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CHAPTERS IN
POLITICAL ECONOMY.
ALBERT
BOLLES.
S.
New York:
D.
APPLETON & COMPANY, 549
AND
551
Broadway.
1874.
nr^.
HB
a>
.5&9
Entered, according to Act of Congress, D. In
in
the year
1874,
by
APPLETON & COMPANY,
the Office of the Librarian of Congress at Washington.
Act
ALBERT
P.
STURTEVANT,
THIS VOLUME AS A
IS
Esq.
DEDICATED
TOKEN OF
The AUTHOR'S/ Affectionate Regard.
PREFACE. The chapters embraced
in this 7vork treat
of the
leading economic questions which are rife in
Although most of the chapters have ap-
country.
peared yet a
An in
our
in
magazines during the past t^vo years,
unity
will be
foimd peniading
attempt has been made
a thorough tnanner,
to
to
something of
its
so
dig
doing,
down for
the
interest to those
glide 07ier the surface
of
work.
handle the questions
which are fundamental, though conscious that, in
the
things.
the
principles
author was
work would
who
lose
only seek to
If ever the ques-
tions
of labor, money, exchange, taxation, afid the
like,
are to receive a permanent settlement,
must
be traced back into the region
and feeling do not i?ig
may
enter,
where prejudice
however dry and uninvit-
be the investigation.
•
Norwich, Conn., September,
they
1874.
——
CONTENTS. PAGE. I.
II.
The Field and Importance of Political Economy,
The Payment of Labor,
.
.
III.
On the 'Increase
IV.
Effect of Machinery on Labor,
V.
VI. VII. VIII.
IX.
X. XI.
XII. XIII.
XIV.
On the Meaning and Causes
—A
XVI.
.... ....
of Value,
.
.
Measure of Value,
Money and Decline
in
its
Uses,
......
the Value of Gold and Silver,
The Money of the Future,
.
.
The Good and Evil of Banking, The Financial Panic of
.
—The
....
Influence of Credit on Prices,
.
.
'28
41
48 73 81
113 117
.
1873,
15
ioi
The Relation of Banks to Speculators, .
140 149 166
On Legal Interference
with the Loan of Money, Payment of Labor, and Contracts of Corporations,
XV.
of Wages,
.
i
'. .
...
The Advantages of Exchange, Taxation,
.
.
.
.
.
.
170
.190
........
200
I.
THE FIELD AND IMPORTANCE OF POLITICAL ECONOMY.
In The Principles of Economical Philosophy*
Macleod
has given
an elaborate criticism upon several definitions of political economy,
and then
clearly
state
and
be
to
one himself which,
offered
and
free
the
risk of
being ambiguous, we shall not
give a definition so precise, because a
According
easily understood. tion,
the principles of
distribution,
origin
is
interest.
political
exchange,
claimed
They
for
own
solely for his
commoner one can be more
an old and well-received
economy
and consumption these
such as
are
to
interests
science,
connected with the words
ambiguities
At the
wealth and value."
appears to
and extent of the
the nature
distinctly
from
his opinion, "
in
principles
relate to the
production,
of wealth.
than
every
man
from
the most
an
defini-
No
higher
enlightened
entertains
self-
having regard
enlightened point of
view.
Although
same
without
results
the
in
moral foundation, these production,
principles
distribution, exchange,
yield
sumption of wealth, as obedience to a perfect moral code. ever economic * p. 132,
and moral science touch, the
2d ed.
2
the
and con-
principles of
Wher-
human
AND IMPORTANCE
FIELD
2
conduct
remark of Dr. political
by each
prescribed
Wayland
economy
are
seen
be the
to
perfectly true, that
is
The
same.*
" the principles
of
are so clearly analogous to those of moral phi-
losophy, that almost every question in the one
may be argued on
grounds belonging to the other."t
For example, moral science condemns laws made trade. |
It
man
that every
teaches
he pleases, unfettered by State ing such
The
laws
is
some reason beyond
his
has the right to
The primary
lines.
enactment
own
moral science condemns such are
condemned by good
the public
is
legis-
protective laws
Of
all.
is
course,
legislation.
political
economy
them with the sharp eye of enlightened if
all
and not
to benefit particular individuals, or a class,
They
good, or for
for the public
aggrandizement; the history of
shows that the prime object of
lation clearly
where
traffic
object of enact-
few at the expense of the many.
to enrich the
protectionist urges their
in restraint of
also,
which looks
at
It sees that
selfishness.
the object of protection, everything must be
protected conducive to that end; and
if this
doctrine be admitted,
protective laws will be enacted so generally as to afford protection to nothing. application,
public are
the principle
If
and merely to
that
be protected,
is
not to receive a logical
a few
their
will result in his protecting himself
he
sells,
things
increased
and
just
most needed by the cost to the
by charging more
consumer
for
so that, after a time, the effect of protective laws
whatever is
com-
pletely neutralized.
Moral
science,
then,
condemns
wrong; economic science because
by operation of * t *
law.
legal it
The conduct
is
protection
because
it
is
impossible to get protection
of people in either case
Perry's El. of Polit. Econ., p. 37, sth ed. Pref. El. 0/ Polit. Econ., p. 4, 4th ed. For an elucidation of the operation of protective laws, see chap.
isth.
is
the
—
OP POLITICAL ECONOMY. same, only
impelled by different motives in one case than
is
it
3 in
the Other.
As
position
this
is
it
by any one
hardly be assailed
will
—
not better to transfer the principles of political
a selfish to a moral basis
We
?
favor this
the
that
economic and moral science yield the same
principles of
results
economy from for four
transfer
rea-
sons.
more persons
First,
principles.
Now,
to increase
human
moral science, Secondly,
it
is
be drawn
will
selfishness.
If
this objection to
the
in
made
them
classification
an appropriate place
to find
to
the
a portion of the truths
of knowledge,
for
subdivision of moral science. part
that
can be enforced
ened,
basis.
in that case
relating to the
We
Moral
these
by
principles
the
and science
in
the
them
clear,
transparent
political
science, because *
The
economy
the will
is
real, existence
self-
can
of pro-
and
enlight-
conclusions
condemns such laws because they
and have only a nominal, and not a
they
upon a
the example
mind, cold,
selfish
enforces
founding
selfishness
wrong; economic science because they are at war with
Fourthly,
would
production,
harmony with enlightened
their
have previously seen
how
supplements
morality.
of
form a
will
it
the principles from a moral source,
by showing
legislation,
Instead
and consumption of wealth.
deriving
be used to sustain moral
economy
Thus the combined power of morality and
interest.
tective
Political
itself,
be easier
will
it
economy.
political
of moral science
distribution, exchange,
Thirdly, after
of
will disappear.
being a piece of knowledge standing apart by
constitute
of economic
study
they are cold and bloodless, and tend
said,
of are
self-interest
after
properly a subdivision
a period.* of moral
operates in every transaction with which
insufficiency of enlightened self-interest as a
been ably discussed by Frederic Harrison
competent basis
in the Fort. Rev., vol.
for t,
p.
economic science fas 356.
FIELD AND IMPORTANGE
4
economic science
This faculty exercises only moral
concerned.
If the principles of political
functions. if
is
economy were immutable,
the will were a stranger in their production,
adhered to
them, political
among
exact
the
because
The
are.
will
the claim that economic
principles
created,
are
fixed,
what
they.
respecting
past
the
in
do
will
Quite absurd
in the future.
Having no place
and
they ought to be
is
there-
in exact literature,
by which economic
being a part of the machinery
will
not
are
determining
principles are absolutely fixed,
fore purely scientific principles.
and the
to a seat
entitled
principles
these
element
an
no moral quality
or disposition of their wealth, are only hypotheses
what they
respect to
But is
which have guided men
rules
the acquisition in
economy would be
sciences.
human
the
if
relegated to the
domain
of moral science.*
economy
If the principles of political to a moral
fish
And
it
tive
method
is
basis,
Economic
changed.
political
in
not write an inductive
landmark fact that
method of searching
the
principles
worthy of note
how
are
the
still
them
for
fruit
of
employed
extensively
Adam
economy.
Smith,
the
is it
thought, but
success
its
he put ten years of patient labor upon
is
not
is
induction.
induc-
true,
is
His Wealth of Nations
treatise.
history of
in the
are transferred from a sel-
is
did
a great
due
the work,
to
the
com-
bining in the happiest manner a philosophic insight with a knowl-
edge of practical found
universal
life,
deducing therefrom
acceptance.
'
It is
than to burrow amid a great mass of *
Jevons,
in
his
Theory of
Polit.
Ecoti., has
course pleasure
is
it
economy
were, at the lowest cost of pain"
the highest end for
man
(p.
is to
27).
gold
in
the
economic science, making maximise happiness by pur-
As Jevons
whom
is
a
utilitarian,
of
though he gives a he so much admires. See
according to his philosophy,
wide- interpretation to the term than his master, Bentham, pp. 27-32.
yet, as the
facts;
which have
dream and speculate
united moral and
pleasure the end, and declaring that "the object of
chasing pleasure, as
principles
easier to
OF POLITICAL ECONOMY.
5
earth can be found only by toilsome mining, so the
gold of eco-
which
must be dug
nomic
truth
over to exist
find
masses of
great
hid in
is
Never did
it.
much
a similar method.
Thomas Tooke
Fifty years since,
his History of Prices with it
Rent
into
the
in this respect is
Later,
similarly,
;
questions
England during ment of patient
and
Twelfth
the
economic history of England
covered, "enabling us to see,"
says
far-reaching
and potent were wages,
ifying from
top
to
Rogers
and Wages
Centuries,
in
Infantile
In 1867,
Prices
Thirteenth
and
a
in
monu-
work which gave a new rendering
investigation, a
of the social and
remarkable.
Richard Jones
Factory
of
work upon the Agricultural
his
The
Edwin Chadwick
Labor, and Sanitary and Poor-Law Legislation. published
one reason why
is
applied the inductive method in
enduring success.
to the subject of
investigations
This
greater
economy
has been too speculative.*
It
change of method among economists
his
Political
.
has failed to convert men.
reasoners
men commit
These followed from wrong premises.
has followed too
applied
acuter
or
logicians
finer
than the schoolmen; never did a class of
mistakes.
it
facts
for the period
NEWMARCH,t prices,
and
"in
pestilences in
bottom the coherence of the English
and the power of our sovereign
king,
lord the
it
how
detail,
modpolity,
under the early
Plantagenets."
Other economic works way,
lar
her economists
are the direct
edition oi Smith's t
As
for
Income, and Tax-
France, she has been noted
who have burrowed and
" Half, and more than fallen,
prepared in a simi-
United Kingdom, and Leoni Levi's History of British
Commerce, are examples.
*
of,
Dudley Baxter's books upon National
ation of the
have
might be spoken
lived
among
the
for
facts.
of the fallacies into which persons who have handled this subject Rogers in preface to his outcome of purely abstract speculation."
half,
Wealth of Nations,
p.
41.
Address before the British Social Science Association, 1871.
FIELD AND IMPORTANCE
6
Chevalier,
in
kept
has
works,
his
all
close
to
inductive
the
method.
So has M. de Lavergne when treating upon the moral
economy
of his
own and
M. Levasseur and M.
other countries.
Le Play have considered the claims of the working classes of France in a similar manner. The same may be said of M. Jules Simon.
Of
the
method, not so much can be
who
country following this
The most prominent example
said.
has addressed himself to the mastery of facts as the foundasubsequent reasonings,
tion of his
reports
methods
its
economy.
A.
the
to
adhered
Wells.
His
some
results have, in
were
to himself as they
out
finding
in
startling
the
New
of
science,
he has
principles of political
the
been as unexpected
instances,
to
State
In his
rigidly to the induc-
For many years pursuing physical
method.
employed
papers, he has
in other
David
is
Government and
National
to the
York, and tive
own
economists in our
political
They
public.
none
are
the less true, however, or less likely of being accepted in the end.
The National and this
method,
investigation
for
and
they are reports
open
gation
The
needed.
upon many
student
to the
nor
appointing
commissions
one where facts
are
of economic
patient,
lying
and requiring
subjects lying in the province
Never was a more
of political economy.
country,
Governments are learning the value of
State
honest
around
in
inviting field of investi-
science
than
investigation
the
our
own
was more
greatest profusion,
while the honest and accurate gatherers are few.
Although the true principles of
by induction, and fixed laws
ments of the sun.
dom,
as
all
others are
that never
we have
On
change
political
economy
are ascertained
only guessed, yet none are hard,
in their
occurrence, like
the other hand, the element of
previously remarked, enters
into
the
move-
human
their
free-
composi-
OF POLITICAL ECONOMY. preventing
tion,
from
us
determining
can the laws of physical
Economical Philosophy*
science, but
we cannot
nomic
more
principles
hence
;
the
economy from
They admit
Frenchman was scheme of
his
rejecting
in
said
to a point where
begin, strict scientific laws can
be established.
data of the
study
become
the
hypotheses."
only
For
reason,
economy can never become an exact
science.
inductions, a large
carry our
allowed
for
the
action
never determine with
of the
element
of his dis"
So
far
as
.
.
Directly
.
scientific
However
of variation
laws,
political
therefore,
far
we
must be
As the land surveyor can
will.
exactness
:
moral conditions
cease to be
this
may
human political
by moral conditions, the
affected
economist as such
conclusions of
and are
One
philosophy.
has very well
physical conditions go, and up
the
Comte of eco-
nature
the
the play of the
consistent
positive
in vindicating his master,
ciples,!
and with great
domain of physical
attempt as successful.
regard his
perfectly.
Prmciples of
in his
industriously,
John Stuart Mill have comprehended
and
will
science.
has labored
we
absolute truth, as
their
Macleod,
economic science within the
to bring
ability,
7
surface
and direction on account
of variation of the needle, so the economist can never discover by the most patient study of facts, any unalterable laws of science, because of the infinite variations in the will of farthest
mer
he can go
conditions,
is
to ascertain
and form
tions, similar actions will
As *
J
the
be produced.
the principles of political
Chap.
I.
t
how men have
hypothesis
David Syme has
declared that the
acted under
under
The for-
like condi-
\
economy
Frederic Harrison, Fort. Review,
that,
economic men.
are ascertained
by induc-
vol. i, p. 369.
"inductive method
is
alone applicable to the investiga-
economic science, and that we shall never be able to make any solid progress so long West. Rev., vol. 95, p. 100. On same subject, as we continue to follow the a priori method." see Prof. Cairnes' CItaracter and Logical Method of PoLit. Econ., Lee. 11. tion of
—
FIELD AND IMPORTANCE
8
any one capable of making an induction can find them
tion,
A
knowledge of economic principles involved necessarily limited to those
not
suit
is
The
sole
advantage one
a knowledge of
in
Thus
understand
the
that business
only business
that
of
principles
The charge
refuted.
men
engaged
in that business.
has over another of equal ability
political
men,
know more
facts
men, can
practical
economy,
conclusively
is
and no more
contains this basis of truth
often
is
out of which inductions spring.
facts,
charge,
the
man
out.
in a particular pur-
concerning their business
hence they are more capable of forming correct
than outsiders; conclusions;
The
economy
history of political
who
attests the truth of
this
asser-
are the most successful cultivators of the science?
tion.
For,
Who
have wrought out those principles which most persons are
willing to
admit as true and of great importance
discovery of practical
economic
men ?
science, from the
been practical men.*
man
By no means. day of
Political
not content with
exhausting
exhausted
dug
others,
As
more
perfect
as
and
*
knowledge of
its
that he
" In every country
in
which
it
rich
mines of which practical
men
manufacturers would have given
may
ex-
acquire a
knows only what happened immedi-
political
economist
may
a wider
acquire
governing a particular business •
has been successfully cultivated, most of the contributions to
made by
operations from a distance;
the
knew, and,
than a participator therein, because,
it
latter
around him, so the
of any value have been
have not
perhaps, or no time or inclination to
knowledge of economic principles
it
all
the reader of the description of a battle
an eye-witness, the
ately
to this,
in
one storehouse of experience, have
in rare
men had no knowledge plore.
Adam Smith
great lights
economists have walked with
have gleaned from him
of business,
Are they the
?
The
five
who were not of the business world, but surveyed whose opinions on business matters few merchants or cents." The Natw?i, vol. 2, p. 146.
writers for
OF POLITICAL ECONOMY.
who
a person
even, than
has
given to
9
the attention of a Hfe-
it
time.
A
economist can see economic principles more clearly
poHtical
because his view
not mystified by pecuniary
is
His judg-
interest.
ments are unclouded by prejudice; undisturbed by the thought of
We
or loss.
gain
unconscious
A
warpings
the fact
desire;
need of
to
and
is
Economy
member
and
interest
the creation of the National
This was the work of the Rev.
wrote a letter to a
by
eminent service sometimes ren-
illustration of the
Professor of Political
John McVickar, In 1827, he
Columbia College.
in
of the legislature of the State of
York, entided Hints on Banking, tem now
beliefs
all.
dered by the theoretical economist,
banking system.
the
indulge in any platitudes as to
opinions
common
is
conspicuous
not
New
which he developed the
in
sys-
This discovery excited the admiration of an
in practice.
eminent banker, John E. Williams, President of the Metropol-
New
itan
Bank
man
of business
of
York,
—an
scientific
has remarked that " to a practical
every-day banker
investigating
scholar,
who
questions
principles, should
in
—
it
seems wonderful that a
political
economy,
be able to see not only the
on purely practical
workings of existing laws, and understand the indissoluble relations
money and
of tell
trade, but
what changes were necessary
and secure the
Not to
should be also able to foresee and foreto
produce the highest prosperity
community." *
greatest safety to the
infrequently the principles of political
be mere
theories.
Some of them
economy
are declared
are nothing more.
The
dif-
ference, however, between theoretical principles, and those derived
from
experience,
is
clear enough.
Scientists
are continually
mis-
taking principles for theories, regarding things as proved which are *
Old and
New
Mag.,
vol. 8, p. 590.
FIELD AND
lO
IMPORTANCE That theories are
not, but only asserted or believed.
some contend, we deny.
man
conduct
can
without theory,"
French
an eminent
enquires
What
To which
the words of
mistake, though
men,
Prof.
practice
is
" but
economist,*
common
very
a
Price t may be added. one,
to
of this statement
more
The
;
is
men swarm
is
a
practical
exact reverse
with theories, none
Theories are well enough,! only they must be regarded
so."
such
Practical
true.
act."
" It
suppose that
as they are called, are destitute of theory.
no
;
employment of means without knowing how or why they
the
as
"
business without them.
his
useless, as
Nay, they are absolutely necessary
no harm
done
is
to
economic science
in including both,
the separation of principle from theory be clearly made.
if
The
some of the
flaw with
many
of the inductions
cient
foundations.
principle
of science,
few
result
is
and so look no
it
may seem
concerning
thing
political
Yet
economy.
country has
machinery of * Sav.
upon
like
insuffi-
and from them a correct, yet
which
were a wider induc-
satisfying ourselves with finding a
farther.
a waste of time and of
space to say any-
knowing the
of
principles
there are pecuHar reasons for saying some-
The
spread
society,
by
importance
the
thing on this point.
our
may be
economy,
produced by several causes, nevertheless
are constantly blundering
single cause,
that they rest
to another principle, perhaps,
Every
tion made.
To some
is
are gathered,
facts
deduced, which, indeed,
is
would give way
we
A
principles of political
extraordinary prosperity that has visited
a kind of poetic haze
and led us
Treat, on Polit. Econ., Intro., p. 24, 4th
to regard Am.
ed.
t
all
over
the
inquiry
whole into its
Princ. 0/ Currency, p.
i.
must have
says: '"Theory is dependent on theory being a generalization of the principles on which practice proceeds, Lecture on Met, these must originally have been taken out of, or abstracted from, practice." J
Sir
William Hamilton
preceded theory;
p.
120,
Am.
ed.
for
practice;
practice
—
OF POLITICAL ECONOMY. working as an
and South, there were but few ques-
of
principles
government involving
The
economy.
political
Congress were upon constitutional law, internal
debates in
great
improvements,
any
Of
application
of the
administration
relating to the
tions
Before the enactment of the great
idle speculation.
tragedy between the North
the
II
and
slavery,
With
questions.
like
The
out of war, these questions passed away.
breaking
the
country had gone
through the formative period of finding out the meaning and scope
Congress was confronted with economic ques-
of the organic law.
With these
tions.
was
it
prepared to deal.
ill
knowledge of them, except the
scantiest
The
portations.
Congressional Globe
It
had only the
monument
enduring
the
is
members of congress upon
of the ignorance displayed by
im-
question of taxing
questions
involving economic principles.*
To what new economic created a great
have been
ing
money
A
to maintain
the
our country blundered
and spent
war,
it
have been carried on and the debt been mistakes which
we
shall
not
;
how
less
of,
or failure
We
might
strife it
is,
are
recall.
One
fearfully
some of the most
to apply,
economy.
ciples of political
the
raising
in
than half
Unquestionably our country has suffered most ignorance
It
?
national currency and system of bank-
How
created.
give rise
and principal of which must be
debt, the interest
provided for and paid.
did the war
conditions
of
its
from an
familiar
prin-
most distinguished teachers,
fair specimens. "All governments fix the value of gold and silgovernment stamp gold and silver would be a simple commodity, like Some governments fix the value of coin higher, and some other things having intrinsic value. lower; just as each for itself chooses to determine." E. G. Spaulding; speech on DemandNote Bill, January 28, 1862. " This currency," referring to demand notes or legal tenders, " can be converted in such a *
ver;
shall give
and without
a couple of
their
—
manner
as to
because the vert
it
yiild six
moment
into the
per cent
the capitalist
bonds bearing
against over-circulation."
mterest on
interest,
Speech 0/
its
par value;
it
can
never greatly
depreciate,
any evidence of its depreciation, he will congiving him a permanent income. Thus it secures itself
holding
it
sees
Samuel Hooper on same
subject.
:
FIELD
12
Amasa Walker, than
it
paper
likely
His words, deemed
currency.
have long since borne evidence of issue of
might be carried on
which Congress was
payments, instead of abandoning
specie
to
irredeemable
how
war,
expense
half the
sticking
clearly set forth in a congressional speech, during
of the
part
early
the
AND IMPORTANCE
wisdom and
their
at
less
by
incur,
them
for
an
foolish
then,
truth.
The
an irredeemable currency, so pointedly condemned by him
and other economists, has wrought a thousand curses from which we are
try,
to
sufifering
to our
coun-
to-day and are to suffer for years
come.
to
Letting the
past go,
many
of our politicians do not yet under-
stand the principles of political economy, the application of which are
needed
ple, there are
matters, truth's
questions of taxation
home.
at
erty
The
some of our
in astronomy.
free banking, specie
are
all
subjects
principles rational
For exam-
to settle questions confronting the nation.
must
principles
settlement.
should
govern
in
these
politicians are as ignorant of as the grandest
The National banking
system, the currency,
payments, redemption of legal-tender
within the
be
both upon imports and prop-
which
domain of
mastered
if
The views
notes-
political
economy, whose
matters
are
these
entertained
to
receive a
upon these
questions,
the nonsense and ignorance displayed by Congress when grappling
with them, would be laughable were the results not so sad and so disastrous to the people.
Every session of Congress economic questions.*
When
discloses
its
inability to grapple
with
matters of foreign poHcy are discussed,
* Perhaps our congressmen may profit by learning what Burke thought of political economy " If I had not deemed it of some value, I should not have made political economy an object youth to near the end of my service in Parliament, of my humble studies from my very early employed the thoughts of speculative even before (at least to any knowledge of mine) it had where, in men in other parts of Europe. At that time it was still in its infancy in England, men thought my studies were not wholly the last century, it had its origin. Great and learned
—
—
3
OF POLITICAL ECONOMY. or treatment of
olden
when dealing with
time,
tives
Congress
in
is
the
in
or,
knowledge and mastery
slavery, a
evinced, although not
reached similar
all
cannot be said of the senators and representa-
This
conclusions.
improvements,
the Indians, or internal
of the several subjects
1
in respect
member who appears
economic questions, excepting a
to
occasionally, for a brief
season, within
the
national halls. It
desirable, therefore, for every person proposing to serve his
is
country
a public capacity to understand the principles of politi-
in
economy,
cal
they apply to
for
No
national legislation.*
one
and
measures
the
how
dispute
the
principles
the whole world. It
has
of political
economy
It is
business
vulsing the
years
the people.
Is
concerning
the
this
How
labor.
economist.
this
of
that
finan-
questions
are growing in im-
Consider the
one of the mightiest questions of the age.
of manufacturing
and
other.
other
It
is
con-
For
pursuits.
question will hang like a mighty cloud over
relation of the
The
character
question looms up before
this
that can
be known
and laborer?
Yet who
not desirable to find out
it
investigated
has
and
assumed a magnitude surpassed by no
years and
of
legislates.
portance to the individual in his business relations. relations of capital
questions
most conspicuous
the
taxation are
upon which Congress Again,
will
important
changed by the war, and
national legislation has been cial
most
the
most
question
question
capitalist
lies
within
all
profoundly the
?
domain
The
political
of economic
thrown away, and deigned to communicate with me now and then on some particulars of their Something of these studies may appear incidentally in some of the earliest immortal works. things
The House has been
published.
I
pension *
may
;
Said
Burke's works,
CoBDEN
witness to their effect, and has profited of them, more Letter to a Noble Lord on the attacks upon his
eight-and- twenty years."
or less, for above
be material for
vol.
5,
/. 192.
" It House of Commons, when addressing them on the corn laws you to get right notions of political economy questions of that kind will
to
the
form a great part of the world's legislation
:
;
for a
long time
to
come."
Speeches, vol.
i,
/. 384.
FIELD AND
14
And
science.
has been patiently and thoroughly investigated by
it
the economist in
The same restrictive
IMPORTANCE OF POLITICAL ECONOMY.
all
its
phases.*
of other
true
is
laws upon foreign importations, for example.
policy of the government be continued
any one ;
whom ?
if so,
Is
?
Are the laboring
it
currency
Do we
?
These, and a host of similar questions,
?
of
economy, and have been more
political
one has anything to
For these
known
reasons, the
special
have a value
statesman
to the
or denied.|
these principles
is
them upon
tell
It is
coming
omy
—
little
hard to believe that any
it
trade, finance
principles of
or commerce.!
the
has
gratifying to
know
The
that a
knowledge of
issuing of eleven editions
and
sesses the
much
grow
in
as a nation
unalloyed.
the streaks of light
trust will
great
so
short
a
awaking out of sleep and
people are
cost us so
not bliss pure and
ferred,
economy
political
and man of business hitherto un-
rapidly widening.
proof that
knowl-
to believe that ignorance of the principles of political econ-
—which
is
we
is
it ?
within the
fall
of Prof. Perry's Elements of Political Economy within period,
by
need more
carefully investi-
gated by economists than by empirics, who, possessing a
edge and having achieved fortunes, find
Shall the
advantage of
for the
classes benefited
National banking system a good one
Is the
range
Take the question of
questions.
A
as individuals is
to
be pre-
beginning to be seen in Congress
power and magnitude
knowledge necessary
and
wisdom
little
to discuss
until
and
that
settle
body poswisely
the
economic questions which involve the prosperity and happi-
ness of the republic. * If the
remark of Cobden be true
the working class above these principles
?
the place
— Speeches,
—that
"the principles of
they ever
fillfed
before "
political
— should
economy have
elevated
they not seek to master
vol. 2, p. 373.
The advantages to be derived by the Christian ministry from the study of political omy are admirably stated by Prof. Boardman in the Bib. Sacra, vol. 23, p. 73. \ The reasons why political economy has not been cultivated in America, are concisely t
in The Nation, vol.
2,
p.
255.
econ-
given
—
11.
THE PAYMENT OF LABOR.
This question ally in
has
England, than
and have
suffered
more
attracted
oftener
resorted to strikes
Yet the wave of
over every part of the land.
in political
is
economy
graver
is
less
Not a more important question
calls for settlement
and greater
difficulties
more or
breaking, with
not one
;
likely to give
is
before a settlement
suffering
reached.
The
contest between
and accumulated
more.*
The
inherited
it,
contest
There
many
is
and him who has
It
less.
is
his labor,
between the
another a shovel. is
one
has
a
vast
a
store
for
brains
a
hundred his farm,
of goods,
demanding something
his
sum, another
another
fortune,
one a
Thus the gradations from the
exertion
or
having
capitalist
and the laborer having nothing except
brains,
Technically, labor
saved, nothing
a contest of the laborer
dollars, another a quarter of that
another his
labor
all.
One man
and Hmbs.
is
a contest between
is
him who has saved
a very gradual shading
millions,
thousand
Capital
labor.
between
is
with the laborer, after
and laborer
capitalist
present
*
especi-
to increase their wages.
discontent has reached our shore, and
rise to
Europe,
in
here; for there laborers have been paid less
more, and they have
and other rude methods
fury,
attention
itself in
set
of tools, the
capitalist to
exchange.
Perry,
p.
122.
THE PAYMENT OF LABOR.
l6
shade
laborer ify
not easy to class-
is
it
persons.
all
As
almost imperceptibly, and
ofif
between
to the true relation
common
sense or reason in the
There
ployers.
no
is
He along the same
interests
And
concern."
this
They
common
laborer, there
" There
:*
is
no
is
workmen towards em-
jealousy of
line.
the
is
Perry
between
antagonism
real
and
capitalist
Says Prof
scarce a division of opinion.
them.
language of
Their
in
the same
all
who have
are partners
investigated the subject. It
in
very easily shown that the true interests of labor and
may be
many
would
is
live
is,
upon which
would return
to their
of the
fruits
of capital of
enterprises
to subsist.
original
earth,
Without
state,
and the
a
built,
and
to build factories
world. raised,
capital,
people
common
saying;
by
fishing,
It
by saving,
is
and
railroads,
and undertake thousands
the returns upon which, though sure
of enterprises,
the
crop
live
like.
is
the world has been able to make such
accumulating capital, that
—
the
from hand to mouth, according to the
hunting, the
progress
of
capital, laborers
accumulation
being made, a railroad
is
required
An
live.
most
undertake
to
While a machine capital
not
could
cases
necessary
that
Without the employment of
are identical.
capital
come,
to
may
be long delayed.
The
has
capitalist
He
united with labor. railroad, labor
is
perfect capital
man * ,£/.
unable of
accomplish
the
theoretical
the rich
man
truth totally
get
Polit. EcoH., p.
employment from
148, 5th ed.
the
it.
things,
To
if
build a
Both are indispensathat
they operate in
unable to unite his
labor, he would become a beggar to
these
can do nothing without
Were
harmony. with
to
just as essential as capital.
Hence
ble elements.
means
the
;
were the work-
capitalist,
he would
—
THE PAYMENT OF LABOR.
The
Starve.
What
is
is
are, therefore, inseparably united;
equally great.
This
their actual position ?
We
make.
tion to
two
interests of the
need of each other
their
is
our investigation
analyze
to
What The
laborer
it
and
We
laborers.
generally actuate
two
the
seek
classes.
?
is
determined to get the highest wages
most work
employer the
for the
or receiving a reasonable compensation
How much
can
The
question of paying
not the one determining
how
get?
I
is
for the least
wages.*
least
The
motives of the two classes are the same.
the question.
be remembered,
it
does not apply to every indi-
unselfish employers
motives which
the
are these
work; the
general;
is
There are
vidual case.
let
motives
of the
picture
Yet
ruling the greatest portion of mankind. that
not a pleasant investiga-
present a dark
shall
17
.
can
little
pay? these
I
are the questions asked.
The
" '
:
The
end
final
highest practical point that
of the trades-unions
'
the
work are
heartily; to 'evade'
who
rules; 'he
greatest benefactor to his order
is
most
; '
'
have plans
they, in
the public *
to
make
use
their
maxim to 'loi-
the sluggard,
that
is
oppose the use of inferior
to the
is
these arts
is
the
according to the
workman
; '
the union-
useless to their employers;
of machinery, articles
—
for
and compel
example,
hand-
has said: "There is an implied contract, much stronger than any instrument or agreement, between the laborer in any occupation and his employer that the labor,
so far as that labor
—
is
concerned, shall be sufficient to pay to the employer a profit on his cap-
and a compensation
equal to the payment." t
making work
cases,
clearly set
raise
Burke
article of
ital
for
some
is
to
work and
it
skillful in
standard of the unions, must be the model ists
*
is
and
of wages,'
rate
no work should be done
ter' at
declared this again
In the Edinburgh Review, \ their object
and again. forth
Great Britain have
trades-unions of
July No., x868.
for
his
risk;
in a word, that
the labor shall
Thoughts and Details on Scarcity,
vol. 5,
p.
produce an advantage 137.
8
1
THE PAYMENT OF LABOR.
.
made
bricks
more
carrying
Leeds bricklayers have a
the
:
at a
time
than
'
as possible of the master's time, has
trades-unions aim at
dering
cases, so is
'
turned
'
making
of each
labor
the
much work
as
efficient
less
; '
;
union
the
industrial
and a witness who appears
This
we cannot
is
quite as
the capitalist
Does he love
selfish
him with having
credit
What can
money
his
say
has had
failed to use
the
afraid
the view of thous.
is
a being as his employer;
himself?
for
advantage of
It is a
it.
to get advantage
he
Is
whom
his
of each
pay
it
;
if
harmony.
to get the sible for
is
and
all
Unhappily,
most he can
what he buys.
this is
for
were willing sell
accord-
world would move on
in per-
sells,
Every man seeks
and pay
as
little
the law of the world.
is
rarely
were willing to
capitalists
not the case.
what he
This
Le1> capi-
forever trying
every exchanger were willing to buy and
—the
?
The
workman, and he has
If all laborers
other.
for a reasonable, or just price,
selfish ?
less
he employs
hard truth that the world
ing to the same beautiful rule fect
some
machine
better motives.
than those
less
it
the long record, especially of British industry, answer.
to
the
court against a trades-
in
But
indeed, an extreme view.
is,
The workman
ands.
work
;
by ren-
in
is,
of outrage, employers are
in cases
'
'
as possible,'
the
'
'must be helped to emigrate.'"
union,
talist
much
been acted on as a rule
omnipotent over masters,' that
topsy-turvy
to prosecute,
number of
small
walking slowly to work, so as to consume as
eight bricks';
man
against one
rule
ridiculously
the
to carry out the law, all are forever inventing
as posr
In order
methods by which
they can overreach each other, while the overreached are continually
applying counter-protectives.
If a
restrictive
tariff
law
is
enacted by which a railroad com-
pany pays twenty-five per cent, more for
its
rails,
it
makes up the
THE PAYMENT OF LABOR.
home manufacturer by
advantage thus accruing to the
from the
the seller will
take
their
Why?
he can.
may
be
although
selling,
honest
knows
of his
story that,
The
they can.
and
condition,
men
generally,
capitalist
them
to
even at a
sell
fellow,
his
trust
tell
the
because
he
take advantage of each
will
other
if
like the rest, and, unfortunately for the
is
He
overcome.
raise the
each afraid to
;
laboring class, he has an advantage over them which for
his
fears
pretending to be
great;
wishing to
and thus deceptions are employed
;
Because he
purposes, pretending not to want
real
very badly, although their wants
not very desirous of loss
buy anything, he hides
intends to
seller if
raising the
advantage of the buyer's situation to
So men hide
price.
man
If a
price of freights.* real intentions
I9
can
live
ployed in reproduction; their labor
difficult
is
capital
is
not em-
not keep, and,
if
they are
all
if
will
it
his
not employed, they perish.
For example
demand the
A
:
owns a
owner says
erty besides,
:
"
No,
and can
he has enough
for
I
his help in the
he pleases.
so.
upon
It
it
is
But
He
if
the
But
has prop-
exhausted;
perhaps does
laborer
enough, then, that
clear
is
is
the
fact,
and every
all
the beautiful
and
of labor
capital
A
holds
in
true
observer will
theorizing
say
about the
order to bring
forth
both, capital often has a decided advantage.
laborer sees
this.
He
says
:
advantage over me, he can compel *
mill first."
that until
support always.
his
Admitting the truth of
The
They
hollow of his hand and can squeeze them as hard This
necessary marriage fruits for
my
will stop
live
not work, he will starve.
as
by a hundred hands.
factory run
higher wages and refuse to work until they be given.
See Col. Grosvknor's admirable
article
"
The
me
to
capitalist
make
a
has
on The Railroads and the Farms, as an vol. 32, page 591,
Ai. Monthly,
a
great
contract by illustration,
THE PAYMENT OF LABOR.
20
which
man says
am
I
:
Work
"
And talists
not
fairly
up
deliver
to
me
for
paid for
money
his
much
for so
because he has
my
services."
or forfeit
a
It is like telling
his
The
life.
capitalist
or I will starve you to
death."
advantage over the laborer, most capi-
this
are not slow to avail themselves of
and
it,
this is the
cause
of the enmity between the two classes.
The
laboring
class
sympathy because
more
receive
they
are
placed at the greatest disadvantage; they are not, in truth, a whit better as
than
many
of them
capitalists,
This
employers, because,
their
is
must be
do, they quickly
when they become
come
things
see
to
wealthy, as
not an
encouraging view of
human
some one be deceived.
said, lest
nature, though
and
Capitalist
every
as
antagonistic
advantage
over
those
to
favorably situated, he has
of the other,
opponent,
his
but
capitalist
more advantages, and can
the better half of the bargain with
the
his in-
each seeks to
the
is
get
most
generally get
This
laborer.
it
laborer,
each seeks to do the best he can for himself, each regards terests
other
and take up practices which once they condemned.
the real
is
situation of both classes.
•
In making the contract for labor, we maintain that the laborer
ought to be willing to work
for a reasonable
ployer ought to be willing to pay
it;
the same;
if
pay
to
as
scarce, the
and the em-
and each ought not
advantage of the situation of the other.
employer ought
price,
to take
labor be plenty, the
If
much, other things with him remaining employed ought
to
ask
no advance of
wages, provided his condition in other respects remains unchanged.
In short, people ought not to take advantage of each
other as
they do.
This law that, as
he
men is
are violating continually.
not
bound
to
The
employ laborers
at
capitalist declares all,
he has the
THE PAYMENT OF LABOR. any price that may be agreed upon.
of paying them
right
other words, as
him
as
or
Httle
much
as
" Capital, being
:
which she
to
mutually
self-same
laborer
accrues
entirely to
Is
it
are the relative
of the two
positions
Absolutely nothing.
The
?
and how much
run
will
No man
will
As buy sell
to weeds, the
if
for
the
Let the
Of
capitalist
capital has he
left ?
at
not
Dis-
Dis-
air.
the wharves, every give
out
its
music.
have anything except what he can get by direct exer-
and
living
the
moon. its
is
are *
0>i
A
factory
would to the
That
value,
course, there
it
upon the income, who
would be of no more use
no labor can be employed a dollar, because
and enhance
deny.
rot
will
spindle will
for selling his property
purchaser than erty
that
keeps him from sinking.
laborer
pense with labor, and every vessel
not
the
take as
to
true
in
agreement with the
to enter into
pense with his services, and capital vanishes into thin
will
thus,
capital, for
entitled
is
own produce."
its
laborer,
tion.
capital
to
and would
represents,
it
under no obligation
cease to employ the
farm
may
profit
Let us examine the question.
?
What
thus
which unassisted labor
for
reward the whole of is
which
profit
whatever
to
into
any arrange-
which labor and herself
to
of any agreement, belong
reason
capitalist
entitled
is
to enter
regarded as the produce of the labor by which the
fairly
the absence
its
and
was created and which
capital
the following
in
reject
liberty to
at
is
any arrangement
That the
agree.
may be
at all,
objects,
accrue to her from
plea on behalf of
by Mr. Thornton,*
under no previous obligation
arrangement with labor
ment
The
he pleases.
as
In
may pay
independent of the workman, he
is
has been put
the capitalist
form
he
21
all
?
great
desire to preserve
a general
spendthrifts Labor, page
truth
which no one
who have no
138.
their propwill
ability or
THE PAYMENT OF LABOR.
22
But
not true of mankind in general.
this is
more wealth,
for
These two
facts
pose,
—the
that labor
—
that
are
all
inher-
Their desire
and add
what they have
to save
then being true,
and
their property,
may have
keep what they
desire to acquire property, or to ited.
to
its
is
value.
upon saving
intent
absolutely necessary for this pur-
is
property-owner ought to be willing to pay a
com-
fair
pensation for the labor whereby his riches are saved and increased.
Now, is
way
the usual
of looking at this question
this
is
—no
man
obliged to build a ship, or a factory, in order to employ labor,
money
because he can loan his they want of
and
ufacturer gets tired of his business
ground that he sells his
establishment, and what then
which employ
for labor less directly;
that
He
He
but the bank employs labor, and loans
touch,
for the
and
employment of they
if
Whether employed capital
He
not,
man
not
their
them
—they
capital
are
for his services.
in
a
to
puts
capital
dollar,
is
bank,
others
to
who
and labor the
as
is
labor, else
worth a million
it
other.
will
loan
it
not do
that
to others
pay a reasonable reward is
—
to
is
abso-
as poor as
is
and both must get a
As men
The workman
in a
it
capital
worthless
as
is
union with
themselves, or
bound
His money
loaned to others for them to use,
The man who
having
simple and similar tasks. use
one
its
Everywhere
labor.
directly, or
must be employed
lutely valueless.
the
do
invests his prop-
buys railroad stocks, but the
railroad employs labor in great quantities.
it
upon the
employs and pays
only difference.
the
is
put to the same use as before.
man-
employ any one, he
Why, he
?
labor.
what do
If the
it ?
resolves to quit
under no obligation to
is
erty in other concerns
use
true, yet
they do not employ labor with
if
it
Very
to others.
living
by
as they will
be used by
to the laborer
just as necessary a
factor in re-
production as capital, and rightfully stands upon an equal plane.
THE PAYMENT OF LABOR. Again, the capitalist asks
own?
mine
with
will
If
"
:
Have
capital
under no obligation to employ workmen,
bound
employ
to
property, he
own
is
cannot
bound
required to employ labor
be
to use
society to
to
Government,
in
employ
protecting
maintenance of himself.
He
must use
loan
For,
he
if
becomes
himself, or
it
will
not use
worthless,
it
become a burden
The
proposition.
or else
their
them or
in the
the sion
it
a duty
is
its
owner
to
another
portion
others
to
State
is
let
to
it
others use
it,
by them.
his property
The
obliged to support him.
no man wastes
property
his
the
He
away.
used
be
in
so as
truth
is
simply
Men
any one
else.
this
—
capital
are in fact
possessions, whether
length to defend
extreme
our
utterly worthless
is
bound
to
employ labor
great or small, are of no value
Labor
is
just as necessary a factor
saving and reproduction of capital, as in producing capital in
first
we
lated.
to
he has
to the public.
unless joined with labor.
to
it
not necessary to go to this
It is
man
If a if
;
other ways.
in
it
has no right to throw
State has the right to see that to
are
a portion of such
enabling
thus
spend
himself or
and the
am
under obligation to employ a portion
in reproduction, as well as to
it
spend
or
so,
it
property,
accumulate more, puts him of
Can
reproducing wealth, then
in
I
either directly or indirectly, for his
it,
support and for the support of others.
property be used as capital
he owes
am, then
I
1
all
away, surely
for if
whether having capital or not."
labor,
he
has nothing,
do what
not a right to
I
my
throw
I
23
place.
Let
it
not be forgotten that in this whole discus-
are not talking of anything but labor, present
Accumulated
with present labor; assertion
is
labor,
to
be worth anything, must be united
the two operate together.
without foundation that the capitalist
gation to employ labor.
and accumu-
Consequently, is
Such an obligation does
under no exist.
He
the obli-
has
THE PAYMENT OF LABOR.
24
no
throw
right to
else his property
to save
becomes
assume that every man he must employ labor,
house was
a
And
if
he must employ labor
compensation
fair
Would not
save the house.
make
to
a definite
engage with a hearty
remuneration, but
house was mean
if
same
the
he were not willing
in
bargain
as
respect to
to
made
uses
Labor
is
and
of capital,
factories,
employ
they must
able price for
His
capital
cannot help admitting the
all
and enhance
its
value;
right
the
it.
that
higher wages. ing to be
fact.
if
Therefore they ought to pay a reason-
there
is
a natural difference;
one
man
worth more than another, because he has greater strength or is
will
Analyze
are desirous of securing these ends,
etc.,
labor.
As between workmen,
It
rea-
position of the cap-
property.
his
necessary to save property
owners of lands,
efforts
pay those men a
The
?
vanish like a stroke of lightning unless united with labor. the
the
to
their
every one say that the owner of that
sonable compensation for their services italist is
away by a
to help in saving
and by
will,
Sup-
therefor.
danger of being carried
in
and some men coming along were asked
They have no time
it.
We
valueless.
he ought to pay
it,
pose a man's flood,
property;
his
if so,
away.
his property
desirous of saving
is
the
strongest
and
should
skillful
rriost
Concerning these natural advantages, there
said.
