ch. 4. Similarly, _Roesler_ Grundsätze, 495 ff. Compare,
_per contra_, _Jer. Bentham_, Defense of Usury: showing the
Impolicy of the present legal Restraints on the Terms of
pecuniary Bargains in Letters to a Friend. To which is added
a Letter to Adam Smith on the Discouragement imposed by the
above Restraints to the Progress of inventive Industry,
1787; 3 ed., 1816.]
[Footnote 193-7: The first steamboat in the United States
was, for a long time, called the "Fulton-folly!"]
[Footnote 193-8: It is just as hard to see why only
money-capital should have a fixed rate of interest, and not
buildings, etc. likewise.]
[Footnote 193-9: In Holland, the legal rate of interest was
lowered, in 1640, to 5 per cent., and in 1655 to 4; but not
since. (_Sir J. Child_, Discourse of Trade, 151.) Besides,
_Locke_, Considerations on the Lowering of Interest, Works,
III, 34, assures us that, in his time, a man in England
could make contracts for unlimited interest.]
SECTION CXCIV.
INTEREST-POLICY.--REPEAL OF THE USURY LAWS.
However, the complete repeal of the usury laws[194-1] has not under all
circumstances accomplished what it was supposed it would; and the state
should take great care, lest by an incautious framing of its laws, it
should put judges in such a position that they may be compelled to
coöperate in the execution of immoral contracts.[194-2] In the lowest
strata, so to speak, of the loaning business, the medieval condition
continues to exist (§ 190) after it has disappeared in the upper. Here,
the loan is effected scarcely ever for the purposes of production, but
most generally because of the most urgent necessity; and the debtor is
not in a condition, from want of education, and especially from his
ignorance of arithmetic, to estimate the magnitude of the burthen he has
undertaken. The business of loaning is, under such circumstances,
considered dishonorable, to some extent, by the public. And when a
business necessary in itself is held disreputable by public opinion, the
usual result is that bad men alone engage in it.[194-3] Real competition
which would but fix the natural price is wanting here in proportion as
the debtor is anxious for secrecy.[194-4]
Abuses in this respect are best guarded against by the establishment of
government loan-institutions, and by the publicity of the administration
of justice to debtors.[194-5] Besides, every contract might be
prohibited the terms of which were such that an inexperienced borrower
could not from them obtain a clear conception of the burthen he accepts,
or which hindered him from paying the debt at a proper time.[194-6]
Lastly, there should be a rate of legal interest fixed by the state to
be charged in such cases as interest is found to be in justice due, but
in which none is provided for by contract; and this rate should
approximate as nearly as possible to the rate usual in the
country.[194-7] [194-8]
[Footnote 194-1: In 1787, Joseph II. abolished the penalties
for usury, but allowed the provisions denying a legal
remedy, in cases of usurious demand of over 4 per cent. for
hypothecations, 6 per cent. for bills and 5 per cent. for
other loans, to remain. Compare the prize essay by
_Günther_, Versuch einer vollständigen Untersuchung über
Wucher und Wuchergesetze, 1790; _v. Kees_, über die
Aufhebung der Wuchergesetze, 1791; _Vasco_, Usura libera,
1792. The opposite view represented by _Ortes_, E. N., II,
24, and _v. Sonnenfels_, Ueber Wucher und Wuchergesetze,
1789, and zu Herrn _von Kees_, Abhandlung, etc., 1791. The
debates on the repeal of the usury laws in the French
Chamber of Deputies, after which _Lherbette's_ motion in
favor of their repeal was rejected. In France they were,
during the assignat-period of bewilderment virtually, and in
1804-1807 expressly (C. C., Art. 1907), but only
provisionally repealed. In Würtemberg, all those having the
right to draw bills of exchange were exempted from them in
1839. Since the law of 1848, governing bills of exchange,
gave all persons capable of contracting, the right to draw
bills of exchange, the usury laws have ceased to have any
existence; without much noise before and without much
complaint after. (A. Allgem. Ztg., 24 März, 1857.) Recent
complete or partial repeal of the usury laws: in England, in
1854; in Denmark, in 1855; in Spain, in 1856; Sardinia,
Holland, Norway and Geneva, 1857; Oldenburg, 1858; Bremen,
1859; in the kingdoms of Saxony and Sweden, in 1864;
Belgium, 1865; Prussia, the North German Confederation, and
to some extent Austria, in 1867.]
[Footnote 194-2: Compare _F. X. Funck_, Zins und Wucher,
1868, a moral theological treatise which rightly demands a
more rigid popular morality in relation to real usury, after
the repeal of the usury laws. The recent cases in which
courts have juridically acquitted usurers because they could
not do otherwise, but have branded them morally, are of very
questionable propriety, in view of the facility with which
high and usurious rates of interest may be confounded. _R.
Meyer_, Emancipationskampf, I, 78, advises that the
capitalist be allowed to ask whatever interest he wishes,
but that the state, as judge and executor of the laws,
should enforce payment only at a certain rate determined by
law.]
[Footnote 194-3: Many laws seem to purposely permit this,
inasmuch as they allow a rate of interest, higher in
proportion as the position of the creditor is less
respectable. Thus, formerly, in some places, the Jews might
require higher interest than the Christians. Justinian
allows _personis illustribus_ only 4 per cent.; ordinary
private persons, 6 per cent.; money-changers, etc., 8 per
cent. (L. 26, Cod. IV, 32.) On the other hand, according to
the Indian legislation of Menu, the Brahman is obliged to
confine himself to 2, the warrior to 3, the _vaysya_ to 4,
the _sudra_ to 5 per cent. per month at most. (Cap. 8.)]
[Footnote 194-4: _Turgot_ considered that only the _prêteurs
à la petite semaine_, pawnbrokers who loaned to hard-pressed
people on the confines of the middle class and artisans, and
the infamous characters who advanced money to the sons of
rich men to spend in dissipation, still passed for usurers.
Only the latter are injurious; not, however, because of the
high rate of interest they charge, but because they help in
a bad cause. (Sur le Prêt d'Argent, § 32.) According to
_Colquhoun_, Police of the Metropolis, 167, there are women
in London from whom the hucksteresses borrow 5 shillings
every day and return them every evening with 1/2 shilling
interest. Something analogous happens much more frequently
in the country, especially in the loaning in kind of
productive capital to poor persons. Thus, in Tessin, there
are many "iron cattle" which the borrower is obliged to
return at their original value, plus an interest of about 36
per cent. (_Franscini_, C. Tessin, 152.) On the Rhine,
frequently as much as 200 per cent. a year, is stipulated
for in such contracts. _Morstadt_, der N. Oekonom. Heft., IX,
727.]
[Footnote 194-5: Compare _J. J. Becher_, Polit. Discurs,
1668, 219; _v. Schröder_, F. Schatz- und Rentkammer, Bd. §§
123, 133 ff. The first _montes pictatis_ were expressly
intended to check the usury of the Jews. Thus, in Florence,
in 1495, after the expulsion of the Jews, voluntary
contributions were made to found a municipal loaning
establishment. Similarly, _Tiberius_, Tacit. Ann., VI, 16
seq. _Count Soden_, Nat-Oek., IV, 57; V, 319, advises that
all contracts for interest should be recorded in a public
registry, under pain of their being held not actionable.]
[Footnote 194-6: _Günther_, loc. cit., thinks that, in every
contract in which the rate of interest is masked, its real
rate should be expressed under penalty of invalidity. In
addition to this, he would have those who have attained
their majority put in full control of their fortune only
after they had undergone an examination.
It seems opportune that the old prohibition against interest
on interest (_Cicero_, ad. Att., V, 21, and L, 26, Digest,
XIV, 6) and the provision that the interest should not be
permitted to be greater than the _alterum tantum_ (Digest,
l. c.) should be permitted to continue. (Digest, l. c.) Both
of these measures were first decreed by Lucullus, for the
protection of Asia Minor. Compare § 115. Florentine law, of
1693, that interest in arrears, or that interest on interest
beyond 7 years, should not be added to the principal without
an express contract to that effect. (_Vasco_, Usura libera,
§ 155.) In England, the usury laws were by 2 and 3 Victor.,
c. 37, repealed, but only to the extent of excepting from
their provisions bills of not over 12 months, and money
loans not over £10. Compare _Rau_, Lehrbuch II, § 323.]
[Footnote 194-7: Compare _Locke_, Considerations: Works, 10,
32 ff. In Spain, the Council of State is required to
regulate the rate of legal interest yearly (law of 1856,
art. 8); a thing which, according to _Braun_, would be
better done in each individual case by the judges
themselves. (_Faucher's_ Vierteljahrsschrift, 1868, II,
13.)]
[Footnote 194-8: In Athens, the rate of interest in general
was voluntary from the time of Solon, who, however, did away
with slavery for debt. (Lysias adv. Theomn., 360.) Yet there
was a legal rate of interest of 18 per cent. for the case in
which a divorced husband delayed the return of his wife's
dowry. Compare _Böckh_, Staatshaushalt der Athener, I, 148.]
CHAPTER V.
THE UNDERTAKER'S PROFIT. (_UNTERNEHMERLOHN._)
SECTION CXCV.
THE REWARD OF ENTERPRISE.
The essence of an enterprise or undertaking, in the politico-economical
sense of the word, consists in this, that the undertaking party engages
in production for the purpose of commerce, at his own risk. In the
earlier stages of a nation's economy, the production of consumers is,
naturally enough, limited chiefly by their own personal wants. Somewhat
later, when the division of labor has been further developed, the
workman produces at first, enough to meet occasional determinate
"orders;" and still later to meet them regularly and as a business.
Later yet, and in stages of civilization yet higher, especially when the
freedom of labor constantly grows, as it is wont to, here, and the
freedom of capital and trade becomes more extensive, enterprise plays a
part which grows more important as time rolls on, and is usually carried
on more at one's own risk.[195-1] This transition is a great advance,
inasmuch as the advantages of the coöperation of labor and of _use_ may
be utilized in a much higher degree by undertakers (_Unternehmer_) than
by producers who labor only to satisfy their own household wants, or to
meet "orders" already made. The awakening of latent wants, a matter of
the utmost importance to a people who would advance in civilization, is
something which can enter into the mind only of a man endowed with the
spirit of enterprise (an undertaker).[195-2]
While most English political economists have confounded the personal
gain of the undertaker with the interest on the capital used by
him,[195-3] many German writers have called the "undertaker's earnings"
or profit a special, and fourth, branch of the national income,
coördinate with rent, wages, and the interest on capital.[195-4] Yet,
the net income of every undertaker is either the fruit of his own land
used for purposes of production and of his capital, in which case it is
subject to the usual laws of development of rent and interest; or, it
must be considered as wages paid for his labor.[195-5] These wages he
earns, as a rule, by organizing and inspecting the work, calculating the
chances of the whole enterprise; frequently by, at the same time,
keeping the books and acting as cashier; and, in the case of small
undertakings, as a common fellow-workman. (Tradesman, peasant). In every
case, however, even when he puts an agent paid by himself in his place,
he earns these wages from the fact that his name keeps the whole
enterprise together; and for the reason that, in the last
instance,[195-6] he has to bear the care and responsibility attending
it.[195-7] When a business goes wrong, the salaried director or foreman
may permit himself to be called on to engage in another; but the weary,
watchful nights belong to the undertaker or man of enterprise, alone;
and "how productive such nights frequently are!"[195-8]
This profit of the undertaker is subject essentially to the same natural
law as wages in general are; only it differs in this from all other
branches of income, that it can never be stipulated for in advance.
