a sacrifice of value, an evil balanced only by such benefit, as may result to the community from the satisfaction of any of its wants, a good administration will never spend for the mere sake of spending, but take care to ascertain that the public benefit, resulting, in such instance, from the satisfaction of a public want, shall exceed the sacrifice incurred in its acquirement.

A comprehensive view of the principal public wants of a civilized community, can alone qualify us to estimate with tolerable accuracy the sacrifice it is worth while for the community to make for their gratification.40

The public consumes little else, but what have been denominated Immaterial products, that is to say, products destroyed as soon as created; in other words, the services or agency, either of human beings, or of other objects, animate or inanimate.41

It consumes the personal service of all its functionaries, civil, judicial, military, or ecclesiastical. It consumes the agency of land and capital. The navigation of rivers and seas, utility of roads and ground open to the public, are so much agency derived by the public from land, of which either the absolute property, or the beneficial enjoyment, is vested in the public. Where capital has been vested in the land, in the shape of buildings, bridges, artificial harbours, causeways, dikes, canals, &c. the public then consumes the agency, or the rent of the land, plus the agency, or the interest, of the capital so vested.

Sometimes the public maintains establishments of productive industry for instance, the porcelain manufacture of Sevres, the Gobelin tapestry, the salt-works of Lorraine and of the Jura, &c., in France. When concerns of this kind bring more than their expenditure, which is but rarely the case, they furnish part of the national revenue, and must by no means be classed among the items of national charge.

Of the Charge of Civil and Judicial Administration.

The charge of civil and judicial administration is made up, partly of the specific allowances of magistrates and other officers, and partly of such degree of pomp and parade, as may be deemed necessary in the execution of their duties. Even if the burthen of that pomp and parade be thrown wholly or partially upon the public functionary, it must ultimately fall upon the shoulders of the public, for the salary of the functionary must be raised, in proportion to the appearance he is expected to make. This observation applies to every description of functionary, from the prince to the constable inclusive consequently, a nation, which reverences its prince only when surrounded with the externals of greatness, with guards, horse and foot, laced liveries, and such costly trappings of royalty, must pay dearly for its taste. If, on the contrary, it can be content, to respect simplicity rather than pageantry, and obey the laws, though unaided by the attributes of pomp and ceremony, it will save in proportion. This is what made the charges of government so light in many of the Swiss cantons, before the revolution, and in the North American colonies before their emancipation. It is well known, that those colonies, though under the dominion of England, had separate governments, of which they respectively defrayed the charge; yet the whole annual expenditure all together amounted to no more than 64,700l. sterling. "An ever memorable example," observes Smith, "at how small an expense three millions of people may not only be governed, but well governed."42

Causes entirely of a political nature as well as the form of government which they help to determine, have an influence in apportioning the salaries of public officers, civil and judicial, the charge of public display, and those likewise of public institutions and establishments. Thus, in a despotic government, where the subject holds his property at the will of the sovereign, who fixes himself the charge of his household, that is to say, the amount of the public money which he chooses to spend on his personal necessities and pleasures, and the keeping up of the royal establishment, that charge will probably be fixed at a higher rate, than where it is arranged and contested between the representatives of the prince and of the tax payers respectively.

The salaries of inferior public officers in like manner depend, partly upon their individual importance, and partly upon the general plan of government. Their services are dear or cheap to the public, not merely in proportion to what they actually cost, but likewise in proportion as they are well or ill executed. A duty ill performed is dearly bought, however little be paid for it; it is dear too, if it be superfluous, or unnecessary; resembling in this respect an article of furniture, that, if it do not answer its purpose, or be not wanted, is merely useless lumber. Of this description, under the old régime of France, were the officers of high-admiral, high-steward of the household, the king's cup-bearer, the master of his hounds, and a variety of others, which added nothing even to the splendour of royalty, and were merely so many means of dispensing personal favour and emolument.

For the same reason, whenever the officers of government are needlessly multiplied, the people are saddled with charges, which are not necessary to the maintenance of public order. It is only giving an unnecessary form to that benefit, or product, which is not at all the better of it, if indeed it be not worse.43 A bad government, that can not support its violence, injustice, and exaction, without a multitude of mercenaries, satellites, and spies, and gaols innumerable, makes its subjects pay for its prisons, spies, and soldiers, which nowise contribute to the public happiness.

