Chapters in political economy

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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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