Rather does it consist of the surplus which the product of the
undertaking affords over and above all the rent stipulated for in
advance or estimated at the rate usual in the country, the interest on
capital, and wages of common labor.[195-9]
[Footnote 195-1: At first, usually imperfect enterprises in
which the shop-instruments, etc., are kept ready for present
orders; and then complete or perfect enterprises. (_v.
Mangoldt_, Volkswirthschaftslehre, 255.)]
[Footnote 195-2: _v. Mangoldt_, Lehre vom Unternehmergewinn,
1855, 49 ff. The same author shows, in his
Volkswirthschaftslehre, that it is better for the general
good that the risk should be borne by the producer than by
the consumer. In the case of the taking of orders, there is
danger only of a technic failure, but in enterprise proper,
there is possible also an economic miscarriage of the work,
even when successful from a technic point of view. But in
the case of the undertaker (man of enterprise),
responsibility is much more of an incentive, production much
more steady, and therefore much better able to exhaust all
means of help. Consumers are much more certain in their
steps, as regards price, etc., since they find what they
want ready made.]
[Footnote 195-3: Thus _John Stuart Mill_, Principles, II,
ch. 15, 4, teaches with a certain amount of emphasis that
the "gross profits of stock" are different not so much in
the different branches in which capital is employed, as
according to the personal capacity of the capitalist himself
or of his agents. There are scarcely two producers who
produce at precisely the same cost, even when their products
are equal in quality, and equally cheap. Nor are there two
who turn over their capital in precisely the same time.
These "gross profits" uniformly fall into three classes:
reward for abstinence, indemnity for risk, remuneration for
the labor and skill required for superintendence. _Mill_
complains that there is in English no expression
corresponding to the French _profit de l'entrepreneur_. [The
translator has taken the liberty to use the expression
"undertaker's profit," for what the French call the _profit
de l'entrepreneur_, and the Germans _Unternehmerlohn_, spite
of its funereal associations, and because Mill himself
employed it, although he recognized that it was not in good
usage.--TR.] (II, ch. 15, 1) _Adam Smith_ had the true
doctrine in germ (Wealth of Nat., I, ch. 6), but those who
came after him did little to develop it. Compare _Ricardo_,
Principles, ch. 6. 21. _Read_, Political Economy, 1829, 262
ff., and _Senior_, Outlines, 130 seq., were the first to
divide profit into two parts: interest-rent (_Zinsrente_)
and industrial gain. Similarly, _Sismondi_, N. P., IV, ch.
6. According to _A. Walker_, Science of Wealth, 1867, 253,
285, "profits are wages received by the employer."]
[Footnote 195-4: _Hufeland_, Grundlegung, I, 290 ff.;
_Schön_, Nat-Oek., 87, 112 ff.; _Riedel_, Nat-Oek., II, 7 ff.;
_von Thünen_, Der isolirte Staat, II, 1 80 ff.; _v.
Mangoldt_, Unternehmergewinn, 34 ff. The latter divides the
undertaker's profit (_profit de l'entrepreneur_) into the
following parts:
A. Indemnity for risk. If this be only an indemnity exactly
corresponding to the risk, it cannot be looked upon at all
as net income, but only as an indemnification for capital.
If individual undertakers, favored by fortune, receive a
much larger indemnification than is necessary to cover their
losses, such indemnification is not income either, but an
extraordinary profit not unlike a lottery-gain, unless it be
called, perhaps, the reward of extraordinary courage
(_Eiselen_), i. e., wages. If, lastly, the indemnity is
uniformly somewhat larger than the risk, in order to
compensate for the continual feeling that one is running a
risk, it must be remembered that all remuneration for
present sacrifice, made directly for the sake of production,
is wont to be embraced under the name of wages.
B. Wages and interest for the labor and capital utilized
only in one's own production, and which cannot be let. _v.
Mangoldt_ himself admits, that, in the long run, only
certain qualified labor belongs to this category.
C. Undertaker's rent (_Unternekmerrente_) depending on the
rarity of undertakers (men of enterprise) compared with the
demand. This, therefore, is not a third component part, but
only one which adds to the other two, _Storch_, Handbuch, I,
180, and _Rau_, Lehrbuch, I, § 237 ff., consider the profit
of the undertaker as an admixture of wages and interest.
Professor _J. Miscszewicz_ has given expression to an
interesting thought in opposition to myself: that credit is
a fourth factor of production (natural forces, labor and
capital being the other three) produced by the three older
factors, as capital by the two oldest. The undertaker's
profit he then considers the product of this fourth factor,
corresponding to rent, interest and wages.]
[Footnote 195-5: Compare _Canard_, Principes, ch. 3; _J. B.
Say_, Traité, II, ch. 7, Cours pratique, V, 1-2, 7-9,
distinguishes three branches of income: rent, interest and
the profits of industry; and he divides the latter again
into the profits of the _savant_, the undertaker and
workmen, (_v. Jacob_, Grundsätze der Nat.-Oek., § 292;
_Lotz_, Handbuch, I, 471; _Schmalz_,
Staatswirthschaftslehre, I, 116; _Nebenius_, Oeff. Credit,
I, Aufl., 466.)]
[Footnote 195-6: I need only call attention to the influence
that the mere name of a general sometimes exerts over the
achievements and sometimes even over the composition of his
army (Wallenstein!); and how important it sometimes is to
keep his death a secret. And so the mere name of a minister
of finance may facilitate loans, etc.]
[Footnote 195-7: It is sufficient to mention the different
positions occupied by the shareholders and preferred
creditors of a joint-stock company.]
[Footnote 195-8: Compare _von Thünen's_ Isolirter Statt, II,
80 ff., and his Life, 1868, 96. _Meister muss sich immer
plagen!_ (_Schiller._) See a long catalogue of books on the
position of the undertaker in the principal different
branches of industry in _Steinlein_, Handbuch der
Volkswirthschaftslehre, I, 445 ff.]
[Footnote 195-9: _Tantièmes_ occupy a middle place between
wages and the undertaker's profit; dividends a middle place
between undertaker's profit and the interest of capital. On
this is based _Rodbertus's_ view, that an increase of joint
stock companies raises _ceteris paribus_ the rate of
interest, and an increase of productive associations the
rate of wages, for the reason that in each instance, there
is some admixture of "undertaker's profit," or reward of
enterprise.]
SECTION CXCVI.
UNDERTAKER'S PROFIT.--CIRCUMSTANCES ON WHICH IT DEPENDS.
As the wages or reward of labor, in all instances, depends on the
circumstances mentioned in § 167 ff., so, also does the reward of
enterprise; in other words, the undertaker's profit or wages. It
depends, therefore:
A. On the rarity of the personal qualities required in a business, which
qualities may be divided into technical and ethical qualities. Among the
latter are, especially, the capacity to inspire capitalists with
confidence and workmen with love for their task; the administrative
talent to systematize a great whole made up of men and to order it
properly, to keep it together by sternness of discipline in which
pedantry has no part, and by economy with no admixture of avarice; and
frequently endurance and even presence of mind. These ethical,
statesmanlike qualities are, take them all in all, a more indispensable
condition of high undertaker's profit than the technical are.[196-1]
B. On the risk of the undertaking in which not only one's property, but
one's reputation, may be lost.[196-2]
C. As to the disagreeableness of the undertaking or enterprise, we must
take into especial consideration the disinclination of capitalists in
general to assume the care and trouble of concerning themselves directly
with the employment of their capital. (§ 183.) The undertaker's profit
is, besides, lower in proportion as he needs to care less for the
profitable application of the different sources of production, and for
their preservation. Hence it is, in general, higher for the direction of
circulating than of fixed capital; in speculative trade and in wholesale
trade which extends to the whole world, than in retail trade and merely
local business.[196-3]
It has, indeed, been remarked, that the undertaker's profit is, as a
rule, proportioned to the capital employed.[196-4] This may be true in
most cases, but only as the accidental compromise between opposing
forces. It is evident that the greater the enterprise is, the greater
may be the surplus over and above the compensation stipulated for in
advance of all the coöperating productive forces, and not only
absolutely but also relatively. We need only call to mind the successful
results attending the greater division of labor (§ 66) and the greater
division of use (_Gebrauchstheilung_) (§ 207); the greater facility of
using remains in production on a large scale, and the fact that all
purchases, and all obtaining of capital are made, when the items are
large, at cheaper rates, because of the more convenient conducting of
the business.
This is true up to the point where the magnitude of the whole becomes so
great as to render the conducting of it difficult. Considered even
subjectively, the great undertaker, whose name and responsibility keep a
great many productive forces together, may demand a higher reward,
because there are so few persons competent to do the same. On the other
hand, it cannot be denied that a support in keeping with his position
may be called the amount of the cost of production of the undertaker's
labor. If this cost is once fixed by custom, it will, of course, be
relatively high in those branches of business which permit only of the
employment of a small capital.[196-5]
In the higher stages of civilization, the undertaker's profit has, like
the rate of interest, a tendency to decline. This decline is, indeed, in
part, only an apparent one, caused by the decreased risk and the smaller
indemnity-premium. But it is, in part, a real one, produced by the
increased competition of undertakers.[196-6] The more intelligent
landowners and workmen become, the more readily do they acquire the
capacity and desire to use the productive forces peculiar to them in
undertakings of their own; and the number of retired persons who live
from their rents grows smaller with the decline of the rate of interest.