What we
wrongful advantage.
object to
is
If the corn crop
the is
use
less
of
receive is
noth-
and
artificial
this year,
is
skill.
the price
should not be increased, except to require people to practice econ-
omy, or let
the
for
some other good
them be paid old prices.
ficial,
as
much;
Let no
if
reason.
they are
advantage be
or forced conditions, and
all
will
If laborers scarce, let
taken
be
well.
are
plentiful,
them work
of unnatural,
for
arti-
;
THE PAYMENT OF LABOR. be said that
will
It
mode
this
of reasoning
operation of supply and demand. plied
No,
not
asking
and
?
about
in
the
contrary
is
All
that
we have
reasonable prices, does
expecting
There
with the working of this law.
the
to
Shall that law cease to be ap-
sense.
true
25
is,
written
not
conflict
however, a wide difference
between the natural and unnatural operation of supply and demand.
— demand
what people
Rightly interpreted, the law
is
need and would purchase
they could buy at a reasonable price
and supply the world
this
and, on the
one hand,
the
demand
The
law, to a great extent, does
is
by creating
often
express
much
really
wants the
by trying
down
What it
is
is
deceive
when they
the price. ex-
each
other;
really
want
refuses
to
to,
buy,
hoping to get a reduction of
thing,
up so deeply, that the natural
real
state of
law of demand
has, in fact, only a limited operation.
upon many
a reasonable price depends
draw any hard and
'impossible to
The most we can do
is
to find out
making contracts between
reasonable
make
to
the truth about
The buyer
of prices.
But
artificial
greater than purchases
But people
also.
advance
other,
so as to beat
not
force, they refuse to sell
covered
and supply
in
is
is,
really
such a price.
at
So numerous are the deceptions practiced, the
price.
ously,
demand
real
an
for
although he
things
really
it
and the supply
they exercise
hoping
than
less
The
changes.
is
forever interfering with this law,
the
indicate,
had
the quantity that can be
is
is
on
scarcity
if
price
capitalist
regard
without
to
fast
what principle
Obvi-
things.
line defining
and workman.
it.
govern
should
This
any advantage which
is
a
either
capitalist or laborer might take of the condition of the other.
There are some considerations, however, that may be mentioned in
making contracts
more where
the
for
work
labor. is
First,
hazardous to
the laborer life
and
should receive health,
than in
26
THE PAYMENT OF LABOR.
those occupations which
powder
operative in a
heahhy and
are
An
from accident.
free
who makes
or
mill,
certain parts of a brim-
stone match, ought to receive higher wages than a person working a woolen factory, which
in
comparatively healthy and, safe.
is
ondly, a person ought not to expect so
much who
employment
get
sengers,
as a
hackman
ordinary
all
hour
is
he
go a short
only
be employed
to
now and
The same person
the time.
England, they ought ployers,
most
in
employment
not to
feel
Ofttimes
if
charge
time
less
by the
employed
to
This
is
required.
much, because
so
bound
to
give
New
they
run,
and
em-
their
them
c'onstant
at a loss,
they would not run, except to keep their help employed. considerations of less
he were
in factories, especially in
expect
instances,
possible.
if
conveying pas-
then, than
will
The
regularly.
for
for several hours, than' if
distance, in proportion to the
With a great many who work
just.
work
charging more
justified in
he can get them
if
employed if
who cannot
person is
Sec-
receives regular
when Other
importance probably enter into the contract
fixing the price of wages.
There are some
subsidiary questions
which require notice. rally,
not
It is said, that
whatever the price
make a
is
main one
paid enough gene-
be, because, as a class,
Avorkmen do
wise use of their wages.
That workmen are not be
may
surrounding the labor
denied.
often prodigal in the use of their
Since
the
war, the wages
wages
will
of factory operatives
have remained nearly the same as before, the prices of hving have been reduced, consequently operatives have reaped a
Some of them have saved have spent
it
have changed extravagance
all.
in
The goods
many
of this
in the
respects,
class.
fine harvest.
money, though the larger number
their
which
factory is
The amount
the
stores
best
and
villages
proof of the
of jewelry they wear
is
THE PAYMENT OF LABOR. very large and clothing, also,
Now,
it
is
expensive to what
and
costlier,
is
use of their
before giving
it
taught
Yet
to
save
a
they do
The same mode
day
them
to use
foolishly,
is
it
operatives?
Is
he
does
cut
put
properly
Ope-
good.
for
nobler
uses.
?
manufacturer
the
to
it
make
and they should be
want, and
of
of arguing will
for
Their
not
a good defence to paying them higher wages
making money,
money
teach
;
?
by way of advice,
This,
against
it
much
so
spend a great deal of money
this
is
money
to them.
was a few years ago.
their living as well.
why pay them
said,
an economic
ratives
it
27
off
any better use than
from his
he not as extravagant, does he not spend as much
foolishly
He
?
cannot,
in
truth,
say
anything
on
that
score.
Thus we have gone over laborer,
ment of
and sought labor.
always best; preferable, in
We
whenever a
over every
the ground between the capitalist
out what
do not say
a division
every case, and
ence
to find
of the
division
when
other.
have succeeded, and what
it
is
How
is
that
profits is
the
price
is
is
fixing
It is
not practicable
rule has a decided prefer-
various plans for
efforts
of any
upon some agreed plan
the
practica'ble.
not, this
and
true rule in the pay-
rewarding labor
workmen have made
to increase
the price of wages, will be considered in the next chapter.
:
III.
ON THE INCREASE OF WAGES.
The
histor)f
of the
very sad one. It
is
It
is
to
efforts
increase
has been created between
Workmen by
which
seek
their
societies,
their intercourse.
all
called
trades-unions,
councils of arbitration, and by strikes.
abandoning the
We
the
largest
The Amalgamated
by
forming
capitalist
shall consider,
It is *
are
first,
following ways
in
the
'
rights
strifes
understanding
claims
demanding higher wages by conference with
ing their
a
is
suffering.
them, and a nearer approximation to
secure
combining into
first
parties, a better
one day mark
will
to
of labor
however, and proves that amid the
very instructive,
and disappointments of contending
perfect justice,
the price
strewn with cruelty, injustice, and
The
industrial
partnerships,
methods of trades-union
voluntary
organization
Society of Engineers in
by
other ways of secur-
and forming co-operative
the
and then
their employers,
associations. societies.
the world.*
in
England, a branch
numbering about 35.000 members, has an annual income of $ 440,000. society from 1851 to 1868 were as follows: Payments to members out of work Aids in sickness For old age For accidents For burials For extra fund for cases of special emergency Aids to other trades
of the
The
Total
by
and
The
trades-unions,
and
expenditures of the
£ 425,844 161,388
45,272 16,000
50,250 12,526 10,375 ;£
721,65s
—|
ON THE INCREASE OF WAGES. combining
of
object
principal
the incidental object
week
The aim
secondly, to
thirdly, to
own competition
labor to
certain
systematic
to prevent the all
'
:t
"
to
To
effect
insist
employment of
numbers;
oppose frequent,
to
*
piece-masters.'"
the price of wages,
workmen
are
A
considerable
has been displayed towards trades-unions, as they are con-
sidered the enemies of the capitalist. object of their creation
words, to
get
is
most instances, he
is
In one sense they
to increase the price of labor
a larger share of the
IVard's ]Vorkmen and Wages, p. Cobden Club Essays, p. 380, second
In
societies has
are.
—
in
The other
profits,
which, in
England,
especially,
capitalist's
unwilling to give.
the greatest opposition to these
been exhibited.
In
18.
series.
"This 'piece-master' is a foreman, whose extra gains sometimes depend on put upon the labor of those who work under his superintendence.'' Gostick. ;
entirely
purpose so long as they pursue proper
this
methods and do not make unreasonable demands.
*
on apprentice-
other objects of the society out of sight except the
justified in uniting for
t
to
object
this
working beyond the regular hours agreed on, and
principal one of raising
hostility
their
restrict
employment of workmen and apprentices
to contend for the
Leaving
of wages
deemed necessary
agreed upon
chief rules
in a certain ratio of their respective '
sought to
limits
have been thus stated by Mr. Gostick
or
rise
convert non-unionists into union-
aims, they have
these in
The
their welfare.
ship;
to op^
first,
is,
cause a
by persuasion or coercion, the former means being preBesides
ferred.*
and
support of
the
in
of trades-unions more specifically stated
whenever practicable; either
sickness
in
pay a certain sum per
expended
this is
while
wages,
etc.
pose any reduction of wages;
ists,
workmen
are required to
and
to the organization,
strikers, sickness,
higher
secure
to
the support of
is
The members
destitution.
is
29
extra pressure
ON THE INCREASE OF WAGES.
30
this country, labor
England
in
labor
and
better rewarded
been most keenly is
more
content.
It
is
where the supply of
England
ized there than in any other country; in
It
is
Trades-unions have been more extensively organ-
largest.
is
is
that the laborer has fared worst,
felt.
evident that
just as
has their power
have a
laborers
right
combine
to
in
order to get their dues, as capitalists have to combine for the pur-
Adam Smith* where
As long ago
advance of wages.
an
pose of resisting
wrote, he said that " masters are always
in a sort
of
tacit,
and
constant
but
uniform
not to raise the wages of labor above their actual
combination
late this
Mr.
Thornton
has
among
reaffirmed
habit of competing with their
custom
is
his neighbors
remark
the
advisable for
accordingly." It
"
:
them
form
To
deliberate together
may,
it
vio-
equals."
employers
at all in the
the contrary,
from time to time,
in order
circumstances, be
existing
in
and some uniform
to offer,
and
Large
On
for labor.
rate
is
agreed to
f
was a long period before workmen
ted to ists
to
each other
what wages
determine
combination,
rate.
any one extensive department of industry are not
to
when
everywhere a most unpopular action, and
is
a sort of reproach to a master
in
as
and every-
these societies, so
Parhament shows the willingness of
workmen
;
England were
strongly entrenched
in the legislation of the realm.
the combination of
in
were
permitcapital-
In 1799, ^^^ following act of that
body
to legislate against
" Contracts entered into for obtain-
ing an advance of wages, for altering the usual time for working, or for
decreasing
be made .
quantity
the
of
work (excepting such contract
between a master and his journeyman), or preventing
any person employing whomsoever they may think proper *
Vol.
I,
p.
70,
Rogers'
ed.
t
IVesi.
Rev., vol. 8i, p. i66,
Am
ed.
in their
ON THE INCREASE OF WAGES, or
trade,
conduct,
the
controlling
for
3I
any way affecting any
or
person or persons carrying on any manufacture or business, in the
conduct or management thereof,
shall
be declared
illegal,
null
and
void."*
This statute
Nor was
illustrates
until
it
how workmen were Parliament
1827 that
workmen from combining.
hibiting
Parliament had taken
it
regarded
repealed
Until
in that day.
statutes pro-
all
employers and
then,
granted that they alone could regulate
for
the price of wages.
In having
the
combine acknowledged by Parliament,
to
right
time put upon the same plane with the
first
now combine In
to
combined
hitherto
work the
So
cerned,
far as
placed
not until
the
had
just
recently that
They have
cause of complaint.
right to
the
this
Governments are con-
upon the same footing
have enjoyed the unquestioned It is
capitalists
we have never been troubled with
our National or State
workmen have no
always been
up, as
for
They could
capitalist.
price of labor
was
to keep the price of labor down.
this country, happily,
question.
He
workman was much advanced.
the cause of the
as the capitalist,
form trades-union
old doctrine
and
societies.
of the right of the
State to control the price of labor has been revived.
This desire
has been expressed by Governor Brown, of Georgia.
In his
annual
message, he
We may
hold
that " labor
said
every law
inviolate
must
so legislate
lish
a baronial one."
We
be controlled by law.
United States, and
of the
upon our labor system, or
still
of that,
in lieu
imagine that there
is
the
fiat
of Gov.
'40 George
III,
is
Brown,
chap
90.
estab-
no danger of the
old English law being re-enacted on this republican to contract for labor
last
soil.
Liberty
too deeply grounded to be crushed out by or
by any one
else
of his
way
of thinking.
ON THE INCREASE OF WAGES.
32
In
this
country trades-unions are of
men, as a general
thing, are well
much unimproved
land to
get
will
a
fair
The
hearing.
which the laborer may,
be
had,
is
so
of labor
claims
the
western prairies are an asylum to
any time,
at
So long as there
paid.
easily
account, because work-
less
fly
from the face of
op-
his
pressors.
Three ways there
are, as
we have
by which trades-unions
said,
seek to get an advance of wages: by conference with their employers,
by councils of
latter
mode we which
Strikes,
the Jacquerie
workmen
if
their
speak
will
strikes.
.
Concerning the
first.
in the fourteenth century
riots,
in order to get
and by
conciliation,
had
their counterpart in
are the last thing for the laborer to
an advance of wages.
As
resort
for the justice of
are not getting a reasonable price
for
their
them,
work, and
employers refuse to pay more, after working the length of
time agreed upon, they are justified in quitting their places. all
is
to
there
is
in the
phenomena of
refusal to
strikes,
That
work unless
an advance be paid, and the workman has a perfect right to de-
mand
such a price and to quit working unless the advance be
of-
fered.*
In England, and
workmen, secure a
generally,
rise
we beheve
the
same
is
have oftener struck to
of wages.
true in this country, resist
posed reduction was the cause of the engineers' the strike at Preston in 1853;
1865;
and of the
a
fall
than to
Says Mr. BRASSEY,t " Resistance to a pro-
strike
of the strike
of the
colliers,
at
in
strike in
the
Wigan,
iron in
1852; of trade 1868.
in
In
* Mr. Thornton has considered the ethics of strikes fully in a paper published in the PFest. Some able and interesting Rev. upon Strikes and Industrial Co-operation; vol. 8i, pp. 165—67. observations upon this subject are contained in a paper by Frederic Harrison entitled The
Iron-Masters' Trades-Union, Fort. Rev., vol. t
Work and Wages,
p. 6.
i,
p. 96.
ON THE INCREASE OF WAGES. each of these cases, the masters had found
quence of the
wages
:
depressed
of
state
trade, to
looking only to what they believed
workmen, refused
Although
many
in
wages,
yet
Great
Britain's
not
other countries,
in
workmen have
cases
One
always.
failure to
of the
advance
the very large
is
of coal
that journal, " without
whether
of coal in
of
strikes
reasons
the
higher
given
to
for
and
this
of labor
price
The London
societies.
on the decline of the English iron that
the price of iron
Anything that
of coal.
price
the
affects
price
"
of iron.
Now," says
pronouncing judgment on the disputed ques-
have been the exclusive cause of the
England, we may take
a very principal
in
it
and
cause,
influence
controlling
in
United States, remarked
raises the price
a
rate
get
to
failed
principal
supply iron manufactures
a recent editorial
with the
been
the
be a degradation of their
to
depended very materially upon the
tion
reduce
conse-
to accept the reduction."
occasioned by the strikes of trades-union
Times*
necessary, in
but the men, ignoring the circumstances of the trade, and
position as
trade
it
33
as
that
late
rise
granted that they have they
are
now
exercising
up the admittedly excessive
keeping
price." Strikes, in this country,
tracted.
have not been very serious or long pro-
They have occurred
the cotton and woolen
mills,
almost every branch of trade;
in
among
the
coal
in
mines, engineers of
railways have occasionally struck, masons, carpenters, printers, and others.
The coal-mine Mr.
expensive of any.
some last
of the
numerous
twenty-five
strikes
Thornton strikes in
Aug.
has
summed up
the
result of
England, happening within the
years, but a detailed
others besides, will be found in '
have been the most extensive and
account of them, and
IVan/'s
many
We
Workmen and Wages. •
29, 1873.
4
ON THE INCREASE OF WAGES.
34 shall
merely mention the great strike of the Manchester spinners
when $1,250,000 wages were
in 1829,
Staleybridge
and who
spinners
Wear pitmen ter
of 1829 and
strikes
by 30,000
strikes of the
Tyne and
in
when $360,000
1833,
of wages were lost;
the "terrible" strikes of the Preston spinners;
weeks
thirteen
the engineers' strike
$215,000 wages were trade
building
Staffordshire
duration, in which
weeks'
the strike
in
and the
strikes of
the
and the North
in
1865, and of the
metropolitan
the
sacrificed;
i860;
in
in
into voluntary idleness, suffering
1853, of fifteen
in
and secondly,
and giving up $2,100,000 wages;
weeks,
thirty-six
in 1836, lasting
first,
and costing the men $286,000;
when 17,000 persons went
1854,
intensely for
Ashton and in
which were very protracted; the Manches-
in 1832, strike
builders'
the
$1,250,000;
lost
the
forfeited;
1830, participated
iron
workers
London
of
tailors in
1868; these are a few of the more prominent instances. resorting
Before
their
settle
times a hearing renders
arbitrator
to
strikes,
is
workmen,
many
in
had, both
parties
a decision, which
state
is
their
immense amount of good, and prevented numerous employer, by coming
showing of
and
forward
his business
— what
at
these
times
by both
final
work and
mode
The
strikes.
and making a
full
he can afford to pay and what not
saved both himself and his workmen from
loss of
This
and the
claims,
accepted as
to
Oft-
These courts of conciliation have been the authors of an
parties.
—has
seek
cases,
with their employers by arbitration.
differences
many a
rupture
profits.
of settling disputes between employer and employed
France, and
originated
in
hommes.
They
are
is
there
estabhshed
six
members
Conseils
des
Prud'-
by decree of government, and
consist of a president, vice-president,
nor employers, and
termed
who can be
elected
neither
by both
workmen
classes.
The
ON THE INCREASE OF WAGES. proceedings
workman,
" in
judgment
almost out
ninety-five
before these tribunals,
is
...
made.
rarely
The
hundred
result,"
to the superior courts of law, they
In
28,000
1850,
had
disputes
in
broken
actually
make peace; likely to
save
capitalist
and
When
but
out,
a
courts
bitter
:
can
instituted
termed an
which
many The
industrial
of these
results, for
the
little,
topics
same subject
workmen simply
Work and
Wages,
are
these
first
history p.
272.
wages by
;
to present the
This
is
of two
secondly, co-opera-
method of conducting business
latter
and do
history of
birth of the
The
they
to increase his
We
little
shall
not
tarry long
is
with
more than point out a few
movements has been
times, that the public are quite well informed of
Pioneers.
perhaps, to
enough,
by co-operation.
lot
partnership.
nearly thirty years ago.
*
his
co-operation of
tion with capitalists,
either
do
early
and expensive contest between the
turn to another side of the
first,
probably would
workmen.
his
experience of improving
kinds
it
between the two classes
division
these
they are
if
many
a
Having shown how the workman seeks
we
than
produced so much peace
country, yet they have
yield the best results.
strikes,
been
been said about the establishment of courts of conthis
abroad, that, were the tribunal established here,
has
less
satisfactorily settled."
Little has ciliation
says
brought
cases
heard before the Conseils des Prud'hommes, of which no 26,800 were
one
a reconciliation between the parties; and,
though appeals are permitted are
employer and "
daily.
one
of
and a
being paid;
not
of one
consisting
council,
in
sit
Brassey,*
judges
inexpensive, the
are
of the
delegation
35
related it
so
already.
co-operative society occurred in Rochdale
The
organization was called the Rochdale
of the
society
has
been told
in a
most
:
ON THE INCREASE OF WAGES.
36
way by Mr. Thornton
attractive
rise of this
like the
twenty-eight
beginning,
the
was
society
his
in
The
work On Labor.
growth of a mustard seed.
In
with
the
weavers,
flannel
disgusted
poor quality and outrageous price of the provisions they were in
two and three pence a week
the habit of buying, subscribed
to-
wards making up a sum of twenty-eight pounds, which they spent in
purchasing,
at
wholesale
and oatmeal.
butter,
wanted
From
paying
They purchased
continued to
grow,
room was necessary hired,
and added
in larger quantities
association
and
it
was laughed
and to
and when the whole
They repeated
operation.
The embryo
sugar,
what he
stock, each took
cash;
in
flour,
were surprised to find that so much
sold, they
had been made by the
Manchester,
in
common
this
at the current prices,
amount had been
was
prices,
after a
at in the beginning,
time
short
the goods
hold
the experiment.
to their subscribers.
it
A
purchased.
was arranged that one of
but
it
was found that a small one
number should
their
act as salesman for a few hours during two evenings in the week.
In
the
1845,
year of the
was ;^i8i, upon which a net
The two
at
in
We
ress.
A
society
follows
had accrued.
a wonderful rate ever since.
In 1847,
a
1850,
to the original grocery
butcher's in
and
and
shop was grafted on;
1852, shoemaking and tailoring
single glance at the profits tells the story of prog-
have
not
show what they were
The
^32
and they
shortly after, a slaughter-house;
were begun.
^80
^77;
and woolen drapery was added
chandlery business;
number of sub-
the
benefit of
they divided
following years
have gone on increasing linen
society,
twenty-eight to seventy-four, and the
had increased from
scribers
capital
second
was
space at the
started
in
for
all
the
figures
;
we
end of each period of 1844,
and the net
will five
profits
simply years.
run
as
ON THE INCREASE OF WAGES. 1845,
£21
1S48,
£\\']
1846,
80
1849,
561
....
1865,
25,156
1847,
72
1850,
880
....
1867,
41,619
1855,
3,106
The
i860,
;^i5,9o6
They bought
causes of their success are very clearly seen.
at wholesale,
and always paid
They never
discounts.
bad
37
large
The expenses
two per
of
management were
distribution
in
necessity
of
obtain
order to
exceeding
small, not
For attracting
cent, of the business done.
equitable
known
themselves
largest
shareholders, they were
were under no
of customers, and
assured of plenty
spending a penny to make trade.
number of
the
getting
consequently had no
sold on credit, and
Having a
debts.
thus
cash,
in
outsiders, their
of profits was a device far more
efficacious
than a showy front or advertising.
When any
makes a purchase, he
one
a
receives
tin
ticket,
whether a member of the association or not, denoting the sum he
At the end of every
has paid. there
is
a deduction
education
among
fund
is
taken
out,
and
There are some very decided benefits First,
one's
secondly, the
stores
give
chaser that what
same
Upon * is
interest
for
one-half per
balance
the
cent,
is
on as
divided
the holders of the tickets.
co-operation.
the
profits are declared,
annum,
of five per cent, per
deduction of two and
the capital, another
an
when
quarter,
he buys
He
Self-Help. pp. 38-9.
measure,
the best will
arising
from
farther than
possible
be of the best
full
Holyoake
also says:
quality, to
form of else;
the
pur-
to
quality, since
* has justly said
"They have no
weight, and pure
this
anywhere
security
owners of the concern purchase
as the
these points Mr.
to give fair
money goes
it
is
for themselves. :
The whole
"
interest in chicanery.
Their sole duty
men who never knew
before what
it
have a wholesome meal, whose shoes let in water a month too soon, whose waistcoats shone with devil's dust, and whose wives wore calico that would not wash. These men now buy
was
to
in the
their
market
own
like millionaires, and, as far as pureness of food goes, live like lords.
shoes,
sew
their
own garments, and
grind their
own
corn.
They buy
They make
the purest sugar
38
ON THE INCREASE OF WAGES.
.
atmosphere of a store
and
trust
is
no deception
Buyer and
meet as
seller
the one side,
In that market there
honest.
—no
There
friends.
and no suspicion on the
no
is
and no second
adulteration
is
dis-
prices.
no overreaching on
other."
Besides supplanting dearer and poorer shops, co-operative stores
considering the
class,
as wasteful
most
means they have,
and extravagant
beneficial
as others
way of
effect in the
making them prudent and more
The This
is
more
are not
quite
infrequently
but these societies have a
;
elevating
self-rehant
other form of co-operation the
The poorer
and promote prudence.
stimulate to self-amendment
all
and
concerned,
men.*
that of industrial partnership.
is
natural method, because capital
is
brought
to
in
the aid of labor.!
The
idea
of an
industrial
partnership
is
for
the
capitalist to
give the workmen wages, a sum rather low, enough
to
sustain
themselves by living prudently, and then, after deducting a certain
sum
for the use of the capital, to divide the rest of the profits, if
between the em-
any there be, upon certain terms agreed upon ployer
and
lishments in
Henry
his
Great Britain
Briggs, Son
&
Co.,
Wales.|
The
first
description.
The
business
in
1852.
tea,
and grind
beasts of the land waddle
organizations
of the
owned by
quarry organizations
slate
is
proprietors
worthy of a brief
was undertaken
twelve years their relations with their
their
down
successful industrial estab-
are the Methley collieries,
and several
of these
For the next
and the best
The most
employees.
own
coffee.
They
slaughter their
own
cattle,
and the
in
men finest
the streets of Rochdale, for the consumption of flannel-weavers
and cobblers." * An article by Prof Fawcett upon the Position and Prospects of Co-operation, in the one by Thomas February No. of Fort. Rev., 1874, is worth reading in this connection. Also Hughes upon The Working Classes of Europe, hiier. Rev., March, 1S74. Germany, workmen form associations and the State and banks loan them money to \ In French Government to be used in the prosecution of their business. This is also done by the
a limited extent. +
For a description of the
slate quarries see Cairnes'
Essays on
Polit. Econ., p.
166.
ON THE INCREASE OF WAGES. most unsatisfactory, and
were
39
were constantly occurring.
strikes
In 1865, they launched their experiment of an industrial partner-
The
ship.
of
business
the
was
firm
company, the owners retaining
transferred to a joint-stock
tv/o-thirds of the shares,
and
offer-
ing the other third to the public, and especially inviting their em-
become
ployees to
" that whenever
a
after
At the same time they arranged
shareholders.
the
divisible
profits
and usual reservation
fair
accruing
for
from the business,
redemption of capital and
other legitimate allowances, exceeded ten per cent, on the
embarked,
profit as a
on
all
employed
those
should
work-people,
or
agents,
by
earnings during the
as
managers,
of such
one-half
among them
bonus, to be distributed
their respective
company
the
receive
capital
excess
as a per centage
year in which
such
profit
should have accrued."
They made no claim tem
one
as
to disinterestedness
;
they adopted the sys-
and speculation.
of convenience
Their profits had
never exceeded ten per cent., and these they were sure of receiving before there was any division to the employees.
The undertaking proves experiment has been
based
upon
it
fourteen
first
brilliant
have been
tages have accrued.
of the
a
that the
The
trial
All
success.
realized,
twelve-month
Briggs reasoned the
The
well.
expectations
and some unlooked-for advan-
began July
the total
i,
1865.
of profits
"At
the
was found
to
end be
per cent., of which the shareholders took twelve and the
was
six-
teen per cent., the shareholders getting thirteen per cent, and
the
In the second year the
work-people two per cent.
workpeople
In
three.
the
third
year
the
total
corresponding
figures
were seventeen and three and a-half"* Industrial *
partnerships
Thornton On Labor,
p.
352.
are
the
consummate flower of the war
—
ON THE INCREASE OF WAGES.
40
between labor and
We
suspect this
spirit fair,
though, since
the fairest
The whale It
is
workmen add
than
in
some degree.
workmen
mode
—they
It
the true relationship that should
They
the workman.
it
It is the
whenever
exist
between the
and
more wealth, and
it
reveals
capitalist
strength, for the
make
to
— and
possible.
this principle.
has received, for
join hands, brains,
end, to produce
only
is
put forth their best energies
of conducting business
have always been conducted on
fisheries
salaries.
gambling
their full share to the increase of
worthy of more attention than
common
better
profits
the division of such increase be equitable.
best stimulus to is
like
which every person displays
capital, that
it
Men
capital.
the outcropping of the speculative or
is
and
same
a
fair division
is
being more
thereof between them.
The
unity of the relation between the two classes
clearly seen,
and the
enmity between them
Can we not
disappearing.
"
*
*
his
is
slowly, but
Thornton
events, things that surely be,
delayed, but until man, no
Wholly on blinding That
as
of shadows thrown before
*
Coming
Nor now
see in vision
whole interest and
Blended
more
lust intent, shall see
his kind's are one,
in individual destiny."
surely,
has seen
IV.
EFFECT OF MACHINERY ON LABOR.
Wealth
is
increased in one of three ways
agriculturahst
The
and by transformation.
transportation,
first
the second of the merchant
;
—by
transmutation, by
way
and
that of the
is
;
the third,
important
principle,
carrier
the manufacturer and mechanic's.
each
In
of these
especially in the
division
since
This
of the
portion
is
has
in his
made
so
Economy of
by the proper
field
many
of political
though perhaps
explored by able writers,
fully
Adam Smith
Charles Babbage,
as
most
the
way, of increasing wealth,
latter
of employments.
economy has been no one
ways,
three
discoveries
in
it
Among
Mattiifacticres.
the three advantages of dividing employments mentioned by Smith, the invention
is
remote, flowing
been
tility
from
its
use
Some
may be
of the
effects,
noticed, as
direct
and
they have not
fully described.
One the
of machinery.
effect is the
introduction of is
continued all
hostility
machinery
nothing compared to what
there are a considerable
on the part of workmen
superseding it
was
labor.
in former
to
This hos-
times,
"
Yet
number of the working-classes who have
a lingering, lurking dislike to machinery, which they cannot rationally explain,
liveliest
apprehension at any
effected in that
grand aid to human
and who look with the
improvement which
may be
EFFECT OF MACHINERY ON LABOR.
4^ industry." *
WARDt
Mr,
this
truth
by
the
referring to
at Coventry, England, which arose from the attempt to apply
riot
steam-power
in the
Northampton,
at
intensifies
manufacture of ribbon
of sewing-machines
tion
and
;
opposition
to the
and WeUingboro', over the introduc-
Kettering,
manufacture of boots and shoes.
in the
Another good authority has affirmed that hundreds of inventions are not utihzed because trades-unions are are powerful
made
are
enough
have
to
annually, because
use of labor-saving
any occasion
has
in
as
there
May
this
opposition,
always prevail here, for the sake of the workman and
has spirit
all.
cannot be denied that labor-saving machinery displaces labor.
must do so during some period of
It
nor
country,
this
always been a flood-tide of work for every one.
It
bricks
not permit the use of
appeared
rouse
to
bad
and
of injurious opposition to the
spirit
machinery has
happened
to their use,
Millions of
way.
their
this society will
No
brick-making machinery.
opposed
As a railway engine
false one.
thus superseding
the
its
use
else the
name
do the work of many
will
is
a
horses,
noble animal, so the horse has
use of the
many
superseded the work of thousands of men, because, in
ways,
can accomplish more.
it
The country
invention
than
in
scarcity of labor, ics.
It is
any other.
though
This
worthy of note how the
This
in
owing, principally, to
the
strikes in
England
perfectly the use of
his
evidence
given
before
the
mechan-
are leading
machinery English
Trades-union
His desire to invent labor-saving machinery was
Commissioners.
t
this
was mentioned by Mr. Nasmyth, a noted
manufacturer,
*
is
in
partly to the greater skill of the
the manufacturers to develop more there.
been more wonderful
of machinery has
Edmund Potter paper read at Workmen and Wages, p. 240. ;
Social Science Meeting, Glasgow, 1868.
:
EFFECT OF MACHINERY ON LABOR. by a
increased
strike,
in
had been able
.contrivances invented since that time, he
the
number of men from
" That
fifteen
hundred
to one-half as
ashamed
author, "
We
to argue."
a
is
thesis
many.
which he would be
are sure the statement cannot be received
duction of machinery except a reduction
employment would
of
field
of
field
Did no new cause operate upon the
without explanation.
the
reduce
to
machinery does not diminish, but enlarges the
employment," says one
duct,
By new
business.
his
1851, afifecting
43
price of the
in the
certainly
be
intro-
pro-
diminished.*
Let a machine be invented by which half the labor required
make
a
particular
be reduced
proportion
demand double
Will the
ployment *
in
thing
will
The economy
cent war, the
be
often
to
the
so that
diminished the
to
Let the future price of
displaced.
is
men
subsequently employed
cost of
first
in
it
manufacture.
thrown out of em-
the
same business
?
wrought through the use of machinery is remarkable. During the retheir machinery for making fabrics more than ever before dur-
EngHsh developed
ing the same time, and reduced, to a considerable extent, the amount of labor required to run it,
as the following table shows
Cotton Factories.
No. of Spindles No. of Power Looms
2,2ro
....
2,887
....
2,549
28,010,217
....
30,387,467
....
32,000,014
399,992
....
379,329
••••
451,569
...
401,064
298,847
No. of Persons Employed..
1868.
1861.
1856.
No. of Factories
379,213
Woolen, Worsted and Shoddy Factories.
2,030
....
3,111,521
No. of Power Looms No. of Persons Employed.. Flax,
53,399 166,885
of Factories
of Spindles
•
Hemp and Jute
of
Power Looms
of Persons Employed..
....
64,818
2,465
6,455,879 ....
118,865
253,056
173,046
Factories. 1868.
1861.
47^
440
417 1,288,043
2,211
3,471,781
1856.
No. No. No, No.
1868.
1861.
1856.
No. of Factories No. of Spindles
....
1,252,236
....
1,679,357
8,689
i5,347
35,047
80,262
94>oo3
I3S>333
,
44
EFFECT OF MACHINERY ON LABOR.
By no means.
In
fact,
such a saving in the cost of production
if
takes place, a long period gets the
the
from
end,
introduction
the
not bitterness to
birain is
his
Labor
is it
In
from
his
own
way
By cheapening
?
of
increase
national
the
joined to the
machine was invented, find
thereafter
it
amount of clothing
ing
is
less;
has largely increased;
gine driven
was
believed
is
What
it.
after-
is
has
in
ever.
this
second
many
When
happened
Has
is
cause
things,
upon
the sewing-
?
women First,
cost of
a
makthings
more wealth with which
to
the invention of the steam en?
Whether
in
transportation,
been the means of multiplying the de-
Not only do workmen continue
for labor.
enlarged.*
is
that thousands of
has
and,
products,
demanded, because the
out of employment it
of
amount of sewing upon some
thirdly, there
and sewing.
men
or other business,
mand
sharply as
secondly, the
for clothing
It
as
no work.
larger
pay
for a season;
demand
which crowds the demand,
first
the heels of the producer
it
Far from
grave.
price
wealth, the
Hence, a larger supply must be had.
would
of his
fruit
inventing machinery and
all returns.
what the
worse, in
By
body.
by the use of machinery,
released,
fares
The
of machinery.
economizing labor, he does not dig
wards,
purchaser
improved machinery.
benefit of the
full
does not follow, though, that the workman
It
the
ensues, generally, before
to
be employed
since the introduction of machinery, but also at better rates ; while
others find work, because
some of the processes of production
are
Workmen can be employed to make parts of greatly simplified. locomotives which once were made only by artisans. Thousands are employed in factories for making cloth, who never would have been employed *
if
Thornton, on Labor,
all
p.
the processes of 319.
making were undertaken by
:
EFFECT OF MACHINERY ON LABOR. Machinery has introduced an
one person.
45
number of
infinite
sim-
ple processes.
In respect to the increased pay derived from working machinery, figures without
give
difficult to
is
it
a
deal of explanation,
great
because the price of wages has been increased from other causes besides this.*
From
and many other
these,
not the enemy of workmen.
May
cease.
the
workman continue
new machinery and that he
is
his
own
" ever
mund Potter,
machinery
"
No
trades-unions," says
*
the
a
sad
fact.
who would
workman
to-day can
it,
to the introduction
of
and
We
The demand
p. 197,
Wages
per week.
per week. s.
think
not.
It
cer-
Hours oj work per
d.
for
most things has
he gives an interesting table of the prices of the
their cost of living for a long period,
Work 0/ Spmner. Nos.
augmented power of machinery
employments, but the labor thus released
up new occupations.
of spinners,
Lbs.
of
quantity of labor.
In Porter's Progress of the Nation,
Years,
out
if
is
Ed-
to millions
denied them, and what
tainly will in particular
wages
This
encouraged invention."
asked, will not
ultimately reduce the
will take
not
it,
?
may be
It
producing
and robbing no one of
fingers.
of employment,
trace his lack
is
introduction
its
mute wisdom of machinery, than
the
Machinery has brought a thousand comforts otherwise have been
that machinery
clear
is
to apply his skill in
sure of earning his bread
when wearing out
it
running the old, with the confident hope
in
when he works with
less
facts,
Let the opposition to
which we quote
Flour per sack.
-week.
s.
12
180
32 6
74
83
1804,
9
200
36 6
74
83
1814,
18
180
70 6
1814,
13^
44 6 60
74
200
74
73 6
1833
22j^
180
33 8
..
69
45
1833
19
200
42 9
,.
69
45
.
per
Week's Net earnhtgs would purchase Lbs.
lb.
Lbs.
Flour. Flesh.
d.
1804,
.
Flesh
.
dd. to
7
6 to
.
117
b^%
124
73
8
175
67
8 6
239 210
67
6
267
85
7.
90
EFFECT OF MACHINERY ON LABOR.
46 a practical
limit,
and when production reaches
That over-production once, though
man
some,
in
is
all
must
it
which few,
a doctrine
But human wants cannot
deny.
will
not possible Jn
is
possible
that,
cease
any,
if
long as
so
entirely
lives.
Another chinery
the
is
from
springing
effect rise
Machinery
of large factories.*
crease his profits in that
the
stimulating
which
is
as
in
many
at
sell
of
cost
his profits.
a business
is
preference
him the things
production.
it
greatest
be
will
profits.
does, whether
for
are
can manufacture at the greatest
increased,
profit;
are
reduced
prices
that point
where he
to
extending his business so
is
produce
cheaper than to buy of others.
their
is
growing every day.
A
And
own
rails,
rail-
be-
This practice of extend-
many
processes as
lock manufacturer, for example,
instead of purchasing his castings of another, will self.
in-
manufac-
ing the manufacture of things so as to cover as possible,
is
generally the
For example, some of the
roads are constructing rolling mills to it
more and
be dependent upon the smallest number not employed by
himself in producing his wares.
cause
way
demand
and machinery
the beginning
in
profits
turer increases his capacity for production
far as. to
that
If the
This, of course, does not logically follow, but
profitable
vented whereby the
re-
the old price and in-
or not, the manufacturer enlarges his factory to produce
enhance
is
sometimes, by reducing the price and
;
His
demand.
likely to yield
increases,
way
diminishes
first
of the thing sold
duced correspondingly with the diminished Sometimes, a manufacturer prefers to
and use of ma-
invention
the
labor and increases gains, unless the price
if
stop.
branches of industry at
make them him-
thus the process goes on of combining more and more,
under the ownership of one person, the different processes involved in a given product. *
See
IVesi.
Rev., vol. 81,
p.
164,
Am.
ed.
EFFECT OF MACHINERY ON LABOR. It
of processes
has
hpw
our purpose to state
not within
is
47
combination
far this
been carried, but simply the
of
effect
it,
both
upon workmen and the pubhc.
One
effect
a tendency to diminish
is
Why
products.
does
the
the
price of manufactured
manufacturer make his castings
lock
stead of purchasing them of the foundryman
can make better ones
If he
will
same quantity
A
afford
?
price, or
at larger
profits,
to
sell
Either, because he similar
castings at a
money by
his
wares
he
the
opera-
a
reduced
state
of facts
at
depends upon the
or not
—whether
previously indicated
duced.
can
can, he
Whether he
price.
same
In short, because he can save
lower price. tion.
at the
in-
can make more by selling the
or a
larger
quantity at profits
re-
combination of processes generally tends to a reduction
of the price of things.
Again, great it
if
gains
be a
the
price
realized
legal
is
not
diminished in the
first
instance, the
tempt others to rush into the business, unless
monopoly, and, through force of competition, prices
are diminished.
y.
ON THE MEANING AND CAUSES OF VALUE.
The
saying
Prodicus, the master of Socrates,
of
reported
is
that " a right use of
words
words rightly used are very imperfect signs
same words,
different persons
Words
and there
is
The
to express ideas.
and sentences convey
phrases,
Yet
of knowledge."
the beginning
is
notions
dissimilar
no way of overcoming the
difficulty.
and
are absolutely necessary for the conveyance of ideas,
a definition
nothing more than a cornbination
is
ever imperfect, acquisition of
may
definitions
therefore,
knowledge can be made
of them.
no progress
be,
to
Howin
the
without them.
Acting upon the principle enunciated by Prodicus, the Greek school
principally
led
of sophists,
HiPPiAS, devoted themselves assiduity,
of
and the flowering of
to
the
this
Aristotle, whose terminology
attention
was paid
to this subject
went to the other extreme
meaning
See Grant's
\
Hallam,
Lit.
A ristotle,
vol.
of Ejirope,
i,
vol.
pp. 81-9. i,
himself,
study
impulse is
till
Protagoras, and
of words is
found
exceedingly the time of
with
great
in the
works
clear.*
Great
Descartes, who
and declared that words had no fixed
at all.f
*
by
loi.
ON THE MEANING AND CAUSES OF VALUE.
A
complete dictionary would comprise the sum
knowledge.
Such a work
ing to a
and the
field.
lot,
Now,
like a great field,
is
entire
number of
down, so that the
may become
lots
total of
each word answer-
or old ones pulled
built,
might continue to widen the meaning of a word
human knowledge was embraced
of
Let the reader think
by one and contracted by another
The most
of a thing
way
particular
;
the
is
it
is
no
be said
As value define the
ponding
them any
to give is
to the
we propose
in
completely lost as
compass or guide
a
define
In
it
so words must be defined,
is,
to
is
be used.
Were at
sea
not
" value " plays
a
economy, yet many economic carefully, as
consequence of 5
the
necessary to corres-
several
starless
is
topics
we should be
done,
upon a
is
Whether
not, such a course
progress with this
it
as
night, without
to point the way.
Although the term political
it
make any
ship
true,
significance.
which
to consider.
one
in
Yet the farmer must
meaning given by others or
order to
it
can be declared
it.
the root-term of economic science,
meaning
necessary in
it
or describe
authoritative than another;
definition
land to indicate where
his
bounded,
for the definition
quality of noses assenting to
more
it
fail
which
arbitrary proceeding
whatever be the authority assenting to fence
whole
the
till
it.
elastic thing, stretched
define
will
by which a
test
—an
number and
a given definition which render
but there
an
is
that can
more persons
that
is,
within
Indeed, one
over carefully and he cannot
this subject
to reach the conclusion that a definition
cannot be changed.
may
smaller or larger, words
be defined as having a narrower or wider meaning.
circle
human
comprising the whole
lots
may be
as additional fences
49
most conspicuous part writers
though the term were of
this
neglect, they
in
have neglected to little
importance.
have greatly multiplied the
ON THE MEANING AND CAUSES OF VALUE.
50 errors
to
be found
in
department of study, which were nu-
this
merous enough before.
At the
we remark
outset,
This truth
any object whatever. Perry's
Professor
my
shall
immediately perceive
appear very clearly from
those which
and has the
as these, learn,
may be
lead-pencil qualities,
by a study of the pencil
any analysis of pencil
the
worth
is
to the
The
No.
?
test
The
of the
us stop to define
This
utility.
is
sense
of
But can
of the
pencil
?
mechanical, or by
how much
detect
however
delicate, applied"
how much
it
is
worth."*
can never be found
It
who have
kept
not
out
the
meaning of
But the
utility
here
value,
object to
meant
is
determined by reason and measured by If an
object
has
capacity to
satisfy
possessor, however strong or weak, however de-
praved or elevated the desire this
and such
itself.
the capacity of an
is
possessor.
its
standard."!
its
I
mistakes of economists
not " that utility which
the desire of
at the end, ot
questioning of the senses, how-
laboratory,
Before going further towards finding
desire of
hard to
view have been most deplorable.
this truth clearly in
a philosophical
its
chemical, properties, can
not a quality of a thing.
is
any object.
satisfy the
of
is
qualities,
value
the
alone can never determine
pencil
Value, then,
itself,
By any examination
its
ever minute, the
These
I
and tangible.
in certain relations
learned by a study of the pencil
Is value a quality ?
*
its
when sharpened
quality,
making black marks upon white paper.
let
all
are visible
composed of wood and plumbago
is
to each other,
in
new
pencil has length, a cylindrical form, a black color,
the touch,
I
a
take up
I
purpose of examining
the
table, for
not a quahty inhering in
is
will
" If
illustration.
from
The
that value
the
word,
Elejnents of Polit. Econ., p.
46.
may
which 1
is
be, that object has utility.
the
Bowen, Am.
etymological
Polit. Econ., p.
72.
one,
In
ardent
1
ON THE MEANING AND CAUSES OF VALUE. have
spirits
as
many
That
third.
is,
utility to
no
has
it
—
obscene book, so long
which
Bible
like the
satisfies
same thing may have no
I'he
another,
and a very high
capacity
to
the
utility
to a
utility
desire of the
the
satisfy
the desire of the
capacity to satisfy
a slight
first,
An
as wheat.
utility,
a soul.
one man, a low
to
has
satisfies desire,
it
longing of
same
the
utility
5
second,
but a
very high capacity to satisfy the desire of the other.*
must
Utility Utility
owner
exchangeability
;
one not
desire of
purchase
distinguished
carefully
capacity of an
the
is
be
object to
combined,
the owner,
one besides the owner ever hears of
known
has exchangeability unless
An is
article
possess both
the case.
often
by another;
desired
ornament or
as
it
may
jewelry,
terms,
and the
let
Thus
gold
and
also
otherwise,
like.
us proceed
There
fertile
island.
provided
Yet
all
could
him
if
great, their
;
an object never
utility.
exchangeable,
it
is
for
useful,
the
for
watches,
into
it
This
may be may wear
owner
the
manufacture
or
to
and desired by another.
to
meaning of these
recovered from his shipwreck, he found
occupant of a comfortable and
was abundance
himself
his
its
even though no
utility
existence
Having cleared up
these possessions
satisfy
as
its
with his ability
also,
exchangeability and
he was the sole owner and
easily
desire of
the
on our way towards defining value.