On the other hand, a public duty may be cheap, although very liberally paid. A low salary is wholly thrown away upon an incapable and inefficient officer; his ignorance will probably cost the public ten times the amount of his salary; but the knowledge and activity of a man of ability are fully equivalent to the pay he receives; the losses he saves to the public, and the benefits derived from his exertions, greatly outweigh his personal emolument, even if settled on the most liberal scale.

There is real economy in procuring the best of every thing, even at a larger price. Merit can seldom be engaged at a low rate, because it is applicable to more occupations than one. The talent, that makes an able minister, would, in another profession, make a good advocate, physician, farmer, or merchant; and merit will find both employment and emolument in all these departments. If the public service offer no adequate reward for its exertion, it will choose some other more promising occupation.

Integrity is like talent; it can not be had without paying for it, which is not at all wonderful; for the honest man can not resort to those discreditable shifts and contrivances, which dishonesty looks to as a supplemental resource.

The power, which commonly accompanies the exercise of public functions, is a kind of salary, that often far exceeds the pecuniary emolument attached to them. It is true, that in a well ordered state, where law is supreme, and little is left to the arbitrary control of the ruler, there is little opportunity of indulging the caprice and love of domination implanted in the human breast. Yet the discretion, which the law must inevitably vest in those who are to enforce it, and particularly in the ministerial department, together with the honour commonly attendant on the higher offices of the state, have a real value, which makes them eagerly sought for, even in countries where they are by no means lucrative.

The rules of strict economy would probably make it advisable to abridge all pecuniary allowance, wherever there are other sufficient attractions to excite a competition for office, and to confer it on none but the wealthy, were there not a risk of losing, by the incapacity of the officer, more than would be gained by the abridgment of his salary. This, as Plato well observes in his Republic, would be like entrusting the helm to the richest man on board. Besides, there is some danger, that a man, who gives his services for nothing, will make his authority a matter of gain, however rich he may be. The wealth of a public functionary is no security against his venality: for ample fortune is commonly accompanied with desires as ample, and probably even more ample, especially if he have to keep up an appearance, both as a man of wealth and a magistrate. Moreover, supposing what is not altogether impossible, namely, that one can meet with wealth united with probity, and with, besides, the activity requisite to the due performance of public duty, is it wise to run the risk of adding the preponderance of authority to that of wealth, which is already but too manifest? With what grace could his employers call to account an agent, who could assume the merit of generosity, both with the people and with the government? There are, however, some ways, in which the gratuitous services of the rich may be employed with advantage; particularly in those departments, that confer more honour than power: as in the administration of institutions of public charity, or of public correction or punishment.

In France under the old régime, the government, when harassed with the want of money, was in the habit of putting up its offices to sale. This is the very worst of all expedients; it introduces all the mischiefs of gratuitous service; for the emolument is then no more, than the interest of the capital expended in the purchase of the office; and has the additional evil of costing to the state as much as if the service were not gratuitously performed; for the public remains charged with the interest of a capital, that has been consumed and lost.

It has been sometimes the practice to consign certain civil functions, such as the registry of births, marriages, and deaths, to the ecclesiastical body, whose emoluments, arising from their clerical duties, may be supposed to enable them to execute these without pay. But there is always danger in confiding the execution of civil duties to a class of men, that pretend to a commission from a still higher than a national authority.44

In spite of every precaution, the public or the monarch will never be served so well or so cheaply as individuals. Inferior public agents can not be so narrowly watched by their superiors, as private ones; nor have the superiors themselves an equal interest in vigilant superintendence. Besides, it is easy enough for underlings to impose on a superior, who has many to look after, is perhaps placed at a distance, and can give but little attention to each individually; and whose vanity makes him more alive to the officious zeal of his inferior, than to the real service and utility, that the public good requires. As to the monarch and the nation, who are the parties most interested in good public administration, because it consolidates the power of the one and enlarges the happiness of the other, it is next to impossible for them to exert a perpetual and effectual control. In most cases, this duty must of necessity devolve on agents, who will deceive them when it is their interest to do so, as is proved by abundance of examples. "Public services," says Smith, "are never better performed than when their reward comes only in consequence of their being performed, and is propo