The strong competition of undertakers now leads to degeneration, and
undertakings or enterprises become usual in which the gains or losses
are subjective, and are destitute of all politico-economical
productiveness; for instance, the purchase of growing fruits, and
businesses carried on in "margins," or differences. It is self-evident
that the circumstances which retard the rate of interest, or turn it
retrograde, would have a similar effect on the undertaker's profit. (§
186.) On the whole, a rapidly growing people meet with great gains and
losses, but the preponderance is in favor of the former. A stationary
people are wont to become more and more careful and cautious. A
declining people underestimate the chances of loss, although in their
case they tend more and more to preponderate over the chances of gain.
(_v. Mangoldt._)
[Footnote 196-1: Thus _Arkwright_, by his talent for
organization principally, attained to royal wealth, while
_Hargreaves_, a greater inventive genius, from a technic
point of view, had to bear all the hardships of extreme
poverty.]
[Footnote 196-2: An experienced Frenchman, _Godard_,
estimates that of 100 industrial enterprises attempted or
begun, 20 fail altogether before they have so much as taken
root; that from 50 to 60 vegetate for a time in continual
danger of failing altogether, and that, at the furthest, 10
succeed well, but scarcely with an enduring success.
(Enquête commerciale de 1834, II, 233.)]
[Footnote 196-3: Thus _Ganilh_, Théorie de l'Economie
politique I, p. 145, was of the opinion that in France's
foreign trade the profit was only 20, and in its internal
trade, scarcely 10 per cent. of the value put in
circulation.]
[Footnote 196-4: _Hermann_ loc. cit. 208.]
[Footnote 196-5: According to _Sinclair_, Grundgesetze des
Ackerbaues, 1821, the profit on capital of English farmers
was wont to be from 10 to 18 per cent. Only in very
remarkable cases, by persons in very favorable
circumstances, was from 15 to 20 per cent. earned; that is,
on the whole, less than in commerce and industry. In the
case of farmers of meadow land, 15 per cent. and even more
was not unusual; because there is a need of less outlay
here, but more mercantile speculation, especially in the
fattening of live stock.
At the end of the last century English farmers expected 10
per cent. profit on their capital. (_A. Young_, View of the
Agriculture of Suffolk, 1797, 25.) And so _Senior_ is of
opinion that, in the England of to-day, industrial
enterprises of £100,000 yield a profit of less than 10 per
cent. a year; those of £40,000, at least 12-1/2 per cent.;
those of from £10,000 to £20,000, 15 per cent.; smaller ones
20 per cent. and even more. He makes mention of fruit
hucksters who earned over 20 per cent. a day; that is, over
7,000 per cent. a year! (Outlines, 203 seq.) In Manchester,
manufacturers, according to the same authority, turned over
their capital twice a year at 5 per cent.; retail dealers,
three times a year at 3-1/2 per cent. (Ibid, 143.)
_Torrens_, The Budget (1844), 108, designates 7 per cent. as
the minimum profit which would induce an English capitalist
to engage in an enterprise of his own. According to _v.
Viebahn_, Statistik des Regierungsbezirks Düsseldorf, 836,
I, 180, the undertaker's profit, i. e., the surplus money of
the value of the manufactured articles, after deduction made
of the raw material and wages, in the Berg country, amounted
to, in 81 iron factories, 146,400 thalers; in 6 cotton
factories, to 21,200 thalers; in 15 cloth factories, to
14,725 thalers; in 4 worsted factories, to 1,700 thalers; in
4 brush factories, to 800 thalers; in 2 tobacco factories to
10,220 thalers; in 2 paper factories, to 7,400 thalers; on
an average, 1,924 thalers; although many undertakers earned
only from 200 to 400 thalers, and some few from 5,000 to
10,000 thalers.]
[Footnote 196-6: This is, of course somewhat oppressive to
many individuals, and hence we find that in those countries
which are unquestionably making great advances in
civilization, there are so many complaints of alleged
growing impoverishment. Compare _Sam. Fortrey_, England's
Interest and Improvement, 1663; _R. Coke_, A Treatise
wherein is demonstrated that the Church and State of England
are in equal danger with the Trade of it, 1671. Britania
languens, showing the Grounds and Reasons of the Increase
and Decay of Land, etc., 1680. And per contra, England's
great Happiness, wherein is demonstrated that a great Part
of our Complaints are causeless, 1677. Analogous claims
might be shown to exist in Germany by a collection of almost
any number of opinions advanced during the last thirty
years.]
SECTION CXCVI (_a._).
UNDERTAKER'S PROFIT.--HAVING THE "LEAD."
The undertaker's profit is that branch of the national income in which
the greater number of new fortunes are made. If a landowner has a large
income, he generally considers himself obliged to make a correspondingly
large outlay, one in keeping with his position; and workmen who are not
undertakers themselves seldom have the means to make large savings.
Besides, undertakers stand between the purchasers of their products and
the lessors of the productive forces used by them in the peculiarly
favorable situation which I may describe by the expression: having, as
they say in card-playing, "the lead."[196a-1] When, in the struggle for
prices, one party occupies a position which enables him to observe every
change of circumstance much sooner than his opponent, the latter may
always suffer from the effects of erroneous prices. If, for instance,
the productiveness of business increases, even without any personal
merit of the individual undertakers themselves, it will always be some
time before the decline in the price of commodities and the rise in the
rate of interest take place, as a result of the increased competition of
undertakers, consequent upon the extraordinary rate of the undertaker's
profit. It is difficult, and even impossible in most instances for the
proprietors of the productive forces which they have rented out, to
immediately estimate accurately the profit made by undertakers. On the
other hand, the least enhancement of the price of the forces of
production is immediately felt by the undertakers, and causes them to
raise their prices. They just as quickly observe a decline of the prices
of the commodities, and know how to make others bear it by lowering
wages and the rate of interest.[196a-2] It should not be forgotten that
the persons most expert, far-seeing, active and expeditious in things
economic, belong to the undertaking class.[196a-3] [196a-4]
[Footnote 196a-1: The same principle is effective in
intermediate commerce, and in the intervention of bankers
between government and state creditors.]
[Footnote 196a-2: This is much less the case in rents, for
the reason that contracts here are made for a much longer
term. Hence, here the farmer has as much to fear as to hope
from a change of circumstances. Hence, too, we meet with a
farmer who has grown rich much more seldom than with a
manufacturer or a merchant.]
[Footnote 196a-3: If an undertaker can cede his higher
reward to another and guaranty its continuance, the
circumstances which enable him to do this assume the nature
of fixed capital; for instance, the trade or _clientèle_
secured by custom or privilege. If the undertaker has not
the power to dispose of it in this way, the increased profit
either disappears with his retirement from the business or
falls to the owner of the capital employed, and still more
to the land owner. Thus, for instance, how frequently it has
happened that a store, which has been largely resorted to by
the public, drawn thither by the business tact of the
lessee, has afterwards been rented by the owner at a higher
rent! (_Hermann_, loc. cit. 210.)]
[Footnote 196a-4: _Lassalle's_ socialistic attacks on
Political Economy have been directed mainly against the
undertaker's profit or reward. Compare the work
"Bastiat-Schulze von Delitzsch, der ökonom. Julian oder
Kapital und Arbeit," 1863. By means of state credit, he
would have this branch of income turned over to common
labor. _Dühring_ also, Kapital und Arbeit 90, declaims not
so much against capital as against "the absolutism of
undertakers." _Schäffle_ D. Vierteljahrsschrift Nr. 106, II,
223, objects to this, that undertakers give value in
exchange to unfinished products, a great service rendered
even to the laboring class, who otherwise would have to
resign the advantages of the division of labor.
The undertaker's profit is precisely the part of the great
politico-economical tree from which further growth chiefly
takes place. To artificially arrest it, therefore, would be
to hasten the stationary state, and thus make general and
greater the pressure on workmen and capitalists, which it is
sought to remove locally. Hence _Roesler_, Grundsätze, 507
ff., very appropriately calls the undertaker's profit the
premium paid by society to those who most effectually combat
the "law of rent." The importance of a good undertaker may
be clearly seen when a joint stock manufacturing company
pays a dividend of from 20 to 30 per cent., while one close
by, of the same kind, produces no profit whatever. But, at
the same time, the socialistic hatred of this branch of
income may be easily accounted for, in a time full of
stock-jobbing, which last never produces except a
pseudo-undertaker's profit.]
CHAPTER VI.
CONCLUDING REMARKS ON THE THREE BRANCHES OF INCOME.
SECTION CXCVII.
INFLUENCE OF THE BRANCHES OF INCOME ON THE PRICE OF COMMODITIES.
We have seen, § 106, that the cost of production of a commodity,
considered from the point of view of individual economy, may be reduced
to the payment for the use of the requisite productive forces rented or
loaned to the producer. Hence every great variation in the relation of
the three branches of income to one another must produce a corresponding
variation in the price of commodities.[197-1] When, for instance, the
rate of wages increases because they absorb a larger part of the
national income, those commodities in the production of which human
labor, directly employed, is the chief factor, must become dearer as
compared with others. Whether this difference shall be felt principally
by the products of nature or of capital (compare § 46 seq.), depends on
the causes which brought about the enhancement of the rate of wages.
Thus, a large decrease of population, or emigration on a large scale,
will usually lower rent as well as the rate of interest;[197-2] an
extraordinary improvement made in the art of agriculture, only the
former; and an extraordinary increase of capital, only the latter. The
usual course of things, namely that the growth of population
necessitates a heavier draft on the resources of the soil, and thus
causes rents to go up, and makes labor dear, must have the effect of
raising the price of the products of labor and of natural forces, as
compared with the products of capital; and all the more as it causes the
rate of interest to suffer a positive decline. The products of
mechanical labor become relatively cheaper; and cheaper in proportion as
the producing machinery is more durable; therefore in proportion as, in
the price of the services it renders, mere interest preponderates over
compensation for its wear and tear.[197-3]
Let us, for a moment, leave ground-rent out of the question entirely,
and suppose a nation's economy whose production is conducted by eleven
undertakers employed on different commodities. Let us suppose that
undertaker No. 1 uses machinery exclusively and employs only as many
workmen as are strictly necessary to look after it, that undertaker No.
2 has a somewhat larger number of workmen and a somewhat smaller amount
of fixed capital, etc.; and that this increase in the number of workmen
and decrease in the amount of fixed capital continues until we reach
undertaker No. 11, who employs all his capital in the payment of wages.
If now, the rate of wages were to rise, and the interest on capital to
fall in the same proportion, the commodities produced by undertaker No.