When Robinson Crusoe that
exchangeability.
the capacity of an object to satisfy the
is
Hence, an object may have
it.
from
satisfy
for
a
house
had no
value.
with
wants.
value nothing;
they
Indeed,
he and they had been
why
in
did
food
and
for shelter
They had were
En(;land. they
not
he
clothing;
and
habitation.
utility, for
quite as
Their
have
they
use'ful utility
value?
to
was
The
presence of some other person was necessary having exchangeable *
See Perry's El. of
Polii. Econ.,
p. 72.
— ;
ON THE MEANING AND CAUSES OF VALUE.
52
and wanting
objects,
exchange
an
must
never exchanged them with each
no
have
they desire, but have not.
unless
for those things
person had lived there, having various things
them, then the
values
Crusoe wanted, and
an
is
commodities exchanged' find that the value of a
agreed to between the person parting
estimate
A
words or terms
what
B
has a hat and
which
in
A
for his hat,
that
of the
;
The
value
thus the hat
is
of the
said to
and, likewise, the shoes are worth
product
now
is
expressed by the other.
complete,
Value
the
commodity *
When
that
one commodity
exchanged is
discussion,
exchanged
7. R. McCulloch, Eficyc. Brit, Art.
hat, therefore,
for
for
product for is
expressed
The
hat.
value
of each
in
the
following
is
manner:
between the person parting with,
to
Money.
his
be worth the pair of shoes
and the person receiving a commodity, expressed is
?
exchange
to
Thus, our conception of value
and may be expressed
the estimate agreed
is
Each wishes
After considerable
other.
agreed that each shall exchange
is
other.
by the shoes
estimate or value expressed
this
he ought to have more than the shoes
declares that it
it.
is
a pair of shoes.
product for that of the
his
own
Hence we
with and the person receiving
In
his
of the several
could have been ascertained.
commodity
which
If another
alone.
which could have been obtained by exchanging a part of for
their
Consequently, Crusoe's possessions had
owned everything and was
value, because he
no
If people
commodities would
other, such
one another
com-
commodities,
Commodities cannot have value
value.
exchange them with
owners
different
further,
the
any value.
same community, and owning
in the
and
things;
place before
could have had
of either person
modities living
some of Crusoe's
also
have actually taken
in
some other
it.*
another, each measures the value of the other.
ON THE MEANING AND CAUSES OF VALUE. This definition of value
or affection of the mind.
It
a commodity
—by
value of anything unless an exchange
Hence, an ex parte estimate,
who
or the estimates of persons
value of a
commodity was
probably
exchange
will
We mean
or thing.
True, we can
can be exchanged for conscious certainty
sell,
it
it
some
at
in
Yet how often men
values
or
only
buy
may it,
it
wish to
sell
it
is
concurrence of two minds."* *
Theory and Practice of Banking,
And
i,
p.
14.
thing, or
or estimates
change they can buy and
things,
and capricious is
a matter of
up the meaning of value, yet that, "
his
own,
however much yet, if
no one
exchange takes place,
desire of each for
a
our
and what he can prob-
little
it
can
the product of
clear that value necessarily It is
this is
it
most distant parts of the
any product of
vol.
what
So the merchant,
the values
put upon
If an
tell
a reasonable degree of
Thus, he says
has no value.
Hence,
the
to clear
do so from the reciprocal
the other.
can
to discern the varying
fail
he has made some mistakes. a person
little
in
estimates that will be
common experience. MACLEOD has done much
will
because
what the
some other
time.
his customers,
commerce
earth.
for
future
tell
worth a certain sum
is
calculate with
put upon things undergo but
and engage
person,
exchange, as ex-
We
it.
future time.
commodity
And
goods.
for
was exchanged
upon the wants of for his
some
for at
of this truth, can
ably get
men
at the time of the last
that a
that
an estimate ever the
is
are not the owners, can never be
commodity exchanged
meaning when we say
per-
owning the
the estimate of one
considered as the value of anything.
pressed in the
made bygone
actually takes place.
e.,
i.
be
will
It
an estimate
it is
;
the parties
all
Nor
exchanged.
articles that are
apprehended.
easily
not an estimate
is
but by two or more
son, however, several
be
will
value does not reside in
seen that
53
requires
the
singular, however, that he
ON THE MEANING AND CAUSES OF VALUE.
54
should have written the following sentence just before those quoted: "
We may
has no
Is
offers
not
it
directly
" that
value
opposed
from
so
other "
of
desire
Before an exchange can
?
is
concurrence
each
for
take
place,
not
this state-
namely,
quoted,
an exchange takes place,
if
reciprocal
the
And
?
previously
the
requires
necessarily
and that
one
the
to
value of a thing de-
that the
saying
to
pends upon the desire of the purchaser
ment
the per-
but upon the desire of the purchaser."
for sale,
equivalent
this
be exchanged
value of anything depends not upon
the
value,
who
son
cannot
observe that since a thing which
the
two minds,
of
can only do
it
product of the
must be a
there
meeting of minds; which person has the strongest desire
change
often difficult to
is
his desires in part,
change. seller
the
at
will
it,
on
article
desirous
of his
knowledge statement
hand
dispose
to
to
is
It
Or suppose
?
perishable
like will
of,
bread
not
the
reduce the value of the
fruit,
a
which
purchaser fruit ?
who
offers
it
An
of
two
is
change taken place
?
impossible.
commodities have
each other since a former exchange,
is
very
use
his
depends, not
but upon the desire of the
for sale,
of value
he
Consequently, the
-depends upon the desires of both;
invariable standard
has
dealer
often
which of them
has the strongest or weakest desire cannot easily be
that the values
to conceal
want of bread, and the
a mistake that " the value of anything
upon the person purchaser."
in great
is
tries
hope of making a better ex-
not the latter use his information to increase
value or estimate
some
in the
Suppose the purchaser
knows
each generally
for
tell,
least,
to ex-
in
told.
For, supposing
changed
relatively
to
which commodity has the
Thus, suppose a bushel of wheat was ex-
changed
for
be given
for a dollar this.
a dollar of gold
last year,
Has
and that two bushels must
the gold risen in
value or that of
;
ON THE MEANING AND CAUSES OF VALUE. the wheat dechned
It
?
no nearer the truth to say that the wheat
is
has dechned than that the gold has risen.
have each been exchanged
modities for
a hundred years.
example,
Suppose that ten com-
same amount of gold
for the
This year, however, one of them, sugar, for
exchanged
is
55
much gold
for twice as
Has
as ever before.
sugar, therefore, risen in value, or has the value of gold declined
?
Put any examples you
a
like,
always be found that value
will
it
relative expression, and, consequently, that
a greater or less value than
exchanged. "
When
the general value
the value of the particular
posed a
all
has
for
commodity
general
in
the
has
decline
declines,
rise,
of every
if this
be
so,
when compared with
value of which
taken
less
but
;
correctly
truth
this
e)ichange
in
it
these commodities must
compared and
is
it
stated
commodity
of a
commodity can be obtained
which
that with
Fawcett
Professor
is
no object can ever have
it
has been sup-
These considerations
place.
demonstrate the erroneous nature of
a statement not unfrequently
made, that there
fall
modities ral
rise
a general rise
is
It
of values, for
there
if
modity, there must be a
fall
is
a
to
com-
all
value of
all
The works
compared."*
is
com-
the value of one
in
rise
in the
and RicARDO are badly infected with error failure
value of
in the
quite impossible that there should be a gene-
is
with which this one
or
in
the commodities
of
Adam
Smitih
consequence of
their
Both sought after an invariable standard
see this truth.
of value, which every living political
economist admits cannot be
found.
Before quitting
meaning of
*
to
command
Manual of
Polit.
subject
the value of
It is
Thus Bascom
money.
power
branch of our
this
price.
says that
" the
gold, silver, or that
Econ. p.
270.
we may
a commodity price
define
expressed
of anything
is
the in its
which constitutes the cur-
;
ON THE MEANING AND CAUSES OF VALUE.
56
Value may be expressed
rency of the country.
whatever:
We
price
now
are
It
of
to agree to the
in
custom among
the
of
causes
changes
men
all
instead
value
political
of those
countries
civilized
money, our investigation
be
will
are
sumption
is
In
Suppose
the
in
causes.
In the one case wheat
dearer;
in
the other
commodity, may
rise
in
Califoenia during the assumption
price, in
is
common
and therefore every other
with
that
made
in
Australia and
In the following investiga-
few years.
made
scarcer,
rises
distinct
consequence of new discoveries
such as those
last
the
always supposed to
value of the commodity,
may become
case, wheat, in
precious metals,
this as-
when
wheat may be due to two very
this rise
the
in
consider
observed that the price of wheat
is
it
price of
the
affects the
is
ex-
expressed
doing,
so
treat
as
Let us explain our meaning by an
and not the value of money.
tion,
we
if
to
yet
price,
generally
simplified
variation
varies, the
be produced by something which
illustration.
economists
involved, which must be kept in view, that
commodity
price of a
,
of
causes of price rather than those of value.
of the
are
bought
values of articles
?
has been
the
What
ready to consider the causes of value.
the causes leading
and sold
any commodity
in
expressed in one commodity only."*
is
variations
are
in price
not
caused by an alteration in the value of money.
What, then, are the causes of price
?
They
are
namely,
four,
difficulty of attainment, exchangeability, personal effort,
and
willing-
ness of deprivation.
By
difficulty
of attainment
is
inhering in, or connected with, is
meant the labor or other
difficulty
a commodity which a person
who
not the owner desires, and which he had rather buy than per* Polit.
Econ.,
p.
222.
ON THE MEANING AND CAUSES OF VALUE. Hence,
form the labor of attaining directly himself.
having capacity out difficulty,
valuable, provided the person desiring
is
pay
sufficient ability to ity to
satisfy
for
But
it.
To
him, therefore, water has
may have no
or
difficulty,
may suddenly
living in the country
having a capacity, the
if,
find the waters of his well dried
become exchangeable.
value because he can get
it
goes to the city to
water
he
finds
but
He
going to his neighbor's well. without
effort
Rather than
go so
order to have
cause
going a far,
that
cannot get
distance
he
to
willing
could not be had without an
it
attainment,
it
considerable is
— which
the
had
person
it
Here he wants
live.
he cannot get
by
it,
direct personal
pay some
effort,
one
city.
for
it
in
for has value, be-
—without pay
rather
by simply
beyond the
Consequently the water paid
it.
Yet
of his neighbor by a very
He
before,
A man
has no value.
it
slight personal effort.
as
be of
it
commodity has no capac-
a
if
of another,
the desire
commodity can be had without
up.
an object
if
another cannot be had with-
to satisfy the desire of
it
57
difficulty of
than
for
make
directly himself.
Whenever an exchange measures the
this
money
difficulty.
actually takes If I
place, price
pay seventy-five dollars
money
for the labor of
another than
Whenever an exchange does not take is
only another expression for
ability of
vast expense,
it
;
make
I
or
watch, it,
—
in
had rather pay
the watch myself.
place, difficulty of attainment
the labor enhancing the
exchange-
Yet labor does not always render an object
an object.
more exchangeable. at
for a
expresses or represents the difficulty of attaining
other words, the labor expended in making this
expresses
A man may
nevertheless
it
build a house in the wilderness
may have no
exchangeability, be-
cause no one has such tastes and desires as the builder. It is
most important
to
remember when
difficulty
of attainment
ON THE MEANING AND CAUSES OF VALUE.
58
is
used as an equivalent or measure of price, and when
as expressing simply the labor
bestowed upon an
The second cause determining
price
object.
have previously defined as the capacity Of an object desire of
one who
changes
desires
indeed
is
it
Now
not the owner.
men
of
ever the desires their
is
to satisfy the
evident that when-
is
it
change, the capacity of things to
Moreover,
also.
impossible, to find out
all
The
influence the desires of men.
exceedingly
is
it
we
This
exchangeability.
is
used
is
it
satisfy
difficult,
and
the causes which create
causes are varied, often
occult,
unknown.
To
A, a
fine picture is
may be
Various reasons
A
picture.
has
perhaps,
the
age, or that
able with
think
genius
of the
estimates
different
of
for art, or appreciation it
of the
The
recognized in the future.
sum.
to B, not half that
;
the
for
a finer taste
He may
the particular picture.
fully
worth $ 5,000 given
become more
will
artist
will
valu-
become more
causes operating upon
desires
are too obscure often to be determined.
The
depend upon exchangeability, but
does price
depends upon
would
it
difficulty
to
This paradox does not,
price.
ever have been declared true,
of attainment
expression trying
proposition has found defenders, that not only
paradoxical
for
find
labor
if
that exchangeability
we
the
a house, with
the
in view.
intention
and
another
as
Suppose a
of purchasing.
man
is
and that
skill.
render
wan-ts,
It it
is
so
the
he inquires the
It
the
grounds are laid out with great care
taste
and labor displayed about the place
exchangeable.
the owner would ask
is
After
looking at several houses, he finds such an one as he wants.
an expensive place;
nor
between
as an equivalent of price
had been kept
think, exist;
distinction
price.
till
now.
Satisfied that
He
it
is
the
place
he
has never thought of the price
Suppose the owner
is
unwilling to
•
;
ON THE MEANING AND CAUSES OF VALUE. the house except at an
sell
enormous price which the other
The purchaser has
willing to pay.
unwilling to pay so much.
reduced
He
price.
between the
Perhaps he thinks the owner
He
owner
willing
is
of the
price
When
they
are
buy now, we
Hence
unchanged.
objects
not
is
brought to
first
wait
will
exchangeability
season;
all
till
the time
is
the
depend
Take peaches,
many
upon
"We
as afterwards, perhaps more.
same from
the
first
Their
to the last of the
though not many exchanges are made
not
will
They want them
lower."
is
but
example.
for
say:
it,
the
that
price;
their
these
not,
market,
the price
much
clear
is
it
by
aifected
exchanged.
things
beginning just as
in the
trying
at a greatly
to sell
Yet during
whether exchanges actually take place or the
is
is
away disappointed
turns
purchases the house.
of
exchangeability
the
un-
is
buy, but he
to
examination of the house and the purchase of
first
exchangeability was
its
means
the
to drive a sharp bargain with him.
afterwards he learns that
59
till
prices
peach
fall
to a
certain point.
There are many rocks unseen when the waters are high, that appear when the waters recede. the waters
when
real
when
when
desires of fall
prices
prices are
that
is,
high
are
through their
There
is
So with our
low.
so
high
that
for
prices of things
them
certain
are
point,
efforts to gratify
They
desires.
are
as
The
only difference
above a certain point, the
rise
unknown the
whether
there,
no exchanges are made, as
low and exchanges frequent.
the
men
below a
or
are
Yet the rocks are
to the world
desires
of
men
when
;
are
prices
found out
them.
one class of commodities, the exchangeability of which
depends primarily upon
their
value.
Remembering
the capacity of an object to satisfy the desire of
remark that some commodities have
that
its
utility solely
utility
possessor,
is
we
on account of
ON THE MEANING AND CAUSES OF VALUE.
6o
Thus a diamond
their value.
useful at the present time because
is
Let diamonds become
has capacity to satisfy desire.
it
plentiful,
however, and not only would their value vanish, but their
Now
Nobody would want them.
also.
which are
that those articles
This
other com-
all
labor or other difficulty
the cause which
is
them
renders
Yet the value of the diamond, so long as
measured or estimated by
is
But
reason.
like
modities are exchangeable because of the
changeable.
utility
properly said
useful simply because they are valua-
ble are only exchangeable for a
connected with them.
may be
it
it
of attainment
difficulty
ex-
has any,
like
other
commodities.*
A
third cause determining
price
personal
is
chaser
seeking for a chair.
is
one that he
likes,
He
the
inquires
not
Personal for the
sell
for nine dollars,
it
therefore,
effort,
Being told that
As
chair.
it
The
?
price
est
What
is
is
first
*
obtain
and
at
the thing desired
think the latter has fallen
is
in
The
price ?
which he must
by a
This was the assertion really made by Bastiat
which Professor Cairnes has attacked.
we
if
ten
the
himself.
highest price
will
pay
of a com-
The
enough understood.
easily
most which a purchaser
the
make one
the highest arid lowest price is
meant by the lowest
tually will sell for, will
term-
much, and
will
is
it
that
determine the lowest.
it
What do we mean by modity
one
determining the highest price of
a cause
is
things, so likewise does
he
the cause that fixes the
is
is
goes into a store, and finding
price.
dollars, he remarks that he will not give so
dealer will
This
effort.
Thus suppose a pur-
of the causes fixing the extreme^ of price.
for
high-
a thing.
least that the dealer acsell,
else the
purchaser
direct personal effort. in his
Fort. Rev., vol.
Harmonies of Political Economy, and -xiv,
p.
424.
But the error into which
considering the difficulty of attainment paid for as the
diffi-
only a partial consideration of the whole The price paid for the diamond measures the difficulty of attainment which the purchaser fact. had rather pay for than undertake himself. That is to say, the difficulty actually paid for is the one which the purchaser himself would probably have to overcome in order to find the culty
expended by the
diamond.
finder of the diamond.
This
is
1
ON THE MEANING AND CAUSES OF VALUE. Willingness
mining
of deprivation
When
price.
the
is
vulcanized
they constituted a monoply as
fourth
rubber
and
cause deter-
last
goods
6
were
whom
no one could make them except the patentee and those
A, the purchaser, desires a pair of boots, but
permitted.
monopolist, will not
sell
them
for
leads
him
to
Either he would
But he would give no more. eifort
than ten dollars.
less
willingness to be without the boots
sonal
made,
first
long as the patent existed, so that
(supposing that he
could
give
get
make them),
B, the
A's unprice.
this
them by or.
see that A's personal
or willingness
effort,
Thus
of deprivation, de-
termined the highest price which he would pay for the boots.
same causes may determine expired.
A
their lowest
wishes another pair.
give him only four dollars a pair. to
deprive himself of them
if
price.
which men
limits
Moreover,
ability,
after
willingness
a
the
price
?
offered.
cause determining price,
unless the price
of deprivation
price.
for that quality
willingness
is
for
comes within the
pay.
will
any other cause of
The monoply has
he cannot purchase at that price
Willingness of deprivation, therefore,
no exchange can take place
The
Now he tells B that he will not Why not ? Why is he willing
Because he believes he can buy elsewhere
for
per-
he would
deprive himself of them rather than buy at a higher price.
we
he
It
is
easily
cannot
be
resolved
may, as we have seen, inhere
of deprivation
has
into
distmguished from exchange-
prevented
a
in
an object
transfer
of the
ownership thereof
Let us now inquire when the highest and lowest prices are paid for things; and, also, all
what
is
the reasonable
price
towards which
things are tending. First,
whenever a commodity constitutes a monoply, then the
highest price
is
paid for
it.
—
ON THE MEANING AND CAUSES OF VALUE.
62
Secondly, whenever that
when
is,
the supply of a
the lowest price
paid for
is
duction, by which
commodity
meant the money paid
is
sum
together with a reasonable
—then
cost,
is
the cost of pro-
for
labor, material,
for profits.
by applying them
of these principles
test the correctness
Let us
unlimited,
is
it.
Thirdly, the reasonable price of a
etc.,
commodity
can be produced without increase of
it
to actual exchanges.
Formerly, the screw part of the metal screw had a
made
hole had to be
that a
in the
wood
flat
end, so
previous to the insertion
In 1846, a screw was invented having a point like
of the screw.
a gimlet, which could be inserted into pine and other soft woods,
such as
The
commonly
most
are
used, without
making a
first
wood
fitted the
always
firmly together,
while
old-fashioned screw.
could be put
Thus
it
eighteen
succeeding
years.
had a greater
and likewise a
utility,
Being a new and useful
other.
right of
By agreement
making
with
the
it
fixed
a
price
alone could at all
Hence,
it
;
the exclusive right of
which
making them.
make them, and they were not
of
they were
or,
if
was
in
so high
that
This company
obliged to manufacture
they were, they could dictate the purchase price. their
power
to
sell
at the
people would pay rather than go without.
that
at
sale
which was not altered very much during the whole time the
company had
any
The company
screws.
for the
patentee, a
company was organized that began the manufacture and
sold,
it
more quickly than the
in
the patentee had the exclusive
invention,
It
and held the pieces secured by
snugly, it
greater exchangeability, than the
these
hole.
great advantage of using this screw will be readily seen.
very
price
highest
They could
a price
fix
no one would buy them; they could lower
only a few would
buy, or
they
could
diminish
it
so
it
so
low
ON THE MEANING AND CAUSES OF VALUE.
many would
that
sought to
The
purchase.
was the highest price
fix
however,
price,
the
should screws it
was
in
that the
not always
is
what
which
the
or
does
monopolist,
always
not
be
sold,
from
great profit
highest price at which the largest
the beginning, to
in
upon
For, be to
even
though
his
consists of the right to
make and
sum
this
is
More
he
but
rather
the
the
he has the exclu-
We
will
At
will
profits are is
found
sell
twice as
many goods
sold for six dol-
at the latter price than at
trial
set
upon the goods.
If,
that a diminution of price does
large aggregate profits as the
And
it
is
now
as before, else the aggregate
diminished by the reduction of price.
upon
rubber
be largely increased
price, the boots are afterwards
purchasers are found
first
suppose that half of
the former, but as the profits have been reduced one-half
necessary to
at
should
be sold, and
rubber goods.
Thinking that the sales
profit.
by a reduction of lars a pair.
sell
pair.
remem-
Thus suppose the monopoly
monopoly.
boots are sold at eight dollars a
it
a price
set
sales;
quantity will
monopoly
his
seek
greatest aggregate profits realized during the time sive right of controlling his
as the
began,
low a price as was
as
set
largest profit therefrom.
quantity can
the largest
a reasonable
get
And
extensive sales.
easy for the
monopolist
the
manufacture
the highest price he can set
is
order to reap
bered, the
company had
make
by
m
were used where they
whether they
of something else in their place.
order to
tell
were used
into general use soon after their
evident
ascertain
for
this,
was a com-
It
they could
whether these screws
and
ones,
be, instead
came
necessary, in It
inquiry
old
place of the
determine
matter to
and
observation
co'Tioany
which the screw would be
at
generally sold in the place of the old-fashioned one. paratively easy
63
former price, then a
as the monopolist
therefore,
it
not bring as
higher price
is
can control the price
ON THE MEANING AND CAUSES OF VALUE.
64
monopoly, whatever
of his
men by
squeeze out of
may
it
consist
the highest price
trial
rather that not have them,
his things
This
for
compete with
to
of the market in order to ascertain the best price
trial
which goods can be
at
pay
of losing his
fear
no one
is
can he coldly
so
they will
without
trade, or of being undersold, for there
him.
of,
sold, has
been
Adam
termed by
aptly
Smith " the higghng and bargaining of the market."
We
might have given a simpler
showing how the
illustration,
We
monopolist can control the highest price of his monopoly.
suppose him to be the owner of a
will
the only one
brated master.
It is
ever produced.
The owner
which he thinks any one be ten thousand two ture.
must
This
is
if
he
sell,
dollars.
and one
offer eight,
dozen
offers
his
picture, and, consequently,
one
is
master has
offer five, three offer seven,
offered,
dollars for the pic-
and
which the owner
at
Having a monopoly,
all.
cele-
Suppose the price to
therefore,
men
can draw out the desires of
situated that he
he
is
so
without losing
can get the very highest price any
willing to give.
may be
Another form of monopoly
On
monopoly. lives a
Let
market.
another
from
men
the
by a
at the highest price
for sale
nine, thousand
the highest price sells, at
kind
of the it
willing to pay.
is
A
offers
picture
fine
miller,
mentioned, namely, distance
illustrate
the line of the Chicago
who,
his neighbors for
us
one time,
at
eight dollars
and
St.
a portion
sold
and
a barrel,
of this
character
the
Louis
railroad
of his
flour to
sent the
rest
to
St.
Louis, which, after payment of ten cents per barrel for freight, he sold for
him
Hence, he received one
dollars.
more upon every
cents sent
seven
to
St.
eight
dollars
Louis.
barrel sold at
Yet
dollars than
it
go to
and ninety cents a
home
was cheaper St.
barrel.
dollar
and ten
than upon each one
for his neighbors
Louis and buy
to
pay
the flour for six
ON THE MEANING AND CAUSES OF VALUE.
The It
between
the difference
is
monopoly may be
extent of this
enough ascertained.
easily
time and
the merchant's
traveling to the market where the things are bought,
and expense of doing
and
that
clear
the
merchants
the
same net
kind of
certain
sold
same
the
yard, yet
which he enjoys
New York
same
But
it
cents
be
noted
fifty
a
is
if
cents
he per
cents a
monopoly
and
his
to the
He may
constitutes a
Mott
or
does
skill,
monopoly,
has the
some
So with
prices.
number of men
having the same
the
exercising
monopoly
price
its
is
con-
laborer. said,
we
think
every dealer seeks, so far as he a
For
monopoly. while
lowest price, that
not pay;
own
of sev-
So with a
will readily pay.
A Webster
why
for it;
the case
a monopolist.
artist is
sells
will
etc.,
away from the
far
illustrated in
and people
proportion
in
calling,
also
can make
From what we have
price
and
price
in
three
for
merchant was
twenty-five
dollars
three
for
and physician.
Whenever labor by the
trolled
A
he
himself;
other men. the
may
labor.
distinguished lawyer
decline.
same
the
sells
and
dollars
twenty -five
the highest price,
to
a
consequence of being so
in
principle
kinds of
field
to
sell
market.
The same charge
sells
so as
York merchant buys
the Chicago
that
the same,
is
transportation, traveling,
three
at
silk
the additional
yard,
eral
the cost of
he actually
if
The New
of an importer and
silk
for
and Chicago
both places intend to
at
profits.
Now, supposing
dollars a yard.
amply repaid
New York
in
expense of
and the time
Thus, suppose that the expense of
customer.
his
a retail business
65
for
6
if
is^
if
the reason
make
can, to
he succeeds, he
clearly appears
can
the
get
thing he
the highest
he does not succeed, he can get only the a price which,
either
he
will
if
raised at
acquire
the
all,
the
thing
purchaser
by personal
ON THE MEANING AND CAUSES OF VALUE.
66 or
effort
obtain
from some other dealer.
it
The
idea in other language.
get the difference between
purchaser will pay for
a
this
he be a monopolist, can
dealer, if
lowest and highest price which a
the
thing;
he be not a monopolist, the
if
purchaser saves the difference for himself that
Let us restate
Is
strange, therefore,
it
every dealer should try to become a monopolist, seeing that
he has
that he
advantage,
this
the purchaser will pay for his
combinations
among men
trades,
products, and
their
able of late
among
And
passengers.
order
in
So we find
all sorts
of
make monopolies out
of
?
to
professions.
This
They combine
railways.
prominent one being
can get the highest price which
monopoly
for various reasons
what we are saying,
Commodore Vander-
a monopoly enjoyed by
BiLT and his friends
when
the Erie Canal
a
;
and
price for carrying freight
to control the
just here, in illustration of
may be mentioned
especially notice-
is
This
closed.
is
the
is
only avenue for transportation between
various places, except the
New York
therefore,
Central
by way of the canal
the
way
India
in
control
the
stopped
at
on account of which
a monopoly
was
created.
one time owned the
Spice
" obtained a
"
sold.
But
to
enjoy
the
to
illustration
Dutch
Islands,
of
East
and could
monopoly
price
Had
in
for
good
they persisted in
they produced, they must have forced a market by
reducing the price, ceived for the
The
own-
the
ice,
do so they were obliged,
seasons, to destroy a portion of the crops. selling all that
they
In consequence of being
quantity of produce raised.
able to limit the quantity, they
the produce "
communication
Mr. Mill gives a very interesting
which
Company
is
have a monopoly,
ers of the railway fullest extent.
When,
Railroad.
so
larger
low,
perhaps,
quantity
a less
that they total
would
return than
have
re-
for
the
;
ON THE MEANING AND CAUSES OF VALUE. smaller;
at
least
67
they showed that such was their opinion by de-
stroying their surplus."*
We
cannot
some of them
come
will
of monopoly
to point out other forms
stop longer
hght
to
connection with
'in
or not, or whether
men
But
whatever
it
this
may
of,
monopoly
exists,
the extent
of his
for his
Let us take up the second principle, and it
Take
to other exchanges.
They can be manufactured
goods.
commodities. test its
the case of
is
no monopolist
out the highest price which the purchaser will pay
without them.
string,
which no man could take away.
The purchaser can buy
ated by the monopolist.
high
profits,
the
Thus,
it
squeeze
rather than go
the situation
is
else.
As
his
clear
selfishness
up
the
leads
often happens that
Princ. of Polit. Econ., vol.
selfishness of other
darkness cre-
him
to
i,
if
until p. 552.
a business
is
accumudo these
men, draw them
same things whenever
of the
it
reversed.
If the dealer charged
would go away with the expectation of
by exciting the
production
quantity..
most important one,
aggregate profits from his monopoly, so
others will press into *
that the
Now,
the light breaks forth to
late the largest
into
and
at the lowest price.
the purchaser
purchasing of some one
And now
to
them because he could control the
one end of the
any more,
by
cotton
In the case of the screws, the monopolist could get
the highest price for
He had
correctness
common
an almost indefinite amount
to
But there
without increase of cost.
a
slight ob-
a
whenever
monopoly, can get the highest price
applying
by
the monopolist, to
that
true,
is
consist
parts
monopoly
make a monopoly of
seeking to
are
particular thing or not, can generally be determined servation.
other
Besides, whether an article constitutes a
of our subject.
it
is
possible.
exceedingly profitable,
production becomes so great that the
ON THE MEANING AND CAUSES' OF VALUE.
68
cost of producing will not be realized.
So long as the patent owners of
force, the
One
illustration will suffice.
making vulcanized rubber goods was
for
Upon
realized great profits therefrom.
it
death of the patent, so
many
the
rilshed into
The
ever with monopolies.
it
that
away.
So
them
create monopolies
to
is
one
party
in
the industrial world
monopolies, another party
is
is
commodities are
all
which will be paid for produce permanently wished says
:
;
all
trying
Hence,
up
build
indeed,
at a loss;
" Capitalists will not go
Persons
upon.
without
whose
capital
and have been known
in
hopes of better times.
or
when
prove.
he could not do so
already
is
there
But they
No new
capital
will
an expectation
be
profit as great (regard being
employment
will
do so
not
if
be invested not
had
only
in
loss,
indefinitely,
from replacing
im-
an employment, un-
of some
profit,
but of a
to the degree of eligibility of the
hoped
for in is
people do not actually withdraw their
least abstain
can
and
considerable time
cupation at that time and place, ^^llen such profit
be had,
they
embarked,
to persevere even at a
other respects) as can be
in
at a loss.
indicate that times are likely to
nothing to
is
a
he
if
So Mr. Mill
a profit less than
easily extricated, will persevere for
profit,
less there
continue to
will
on permanently producing at
price
ultimate
the
is
For no man
would inevitably become a bankrupt.
as he
cannot be
a!:
to
the lowest price are paid
This
tending. things.
They not even go on producing
to
of
commodities, we shall take note of the reasonable price towards
which
live
inspires
selfishness
equally zealous in tearing them down.
Having shown when the highest and for
by the
their destruction.
others, bringing about, sooner or later,
while
men which
selfishness of
counteracted
the
same business
the succeeding gains of the monopolist melted quickly is
in
it
when consumed.
any other ocevidently not capital, they
The
cost
of
ON THK MKANING AND CAUSES OF VALUE. production, called
and
with
together
the
Nobody
Whoever does
so,
rects as fast as
he
does
The
make
same goods
to
profits
on them rapidly
time
a
fashion
made
fell
was quite limited, and as
upon her laws no
and were
to the cost of production.
willing to
wear checks degree to
sell
to
still;
if
others
a
price
the
the
exchangeability
purchaser fixed
the
of production. Polit,
and
dictates
goods had
when
they were ready to
buy.
manufacturer was a qualified monopolist,
hand having diminished, the
Prim. 0/
her
of
these
Econ., vol.
1,
p.
555.
fixed
the
In that
price;
goods rapidly declined, so
of the price;
the
corresponding with their
he controlled the supply for a time, and so
afterwards that
After
no longer
daring to trample so
of exchangeability, at
purchasers,
exchangeability to these the beginning, the
fashion,
some were unmindful
True,
merchant was willing
*
that checks should
wear out what checked clothing they had,
as to
more.
always had a certain
is,
to a
soon as they could, so that the
Those who followed the decrees of
bought
its
Immediately the exchangeability of the goods declined.
be worn.
far
monopoly
manufacturer being large, others
as
away
constituted a
it
new decree
a
of bringing
In the beginning, the
fashionable.
profit to the
began
the
loss.
checked woolen clothing was exten-
exchangeability suddenly increased, limited extent.
labor
of
and operation of the foregoing
existence
be obtained
could
purpose
illustration for the
being
then
it
that
made by
the prospect
be
able."*
is
Several years ago
worn,
sively
quantity
therefore
under a miscalculation, which he cor-
it
view the
single
principles.
may
things
all
willingly produces in
Let us give one other a
profit,
necessary price, or value, of
capital.
into
ordinary
the
69
in
final price
the end, the quantity on
was determined by the cost
ON THE MEANING AND CAUSES OF VALUE.
70
a reasonable price, which
It is evident, therefore, that
of production, will be the ultimate price will also equalize the
or less than he ought
of
have.
to
It
is
constantly increasing,
price are
yet
no one
This price
will get
beyond our space
number of commodities bought and
that the
things.
all
division of gains so that
the
more show
to
a reasonable
sold at
evidence
the cost
is
of this
fact
is
conclusive.
The
commodity
often
is
friendship
the
to
pay more
objects
modified by various causes
Thus a man may pay more
extrinsic.
will
between the highest and the lowest price of a
difference
which
seller,
or
sympathy and
such associations
represent.
community may trade
at a particular place,
even though they pay
on account of the known
purchaser may' often be veiled,
of a
actually
pay
as high
a
price
like a piece of glass, the dealer
The same
is
what
also
he
would,
when
mind being
the highest and the lowest price are paid,
and
the price of wheat
day, and one dollar and ?
he does not
real
be the ultimate price of things,
will
change
his
the principles set forth.
stated
for instance,
the
if,
These are seeming, not
sary to say something further concerning the If,
Again, the de-
so that
could see what his real desires were.
also true of the dealer.
exceptions to
Having
as
People
So the members of a
character of the dealer for honesty, politeness, etc. sires
call
order to aid the
festivals in
for their goods,
we may
because of his
condition.
his
for
for things at fairs
a somewhat higher price
that
for a thing,
is
it
may be
neces-
fluctuations of price.
one dollar per bushel
to-
a quarter to morrow, what has produced
Many would
say
it
has been produced either be-
cause the quantity to be had has diminished or the quantity desired
men
has increased.
This
is
not always true.
are each desirous of purchasing
Suppose that three
a particular horse, and that
1
ON THE MEANING AND CAUSES OF VALUE. each one
willing
is
No
more.
one hundred dollars
give
to
be' obtained
price can
greater
there are three customers than is
many
true in respect to
sum
give a certain
of the transactions of
for a particular thing,
cases
that
is,
others
purchased
are
may be obHged Remembering always
to
many
of this in
purchased at a
substitutes
given
price,
Consequently,
therefor.
extremes
old
the
at
sell
personal
that
the
fix
as
will
and no more; no matter
buy.
will
and willingness of deprivation
effort
of
no one
price, or
fluctuations
price,
price
in
are
the
consequences of a change in the exchangeability of things. long as tiful
this is
or scarce,
unchanged, whether the
creases,
and
crop
is
only half as
have
their
vice
that
all
I
great
this
Not long
Thornton
generally stated, not,
and
and the
same
the
all
I
mean
to
year, but I
all it
they want or not."
becomes more
pay a higher
price.
since the
price of laths
in
little.
cannot
as before.
to
dealers
has succeeded
very defective
vice versa. it
the wheat
that
so that
last,
What was
the
ex-
Take
New
the reason of this
(Thornto?t
believed
that all
the
laths
in the
showing that the law of supply and demand, at least as that if it were true, prices should often rise when they do
in ;
07t
Labor, chap.
i).
Though succeeding
in this, his
by the law of competition, we think Mr. Mill has shown to be a Thornton's book by J. S. Mill, Fort. Rev., vol. xi, pp. 505-518.
to replace
view of
is
true
is
was suddenly found that the quantity on hand was
It
quite limited, * Mr.
in-
In such a case
York market had advanced a ?
the
It
short this
is
are willing
all
when
exchangeability often
illustration,
as
want, whether others get
Others say the same thing.
advance
year
they remain
if
The wheat crop
changeable, so that
another example.
its
Suppose, for
versa.
wants supplied
say to myself: "
have
diminishes,
So
becomes plen-
article itself
remains the same.
price
its
commodity
quantity of a
if
commodity becomes much reduced, the dealer
quantity of a
the
The same People
life.
The reason
less.
cannot be
things
if
and no
it,
horse because
there were only one.*
if
whether the quantity be more or
for
the
for
7
failure.
attempts
See re-
ON THE MEANING AND CAUSES OF VALUE,
72
market, and more, would be needed at once to process of construction.
ings
in
this
state
qualified
a
certain
of things to
increase
monopolists, that extent.
When
The the
finish the
build-
took advantage of
dealers
They became
price.
in
fact
they sought to control the price to
is,
market was found
condition of the
the
out by the builders, they rushed to the dealers to get their wants supplied in order to complete their work. the
suddenly increased,
laths
more
for
they
had
them,
—and
fixed.
—the
The
Suppose
the
builders
had
would the advance have continued
would have sunk down ber
and quantity
every case.
to
Personal
willing
met
till
the
satisfy the efibrt
pay
to
so the dealers could get the additional
agreed not to pay the advance, but to send supplies,
exchangeability of
builders were
price
together
and
elsewhere for their ?
Certainly not ;
it
purchases were sufficient in numdealers.
So
it
will
be found
and willingness of deprivation
fix
in
the
extremes of price, while the variations between them are dependent
upon exchangeability, which
the chief of which
is
in turn is affected
difficulty of attainment.
by many
causes,
yi.
MEASURE OF VALUE,
A
we have
It is impossible, as
seen, to find an invariable
measure
of value.
may be made, showing what ought
But a comparison of values to
be regarded
commodity.
as
a
real
advance or decline
in
the value of a
Suppose that the value of ten commodities have
mained unchanged
for
and
twenty years,
after that time,
one
re-
of
them, wheat for example, cannot be exchanged for more than half the quantity of the other things as before.
The value
measured by them, has declined
which
in value,
of wheat as
decline
may be
impossible,
neither
regarded as a real diminution.
Although an invariable standard of value is
it
needed
for
measure of value Prof.
Fawcet
ure the
is
amount
so is
many
purposes
as
is
is
generally supposed.
not required to inventory
wrong
in saying that
either of a nation's or
only be stated by enumerating Instead of saying that a farmer
" without
one's
some such meas-
an individual's wealth could
a long catalogue of is
worth
^
9,000
commodities.
we should be
able to form no other estimate of his wealth, except by
inventory of his possessions.
A
possessions.
The number
making an
of cows^ horses,
pigs,
A MEASURE OF VALUE.
74
quantity of com,
sheep, the
etc.,
Not
be separately enumerated."*
he possessed, would so, for
property
all his
have
to
no recog-
number of bushels
nized standard of value, he could estimate the of wheat or pounds of iron, to which
all
there were
if
equivalent.
is
Instead of affirming that his property was worth ^9,000, he might say
100,000 bushels of wheat or
was worth
it
of iron, or something
A
measure
of value
is
Do
horses.
but
equally,
to
B
no
says
worth $200." as
much
A
conversation.
their ;
ex-
specific
to trade
willing
is
to
exchange
he wants something more besides A's
" If," .says the latter,
twice
tons
they need any measure of value in order to swap ani-
Listen
horse.
making
not required in
For example, two horse-jockeys meet who wish
changes.
mals?
ten thousand
else.
"your horse
In
other words,
as
A's,
It
B
of no
is
worth $100, mine
is
regards
horse
his
consequence
as
A
how much
by what standard he values him, B regards
values his horse, or
horse as worth twice as much.
It
will
is
worth
his
be readily seen that
gold or any other measure of value had never been thought
of,
if
the
valuation of the respective horses could be as easily ascertained.
A of
measure of value
For,
if
to
compare or
and so on,
gold,
and another by
would be
it
quotation of prices.
As
register the values
exchange.
for purposes of general
one person was comparing the value of
and another by per,
needed
of merchandise
articles
all
is
all
things
by wheat,
and a fourth by cop-
silver,
quite impossible to have any general
these are necessary for the transaction of
business, as well as for estimating the cost of living, a standard of
value
necessary.
is
Another need of a measure of value or loss *
by persons
Man. of
Polit.
in
making
Econ., p. 301, 3d ed.
contracts.
is
to prevent
For,
if
undue gain
the measure be a
A
much;
and
one
varying
increases
in
75
creditor
the
value,
in
measure decreases
the
if
MEASURE OF VALUE.
he
value,
get
will
too
little.
In our country the unit of measure for expressing value
which measure was established by act
dollar,
1792.
2,
This measure of value, which
of a
sisting
venience
to
dollar
and
every
other
fractional
its
measure
in
is
the
of Congress, April
—con-
a decimal one
is
too
get
will
parts
—so
use,
was the invention of
superior
in
con-
Jefferson.
Although the unit of value-measure
is
the dollar, yet there are
four different instruments expressing that unit.
The
act of
provided for the coinage of a silver dollar,
1792
of the value of a
The
silver dollar
which
first
The
or
dollar,
pillar
then
pure
silver,
act of January
18,
the
being
fineness
1837, reduced
andths, the quantity of pure
The coinage of
the
except as a " trade dollar
"
remaining
silver
dollar
silver
has
circulation
for
892.4
the standard
weight to 4121^ grains, but increased the fineness to
fore.
current.
coined in 1794, weighing 416 grains, of
were
grains
STi^/i
thousandths.
Spanish milled
was
900 thous-
371^
grains as be-
been
discontinued,
China, Japan, and
in
other oriental countries.*
The
act of
dollars. five
March
3,
They were
and
1849, authorized the
issued
eight-tenths
the
grains,
23,22 grains of pure gold.
same
this act
coinage of gold
They weigh twenty-
nine-tenths
are
Under
first
year.
fine,
and
contain
they have been coined
ever since.
In 1862, Congress authorized the issue of a paper dollar, com-
monly known
measure of value less *
than a
This
as the greenback.
gold
Act of Congress,
1873.
in
this
country.
one, people
will
As
has become the universal this
paper dollar
buy and
sell
by the
is
worth
inferior
A MEASURE OF VALUE.
76 measure.
This
always the case.
is
In proof of the fact
it is
only
necessary to state that the prices of most commodities are largely increased because of the adoption of this
gold
or
was
equivalent
its
only measure of value, in 1859,
the
When
a barrel of flour was sold for five dollars. invented, in 1862, the
latter case the flour is
Some
gold.
same
same
Why
dollars a barrel.
things
?
measured by greenbacks
;
measured by the
are
greenbacks were
quality of flour sold in difference of price
this
When
paper measure.
1864
for ten
Because in the
gold
dollar
in the
former by
now, the
as before the creation of legal-tender notes, especially impor-
which are paid
tations,
thing sellers
The
for
in
gold; the prices of almost every-
however, are measured solely by paper
else,
dollars,
because
expect to receive them in exchange for their commodities. .last
form of dollar
the
is
bank note, which has
the
same
value and characteristics as the legal-tender note, and the two are
employed
indifferently as a unit of measure.
—the
Thus, the dollar legal-tender-
the
unit
and bank-notes.
answer usually
is,
of If
many
so
the fractional part thereof
measure
we
a commodity
is
for
or
silver,
or
Some
a barrel of flour
is
the party fixing that price does not
*
article
is
said
to
be worth
IFays and Means of Payment,
measured by a
dollar,
deny
dollars.
whatever
mean
p. 79.
may be
not have in view the
this.
said to
a half-eagle, or of silver in five dollars.
an
than a dollar,
less
if
much
ideal thing, but rather of so
equivalent.
its
well:* "When
some
or,
we do
the instrument expected in exchange, receiving merely of
silver,
In store and shop, in railway car and
exchanged
is
gold,
inquire the price of anything,
dollars;
manufactory, the price of everything
When
—embraces
Says
be worth
gold,
Mr. Col-
five
dollars,
the quantity of gold in .
fifty-five
.