11 would rise most in price, and those of No. 1 decline most. In the
case of undertaker No. 6, the opposing influences would probably balance
each other, and if the producers of money belonged to this sixth class,
it would be very easy to get a view of the whole change in the
circumstances of production, in the money-price of the different
commodities.[197-4]
[Footnote 197-1: Compare _Adam Smith_, I, ch. 7, fin. This
relative increase or decrease of one branch of income at the
expense or to the advantage of another, should be
distinguished from the absolute change of its amount which
does not affect the cost of production. Thus, for instance,
when the rent of land indeed increases, but in consequence
of a simultaneous improvement in agriculture, a decline in
the rate of interest, and an enhancement of the price of
wheat is avoided (§ 157). So, too, when individual wages
increase on account of the greater skill and energy of
labor, but the same quantity and quality of labor do not
become dearer (§ 172 seq.); and lastly, when the rate of
interest remaining unaltered, the receipts of capitalists
are increased by reason of an increase of their capital (§
185).]
[Footnote 197-2: After the great plague in the 14th century
in England, when all the products of labor became dearer,
skins and wool fell largely in price: _Rogers_, I, § 400.]
[Footnote 197-3: Anyone who carefully reads all the five
divisions of _Ricardo's_ first chapter will soon find that
this great thinker rightly understood the foregoing,
although the great abstractness and hypothetical nature of
his conclusions might easily lead the reader astray. The
proposition which closes the second part, and which has been
so frequently misunderstood by his disciples, can be
maintained only on the supposition that the prices of all
commodities hitherto have been made up of equal proportions
of rent, capital and wages. But think of Brussels lace and
South American skins!]
[Footnote 197-4: Compare _J. Mill_, Anfangsgründe der polit.
Oekonomie, Jacob's translation, § 13 ff.; _McCulloch_,
Principles, III, 6. _Adam Smith_ was of opinion, that higher
wages enhanced the price of commodities in an arithmetical
ratio, a higher rate of interest in a geometrical one (I,
ch. 9). Similarly _Child_, Discourse of Trade, 38. This last
_Kraus_, Staatswirthschaft, better expresses by saying that
an increase in the rate of interest operates in the ratio of
the compounded interests.]
SECTION CXCVIII.
REMEDY IN CASE ONE FACTOR OF PRODUCTION HAS BECOME DEARER.
When one of the three branches of income has grown as compared with the
others; in other words, when the factor of production which it
represents has become relatively dearer, it is to the interest of the
undertaker and of the public, that it should be replaced where possible
by another and cheaper productive force. (§ 47.) On this depends the
advantageousness of _intensive_ agriculture (high farming) in every
higher stage of civilization. There land is dear and labor cheap. Hence,
efforts are made to get along with the least amount of land-surface, and
this minimum of land is made more productive by a number of expedients
in cultivation, by manuring it, by seed-corn, etc., of course also by
the employment of journeymen laborers, oxen, etc. And since the price of
land is intimately connected with the price of most raw material,
remains are here saved as much as possible, often with a great deal of
trouble.[198-1] In a lower stage of civilization, such savings would be
considered extravagance. As land is here cheap, and capital dear, it is
necessary to carry on the cultivation of land _extensively_; that is,
save in capital and labor, and allow the factor nature to perform the
most possible. The clearing up of untilled land, or the draining of
swampy land etc., would be frequently injurious here; for it would
require the use of a very large amount of capital to obtain land of
comparatively little value.
In large cities, it is customary to build houses high in proportion to
the dearness of the land.[198-2] Thus, in England, where the rate of
interest is low and wages high, labor is readily supplanted by capital.
In countries like the East Indies or China, the reverse is the case. I
need only call attention to the palanquins used in Asia instead of
carriages; to the men who in South America carried ore down eighteen
hundred steps to the smelting furnaces,[198-3] and, on the other hand,
to the "elevators," so much in favor in England, which are used in
factories to carry people from one story to another inside to save them
the trouble of going up stairs.[198-4]
[Footnote 198-1: The sickle instead of the scythe; careful
threshing by hand, and, where the rate of interest is low,
threshing by machinery instead of the treading out of the
sheaf by oxen. Thus in Paris the scraps from restaurants and
soap factories are made into stearin; and the remnants in
shawl factories in Vienna are sent to Belgium to be used by
cloth manufacturers.]
[Footnote 198-2: Remarked in ancient times of Tyre, which
was situated on a small island, and, therefore, without the
possibility of horizontal extension. (_Strabo_, XVI, 757.)]
[Footnote 198-3: _Humboldt_, N. Espagne II, ch. 5, II, ch.
11.]
[Footnote 198-4: Thus, in England, the safety of railroad
trains is not secured as in Germany by a multitude of
watchmen, etc.; but by solid barriers, by bridges at every
crossing, in other words, by capital.]
SECTION CXCIX.
INFLUENCE OF FOREIGN TRADE.
Foreign trade, that great means of coöperation of labor among different
nations, affords such a remedy in a very special manner. It very
frequently happens that the undertakers of one country, when a certain
factor of production seems too dear at home, borrow it elsewhere. Thus,
for instance, a country with a high rate of wages draws on another for
labor, and one with a high rate of interest on another for
capital.[199-1] We elsewhere consider such a course of things from the
standpoint of the supplying country, which in this way is healed of a
heavy plethora of some single factor of production which disturbs the
harmony of the whole. (§§ 187, 259, ff.). But, at the same time, the
supplied country, considered from a purely economic point of view, reaps
decided advantages therefrom. If, for instance, a Swiss confectioner
returns from Saint Petersburgh to his home, after having made a fortune
in an honest way, no one can say that Russia has grown poorer by the
amount of that fortune. This man made his own capital; if he were to
remain in Russia, its national economy would be richer than before his
immigration thither. Now, it is, at least, no poorer, and has in the
meantime had the advantage of the more skilled labor of the
foreigner.[199-2] And, so, when a capitalist living in Germany purchases
Hungarian land, the national income of Hungary is diminished by the
amount of the annual rent which now goes to Germany; but it receives an
equal amount in the interest on capital, provided the purchase was an
honorable one and the capital given in exchange for the land honestly
invested.[199-3] If Hungary, in general, had a superabundance of land
but a lack of capital, the economic advantage is undoubted.[199-4]
These economic rules, indeed, are applicable only to the extent that
higher and national considerations do not in the interest of all, create
exceptions to them. "Is not the life more than meat, and the body than
raiment?" No rational people will allow certain services to be performed
for them preponderantly by foreigners, even when they can be performed
cheaper by the latter--the services of religion, of the army, of the
state, etc. The same is true of landownership; and all the truer in
proportion as political and legal rights of presentation and other forms
of patronage are attached to it. Lastly, hypothecation-debts which go
beyond certain limits, may entail the same consequences as the complete
alienation of the land;[199-5] and Raynal may have been, under certain
circumstances, right when he said, that to admit foreigners to subscribe
to the national debt was equivalent to ceding a province to them.[199-6]
It is obvious that a great power may do much in this relation that would
be a risk to a small state.[199-7] [199-8]
[Footnote 199-1: "The transportation of productive capital
and industrial forces from one point where their services
are worse paid for, to another where they find a rich
reward, will not be apt to be made so long as the
equilibrium may be obtained [most frequently much more
easily] by the interchange of the products." (_Nebenius_,
Oeff. Credit, I, 48.) The repeal of the corn laws in England
certainly diminished the emigration of English capital.]
[Footnote 199-2: For an official declaration of the
Brazilian state in this direction, see Novara Reise.]
[Footnote 199-3: Basing himself hereon, _Petty_, Political
Anatomy of Ireland, 82 ff., questions the usual opinion,
that Ireland suffered so much from absenteeism. He says that
a prohibition of absenteeism carried out to its logical
conclusion would require every man to sit on the sod he had
tilled himself. _Carey_, On the Rate of Wages, 1835, 477,
calls English capitalists who draw interest from America,
absentees.]
[Footnote 199-4: The older political economists have, as a
rule, ignored this law, and were wont to consider every
payment of money to a foreign country as injurious. Thus,
for instance, _Culpeper_, Tract against the high Rate of
Usury, 1623, 1640, disapproves all loans made from foreign
countries, because they draw more money in interest, and in
repayment of the principal out of the nation, than they
brought into it at first; and all the more, as the loan is
generally procured, not in the precious metals, but in
foreign goods, of which there is a superabundance in the
home country. Similarly _Child_, Discourse of Trade, 1690,
79, who claims that the creditor was always fattened at the
expense of the debtor. Hence _v. Schröder_, Fürst, Schatz-
und Rentkammar, 141, advises that the capital borrowed in
foreign countries should be confiscated. Compare, also, _v.
Justi_, Staatswirthschaft, II, 461. And yet the very
simplest calculation shows, that if a man borrows $1,000 at
5 per cent. and makes 10, he is doing a good business with
the borrowed capital. This _Locke_, Considerations, 9,
recognizes very clearly. Compare, also, _J. B. Say_, Traité,
II, ch. 10, and _Hermann_, Staatsw. Unters., 365 seq.]
[Footnote 199-5: Think of the English creditors in Portugal
and the Genoese in Corsica (_Steuart_, Principles, II, ch.
29.) Considered simply from an economic standpoint, the
Edinburg Review, XX, 358, very clearly demonstrates that
England should recruit her army from Ireland, where wages
are so much lower than in Great Britain. But how dangerous
in a political sense! In 1832, one-fourth of the stock of
the United States Bank was in the hands of foreigners, and
hence its opponents nick-named it the "British Bank." By the
rules of the principal bank in Philadelphia, in 1836, only
American citizens were allowed a vote in its proceedings.
Similarly in the case of the Bank of France. (_M.
Chevalier_, Lettres sur l'Amerique du N. I, 364.) It may be
remarked in general, that the older political economists
have based correct political views on false economic
principles, while the more modern ignore them entirely.]
[Footnote 199-6: Compare _Montesquieu_, E. des Lois L, XXII,
17; _Blackstone_, Commentaries, I, 320.]
[Footnote 199-7: Thus Austria conceded, in 1854-55, a number
of railways to French capitalists, and always favored the
purchase of landed estates by small foreign princes. In the
latter case, Austrian influence abroad was much more
promoted by the measure than was foreign influence in
Austria.]
[Footnote 199-8: Every nationality is not worth the
sacrificing of the highest economic advantage or profit to
it. Or, would it be preferable to leave the Hottentots and
Caffirs, poor, barbarous and heathenish?]
SECTION CC.
INFLUENCE OF THE BRANCHES OF INCOME ON THE PRICE OF COMMODITIES.
In relation to foreign trade, in the narrowest sense of the term, fears
were formerly very frequently expressed and are sometimes even now,
which in the last analysis are based on the assumption that one country
might be underbid by another in all branches of commodities.[200-1] This
is evidently absurd. Whoever wants to pay for foreign commodities can do
it only in goods of his own. When he pays for them with money, the money
is either the immediate product of his own husbandry (mining
countries!), or the mediate product obtained by the previous surrender
of products of his own. To receive from foreign countries all the
objects which one has need of, would be to receive them as a gift.
It is just as absurd to fear that the three branches of income in the
same country's economy should be all relatively high at the same time,
and competition with foreign countries be thus made more difficult. Rent
and interest especially in this respect have to demean themselves in
ways diametrically opposed to each other.[200-2] When trade is entirely
free, every nation will engage at last in those branches of production
which require chiefly the productive forces which are cheapest in that
country; that is which the relatively low level of the corresponding
branch of income recommends to individual economy and enterprise. The
merely absolute and personal height of the three branches of income has,
as we have said, no direct influence on the price of commodities. In
this respect, all these may be higher in one country than in another.
Thus, for instance, English landowners, capitalists and workmen may be
all at the same time in a better economic condition respectively than
Polish landowners, capitalists and workmen, when the national income of
England stands to its area and population in general, in a much more
favorable ratio than the Polish.[200-3]
[Footnote 200-1: Thus, _Forbonnais_, Eléments du Commerce I,
73. _J. Moser_, Patr. Ph., I, No. 2.]
[Footnote 200-2: For a thorough refutation of the error that
everything is dearer in England than in France, see Journ.
des Econ., Mai, 1854, 295 seq. A distinguished architect
assured me in 1858, that a person in London could build
about as much for £1 as for from 6 to 7 thalers in Berlin;
only the aggregate expense in both countries is made up of
elements very different in their relative proportions.]
[Footnote 200-3: We very frequently hear that countries with
high wages must be outflanked in a neutral market by
countries with a low rate of wages. _Ricardo's_ disciples
reject this, because a decrease in the profit would put the
undertaker in a condition to bear the loss caused by the
high wages paid. See Report of the Select Committee on
Artisans and Machinery. _Senior_ ridicules such reasoning
very appropriately by inquiring: "Might not the loss enable
him to bear the loss?" Outlines, 146. And so _J. B. Say_
thinks that wages are always lowest when undertakers are
earning nothing. The truth is rather this: a country with a
relatively high rate of wages cannot, in a neutral market,
offer those commodities the chief factors required for the
production of which is labor; but the comparatively low rate
of interest or low rents, or the lowness of both found in
connection therewith, must fit it to produce other
commodities very advantageously. If, therefore, the rate of
wages rises, the result will be to divert production and
exports into other channels than those in which they have
hitherto flowed. The old complaint of Saxon agriculturists,
that there is a lack of labor in the country, is certainly
very surprising in a nation as thickly populated as Saxony.
But the remedy proposed by the most experienced
practitioners consists chiefly in a higher rate of wages to
enable workmen to care for themselves in old age, the
introduction of the piece-work system and an increase of
agricultural machines. But it seems to me, that the whole
situation there points to the advantage of in part limiting
the large farming hitherto practiced to live-stock raising
and other branches in which labor may be spared, and in part
of replacing it, by small farming of plants which are
objects of trade.
Many points belonging to this subject have been very well
discussed by _J. Tucker_, in his refutation of _Hume's_
theory on the final and inevitable superiority of poor
countries over rich ones in industrial matters. (Four Tracts
on political and commercial Subjects, 1774, No. 1; _L.
Lauderdale_, Inquiry, 206.)]
SECTION CCI.
HARMONY OF THE THREE BRANCHES OF INCOME.--INDIVIDUAL DIFFERENCE IN THEM.
As national-economical civilization advances, the personal difference of
the three branches of income is wont to become more and more sharply
defined.[201-1] The struggle between landowners, farmers and workmen,
which Ricardo necessarily assumed, did not exist at all in the middle
ages; since landowners and farmers were then usually one and the same
person, and since workmen, either as slaves or peasants, were protected
against competition properly so called. And so in the industry of that
time, based on the trades or on domestic industry.[201-2] [201-3]
When, later, the division of labor increases, all the differences of
men's aptitudes are turned to more advantage, and are more fully
developed. In the same proportion that a working class is developed, the
members of which are nothing but workmen, and can scarcely hope to
possess capital or land,[201-4] there grows up, side by side with it, a
class of mere capitalists, who come to obtain an ever-increasing
importance.
Considered from a purely economic point of view, this transition has its
great advantages. How much must the existence of a special class of
capitalists facilitate the concentration of capital and the consequent
promotion of production, as well as its (capital's) price-leveling
influx and outflow! Even "idle" capitalists have this of good, that,
without them, no competent man, destitute of means could engage in any
independent enterprise. When, indeed, the gulf between these two classes
passes certain bounds, it may, politically and socially, become a great
evil. (§ 63.)[201-5]
[Footnote 201-1: Among nations in their decline, rent and
interest fall into one possession again, because capitalists
here are wont to buy the land. (_Roscher_, Nationalökonomik
des Ackerbaues, § 140 ff.)]
[Footnote 201-2: Related to this peculiarity of the middle
ages is the fact that the canon law looked with disfavor on
the personal separation of the three factors of production.
So also in the prohibition of the _Weddeschat_ referred to §
161, instead of rent-purchase (_Rentekauf_), also by
extending the idea of partnership to a number of
transactions which are only forms of loan. (_Endemann_ in
_Hildebrand's_ Jahrb., 1863, 176 ff.) Antiquity also, with
the independence of its oikos, with its slavery, etc., had
not developed the difference between the three branches of
industry to any extent. _Rodbertus_, in _Hildebrand's_
Jahrbb., 1865, I, 343.]
[Footnote 201-3: If older writers, like _Steuart_, etc.,
speak so little of capital, labor and rent, and so much of
city and country, it is not on account of ignorance simply.
The contrast between the latter was then much more important
than to-day, and that between the former much less
developed. When, indeed, _Colton_, Public Economy of the
United States, 1848, 155 ff., claims that because in America
the three branches of income do not exist in so separated a
condition as in Europe, therefore European Political Economy
and its theories are not applicable to America, he forgets
that science should not be simply a description or
impression made of the reality, but an analysis of it.]
[Footnote 201-4: It is a very characteristic fact that, in
our days, when workmen are spoken of, it is generally day
laborers and tradesmen that are understood. In Prussia, in
1804, 17.8 per cent. of the population earned their living
by letting out their labor; in 1846, 22.8 per cent. as
day-laborers, servants, journeymen, tradesmen and factory
hands. (_Dieterici._)]
[Footnote 201-5: _Ricardo_, Principles, ch. 4, recognizes
the bright side as well as _Sismondi_, N. P., I, 268, or
_Buret_, De la Misère des Classes laborieuses en Angleterre
et en France, 1841, its dark side. _Sismondi_ thinks that
land and the capital employed in its cultivation are found
to the greatest disadvantage in the hands of the same
person. The existence of a thrifty peasant class (also of a
class of tradesmen) is one of the best means to prevent the
too wide separation of the three branches of income.]
SECTION CCII.
HARMONY OF THE THREE BRANCHES OF INCOME.--NECESSITY OF THE FEELING OF A
COMMON INTEREST.
Every class corresponding to a branch of the national income must live
with the consciousness that its interests coincide with the economic
interests of the whole nation. Whenever the entire national income
increases, each branch of it may increase without any injury to the
others, and, as a rule, does really increase.[202-1] But it is possible
that the land owning class may be specially dependent on the prosperity
of the whole people. How easy it is for workmen to emigrate; and how
much easier yet for capital! England, to-day, can scarcely carry on a
great war, in which it would not, at least at the beginning, have to
fight English capital.[202-2] Where the treasure is, the heart is also!
The land alone is immovable. It alone cannot be withdrawn from the
pressure of taxation or from the distress of war. It alone cannot flee
into foreign parts.[202-3] [202-4] At the same time, it cannot be denied
that the possibility of being able to carry one's fortune out of a
country in one's pocketbook and to be able to procure there with one's
money the same conveniences, customs, etc., to which one was accustomed
at home, is, under certain circumstances, an important element of
political and religious freedom. Moreover, the bright side and the dark
of every class of owners, especially the dread of all unnecessary and
also of all necessary change, must be common to rent and interest.
Hence, where there is a marked and well-defined separation of the
branches of income, it will be always considered a difficult but
unavoidable problem, how to enable mere labor to take an active part in
the affairs of the state.[202-5]
In times when calm prevails (not, however, in transition-crises such as
are referred to in § 24), there is a public opinion concerning merit and
reward, we might say a public conscience, by which a definite relation
of the three branches of income to one another is declared equitable.
Every "fair-minded man" feels satisfied when this relation is realized,
and this feeling of satisfaction is one of the principal conditions
precedent to the prosperity of production; inasmuch as upon it depends
the participation (_Theilnahme_) of all owners of funds and forces.
Every deviation from this relation or proportion is, of course, a
misfortune,[202-6] but never so great as when it takes place at the
expense of the wages of labor. It should never be forgotten that rent is
an appropriation of the gifts of nature, and that interest is a further
fruit obtained by frugality from older labor already remunerated.
Besides, the rate of wages when high, generally adds to the efficiency
of labor, which cannot be claimed for interest or rent.[202-7] The best
means to preserve the harmony of the three branches of income is,
however, universal activity. "Rich or poor, strong or weak, the idler is
a knave." (_J. J. Rousseau._)
[Footnote 202-1: The contrast between _Adam Smith_, at the
end of the first book, and _Ricardo_, ch. 24, in regard to
this point, is very characteristic of the times of those two
authors. According to _Smith_, the private interests of the
landowners and laborers run entirely parallel; only both
classes are easily deceived as to their own interests.
Capitalists understand their own interest very well, and
represent it with great energy; but their interest is in
opposition to the common good, in so far as their profit
among a poor and declining people is higher than among a
rich and flourishing one. _Ricardo_, on the other hand,
thinks that the interest of the landowners is opposed to
that of all others for the reason that they desire that the
cost of the production of wheat etc. should be as high as
possible.
Related to this is the fact that, in _Adam Smith's_ time,
the new theory of rent remained almost unnoticed, but that
after 1815, it became rapidly popular. In a similar way, the
socialists of the present time are wont to charge the
undertaking class with opposing their own interests to those
of the whole people, meaning by the whole the majority. (§
196 a.)]
[Footnote 202-2: Towards the end of the 14th century the
great Flemish merchants always sided with the absolutism of
France in opposition to their own _Artevelde_.]
[Footnote 202-3: Hence it is, that in so many constitutions,
charters of cities, etc., the exercise of the higher rights
of citizenship is conditioned by the possession of a certain
quantity of land, and that landownership is considered as a
species of public function.