So,
shiUings,
if in
England
neither
party
A MEASURE OF VALUE.
77
forms any idea of the quantity of gold equivalent to that amount,
although payment cannot be
made
beyond
in silver
whep
So, during the Revolutionary war,
many
for
forty shillings.
years there was
only a paper circulation, prices were expressed in the various currencies of the different
and very few indeed could have
colonies,
been guided by the quantity of gold
or
" It
is
evident, therefore, that
money
equivalent
silver
price expressed in their pounds, shillings,
of account
which prices are quoted and expressed
any
to
and pence. is
medium
the
in all countries.
pable of measuring, comparing, and stating values
to
in
ca-
It is
utmost
the
extent of the requirements of trade." It is true
when
dollars are received
and paid, we
are not always
thinking of the quantity of gold or silver they contain, but rather,
what may be "had
for
counterfeit
or base
good one,
so
dollar
The
reason
is
performs
why
we do
has been said that a
it
equally well
one knows that
long as no
ceiving metallic dollars, purity.
This
them.
it
is
the
bad.
of a
offices Still,
in re-
not forget about their weight and
why we do
not
them
always weigh
is
that,
from long experience, we find they are generally as heavy and as Let their debasement begin, either by
pure as the law requires. the
admixture
of foreign
metal, or
quantity of gold or silver, and
ceived without dollars.
first
As long
The same
being weighed.
as
future
their
by diminution
redemption
readily received without thinking about silver
that
may be had
uncertain,
and people
exchange
for
for
will
in
their
legal
not a metallic dollar would be re-
them;
let
be disinclined
the
is
is
true
of paper
certain, they are
quantity of gold
their
and
redemption become
to receive
them, either in
commodities, or in payment of debts.
Their value
diminishes, perhaps ceases. It is true that
an ideal money has been used by some people.
A MEASURE OF VALUE.
78
The famous
illustration of
Montesquieu
is
always brought to the
front
by those maintaining the theory of an actual or possible
ideal
measure
value
without money,
three
macutes,
same
as
purely
ideal.
A
six,
another
ten
another
they
if
said
simply three,
certain
Hamburg
that " in
millions are
banco, but no such coin that commercial
B arth, t
in his
writes
of a
money
for
city
Travels
exchanged
and
pound
name
the
cotton strips which then
'
" not
at
or two
and
are
for
the
of copper
rotl,'
still
became
reckoned equal
thirty
the
is
Lieber once
New
York,
of the
mark
any native coin of
North and Central Africa, any standard of
present
of the
ancient standard
has long since fallen into
remains.
The
have
lately
usual,
supplanted by the 'cowries' or 'kungona'.
kungona
worth
is
This
name
in the
there
is
Discoveries in
buying and selling;
though
ob-
of course, foreign coins are in use."
who have
people
nor
exists,
—though,
country, namely, the
or
Dr.
ten.
six,
article
macutes.
an address before the Historical Society of
stated in
disuse,
Laws *
of the Spirit of
on the coast of Africa have a sign of
blacks
the
that
served
The author
of value.
.
begun
to
or
be
Eight cowries
.
.
gabaga,'
'
one gabaga, and four gabaga,
to
kungona, to one rod."
Here an
ideal
measure
of value has survived the use of the real measure. It
— of
is
not true, however, that the dollar
ideal
is
its
money,
Colwell
weight and purity whenever
a paper dollar, of
We
as Mr.
its
— our money
maintains, for
we
receive
ultimate redemption
in
it,
the
we
of account
are
thinking
we
receive
precious
metals.
or,
if
admit that we are slowly approaching towards the use of ideal
money
in
consequence of divorcing in thought the quantity of gold
contained in the dollar from the dollar as a thing of pure imagin* Vol. 2, p. t
Vol.
2,
p.
59, 55.
new Am.
ed.
—
A MEASURE OF VALUE. It is possible
ation.
will
proves
That the time
this.
when our money
be,
worth time and space
is
value of gold and silver
Locke t
likewise
and
country
because
economic
standards
modified according as
is
:
parts.
its
.
has written that,
For,
loss.
This Said
writers.
The relative human industry "
:
as well
and
yard, whose parts lengthen materials
that
as
government will arise
to declare
Money
of account
.
James Stewart's their real
what each This
Polit.
nations
money
given
might
.
could become an
" Civilized
of value,
from their use. has
as a
into ideal."
Locke's Works, vol.
§
Money, chap. IV.
any
are the only
is
it
5, p.
trade, of
value to one
writers
of late
two or more things
within
worth, so
is
may
if
the that
power of the no
difficulty
be admitted, but the very
of neglect
in
example a
measure of
in-
and incompetence on the
although there was no such thing as any substance, and proportional equivalent for every commodity. Sir
i,
p.
526,' 4th ed.
make use of ideal money only, because they have converted Montequieu Spirit of Laws, vol. 2, p. 56.
generally
]
and
exist,
adequate
Econ., vol
for
settled, invariable,
They contend that
standards
Moran §
stances
shrink,
have not always a
holding opposite views. are. used
together in
make a measure,
Moran and Patterson |
another."
metals, as gold
and keeping the same proportion of value
One, may
.
"two
commerce both
measure of commerce must be perpetually
the
the same, invariable,
*
all
as
silver
the measure of
cannot be
silver,
which
a State.
in
exist
Consequently only one at a time should be used as money."
earth.
all
not
more of one than of the other from the bowels of the
extracts
And
nor
is
as early as the seventeenth century, in allud-
use of gold
the
to
a source of confusion and
has been clearly maintained by nearly
ing to
ideal,
to refute.
the having of a second one
William Petty,
foregoing
not yet,
is
become purely
will
Only one measure of value ought
Sir
The
have an ideal money.*
to
Barth
from
extract
soon
79
151,
2d
ed., 1823.
I
Econ. 0/ Capital, pp. 56-9.
A MEASURE OF VALUE.
8o
part of the government, prove quite conclusively that
So long as one
be intrusted with such a delicate duty. our purposes there
for
The
experience
standard.
of
is
France has
insisting that
countries, as
to
that the
oppose a double
of 1869-70, consist-
was
some of the members going desirable
to
still
in favor further,
ascertain the views of other
measures required to carry out such an ob-
intensity
in
favor of adopting
See Corresp.
a similar standard, declaring
by the existence of a double standard. towards a single standard,
but one. *"
her to
of prices in their country had been greatly aggravated
rise
gravitating
is
it
the
sufficient
Likewise the Belgian Monetary Commission, of November,
1873, reported
in
led
is
having more.
members, voted, by a large majority,
of a single gold standard,
ject.*
for
The French monetary commission,
ing of twenty-three
and
no necessity
should not
it
in
Land. Econ., Nov.
15,
1873.
So the world
and ultimately
will
have
—
VII.
MONEY AND
Great
Mammon
!
USES.
ITS
Greatest god below the sky.
The term money, taken
in
etymological sense, means
strict
its
Spenser.
something standing between two extremes and relating them to
Money
each other. itself
exchanged
for
other things, but never for
Small boys, indeed, swap cents, but
medium the
is
to
get
other things than
same wants now
as before the invention of
bread, cloth, furniture, etc.
means of
those
men
—and
satisfying these wants.
money If
society in which commodities were
money
use
is
money
as a
Men
have
—they
want
parted with.
used only as an easier
we could imagine
a
state
money, we should readily learn the great advantage of having In such a state
of
exchanged without the use of it.
the various products of the earth were exchanged
directly for each other. This system of
exchange
is
called barter.*
means of barter is taken from a work upon Fiji and by Thomas Williams and James Calvert. They exchange pottery for masi, mats and yams. On one island, the men fish, and the women make pots for barter with people on the main. Their mode of exchange is very irregular; the islanders send to inform those on the main-land that they will meet them, on such a day, at the trading place, a square near the coast paved for that purpose. The people of the continent bring yams, taro, bread, etc., to exThe island tribes of the Great Fiji take yagona to the coast, receiving in change for fish. exchange mats, mace, and fine salt. P. 72. *
The
following instance of exchange by
the Fijians
—
.
.
:
MONEY AND
82
Of
when
a time
"
ITS USES.
this state of things existed
From Lemnos
numerous
a
isle
Freighted with wine
.
.
Homer
sings
had come
fleet
.
All the other Greeks Hastened to purchase, some with brass, and some With gleaming iron ; some with hides, .
.
.
Cattle or slaves."*
Money
is
measure of value
a
Having already shown required,
now remains
medium
as a
First.
He
it
—
tailor,
A
A
So
and making known
A
his wants, offers to ex-
But
goes to some other tailor
B says he who makes
does not the
same
need a pair of shoes, and
could supply him he would take them in exchange for a coat.
must now find a shoe-dealer, who
change
A
is
by money
A, a hatter, desires a coat.
the garment desired.
for
reply; he remarks, however, that he does if
exchange.
of
to point out the offices fulfilled
a labor-saving instrument.
goes to B, a
hat.
medium
a
of exchange.
It is
change a hat
want a
and
what purposes a measure of value
for
for a pair
finally
of shoes.
will
accept of a hat in
After spending
succeeds in exchanging a hat for a pair of shoes and then
goes to the tailor and exchanges them for a coat. labor
might have been saved
money.
ex-
a great deal of time,
in
this
See
exchange by the use of
A, instead of going to B, to exchange a hat
would have
sold
his
money
hat for
to
how much a coat,
for
any one who wanted
it,
and with the money thus obtained he could have procured a coat.
change for
For
A
would have been
for his
Lord Derby's
The
namely, shoes.
ing power, while *
to
receive
money
in
merchandise inasmuch as he could exchange
anything he desired.
ticular thing,
willing
trans.
money has
hat
Thus
exthis
could purchase only one parit
had only a
limited
a general purchasing power.
purchas-
;
MONEY AND Thus
Perry*
Prof.
ITS USES.
correctly says, in pointing out the difference
between money and other commodities
some
of buying
power,
from
things
chasing power "
At
of society, to
view," says Chevalier,! "
first
money complicated use
mense
transactions,
It
ter.
of enormous
is
step
backward
it
to the
The ingly in
like
this
general pur-
utility
one of the
that
money, and
money
of
might
there its
an
im-
to bar-
machine which
adoption has been likened
was
after
a
obliged
tells
strik-
us that
market, but he would
who wished to
to
the
buy com,
exchange them shirt,
difficulty
in
if
he
for shells
and with
good deal of bantering,
So great was
may be
He
payment, and would rarely accept
therefore,
first
Monday
he must buy a " kulgu," or
farmer's corn.
take
truth,
which he passed, the practice of the
shells in
person,
dollars,
succeed,
no
is
in
to return
as a labor-saving instrument
villages through
of a dollar; the
these
we were
from the experience of Earth. |
on no account receive
with
if
two
necessitates
it
and we should
civilization,
farmer was to bring his corn to the
had only
of
sorts
of letters."
discovery
illustrated
the
all
might seem that the use of
inasmuch as
advantage,
in
has been wisely said
economises labor
has
it
buy
exchanges where otherwise there would be but one'; but, .its
power
the
a great deal of time in making exchanges.
saves
it
They have
Because money has
persons."
all
"
:
from some persons,
of things
sorts
from the usages
derived
83
this
buying
he the
of getting things, in
consequence of having no general medium of exchange, that often his servants
would return from
their purchases in a state of the ut-
most exhaustion. Secondly. *
—
It
prevents the
deterioration
t
Elements of Polit. Econ., p. 208. On the Probable Fall in the Value 0/ Gold,
\
Travels, vol.
2, p.
51.'
p. 38.
and
loss of
commodi-
MONEY AND
84
C
ties.
after
made
is
it
He
a baker.
is
or
must
give
will
of
dispose
He
spoil.
will
it
who
there a person
ITS USES.
useful
for
and with
Long
been
injured
readily
difficulty,
unfit for
before disposing of his entire stock, a portion of destroyed.
or
bread
his
sell
for
may keep
If
money were
use,
has
it
he
could
whatever
products into
perishable
his
power of purchase locked up
its
in
money, and with that obtain
By transmuting
he desired.
he
in ex-
it
and while they are going on the bread becomes old and use.
quickly-
cannot find only here and
him any thing
Thus exchanges take place slowly
change.
bread
his
money,
in this
form as long,
reduces the cost of a commodity.
In a State
as he pleases.
Thirdly.
— Money
having no money with which to make exchanges, more time pended, perhaps,
ducing them.
in
exchanging
things
Thus, the hatter previously mentioned might
consumed more time
in
exchanging a hat
than was employed in making the hat. is
is
ex-
than was spent in pro-
for
have
the coat he wanted
Consequently, the hatter
of the benefit of his labor, or the value of his
really deprived
product must be increased. Fourthly.
— Men A
amounts.
do not
farmer
who
always
wish
brings a fatted
to
exchange
ox
to
equal
for
market finds per-
sons enough wanting a few pounds of beef, but none wanting the
He
entire animal. for a
cannot divide the ox and give
a part of
it
few pounds of coffee or tea; perhaps he does not want the
value of one quarter of the animal in groceries
money
By means
of
farmer can
first
all
difficulties
exchange the ox
for
can be
easily
or
other
things.
overcome.
The
money, and with that he can
get whatever he desires. Fifthly.
for
its
— Money
reward.
secures
Without
the
employment of labor by providing
money how could
a cotton
factory, for
t
MONEY AND example, be run with
hundreds of hands
its
in
They
have not time
products, and
cloth
they
if
amount of
limited
;
no
wants
where
?
it
labor or
skill to
entire
And
cloth.
ting their bread, should shall
think
because
they
community
A man
?
return; hence, he must labor for those
must take
and
any of
if
must
them
how would
ship to pieces,
liberally,
in
are willing to give, in
"The
support.
meat;
what he did not want, he they
many
are
there
who
employment from
in iron, or bread, or butcher's
gratuitously, or
this,
away,
anything satisfactory
who
hundred men are engaged
If a
division.
house,
his
Besides
assistance.
pay
patients produced
attend
either
his
the
more than a
pay him most
ever so small quantity, the articles needed for his
physician
make
to
?
having nothing except
to secure
willing to
not able to give him
are
requires
that
for other
it
would be unable
might be unable
offer,
with
exchange
far to
of sending their cloth
who wanted him and were
those
The owner could
?
if the operatives, in despair of get-
be sent
it
go
to
they
had,
desired exchanges, for
85
and what could be done
pay them only certainly
ITS USES.
must die
products
without
incapable
in building a
of
ship or a
they take their pay in kind, without taking the
and thus rendering
their
work
Avholly
useless?"*
Thus, without money the division of labor would hardly
Rather than lose the time
make exchanges or run the
to
exist.
risk
of
losing the results of his labor, by injury or decay, or be subjected to the
other difficulties mentioned,
would supply
his
or profession. *
Waylanu,
clearly than t
Barth
com,
rice,
exchange.
own needs by
no man could
Besides,
In
himself in
to supply his
the effort
far as possible,
No
any one
art,
trade,
wants by making him-
author has illustrated the uses of
money more
Wayland.
says that he was etc.,
man, so
direct effort.
perfect
El. of Polit. Econ., p. 190.
President
every
because he
Travels, vol.
i,
repeatedly did not p.
5(J8
;
prevented from buying what he absolutely needed,
have, and could not get what the people wanted vol. 3, p.
203.
in
MONEY AND
86 self
whatever he desired, he could not attain to that perfection
which art
ITS USES.
is
whenever man
possible
or trade, or
make
a single
part of a complicated mechanism.
Manufacturers could not thrive at products
requiring
laborer be paid in
business he
is
all
who sought
an
that
article
hence,
;
engaged
it
as long as
universally
is
make no
will
make
to
But
minute subdivision of labor.
a
get whatever he likes
permitted to practice a single
is
he can have money '
the
if
he can
desired,
difference
those
what
in
exchange
in
for his labor.
Such are some of the most obvious advantages of the use of
medium
a
To
of exchange.
enough has been said
medium
greatest use as a
Money,
for
medium
money
that
clear
it
of the
is
exchanging other commodities.
combines these two
then,
might be added, but
these, others
make
to
qualities
—
is
it
a measure of
value,
and
means
exact, for the reason, not only that a perfect value-measure
a
cannot be found, but
of exchange.
also,
that everything
and a medium of exchange which thing
else.
in
money
is,
cality
is
it
is
something used
more generally than anything
The mistake
stated.
a measure of value
means
for getting other
of value.
a measure of value for the thing
each particular transaction. that
is
by no
is
of exchange and measures
instruments
Everything parted with
definition
given or received for some-
is
If jack-knives are used as a
things, they are
ceived
This
All
that
can be
in a particular
else
for
said
of
country or
lo-
the purposes
of writers upon this question
re-
is
above
in trying
give a precise definition, which cannot be framed, unless
it
to
be ex-
ceedingly general.*
William Latham has declared issued *
by
the State or
See Banker's Mag.,
vol.
that
coins, all
notes,
whether
by banks which are endowed with the
26, p.
545;
article,
"What
is
Money?"
fac-
MONEY AND
The
money.*
A
defect
definition
this
in
measure value, although
instruments
in the
definition
and acquitting debtors, are
paying debts
ulty of closing contracts,
87
ITS USES.
that not
is
of these
all
mediums of exchange.
are
all
North British Revicw,\
money
that
"only
is
another word for the machinery which accomplishes the exchange of commodities,"
has said that "
we
arrive at
for certain Is
it
money
last,
a
may be
First.
— Many
—a
money
Two
is
and thus
.
a tool required
its
For
two
this,
given.
as
is
when
was,
will take
given, lies as
are
measure of value and a medium of exchange
powerless
on
living
to
his
value as
create
in
exchange
much within the power of the people
members
shall
faction of debts than the
It
the
lone island in
create value in every case.
from the Government
mine as of the Government.
deed, call
.
of money, which
uses
persons are required to
people
what
.
people believe that Government can create value
Crusoe
Robinson
ing
that
the
singular that
Government
and money.
is
true view
be the subject of so much confusion?
reasons
Pacific.
means
Price}
Prof.
reason.
not an end but a
is
at the
little
simply these two
What
same
defective for the
specific purposes."
not
—should
is
for
what deter-
to
has no more power of ordain-
from one another
receive
birds of the
air.
a bit of gold " one dollar,"
but
power of the Government which gives value
in
satis-
Government may it
is
to the gold.
Government
in-
not the Avork or
That
is
never
performed.
Melt the gold so that every mark of the Government
superscrip-
the
tion
product
is
labor which
of
obliterated, yet
by coining
it,
its
the
value
merely announces
is
its
unchanged. weight and
The Government, fineness.
Does the value of a piece of paper depend upon the *
Fort. Rev., vol.
4,
p.
214.
t
Vol. 35, p. 176,
{
inscription
PrincipUs of Currency, pp.
j66, 167.
MONEY AND
88 of
Government
the
thereon
valuable simply because
Government ple
They
course not. the
Government
has
says
they retain
the promises
fulfill
Secondly.
— Money was not
exchanges.
was designed
It
Stuart Mill
" It
:
modiously, without
a
is
people believe that
number of them.
the
machine
less
would be heard
is
imperfecriy understood
very
The
more paper money.
for
of exchanges, and
money
more prosperous
is
business.
This
;
is
the greater
of the
fact
issued,
business vastly
increased,
its
business. affect the
currency
demand.
have been as
arises
sprang out
at that time
demand
his
was due, not for
all
sorts
The Government became an enormous consumer, and It was the National demand demands were great.
to that existing before,
The
It
and
and every one rejoiced over
But the prosperity enjoyed
superadded
depend upon
when more paper currency was
increase of currency, but to a greater
of course
the ra-
the quantity, the
a grievous error
that during the war,
no
people, or a
the prosperity of business,
in circulation
misconception of the uses of money.
of products.
com-
else
somehow
total
prosperity.
and com-
quickly and
large portion of them, have seized the idea, that
the quantity of
ex-
John
Says
doing quickly
for
facilitate
making
in
it."
This economic principle
to an
Of
?
of which these are the
and labor
what would be done, though
modiously
from a
it
peo-
yet
value
their
designed to stimulate, but to to save time
changes, but not to add to
pidity
Is
Supjpose the
be valuable, and
to
are valuable because the
will
value.
so ?
•
evidence.
cry
greenback
them, would
take
to
A
?
Government
the
greenbacks
declared
declined
ITS USES.
great.
afloat, or
If
A
which gave such an impetus
more
strictly,
to
partly afloat, did not
none had been issued the demand would coincidence was mistaken for a cause.
MONEY AND This
instrument,
sounded
exchanges more
render
to
in the ears of
irredeemable
the present
who
all
89
was invented
currency
that
principle,
ITS USES.
are-
currency.
and
merely a medium,
is
Now, suppose more
No
moment,
a
one, for
does not tend
easily acquired
to
the
and body,
go-between,
a
things
are life
get
for
getting
their prices are increased ?
if
contend that an increase of money
will
and
to increase prices,
that
any more can be pur-
with the whole sum, than with the
in the aggregate,
chased,
of
no argument
be an increase of money, how can
there
these things be
be
and happiness of
to the sustenance
money
that
them.
to
expansion
an
requires
prove that what people are really trying to
which minister
ought
convenient,
seeking for It
labor-saving
a
as
sum
existing before the increase was added. It
is
not the proper function of
This
is
a perversion of
its
use.
Were
and nothing more.
money
to stimulate
was intended
It
this idea
exchanges.
to facilitate
them
kept in view we should hear
no more about an increase of the currency.
The "
Hebrews
used
Abraham weighed the audience
in
silver,
current
cattle
were
ers
as
silver
Ephron, sons of
money,
and
for
it
the silver which
Heth,
with the merchant."*
frequently used,
Soon
oxen.
of the
money
Homer
Africa.
to
still
are,
four
is
he
written
that
had named,
hundred shekels of
Among
pastoral nations,
by some of the
tribes of
the
armor of Diomede cost nine
after the period of the
Homeric poems, copper skew-
tells
us that
were used as money throughout Greece, Avhich were super-
seded by the
silver
coinage of PHEiDON.t
*
Gen., 23
t
See Rawlinson's Herodotus.
:
16.
coined money, Book
i,
On
the
appendix, note B.
invention of coining and the earliest specimens of
Also same work, Book
i,
and notes; Book 7, 28 and 29, and notes. The Lydians, "so were the first nation to introduce the use of gold and edge, 166,
.
p. 180.
.
Book 4, we have any knowl-
94 and note 3;
far as
silver coin."
Id.,
vol.
i,
—
MONEY AND
go
ITS USES.
Once, the Anglo-Saxons regarded slaves as money people of
had
Newfoundland
their
wampum
Virginia,
;
Massachusetts, wheat. village
in
Scotland used
unknown substance
the
Romans
Africa and
stamped
in
with the image of the sovereign
or
compounded with
India, shells
are
of the American
salt
Barth
money having no
name once
many
An
Montesquieu, Africa.
as
He
once
by
West
Africa
Indies and
strips
of
cotton
mentions the use of beads as money
money, called macutes, in use
later
garded as money among tain them, either
parts of
in the
existence, although pieces of metal of that
ideal
Sooner or
In some
speaks of the use of the " rothl," an ideal
real
circulated.
places.t
^Ethiopians are
powder and shot were once employed;
some
In
Abyssinia.
in
cloth are used,
parts of
In Thibet, and in some parts
Campeachy, sugar
in
The
other metals.
many
of compressed tea serve as money.
colonies
logwood
used.
still
said to have used carved pebbles.
likewise,
and
was frequently
leather
of the Eastern Ocean, and
islands
of China, small blocks
;
Spartans, iron passed as money; among
the
copper, simple
Throughout the
The Indians tobacco
its
Adam Smith says, that in his day a nails. Among the Carthagenians an
enclosed
Among
China.
one time,
at
Likewise, bark stamped
used.* in
likewise, the
;
codfish in the last century.
among some
tribes
gold and silver have all
industry,
nations,
is
in
mentioned by in
come
Northern to
be
re-
which have been able to ob-
commerce, or conquest.l
and others have generally affirmed that the Carthagenians had leather See Heeren's Historical Researches. African Nations, p. 68. in use in different parts of Africa see Earth's Central Africa, vol. i, p. 568; vol. 2, pp. 55, 151; vol. 3, pp. 190, 230. Also Burton's Lake Regions, pp. 233, 271. \ MoRAN mentions many things vi^hich have been used as money, p. 7; also Say, Polit. Econ., Patterson has vi^ell said: "We need not seek a definition in chap. 21, sees, i and 2. the intrinsic qualities of the substances out of vi^hich money is made, for there is not a single The generic quality which constitutes money intrinsic quality which is common to them all. those substances some quality superimposed upon, or is manifestly something extrinsic to currency." Econ. o attributed to them, or at least to the shape which they assume as * Political economists
money, but this t For money
is
a mistake.
—
Capital, p. 13.
;
MONEY AND The
various
Among
civilized nations gold
The reason
ment.
money
used as
things
highly
ITS USES.
is
value. instru-
greatly
can be exchanged among a greater num-
it
It
is
held
Yet gold
the people of nearly half the earth.
esteem
in
high
is
not valuable
" If English merchants send out sovereigns to
everywhere.
the Chinese will not receive these coins as
Gold
kind of gold coins. one-third
in
most valuable
differ
the
is
ber of persons than any other thing.
by
9I
human
of the
not
is
money
money
—nor
China,
any other
Empire
in the Celestial
race (nearly one-half of the civilized popu-
lation of the globe) refuse
to accept
the yellow metal as currency.
Ipven in India, where gold coins have been in use from the liest
the value of gold
times,
Why
have
things as
weight
money
will
tons
of rice,
or
greatly diminished."*
such
a
pre-eminence
command,
ordinarily
thousand pounds of wheat, five
is
silver
One pound
exchange,
in
other
fifteen
thousand pounds of Indian corn,
thirty
a ton
over "
because of their portability.
First,
?
gold
of
and
gold
ear-
The
and a-half of cotton. t
money, though
quality renders silver valuable as
countries, because a larger quantity than gold
less
has
only
same
in
many
the
same
so,
value.
These metals are very valuable
They can be wrought
malleable. retain
any impression, may be divided
and again
divisions
into
which they
any shape,
*
Patterson,
t
Amasa Walker,
id.,
p.
will receive
and
into the minutest quantities
Hence, they are
In consequence of the small sub-
may be
as of equal value for a great
coined, they can be
number of
exchanged
products.
13.
Science of Wealth, p. 127, from which
silver are fitted to serve as ed.
money, because they are so
united, with the smallest possible loss.
admirably adapted for coinage.
Am.
as
into
money
are chiefly drawn.
work the reasons why gold and
See also Sav's
Polit.
Econ.,
p.
170, 4th
—
MONEY AND
92
They
Germany,
The copper
They may be
They
than that of
Sweden.
It
and
By
refined.
alloy they
are
money.
Likewise,
easily restored to their original purity without loss.
unaffected by atmospheric
are
decay
like iron, so that the
Ptolemies may be
the
is
that of
better adapted to use as
so
different
better than that
better
is
of
iron
silver.
readily alloyed
and
harder,
can they be
rust or
Sweden
while the copper of
not so with gold and
made
The
of Siberia
and the copper of Japan surpasses
Siberia, is
California, Australia,
in
everywhere the same.
is
countries varies greatly.
of
Found
are of uniform quality.
Russia, gold
or
ITS USES.
gold and silver in the
existence
in
They do not
influences.
to-day,
either
age
of or
plate
as
money.
They
rapidly destroyed
are
modities
and
almost inconsumable by use.
are
Even
period.
example,
for
clothing,
iron, in
agriculture,
railroads,
the
by using them.
disappear
ways
the
in
mechanic
made
vestigations
of gold was
the
at
only
to
i
in
arts,
com-
other
of food
Articles
is
it
etc.
silver
all
comparatively
a
which
But the duration of gold and
years.
Nearly
—
is
short
generally used
a
few
vastly longer.
In-
lasts
only
United States Mint show that the wear that
2,400;
is,
a
gold dollar would wear
out only by 2,400 years' service.
A
transcendent reason
money
is
why
gold
their uniformity of value.
and
silver
The
necessity of having
are
so valuable as
com-
modities which will always possess value, and which will fluctuate as
as
little
possible,
this
necessity in
the
villages
perpetual * p. 271
;
see
his
is
understood.
Burton
has
visited,
often,
he
Barth's Central Africa,
the says,
vol. 2, p.
value
of
causing 55.
illustrated
At one
Lake Regions of Central Africa*
which he
change,
well
money was severe
loss
ot
liable to
to
the
MONEY AND merchants who, of
(consisting of beads) find that
it
dollars
gold
in
be more
will
in the world,
I
paying any more
for
be had.
The crop might be
hand,
other
obUged
be it
that given to me.
The
impossible
is
which
be
will
ceedingly useful
at
as
money.
universally desired.
so
at
have
I
an equivalent to
very great.
value
anything, the value
of
and
gold
of any substances
so
of
silver
known.
One
reason of this
Hence,
if
they have
one place than another, they instantly begin
that
it
on the
is
Conse-
long as their value remains so uniform, they are ex-
quently, as
are
least
is
invent
or
The
changeless.
though the
variable,
if,
I
to
need, therefore, of having something of as
discover
to
to get
whom
to
like
if
difficult
Or
price.
person
the
nearly unchangeable value as possible, It
was able
I
if
pay a heavy
plentiful,
whereas,
;
might be very
it
would not get anything
it
money without
to get the
and
short,
to
was very
agreed to deliver
instance,
for
it
such abundance
is
than at the present time
it
pay wheat,
to
should
There
would probably be able
promised
I
promise to pay a thousand
get than now.
difficult to
quantity
large
suddenly becomes unfashion-
it
may
I
a
hence, without running any risk that
years
ten
93
providing themselves with
after
able and consequently useless.
all,
ITS USES.
place where their value
is
In
smallest.
this
is,
because they
a
greater
flow towards
to
way
value
their value
is
kept steady.
To complete
this
were valuable
silver
That
is
creases
long before they came into
that gold
use
a function superimposed upon these metals. their
their value
place.
we remark
side of our subject,
;
value,
or
but
it
as
beautiful
money.
This use
in-
not the sole or principal cause of
the cause of imparting
The Wampumpeag
regarded
is
as
and
value to them
in
the
first
currency of the American Indians was
by them, and
so
it
passed
as
currency.
—
MONEY AND
94
The same
of gold and
true
is
they came into use as
used
money,
else
money, they are found admirably
and
function,
The
may be
inquiry
beginning
are used
so
What
?
They were
silver.
prized
serve
to
fitted
before
never would have been
they
Being desirable apart from
purpose.
that
for
ITS USES.
their use as
additional
this
for this purpose.*
pressed:
Why
did gold have
gives value to anything
value in
the
Exchangeability, which
?
we have seen to be one of the causes of value, springs out of the
manifold
the
same
desires
diamonds were
enough
A
possess.
wishes
first
why
to see
noble,
convert
to
easily transported.
to
difiicult
take
Gold and
pearls, or other
placed in
the
they were such
we
his
all
monds which There
is
land with
his
animals, or
him, and
furniture,
so desirable, because they " Gradually,
and
the civilized world.
if
seized
estate
which he
may
that
be
He
can-
be
very
would
But he
on the way. into
gold and dia-
that he can easily carry.
any,
by
know
he has
that
till
A
his sovereign.
and by the exigencies of
propriated by general consent to the uses of money, in
easy
Again, his houses and lands are not
may be
in the course of time,
is
it
of wealth to
or any bulky merchandise.
land and cumbrous property
fear of robbers, for few,
it
desire,
gold and
intends to go a long distance.
these things in his possession.
*
wealth,
forms
some other form of wealth
are a very small parcel,
less
When
canon of desirable
Besides, he might be robbed of these things
converts
gratified
silver
things.
suppose, has a large
will
into
He
not, of course, take
man.
of
as diamonds,
society, they
at last that consent
This appreciation was ulterior and consequent
quar-
came to be apbecame universal
to the ascertainment of
which Gold and no probability that they would have been employed as money. This. was not the original ground silver are not valuable simply because they are money. of their being held in such high esteem but they have been adopted and have obtained universal consent to be used as money or a common medium of exchange because of their value for the
many
there
useful
and admirable
qualities of these metals
is
for
other purposes, without .
.
.
;
and because they are always in demand for such a vast variety of appropriations money." Colton's Public Economy. See also on the Origin of Money PatterMill's Polit. Econ., vol. 2, p. 19. son's Science of Finance, p. ii other uses,
other than
;
;
MONEY AND rel
may
and
ITS USES.
95
spring up between them, and his domains
But
laid waste.
precious
he
stones,
burying them
can
the
in
nearly
if
them
conceal
by
or
earth,
may be invaded
property consists of gold and
his
all
from his destroyer
them
fleeing with
to a
by
distant
country.
Moreover, wealth was originally a sign of social rank, and
men knew what owner of
large
is
from the
If without
herd
But he comes wearing gold and diamonds and
At once
wealth.
great
social position, for
owner of so much
marks of
other
taken to be a person of elevated
In
wealth.
much beyond
people
still
this
same rude
the
we have
respect,
state
not
in
they do not rank.
if
consequence of
forms of wealth which draws.
may be
But
People look up to
hence,
this;
easily
many
displayed.
diamonds become
sands
which they are found, and who would wear them
they were once prized because of their beauty,
now,
for let
them
off like the dust of the street.
the
like
it
let
men
seek for those
They
attention in
yet
Many
of civilization.
wear gold and diamonds, because being wealth, they
confer power, even
wealth
is
sort,
of mankind.
one without such a position could not be the
passed
of
he
go into a
to
wealth of any
common
belonging to the
he was the
that
fact
Suppose he concludes
not known.
is
near his broad acres,
the lord lived
was,
possessions.
regarded as
is
rank
his
country where he
he
When
a sign of power.
still
as plentiful as the
they
are
?
not
If
so
abundant mines be discovered and people would shake It is principally the
men and women
idea to
be considered
wealthy,
much
Let a person who, whether wealthy or not, cares
to
wealth.
make no
diamonds
?
display of
He
that
it,
leads
to
wear so
and what does such an one think of
does not wear them or care anything about them.
This desire to display wealth
is
a scar of a barbarous
civilization,
MONEY AND
g6
which
and
will
disappear
ITS USES.
when wealth
ceases to be a source of power,
and moral goodness are enthroned
intelligence
by no means follows that gold and diamonds
It
stitute
wealth because they are so regarded to-day.
they are,
as
long
and,, so
expenditure of great great value,
The
and
will
as they
can be
of course, a
labor,
They show how very
if
It is
Yet, so long
only by the
obtained
have
small quantity will
to
effect
or
The
exchanges.
its
display dense ignorance.
question
this
how much money
late,
country require to
answers generally given
derstood.
place.*
its
always con-
remain very desirable forms of wealth.
question has been discussed of
currency does any
few,
in
will
imperfectly the functions of
money
are
un-
looked upon by many as a mighty question which This
any, are capable of answering.
is
because such per-
money
sons do not comprehend what the functions of
If they
are.
be answered
easily
Whenever the business of a country has become adjusted
to the
did,
they would
see
that
question
the
can
enough.
currency employed in making
may
be,
no increase thereof
clearest principles
of
whatever the amount
exchanges,
its
ever required.
is
economic
science.
It
This
is
one of the
makes no
difference
whether the volume of currency be great or small, prices
commqdate themselves
to
it;
and
creased, other things remaining
increase
will
be
to raise the
of a
Coffin, in his Ojtr Hindoo woman " :
New Way Round No
the
amount
price of commodities. effect is
the Woild, thus
Western lady can appear
in
will ac-
thereafter
the same, the only effect
of the currency be withdrawn, the *'
if
So
if
be
in-
of such
a part
a depression of prices.
speaks of the dress and ornaments
such gorgeous costume, as the Hindoo
woman before us, wearing a robe of crimson silk, reaching to the knees, trimmed with yellow bands across the shoulder, a yellow skirt edged around the bottom with cloth of silThere is silver enough in the broad ver, beneath which is an underskirt of purple silk. rings and bands clasping her ankles for a set of tablespoons, to say nothing of the display on her arms, round her neck, dangling from her ears and nose, and gleaming on her finP. 119. gers, or of what she has lavished upon the garmentless child toddling by her side."
MONEY AND It
of
is
adopted, and
commands
which
to
exchanging
used on account of
is
of
arise
will
pursue
If
it.
If
the
such
that
certain
is
means of an
the
from
of the proposition
paper
hence
and
value
is
Keeping these question
need?
:
it
on account of
unsound.
is
is
the
How much
self-regulating;
But when
below
equally true. in
all
circulation
Gold and
outside
is
was
the
silver
the
and
will
local a currency,
in value, while
places
it
it
was supplanted by
it
The more
par.
fluctuations
in
of
have a wide
same
of our
converse
;
own
but
our
country,
very unstable. facts
How much
The
is
value
no
In
While the former was inquiry:
The currency was
its
their
currency has its
it
supplanted by
is
currency, exchanges were violently unsettled,
violent are
circulation,
the
with
regulation.
legislative
present
more
all
unsettled
currency
a
paper currency.
inferior,
we were never troubled
remain so as long as the
Like the sun,
driven out a sound, specie currency by
does the country need? free
cur-
currency employed by a country produces this
United States we have
use,
same
be remembered that no sound currency disturbs ex-
it
it
the
appointed course without interruption or change.
its
changes. effect,
no
is
be no vio-
will
while
a currency having the confidence of
Let
there
exchanges are disturbed, they
an inferior currency, then exchanges are it.
There
all.
commodities
once
has
it
such a currency
from other causes than the currency.
will
When
currency
to the
values have been adjusted,
perfect confidence
the
lent disturbance in
rency
all
may be
productions.
its
exchanges, provided that
effecting
in
difficulty
begins to exchange
first
long as a nation sticks
as
97
consequence what the volume of currency
little
with which a nation
Now,
ITS USES.
less of
8
it
in
mind,
of this
it
is
paper
the better while
easy enough
currency does it
to
answer the
the
country
continues below par with
;
MO>fEY AND ITS USES.
98 If
gold.
be an
it
with gold and it,
certainly
it
we should not make
silver,
contract
but rather
currency, as
inferior
quantity and
the
The country needs no more
of
it;
poorer by watering
it
improve
so
there
compared
is
quality.
its
much
altogether too
is
now. Besides,
by increasing
quantity,
its
purchasing power
its
power of the
ished, so .that the aggregate purchasing is
and
with,
credit
by issuing more
ment
as of individuals.
people
gold
prefer
There
diminish.
by no
its
larger
We
be
promised
in
first,
felt
so
is
it
is
par.
The
their
value
will
The Government purchasing
aggregate
the
By
at a discount.
make
long as
much
too
is
redemption of
below
issuing
diminished, and the country has no
with which to there
more
this effect.
increase
as long as
Govern-
as true of the
is
issuing
no escape from
fact
in
conclude —
excess will
By
them.
to
is
pay
every one, except he be an
it,
The same
.
to
neither improve nor sustain his
Its legal-tender notes are
purchasing power
amount
will
ingenuity can
of
sort
notes.
power of the currency more,
know
creditors
his
beheves the debtor
inflationist,
an individual
$ 100,000 and has only half that sum
gives his notes for
them
amount
larger
When
no greater than that of the smaller sum.
dimin-
is
it
is
worth
exchanges.
currency now, and the less
than gold, which
secondly, while
it;
its
gold continues, the question whether the country wants more of or not
is
is
inferiority to it
without any significance, because the country by no kind
of legerdemain can actually get
a larger amount
may be
more
issued, but
if it its
be wanted.
value
is
Of
course
entirely
absorbed
value
depends
by the currency existing before.
When upon
the
three
currency of a things
:
first,
secondly, the extent of
its
country
the
is
sound,
its
amount of business
credit;
done
thirdly, the rapidity with
there
which
MONEY AND money
its
business
If
circulates.
be extensive,
rapidly, or credit
than
they are able to loan
sum,
is
it
which, in
value
its
money
or
circulates
needed than
is is
By keeping money and again
again
it
discounted
if
the
less.
it
some one
to
The amount
this.
in
these
institutions
one person deposits a
;
another, he pays
to
turn, discounts
Comptroller shows
money
more rapidly through the agency of banks
circulates
any other way.
in
99
light,
is
less
opposite conditions prevail, and so
Money
ITS USES.
another bank,
into
it
Any
else.
report of
National
of the
the
circulation,
according to his report for 1873, on the 12th of September, was
$339,081,799, while
sides
loans
the
course there was the
amounted
legal-tender
to
on the other hand, a large amount of currency was
;
possession
of the
From
people.
these
facts
rency circulates more actively through
Of
$940,233,304.
of $356,000,000 be-
circulation
it
is
in the
clear that cur-
the agency of banks
than
through the action of individuals.
The
use of credit in
change, after
how
etc.,
the
its
bank checks,
various forms,
We
supply the place of money.
matter of the
they operate
extension of credits
lessen
to
the
need
for
shall in
bills
of ex-
discuss
here-
country and
this
England
money.
has
not so much currency as France, though doing a vaster business, yet
her exchanges
struments of credit.
England, the
it
is
are
easily
made by means
In France,
money
is
tracted,
it
parts
They had it
in-
in
When
deposited in banks and kept in circulation.
German indemnity was paid by France and new
loans con-
was a world's wonder that such an immense throng
should gather in Paris to subscribe for the loan. all
of the various
absorbed, hoarded;
of France. laid
was
the
country, farming
by money, and, instead of depositing
had been kept L.ofC.
It
They came from
in their houses.
The
loan
population. it
in
banks,
being regarded
safe,
MONEY AND
lOO
money was drawn
the
ITS USES.
The
forth.
reflection
is
not creditable to
that country that such a vast throng should be without confidence
Bank of France,
in the
money
should have no
fact,
that
serves
credit
liquidating debts, proves
and confidence or
quired
than
body wanted money to
credit
;
business
the
Thus
the
Why
not
confidence was
additional currency.
mand
for
No
Because, in
Many
universal.
of the
state
that
;
was
enough.
So
no need of
and then the de-
Upon
the
restoration
before.
This
prevailed.
is
of the
When
money enough; when confidence
more money was required filled.
once came
a week before
there was that,
of things which
confidence was strong there was
confidence had
this
there
generally diffused
re-
amount was
present
one said fact,
at
more currency
no more money was needed than
explanation
disappeared,
currency will be
to trust.
The panic destroyed
more money was
confidence, true
?
in
whenever
panic of 1873, every-
the
had increased so enormously the
panic.
long as
in
country needed
inadequate to make exchanges.
it
For when these calamities
gone, more
is
money
as
and the necessity of providing
no one dared
conclusion that
the
same purpose
the
panics
other times.
at
confidence of
.the
itself.
currency when they occur.
additional
France
or rather, that
commanding
necessity of maintaining
the
possible, in order to avoid
arise
branches;
its
Government
the people except the
This
or
institution
to supply the place
which
VIII.
DECLINE IN THE VALUE OF GOLD AND SILVER.
.•.
Nearly
silver
causes
economists agree that the value of gold and
This
depreciating.
is
:
political
all
and the
depreciation
demand
substitution of other things for
money.
;
its
In respect to the present supply, to
times, yet
In
quiry into
no 1
is,
after
and imperfect
and
Cotistimption of the
of investigation
field
time in which he wrote. research,
;
very wide as-
a
Mr. Jacob published an elaborate Histotkal In-
the Prodiictioti
covering the
from three
ornamental use
labor has been expended
command
obtained
results thus far
83 1,
much
chiefly for
production of gold and silver since the earliest
the
ascertain
sent.
arises
lessening
the larger supply
all,
from the
estimate,
Indeed, the
production and consumption
of the
LOCH, are " at
as
least as great
in
wide
metals
of the precious
difficulties
of finding out the
precious metals, says
their
the
and that even very rude
in respect to the production
during the earlier ages.
ages to
This work, though abounding
only an
Metals,
Precious
earliest
importance.
They
in truth, of a kind to afford any certain conclusions, and
M'Culare
not,
we must
be contented with those that seem to present, on the whole, the greatest silver
in
amount of
probability."
For the production of gold and
America, from the discovery of the country
to
1803,
t
:
DECLINE IN THE VALUE
I02
great reliance has his
Danson,* who with
data
the
been given
amend them.
the
to
Chevalier has
Blake's Report upon
Government on the
tion
in
in
1867,
is
to
Blake's estimates,
made
to the
United States
and probably the
best, exposi-
the latest,
is
of gold and silver to i868, according
as follows
(Amounts supposed
800
to
be on hand)
$1,790,000,000
800 to 1492
345,000,000
1492 to 1803
5,820,700,000
1803 to 1848
2,484,000,000
From
this
difficult to
there
is
3,571,000,000
amount
the losses are to be deducted, which are as
amount produced.
agreement among writers
—
placers
originally contained
it
for
unnumbered
is
and
in
by the grand operations of them
Indeed,
respect
in
if
possible,
the
to
loss
of
amount now remaining.
for the future supply
from two sources
was
$ 14,010,700,000
total
ascertain as the
less
gold, than to the
As
in
subject.