I read, a short time ago, the life of a North-German
noblemen who, in 1813, had fought bravely against the
French, "although he was a man of large estates, and the
enemy might therefore very easily have laid hands on them."
If this "although" of his eulogist expressed the actual
feeling of large landed proprietors, a great many old
political institutions would have lost all foundation.
_Ad. Müller_ was of opinion that the rights of
primogeniture, etc., might be an obstacle in the way of the
development of the net income of a nation's economy; but
that they gave to the state and to the national life the
warlike tone so necessary to them, etc. (Elemente, II, 90.)]
[Footnote 202-4: "The Roman capitalists on whom Pompey
counted, left him in the lurch at the moment of danger,
because Cæsar destroyed only the constitution, but respected
their business relations." (_K. W. Nitsch._)]
[Footnote 202-5: _Kosegarten_, Nat. Oek., 186, thinks that,
on account of the struggle between the labor interest and
the interest of capitalists, in our times, the "fourth
estate" is not as well represented by persons belonging to
the propertied classes as the constitutionalist party
thinks. And in fact, _Jarke_, Principienfragen, 1854, 197,
would have it represented by the government, in order to
prevent the struggle between rich and poor. See
_Cherbuliez_, Riche ou Pauvre, p. 242 seq.]
[Footnote 202-6: _A. Walker_ shows, in a very happy manner,
how no misfortune, however great, whether it come from
heaven or from earth, in the shape of pestilence, drought,
flood or oppressive taxation, so rapidly and hopelessly
ruins a nation's economy as when the harmony which should
exist between capital and labor is disturbed by foul play or
legal frauds between labor or capital and their reward. (Sc.
of Wealth, 66.)]
[Footnote 202-7: Compare _Lotz_, Revision, III, 322 ff.,
327, 334 ff. Handbuch, I, 511 ff. _Lafitte_, Sur la
Réduction de la Rente, 56. _Fuoco_ exaggerates this into the
principle: _che la distribuzione, e non la produzione, sia
la prima e principal operazione in economia_. (Saggi
economici, II, p. 44.)]
CHAPTER VII.
DISTRIBUTION OF NATIONAL INCOME.
SECTION CCIII.
EFFECT OF AN EQUAL DIVISION OF THE NATIONAL INCOME.
The best distribution of the national income among a people is that
which enables them to enjoy the greatest amount and variety of real
goods, and permanently to produce real goods in an increasing quantity
and variety.
If the income of a people were divided equally among all, each one would
indeed, be, to a very great extent, independent of all others. But then,
no one would care to devote himself to the coarser and less agreeable
occupations, and these would be either entirely neglected, or people
would have to take turns in engaging in them.[203-1] (§ 9.) And thus
would disappear one of the chief advantages of the division of labor,
viz: that the higher orders of talent are devoted to the higher orders
of labor. Besides, it is very doubtful, whether, under such
circumstances, there would still be any solvent (_zahlungsfähige_)
demand for the achievements of art.
Nor would the saving of capital prosper, where such equality prevailed.
Most men consider the average outlay of their equals as an unavoidable
want, and save only to the extent that they possess more than others of
their class. If, therefore, every one had an equal income, no one would
consider himself in a condition to save.[203-2] The same consideration
would deter most men from every economic venture, and yet no great
progress is possible where no venture is made.[203-3] [203-4]
[Footnote 203-1: According to _Schäffle_, System, II, 379
ff., "the distribution of the social return of production
which conduces to the attainment of the highest measure of
civilization in the moral association of men and in all the
grades of that association, and thereby to the satisfaction
of all true human wants in the highest degree." Thus only
can a satisfactory line of demarkation be drawn between the
profit of capital and the wages of labor (384).]
[Footnote 203-2: See _Aristoph._, Plut., 508 ff. Not taken
into consideration sufficiently by _Benjamin Franklin_, in
his eulogy of the equality of property: The internal State
of America, 1784.]
[Footnote 203-3: The essential characteristic of the desert
is, according to _Ritter_, Erdkunde, I, 1019 seq., its
uniformity. No break in the horizontal plain, and hence no
condensation of atmospheric vapor into bodies of water of
any considerable size. The composition of the soil is
everywhere the same; nothing but masses of silex and salt,
hard and sharp. Lastly, extreme mobility of the surface,
which undulates with every wind, so that no plant can take
root in it. Nearly every feature in this picture finds its
analogon in the extreme political and economic equality of
men.]
[Footnote 203-4: _Les supériorités, qui ne sont dues qu'à,
un usage plus intelligent et mieux réglé de nos facultés
naturelles, loin d'être un mal, sont un véritable bien.
C'est dans la plus grande prospérité, qui accompagne un plus
grand et plus heureux effort, qu'est le principe de tout
développement._ (_Dunoyer_, Liberté du Travail, IV, 9, 10.)
But, indeed, the rich man should never forget that society
"inasmuch as it permits the concentration of wealth in his
hands, expects that he will employ it to better advantage
than the mass of mankind would if that same wealth were
equally divided among them." (_Brentano._)]
SECTION CCIV.
DISTRIBUTION OF NATIONAL INCOME.--MONEYED ARISTOCRACIES AND PAUPERISM.
The extreme opposite of this, when the middle class disappears and the
whole nation falls into a few over-rich men and numberless proletarians,
we call the oligarchy of money, with pauperism as the reverse of the
medal. Such a social condition has all the hardship of an aristocracy
without its palliatives. As it is, as a rule, the offspring of a
degenerated democracy,[204-1] it cannot in form depart too widely from
the principle of equality. Only get rich, they cry to the famishing
poor; the law puts no obstacle in your way, and you shall immediately
share our position.[204-2] Here the uniformity and centralization of the
state, which are an abomination in the eyes of genuine aristocracy, are
carried to the extreme. Capital takes the place of men, and is valued
more than men. All life is made to depend on the state, that its
masters, the great money-men, may control it as they will. The falling
away of all restrictions on trade, and of all uncommercial
considerations relating to persons and circumstances, gives full play to
capital, and speculators seek to win all that can be won. And, indeed,
all colossal fortunes are generally made at the expense of others,
either with the assistance of the state-power or by speculation in the
fluctuations of values.[204-3] The dependence of proletarians on others
is here all the greater, because from a complete absence of capital and
land, so far as they are concerned, they are compelled, uninterruptedly,
to carry their entire labor-force to market; and also because the supply
of labor is made in masses embracing a large number of individuals,
while the demand for labor lies in the hands of very few, and may be
very readily and systematically concentrated.[204-4] So great and
one-sided a dependence is, for men too far removed from one another for
real mutual love, doubtless one of the greatest of moral temptations. It
is as easy a matter for the hopelessly poor to hate the law, as it is
for the over-rich to despise it.[204-5] Under such circumstances, the
contagious power of communism, the dangers of which to order and freedom
we have treated of in § So, is great. There is a dreadful lesson in the
fact of history, that six individuals owned one-half of the province of
Africa, _when Nero had them put to death_![204-6] Externally, a moneyed
oligarchy will always be a weak state. The great majority who have
nothing to lose take little interest in the perpetuation of its
political independence. They rather rejoice at the downfall of their
oppressors hitherto, and are cheered by the hope of obtaining a part of
the general plunder.[204-7] The rich, too, separated from the neglected
and propertyless masses of the nation, and rightly distrustful of them,
begin to forget their nationality, and to balance its advantages against
the sacrifices necessary to preserve it. But, a merely materialistic
calculation leads doubtless to the conclusion, that universal empire is
the most rational form of the state. The world-sovereignty of Rome was,
by no circumstance more promoted than by the struggles between the rich
and the poor, which devastated the _orbis terrarum_, and in which the
Romans generally sided with the property classes.[204-8] [204-9] [204-10]
[204-11] However, the worst horrors of the contrast here described can
occur only in slave-countries. Compare _Roscher_, Nationalökonomik des
Ackerbaues, § 141.
[Footnote 204-1: The more the lower classes degenerate into
the rabble, and the more the national sovereignty comes into
the hands of this rabble, the easier will it become for the
rich to buy up the State.]
[Footnote 204-2: In the middle stages of the nation's
economy, such as are described in §§ 62, 66, 90, 207, in
which even the relative advantages of industry on a large
scale over industry on a small scale, are not much developed
the making political rights dependent on the possession of a
certain amount of property is certainly a means of promoting
equality. Hence, therefore, a reconciliation between the
differences of class created by birth, may be effected for a
long time here.]
[Footnote 204-3: _Hermann_, Staatsw. Untersuchungen, II,
Aufl. 136.]
[Footnote 204-4: _Necker_, Législation et Commerce des
Grains, 1775,1. passim. Compare _Bacon_, Serm fideles, 15,
29, 34, 39.]
[Footnote 204-5: _Schiller's_ terrible words:
"_Etwas muss er sein eigen nennen,
Oder der Mensch wird morden und brennen._"
--i. e., "Something must he call his own, or man will murder
and burn."
It is one of _J. G. Fichte's_ fundamental thoughts that as
all property is based on mutual disclaimer, the person who
has nothing of his own, has disclaimed nothing, and
therefore reserves his original right to everything.
(Geschlossener Handelstaat., Werke, III, 400, 445.)]
[Footnote 204-6: _Plin._, H. N., XVIII, 7.]
[Footnote 204-7: How frequently this circumstance turned to
the advantage of the Germans during the migration of
nations! Compare _Salvian_, De Gubern, Dei, VII. Very
remarkable answer given by a Roman taken prisoner by Attila,
why it must be more agreeable to live among the Huns than in
the over-civilized Roman Empire: Prisci legatio, in
_Niebuhr_, Corp. histor. Byzant., I, 191 ff. And thus the
conquest of Constantinople by the crusaders, took place amid
the jubilation of the populace and of the country people:
_Nicetus_, Chron. Hist. Urbs capta, § 11, 340. This law of
nature becomes most apparent when one compares the
preponderating power of Rome against Carthage, with its
weakness against the Cimbri and Mithradates. May not
Hannibal have been to his own country a phenomenon like that
which Cæsar was afterwards to Rome? A healthy and united
Carthage he certainly could have held against Italy.]
[Footnote 204-8: On the tendencies of the later times of the
Jewish monarchy toward an oligarchy of money, see _Amos_, 2,
6 seq.; 6 1 ff.; 8, 5 ff.; _Micha_, 2; 2 _Isaias_, 5, 8 seq.
Compare _Nehem._ 5. While Exodus, 30 and 38, mentions over
663,000 taxable men, the ten tribes comprising the kingdom
of Israel had only 60,000. XII Kings, 15, 19. _Ewald_,
Geschichte des Volkes Israel, II, 2, 320.]
[Footnote 204-9: The spirit of the Grecian moneyed oligarchy
is best revealed by _Plato_, De Republ., VIII, and
_Aristotle_, Polit., III, VI, passim, the first of whom
considers the contrast between rich and poor as in itself
demoralizing (IV, 422). All that can be called by the name
of tradition, the political faith of a people, and the
national feeling of right, had, in the Grecian world, been
transformed into mere reasoning and concerned itself, with
frightful exclusiveness, to the contrast existing between
rich and poor. Compare _Aristot._, Pol., II, 4, 1, with
_Droysen_, Gesch. des Hellenismus, II, 496 etc., and the
citations from _Menander_ in _Stob._, Serm., LXXXIX, 503, in
which gold and silver are proclaimed almighty. It is a
remarkable proof of the _omne venalia esse_ in Greece that
_Thucydides_ (II, 65) lauds even _Pericles_, especially for
his incorruptibility. _Demosthenes_ says of his
contemporaries, that it excited envy when any one was
bribed, laughter when he confessed it; that he who was
convicted of it (bribery) was pardoned, and he who blamed
it, hated. (Phil., II, 121.) Compare the list in _Demosth._,
Pro. Cor., 324; _Pausan_, III, 10. In Athens, on the
occasion of the census-constitution imposed forcibly on the
state by _Antipater_, that in a population of 21,000
citizens, only 9,000 had a property worth 2,000 drachmas or
more, that is, enough for a man to live on in the most
niggardly way, on the highest interest it would yield. If,
in addition to this, account be taken of the large number of
slaves, the small number of the property class is all the
more surprising, inasmuch as Lycurgus' financial
administration bears evidence that the people were in a
flourishing and comfortable condition; that afterwards,
peace for the most part prevailed, and that Alexander's
victories enabled Grecian commerce to make large gains.
Compare _Boeckh_, Staatsh. IV, 3, 9.
In Sparta, the governing class finally numbered only 700
families, 100 of which owned all the land, and 600 of which
were, therefore, only noble proletarians. It is well known
that the social attempts at reform by Agis and Kleomenes
only precipitated the downfall of the state. (_Plutarch_,
Agis and Kleomenes.) _Aratos_ owed a great part of the
consideration in which he was held to the reputation which
he obtained by protecting the property of the Sicyonian
exiles (_Thirlwall_, History of Greece, VIII, 167), while on
the other hand, men like _Agathocles and Nabis_ supported
their faction by persecution of the rich, new debtor-laws
and new division of land. (_Polyb._, XIII, 6, XVI, 13, XVII,
17, XXVI, 2; _Livy_, XXXII, 38, 40, XXXIV, 31, XXXVIII, 34;
_Plutarch_, Cleom, 20.) _Livy_ expressly says that all the
_optimates_ were in favor of the Romans, and that the
multitude wanted _novare omnia_ (XXXV, 34). On the frightful
struggle between these opposite parties, on the revolutions
and counter revolutions, see also _Polyb._, XIII, 1, 2;
XVIII, 36 ff., XXX, 14; XXII, 21; XXXVIII, 2, 3; _Diodor._,
XIX, 6, 9; _Exc._, 587, 623; _Livy_, XLI, 25, XLII, 5;
Pausan, VII, 14. In Boeotia, no one was for 25 years,
chosen by the people for the higher offices, from whom they
did not expect a suspension of the administration of justice
in the matter of crimes and debts, as well as the spending
of the national treasure. (_Polyb._, XX, 14, 5, 6.) The
events at Corinth, before its conquest by the Romans,
forcibly remind one of the Paris Commune of 1871. This
decline had, as usual, begun earliest in the colonies: thus,
in Sicily, even in _Thucyd._, V, 4. Milesian struggle off
the ploutis and cheiromacha in _Plutarch_, Qu. Gr., 32;
_Athen._, XII, 524.]
[Footnote 204-10: The disappearance of the middle class in
Rome, between the second and third Punic war, was brought
about chiefly by the great foreign conquests made by it. An
idea of the wealth which the governors of the provinces
might extort may be formed from this among other facts, that
Cicero originally demanded against Verres a fine of
5,000,000 thalers. (_Cic._, in Verrem Div., 5.) Verres is
related to have said, that he would be satisfied if he could
retain the first year's booty; that during the second, he
collected for his defenders; and during the third, for his
judges! (_Cic._, in Verr., I, 14.) Even _Cicero_ became
richer within the space of one year, in Cilicia, where it
was well known he was not oppressive, by 110,000 thalers,
which sum does not include numerous presents, pictures, etc.
(_Drumann_, Gesch. Roms., VI, 384.) On the frightful
oppression and extortion practised by Brutus (!) in Asia,
see _Cicero_, ad. Att, V, 21; VI, 1. _Sallust_, in his
Jugurtha, has shown how such men waged war, and to what
extremes their well-deserved want might push them in his
Catiline. _Patricium scelus!_ Most of the senators were in
debt to Crassus; and this, together with his great political
insurance-activity and power in elections, criminal cases at
law, etc., it depended that he, for a time, figured beside
Cæsar and Pompey.
The wealth of these important personages must, and that not
only relatively, have made the poor poorer and their luxury
excited the covetousness of the people; but especially the
great number of slaves they kept, combined with their
pasturage system of husbandry, which rapidly spread over all
of Italy after the provinces had emptied their granaries to
supply the wants of the sovereign people, must have made it
less and less possible for the proletarians to live by the
work of their hands. Previously, the lower classes of the
free born had been exempted from the military service, while
slaves were conscripted for the fleet. Now, all this was
changed; and thus was taken away one of the chief causes
which had made the labor of free day laborers more
advantageous on the larger estates. (_Nitzsch_, Gracchen,
124 ff., 235 ff.) The spoils of war and conquest caused the
higher middle class to prefer to engage in the usurious
loaning of money rather than in industry which would much
more rapidly have formed a small middle class. (_Mommsen_,
R. G. I, 622 ff.)
Hence, the _misera ac jejuna plebecula, concionalis hirudo
aerarii_, according to _Cicero_, ad Att., I, 16, 6. At a
time, when the Roman census showed a population of over
1,500,000, Philippus, 104 before Christ, otherwise a
"moderate" man, could claim that there were not 2,000
citizens who had any property. (_Cic._, de Off., II, 21.)
True, those few were in such a position, that Crassus would
allow that those only were rich, who could feed an army at
their own expense. (_Cicero_, Parad., VI, 61; _Plin._, H.
N., XXXIII, 47.) Concerning the colossal private fortunes
under some of the earlier imperators, see _Seneca_, De
Benef., II, 27; _Tacit_., Ann., XII, 53, XIII, 32; XIV, 35;
Dial. de Causis, 8, _Dio C._, LXIII, 2 seq.
The clients of the time, that is the numerous poorly paid
idlers treated as things of little value, in the service of
the great, correspond, on a small scale, to the position of
the great crowd in relation to the emperor. Compare
_Friedländer_, Sittengeschichte Roms., I, 296 ff. As late as
the West-Gothic storm, there were many houses which drew
4,000 pounds in gold, and about 1/3 as much in kind, from
their estates, per annum. (_Plut._, Bibl. Cod., 80, 63,
Bekk.) Goddess Pecunia Majestas divitiarum, in _Juvenal_, I,
113.
If we take the Roman proletariat in its wider extent, the
most frightful picture it presents is its slave-wars. Such a
war Sicily had shortly before the _tribunate_ of the elder
Gracchus, cost over a million (?) livres; and at the same
time there was a great uprising of slaves desolating Greece.
(_Athen._, VI, 83, 87 ff., 104.) A second war broke out in
the time of Cimbri. But the most frightful was that under
Spartacus, who collected 100,000 men, and the course of this
uprising will always remain a type of proletarian and slave
revolts. It originated among the most dangerous class of
slaves, most dangerous because best prepared for the
struggle, the gladiators, and among the immense _ergastula_,
where they were held together in large masses. It spread
with frightful rapidity, because the combustible material on
which it fed was everywhere to be found. It was conducted
with the most revolting cruelty. What the slaves demanded
before all else was vengeance, and what dread had a
gladiator of a death unaccompanied by torture?
After the first successes of the slaves dissensions broke
out among them. Such hordes can nowhere long preserve a
higher object than the momentary gratification of their
passions--a fact which shields human society from their
rage. Piracy, also, is another side of this proletarian
system. It found its strongest aliment in the system of
spoliation practiced by the Romans in Asia Minor. The
oppressed along the whole coast, joined the pirates
"preferring to do violence rather than to suffer."
(_Appian_, B. Mithr., 92, _Dio C._, XXXII, 3.) The temples
and the wealthy Romans were in special danger. But the worst
feature in the horrible picture was that many of the great
shared in the spoils with the robbers. They bought slaves
and other booty from them at mock prices, even close by the
gates of Rome. (_Strabo_, XIV, 668 seq., _Dio C._, XXXVI,
5.) Precisely as the slave-wars were looked upon with
pleasure by the poorer free men. Incendiarism was one of the
chief weapons of mutinous pauperism. (_Drumann_, IV, 282.)
The celebrated bacchanalian trial and the questions of
poisoning which followed it as a consequence (186 before
Christ) may be looked upon, in Rome, as the first marked
symptoms of the disruption between the oligarchy of money
and the proletariat. This put the morality of the higher
classes in a bad light, while, at the same time, a large
slave conspiracy in Apulia, which was not suppressed until
the year 185, exhibited the reverse of the picture. Cato,
the censor, endeavored to oppose this tendency by high
sumptuary taxes, and by establishing proletarian colonies.
At the same time we see the various parties among the
nobility uniting and the publicans joining them. (_Nitzsch_,
Gracchen, 124 ff.) The history of the last hundred years of
the Republic turns chiefly on the three great attempts made
by the proletariat to overthrow the citadel of the moneyed
oligarchy, under the Gracchi, under Marius and under Cæsar.
The last was permanently successful but entailed the loss of
the freedom of both parties.