Grand
the
sank to the bottom.
known
well veins.
rocks,
gold
is
in the
have
it
placers
to pieces,
along in their courses
Placer-mining, therefore,
in
is
Land
nothing
Office
over
rolled
and grinding them
ages, breaking
derived
which has been extracted
Journal of Statistical Society of London, vol. 14. See also Commissioner Wilson's learned investigation
researches are very valuable.
that
That found
Streams
nature.
washing out the gold and carrying
1
reason
Value of Gold, though
the
1848 to 1868
*
together
figures,
found
gone over the ground
carefully
in
Spain, though Mr.
has
subject,
the Precious Metals,
The aggregate production
14 to
New
Humboldt's
studied
carefully
pertaining
work upon the Probable Fall
his
to
Baron Humboldt's estimate
to
Essay upon the Kingdom of
Political
Repoi't,
till
it
but the
1867.
His
OF GOLD AND SILVER. over
digging
and
dry,
which gold
in
Once
is
supposed
that
rivers
have become
be deposited.
to
that, as the soil containing
was thought
it
and
beds of streams
the
IO3
gold which had
been thus extracted by nature from the rocks, was quite limited
when
extent,
in
had been worked
it
gold would be exhausted. late Sir
R.
But now gold
placers so,
is
is
it
it
to
is
I. is
Murchison
over, the
in
work upon the
his valuable
generally acknowledged
Siluria.
normal supply of
the
that
be derived from the rocks, and that the gold found
clear
that
the
future
supply of gold
Murchison
strongly maintained
that the
in
This being
amount.
only a small portion of the whole
and productiveness of the gold-bearing
extent
supply of
future
Such was the opinion expressed by the
depends upon the rocks.
productive
gold-veins
were confined chiefly to the Silurian rocks, and that the quantity
which they might yield would, not very long hence, be exhausted.
The to
gold-bearing rocks in the Ural Mountains, in Australia, and
a considerable extent, in If "
period.
we
cast
Pactolus of Ovid, to the Alps and
California, belong to the Silurian
our eyes to the
golden Tagus of the
the Middle Ages, to tracts
by the
countries watered
the
Phrygia and Thrace of the Greeks, to
in
Romans,
to
the
Bohemia of
Britain which were worked
in
old
times, and have either been long abandoned or are now scarcely at all productive, or to those chains in
America and Australia,
which, previously unsearched, have in our times proved so rich;"* in all these lands
gold
has been imparted abundantly to only the
Silurian or the associated eruptive rocks. sively
proved since the time when the
Siluria logical *
first
was published, that gold abounds age.
The
Murchison's Siluria,
explorations of p.
475, 3d ed.
Yet
it
has been conclu-
edition of in
Murchison's
rocks of every geo-
Trask and Whitney
in
Cal-
DECLINE IN THE VALUE
I04
IFORNIA
secondary
and
1853
in
fossils in
the
and,
main
belt of gold-bearing
subsequently,
with the discoveries in
Hungary
in
longing
geological
periods,
the
to
latest
the
54;
1862,
—
discovery
slates;
of
together
prove that rocks be-
even
as
late
the
as
Tertiary, contain productive gold-bearing veins.*
Again, later geological investigation has shown that the quantity contained in the rocks, and which
than
geologists
is
accessible,
the gold-veins parted as they descended
became mere threads
Mr. Selwyn,
advantage.
ment
at
Australia
in
report
his
the
into
could not be
that
more abundant
is
Murchison maintained
formerly supposed.
to
rocks,
that
they
till
followed or worked
English
the
to
Govern-
1856 and 57, on the mining resources of
in
the colony of Victoria, declared that there was no evidence from the mines in that place to sustain
Murchison's
position that any
vein rich at the surface dies out or suddenly becomes unprofitable.
was
It
upper portion of many veins were once
true that the
gold had been removed by denudation.
even thus abraded, were
veins,
went
ent surface,
of yield in scale,
was
most of the
to
Mr.
J.
might be
to
P. 457-
be
true
on a large
considered
carried. in
as
Raymond,
iSyOjt said
that
practically inex-
Indeed, the statement of Murchison, accord-
this authority,
"is
Arthur Phillips
completely overthrown by experience." speaks the
See Whitney's Geology and review of same in Sill. Jour., vol. 45, p. 334, second series.
series;
their pres-
prove that the diminution
United States Government
gold-veins
haustible in depth.
ing
on
many
so slow as not to be appreciable within any depth
in his report to the
1
very fact that
often very rich
still
opinion, to
though admitted
depth, even
still
The
which ordinary mining operations might be
to
*
in his
far,
The
But the reason was very apparent.
richer than they are now.
far
Sill.
opinion
now
universally ac-
Jour., vol. 41, pp. 231 and
351,
second
—
OF GOLD AND SILVER. knowledged, that
gold
metalliferous veins to
Gold
found
is
mine thus
The gold
in
not more liable than ordinary
become impoverished
till
has
it
reached
division
the
There
is
no extended
globe, without
its
Comstock mine
region,
found
in
connection
that
the
with
lead
lead;
mines
quantities of silver for ages to
and
in *
will
the future
as
lead
probably
period
;
re-
Since
till
1862,
very
Silver
is
veins
expand
Murchison
yield
enormous
come. capable of as rich yield
as in the past, the value of those metals will greatly
—
"Recent
that the
no great
quite limited,
Nevada.
in
the gold and silver mines are
if
dis-
Chinese Empire.
largely as they descend from the surface of the earth,
declared
new
Quite
gold-field.t
$ 80,000,000 have been extracted therefrom.
Now,
Brazil.
in
work showing that gold
a
modern times was
silver in
the discovery of the
has
richest
Indeed, the
Pacific.
Mr. Pumpelly| has published
The production of
often
The
regarded as co-incident with the mount-
globe.
of the
to
deposits exist in almost every province of the
about
depth.*
Morro Velho mine
the
is
may be
chains of the
cently,
in
region in Russia has been constantly expanding by
tribution of gold
political
are
almost every part of the world.
discovered
far
discoveries,
ain
ledges
I05
observations and experience appear to lead to three important conclusions first most productive gold-bearing rocks are by no means exclusively confined to the Silurian secondly, that aqueous agencies have been, and still are, actively at v/ork in the forma-
more liable than ordinary metalThe Mining and Metallurgy of Gold and R. Brough Smyth, in his Gold-Fields of Victoria, maintains Silver, by J. Arthur Phillips. a similar view. He says, after examining two hundred veins, that " taking the whole of the information and results obtained into consideration, there is much reasonable evidence produced in support of the theory that quartz reefs are richer as they increase in depth, and in addition tion of mineral deposits; and, thirdly, that gold ledges are not
liferous veins to
to this, that t J
become impoverished
in depth."
they are wider."
Blake's Report, p. 235. Smithsonian Contributions, Oct.,
viously quoted, that the area of the vastly greater
1866. R. Brough Smyth has written, in his work preAustralian gold-fields yet unexplored, 01 imperfectly so, is
North America. Of the 20,000,000 more than 600,000 acres have been explored, while many of by improved methods, better results than ever before.
than any other upon the Pacific slope of
acres of gold-fields in Victoria, not the oldest mines are yielding,
DECLINE IN THE VALUE
I06
decline.
the
increased
several
times
cannot be denied that
It
has sensibly diminished
value
its
supply of gold
in the
of
history
the world.
During the period between
the
commencement
wars and the age of Demosthenes, very plentiful in
Greece.
be coined from
to
became
metals
Their value, consequently, greatly
preciated; as well, also, as in the time of
who caused money
the Persian
of
the precious
Constantine
de-
the Great,
found
the precious articles
in
* the heathen temple.
When Julius C^sar was emperor Momsen, t
that
value, as
in
fell
it
money market
the
of gold into
masses
of
Rome, he brought such at
Rome, according
compared with
to
about
silver,
twenty-five per cent. It
a clearly established
is
that the
value of gold has
de-
since the discovery of the gold mines
civilized countries
clined in
fact
California and Australia.
in
JevonsI
Prof.
been a
rise
This
rise
England
of prices in
measured by
cent., as
with the utmost confidence, that there has
asserts,
fifty
to
the extent
of eighteen
of prices represents a real diminution in the general pur-
chasing power of gold to that extent.
Yet others, including
Cairnes, suppose the decline to be much greater, *
See Boeckh's Public Ecotwmy of the Athenians,
tVol.
4,
p.
per
chief commodities, since the year 1849.
343.
English
transl.,
new
ed.
p. 14,
Prof.
reason
for the
Eng. translation.
Polybios says, that
in his
time
the gold mines
were so rich about north of] Aquileia, but especially in the country of the Taurisci Norici, and that the diggings (genethat if you dug but two feet below the surface, you found gold, instances the gold was found pure, in rally) were not deeper than fifteen feet; that in some |
others it lumps, the size of a bean or a lupin, and which lost only one-eighth in smelting in barbarians in the working required more smelting, but was very profitable. Italians aiding the and the cheaper over the whole of Italy for two months, gold became forthwith one-third monopolized it themselves. At Taurisci discovering this drove the associate Italians away and ;
;
present
all
gold mines belong to
Murchison's Siluria, *
p. 475.
London Economist, May,
1867.
the
Romans.
Strabo, book
4,
chap. 6, sec. 12, quoted
in
OF fJOMJ AND SILVER. that the course
of prices previous
IO7
1849, was
to
down-
decidedly
wards, so that the increased supply of gold prevented a greater de-
them, and also occasioned the
cline of
volume of
ence
Amongst
at least
is,
reaffirms
think
I
of
former
his
to
and
writers,
general of
in
the is
the
that
of the
effects
on the part of
who view
all
change.
this
agreed
well
pretty
is
it
measure, due
large
in
causes
the
to
But on the other hand, there
gold discoveries.
commercial
respect
in
is
economists
advance
he
1873,
his
general prices has taken place, the only differ-
in
opinion
of
in
In
stated.
says: "all are agreed that within twenty years a sub-
advance
stantial
published
essays,
He
opinions.
above
rise
the
question
from the stand-point of practical business, a strong disposition to ignore,
or altogether to deny, the influence of this cause in deter-
mining the is
port
We
results."
among
are
gold has declined
right, that
in
those
who
think Prof.
Cairnes
value, for the evidence
sup-
in
of this conclusion will admit of no other explanation.
In
country the decline has been very marked since
this
we have compiled
Elsewhere, the decline
has
been
in
Other things,
products.
a
of
table
prices
one hundred of the leading the production of
in
i860.
showing
what
American
which more labor
has entered, the decline has been greater.
The greater If
A
so
;
for
it
is
B and C may want
it,
long as they
have
people, though not for
lightened
instance,
nations
a
among
value all,
between
if
it
has
they do, of course
it
Hence, the precious metals,
among
a considerable
their value will
may become as
and
still
off to the East.
only a slight indication that
valuable, although valueless to A.
silver,
would have been
these metals
had not an immense quantity been drained
does not want a thing
no value is
the value of
decline in
valueless
themselves,
number
be preserved.
among yet
so
the
long
of
Thus,
most enas
such
DECLINE IN THE VALUE
Io8 quantities
of
India
are at present,
as
by the
desired
are
it
For many years these countries have else
silver,
Patterson,
that
pends upon the continuance of of gold and
The value ing use
bank
notes,
gold in
absorbed vast quantities of
this drain
from
of exchange,
making exchanges has become
as
etc.,
substitutes
etc.,
may be
properly said that gold
because
credit
and
the
many
various
evils,
in
instruments
for
in
has increased.
The
civilization.
of credit
Hence,
value.
declining
silver are
that
gold
all
them, and the
use
to
willingness to trust others
one of the marks of an improving
amount of
direct influence in de-
or rather, supposing
no one dared
corrupt that
or
checks,
1872,
vast
this
precious metals would enormously increase
of
substitutes for
Let an edict go forth that
value of these metals.
so
of
given by the several banks composing the
no such instruments could be used,
men were
use
For example,
universal.
The use of $ 33,844,369,568. in place of gold and silver has a
preciating the
The
Clearing-House Association, representing sixty-one
of exchange,
association,
for
de-
increas-
the
money.
for
banks, received for the year ending September 30, bills
is
of bullion to the East."*
decline
will
substitutes
bills
It
the prosperity of the world
silver
as
bank checks,
New York
the
things
of other
China and
ago would have declined.
long
value
its
this reason, says
of
inhabitants
value will not be materially lessened.
its
it
value It is
substitution
attended with
is
arising from unwillingness and inability to comply with
their requirements;
but as the infirmities of
human
character dis-
appear, notes and promises of every kind will have general prefersilver as instruments
ence over gold and
Gold and
silver
ment dechnes. *
will
decHne
Probably
See Fawcett's Man. of
Polit.
it
Econ.,
in
was p,
value
this
436,
of exchange.
use
as
their
which
use
first
for
orna-
gave them
OF GOLD AND SILVER.
Ornaments are worn
value.
person
the
gold,
as
the
;
be worn,
will
person
not
for
and power, they
of rank
pains
less
regarded
the
property, which
depend
largely
contained in a small space,
beautify
to
So long
beautiful,
taken
adorn
to
but as
past;
to
they the
indications
be worn, and
diminished.
is
and
the value of gold
lastly,
as
one day cease
will
with every declining use their value
And,
be
will
in
one,
;
and wealth.
rank
diamonds, are
coming ages than
the
in
two reasons
for
indicate
to
other,
and
silver,
109
silver,
upon the
will decline
that
fact
when
kindred forms of
arid
much
value
is
more cum-
other and
brous forms of property become secure from seizure and intrusion.
As
advances, and
society
more
equable
may be
they
more
concealed,
quickly
or
With
danger
of
loss,
society,
its
members, instead of converting
away.
pass
will
form of gold and diamonds, with
works of genius
the
clearly seen
in
this
alone,
centuries
more will
that will
and
to
secure,
minister
him only
to
come. it
is
for
In
and
art
little
surely
and wisely
in
transported
not
the
to
that
the
the
the
and enrich them is
Then, wealth
to
many
laws
of
now will
upon the body;
gratification of
an hour, but
of
into
tendency which
Europe.
less
state
wealth
their
houses
—a
with
improved
this
in marble, instead of
short, as
evident
be greatly changed.
stones will be of
build
will
country and
be displayed on canvas and in things
clearly defined,
have property compressed into such forms
executed, the desire to that
and
operation,
their
in
become more
laws
its
one
man
persons and for property
become
forms which wealth assumes
Thus gold and
and the precious
silver
account, except as they
may be
useful
in
the arts.* *
One
cause ^resting the
kept up the demand.
fall
of gold
is
the increase of population;
that
is,
population has
no
DECLINE IN THE VALUE
We
do not believe that gold and
moment
from their
apart
value as Avealth,
apart from their
human
We know
money
desires.
to-day consists
much
think contains
in almost all cases in
silver
would
—
is,
intrinsic value
in
capacity to
some
hold
use
its
which
be wealth,
it
that
itself
we
a ready
So
«sale.
are
no longer regarded
for
nobody
ceive
will take or
them
changed
lest
in
bring us ceases to
it
merchant bought a fashionable
then,
but he declines to buy the same kind
com-
unfashionable now, they do not
spring, because, being
mand
as wealth
this earlier use
But when
A
is
it
of
we
view
this
capacity to
its
desire.
certain kind of goods last spring, because, being
this
value
chief
the
whereas
;
will cease to circulate at all.
they could be readily sold;
immediately,
was regarded
it
has been superseded by another, namely, other things besides
satisfy,
that
was taken
it
circulate for a
apart from their
money, and
as
Originally,
truth.
that
gold and
with
silver.
When
money,
as wealth, they will not circulate as
Everyone
buy them.
they cannot
be passed
will
they
be afraid
to re-
True, they have not
oif.
appearance or composition any more than the goods
previously spoken
of,
but that makes no
difference;
man
om-
is
nipotent over his desires, and the fact that he wanted a thing yes-
not
terday will
agree with those circulate as
time,
till
the
rekindle
who hold
money
after
desire
that
it
is
people find out that their value
longer wealth, in
it.
Its
But when
bad. it
will
cannot
gold and silver will continue to
they cease to be wealth;
coin will circulate quite as well as a that
Hence, we
to-day.
people
is
they
may
for a
gone, just as a
good one
till
bad
people find out
do find out that gold
not be wanted for any quality
still
is
no
inhering
value will irresistibly vanish, just as the value of every-
thing else vanishes which are subject to
is
no longer
desired.
no peculiar laws by which they
will
Gold and
silver
remain buoyant
OF GOLD AND SILVER.
Ill
of those laws which sink everything of a kindred nature
in defiance
Consequently, when gold and silver and diamonds
to the bottom.
cease to be wealth, and
the world
finds
it
become
out, they will
worthless.
Such are the principal reasons operating gold and
silver,
and which,
operate.
Gold
of which
Milton
its
departure
it
multiply in quantity
will
to depress the value of
evident, will continue
is
the day of barbaric gold,
;
away, while
disdainfully spoke, will surely pass
hastening by the use of substitutes for
is
to thus
it,
money,
as
as well as in other ways.
Two and
consequences flow from the
worthy of notice.
silver
due them,
session, or
ever,
ments
will
indebtedness
be the greatest gainers. will
thing which most of
to
be
in
In
them have agreed
how-
this Avay there will
be a
one
loss of
question
:
"Is
tions enjoying
it
a
as
this
to
pay.
in
purpose of registering our wealth, and
in
there
put
well
the
genera-
look back
much wealth
the
instrument
future
.
civilization, will
wasting so
is
Secondly,
.
Na-
all
this
preparing an
not probable that some day
on our barbarism
nearly
Patterson has
money.
more advanced
way,
But Govern-
inasmuch as
in
their pos-
in
it
class,
discharged,
be a great saving of human labor
be thereafter used
pity
The
evening up of the accounts between mankind.
tional
will
having
those
First,
suffer loss.
be the gain of another, and
will
partial
will
accruing to gold
loss of value
with
the
mere
employing such an
infini-
for
tude of labor upon what could be accomplished without any." * Little
do we think of the
humanity has endured
When
the
their wives, *
Californian
to get
mines
and brothers
Econ. of Capital,
p.
lo.
sufferings
and
risk of life
possession of these
were
discovered,
their sisters, the
which poor
shining
metals.
husbands
forsook
emigrant came from the
DECLINE IN THE VALUE OF GOLD AND SILVER.
112
and
shore,
farthest
They endured
went and
all
and
of body to disease
greatest exposure
these counters for
obtain
delved for the precious gold.
of hunger
privation
fornia was repeated
in
laboring under the
thirst,
and death
When
Australia.
—and
The
making exchanges.
simply to
story
of Cali-
most auriferous
that
country was discovered, thousands flocked thither to dig for gold.
The Buckland literally
rocks
a
river,
of
river
upon
where the death.
either
side,
largest
The
reflected
cemetery where
the
was reminded of the
mines.
the
fate
his
probable
?
faces
as
those
who had gone
so
that
the river was the
every fresh miner
he passed on
his
before,
testify
way to
to
meet
and the multitude of
of the magic and bewitching
Great as has been the acknowledged power of
gold.
But
day
the
striking
of the miners,
which befel them before
way down
laid,
fate,
were found, was sun,
Nothing daunted, however, they hurried on
of
woman, cannot votion
that
little
miners were
graves remaining to this
power of
A
the
upon the
and caused a worse blindness than setting out for the diggings.
nuggets
rays' of
dull metal
this its
sovereignty
history of conquests
and
claim a greater is
sufferings
to is
cease; to pass
all
homage and its
away.
long,
de-
painful
IX.
THE MONEY OF THE FUTURE.
We
have not prepared
chapter with a view to setting forth
this
any Utopian or useless scheme, but to answer the assertion that gold and silver
will
because
future,
continue to be used as
there
nothing
is
money being
necessity of
that purpose, the conclusion
tion;
In
the second,
that
and nothing hav-
be employed
that they will
premise,
first
and of course the conclusion.
venience. factured, it
medium
the
to
function, a
latter
form of paper
It is
measure of value and a medium of exchange.
a
is
it
respect
We
The
place.
use of the precious metals for
drawn
is
in the indefinite
their
in
have already shown that money performs a two-fold func-
silver in the
short,
money
Admitting the truth of the
in that capacity always.
We
put
universally admitted,
ing been discovered to supply the
we deny
to
can
not
has
be
so
every
more
easily
easily
counted,
over
original
the
in
transported,
occupies
counterfeited,
advantage
the
and
of gold
representative
currency excels
less
precious
con-
manu-
space,
metals
as
in
a
of exchange.
have adverted to the necessity of having
standard of value, and 9
the
desirability
of having
a
measure or
this
standard
THE MONEY OF THE FUTURE.
114 comprise
money
the
of a
the standard be
tha:t
may be
very
a
used as
actually
transferring
it
for
medium
of
there
would
because
such,
The
measure of value, that
chief requisite
which can be so represented exchange;
in
as
form
to
Another important feature not overlook, namely, that that the thing represented
does not follow that
on hand by an tion,
in the
in
least
silver in their vaults,
ment.
of this
failed, that
is*
thing about the
This
is
the principle
money
sentative
be
for the
for a country,
it
Their circulation
is
in
circula-
may be
con-
upon which the National by gold and
secured, not
but by bonds in the possession of the Govern-
In
1857,
when
to
pay
bills,
all
the
currency
is
a
medium
fully secured, since
the representatives
banks
their notes
in
provide for
is
to
New York
in
fully
State. its
secured
The need-
security.
Now,
be preferred to the thing
of exchange, provided the
no one
specie,
because they were
to
payment of
for the
object to receiving
will
since the representative of value
possessing value, as
we must
exchange
in
bonds held by the Comptroller of the
State
of
be a representative of actual value;
it
objected to receiving their
ful
and
of exchange
can be really had
were unable
by
value,
amount of money must always be kept
an
no one
property.
best
easily counted, car-
So long as these are ample security
the circulation,
for
the
medium
best
provided the issuer have ample property that
banks are chartered.
were
need
little
individual, equal to the representative
verted into money.
it
select
to
the
if
etc.
medium
In creating a currency or
representative.
be
is
be most
other words, so as to
preserved from decay, counterfeiting,
ried,
good
If a
exchange,
changing
thing
a
is,
not necessary, though,
is
of exchange.
purpose, the standard of value
this
inconvenient
in bulk.
It
medium
a perfect
be invented
substitute can
country.
measure of value
the is
reprerarely
THE MONEY OF THE FUTURE. ever wanted so difiference is
what
long
as
Hence,
unchanging.
Does any one doubt
tons
and
gold
if
obtained,
silver
change
of iron.
this
statement
?
A
It
deposits bonds
bank
is
makes but
it
the security be
no one would be subjected
for instance,
of the
be
can
it
sort of thing
115
as
long as
were displaced by
iron,
to inconvenience or loss.
What would be
?
little
value
its
created with
a
the effect
of
capital
1,000,000
which are deemed equivalent
in
value to the iron with the United States Treasurer, and receives a circulation for nine-tenths of the metal, that
ing to pay
bank
who
all
is,
bank notes promis-
The
take them iron in exchange.
notes of the
secured by the bonds;
circulate because they are
is
it
consequence whether the bank has a pound of iron or not,
body wants any.
are fully secured;
bills
Of
content.
may
But one that will
be
bills
as this
it
is
difficulty.
the
of various
for
no-
that their
is
case,
they
redeemed of
are
as nearly
therefore, iron has
If,
will answer just as well as
say, iron
cause no
is
know
consists in having the
are finally to be
value as anything can be.
a value as gold,
in
and so long
to
course, a part of the security
property in which the a fixed
want
All the bill-holders
of no
a basis
Very
qualities.
The bank makes
its
as fixed
for
money.
true,
but
notes payable
a particular quality of iron, and every other kind of iron might
graded by
Mountain Rated by
in
Missouri,
that,
quarter less
For example, the iron coming from the Iron
that.
or
we
will
we
will
say
is
taken
say that the iron of
a quarter more,
worth half as much, and so on.
that
the iron
of
make
its
a
notes payable in standard iron or
standard. is
worth a
New York
Every quality of iron
could be easily rated according to the standard, could
as
Michigan
in the
is
world
and every bank other kinds, ac-
cording to their value, measured by the iron of standard quality.
As there
is
a
great
abundance of
iron in
the world,
and
as
it
THE MONEY OF THE FUTURE.
Il6
must always be used, no trouble would ever
redeem any promises
for
has value for the same reasons as gold.
and
silver
not be used as money,
there
category.
If gold
would be no
their place, for the use of iron
as a
us to no inconvenience, and
change had been made.
in
The two
become worthless
as a representative for iron as a ject
arise in
which iron was pledged
getting
it
to
payment.
Iron
are in the
same
so that they could
difficulty in
supplying
measure of value and paper
medium
of exchange,
the world
hardly
would sub-
know
that
a
X.
THE GOOD AND EVIL OF BANKING.
Many
advantages
are
They
money.
from
derived
Banks
mentioned.
briefly
also collect
are
from
it
who
Another benefit
have.
money due
drafts,
Gi LB art's Practical are
recounted
seem
Banking
in
these
latter
in
with-
payment.
In
number of advantages
a
days
others
to
it
another,
to
some
mentioned,
those
to
of
by means of
transmit,
even bank notes
or
Treatise on
curious
quite
silver,
addition
in
they
that
is
deposit
small and large
in
and loan
it,
one part of the country
in
sending gold or
out
for
the
for
quarters
all
sums from people having no use
may be
These
banking. places
useful
of
of
which
conducting a bank-
ing business.
Evil cial
also
panics,
tilence,
are
is
one
says
of
Prof.
characteristic, of
may be
loss, there ii.
of
evils
banks
Price,
"
is
element,
this .
may be
ruin,
.
.
were
this
The
finan-
war or pes-
banking
calamities
these
crisis ?"
like
the
attending
a phenomenon of banking.
is
Section
the
a modern
disorder
*
which are dreaded
disasters
Before the existence " What,"
Commercial and
blended with the good.
those
system.
unknown.
distinguishing
essence of the
Without the banks there
but there cannot be that
pecu-
THE GOOD AND EVIL OF BANKING.
Il8
which
disorder
liar
a
or
panic.
It
which generates
The panic The banks
popularly
is
commotion
the
is
1873 not
did
originate
be considered
As
it
bank
if
first
The
to
speculators
dissect
Our
resources.
its
banking region
the
an
is
exception.
may be
regarded as
part they played in this disaster will
we would know how
with
crisis
a subsequent chapter.
in
necessary
is
of a
were they a co-operating
nor
it,
cause, unless the aid rendered to
aggravating the panic.
within
United States
the
in
name
the
malady."*
this specific
of
known by
some
to
extent
the
we
panics are produced,
attention
of
parts
a
begin
will
be confined to three
shall
items. First,
capital of
the
is
bonds and other count
securities.
is
invested largely in
At present most of our banks of
under
organized
are
bank which
the
requires the investment of their
banking
National
the
capital
dis-
which
law,
stock in the bonds of the
National Government. Secondly,
may be mentioned
made payable
at various
exceeding
rarely
even a shorter
by the
issued
times, but
while
six,
The
time.
and
lender,
the loans of the bank.
four months,
generally within
many
are
funds
loaned
deposits.
,
payable
in
days or
sixty
of bank notes
consist
Many
These are
people
suppose
that
the greater portion of such loans are the notes of the lender, but
a mistake.
this is
Bank
of
showed
Thus, the return of the
New York that
its
City to
loans
gle
bank note was
the
$5,352,803,941
its
the
amounted own.
of
National
to
Chemical National Government
$3,956,415.06, but not a
Its loans, therefore,
deposits
in
1869
for
the
sin-
were made from
possession
of the
bank.
* TV. Brit. Rev., vol. 53, p. 235. t
The bank had $
12,685 of
its
old notes as a State
of mention in comparison with the discounts.
bank outstanding, but
this
is
not worthy
THE GOOD AND EVIL OF RANKING. Take
Sir
He
John Lubbock's bank.
of ^19,000,000 paid into
Checks and Notes Coin Three per
what does
it;
this analysis
1
notes, one-half of
ninety-six
the whole
and
per
half
which
of
out
amount paid
the
was
cent.,
made
due
credit of
be
—
is
loans
of
assistance
merchant carry on
so
for
In
his
business,
the
—merchant,
fur-
whom
Again, to
receipt
benefit, for the
bank would
if
at
lose
which
given the
way
looks
and
contractor,
upon the bank
relies
this
confidently
successfully,
the
bills.
banks are granted.
constantly
are
and which must be discharged
deposits
ability to pay.
chant
He
meet payments
to
customer
the
amount of
mutual
loans
business,
in
destroyed.
amount of the
and
checks
Every bank has a number of persons, often a
?
They need
ers.
of
number, who usually are depositors as well as borrow-
very large
falling
18,000
in consisted
checks upon other banks,
Coin and bank notes are only small change. loans
show?
one per cent, was coin, while the remain-
a
Deposits, consisting very largely of
are
analysis
487,000
cent, only of
staple
the
us
^ 18,395,000
der,
the
given
bills
bank
nish
has
II9
borrower the to
may have
custom his
likewise
is
bank
may The
he
and
there,
pecuniary
its
funds.
to
help
on
its
to
mer-
the
This
is
a
not conduct his business
without the means thus obtained; profit
his
created by which the for
bank looks
the
and employment of
all
whoever
for assistance.
dependent, to a large extent, upon
is
merchant could all,
the
else
notes and deposits
if
and they
were not employed. Thirdly, the reserve.
were required
to
Under
the
State-bank system, the
banks
hold a certain amount of specie with which the
notes issued by them could be redeemed.
Those transacting
busi-
:
THE GOOD AND EVIL OF BANKING.
I20
under
ness
National banking law are
the
United States
legal-tender notes of the
country banks must have a reserve of circulation;
their
and
banks
the
hold the
to
The
per cent, to redeem
fifteen
the
in
required
in place of specie.
larger
twenty-five
cities
per cent.
Let us now cross over to the other side of the bank bilities.
These
mainly of deposits,
consist
—
own bank
its
its
lia-
notes,
and bank balances. First, deposits are the
to
are
They
depositors.
its
on
payable
something
sums held by the bank belonging
various
An
demand.
inventory
of
Checks drawn by the depositor, or
b.
Notes of that bank, or of other banks.
c.
Notes of individuals, or
which are deposited to the depositor their
sellers
ceive
them
might
show
like the following
a.
owe
and
properly called inscribed credits ;
are
have
collected.
largely
received in
money; and
amount of which
Such notes and the
to
upon other banks.
of exchange running to maturity
for collection, the
when
existence
bills
others,
sales
is
credited
of exchange
bills
of merchandise.
payment, not money, but orders
these orders
they lodge with
their
"
The
to re-
bankers for
collection." d.
Notes of the depositor, or of others belonging to him, which
and the amount thereof
are discounted at the bank,
This
his credit.
Though
is
the origin of the greater part of
deposits arise in the several
they are held by the banks express or implied, which classification *
upon very
is
passed to
all
deposits.*
ways above mentioned, yet different
conditions, either
may be understood from
the
following
:
This analysis of deposits is but See p. 148.
Science of Wealth.
little
more than a re-statement from Amasa Walker's
THE GOOD AND EVIL OF BANKING. "
a.
121
Permanent or compulsory deposits made by business
wishing
bank
for
accommodations,
order
in
secure
to
men larger
loans."
" Fiduciary
or
safe
keeping, by
executors, guardians,
etc.,
who
b.
funds
are receiving
made wholly
deposits,
trust
to
be
paid
temporary
for
of corporations,
treasurers
out, or
invested
at
a
future period." " Active deposits,
c.
made by
business men, to be withdrawn to
meet current payments."*
Now,
And
all
deposits
herein consists the
made
are
of these
for a fixed time,
the notes
persons
to the
payment
thereof,
either
the tenor of the
notes.
made payable notes which
then,
it
specie
In
the
furnish
or
other words, the
time, although
basis
may be
making loans
for
are
true
ceived.
of their
deposits
is
and because
they do
payment of bank notes
;
that
depositors
nevertheless, a
are
large
which depositors thus
*
Walker,
t
Deposits circulate from owner
100
times
Mag.,
vol.
in
p.
suffer to
are
and bank payable on
not as
their
demand
deposits
specie or
soon as they are
re-
constantly using a portion
portion
is
left
bank, which would remain unemployed unless loaned. tion,
to
bank ever make loans
asked, can a
made
It
take
loans of banks
the deposits
as soon as
t
can
in
the
tenders, according
legal
Simply because people do not demand ;
loans
either
fall,
in safety ?
legal tenders in
The
banks issuing them, and demand instant in
given
in a
any moment.
of other banks, while
whose hands these very funds may
into
How,
at
and the borrowers are paid
discounting bank, or
of the
them immediately
call.
may be demanded
peculiar difficulty of banking.
remain
with
the
That por-
for a longer or shorter
149.
a year."
13, p. 423.
to
owner on an average once
George Opdvke, " New View
of the
in three and a-half days, or Currency Question." Bank.
THE GOOD AND EVIL OF BANKING.
122
time,
upon
known.
generally
is
cases, borrowers,
is
it
Besides,
customary
deposit, in order
permanent or compulsory deposits are
who make them.
They
made
are
They
are
show a
'
No
by any law or
rule to
perative as
law.
profit,
and
the
liberal
discounts.
do
accounts
profitable
customers is
as im-
will
secure
to
most
the
to to
1857, wrote
New York
quarter or one-half shall
be
The custom determining with banks
left
is
the
variable.
A
porcor-
custom "very extensively"
the
that
banks " of discounting large amounts
lay in
bank
upon the same condition."!
that this
order to
in its
and the banks can loan the same
;
of paper, with the express understanding
tained
drawn upon.
These deposits constitute a permanent loan
tion of discounts that shall
prevailed in the
understanding
to be
but custom in such case
this;
The
by those
all
bank, perhaps, compels
customers on interest."*
respondent, in
tacit
and not
less
"
Banks are conducted wholly with reference most
the banks, without interest their
the
at
from the bank, and
to secure favors
good account.'
used
not
with
that they are to remain in the bank,
made
many
are, in
have more or
to
necessary accommodations.
get
to
depositors
as
them
for
custom looks very much
agreement that one-
or
another discount
till
We may
ob-
mode
of taking
notes, that
banks are
another
like
is
remark, by the way,
usury. It is
upon such
make
able to
deposits,
and
their
loans to individuals.
own
For
is
it
evident that
if
the
banks could not ascertain, with any certainty, the amount of deposits
that
would probably be withdrawn
could not loan any portion thereof. constantly returned for
ever the *
payment
Bank. Mag.,
149. vol.
12, p. 47°-
if
their
in specie, legal
law requires must be paid
Walker, p
So,
in a
for
given
time, they
own
notes were
tenders, or what-
them, the banks would
THE GOOD AND EVIL OF BANKING. dare
not
them
for
make
to
may be
prevent
to
in
the
attempt.
circulation
indeed,
;
But
withdrawn, as
instantly
custom
any
put
to
would be
it
no
is
law
imperative
or
and as there are occasions when
this,
folly
every dollar of deposits
as
there
I23
been, or attempted to be, done, and which
may
has
this
again, con-
arise
sequently, banks are always occupying an exposed situation which the wisest
sometimes
foresight
occasions
those
banks are
loans, the
circulation.
They
to
As these bank notes
is
quantity of
keep a certain
own
their
Lastly,
consists of
their
may
when
notes
we
for
are always redeemable
it
on hand
balances. shall see
They
deposits
are
banks
banks
nearly one
sum had been
in
order
to
This form of indebted-
due from one bank
of the
city of
evils of
to
financial
another.
New York owed
In
other
hundred millions
of dollars,* a part of which
them
liabilities,
with
left
banks are
hereafter that they have
played a most important part in aggravating the
August, 1857, the
its
presented.
we may mention bank
worthy of notice,
panics.
cent, of
the general Government, National
in the circulation of
ness
act, the
by United States bonds deposited
secured
are
with the Comptroller.
redeem
their
quantity that
indebtedness
by any bank does not exceed ninety per
be issued
required
of bank
Under the National banking
notes.
Moreover, when
protect.
to
least able to repay.
form
Secondly, another
own
fails
which depositors generally demand
in
arise
to
meet various
had been tempted
the greater portion
thither
although
by the payment of
four to six per cent, interest.
Thus much bank,
To
in
one
is
order to
that
all
understand
familiar with
said
was known before
*
vol.
Bank. Mag.,
12,
need be said upon
p.
334.
the ;
how
it
it
anatomy of a
originates a financial crisis.
business of banking
to others
the
all
that
was indispensable.
we have
— THE GOOD AND EVIL OF BANKING.
124
How,
a bank
then, does
financial
crisis ?
It
be
will
about
bring
dire a calamity as a
so
upon examination,
found,
banks have always produced them by withholding loans
or,
;
1797, the course,
by withdrawing
in other words,
customers to pay.
ability of their
Thus,
was done by refusing
the 2ist of January
"
bankers were obliged, for their
" After
On
taking
all
the
the
we cannot
descriptions
was
it
the
for
private
exam-
into
they then
an enormous
that the fatal to
increase
its
hour dis-
consideration,"
says
the opinion expressed
to acquiesce in
subsequent avowal that experience had led policy
at
instant" was very great.
at the
circumstances fail
felt
bank began
"produced
relief all
repent of the
year
follow the
security, to
by so many eminent bankers and merchants
to
latter
gave no true idea
this
accommodation,
the 25th of February
The next day
and the
MACLEOD,
But even
own
of
stock
their
sell
"
of
on
In order to meet their payments persons were
ple of the bank.
counts,
—which,
16,017,510,
and the 25th of February of the
of the curtailment of mercantile
sacrifice."
jC^
^8,640,250, on the 25th of Feb-
the year the panic occurred.*
had come.
circulation
—from
panic of
Discounts were reduced nearly ^2,000,000 between
ruary, 1797.
to
English
the
its
to discount
the 28th of Februaty, 1795, to
obhged
their confidence in the
in
Bank of England reduced
the
that
customary
their
at
many
pursued,
the time,
by the
of the directors
and by the decided
opinion of the Bullion Committee, that the policy pursued by the
bank
in this
momentous
restrictions they
contributed
to
The
was erroneous, and
that
the severe
attempted to place upon commerce, very greatly
on the calamity by which they were subse-
bring
quently overwhelmed." *
crisis
exact reduction was
t
;£ 1,910,580.
The
produced by a similar cause, t MACLEOD, Theory and Pract. of Banking,
first
vol.
English
i,
p.
401.
panic occurred in 1793, and was
THE GOOD AND EVIL OF BANKING. Again, in the English
ing
day, the
months previous
six
This policy was continued
issues."
its
of 1862, for
crisis
Bank of England had been
the event, the
when
of December,
13th
the
1
not, to
any
extent,
course,
was
still
persons would
any
the night of Tues-
till
was
crisis
The
money
best
its
length
render
found that
it
and
position,
that,
bank,
the
involve
to
;
continued
if
well
policy,
deputy
and deliberate resolution
firm
country.'
Instead
money
loans in
in
before
;
...
dreadful
assistance in
'
'
and
'
We
in
which
our power.' "
'
At Norwich,'
upon
their
The mere
said Mr.
counter so
many
feet
totally
ruin.
changed In
taken
!)
with
the a
the
they forced out their it
by every possible
occasions over-nice ; seeing
policy,"
sight of the
Richards,
would
they
common
length
the public were, " This
At
own
its
profuseness. (at
lent
crowned with the most complete success; almost immediately.
a
of
steadily
modes we had never adopted
in
we were not on some
state
day,
in
bank
the
discount,
to
for
usual.
make common cause
directions.
all
another
they had
to
of refusing
Kearman,
means,' said Mr.
the
governor,
than
scarcer
utmost
the
of
that
supply
bank had been
country,
14th,
and discounted with
words of the
said
any terms, nor
were undermining
for
as the
Accordingly, on Wednesday the its
much
such measures
as
stock,
by invalidating the ordinary
yet the
money
could
securities
other
;
had rendered a greater
credit,
height.
its
Baring
Mr.
money on
distrust,
aDsolutely indispensable
doing
and
their
prevalent
money
at
Huskisson, the
Government
into
unsalable;
part with
of commercial
forms
converted
more
not
security.
be
to
" violently contract-
" During the previous forty-eight hours," said Mr.
president of the bank, " even the best
25
*
when
of bank
we rendered
says
Macleod,
the panic
was
every " was stayed
bank notes was enough. the
Gurneys showed
notes at such a thick-
;
THE GOOD AND EVIL OF BANKING.
126
ness,
the panic was
completely allayed
and by the end of the month the
try,
By
stopped the run in that part of the country.'
it
December
of
all
the 24th
over the coun-
banking world
credit of the
was completely restored."*
The next
great
was
crisis
in
The extreme
1847.
pressure
began on the 23d of September, when the Bank of England adopted more
of October
15th
stock or
so
sell
and
to
The
than
greater
and
of private discounts
took place.
in his
possession.
game was played
terrible
and
advances."
made
What
Gurney
this
No On
it
and other towns,
known
Patterson, Economy of
it
the
23d of October the
The Government, with
out.
followed
?
The on
o'clock
produced
community,
its
effects
;
in
recom-
their discounts
Government the
view
the .
.
amount of
Monday,
that notes might be Capital, p. loi
complete cessation
one would part with the
done than the panic vanished
stated that
sooner was
A
them.
directors to enlarge the
public about one
sooner was
*
bank
the
Several
daily.
Bank of England became
" to restore confidence to the mercantile
mended
policy was
restrictive
banking department were being rapidly
its
exhausted, a complete panic seized
money
fetch
As the whole of the commercial world knew
ever.
that the resources of
or notes
advance
to
failed
what they would
Things grew worse
drain on the
banks
other
hoard the notes received
large banks in Liverpool, Manchester, Newcastle,
stopped payment.
the
Government
consequently
for
of this narrow
only effect
hoarding and panic.
On
discounts.
Bank of England were sold
they
securities,
the
that
to create
securities,
their securities,
the
lessen
to
discount upon either
to
as
bills
When
payment.
on good
refused
it
Exchequer
hastened to in
measures
stringent
letter
25th,
" was
and no
like a
dream.
Mr.
ten
minutes.
No
had than
the
want
MacLeod's Theo. and Pr act. of Banking.
for
;
THE GOOD AND EVIL OF BANKING. them ceased."
—
made
description
do not want
application
but
notes,
he
subject,
this
to
give
with
us,
us
said
" Parties
:
the
we
stand by us, and
will
have
shall
'
They
said,
'
to use
them
anything, in short, that will give us confidence.
we can me,
we
'
get
bank notes we
Let us have notes
rate
of
indeed, to take the notes, because tell
us that
Hence,
dence.'" the
we can
and
get them,
Patterson
season
aggravating a
we
is.
think that
Parties said
We
to
mean,
don't
not want them
shall
;
only
at
once restore confi-
the
restrictive policy of
will
this
chief cause
the
of commercial
Had
most destructive panic."*
interest
says "that
Bank of England was
credit,
say
;
charge ten, twelve per cent, for them
;
what the
care
don't
we
If
want them.'
shall not
We We
we want; do
that
all
every
of
observation,
confidence.'
have notes enough, but we have not confidence
you
27
In the speech of the Chancellor of the Exchequer
Wood — on
C.
Sir
1
of this
collapse
difficulty into
the bank continued
its
of
one of
customary
discounts this panic would not have occurred.
Let us turn to the financial history of our
dence of the sioned by
truth
the
that
the
of banks
refusal
grant
to
own
country for evi-
originating here were occa-
panics
the
usual
advances to
their customers.
The
financial crisis
the first-named year
of the
1817
of the
determined to contract the loans of the Philadelphia was ordered to reduce
its
$2,000,000, the same reduction to be timore;
$700,000
the one
in
the
of
*
first
Patterson,
at the
Norfolk.
p.
io6.
branch
in
All of these
November.
In
the
two
continued
directors
In
years.
July
of
United States Bank
institution.
The bank
discounts to the
made
at the
in
amount of
branch
in
Bal-
Richmond, and $500,000
at
reductions were required before
short
space of three months and
THE GOOD AND EVIL OF BANKING.
128 days
ten
had been reduced four millions and a
discounts
This reduction had a very disastrous
through them on the
was
discounts
reduction
of
ruined;"
then
was
it
community.
rest of the
ordered,
Yet a
"the
till
"For a
stopped.
who had broken
many
parts of the country the
Philadelphia, and
others
in
Gouge,*
was
yet
morning,
was
it
heard," adds Mr. NiLES,t "of a severe pressure on men
in
"We
more deplorable."
still
In
stood.
was as great as
distress
it
who
were
people says
time,"
day, but
previous
the
further
still
" the question in Market Street, Philadelphia, was, every
not
half.
on the merchants, and
effect
in busi-
a general stagnation of trade, a large reduction in the price
ness,
of staple
Real
articles.
nominal value, and
Many
ing.
and
it
is
is
respectable
that
many
rapidly
is
good
any
suffered
as 'old gold,'
have become bankrupts,
must go
as
confidence
month
cent, per
little
is
banks are
the,
among meroffered for the
while ago, were con-
and whose makers have not
since
valuable than
here-
render their
losses to
its
profits
discount of promissory notes, which, a sidered as
in
traders
others
shaken, and three per
depreciating
are exceedingly diminish-
customary accommodations ;
refusing their
chants
or
rents
its
highly
agreed
property
notes
less
tofore."!
A
committee
Pennsylvania to truth.
the
by
appointed
They reported
that
United States Bank,
counts by the
State
reduction
the
together
banks,
of
the
causes of the panic
the
inquire into
Legislature
the
with
of
got at the
of discounts the
State
made by
reduction
of dis-
had brought about the commercial
distress recently experienced.
Passing over the
commercial
by the United States Bank *
Gouge, Short
Hist, of
Paper Money,
crisis
in p.
of
1837, which was caused
the same way
32-
t
Id.
\
as the former one,
Quoted by Gouge,
p.
32.
THE GOOD AND EVIL OF BANKING.
we
take up the
will
of the
of 1857.
crisis
was opened by the
It
Ohio Life and Trust Company
many banks and
individuals
would have extended no
suffered
by
this
failure
Although
$ 2,311,268.
for
But the
further.
I2g
ordinarily,
loss,
it
a concern of
failure of
such high commercial standing aroused the suspicion of the banks respect
in
insolvency
the
to
of other
confirmed
New York and
and Michigan Southern,
Erie,
soon
and other corporations whose stock sidered
To
investments.
solid
and houses.
corporations
Their suspicion was
by the
after
railroad
devoted
city
themselves
to
aggravate
the
New York
unholy task
the
of an
correspondent
a
large
body of active houses are known to influence the
merely to
alleged
not
regular
meetings,
chief vocation,
it
enable the validity tion,
to
operate with
be assumed,
back again, or their
Clearing-House. contracted
legal
retain is
their views,
a joint capital, but
to quake.
"
A
for the
and are hold
to
advisers,
They thought only
that of
other
banks,
own
notes
by
the
whose
may
The
loans
of the
New York ist
Sept. lo, 1857.
10
See Bank. Mag.,
vol.
themselves.
issue of
their
which
for
of
their
circulation
they
could
city
through
p,
334.
get
the
banks were
of August and the
12,
own
own
way of exchange
$ 25,000,000 between the
London Times,
:
of each kind of security to be called in ques-
of October. '
credit.
discover points that
to
loans matured, they received
notes, and, as
or
certain
newspaper
be associated
work out
refusing further discounts they stopped
specie,
bringing
English to
from
New York
to create universal distrust." *
and thus
The banks began By
press
and permanently
may
of
con-
arising
evil
and of undermining the National
Said
purpose;
companies,
and bonds had been
these failures, a powerful combination of speculators in
large undertakings to ruin,
of the
failure
24th
THE GOOD AND EVIL OF BANKING.
130
The
result
might have
been
easily
were dependent upon the banks their
upon
funds;
for
found
denly
if
cut
who had
not
those
course,
means necessary
When
apparent,
when
crash
tlie
consequences,
first
the
fail.
panic
the
of
to distrust others,
l)ank
refusal to discount in the
wake
to obtain loans
seem,
at
first
and afterwards
leading banks to
redeem the
to
sight, to
began with credit.
to themselves.
discounts
We
the
The
have
failure
is
alread}'
of several
failure of these led
and soon a general contraction of loans
was frightened by the action of another,
among them became ot
be a
which banks
decline
customers to pay.
1857
?
always led to the most disastrous
has
it
prominent concerns of undoubted
One
is
circulation,
peculiar relation in
to their customers
Secondly, another reason
that
reduce their own
may
This
distrust in the ability of their
lowed
Of
get
were obliged to
comes they may be able
difficulty.
dictate of prudence, but from the
set in.
they sud-
advances.
money, or could not
the
their business,
First, to
:
stand to their customers,
banks
Now
usual
the
why do banks pursue such an untoward course
balance without
seen
assistance from this
the evil consequences of a sudden contraction of loans
For one of four reasons so that
on
to carry
from
oft'
of rely
to
had been conducted
amount of
be forthcoming.
needed, always
themselves
many
accustomed
been
business
their
the supposition that a certain
source would,
so
They had
payments.
ordinary
upon the banks
The borrowers
foreseen.
advances to meet
for
the
banks, so that
general. it
till
the
Individuals
fol-
was almost impossible
from any source.
Thirdly, l)anks sometimes refuse to discount from lack of funds.
We
have already seen how largely dependent they are upon
depositors for loanable capital.
any time from three causes
:
This In the
supply first
may become
place, loans
their
short at
due a bank
THE GOOD AND EVIL OF BANKING.
may
be
not
paid
ing in the
ment or
maturity, in which
at
make new
funds to
forthcoming, so
that
goods, " such
cannot
it
had
be
does
loan
to
bank
the
is
In
again.
sudden
short from a
not the
falling
may happen through
This
deposits.
when
occurs
as
trade
want
for
of
when cotton
deficient, or
is
money due
may become
accumulate
merchandise harvest
it
the
customers of the depositor, or diminution in the sale
failure of the
of
case
circumstances that could not
In either case the
amount of
the
have loan-
customer from
a
second place, the supply in
not
may happen by imprudent
instance on the part of the bank, or the embarrass-
first
failure of
be easily foreseen.
oft'
This
loans.
I3I
goods reduce
customers of cotton
third place, at such times
bad,
is
and
purchasers,
is
scarce
or
or
stocks
when
consumption."*
call
more generally
depositors
and the
dear,
their
of the
In
the
for their
deposits.
Fourthly,
margin
a small
savings,
vested
when
time
very
" from
form a large In the
diminution of profits
a
and reducing the
savings,
for
which
of bankers." t
disposal
the
may happen
it
quantity of
portion of the case, the
either
depositor
deposits
generally
leaving
seeks
means
uninat the
away
fall
at
extended
for
accommodations.
The banks, however,
panic let
is
it
their
own
When
also.
this
up
to
its
have
banks
selves, and,
successful * Price,
4.
if
^'"'^
not
need
defense.
the
seen be,
It
is
lives
done, the a panic,
consummation.
In attempting to take the lives of their customers, that
is
Having now shown how banks begin
complete.
us follow
completely extinguishing
before
of their customers, lose
that
the former
destroy their stranger
Rev., vol. 53, p. 241
t
Id.
still
foes
that
it
strange
is
would defend in
trying
to
them-
make
a
banks have not seen
THE GOOD AND EVIL OF BANKING.
132
that their destruction was inevitable
customers were inclined to
if
destroy these institutions.
How ?
By
calling
this there
we
banks
think,
true
is
As
occurred here.
among
from
fail
their
us,
is
it
to
bank must
English
to
there
'
If a
take alarm. deposits
?
Very many have
because they were not
is,
nor
" If
the
can
to a real or
common
its
did
exchange
^
not for
a
issue
notes
is
is
or
£ \o
more it
on
surely
pay
to
its
such panics quite a
issues, is
the panic
but loans.
of
The banks
1857.
And
did
the
of Capital, p. 95.
gold
in
for
if
no bank can pay up
The merchants
left
such a run,
gold or notes." * did not want specie,
refused to grant them.
the deposits they held were
were denied,
for
merely an accompaniment (and a compar-
one) of the run for deposits.
deposits at once, whether in
* Ec07t.
how
attributes
The demand
note.
single
not promptly checked, must prove fatal;
Take
t^
still
supposed unsoundness of the note
atively trifling
its
is
gold
of notes," says
will
notes,
idea which
for
There would be panics and runs on the bank, though
mistake.
they
bank cannot pay
It
is.
be, a run
holders
bank, the depositors
Hence, the
understood
been clearly
not
Patterson, "who probably have not more than lose faith in the
without
panics,
Let us see what the truth
never
deposits.
for
depositors-
respect to the panics which have
has
failed usually
notes.
their
that
apart from a run
hand,
From
fail.
pay
to
inability
worthy of considerable notice.
redeem
clearly evident
in
hint
this
supposed that the banks have able
Both bank notes
specie.
the
respect
in
It is quite as true
exception.
or
call
no escape.
is
Generally, This,
and
deposits
for
and deposits must be paid on
to
A
large portion of
secure advances.
banks suppose
that
such
When
deposits
these
would
THE GOOD AND EVIL OF BANKING.
Why
remain?
should they be kept
keeping them there had vanished?
for
make payments
to
in
^33
bank when
the
all
reasons
were needed
Besides, they
order to continue the struggle a litde longer
in
with the contending elements.
Perhaps, too, a
of retaliation
spirit
quickened the determination of some depositors to withdraw
The language used by
deposits. to their
bankers was
time of
crisis,
in
bringing
and reputable
as
yourselves, the
this
on the
is
it
note (which this
plea
wc had no
down
scores of jniblic
to
of
can do
it.'
The banks,
"
Very
for
true that
many
in
holders
places
the notes were
to
justified
your promises
the
convertibility
of
city
the
you produced
that
community may
of course, coidd not do
specie
in
to ])ay.
well
turn
it^
and so they
At the same time the Western
lumdred millions of bank balances.
New York
distrust in the
led their
their
more
gentlemen, kf us sec if you
well,
were obliged to close their doors.
banks called
firms, as solvent
still
//uesHo/iiiig),
wide-spread suffering, the outraged '
good
are
fulfill
of preserving
thoi/i^ht
round upon you and say,
their
merchants
city
" If you think yourselves justified, in a
:
checkmating you, by requesting you Since
New York
the
was demanded, but
banks
to
demand payment
redeem
their notes
of them in
It
is
was not
it
specie.
which All of
amply secured by the pledge of sound bonds held
by the State Comptroller, besides the specie owned by the banks.
And,
in
fact,
city failed in its
circulation.
all
the
worst
time
crisis
of 1825
—
every note was
i^aid.
Not a bank
1857 having insufficient funds to pay every dollar of
Their notes circulated without loss of value during that
specie
which ever
so far from
payments were
befell
the
discrediting
suspended.
Bank of England its
notes,
"Even
— the
the crisis
was actually relieved
by the accidental discovery of a million of unburnt
Commerce
New York
in
£
was probably never more severely tried than
i
notes.
in
1847;
THE GOOD AND EVIL OF BANKING.
134 but
merchants,
the
counts, took to
of
vertibihty
dread
their
in
bank
feared that
and
often
pay cheques drawn against deposits."
might cease
1857 were unable
A
else.
to
pay
We
if
depositors, indeed
greater, than
were secured,
either class
have thus dwelt upon
this point,
occasioned by a run, not
by a run
because,
for
circulation
their will
non-payment of the
amply secured.
is
it
reason
will
simply
of
be
it.
their
be
bank
for
National
be paid, no one
circulation of the National banks,
banks
the
fail
ever
generally,
so
no one
not aggravate a financial panic, for
will
any portion
lose
Let
will
it
the
that
will
bill-
a panic breaks
exchange
in
Assuming
bonds are a sound investment, and that they will fear the
if
among
latter.
bank system,
legal tenders
for
deposits.
for
was the
it
out during the existence of the National
notes, but
in
specie or anything
in
was known; nevertheless, the run would have
been as great among for,
banks
on such banks would have taken place whenever
run
their true condition
holders
bill-holders
their
to
moment
some
True,
t
so
compeers, that
his
bills
be discounted, or that the bank might be unable at the to
dis-
was not con-
It
so
Overstone and
Men
be endangered.
to
been
has
as
note,
of
suspension
the
hoarding, not gold, but notes.* the
groundlessly asserted by Lord
was fek
of
therefore,
If,
inability
to
the
banks
pay
deposits
fail,
the
when
demanded.
We
have now gone over the ground
commercial and financial panics.
by the banks which,
in
We
destroying
in respect to the
have seen that
their
customers,
it
are
cause of is
begun
in
turn
destroyed by them.
What *
This
t iV.
is
are the remedies
?
The
what merchants and others did
Brt't.
Rev., vol. 30,
p.
183.
first
remedy
in the panic of 1873.
is
that
banks must
THF, r.dOD
care
exercise
in
dently. nay, even
employed
making
or
other
power
Whether they
the
cattle,
jirofits
the one
l)y
And
do, in getting their funds.
If
may
unjn-otluctively, they
in
savings of the nation,
paid.
" Kverything,"
gacity
and
ftiture
says
prudence
and goods, the com-
the resources of banks
find
as they often
difficult,
it
are
such loans are not discharged,
if
granted and
loans are
Prof.
banks
and
of corn
suri)]us
according to agreement, the banks are dei)rived of part resources out of which
They
banks.
the
amassed, which constitute the
kinils
all
be applied.
)iational savings, shall
employed
employed
are
accumulated clothing
of
modities and machinery of
inijjru-
These may
may be
what jjurpose the
to
banks,
wealth, or, they
dis])Osing of the uninvested
and deciding, mainly,
have
often
determined principally
is
135
loaned their resources?
in the i)roduction of additional
the
are the
How
loans.
recklessly,
employed unproductively.
way
AND EVIL OF BANKING.
Pkuk, "depends upon on
to
bear
the
past,
bring
of
their
deposits the
loans
tlie
are sa-
they
grant."
by
Profiting
more
carefully
parison
ones
in
is
formerly
into
the value
the bills
upon
/w/<7
were uniformly
Another this
to
sound
fiilr
modern [parties
over the old
institutions
and loans which are well
of
made by
the
transactions, while the
and
skilled
of the
assets
accountants
banks proved extent,
accommodation loans
well secured. is
to
grant
would not obviate many of the for in
loaned
The com-
discounted were, to a remarkable
remedy proposed
which occur,
have
banks
security.
to
comptroller has said in one of his reports
notes
safe
respect
investigation
and condilion
-.wm]
of in
favor of
in
The National
thai
but
than
immensely
very thorough
a
baseil
experien( e
making loans
secured. that
die
loans financial
for a
short
time,
embarrassments
1857 several of the wealthiest houses in
New
THE GOOD AND EVIL OF BANKING.
136
York
city failed
Indeed,
to run.
pay
to
may be
it
days
fifteen
regarded as an open question whether
community does not
the
paper which had only
their
more by
suffer
accommodations
short
than by longer ones.
Again, banks should aid
customers.
their
to
making a loan
that
testimony
universal financial
be It
nearly
the
all
through which
crises
no bank
that
true
is
withholding
in
observers
the
out cause.
This was the opinion of the
1810,
respect
in
same
true
is
New York
respect
in
and
loss
was
course
of
directors
is
now
unnecessary, and
has arisen.
nary losses."*
A
more
The
1819,
when
States suspended
discounts as before,
do
her to
But the
so.
were saved from the
In the
of 1857, a
crisis
at
New
York,
and
too
great.
policy,
banks
would
Although the vol.
effort to
not
agree
was
12, p.
430.
as productive
now
is
it
.
.
con-
This
.
our leading bank
of nearly
all
the evil
would have relieved the
have saved the merchants extraordi-
many
crisis
considered by
liberal policy
thus would
Indeed,
and made an
Bank. Mag.,
sudden
unnecessarily
merchants, and
*
States.
bank accommodations
contraction as
make
for
'97.
Banker's Magazine at that time, wrote that " the
the
ceded,
of
crisis
New England
all
which swept over the other
contraction of
to
Committee of
1793 and
and Western
madness
as
it
was that she and
writer for
that
American
Southern
various
the
advances with-
Bullion
of
crises
Boston continued
though many regarded result
the
to
the
all
payments.
specie
English
the
to
in
the
is
it
England have
usual
their
justified
But of
country and
this
banks have withheld
passed, that
usual
their
is
not probably be repaid.
will
of
slow
very
to felt
of
them saw the end of
extend their loans this,
very
it
was
severely
;
finally
in
their fatal
but, as
all
the
abandoned.
England,
yet
its
THE GOOD AND EVIL OF BANKING. worst
were
eftects
by
arrested
pursuing
By
namely, the expansion of loans. can
&
Peabody
of
firm
instead
withdrawing
of
munity when
dence was
Had
English compeers, the
have
extended
assertion
most
is
Another
too
interest
Of
as
banks
the
loss,
possible,
who
will
other
enterprises
lightly considered. trial
allowed on them.
is
world
is
at
ofttimes
In addition
is
present
to this loss
greatly disturbed, which
in
New York
order to
upon
employ them
not
the
in
obliged
are
to loan their
This practice can-
course,
and
generous
of
among banks
Moreover, an amount of capital
way and
this
began
crisis
keeping
the
is
deprecated.
security, or to persons
manner.
was their
of
truth
the
This arises from the fact that
strongly
quickly
as
as
water would never
that
fact
a decided tendency
is
against
themselves deposits
the
in
as wise
The
ocean.
the
panics
against
security
There
and other places be
that confidence
it,
this side of the
proven
clearly
deposits too closely.
not
on
crisis
comconfi-
soon as discounts were renewed.
to subside as
deposits.
save
to
ruffles across
its
The
mercantile
the
in
American bankers been
the
be
to
saved.
was required, and when
was necessary
that
all
was
former experience, and,
their
confidence
their
confidence
greater
freely given.
by
policy,
great Ameri-
known
was
solvent,
perfectly
English bankers had grown wise
opposite
the
course the
this
Company,- which
though
embarrassed,
greatly
137
in
to
save
loan
their
insufficient
a profitable
being sunk in time,
which
of capital, the
is
rail-
very indus-
has a marked tendency to
cause a derangement of prices, and
to
a greater portion of bank
With the cessation of labor
comes a decline
in
unable to meet
many
meet from the
sale
the
deposits.
of goods,
sale
of
of his
require the withdrawal
his
products.
that
the
merchant
which
he
expected to
so
payments,
of
He,
is
therefore, has to look
JHE GOOD AND EVIL OF BANKING.
138
bank
to the to
safe
more extensive accommodations.
for
that
say,
consequence of the greater
in
and the diminution of
some kinds of
business,
the depression
and derangement
and the
various
in
and indications should lead the banks on hand, so
emergencies that
A seem
may
impracticable
in
our
Thus,
feasible elsewhere.
it
competition
—
in
therefrom,
and
trades
is
industries,
these facts
all
keep a larger portion of Ije
able
meet new
to
arise.
preventive of financial
last
to
may
they
that
short,
jirofiits
wealth in unprolitable investments
loss of
their deposits
In
crises
is
though
country,
Scotland,
in
it
been
has
found
1857, after the
in
the Western Bank, the other banks having
may
This
co-operation.
fall
of
central establishments
Edinburgh, seeing that the panic was assuming a most destruct-
in
ive
intensity, resolved
each
to
other.
strenuously in the support of
co-operate
Patterson,* "
" Accordingly," says
as
gold
as
fast
was withdrawn from the Union Bank and deposited with some establishments,
other
of the
And
menaced bank.
— anxious
while
steady
the
bags to
humorous
more deed,
in
depositors
bank the the
on
thus
carrying
with
clerks,
it
is
a curious
fact
Union Bank,
land, which
is
in
that
the
1857, was
the
November,
of
up and down Bank heavy bags
in
cabs,
back
There was
no measure
banks and
to
promptitude, carried
off their
equal
operation, but
12th
critical
Union Companv.
beneficial alike to the
from the
that
current of gold passing
there was a double street-
was immediately returned
it
a
to the public.
greatest
made
dash
transfer
to the
of the
been
have
could .
.
.
In-
of accounts
Bank of Scot-
only distant some two hundred yards
— the
panic-
stricken bearers of gold evidently being anxious to be rid of their
*
Economy of
Capital, p. 114.
THE GOOD AND EVIL OF BANKING.
139
precious burden as soon as possible, and depositing
it
accordingly
with the nearest of the other banks."*
How
marked the
Bank, on Saturday, the
When,
coin
to sustain
assistance, they refused
give
to
to
several
Instead
it.
City
East River
for instance, the
and applied
itself,
New York
by the
October, wanted
of
14th
wisdom of
action and
the
displayed
that
in the crisis of 1857.
banks
in
between
contrast
and
banks
Scotch
the
$ 20,000
only
banks
large
for
making common
of
cause with the weaker banks, the stronger ones seemed determined the others in order to retain their
to break
They
failed
banks was
the weaker
were
comprehend
to
is
upon
stand
they easily
broken
by
their
very
a
through, and
We
think
co-operation
that there
even
in
are
this
— that
Co-operation,
which
crust
that
circulation
"The
all
among
by the wisdom of the
They should remember
own.
is
profit
therefore,
the
may
difference
thickness
in
not very great after
Most of them
are similarly circumstanced.
be-
all.
some favoring circumstances country.
that
any time be
at
and doing business under the same system, so that their
strength.
the cause of
own, and that by helping these they
thin
neath one bank and another
own presumed
situation
real
They should
the true rule.
banks, and
Scotch
their
themselves.
strengthening
banks,
their
are
to
bank
organiz^ed
in respect to
Besides this
fact,
we need hardly remark, was perfectly legitimate. The banks to which the Union Bank transferred their accounts became responsible for the sums thus deposited with them. That was a terminateo transaction. The lending of the gold by these *
proceeding,
customers of thf
banks
to their
menaced comrade was
a separate affair
— amply justified
alike
by the solvency of
the establishment to which the loan was made, and by the advantage which resulted from
it
to
community at large. Such united action on the part of the Scotch banks, if timeously commerced, is adequate to stop the heaviest run for gold which any panic can occasion. To withdraw money in gold is a cumbrous and anxious process. One would require a cab to carry away even ;^i,ooo in sovereigns. Moreover, no one is willing to run the risks attendant upon keeping a larger sum of gold in his house or office. And, hence, as happened in Scotland, in 1857, money which is withdrawn from a bank, not for business all
the banks, as v/ell
as to the
purposes, but simply in consequence of distrust,
is
immediately deposited with another bank.''
— Patterson.
THE GOOD AND EVIL OF BANKING.
14° there
is
another of great importance
gether in action
of the
can support they only
will
out
The banks
rest.
one
another
And
will.
unhappy one looking
that
if
has
only for
be led to act in
The
—that
two or three of our large
quite as well
characterized
itself
like
located in
they pursue
—no
as
this
them
banks grouped
the
really
cities
each of these places the
Scotch
policy, rather in
the
doubt that banks
before
the
panic
truth of our
Batik. Mag., vol. 26, p. 357.
— of
each
1873.*
The
effects
of co-
observations, which are
merely
the deductions of previous experience. '
if
in other places
of
action taken by the banks then, and the splendid the
past
banks,
than the
manner, and thus co-operation be secured.
foregoing was written
operation, prove
to-
determine the
XL THE FINANCIAL PANIC OF
A
panic
is
overtook the stricken
in
sometimes
a felicitous
country respect
term for a disaster such as the
in
to
in
money
were frightened, and sold
tlie
and
whim
lost
reason, acted
their
and reputation
what they were doing.
They ceased
fortunes
they
time
with
to
institutions
they had it
built
up
Men
They
;
or did
noted
of severe
for
trial,
madmen, and
like
scaice
thought of
a
be masters of themselves.
and many of the
had amassed were ruined,
manner, as
are
soldiers
enemy.
ruinous rates
deliberation, especially in
bent before the storm,
were panic-
as
the
of the hour.
sacrificed their property
The
of
property at
their
anything else according to the
just
affairs,
presence
that which
Men
autumn of 1873.
tlieir
panic-stricken
their coolness
1873,
according
to
the
most
was supposed, perished as lucklessly as
approved their
man-
agers.
What were the
panic
the causes of these queer
had
unmistakable
been
signs
of
its
phenomena
Shrewd
predicted.
coming.
In
?
observers
fact
For months could
they were
read
not very
obscure.
An enormous amount road
enterprises
which
of
do
money had been not
pay,
and
invested in
will
not
for
new
rail-
years
to
THE FINANCIAL PANIC OF
142
The Northern
come.
Railroad
Pacific
1
873.
notable
a
is
Running through an almost uninhabitable wild part of the v/ay, cost,
and constructed thus
perhaps longer, no dividends
have been
launched
amount of
capital
will
be declared.
upon the country,
has
been
every unprofitable railroad
in
will
it
and
twenty
years,
Similar
enterprises
an enormous
which
The country
sunk.
built.
for
greater
expense,
far at great
when completed, $ 100,000,000, and
illustration.
the
for
True, a portion
by
poorer
is
of capital
may
be invested without the expectation of present gain, but no nation can afford to invest more than a small amount in the last six or seven
may be
money
To
for
could withdraw from the
it
for
possible
&
distress.
to
gather
much
so
?
judgment of man
the
with,
OvEREND, GuRNEY
is
not
Co. had a reputation next
always
correct.
Bank of
to the
being careful and sound bankers, and immense sums
were deposited with them capital
colossal
it
such foolhardy enterprises
begin
England
how was
asked,
For
way.
this
country has greatly exceeded the
mass without creating confusion and
floatirfg
It
this
has fixed more capital than
It
limit.
years
yet in six years they ran through their
;
The most
and became bankrupts.
careful
blunder.
Undoubtedly, when Jay Cooke & Co. undertook
negotiate
the
not
to
Northern Pacific Railroad bonds, they thought the
road would be a profitable It is
will
fair to
enterprise.
say that they swindled
They were too the
sanguine.
public, for the
heavy
advances made by themselves are not consistent with the charge of
fraud.
The
millions
of
their
own
property
buried
in
this
undertaking prove that, however defective their judgment, they least
were honest.
Men
are
tractors
The same may be
continually
make
deceiving
mistakes
in
said of other
themselves.
estimates
Engineers
and lead others
at
enterprises.
and con-
into trouble.
;
FINANCIAL PANIC OF
THli
Many
man supposed
a
He may
so in fact.
be clear-headed and far-sighted
to
have been
successful
amassed a large fortune through pure outside signs, for
seen
crosses the ocean
he has had
encounters a
in
may
accomijlish
some
thus
plan and observe
upon
floated
an
his
the
for
ability
accident
ability
tested
is
men
is
names of Wall
great
found to be as unsound
their
in
;
when
l)ut
gigantic
observation,
Numerous
wanting.
is
ordinary enterj^rises, or
all
undertaken, and
careful
the
projects
as
to
have been
who
their i>()ckets,
in
the
plans
ability
Street financiers,
heads
is
captain
voyage he
fifty-first
great feat through luck
and wide and
necessary,
A
found deficient, and thus with thousands of
is
construction of a great railway are
judges by success
ability.
his
When
wrecked.
is
on
the time;
all
They have enough
life.
they
and
with
credited
and never meets with
times
fifty
gale
adequately he
forthwith
is
weather
fair
The world
luck.
not
is
and have
business,
in
can judge by no other, and when
it
possessor
its
143
187,3.
are
and
grossly ignorant of the magnitude of their undertakings.
This
cannot
truth
many have no
be
driven
way of those
end
a])]iear
liave far less faith
others, than they
them
entrusting
the
in
their
Of
so,
but
ability
it
is
and
money and
able fact
is
that
that
they are
honesty and ability
sell
is
no sure
men
from
honesty of
the
in
careful
inquiry before
other property.
intentionally deceived.
men who have
They
people should
certain that
Another reason why many persons have invested schemes
great
Deceiving them-
course, there
ofttimes
a
rei)Utati(^n.
yet are mistaken.
do have, and make more witli
deeply, that
the truly sound and conservative
distinguishing
who merely
it,
deceiving others.
in
too
commensurate with
ability
honestly sujjpose they have selves, they
home
It
acquired an enviable
out in order to
in is
miserable a
lament-
reputation for
make money.
The
story
THE FINANCIAL PANIC OF
144
is
A
repeated.
often
manufacturer wins
manufacturing splendid
and
material,
goods are
in
They
goods.
work
the
is
of his reputation, he begins
He
bankers
impose upon the public.
when
the
negotiators
the
public.
know
Receiving a large
opposite.
and the
Just
They
are
told
upon them the
that
truth
is
outweigh
the
ruin
His
inferior
that will
securities
be promptly exactly
the
negotiations,
of their
deluded holders of such
odium
best
summit
the
that
will
their
the
for
so do brokers and
for
loss to the
are willing to bear all
They
of the
hands.
skillful
commission
they allow that consideration to reputations,
wrought
by
Having reached
are perfectly sound, that the interest paid,
reputation
great
manufacture goods of an
to
quality.
imposes upon
a
are
performed
demand everywhere.
1873,
own
securities.
be heaped upon
themselves for the sake of the reward they are to receive. It
to
would be a waste of time and space
which men who have achieved a
and ruined
a
for
it
speculative or bogus companies
names
are secured to
tation
stocks
oil,
have
lent
it
mining, and other
have been organized, some noted
and innocent purchasers beguiled.
are just beginning to open their eyes
been duped by those
reputation
head these organizations, upon whose repu-
sold
are
fine
Often when
reward.
to recount the projects
in
whom
and
find
out
how
Many
they have
they had reposed the greatest con-
fidence.
Another way
which the public have been beguiled into pur-
in
chasing railway bonds
bonded are.
less
Formerly, railroads
subscriptions, the capital
Now,
is
heavily, in
mode
were
to
to suppose the roads to be their entire cost, than they
built principally
by means of stock
bonds constituting much the smaller part of the In
invested.
the
by being led proportion
is
those
days
bonds were
safe
investments.
reversed; bonds are sold for nearly the cost of
— THE FINANCIAL PANIC OF constructing the
and a
road,
little
stock
1873.
^45
merely to center
issued
the control of the enterprise in a few persons.
So long as these bonds constituted only a small portion of the invested
capital
railway enterprises, they were,
in
sound investments, and found a ready
we have
remarked,
just
popular with high
estimation
no
the
issuers
railway
confidence in railway bonds having
abused that
terribly
The
confidence and
heavy
cause which
last
inflation of
the
become
the
we
in
In other words,
strong, railroads
have
Of
late,
nearly destroyed
have been made upon very inadequate
ers are likely to incur
bonds become
advantage of their
took
proportion to the stock of a road than formerly.
issues
But, as
amount of bonds per mile
issue a larger
to
had
sooner
than
investors
most cases,
in
sale in the market.
it.
security,
and hold-
losses.*
mention inducing the panic, was
shall
Too much
currency.
has been issued, and
was imprudent investments.
This
not the
the
natural
first
time a plentiful supply of currency has led to unwise investing.
Macaulay
has
from
arising
narrated
in
In
Insurance
Company,
the
Alum Company,
Company.
the
of former rash investments
1688 there was an excessive
of which
immense
the Pearl Fishery
is
" In the short space of four years
of companies, every one
Company, the
history
England.
to subscribers the hope of
the
the
a similar cause.
money
supply of a crowd
result
Paper
Company,
Blythe
confidently held out
gains, sprang into existence
Company,
the
the Glass Bottle
Lutestring
Company,
Coal Company, the Swordblade
There was a Tapestry Company, which would soon
furnish pretty hangings for all the parlors of the middle class, for *
all
the
bedchambers
See an excellent
article
in
method of organizing a modern Vol.
8,
p.
185.
II
of the
The Nation, railroad and
higher." entitled
raising
A
and
Copper Company
The Railroad Mania, in which the money to build it is succinctly given.
—
THE FINANCIAL PANIC OF
146
England
proposed to explore the mines of undertook to bring up precious
and
a
Greenland
Dutch whalers from
when
prevailed
could not
Bubble
Sea
South
described some of the companies formed a
state of things
Macaulay
broke.
before
little
;
the
drive
to
fail
The same
the Northern Ocean.
the
Company-
a Diving
;
from shipwrecked vessels
effects
Company
Fishing
1873.
has time.
this
on the Coast — Insurance of — Insurances of Losses by Servants—To Bastard Water Fresh — For building of Hospitals make Children — For building of Ships against Pirates — For making of Oil from Sun-flower Seeds — For improving of Malt Liquors — For from Lead recovery of Seamen's Wages — For extracting of "
Wrecks
be
to
fished
Irish
for
Horses and other Cattle
for
Salt
Silver
transmuting — For Metal — For making of the
Quicksilver
of
Iron with
Pit-coal
number of Jack Asses from Spain For
Hogs
fatting of
— For
a
into
— For
and
malleable
a
— For
fine
importing a large
Human
trading in
Hair
Wheel of Perpetual Motion."
In these several ways, the public
have been beguiled
into
in-
vesting very heavily in bonds and stocks that are of very Httle or
no value.
It
line of these
is
silent
and then they bonds first
will
will
or
Long
pay.
them
the circulating
ence whether
it
is
for
many
paid
before
time
that
part of his
capital, or
another.
be taken up,
the
is
out for
concerned,
it
Of
makes
invest
In
it
fact,
course, so
little
differ-
or
unprofitable
enter-
in the
one case as
in the
profitable
same amount
and
stocks
some of those who
a song, and
But one person can much better afford
pected, than
lands along the
years, the
railroads will
have become bankrupt.
will
medium
prises, for there is just the
other.
after
lightly-traveled
haVe been sold
invested in
far as
that
true
to
throw away a
where no immediate return
no person
ought
to
invest
is
ex-
in
a
hazardous enterprise, or one where dividends will be long deferred,
!
THE FINANCIAL PANIC OF any portion of
want of which
his wealth, the
business or living,
if
may be asked, where is the loss in such quantity of money in the country is the same, had employment, and the
rich
taken place except a change rich
has
taken
engaged is
to
poor
the
have
paid
in
desirable
this
of
labor
the
for
enterprises ?
The
the laborers
have
Has anything
it.
money from
of this
not
Is
?
All
place.
in
him
cripple
will
returns should be long delayed.
It
the
147
1873.
the pockets
thousands of
the
unproductive employment has been
thrown
men
thus
away.
but the loss of labor and capital.-
not the loss of money,
of
Something more
?
It
Sup-
pose they had been employed productively in improving the high-
ways and bridges of the United States, beautiful system of streets
for
what a
example,
and highways would have existed over
the land
The waking up
to
and bonds
of
stocks
property,
coupled
were
the country
with
the
many
that
realization
the
or
worthless
of some
failure
of the railroad
When
had been aiding railway schemes, brought on the panic. public confidence began
to
(juences that were sure to
course as
many
of
its
at
it
once became
For the panic took the same
follow.
and
predecessors,
once aftected the value of the
loans
were easy to depict the conse-
The weakening
what was coming. at
fail
was not
it
of the
collaterals
began
to
mate, and no one
deluged
with
great
save
could
themselves.
complain
quantities,
became frightened and wanted
;
sell.
market
stock
made enormous They saw
once began
when
the
this
way
stocks
to sacrilegiti-
market was
declined violently.
In
tell
some stocks
This was perfectly
but
prices to
at
difficult to
of
entire
had
quake.
gomg down below the margins, and they fice their securities to
prices
The
rest.
Banks which
unsettled.
upon stock
poor
very
noted houses which
the
Others
utmost
;
THE FINANCIAL PANIC OF
148
confusion was produced,
To enhance
pale.
the
were distrusted.
grew low, and every one turned
prices
many
diflficulty,
demand were
deposits payable on
1873.
of the houses having large
upon
called
Rightfully, too, for they
to
had no money.
loaned to speculators, and could not be obtained.
all
could aiford
wants
their
many
cases could
not be
supplied,
were expecting a large withdrawal of deposits. to decline,
and the
of preventing
who were
difficulty
for those
it,
desirous
was
was aggravated.
for
banks
the
Stocks
continued
There was no way
having confidence in certain stocks, and
of purchasing
Thus the panic originated
had no money
them,
lack
in a
of confidence;
another, and finally nearly
suspected, then
It
The banks
help to any one outside of their customers, and
little
in
They
respond.
all
to buy.
one was
first
When
were.
confi-
dence was broken down more money was needed to do business,
and the
property at
sales of
ruinous
rates
were made to get
But so many wanted money there were no buyers,
To suppose that $44,000,000 of supplied the demand for money at this ers.
rance
of the
facts.
A
vast
legal
were
all
tenders would
it.
sell-
have
time betrays a great igno-
sum was needed because
of
the
wholesale destruction of credit. It is true the
did they help lators.
When
admirably.
must
banks were not the originators of
it
on, except in the
the
came
Remembering
—they
sion
all
first
threatened to
division
crisis
fail
the banks
their
united
this
panic, nor
way of loaning funds conducted
former experience
their
—
that
to specu-
business in
divi-
and weathered the storm which
overwhelm them.
would surely have caused
at
Co-operation saved them
their destruction.
XII.
THE RELATION OF BANKS TO SPECULATORS.
Speculation
wealth
in
not
is
production of wealth.
the
borrow one hundred thousand dollars
months they have their
original
while
risen,
cost,
nothing to the nation's wealth.
chased them; they effort is
instance,
labor
upon
therefore,
existed to
is
this principle
may is
in
anything that
to
enhance
to
it
than
rightly
nothing.
before.
And may
to
its
I
is
production
in
added I
pur-
it
daily
afifirmation
wheat,
If
for
have performed no
greater
business
no exception of a
the
same
buy.
I
;
No
value.
The whole
the
necessaries
quantity exists of
speculation,
non-productive.
is
single
To
commodity which
Whether speculation
form the subject of speculation.
stocks, or
of
which afterwards takes
for a rise,
be condemned because
there
have
I
existed before
stocks
I
in three
without any additional value by any
purchased and held
is
have added nothing
place, I
now
respect
in
now
The
and
stocks,
possession, one-quarter
This cannot be denied.
of mine.
true
exist
my
produced
have
I
in
buy
to
If
of
life,
the
principle
remains the same.
Perhaps
if
we delay
tion, the truth of this
duction
is
a
moment upon
principle
may
the
meaning of produc-
be more apparent.
meant the doing of anything
to a
By
pro-
commodity by which
1
5
THE RELATION OF BANKS TO SPECULATORS.
O
value
its
to
it
Labor,
value to the wheat.
elements
indispensable
adds
labor
thing
a
to
anything;
or,
if
a
is
and buys
and
He
of attainment
difficulty
Any man,
adds
one of
is
who
therefore,
provided
producer,
a pro-
is
term.
of the
be
labor
his
speculator never enhances the value of
he does,
practices
various
or
of value.
The
desired or has value.
meaning
above
ducer according to the
the
if A goes to Chicago New York and sells it, he
Thus,
increased.
is
wheat and transports
economically
are
that
of labor, but by
by means
not
is
it
arts
and
morally
wrong.
Hence, we is
speculation
repeat, that
detrimental to every
nothing to the wealth of society;
respect he
man who
and
man who is how ? By using
inquire tion
is
purposes
for
world It
limited,
is
and
required by the
thousands of
add
the
money
is
it
all
men and
business.
If
money
is
cotton.
In
is
order,
is
daily bread,
his
required
is
Do you in
of wealth
producthe
in
producing more wealth.
in
contractor, to
He
enable
Now,
on it
the
their is
by
railroad,
them
to
pay
business,
for
and
clear that all the
withdrawn from other kinds of
loaned to a broker to buy stocks,
diverted from the manufacturer,
buy
that
in short, to carry
to the wealth of the world.
wealth employed in speculation
to
the
corporations, ;
for
toils
purchase of him.
needed
merchant,
this
But he
to rejoice.
production.
in
The amount
of speculation.
labor and other things to
obliged to
the rich
In
concerned.
is
engaged
man who
poorest
the foe alike of the
adds
he had simply neutral quah-
if
is
and
calling,
speculator
as well off without
would be
it
and commerce would have reason
the foe of every
is
Yet
only a blank.
is
society
ties,
The
anything
him, so far as producing
as with
an unlawful
is
of society.
interest
who needs
therefore,
for
the
it
to
pay
it
is
for help, or
manufacturer to get
THE RELATION OF BANKS TO SPECULATORS. he must pay a higher rate of
it,
no money were diverted facturer,
surface,
speculators
that
the wealth that
Speculation
wealth
from
adding
to the
not
always
Nation,
had to
productive
detrimental
prospect
country
would
it
here,
seemed
it
But
is
it
the welfare
to
that " speculation
to
have
not.
its it
been quite
Abroad
it
of the
banks
having
National credit
;
tended
to
then
the war
became
only too moderate."* *
The Nation,
its evils.
all
tended
It
the continual
have
left
and
vol.
2,
p. S09.
with
available
the
of the
mere
would have drawn
inter-
of
both
produce
T/ic
a
here,
speculation, however, rates,
here, to the obvious
the
this
shipments decidedly unprofitable, and foreign
Thus we closed which
Thus,
(during the war)
Government and
always a handsome specie reserve.
of speculation
and
speculation
until the close
useless
The chances
diverts
it
prices
that
holders
would
because
First,
promise something better than interest at foreign
strengthening the
and the
rich
of society.
in gold
and an immense amount of gold was kept
excess
said
which outweighed
holders.
its
would
to the
disturbing
1862, and have remained abroad
in
dead-weight upon est;
thereby
of an advance, without which
war, since
which
rises
by diverting from production
country, by giving
the
in
of the
alike
if
price,
and, secondly, because
business,
certain beneficial results
keep gold
higher
a
paid
for this purpose.
burdens of society.
1866, said
in
for
be condemned on two grounds:
to
is
foes
prices
a non-productive business.;
is
is
the
are
needed
is
goods
be
The manu-
channels.
consumer, and thus the fact
because they enhance
poor,
than would
interest
speculative
his
sell
ultimately paid by the
is
it
must
turn,
in
into
15!
result,
The very as
it
made
exchange unsalable.
a very respectable
stock
of gold,
to the public at prices which
were
tMe relation of banks to speculators.
152
It
may be
outweighed
and to
questioned whether "speculation in gold
fairly
to
is
business
One
be condemned.
unsettled, causing greater
loss '
Any
suffering.
ciety
Prices were
evils."
its
have prices
that
of
prices
unsettles
worst evils
the
can
that
an unsettled, fluctuating
in
generally,
is,
befall
so-
Thous-
state.
ands of people lose by a change
in
Yet
brought about by speculation.
this unsettled, disturbed state is
Indeed,
is
it
like a ship
with
its
not move.
On
the
passes
and
over the
ocean
the
of tfade
other hand, the
surface
is
sails
and
steer his vessel across the
rangement of
Not
trade.
prices,
were needed ing
life
occupations,
But
and abihty
in other callings, forsook
of a
speculator.
their
Or,
if
minds were not
If
did tend that way, then
melancholy
fact, that
Was
gold was more
this true ?
believe that speculation
demands of commerce,
It
it
his
and prospects of diverted
by
Thousands who
in
keep
we have
former
their
work
to
to
potent
may have
competed so that
fill
of the trader,
as
before.
gold in
the
this curious
and
to the speculator for
the purposes of speculation than to the trader for the
exchange.
easier
to follow the bewitch-
chained
speculation " tended
country ?"
it
the
all
capital
they continued
that
it
steamboat,
he can
also.
them
true
is
he does
air;
track
and
unsettled
speculation in gold, but industry
is
But when the
rejoices, for
baffling the interests
prices
to
a
breeze.
intended
delights
speculator
and uncertain, by causing a de-
difficult
and by
only were
the like
no disturbing
wind springs up, then the speculator
rendering his future more
in
merchant,
untroubled waters,
of the
steadier because there
calm, the
is
suspended
uselessly
sails
of merchandise.
price
the speculator most
the state in which
So long as
live.
the
been, but
purposes of is
hard to
the
regular
it
successfully with
became the omnipotent master of
the universally recognized instrument of exchange.
But
if
it
did
THE RELATION OF BANKS TO SPECULATORS.
—
if
gold was kept in
the
1
country by speculation, was
obvious strengthening of the National credit ?"
it
53
" to the
Certainly, not
all
the gold in the country belonged to the National Government, and the portion not
owned, could have had very
so
influence in
little
And
the " strengthening of the National credit."
we owed
if
debts
abroad which only gold could discharge, was the National credit
more strengthened by the existence of such a strong speculation that gold was
tempted to
remain
ment of speculation, than the National strengthened indebtedness
gold
the
if
also alludes to speculation in food, that
more
is
it
the
price
all
came round,
is
perhaps,
clearer
Egypt?" reasoning is
to
When
there
the
entitled,
may
"
it
often
is
nothing in
is
not for speculators,
it
plentiful crops, while
sell
be so
low
as
lead
to
to
in the course of nature a barren sea-
would be no would
greatest
up against
stores laid
follow.
speculators
and
it,
Joseph and Pharaoh on
record
and
;
what
than that their speculation in corn was the salvation of
Now we is,
apprehend
that
the
for
and
defect
that the business of an exchanger
confounded with that of a speculator.
purchase
he
Were
by consumers would
paid
says, " there
it
utterly unable
the desolations of famine
were,
Yet,"
plainly beneficial.
would be
extreme wastefulness. son
have been
discharge that
.to
?
The Nation
the farmers
of
spirit
an instru-
as
would
credit
had been sent away
censured with special severity.
which
here
sake
the for
of the
nothing more
also purchase
;
with the
reasonable
he
is
the wheat in the country, for instance, is,
this
who
man,
gains
to
mode
is
true,
which
may he
then only a producer.
fact that its
price
of
a producer,
is it
expectation of an
which may take place, from the simple
What we condemn
A
in
is
But
additional rise
by purchasing
may be
all
controlled.
the purchase of the wheat for this latter pur-
THE RELATION OF BANKS TO SPECULATORS.
154
Supposing that
pose.
wheat
If
it
was not purchased
"the farmers would be
that
is
needed,
merchant,
ducer,
unknown
farmers would be
Would
true?
unable
utterly
the
even
Were
says, "
writer
merchant
though not
it
arms
his
reasonable profits
sale
of wheat
the
speculator
customers,
his
to
Such
?
and yet we see that
could be
that
it
the
is is
But he
had previously
unable to it
sell
The
of
to lead to
that " the
said
plentiful crops
were
were
it
not
so low as
speculators,"
for
the
to
foYego
purchase and
"
:
argument,
JVation's
The
latter part
price paid
lead
then
of
by
extreme wastefulness."
farmers would
be
utterly
not for the speculators."
it
Is
If " the price paid
possible to harmonize these statements ?
consumers would be
ears so
Would he
?
made on
For he adds
low as
Is this
his
customers, while the
knocked over by the
all
is
the
unable to reap the gains of
effect
the very sentence just quoted.
consumers would be so
if
speculator
speculators,
and stop
granaries of the farmers were filled to bursting
the
true
it
crops?"
plentiful crops."
to sell
fold
a
for
not hear the demands of his
that he could
is
by the regular pro-
not be purchased
it
exchanger,
or
The
?
will
for this end,
utterly unable to sell plentiful
by
extreme wastefulness,
to
evidently,
the
people
could
obtain the crops without the speculators, for they could not waste
what they did not have, and, of course,
Nor do
to sell their crops.
produce by seUing get
if
they sold
it
the
farmers
the
farmers would be able
get
any more
directly to
the
wholesale or
retail
their
for
to the speculators, ordinarily, than they
would
merchants or
their consumers.
In regard to the husbanding of stores for periods of scarcity, there
is
no speculation
in
this.
We
have said
that
speculation
consists in obtaining control of the supply of a thing, so that the
price thereof can be fixed
by the holder with the intention of
sell-
THE RELATION OF BANKS TO SPECULATORS. more than a reasonable
ing at
vided against
apprehending a famine, they pro-
by storing up an
it
There
visions.
no speculation,
is
when
large quantity, but only
extraordinary
quantity
of pro-
necessarily, in the purchase of a
the
owner takes advantage of the
charge an extraordinary and wrongful price for the same.
fact to
Consequently, Joseph and
Pharaoh were
they sold at such a price
:
and
no proof that they
It
did.
if
may
not speculators, unless
we remember be
above alluded
correctly, there
of the
writer
article
and ourselves; that the difference has arisen
to
is
that with these explanations
would be no contrariety between the
there
Pharaoh
But Joseph and
profit.
were not speculators, because,
I55
consequence of not developing the subject as
fully
in
we have
as
done.
We
of pure morality requires that only a rea-
the rule
believe
a profit
depends upon circumstances.
is
tremendous
with
more
charging
reasonable charge
a
risk,
unaccompanied
for
his
and put
fruit
in successful
charging more on
money sunk
the
which
ages
up
are
prices,
much
goods
of
When
prices
there
is
previous
not to be taken
a
less
to
particular
are
no excuse
business involves
fruit-dealer
perishable,
When
the
justified
is
than
and
risk,
attempts.
scarcity of the
get back
to
market
to
that
to
in
But advant-
kind
to
was
justified
the market scarce by buying likely
in
wheat-
a
cable
Atlantic
company was
greater
are
a
greater than in a business
unsuccessful
of the
a
If
make
sought for
is
working, the
account of the
in
is
Thus the
risk.
dealer for wheat which will keep. laid
What such
upon any kind of product.
sonable profit be sought
be
in
force
all
the
demand.
be influenced by any unfair means,
loaning
money
to
help
on the movement.
Every one knows that railroad stocks are worth, generally speaking,
quite
as
much one day
as
another;
yet
their
prices
are
THE RELATION OF BANKS TO SPECULATORS.
156 always
They
changes.
these
the meanest
who
do
means, by
unfair
to
loan
right
to
or
Banks have no
so.
by
gain
an immoral business to
is
purposes,
speculative
for
wish to
by
generally, It
to
money
to
help specu-
any kind.
lators of
may be
It
caused,
are
and canards.
stories
purchase stocks those
and a great many buy, hoping
fluctuating,
asked, what
customer what he proposes
do with
make such
the duty of a bank to
has a bank to inquire of
business to
his loan ?
It is
its
sometimes
Should a banker sus-
inquiry.
pect that an applicant wanted a loan of a thousand dollars in ten
one-hundred-dollar
bills
would not have the Neither
loan.
be used
is
Formerly,
it
to
for a
right
it
payment
in
for the
right
purpose of counterfeiting them, he
make, nor would he make such a
bank
make
to
ers,
We
like.
admit
and another adopted, namely, first
to assist only those
is
—merchants,
that
of interest and the security.
Wall
speculator in nishes
some productive business
good
Banking
shall
security, the
capital
pays
Street
is
good
a
he wishes to have
if
rate
men
erecting buildings, paying
Fixed capital
for
real
should come from
not from banks of discount;
is
most unprincipled
If the
bank makes no
designed to aid
be
what use the
the borrower that he
of interest, and fur-
further inquiry. in business, to facilitate
exchanges, in paying for labor, goods, and the
tions,
to
from the bank, the only thing apparently thought of
assistance
the rate
in
who
manufactur-
he who pays best
Instead of telling
to be appUed.
must engage
to
custom has been thrown away
this
accommodated, without considering or caring
money
is
for real estate.
was the custom of banks
were engaged in productive occupations
and the
a loan which
estate, or
individuals
like,
and not
in
helping speculators.
and savings
hence, every
institu-
application
to
a
:
THE RELATION OF BANKS TO SPECULATORS. bank
discount
of
should be
It
in
economic and moral point of
an
and
view, but
it
bank
under which most of our banks
A
act,
purposes
latter
National bank has no right, according to law, to do
wrong not only
is
of these
57
once declined.
at
Besides, a this.
a loan for either
for
1
is
contrary to
government
official*
the
has
spirit
rightly
of the
National
and do
business.
intent live
that " a charter to carry
said
on the business of banking does not give power goods to a foreign
real estate, to ship
to
buy or
sell
port, or to engage in or pro-
mote any speculative operation." It
cannot be denied that our banks, especially
the United States Comptroller's report
statements
of
New
taken
York,
that
1868,
for
separately,"
in
the
Thus we
speculators to an enormous extent. t
assist
cities,
larger find in
"the bank
show the loans of
the banks in that State to have been substantially as follows
Commercial or business paper
$90,000,000
Demand loans
68,500,000
Accommodation
loans
3,500,000
Suspended loans
1,500,000
Total Nine-sixteenths " the
amount
of
loans
these
loaned
on
call,
as
Merchants the
cannot
goods which
converted into cash.
leads
use
to
commercial
it
paper; is
not
is
very
advantage money payable on
they buy
with
it
cannot be instantly
But stock and gold speculators can almost
*
United States Comptroller of the Currency, report of
The
only notable refusal of banks to loan speculators
summer
purposes
the belief that
to
t
grain speculators in the
business
legitimate
are
for
call
stated, but reliable information
small."
$ 163,506,000
,
of 1870.
— The
Nation,
1869. is
vol.
that of the 10,
p.
416.
Western banks
to
the
THE RELATION OF BANKS TO SPECULATORS.
158
always realize on these forms they are able to the
United
of property
money payable on
use
Comptroller
States
very
quickly,
with
call
drawn the
has
that
so
Hence
profit.
" that
inference,
nearly one-half of the available resources of the National banks in
New York
the City of
used in the operations of the stock
are
and gold exchange."
"In
addition
from
ranging
tors,
fact
is
the
same
that
together,
New York
the
opera-
(on
daily
Taking the
somewhat
the
furnish
class of
$120,000,000
to
they
$70,000,000,
amount was $112,800,000).
certified ^checks
developed,
of
checks to the
certified
$110,000,000
5th of October the
loans and
loan
this direct
to
by means of
facilities
startling
banks
National
the call
furnish
$70,000,000 of capital and $112,000,000 of credit for speculation,
hundred and eighty-two million of
or one
later returns
loaned by the banks to
banks have been
the
speculators, so
But we have no reason
selves with these.
We
dollars."
from which we can correctly
we must
have no
amount
the
ascertain
content
our-
suppose that the
to
indulgent to the speculators since this report
less
was made.
The loaning
of bank funds
to speculators
cent date.
Perhaps
the
of the
in
1816.
was $ 35,000,000.
bank having become very
they find?
made
On
the
one of
$ 502,222
counts to the amount
of
corrupt, in
examine into
to
21st
to several incorporated
including
of re-
evil
in
this
Second United States Bank chartered by Its capital
was appointed by Congress did
not an
most noted example of reckless loaning
country was by the
Congress
is
•
of
its
December,
affairs.
1840,
companies amounting to
the
The
1841
Wilmington
to
a
operations
committee
And what loans
were
$ 1,211,163,
Railroad.
$ 740,056 had been made with
at
Disleast
THE RELATION OF BANKS TO SPECULATORS. six
months
run
to
and
;
balance was
the
great
deal
suspended indebtedness was discovered.
of
individual firms and
than $ 20,000
twenty-nine
;
charged
with
had debts
November,
year
the
of
by
given cashier,
to the extent of
of $115,000, which was
tion.
If
officers
vested
any one would did with
them
their
the
in
When
him
the
was
to it
made
when
to
the
as
the bank.
same
bank
the
in
He
$326,382.
cashier
know what
to
to the
of the
institu-
two last-named
in
the
that
they
in-
Dauphin and Lycoming coal companies were given
were transferred to the bank
to purchase cotton which
BiDDLE,
as
salary
At the
may be answered
" fancy stocks "
"
resigned
foreign agent,
enormous
indebted
of these various
same year an advance was made
Co., of Liverpool.
he
its
$ 104,000.
In 1836
of the indebtedness of their holders.
upon the pledge of
to
Camden and Woodbury, Wilmington, and
stocks
as worthless, they
an
finally increased
like
funds,
Grand Gulf Railroads, and lands.
between
accommodation
heavy indebtedness
his
cashier
assistant
first
were
$ 408,389, and the ingenious reason
was charged with
cashier
concerns
Philadelphia,
in
appointed as
then graduated as assistant and was
up
A
Fifty-two
$ 50,000 each,
Six
1837, received
giving
for
was on account of
time, the
firm
bank, upon being
the directors
former
exceeding
$ 100,000.
Mr. Samuel Jaudon, when
1837.
the
was a debtor
sum
one
in
more than half of which was obtained
the extent of $4,213,878,
cashier
of
One
$ 2,314,000. and
August, 1835,
59
companies were severally charged with more
and nine having each a debt
A
loaned payable
Nine companies had discounts of over $ 100,000 each.
year.
in
1
was remitted
the
in satisfaction
amount loaned
was nearly $ 20,400,000.
to A.
The derangement
explaining
the
effect
G. to
Jaudon
to enable
him
Baring, Brothers
of the currency,"
of
The
this
purchase
&
said Mr. to
Mr.
;
THE RELATION OF BANKS TO SPECULATORS.
l6o
" placed the staples of the South entirely at the
Adams,
who
the foreign purchaser,
to the prostrated planter.
by employing
have dictated the terms of
could
was thought proper
It
mercy of
mak-
of the bank in
a large portion of the capital
sale
to avert the evil
ing advances on southern produce."
Why
banks
have
made payable on
deposits are generally it
be
to
for,
wise
a
speculators
assisted
policy
loan
to
large
much
so
If loans
wanted
were
loans
collateral, the
moment's
were made
portions
brokers with
to
safe,
in
this
manner
easily
be ob-
and gold
stocks
and they could be repaid
The banks never dreamed
notice.
— As
banks have believed
call,
they are asked to pay heavy sums, they can
if
tained.
First.
?
that
if
at
a
many
a great
no one could; and, consequently,
to realize quickly,
as
that
such loans were not more likely to be paid than others. Secondly.
— By
can be loaned.
upon at
making
making
In
By
Thirdly. is
outbid
call
in such loans
have offered higher
legitimate
Yet, having offered rates afford
to
chants
left
pay,
Fourthly.
was
their funds
loans, however, they
call
humiliating to us as a nation, that to
all
heavy demands can
dis-
whenever they
dividends are increased.
this policy
— Speculators
been able
loan
to
institutions are liable to
these
count more heavily as they can desire.
greater portion of deposits
The banks do not dare
time, because
any moment.
call loans, a
and
for
have
money. for
It
years
healthy business for money.
of interest which
speculators
rates
speculators
have been
merchants
could
not
accommodated and mer-
without help.
—Another
that, as
reason
impelling
they had encouraged
three to five per cent,
deposits to avoid Toss.
on them,
it
banks
deposits
by
to
make
offering
became necessary
The only chance
to
call
loans
interest
at
to loan these
make anything was
THE RELATION OF BANKS TO SPECULATORS.
They had,
depositors.
it
at
is
higher
true,
The banks have
do our own.
The
this.
offenders
Not
funds
to
by
Prohibit,
law,
banks have
New York
in
custom of paying
and opponents. evils
paid,
far
from
the
the
special
a specified time, but only
pay high
on
interest
— we
of resorting
to
deposits
those
To pay
business.
rates
how
can
The
deposits.
to
if
this
interest
believe
to
—
that
made
interest
is,
daily
on these
be
method of
This remark has no application
upon
interest
course of
question arises,
improper use of them,
benefits
encouraging an increase.
usual
them
unquestionably tends to increase deposits, but
outweighs
payment of
speculation.
on deposits has found many defenders
interest It
arising
condemning
speculators by loaning
this assistance ?
payment of
the
for
The
carry on their operations.
banks be prevented from rendering
to
much
offer so
the
all
principally
are
We have given some of the reasons We have seen that banks greatly assist
for
to
abroad
and even there many honorable exceptions may be found.
City,
the
paid
those
of banks
thus diverted a large portion of
their resources to speculative purposes.*
been guilty of
than
rates
precedent
the
on deposits, though few of them
for offering interest
as
and
immediately
loan
to
l6l
those
and
—
to
the
made in
the
especially
be contrary to sound banking.
After the terrible crisis of 1857, the Clearing-House Association of
New York
the into
this
City
subject.
banks appointed a committee to investigate
At
that
time
all
except six out
banks composing the association united
pay in
interest
on deposits.
their report.
* It
is
The
in
of forty-six
an agreement not to
This fact was stated by the committee
subject was considered
by them with marked
merchants, manufacturers, and others who for loaning to speculators, to loan their own deposits to such order to get interest upon them. Thus their greed for gain leads men to feed the a
thing
of
common
denounce the action of banks banks,
in
speculators
whom
in
they denounce.
occurrence
1
THE RELATION OF BANKS TO SPECULATORS.
62
and the conclusions
ability,
up near the close of est
which they arrived were summed
at
report.
their
upon deposits they declared was, 1.
Inherently unsound.
2.
That
tends
it
The
weaken the
to
practice of paying inter-
— legitimate
commerce
of
country, and to disturb the regularity of the business of the 3.
That no bank can
4.
That
and profitably practice
safely
tends to interfere with
it
the
efficiency
the
city.
it.
and
Stability of
our banks, and with the harmony of their intercourse with each other. 5. its
That
from
discontinuance will not divert any substantial depos-
its
this city.
6.
That the reasons
7.
That
has,
it
for
under
discontinuance are daily increasing.
its
like conditions,
no
fair
precedent
in older
countries.
That, as
8.
it
sixteen
After
exists here,
it
more
years
has been unjustly applied.
of experience
in
Clearing-House Association appointed another
What
sider "
ness
and,
;
banks
the
same
committee to con-
reforms are required in the operations of banks with
other and
each
banking,
first
the public
and
most prominent,
discontinue
entirely
increase the security of their
to
.they
payment of
the
recommend interest
upon
busi-
the
that
deposits,
whether directly or indirectly."
With
accumulated experience before
this
ernment ought
payment of
tom
prevails
system largest
such
is
in
not
interest
hesitate
to
upon
abroad
is
of no force
so unlike any other.
the world,
a law be
in
deposits.
has
us,
enacting a law forbidding the
The
fact that a different cus-
here, because
Besides, the
never paid
passed and banking
National Gov-
the
Bank of England,
interest
will
our monetary
on
become
the
deposits.
Let
a sounder
busi-
THE RELATION OF BANKS TO SPECULATORS. ness, while the
country at large
be
will
1
greatly benefited
63
by the
severe checks which speculation must receive.* It
be
will
Why
said,
why
them
not permit
with
interfere
to
The common saying among bankers rency the
;
make
What
business of the banks."
banks have the right
that
if
allowed to exercise
This
interference
is
Take
why
saying
affairs,
?
It
and
that
they so loudly clamor for non-
concerns.!
beyond the scope of the government
To
reduced
are
Profits
Moreover, many bankers are very outspoken is
interfere with
this
in
own
?
banking would become a more profitable
it,
their
their
own judgment
care of the cur-
do not
implied
manage
to
the reason
is
in
"
:
as secure as possible, but
that
is
business.
is
banks?
of the
action
the
according to their
act
to
in
thereby.
their claim that
it
undertake the super-
vision
and direction of banks.
claim they add
tional
consideration that whenever the government has undertaken
this
this addi-
the supervision and control of them, no benefit has resulted there-
from, either to the banks or to the public.
Banks are corporations created by the government, not
good of the corporators lic.
They have grown
wholly
selves,
* It
is
seem
in
now-a-days.
and
one-sided
if
the banks are
the
be quite innocent of
to
think
this
corporations
that
government has no forbidden
will thereafter retain all of their
sary to keep small deposits with
to
created only for the benefit of them-
affairs,
therefore that the
evident that
country banks
general,
for the
good of the pub-
also for the
Corporations,
truth
are
alone, but
city
own
banks
to
pay
deposits. in
order
to
any
on deposits, of course, the
interest It is
right to put
true that
it
would be neces-
have the drafts upon the city
beyond the quantity rebanks would be deprived of these In 1870, the numerous and perennial fountains from whence speculators have been fed. amount thus furnished by the country to the city banks amounted to $ 72,272,790.36. The speculators, therefore, would be so weakened from this loss of blood that they could not carry_ on their operations with the same degree of energy as before. banks paid upon presentment.
But
all
the deposits of country banks,
quired for this purpose, would be retained.
t
See article
in
Banker's Magazine
Hence
— Banking
the city
Amendments — July,
1870.
THE RELATION OF BANKS TO SPECULATORS.
164 checks has
suppose
to
but
endowed with corporate
upon the
of
that
for
and from which
public,
pubHc.
the
is
it
not for their
life,
absurd
very
is
no
prey
to
institution
to derive
and
error,
this
It
government creates an
the
that
must unlearn
corporations
that they are
merely,
The time
of their earning the greatest gains.
come when
remember good
way
the
in
fully
If
benefit.
the government, by mistake or otherwise, has endowed such an institution with a legal existence,
as
possible.
as
well
as Is
society.
than
lic
created it
A
should be removed as speedily not beneficial to the public
is
no place
corporators, has
the
to
it
which
corporation
a well-organized
in
not true that corporations gain more from the pub-
it
them
?
Indeed,
were not the case
?
And
public
the if this
from
would
one
may
such be the case,
if
be
ever
not be doubted whether the government should ever create a
corporation
Surely,
?
government ought
to
such
if
are
institutions
authorized,
watch over them with a jealous
public suffer too much, rather than the corporators lose too
The banks must remember
therefrom.
that
they
are
is
not conducting
to
Nothing can be plainer than
any way the laws of to
loans,
corporate
their
if
life,
they
it
is
such abuses by applying
correct
interfere,
whenever
harmony with
their business in
making imprudent or unwise
government
right
the duty of the government to interfere,
of society.
interests
are
it
much,
that they are corporations,
and consequently that the government has a
and
the
care, lest the
this.
If
banks
abusing
are
the
the best
in
duty of the
the most effica-
cious remedies.
We
have seen that banks loan a large portion of
speculators;
includes
money
it
that banks
injure
the productive class
needs;
and
that
the
mercantile
their funds to
community, which
of the country, by withdrawing
this evil
can be corrected,
in part
the at
THE RELATION OF BANKS TO SPECULATORS. by forbidding the banks from
least,
What
than
clearer
is
upon them
striction
The banks
should
this,
order to crush us out." injuring
Very
Besides,
If
well.
more than
the public
crushed out.
you benefit
you are not obliged
make money enough without making
occupation.
The
upon
fer
live,
it
with
from
in
order
is
in
without
live
loans,
money
less loss
tainly preferable that
to itself
than
if
fish
without
each should
subsistence, he will
succeed
The government may payment of
the
you
and by to
make
you are permitted
feeding
the
left
to
it
you
is
cer-
procure their
whether the speculator
wisely go further than this
interest
banks from taking gold as
sharks,
to
If
pick up a living in other ways.
For the producer knows that when both are
ding
be
to If
all.
public can be deprived of the benefits you con-
cannot feed the good
own
It
and seek some other
banking,
corporate
call
the
to get
live.
and they be chased by a pack of greedy speculators.
not.
re-
have done,
to exist at
interest
retire
this
you ought
it,
cannot
on deposits
to
you cannot
paying
them, then
deposits.
lay
and we cannot
what our enemies, the private bankers, wish
just
on
65
?
"Oh! you do
say,
paying interest
the government
that
1
on
deposits.
collateral for loans.
It
may
No
one
does or
m
forbid-
forbid will
the
keep
gold except for speculative purposes, and the fact that one wishes to use
merely
as a basis for loans
it
for speculation.
than that in
gold
if
evidence enough that he holds
such a law were passed
by cutting
purchased.
is
The banks know
off
the
it
this.
Nothing
is
it
plainer
would diminish speculation
supply of funds to
pay
for
the
gold
XIII.
THE INFLUENCE OF CREDIT ON
A
great
deal
credit
on
prices.
banks
increase
dollars,
has
been
their
circulation
promising to redeem
enormous Probably.
amount
of
is
one
have
in
gold
of
influence
Suppose the
thousand
on demand
it
the
simple enough.
to
promises
of
millions
Would
?
on
any influence
this
prices
?
Supposing the people had confidence that they would
would have
precisely
the same influence on prices as a like increase of gold.
If the
be surely paid according to
addition of so
lull
their tenor, they
'much gold would
bank notes which
increase
are substituted for
prices, so
would these
So long as people have
it.
confidence that gold and bank notes, or other instruments of
and
credit, are really
fluence ,
concerning
written
Yet the subject
PRICES.
At
upon
of each
difiiiculty
instantly convertible into each other, the in-
prices
is
the same.*
Thus
far there is
no
with the nature of credit.
this point
we must
distinguish between a depreciation in the
measure of value and an increase of of the phrase, as
we have
seen,
prices.
no such
In the
strict
distinction can be
sense
made,
*" There Is scarcely any shape into which credit can be cast, in which it will not at times be called to perform the functions of money, and whether that shape be a bank note or a bill of exchange, or a banker's check, the process is in every essential particular the same, and the result is the same." Fullarton on the Reg. of Cjtrrcncies, p. 29.
,
THE INFLUENCE OF CREDIT ON but popularly there
are
measured or estimated
in
which
were given
exchange.
same,
measured
familiar with the fact that
all
in
paper dollars
by the
gold
—that
What,
therefore,
increase
of
gold
remain
to
happened was
(suppposing
prices
the
same), but
the
large
as
for
quantity
a
amount of gold
as be-
not, popularly speaking,
measured
of things
price
an in
depreciation in the measure of
a
The paper measure was not
value.
late war,
legal-tender notes,
is,
Yet prices remained nearly the
standard,
of wheat could be purchased for the same fore.
167
were greatly enhanced during the
prices of things
the
We
one.
is
PRICES.
equivalent
the
to
metallic
measure.
The
and
fall
of prices
rise
governed directly or immediately
is
by the law of supply or demand, though a very vague and de-
Then demand,
law.
fective
money which
of
have plenty, then he chase
and
But
less. if
be
it
if
will
purchase
he have
equivalent
to
" has
exactly
money
tells
but
its
to
hands, so
hand
is
upon
credit,
proportion
If he
purchase with. if
he
short,
pur-
will
money; cheaply
just as
" Credit, in short," says Mr.
prices, not
does
that
;
money, then he buys
simply
amount multiplied by
in
to
more
same purchasing power with
the
also
sharpened by the amount
credit, this is a substitute for
though money was paid.
as
is
may have
buyer
the
turn,
in
and
in
the
money,
proportion to
number of times
credit
transferable
more potent than
Mill,*
and
as
its
amount,
it
changes
from hand to
credit
which only
performs one purchase."
Confidence *
Princ of
is
writings about credit, as
616-623,
(.2d
rarely perfect.
Pol. Econ.,
ed.)
vol.
2,
p.
Macleod
When Mill
75,
(Fifth
The merchant knows Lond. ed.)
There
has earnestly labored to show.
says that credit
is
not capital,
is
that custom-
no contradiction
in
Mill's
0/ Econ. Philos., pp. he means by credit the power to Princ.
The transfer of money is not the creation, but merely the transfer of capital. borrow money. The power to buy goods, etc., without giving anything in exchange, this is capital, and Mill does not deny it. He is silent in respect to it.
—
THE INFLUENCE OF CREDIT ON
105
are frequently
ers
whom
to
he
which he
at
cover insurer
against
insurance
would
course,
among
an additional price
from
the
failure
all
in fixing a price is
charged to
In other words, he becomes his
loss.
arising
loss
expects that
Hence
will fail to pay.
shall sell his goods,
cost of this
of
some
prospective
this
He
failing in business.
sells,
PRICES.
own The
of customers.
an additional price to the goods .which,
is
charged
not be
if
payment
immediate
were
made. depends immediately upon supply
It is true, therefore, that price
and demand which, of credit.
Says
in turn,
Fawcett
commodities would
for
:
very
is
" If
much
increased by the giving
were not
it
for credit, the
much
frequently be
demand
fact,
when
may
increase without any assignable limits."*
How
credit
is
given, the
are sellers able to give so
from those of
whom
from banks.
The
their customers.
because
is
freely
latter furnish credit
bank notes
Let
us
now
first
a
By
demand
begin at If
In
is.
commodity
obtaining
it
by exchanging notes with
the customer seeks to exchange
willing to trust him, but others are not;
the notes of the
acting on price.
credit ?
for
it
higher confidence than his own.
inspire a
may be more advantageous
whom
much
than
they buy, and from others, though principally
The reason why
The bank may be
less
to
owe
bank are
the
or,
bank than the party
it
to
paid.
the other end of the chain of influences
the banks, or the individuals, did not
place loan their credit, others could not
in the
buy so many goods,
Says Prof. Price: "What raises prices universally is buying, whether that buying be made by the transfer of an article of equivalent value, such as coin, or whether the goods are sold and delivered without payment being made at the time. The greater the buying, either on trust or with coin, the stronger will be the tendency The particular manner in which evidence is obtained of the articles in demand to rise in price. of goods having been delivered without payment, and security taken, by bill or note, that this deferred payment shall in due time be effected, is utterly insignificant, so far as concerns any *
Man. of Polit.
action on prices."
Econ., p. 387, (3d ed.)
Prijzc.
of Cnrj-ency,
p.
168.
THE INFLUENCE OF CREDIT ON PRICES. hence, there would not quently, their price rived, increases fore,
the
springing
some in
price
banks out
be so great demand
would
are
be
Credit
for
them, and conse-
from
whomsoever
by stimulating and feeding demand. not
alone
of the credit
writers, but
less.
l6g
only in
justly
chargeable
system, according
common
with
all
to
who
with the
the
evils
opinion of
give credit,
proportion to the respective amounts given by banks and
viduals.
de-
There-
and indi-
XIY ON LEGAL INTERFERENCE WITH THE LOAN OF MONEY, PAYMENT OF LABOR, AND CONTRACTS OF CORPORATIONS.
In this chapter
we
shall
the State to interfere in the
namely: Contracts
for
porations, leaving
the
consider the right and
making of three
expediency of
classes of contracts,
Labor, Usury Laws, and Contracts of Corquestion of enacting
laws to be
protective
discussed in the chapter following.
Why
does any one seek State interference in these matters
true answer reveals the selfishness
Employers
generally have wealth, either inherited
while the laborer's wealth
is
by accident or
ished or forever
lost.
From
Of
has the advantage.
own
nate
is
Work
terms, he can wait
the son of or
toil.
starvation
is
A
it
is
and
his
or
acquired,
his
body
wealth
die
dimin-
is
evident that the employer
course, his wealth will not increase with-
out the co-operation of labor; his
disease,
the situation of the parties,
Let
and limb.
in brain
or be impaired
?
and tyranny of mankind.
He the
till
he cannot employ
but
if
the
laborer yields.
Not
it
so fortu-
must take what he can get or only
alternative
of
his
upon
life.
starve.
The
ON LEGAL INTERFERENCE. knowing
capitalist,
He
of wages.
of the
tion
mand and
when
parties
sum
to the
The laws governing human
ply,
which
field
of economic science,
quendy
is
it,
absorbed
The law
and here
is
of de-
big one.
a
action cannot be half as clearly traced
is
The law
demand and
of
only a crooked
sands
the
in
the other
the true situa-
is
thought to have such a universal
is
superior force. a
This
terms
offering
in
unmasked.
holes in
and of God.
as the laws of nature
fact
offered.
fully
is
it
many
supply has
the
price of labor himself;
really fixes the
party merely assents
by
profits
this,
171
sup-
operation in
brook that not
of selfishness,
or
the
infre-
by
diverted
In the older countries, especially, the capitalist has
tremendous advantage, because the quantity of labor There not being work enough
cally unhmited.
own
ployer dictates his
even
.terms;
Wealth would
the employer might not change.
em-
for all, the
had work, the mind of
all
if
practi-
is
still
hold the key
to the situation.
Thus we come labor
for
—has
in sight
the
of the a
State
question touching
first
right
to
interfere
contracts
behalf
in
laborer in fixing the terms of the contract for his services the right be admitted, right It if
is
is
it
;
and
if
expedient for the State to exercise this
Let us follow the case of the
?
of the
laborer
one
step
farther.
not for the interest of the capitalist to suffer labor to perish;
he did,
his
own
profits
would be
He
lost.
seeks to retain him,
paying the smallest sum necessary for that purpose.
The
beautiful rule of equity
would divide
would give the employed a reasonable sum capitalist a like
vide is
the
sum
balance,
if
for the use of
any remained,
his
He
seeks to find
out
fairly
the
for his
capital
and
It
work, and the skill,
and
between the two.
not the way, however, that the capitalist
question.
profits differently.
di-
This
generally looks at the
least for
which he can em-
ON LEGAL INTERFERENCE.
lya
ploy laborers and keep them from starving, and retains the rest of the income flowing from his business for himself This, of course,
is
may be made
several objections first
place,
workmen.
some
form of statement.
to this
Splendid instances of
Various
have occurred
this
trials
making
are
lightened countries to devise a practicable
between employer and employed. borer
in this
make
to
is
second place, the
the
amount of work
the second
not the Government
tween the two is
more en-
of dividing profits la-
be done, and from
to
which he can improve
land
he
if
a satisfactory agreement with his employer.
This, then,
claim
mode
This happens from the smaller number of work-
in proportion to the
the abundance of unoccupied fails
In
in the history
in all the
country exercises greater freedom in making contracts
than in the old.
men
In the
profits equitably with their
capitalists divide their
of British industry.
and
stating the question in the broadest way,
question
make laws
classes
raised
—
shall
profits
be-
by the laborer
fairly distributing
the
The argument upon which he founds
?
briefly this, that
his
he has contributed the larger share
in
earning the profits, hence they ought fairly to be divided.
A
similar foundation of facts lies beneath the usury law.
lender " so the borrower declares, " means to oppress the
same advantage over
The
borer."
of his
will not loan
to supply his wants,
he can
brino-ing the
guesses
even
if
it
suffer a portion of
and
finds out
it
;
to
lie
The
he has la-
cent, for the use
Having ample means
for less.
He
me
employer has over the
the
a part of his property
borrower to terms.
into his business,
money.
that
lender, for example, exacts ten per
money, and
interest,
me
"
is
not earning
idle for the
purpose of
watches the borrower, pries
how much he
is
making,
and then
high a rate of interest he will pay for the use of the
how The more
profitable
the
business, the
more he
will
pay
ON LEGAL INTERFERENCE. rather
than go
notch,
and behaves
to
figures.
his
without
The borrower and he
upon the
calls
He
seeks to get
law.
Like the
would
lender
ey loaned.
the
law
is
the
fixing
in
of
rate
money
is
is
passed to
not
a
merchant, the
A
making
prevent the
much
much danger
within bounds.
commanded enormous far as
reason
to
is,
charge
than
higher
who rates,
But
if
are
obtaining
As a
fact,
generally charging
it
Government,
banking
customers, so Individuals are
institutions.
of other
'
The
people, and
their
own.
are
This
is
passed to prevent banks from
is
should cover
of others
it
their
They consider what a man can
rapid survey of the
interference of
and
especially true of banks.
supplied
than
a usury law
taking advantage
this
to
applied to prevent
potatoes.
when lending
must have the law applied
From
his
is
from
lender
of lenders
money
individuals
advantages, logically
taking
business,"
at the old rates.
all,
rates
especially true of savings banks. afford to pay.
for
banks
banks are loaning the
more merciful
says
During the panic of 1873, when money
prices,
they supplied them at
disposed
lender
his
in
may be
This
excessively high rates of interest.
They keep
as to reserve the
the rate of interest asked.
is
the farmer from charging too
money
of wages, the
high
so
it.
borrower accruing from the mon-
be
too great a reward, the same principle
however, there
take,"
to
by force of
the lender
rate
interest
profits to the
according to the conclusion If a usury
crawl up
will
State to prevent the lender from reaping
the borrower
"How much
himself:
by waiting, the borrower
73
highest
the
to
"This advantage you ought not
capitalist fix
If
marks up
lender
upon an even plane with
amount of
smallest
that
says:
The
it.
I
by
all
selling
All
cases. at
too
men
profitable
to them.
motives leading
will
be
seen
men
to seek the
that the reason
is
to
ON LEGAL INTERFERENCE.
174 help one class
an
or to prevent one class from, getting an advantage
in,
over another.
It
advantage
is
over
to enable
one or more persons
the
or
rest,
in obtaining
an
neutralizing
in
advantage
already possessed.
Even Government
our opinion, owes
in
itself,
very desire of one man, or a set of men, to
over
by
were not to
In
others.
desire
We
triumph.
do
one-man power and
stance,
tion
believe
was
few,
of
the
A
some
ion
and ruled the
realized, to
their
was
it
in
consummate is
the
that
is
a principle in
the
issuing first
in-
an advantage by an individual or
in
all
It is
is
;
illustra-
and countries of
times
possible
only another
of the
get-
strong ruling the
The
no exception. is
nearer
the liberty
but in the fairest Government that has
face of the earth, a few have led public opin-
rest,
No
;
it
right of the people
the
This usurpation,
possible.
is
the
is
history
pure democracy, the more equal
bloomed on the
cuted law for the
it
by
sovereigns
Government
and the power enjoyed
rulers.
if
prevailing
yet
a class with
it
whenever
the approach to a
need of
taught
sort of
to retain
democratic
They have
democracy
lesson
own
their
rest
If
and opinions
ideas
a pure
bitter warfare.
spirit
ting advantages
weak.
the
Government was founded
that
existed in the beginning;
to get
and
;
The
choose
from a long and
by a
not
of civilization.
rule
few ruled
a
have
governing, to
for
or agreement
acquiescence
to
or
wisdom, as they rule now.
or
force
an advantage
to obtain an advantage in accumulating property,
gratify the
flower
one
beginning,
the
virtue of superior
origin to this
its
obtain
and the mass have been
some
extent, their
king, unaided
rest.
own
willing to follow.
,weakness,
and the
and alone, has made and exe-
But kings have identified the
interests of
own, and so have been able to tyrannize over
the greater number.
The wider
the ruling
class, the
more
dis-
ON LEGAL INTERFERENCE. tributed will
of Government
personal ends, and will thus use
for
immersed
become purely would cool
a party's
advantage of
for the
and the
disinterested,
that
strejigth,
its
members.
who
parties
This
?
can use the
it
Let party service
most of
zeal of
till
it
now
in selfishness than they are
principal source of
the
Government
land,
dominant party has always used the machinery
that the
are less deeply is
own beloved
the advantage, yet, even in our
is
deny
75
1
members
its
suddenly and as greatly as their bodies would
off as
if
placed around the north pole in the dead of winter.
From
this analysis of
we have seen
ments,
motives of people
the
that
balance the situation of those opposed so
make
the
It
either
is
those
may be
they
that
able
to contract
to
each
on
fair
sought to
is
other in business
terms
or else
;
advantages already possessed by any one greater
even
to
up the
the
stated
problem
the
in
broadest manner,
proceed to consider whether the Government has a right fere in the cases
functions of
still.
make
of mankind, or to
condition
to
better-off
well-off
Having
making agree-
in
the assistance of the State
mentioned.
shorter
cut can
shall
to inter-
This involves a consideration
By no
Government.
we
of the
we reach any
satisfactory conclusion.
One
class of very able thinkers maintain
titled to the
fullest
by every other
Not
sometimes
the cardinal
have
duty of the
State
Government more
carved
breaks
right to
state their doctrine in a shorter
right or wrong, they are entitled tions of
a person
Government a
liberty of another, has the
class
till
out
its
is
to administer to the
exactly
man
in
is
en-
like liberty
upon
interfere.
the
This
way, namely, that
Whether
justice.
merit of stating the func-
precisely than
functions
every
enjoyment of
liberty subject to the
individual.
that
any other
and
class.
logically
in
They
many
—
176
ON LEGAL INTERFERENCE.
_
minute
able
less
to
reason
Government, hard and
more
is
it
impossibility
express
of Government, indicate that the view truth
The
?
most
truths
we can
although
less
tell
by throwing exist
out but
;
about
difficult
all all
is
some
in
functions
to
draw any
to
may
Yet,
broader
the
not
this
functions
deeper and nearer the
beneath the crust we
minds
will
There
qualities.
its
Comte
as
grope
sohd earth
that the
questions and
According
tions in this way.
;
we know
of a thing,
getting a clear notion
do not
yet
difficulty,
broader
are
clearly seen are those lying nearest to us
and which are the most shallow darkness and
Government
of
nay impossible,
or
view
different
those functions.*
realize
to
a
ascribing
difficult,
defining
line
fast
functions
that
is,
holding
those
if
exact
the
state
the
respects,
very
But
particulars.
is
a
in
there,
is
way of
got of philosophy,
maintaining that
they
not be satisfied with solving questo our
way
of thinking, those
who
have obtained such limpid and simple views of Government have dealt with the question very
may be noted
It
ment
—which
is
of Government
unless
it
first
itself.
stated
Government. either
original structure
is
society can
Comte
philosophy.
treated
—support
in
it
by reference
Such a reference
be maintained that society of a
Government,
No
as
that those holding the narrow view of Govern-
the one
origin
ception
much
is
bound by
If society
enlarging
or
is
left
the original con-
free
narrowing
to the
wholly useless,
is
its
change
its
functions,
its
to
not of the slightest consequence.
impose terms upon
their successors.
has no claim upon the future and cannot dictate to accept what others have bequeathed, but there
is
it.
The
past
We may
no law compel-
Mill: "In attempting to enumerate the necessary functions of Government, be considerably more multifarious than most people are at first aware of, and not capable of being circumscribed by those very definite lines of demarcation, which, in the inconsiderateness of popular discussion, it is often attempted to draw around them." Priitc. of *
we
Says Mr.
find
Polit.
them
to
Econ., vol.
2,
p.
387.
;
ON LEGAL INTERFERENCE. ing a legatee to accept a legacy.
Society
Spencer and
functions
the
Government,
of
of his
rest
will
mankind
of is
growing
are
improving
Government
Government than
better, they
both
In Christian
ridiculous.
theology
truth, that as intelligence
more
clearly discerned, theology
a
ures with
the
ship, in
new
theology
respect to Government, as
goodness,
If
this
be
more
become
and
Government change
granted,
we
ment was founded
upon
Spencer, or u|)on
some
sole question It
is
what
is,
|)ossible that
is
come
be a recogspiritual are
upon them by modern
increase in intelligence
conceptions
their
the
though, Spencer principle
lying
upon no
Government
the correct one. it
view both
was
all
;
the
mankind to-day
?
should be allowed
in
like
liberty
enunciating
In
it,
harmony with a
deeper, namely, that such a limitation of the
functions of (ioveriuiient was best for the
Certainly he would
Herbert
by
principle at for
— mankind
undoubtedly thought
still
of
Crovern-
original
enunciated
principle
to exercise the fullest liberty subject to the exercise of is
and
advanced condition.
Spencer's principle
—
scholar-
The analogy holds
inter-related,
other, or
by every other mdividual
Instead
profounder study of the Script-
mankind
the best
to
kind
to
care not whether the
if
and things
to perfection.
to suit their
more But
changes and improves.
light reflected
brought nearer
is
figures
ours.
and most enlightened,
has
it
increases,
perfected system, the
of being
it
in
maintain that the same
for the rudest
nized
the narrow
to
(lOvernment
need a better
To
condition.
best,
is
indeed,
;
of this char-
is
holding
class
not deny
{)rominently in their doctrine of
suit their
progressive and needs
is
That society
a progressive iorni of (lovernment. acter,
177
not deny that
in prescribing
this
good
of
individual.
the
was the end
a Government and in finding
lie
its
hence, in determining the functions of Government, we
had
in
limitations
must
in-
ON LEGAL INTERFERENCE.
178
what kind of one
quire,
be limited so as not to is
Nor
will
individual
it
We
all.
A bur
need spend no time, then, over
ideas of
in
scope,
its
good approach nearer
Government must change good thought of
the only
the
to
change
The
wrought
is
symbol of
better,
it
fair
and
human
time
all
life
perfect
Suppose
it
the conception
as
;
beautiful, a
nor
;
corresponding
and province of Government.
must ever change to promote
of a definite Government for incessant changes of
absolute and
and yet an instrument
himself,
For, as
beginning was material and low,
nature
the
in
man
sub-
its
to correspond with them.
in the
grows and blossoms
this point.
must change.
it
Government evidently must correspond with of good
best Govern-
end the highest good of
for its
cannot be stationary
truth.
after the
other,
our eyes upon the good of one or the good
fix
Government having
jects
good of every
highest
the
when looking
difference,
we
ment, whether of
Here
?
inquirers set out.
all
harmony with
making no
thus
powers
its
be much questioned that the highest good of each in
is
whence
shall
our highest progress
interfere with
the true starting point
How
best for us ?
is
is is
his
good.
to
make him
No
conception
by reason of the
possible
Government
a fixed
be
to
desired.
As a general thest
advanced
Government promotes
rule.
least
;
easily
this is
succession of compromises between
and other
classes not so good.
wishes of
no
sires,
class,
and not severe enough
upon one
equal advantage
class
the
the wants
Laws
good of those All laws
seen.
of the
far-
are
a
better class
really represent the
complete
being more severe perhaps than one class de-
of penal laws, nevertheless tion
enough
all
for
another.
are
than upon another.
of every
member
This
is
more beneficent
Laws
of society are
especially true in their
operating scarce.
operato
the
Still,
if
ON LEGAL INTERFERENCE. advanced sentiment of
a law does not always reflect the most ciety
an approximation to
is
it
179
and by and by becomes the
it,
timent of many, affording some degree of protection.
law has
that
trine
and
an educating
containing more truth than
some
sen-
So the doc-
power,
uplifting
believe,
so-
if
actually
not wholly false;
is
al-
though the danger of the non -enforcement of such laws, even enacted,
The
growing out of a law which cannot be enforced, because
evil
opposed
force
educating power.
its
not the keeper of for those
and
sentiment
the
to
greater than
Law
if
too great to warrant their enactment upon this ground.
is
it
who
;
hence
necessary
The law
is
to
execute
is
it,
for the law-breaker,
must be a law that can be enforced.
it
are always willing to keep
them are not
laws,
only rules.
As
the
civilization
closely inter-related to every other
of
so the functions stated
this
truth
in
body
social
for
any one man
an admirable way.
influence to
the functions of
merely,
the
all
rest,
"
Prof
The
all
of
Huxley
actions of one
and the
affect
each
member
interfering,
ment
is
bound
that
They
largest
measure of
human improvement will
it
more
to self-protection
other
more and in
order
which even Spencer admits Govern-
to furnish.
Spencer and those holding cate the
of
Consequently,
more, the sphere of Government must continually widen to furnish that self-protection
has
less possible is
his fellow-citizens."
men
more
higher the state of
Government were pared down
yet as the actions
is
him more, and
affects
do a wrong thing without
or less, with the freedom of if
member,
Government must widen.
more completely do the
civilization, the
the
each member
of society increases,
not deny that
is
man
similar views of liberty for
most
all,
rapid
Government advo-
because
under
they believe
that
condition.
should aim to reach the highest end
ON LEGAL INTERFERENCE.
l8o
known to
and
to himself,
Government, so
that
be used to bear him upward toward
In
erty-theory
Perhaps
or remedial
institution, yet
The end
all
of
things
crime.
Is
most
develop
will
it
and there
is,
wholesome laws
to
is
in con-
—
render
to
true that
it
the highest liberty
This
?
is
state of nature
prevent
in
aimed
is
of of
exercise
who narrow down
by
fairer
at
commission
Are plants the most beautiful
Are they not made
?
fact.
the
the
best
the belief of those
the functions of Government.
it.
a reformatory
is
no disputing the
is
flourish
will
lib-
under
rapidly
punishment
All
and
justice
man
up the
set
improve society by punishing
crime and restraining wrong-doing.
both
they have
not correct to say that Government
is
it
man
because
is
why
very reason
For, the
they
fact,
cannot deny these statements without involving themselves tradiction.
ought
possible,
far as
that end.
cultivation
in
a
Do
?
not careful watching, pruning, and watering of them, increase their
and color
beauty of form
more rapidly under a
make
the student
them
pursuing
beauty unto
toil,
and
way
Who
?
years
morahty, rehgion,
mind
believes
sanguine State.
Undoubtedly it
State
the
has
savage
a
the
in
The
State can
men
;
do something
how much
opinions
of
much
many
are
it
undertaken
to
do things which
however, that will
alone.
a
educating and restraining power of the often
true,
left
the is
altogether too
men
have
in
as the popular
not
to
of
finest
in
can do
contains no civilizing power, or that
ought
mode
blossoming
perfect flower?
cannot do half as
The
can.
concerning
The
it
and
the product of the greatest care,
is
The
of instructing and directing
question.
of
progress would
to the exercise of the
his studies
most
men improve
that
What
?
left
if
heard
ever
like the
restraint in living.
questions
cultivation
the choice of
perfection
art,
intellect,
state of
in his earlier
liberty in
largest
Who
?
It is
the
it
State
develop most rapid-
ON LEGAL INTERFERENCE. wlien
ly
themselves, or with other
to
left
which they may
themselves and would
not
Firmly as we believe
in
now
fearfully
ble
as
and the need of
vegetable
that
uriant
spend
will
We
growth.
his
genius
evil
and severe
all
He
its
force
be
it
man
of
He
is
all
a
garden
extending
in
unless
fruit,
is
will.
like
discipline.
and check.
is
fee-
of a
sufficiently the evil tendencies
his coercion
bearing no
they could.
if
improve are so
his aspirations to
better for every proper restraint
branches, and
condition
their
State,
not want to help
ultimate perfectibility of man, he
overpowered by
Spencer does not consider
than the
helps
many do
great
improve the
depraved and
be easily
to
A
into use.
call
iSl
vines
its
clipped
the
in
or
lux-
its
admit that a great many State checks have
dwarfed rather than developed the powers of man, but not always.
Spencer has
illustrated the
first
fact
most
a
in
manner,
brilliant
and by so doing has popularized a theory which we believe
unsound and pernicious things as well as
its
do what
it
is
cannot do, or can only do
were much better never undertaken
both
for
many
it
has.
in
a
most feeble way.
This
is
that
We
to essay the impossible
have previously observed that
highest good.
sequence
in
This
is
this
It
had
it
failures
of
and the impracticable. all
people are Hving for the
true in a general sense.
what phraseology
be-
the strongest side of
Spencer's teachings, the showing up of the numerous
Government
for-
continually attempting to
Government and people
things
be
good
Spencer has proved
latter.
Government
that the
to
its
and the former ought not be
evil ones,
gotten in the condemnation of the
yond a question
Government has done
to society.
idea
is
It
of no
is
clothed, whether
conit
be
simply the highest, or the highest end, or the highest good, or the greatest happiness, or tion
is
that
in
some other
every person
has
clothing.
The
sole
some supreme purpose
in
conceplife,
al-
ON LEGAL INTERFERENCE.
l82
though that purpose may be
God,
view
in
will
Now, we maintain what
is
drunk
it
practically
in
is
many
they
as
in serving
but that each has a su-
;
denied.
end of Government ought
the
by
province;
its
may be
cases, to
assist
society in
Everything Government can do
highest end.
within
not be
that
individuals
highest end of one
that of another in getting
preme end
its
different with
as
The
are unlike in character.
end are
this
to
be
attaining
in that direction
powers limited.
its
This object of Government has the merit of simplicity and comprehensiveness.
It
and
by experience
sanctioned
is
narnes, though perhaps
way than Locke, who
briefer
Government
declared,
"
by
great
in a nobler
That the end of
good of mankind."
the
is
and
no one has expressed the idea
Government
will
change
with the growing conceptions of the highest end of living.
There
If this view
be
correct, the functions of
no permanent sphere
can be
changes going on
no
suffered
track
the
Government
to
and
pursue,
give
flowers;
nevertheless the
state.
mark out permanent tears
impartial
life.
its
fair-
will
reader of history can
fail
and
evil
With
man
The weeds
grows and one day
also
overcoming
is
notions of the true end of direful confusion
good
No
in perfect beauty.
to see that the world
and
incessant
grow more luxuriantly than the good and hide
of misery
bloom
to it
Through blood and
looking up and struggling to reach a better
est
of the
would be easy enough
it
But we are progressing.
bounds. is
for
then
because
it,
mankind made no progress and
If
in society.
decline,
for
this
attaining to higher
advancement, a strange
would be wrought were Government
to con-
tinue in a narrow, worn-out track. It
does
broader
not
field,
follow,
that
in
legal
the
spreading of Government
penalties
will
increase
in'
over
a
number and
ON LEGAL INTERFERENCE. Quite
heaviness.
with
better
the
Only murder
living.
Great Britain,
country and
number with
the
be fewer and lighter
will
punished with death
is
yet
ing of a frank upon a letter was increase in
They
contrary.
183
in
Coleridge's time the
in
punished
in
this
this
forg-
Laws
manner.
progress of civilization, but they ap-
proximate more and more toward rules
for the
conduct of the
in-
dividual.
We
imagine that in a perfect moral
Government, there
only rules governing the intercourse of penalties whatever, for they
be
not
them
for
scouter
break
to
there be
rules will
no
them.
disposition
and maintenance of Government
good of man, the believer
of this doctrine
part which
if
be
aside.
In the establishment object, the
would be unnecessary; but
our guidance even
will
members, without any
numerous because there are none
less
Rules are needed to set
its
can
in
for
this
and the
divine origin
its
For the conception of the
agree.
Government should play
in
reaching the highest,
is
the
conception of a majority or of a smaller number of those living
under
it.
ment,
in
ernment
We
have adverted -
manner
the
to
our opinion, sprang into being. is
that of the
few,
or surpassing ability, or rascality,
may
govern, but after
He
Government
Even
Government has
obtained of the army by Napoleon,
more
friends
inevitably be overturned.
will
who
Govforce,
all,
must have
Control
several rulers.
united their interests with
own, enabled him to plant himself on the throne of France.
Be a Government ever
so democratic a few leaders rule.
may
at
a
Govern-
Practically, every
to support him, else his
his
which
one man by virtue of greater
than one alone must govern any people.
the most despotic
in
be
few
more of them do
the
thinking
one time than
and
controlling
at for
There
another,
nevertheless
society.
Only now
ON LEGAL INTERFERENCE.
184
and then
one found who thinks
is
The
and they always
of Government are not always those which
functions
C would
set up,
but are those set up by the
If the greatest liberty be allowed, this to the best interests of
son or
the same.
is
it
if
;
the least liberty
may be
Government
Avent,
God, which
is
it
may
prevent
all
such.
It
was an approximation
to the
may
In either
would see that so
order
one day to prevail (accordmg
The former
tolerated, the rea-
is
Government may be few
another class would only see that the idea of
was absurd.
of society.
very low or very exalted.
it
a divine
in
leaders
will.
B and
thought to be conducive
is
the functions of
vilest practices, or
believer
the
case,
all
Hence
many; the end of
permit the
Those who both
fewer act.
;
think and act have always controlled society,
as
far
Government of
to his belief), while
God
or a divine order
might mourn over the rules of
class
society because they contained such faint glimmerings of the highest
end of man and of the best Government acknowledge that the
however Let
us
not
leave
this
point
Divine affirms that a time
tion of the
selves.
him, yet he would
God
to
its
The
yet.
coming when
is
law,
which
perfect one to come.
a revelation of
of the
of these
things,
So
God as a
all
will
believer will
give.
be
the
perfect,
The
shadow and an
far as
in
Government
seer
indica-
goes,
it
makers and upholders, the unfolding
Divine idea, either consciously or unconsciously to them-
The
progress of the
moral
quite
upon the present Government
looks
for
ghmmer
real
faint.
obeying a perfect
is
saw a
rulers
seer beholds in the
progress of
Government a glimpse of the
Divine idea within, but
it
is
there,
mankind and
perfect
and
will
day.
in the
Crude
not die for
it
is is
planted and nurtured by God.
The
disbeliever in the supernatural says
:
" This
is
all
nonsense."
ON LEGAL INTERFERENCE.
He
Government
that
affirms
" Very
well,"
human
purely
a
is
other, "
the
replies
185
we can
agree that both are living for the highest, and
(lovtrnment (
rovernment as
differ
the
human
expedients
though imperfect, of the Divine
Thus
is
it
seen that as
all
agree as to whither
laws
by both
mind
collective
able to
Who
all.
entering
controlling
will.
same absolute end, though
live for the
into
If the Christian's belief
is
Government of God,
eternal
absorbed and
lost in
till
Having shown what,
in
our opinion,
into
the
power
expect
will
hkeness of
contrivance If
he
human
Whether Government
mentioned,
depends
We
society.
upon the
is
purely a
is
the true end of Govern-
shall interfere in
of
effect
is
wrong,
is
device.
remains for us to answer the questions announced
beginning.
ference
agree-
is
the future
is,
he
the splendor of the other.
then he must confess that Government
it
it
right,
human
the
by the
Divine
or
what
it
Government growing more and more
to see
ment,
human
the
to
Government and making
alone can reveal.
the
as
Government main-
are determined
Hence, Government
society.
right
is
The one
the other, the expression,
;
the same, and
are
classes
we only
;
proceed."
not for the same relative one, the functions of tained
be
functions shall
whence the
source
claims they are pure
its
we
for
the object of
that
We
our way.
in
tending, and what
is
to
on
to help us
is
contrivance.
together,
live
such
the
in
any of the cases
interference
upon
have shown that the reason why Government
inter-
sought
any case
get,
or to prevent, an advan-
tage of one person or more over others.
In our opinion, Govern-
is
ment ought
to
in
assist
no
class
another, whether the class be
where.
is
to
in
Hving
Government must preserve
equahties greater.
This
is
obtaining in
the
advantage
same country or
equality,
clear enough.
an
and not
But how
far
over else-
make it
shall
in-
go
1
ON LEGAL INTERFERENCE.
86
way of
in the
We
of expediency.
go very
to
ment
do not question the
one
and put
in
the.
no power
save
to
If
pleases.
if it
it
Government has
What
contend.
one
and
class
certainly
is
in the
the
shadow of death, oppression,
weak.
the
of the
the funeral
is
has a right,
the nation
This, of course,
is
if
predicated
prevent undue advantages
the end of the matter.
is
gone the whole length
for
which we
usury law save to
of a
object
in
Government
wronged and
a class
And
has the ability to
cannot, that
it
far
a question
is
right of the
the
interests of
more senses than one.
idea that
taken,
do not believe that Govern-
thinks best, to stop these things.
upon
how
existing;
down another by monopoly and
class crush
forth
Such destruction of the nation
We
far in this direction.
to exist in a land of darkness
is
to see
it
now
the inequalities
leveling
way of preventing advantages from being
the
from taking advantage of another
prevent
The money
?
lender
oppresses the borrower in exacting excessively high rates of inter-
The law
est.
aimed
is
to prevent this.
But the principle involved
in the
law by which Government interferes to prevent the taking
of an
undue advantage
in the loan of
force to every thing else
Some
Government; but
ment a
sell,
is
this
claim
is
thinner than
and
within
human
just as
much
the
difficulty of
control. in
dependent upon the Government.
Is
not
an uncoined as its
attaining
the in
Remove
it
is
and regu-
the creation of
Govern-
gossamer.
it.
five-dollar
Value
?
Its
desire
purely
is
gold-piece
a coined state
weight and purity, and
scription, re-melt a gold
use.
That depends upon the
not the creator of value.
thing
and
right to step in
charge for the use of money because
late the
for
which men buy,
Government has the
claim that
money, applies with equal
worth
value
is
not upon the work of
every trace of the Governmental super-
coin,
and the shapeless piece of yellow
ON LEGAL INTERFERENCE. be worth as
metal
will
ment
exercises
has no right
much
shall
much
by
anything
virtue of
and other things
We
solely
is
The
hence,
;
does to money to say
it
There
for the use thereof.
property clinging to money.
ing power.
This proves that Govern-
as before.
no peculiar power or charm over money
be paid
of determining
187
how
no mysterious
is
sole difference
it
between money
that the former, generally, has a wider purclias-
have
prove that Government has a right
tried to
how much
shall
be paid
for the use of
upon the ground of preventing one
citizen
money, but
from taking an
unjust advantage of another.
Whether Government should two questions: for
first,
Government
now
is
crystal
that
;
secondly, whether
and
if
we admitted
Government cannot
prevent advantages from being taken.
and over again.
is
that
interfere
power
it
was,
it
effectively
is
to
This has been proved over
not a usury law in existence,
Union, to-day, that
of the
State
There
buried out of sight
to call
has the
it
not great enough to warrant interference
on the part of the State; as
depends upon
right
Whatever the past may show, we believe
to interfere effectively.
clear
this
whether the advantage.be so great as
interference
that the oppression
exercise
anything but a dead
is
and almost out of memory.
any
in
letter,
So much
for
a
usury law.
The two
questions
answered together.
concerning
upon the grounds assumed the
taking of an
between
capitalist
or on the other. rence.
too
If the
small
a
the
payment
Government has a in
enacting a
improper advantage.
of
labor
perfect right
to
may
interfere,
usury law, to prevent
Whenever the advantages
and laborers become too great on the one
Government may
capitalist
be
side
interfere to prevent their occur-
squeezes the laborer too hard, or divides
portion of the
profits,
or
the
laborer
demands too
I
ON LEGAL INTERFERENCE.
88
much
pay,
Government has the
reasoning, of determining what
As
receive.
ence on the part of the
more
differences
We
come now
existence
a
the
last
With
State, they
State, yet
true origin
growth
gigantic
their
them
for
;
indeed,
in
have
their birth
and many
other
like
most
The peo-
besides.
and character of corporations. country, with
this
their
enormous
workmg and aims shows
glance at their
superficial
the
folks,
aggregation of wealth, they deserve the most careful watching. the
and
live,
They seem
and dependence.
much
it
corpora-
longer they
the
their
adjustment.
class of contracts, those of
they have
must not forget the
interfer-
Both adjust
make an
to
they are very
time, that
entitled to all the rights
could
State
forget their parentage
think, after
pay and the other
shall
none.
is
attempting
if
by the favor of the
more do they
ple
the
figure
to
there
These are creatures of the
tions.
to
State,
easily than
would cut a sorry
one
need, or practicaoility of any such
the
for
according to the foregoing
right,
the
For that
they propose to ask a great deal more of the State in the future,
and
to abuse the
was
justified
mother which gave them being.
on the ground that they would prove beneficial
the community, but It
we
State
and subject
them
and its
governed
to
members, the
that
We
for
the
all,
There
have shown
good of
same manner.
for the best interest of
corporations
control.
its
individuals.
in
becoming
fear of their
must not be forgotten
govern
Their creation
all.
is
its
are
to
curse.
creatures of the
no analogy between
how
the
State
should
Corporanons must be
So long as they are conducted
they should be
let
alone.
When
con-
ducted otherwise, the State must not hesitate to interfere and prescribe such checks as
are
see that they are enforced.
the claims
called
The
for
by the good of
State
and arrogance of her own
society,
and
must not be beguiled by children,
who
are
growing
ON LEGAL INTERFERENCE. they increase
bolder as ger,
unless
restraint, itself.
the
that
State
they
in
be
will
wealth watchful
and power.
and
keeps
I
For there
them
become more powerful than
is
in
the
89
dan-
proper State
XV.
THE ADVANTAGES OF EXCHANGE
Many or
still
hug the delusion
other must be
the
changes
may be
the
that in
beneficial
to
every exchange
They cannot
loser.
sideration of the subject ought to convince I
exchange a horse
for a house,
Yet a
concerned.
all
them of
because the
is
it
one party
believe
that
ex-
con-
slight
their error. latter
is
If
worth
to me than the horse, else why would I make the exchange ? And why would the other party exchange if he were not to be a
more
gainer
by the transaction
plied that both If they are
But or
if
parties
course, in this statement,
is
compelled
to
pay a dollar
although by waiting a
little
one-twentieth of the sum, the case
tant price perhaps, it
We
yet the bread
is
as
it
is
they
imlike.
another thing.
a loaf of bread
for
he could get
it
for
not changed.
One may pay a most exorbi-
worth more than the
is
dollar,
would not be given. must not leave out of
tinually taking
sight the fact
that
mankind
are con-
advantage of the situation of things, thus reducing
the benefits of exchange to one party other,
time
do
from starving,
is
a dollar for a loaf in order to keep
else
to
compelled to make exchanges, that
a person
starve,
Of
?
have perfect freedom
As a general
rule
and increasing them
to
the
each party seeks to get the best of
a
THE ADVANTAGES OF EXCHANGE. bargain
that
;
to
is,
make
Nevertheless, something
other party.
In every contract there
The
width.
margin can
I
get?
If
How much duce him
can
I
leaving the least to the
always
party
get and leave enough
of greater or
is
how much
all,
both.
for
left
party to in-
this is the
?
of that
the other will not
to the other
the agreement
parties.
between the
lying
is,
get
to
both
to
left
profits
a portion must always be
;
make and execute
to
each
with
one attempts
enter into the agreement
it,
This profit-margin
it.
question
is
margin of
a
is
making
parties desirous of less
the most out of
I9I
question
which people generally put to themselves when making contracts. Neither party can take
mated; is
all,
not be consum-
will
and
that
man
regarded as the most adroit who, by deception and covering up
of his situation, by boldness
or
other means, succeeds
the largest portion of that margin
it
getting
every exchange
in
all
parties
are gainers.
Freedom of exchange nature,
By
in
and the execution of the agree-
Yet the truth remains, that
ment. to
agreement
else the
the profits must be divided between both,
affected in three
is
ways
;
by
necessity,
by
and by law.
necessity,
no option
is
we mean when men them
left
obliged to pay whatever
in is
previously considered, yet
are in
such a situation
making an exchange, asked
we
for a thing.
that
and they are
This point we have
further remark, that
the
taking ad-
vantage of the situation of a person to get an unreasonable price for a thing is to
be condemned.
If a
man
is
starving, the baker
cannot morally ask any more for his bread, although his customer
may be abundantly
able to pay an increased
price
;
if
there
is
a
famine, the price of corn ought not to be enhanced, except so far as
may be
economy
;
necessary to lead people into the practice of necessary if
money
is
scarce, the lender ought not to increase rates.
THE ADVANTAGES OF EXCHANCxE.
192
A
fair profit is
all
or services under 4;he Restriction
man
that a
of freedom by nature
from distance, and the
arise
can morally demand
to
New
If
when checks
is
Thus, wheat we
like.
New
seventy-five cents per bushel in
Chicago.
York, the cost of transportation
Thus,
and eight
in
port
New
it
to
transportation
Such
turer.
operate as a protection if
Avill
come
will
of wheat
being
natural,
restrictions
between various
pound
cents a
New
in
pound
York,
to trans-
because the cost of
hither
operate as a protection
protection,
These
trade
to
three
costs
it
York, none
worth
a natural check to the
is
points.
iron be worth ten cents a
London, and
is
York, and half that sum in
exchange of the grain between the two of nature often
wares
exchange
to
will say
costs thirty cents to transport a bushel
it
sections.
his
for
usual conditions of society.
the
to
forms
home manufac-
no ground of
just
complaint.
The freedom Laws to
of exchange
are passed restricting
encourage production
at
is
it
sometimes interfered with by law.
upon the ground
A
home.
that
it
is
manufacturer says:
desirable
"B
ought
not to be permitted to buy his clothes in London, because, though the price
them
in
may be
less,
he ought to be willing to pay
order to encourage
independent of England." the good of his
demands
Many
country to buy at home,
objections have been
them, that trade,
then
manufacturer
the
the enactment of a law which shall virtually prevent
among it
others,
was
that
entirely
him up
made
the
to the
State
beyond
its
to the
Whether
this
home
him
market.
enactment of protective
had no authority power
and that every individual has the
can buy cheapest.
for
home industry and make our country And if he has not sufficient regard for
from buying abroad and shut
laws;
me more
to
right
fetter
to
to
enact
freedom
of
buy where he
ground be valid depends,
as
we
THE ADVANTAGES OF EXCHANGE. have previously shown, upon
good of the people
I93
question, whether
the
no objection can be
be benefited,
Whether they are
raised to their enactment.
be beneficial or not turns mainly upon the question,
to
be
we do not engage
them than now?
If
England
erence to production here, there
England remained
sells
their
Thus,
?
we
if
England charge more
everything to us without
ref-
nothing to the protectionists'
is
than they would have been had
If English prices are less
claim.
manufacture
in their
manufacture cotton goods, would
did not for
if
will there
making a monopoly of
of other nations
likelihood
less
products
the
for
is
it
to enact such laws ? if they are to
we
the sole manufacturer,
by en-
are benefited
home manufactures by application of law. England undoubtedly charges less for many things because
couraging
we manufacture them. we
believe that
law,
if
the
all
American
industries
had not been protected by
There
is,
There
which has been fostered by
of the
for
The
principal
is
no
virtue, therefore, in
that
system
If our manufacturers
legislation.
have
and we are made independent of England, the object
Government
manufacturer
will
is
pure enough
;
the
yet
not bear examination.
they can, in order to
We
many are
Government whenever
drawn
in
respect to
protective
cannot reach such a sweeping conclusion as 14
a
like
make money.
conclusion, then, shall be
legislation ?
object of
Most of them
the rest of the world, seeking aid from the
What
now paying
laws has been, not to benefit the many, but
object of protective
increased,
selfish as
life.
however, another side to the picture.
to enrich the few.
and
just as grasping
other nations, and charged us more than we are
of the necessities of
na-
advantage of each other we can,
England would have proved
many
human
Considering the infirmities of
ture, the desire to take
is
THE ADVANTAGES OF EXCHANGE.
194
deduced
In some instances, undeniably, the building up of our
bad.
home
dustries at
we purchase a
made
has
we can
prices because
at less
supply our wants from
Had we
pursued
we should have been screwed down
policy,
some
tection, therefore, in
encouragement of the
the opposite
to higher prices.
been a positive
cases, has
manufacture
in-
and
us independent of foreign nations,
wider number of producers.
the
good or wholly
generally, that protective laws are wholly
of
Pro-
In
benefit.
and
cotton
woolen
goods we believe that we are the gainers by the system adopted.
Were we dependent upon more.
we must
Yet,
land, France, trade,
and
monopoly.
we have such
may be
;
if it
is
does not
if
of
There one.
another
is
We
changes.
it
is
effect this
side
to
this
the
purpose, there
Surely its
question
it
is
no
justifica-
is
just to enact a
pay.
fair
and a most important
have shown that people are benefited by making exThis
is
just as true of people living in different countries
as in different towns.
As between people
perfect freedom of exchange
is
not denied.
living in the
usually given
is,
This
that
we
it
deny.
independent except so
is
desirable It
far as
is^
to
make
?
it
be
The answer
every country inde-
not desirable to
may be
same town
But why should
denied as between people living in different countries
pendent.
such
commission
and monopolize
to undersell
labor.
give to
to
to prevent
by which labor can get
possible,
name
not the proper
The aim
by screwing down the price of law,
a wide field in which to pur-
England has been able
it.
our
upon the ground of preventing a
justified
Protection
wrong
Eng-
for
danger of being ruled by monopolies.
however.
legislation,
tion for
less
is
Protection
of a
not leave out of sight the fact that
and Germany, have been competitors
as long as
chase, there
would charge
they
markets,
foreign
make any country
necessary to place
it
upon
THE ADVANTAGES OF EXCHANGE. an equality with others
making exchanges,
in
I95 other words, to
in
prevent the operation of monopoHes.
The and
prevent free intercourse between different countries
spirit to
an unnatural advantage of one nation
to create, if possible,
over another
bargain.
same
precisely the
is
each other.
their intercourse with
This
because each
is
is
spirit
which individuals exhibit
Each
tries to
The same
selfish.
principle crops
out in legislation between the various States by which tries
advantages over the
to get
Lastly,
it
applied
is
Protection, therefore,
ment of individual same old
spirit,
us,
taken the
have not.
our
in
intercourse with
Of
we must
course,
There
national
into
We
selfishness.
It is the
ently towards the people
to correct
have been
no more reason
is
a develop-
a nation pursues a
if
nations.
is
It
same source and incapable of
some way seek
in
initiative.
foreign
a radically selfish policy.
selfishness
each State
rest.
springing from the
being defended.
wards
is
selfish
for
selfish policy to-
it.
when
But we have nations
other
conducting ourselves
God made
of one blood
bid eternal defiance to
benevolence
buy and one
sell
will ever
our
in
nations of
His law, and
conduct
Away
other nations?
all
"Hath
men
? "
if
we
shall
one another and
towards
and
And
we
cultivate selfishness instead of
with such horrible thoughts!
at fair prices,
differ-
than towards one an-
of other nations
other, so long as they manifest a right disposition with us.
not
in
get the best of the
towards
us seek to
let
are contented with these,
hear of a protective policy adopted unless
it
no
be to
prevent a monopoly.
There has been a great deal of discussion as is
benefited by
tion has
protective
laws or not.
In
to
been renewed of enacting protective laws
of the workman.
Whether such laws
are
whether labor
England,
the
for the
beneficial
to
quesbenefit
him or
THE ADVANTAGES OF EXCHANGE.
196 not,
depends upon the question whether the products of
are
all
sold
own
his
country
or not. ;
his labor
he makes
If
market, he wants no protective laws
foreign
home
in
if
he makes
for
a
for
a
market, the fewer foreign products coming into competition
with his labor the better for him. " Does protection protect ? "
much
rise to
of
dispute.
and yet
error,
enough.
there
profit,
is
another question which has given
is
subject
seems
us
to
befogged with a great deal
is
made
is
explanation
the
that
upon a foreign
laid
and the thing
not imported
is
it
If a duty is
The
home and
at
no question but that protection
easy
is
high that if
article so
for
a
This
is
sold
protects.
as clear as noonday. It
is
have
unquestionably true that our
operated
article
he can afford to make price
the scale
tariff
of
their
by the
own
railroad
is it,
shut
laws, to a great extent,
goods and encourage home
foreign
If the iron manufacturer sells
because the foreign as
out
But another principle
manufactures. action.
shut
to
comes his
to
in
goods
modify
their
at a higher price
out, although
as
low perhaps
the parties buying the goods increase
This
wares.
companies.
It
is
illustrated
costs
on a grand
them much more
to
equip their roads in consequence of the advance in the price of iron,
and so they make up the
difference
of freights.
Whether protection
the question
how
increase
the
protects
generally other persons
price
of their products.
by increasing the or
not,
besides those
If every
protected
one increases the
price of his products comparatively to the increased cost all
the
the benefits of protection are
protected
to
get
protection,
lost.
All turns
upon
he must not only
higher rate, but others must not change their rates.
he gains nothing
in the end.
price
upon
depends
of iron,
For
that. sell
at
the
If they do,
THE ADVANTAGES OF EXCHANGE. As a
have
things
came
fact in
our history, when a
risen
general
so
in
Such
creased once more. country.
more
will
It
is
law.
Prices will
over
tion spreads
The
to
things,
all
principle
to attempt to get
in-
this
competition with
in
bill
many wanted
The
are.
But
now
last
that
it
that can be
time
was defeated on
if
is
foreign useless
hoped
is
was attempted
it
very ground,
this
protection the law would be of no avail
any person.
The prime class at the
object in establishing
expense of the
is is
to benefit a few.
rally
It
is
in
class,
because
We
it
is
its
effects
The
real
the
object
upon every country
in-
an Amerhis
Government could very properly
in-
have proved that
industries,
State
down
him
break
in order to
it
is
advantage of
the duty of the
and undue advantages.
The
Government
State can pro-
although detrimental for a season to the people,
the object be to build
them up and prevent other nations from
dictating the price of the commodities
ground
•
an attempt to take an undue
to prevent monopolies tect
to benefit a
If an English manufacturer should cripple
it.
business, in such a case
another.
is
not general legislation, and gene-
ican manufacturer by underselling
terfere,
laws
intent to benefit the
enacting them;
has wrought most pernicious
dulging in
protective
The
rest.
always a secondary object
if
in
logical applica-
its
all,
more protection; the most
to increase the rates, the
to
coming
at
so well understood
is
keep the laws where they
that as so
be-
tariff
legislation
tariff
not rise so rapidly.
the principle of protection be admitted
articles.
rise
and the
legislation
a history of
the
of the law was gone,
effect
be seen, too, the fewer the things protected, the
the
effectual
additional
to
97
has been increased other
another, until
after
that the protective
was then had
resort
one
price,
tariff
1
for interfering with
protected;
freedom of trade.
that
When
is
the sole
foreigners seek
THE ADVANTAGES OF EXCHANGE.
198
no such advantage, but
we can make and
than
sell for
the
sell
a reasonable price, and
for
same product,
our ad-
for
is
it
less
vantage to buy of them, and any interference with that liberty for the sake of benefiting a class If
be admitted that protective
it
society, of course,
such
not the
is
seek for
It is
it
The
much
society so
off the
history of
who
specially
as
themselves
effect
upon man-
upon which
policy,
this
With the
of the past.
littleness
growing out of
the independence of nations.
We
in
do not believe
in
Dependence upon one another
and nations strengthens the
bonds of peace.
shows that
it
general,
in
good of
day of universal love and peace, and
narrowness and
selfish feeling
the
for
not the intent of those
was founded, we have no sympathy.
individuals
is
These laws have not had a good
glorified the
narrow,
legislation
is justifiable.
They have put
kind.
fact
it
fact.
to benefit
it,
in particular.
have
iniquitous.
is
Protection weakens
spirit
that
of unity and
in the spirit of
personal advantage, the history of protective
legislation
the saddest which can be read, for
the
it
reveals
the
and encourages
spirit
Conceived
war, the greatest scourge of mankind.
as
is
one of
dreadful selfish-
ness and tyranny of mankind.
There not
is
always
could be.
is
If
blood
lives
it
in
we can study all
design
is
complete If. it
nations
selfish,
if
is
we
runs a miser-
and absolute
seeks to live by
Its policy
of Providence,
it
our shell like a
failure.
itself,
having no commerce, no
cold, selfish nation.
the
of other
live within
only for himself
rest of the world,
becomes a
to this subject, that
independent
equally true of a nation.
dependent of the course,
be
to
ought not to seek to
which miserably ends
life
This
desirable
We
A man who
turtle.
able
one other principle pertaining
is
in-
inter-
too narrow.
He made
of one
nations of men, and intended that they should dwell to-
!
THE ADVANTAGES OF EXCHANGE. gether
harmony and
in
He
unity.
never
1
intended
99
they
that
should be completely isolated any more than the members of a
A common
family.
seeks
destroy that
to
runs
life
life
one another, and
We
thetic, peaceful,
and eager
pendent means
to
We
be.
need
can never afford
What
a
vast
commerce
is
is
jealousy and
God
stroyed
upon
No, never.
So
human
destroy
to
long as
we have
selfishness
and
must
tion
in
gain.
public
affects the
opinion
and
in
is
the design
peace
be it
deshall
which
which brings the
pride,
which we
a grand discovery!
happiness of every
it
is
makes them one.
to the principle with
What
but it
peace
voice or pen
individual, so in national exchanges, they are sides
how
believe, originated in heaven,
nations of the earth together and
Let us revert
Shall
world's
the
!
universal
for
;
How
brotherhood and put-
great
Shall
?
we
support that policy which, tends
working
day of war and bloodshed.
be infringed
?
world
the
to
enmity between nations
linking the whole world in one
ting off forever the
of
ours.
commerce has been
drawing the nations together and It
we
be independent of other nations,
to
wholly opposed to the protective policy.
down
breaking
inde-
This should never
cold, selfish.
and they need
benefit
To become
one another.
to help
become proud,
their civilization
God and
were created dependent upon
dependence which makes us sympa-
this
is
it
and a policy which
all,
contrary to the design of
is
best interests of humanity.
the
through
national
human
set out, that as in
made because both
"It created a revolupolicy,
being,
which
directly
and forever removed
a perennial source of war from the world."
We
do not propose
recognize ish
and
it
to set aside that
and enforce
their
good
it,
beautiful truth.
that the selfishness of
increase.
We
men may
shall
dimin-
XVI.
TAXATION
Taxation
The
is
one of the most important functions of Government.
and collecting
four cardinal rules to be observed in assessing
taxes laid
down by Adam Smith, have become and we cannot do
frequent repetition, "
I.
—The
classic
better than state
from their
them
here.
subject of every State ought to contribute to the sup-
port of the Government, as nearly as possible in proportion to their respective
abilities
that
;
is,
proportion
in
revenue which
the
to
they respectively enjoy under the protection of the State. observation or neglect of this
maxim
what
consists
is
In the
called quality
or inequality of taxation. "
be
2.
—The
certain,
tax which each individual
and not
arbitrary.
of payment, the quantity to plain to the contributor,
" 3.
— Every
manner
in
tributor to
"4.
— Every
it
is
most
bound
at
manner
be clear and
the
time,
be convenient
or
in
the
for the con-
it.
tax
ought to be so contrived as both
and above what
State."
pay ought to
person,
and keep out of the pockets of the people over
to
all
to every other
likely to
to
of payment, the
be paid, ought
ought to be levied
tax
which pay
and
is
The time
it
brings
into
the
as
public
little
to take out
as
treasury
possible
of the
TAXATION.
was following a natural order
It
equality of taxation
We
because
first,
it
201
place the rule relating to
to is
preeminent
importance.
in
need repeat no commonplaces upon the necessity of observ-
ing the rule;
the
necessity
deeply graven in the popular mind,
is
and no word§ can deepen or widen
that
Double there
taxation
no escape.
is
B
once, and
is
unequal
If
A
if
the
From
taxation.
conclusion
this
pays a tax upon a similar piece twice, the
No
matter in
kind of property
specific
pro-
this rule.
pays a tax upon a piece of property
doubly and unjustly taxed. laid,
What we
feeling.
pose to consider are the glaring violations of
latter
is
what form the tax
is
taxed twice
is
doubly
is
it
Most shocking instances of double
and wrongfully taxed.
taxa-
have been reported.
tion
The most common method
of taxing property twice
in assess-
is
We
ing bonds, notes, and other evidences of property.
begin
will
with the taxation of currency.*
The currency tion of the
ernment.
of the country consists principally of the circula-
National banks which
such a tax
After
form of money
the
taxation.
The
first
shall
proceed
to
taxed by the National Gova subsequent taxing of
most
circulation
end of taxing
is
which
$75,000. third
is
interest,
enough, but
form of property, as
this
we
show. illustration,
taxed for
Two-thirds of
by Jones.
in
it
double
cases, as
well
has $ 100,000 of
loans $ 50,000 to Jones, secured by mortgage
estate
its it
is
full
value.
owned
Its
worth,
virtually
and Jones pays a tax upon $75,000 of in
Overland Monthly, vol
ii,
p.
this currency.
upon
we
his
real
will say,
is
by Smith, and one-
But Smith must pay a tax upon
See very interesting article " and Should Money be Taxed ? *
upon the
tax
Smith, the inevitable
He
is
laid,
interest operates, in
at
that ought to be the
is
351,
his
$ 50,000
at
real estate. entitled.
" Must,
Can
TAXATION.
202
double taxation
Is not this
does not actually
How, full
?
Jones taxed upon what he
Is not
to the extent of
two
these
then, shall
value of the
laid
own
parties
we
estate; for
real
upon property rather than upon
and
and
for it;
if
he
is
?
be taxed
?
Jones
the
for
believe that taxes should be individuals, because there
Any
a greater certainty in collecting them. session of property,
$ 50,000
who
person
is
is
in pos-
owner, ought to be taxed
the nominal
not the actual owner for any or only a part,
is
then he can adjust the payment of the tax with the real parties
This
in interest.
vast
by
is
far
the
preferable
amount of deception, and the
rule, for
it
will
avoid a
and
collect a larger
State will
juster revenue.
In accordance with
$75,000.
much
for the use of
Smith
It is there.
taxed for
for
on hand.
He
for
the
money, or he
not
will
will
before
it
lets
$ 100,000
is
divide
taxed,
for
in
so
with
tax
it
transferred
real estate.
is it
represented by to
Smith, we
Jones, will
who
assume,
it,
who
Smith is
for
puts
double taxation
which Smith
it
into his
Is
list.
latter
has,
was taxed upon
exchange, and
that
is
it
what he has parted with, ?
was
The bank
issuing
taxed for them.
them, so long as they were his; when he
Jones have them, the he received
the
Smith
he loaned the money to Jones, as cash
tax
of notes
Smith was taxed
Smith has
Jones have
clear, therefore, to
what Jones
give
that sum, the State ought not to tax
form of
in the
it
was taxed
not
he
$ 50,000 loaned to Jones, because
real estate. is
to
his
it,
some agreement made between themselves.
Jones pays a tax upon for
Jones should pay a tax upon
Being obliged to pay
him according If
rule,
this
his real estate
let
which
a sufficient taxing of
all
parties.
Let us follow the other $50,000 of Smith's currency.
He
loans
TAXATION.
$25,000 of
money
of them.
there any justice
Is
B?
loaned to
Certainly not
He
is
taxing
in
taxed
Smith
purchase of cotton for his
cash on hand. stock;
In the
who expends
it
or, in
same property
tax besides, the
nor has
a tax upon
the third place, he
money
taxed twice.
is
it
in
his
who pays
business.
If
same property.
tax thereon, that
dered
it,
is
King
If
surely neither
has re-invested
there
King
is
no
If
King
a
has not
he has purchased has loaned
to
it
has loaned if
it
and pays a tax
it,
justice in
same thing;
the
taxed
is
Smith pays
a tax thereon, or he has wasted or lost
upon such an investment, the
his
manufactured goods on hand,
into stock, nor
as cash in the drawer or bank, either
else
raw
on
if
other property upon which he pays a tax, or he
some one
it
as
it
his
wages, he pays a tax
In either of these three cases,
his cash.
put Smith's
wages, or keeps
King pays
for
it
manufactured product unsold;
upon
mill, for
case,
first
he has expended
if
value
money
the
for
Smith loans $25,000 to King, a manufacturer, in the
expends the
for the full
double taxation.
is
it
;
He
a merchant.
is
purchase of goods.
the
in
Brown, who
to
it
203
Smith
taxing
who pays
to another
King has
for
lost or
he nor Smith should pay a tax
a
squan-
for
what
neither one has. All
money
cover nearly tice in
is
loaned
all
cases.
in these
is
equal to the
than either indebtedness or is
believe these instances is
no
jus-
has been taxed once.
it
Another way of stating the indebtedness
We
clear, therefore, that there
It is
taxing currency after
ways.
same
money money
is
conclusion
is
this:
loaned, the taxation
double taxation.
As
all
of more
The
State
constantly transgressing this line, taxing both.
The
taxation of bonds
except municipal bonds.
falls
in the
They
same category
represent, in
as mortgages,
every instance, real
TAXATION.
204
upon which
or personal property
poration, for example, justice in taxing
we have seen ought not
mortgages, which It
may be
said,
question
this
taxed,
we
require
to
is
it
the
of the
proper
pay upon the property True,
this
is
a most important one.
one
We
only actual, tangible property, and franchises should be
insist that
taxed, in the possession of the holder
the best of reasons to support
There
is
if
he has a nominal interest
he may not be the actual holder.
therein, although
tion.
similar
be made of B.
of the questions involved, and
is
to individual
be taxed.
to
A
railroad cor-
Where
one purely
is
assessment of the tax; instead of having
payment
A
property.
its
Such bonds are
bonds?
its
all
paid.
are
taxes
taxed for
is
First,
it.
will
it
This rule has
avoid double taxa-
no danger of taxing a piece of land twice through
mistake.
It
is
Secondly,
it
will
done,
sometimes prevent
but
done
commissibn
the
openly,
knowingly.
Now,
of fraud.
the
owners of bonds, notes, and the like do an enormous amount of lying in
small
denying
their
tieth of the
put into the
bonds lists.
deception.
it,
estate,
If actual
there
are
taxable
are
some way evade
property were taxed, instead
and merchandise cannot
They
exist.
How much
be put
better, there-
tax them, and thus prevent the lying and deception which
universally practiced under the system
is
in
would be no chance of practicing
goods,
out of existence by words. fore, to
Probably not one-twen-
taxed.
People he and deceive, or
paying taxes upon them.
Real
is
United States which
in the
of the evidences of
Only a very
ownership of such property.
amount of such property
now
prevailing!*
For illustration of the failure to assess and collect taxes upon personal property see Reports of Commissioners to Revise the Laws for the Assessment and Collection of Taxes in the State *
<
of
New
York.
1871-2.
" It has been made manifest
to every
revenue board that convened at Harrisburg, from Feb-
ruary, 184s, to the present time, that the returns of personalty, and, especially, of moneys at Report of Commisir.<-erest and stocks, were never a tenth of their actual amounts or values." sioners to City of Philadelphia to Revise the
Laws Relating
to Taxation.
P. 9.
TAXATION.
Suppose ing
simple rule were adopted,
this
would be!
it
It
would cover
those issued by municipalities. those
money
of
franchises
—a
would cover
a tax rule
and
money
at
would cover
It
and wide-reach-
all
The only
inasmuch as
interest,
invested
simply the
goods and the
in
it
of property not
species
money which
cannot be
as this
far
stocks
except their
thing that cannot be lost out of sight by words. all
paid.
is is
how
mortgages and bonds except
all
which should be taxed upon
associations,
who have
persons
205
upon which
like,
covered by the
may have on hand;
a person
rency issued upon which a tax has been paid by the banks ing
there
it,
Were more
this
property
to
is
New
for taxing
property
York,
for ?
rendered.
is
instance,
A
Massachusetts.
True
A
is
laws there, and
A
the
of his
protection
bonds and
stocks.
is
in
given.
State. is
A
tax
is
by
protected
ought not to be taxed there.
it
the
New York
Massachusetts,
is
indebted to that State, not property. is
no
might
assist
If
him
property, of which the deed
The same justice
property in a place away from where is
the latter
The property
State of
in
There
taxing
and B are the owners, but the prop-
in punishing the offender, but
merely the evidence,
for
Albany, and he holds a mortgage
B.
not in Albany, hence
A's deed were stolen, the
The ground
over property situated in
exercise
in
lives
upon the property by
is
would be
it
but what protection does the State
given;
protection
upon a piece of property located
erty
adopted,
any other, because the tax would be paid where
the
Massachusetts
paid
issu-
a second time.
it
property
of taxing
principle
just than
protection
of
no reason
is
It
loaned to
is
above the whole amount of cur-
value
in
this
it
is
protected by the
New
York,
for
true
of railroad
in taxing the
evidence of
is,
is
because no protection
TAXATION.
2o6
be said that
It will
great hardship
A man
The
the
all
two
He
supposed.
It is
may be
answers
memoranda of property
New
and educates
his
this right?
To
this
bonds
are
the
city
asked,
given.
existing in
pays no taxes where he
of the
privileges
children at the public expense.
question
may be
following case
Railroad bonds.
Central
but enjoys
lives,
the evidences of property are not taxed,
if
arise.
Boston owning one hundred thousand dollars of
in
lives
New York
may
is
his
First,
York, where he must pay
a tax to benefit other people and educate their children.
Secondly,
every individual pays a personal tax for the benefits accruing to the person,
and
this
should cover a tax to support public educa-
tion.
A
Boston, but owns a farm in Wisconsin, where
lives in
All
taxed.
admit that
or stock in a
tax
this
Wisconsin
railroad,
he has to pay another tax upon not the latter tax as unjust as
taxed at his place of residence
Were
this rule
franchises,
all
Our
now.
mode
provision
serious
and yet
in Boston.
Is
farm in Wisconsin were also
visible, actual
property,
and
be taxed and more equally than
lying,
escape of
ought to be inserted
double taxation. rest
and
this
is
barbarous in the extreme, leading to
is
attention
For
there,
bonds
it
owns bonds
?
property would
present
ought to pay taxes to the
his
adopted, of taxing
a vast deal of deception
merits
which are taxed
his stock or
if
A
correctly laid.
is
end
with
and enabling thousands who paying none.
economists
and
This
subject
legislators,
and
prohibiting
in
every constitution
all
should work, for with
this
to
upon the present absurd and unjust system of taxation generthroughout our country can be broken down, and
ally prevailing
another formed, having
its
origin in equity
and
justice.
ni'A7
Ql Al
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