Among the pretty nearly useless remedies employed, besides
those described in § 79, I may mention the following also:
the great number of agrarian laws intended to lessen estates
of too great extent owned by one person, and to restore a
free peasant population, in the years 133, 123, 100, 91, 59
before Christ; the law in Hannibal's time (_Livy_, XXI, 63)
that no senator should own a ship with a capacity of more
than 300 amphora; the provision (_Sueton._, Caes., 42) that
all great herd-owners should take at least one-third of
their shepherds from the ranks of freemen; the many laws _de
repetundis_, the first of which was promulgated 149 before
Christ, intended to protect the provinces against spoliation
by the governors; the L. Gabinia, 56 before Christ, which
prohibited the loaning by the provinces in Rome; lastly, a
rigid enforcement of police provisions against slaves,
especially against their bearing arms, which were carried to
such an extent, that slaves who had killed a boar with a
spear were crucified. (_Cicero_, in Verr., II, 3.) The chief
rule of every real oligarchy of money is, while they hold
the lower classes in general under their yoke with great
severity, to keep dangerous elements in good humor at the
expense of the state. Among these are especially the rabble
in large cities and the soldiery. Compare _Roscher_,
Betrachtungen über Socialismus und Communismus, 436, 437.]
[Footnote 204-11: In medieval Italy, also, popular freedom
was lost through a moneyed oligarchy and a proletariat.
_Popolo grasso_ and _minuto_ (_bourgeoisie_--_peuple_) in
Florence. The former were reproached especially with the
breach of trust in the matter of the public moneys
(_Sismondi_, Gesch. der Ital. Republiken, II, 323, seq.),
which reminds one of the French cry, _corruption_ in 1847.
_Machiavelli_ gives a masterly description of the class
contrasts during the last quarter of the fourteenth century,
in his Istoria Fiorent., III, a. 1378, 4. The poor, whose
spokesmen recall the most desperate shibboleths of modern
socialists, dwell principally on this, that there is only
one important difference, that between rich and poor; that
all men are by nature entirely equal; that people get rich
only through deceit or violence; that the poor want revenge
etc. It is significant how, in Florence, the largest banker
finally became absolute despot, and that contemporaneously
in Genoa, the Bank of St. George, in a measure, absorbed the
state; the former supported by numerous loans made to
influential persons like Crassus (_Machiavelli_, Ist. Fior.,
VII); the latter by the overstraining of the system of
national debt.]
SECTION CCV.
DISTRIBUTION OF THE NATIONAL INCOME.--HEALTHY DISTRIBUTION.
Hence a harmony of the large, medium and small incomes may be considered
the indispensable condition of the economic prosperity of a
people.[205-1] This prosperity is best secured when the medium-class
income prevails, when no citizen is so rich that he can buy the others,
and no one so poor that he might be compelled to sell himself. (_J. J.
Rousseau._)[205-2] Where there is not a numerous class of citizens who
have time enough to serve the state even gratis, as jurymen, overseers
of the poor, municipal officers, representatives of the people etc.
(compare § 63), and property enough to be independent of the whims and
caprices of others, and to maintain themselves and the state in times of
need, even the most excellent of constitutions must remain a dead
letter. Nor should there be an entire absence of large fortunes, and
even of inherited large fortunes. The changes of ministry which
accompany constitutional government are fully possible only when the
choice of men who would not lose their social position by a cessation of
their salaries as public functionaries is not altogether too
limited.[205-3] Thus the transaction of the most important political
business, especially that which relates to foreign affairs, requires a
peculiar elasticity of mind, and a capacity for routine on the grandest
scale, which with very rare exceptions, can be acquired only by
habituation to them from childhood, and which are lost as soon as the
care for food is felt. The bird's-eye-view of those who are born "great"
does not, by any means, embrace the whole truth of human things, but it
does a very important side of it. Among this class, as a rule, it is
easiest to find great party leaders, while leaders who have to be paid
by their party, generally become in the long run, mere party
tools.[205-4] It is true that it requires great intellectual and moral
power to resist the temptations which a brilliant hereditary condition
presents; temptations especially to idleness, to pride and debauchery.
For ordinary men, it is a moral and, in the end, an economic blessing,
that they have to eat their bread in the sweat of their brow,[205-5] and
that they can grow rich only by long-continued frugality.[205-6]
However, the distribution of the national income, and every change in
that same distribution, constitute one of the most important but at the
same time one of the most obscure departments of statistics.[205-7] When
inequality increases because the lower classes absolutely decline, there
is no use in talking any longer about the prosperity of the
nation.[205-8] It is different, of course, when only the higher classes
become, relatively speaking, higher yet. But even this latter kind of
inequality may operate disastrously, inasmuch as it nourishes the most
dangerous tendency of democracy, that of envy towards those who are
better off.
[Footnote 205-1: _Verri_ Meditazioni, VI.]
[Footnote 205-2: _Aristotle's_ view that, in a good state,
the middle class should preponderate. (Polit. IV, 6, Sch.)
_Sismondi_ says: _la richesse se réalise en jouissances;
mais la jouissance de l'homme riche ne s'accroît pas avec
ses richesses_. (Etudes sur l'Economie politique, 1837, I,
15.)]
[Footnote 205-3: If state offices were to be filled by
doctors or lawyers who live by their practice, after a time,
only those could be had who had no large practice to
sacrifice, that is, beginners or obscuranti.]
[Footnote 205-4: Per contra, see _Bazard_, Doctrine de Saint
Simon, 323. But _Sismondi_ is certainly right: _nous ne
croyons point, que les hommes qui doivent servir à
l'humanité de flambeau naissent le plus souvent au sein de
la classe riche; mais elle seule les apprécie et a le loisir
de jouir de leurs travaux_. (Etudes, I, 174.)]
[Footnote 205-5: To appreciate the demoralizing effects of
an income obtained without labor and without trouble on men
of small culture, we need only witness the bourgeoisie at
great watering places, pilgrimage places, seats of courts
and university cities supported largely by students.
Similarly at Mecca, Medina, Meschhed, Rome, etc. (_Ritter_,
Erdkunde VIII, 295 seq. IX, 32), and even in Palestine,
during the crusades, when the miserable Pullanes counted on
the tribute of the pilgrims. (_Wilken_, VII, 369, according
to _Jacob de Vitriaco_.)]
[Footnote 205-6: A man with $100,000 a year has a much less
incentive to make savings than 100 men with $1,000 each per
annum, for the reason that his economic wants are already
all richly satisfied, and he can have little hope of
improving it by saving. (_von Mangoldt_, V. W. L., 141.)]
[Footnote 205-7: _Harrington's_ fundamental thought
(1611-1677, Works, 1700) is, that the nature of the
constitution of a state depends on the distribution of the
ownership of its land. "Balance of property!" Where, for
instance, one person owns all the land or the larger portion
of it, we have a despotism; where the distribution is more
equal, a democracy, etc. All real revolutions are based upon
a displacement of the centre of gravity of property, since
in the long run, superstructure and foundation can not be
out of harmony with each other. For this reason, agrarian
laws are the principal means to prevent revolutions.
(_Roscher_, Gesch. der English. Volkswirthschaftslehre, 53
ff.) _Montesquieu_ also pays special attention to the
political consequences of the distribution of wealth. Thus,
for instance, in monarchies, the creation of large fortunes
should be promoted by the right of primogeniture; in
aristocracies, on the other hand, the great wealth of a few
nobles is as detrimental as that of extreme poverty. (Esprit
des Lois, V, 8, 9.)]
[Footnote 205-8: The common assertion of the socialists,
that the inequality of property is frightfully on the
increase, is as far from being proved as is the opposite one
of _Hildebrand_, Nat. Oek. der Gegenwart und Zukunft, I, 245
ff. According to _Macaulay_, Hist. of England, ch. 3, there
were, in England, in 1685, only about three (ducal) families
with an annual income of about £20,000 a year. The average
income of a lord amounted to £3,000; of a baronet, to £900;
of a member of the house of commons, to scarcely £800; and a
lawyer with £1,000 per annum was considered a very important
personage. At the same time, there were 160,000 families of
free peasants, that is more than 1/7 of the whole
population, whose average income amounted to from £60 to
£70. For the year 1821, _Marshall_, Digest of all Accounts,
etc., II, 1833, assumes, that there were 4,000 families with
over £5,000 yearly income; 52,000 families with from £1,500
to £5,000; 386,000 families with from £200 to £1,000;
2,500,000 families with less than £200. Compare, _per
contra_, the Edinburg Review, 1835. The income tax
statistics of 1847 show that 22 persons had an income of at
least £50,000 a year; 376 persons, from £10,000 to £50,000;
788, from £5,000 to £10,000; 400, from £4,000 to £5,000;
703, from £3,000 to £4,000; 1,483, from £2,000 to £3,000;
5,234, from £1,000 to £2,000; 13,287, from £500 to £1,000;
91,101, from £150 to £500.
If we compare these numbers with the corresponding ones of
the income tax of 1812, the numbers of those who returned an
income of £150 to £500 increased 196 per cent.; of those
with an income of from £500 to £1,000, 148 per cent.; of
from £1,000 to £2,000, 148 per cent.; of from £2,000 to
£5,000, 118 per cent.; of from £5,000 and more, 189 per
cent.; while the population in general had increased by
about 60 per cent. Compare Athenæum, August, 1850; Edinburgh
Rev., April, 1857. Between 1848 and 1857, the development
was less favorable, so that the incomes of from £150 to £500
subject to taxation, increased only 7 per cent.; those from
£500 to £1,000 about 9.56 per cent.; those from £10,000 to
£50,000, by 42.4, and those over £50,000, 142.1 per cent.
Between 1858 and 1864, the incomes derived from industry and
commerce, subject to taxation below £200, had increased
about 19.4 per cent.; those over £10,000, 59 per cent.;
while the aggregate amount of all taxed incomes in this
category increased 19 per cent. (Stat. Journal, 1865, 546.)
According to _Baxter_, The National Income of the United
Kingdom, 1868, there are now 8,500 persons with a yearly
income of £5,000 and more, who draw in the aggregate 15.6
per cent. of the national British income, and on the average
nearly £15,000 each. There are, further, 48,800 persons with
a yearly income of from £1,000 to £5,000; 178,300 with from
£300 to £1,000; 1,026,400 with from £100 to £300; and
1,497,000 with less than £100 a year from their property. In
addition to this, 10,961,000 workmen on wages, with an
aggregate income of £324,600,000. Compare §§ 172, 230.
In France, the number of so-called _électeurs_, who paid
direct taxes to at least the amount of 200 francs was, in
1831, 166,583, and increased uninterruptedly until 1845,
when it was 238,251, while the population had increased only
8.5 per cent.
In Prussia, the revenue from class-taxation up to 1840,
increased, unfortunately, in a smaller proportion than the
population: hence the lowest classes must have increased
relatively more than the others. (_Hoffmann_, Lehre von den
Steuern, 176 ff.) Between 1852 and 1873, according to the
statistical returns from class-taxation and of the
classified income tax, the growth of large incomes in the
provinces of old Prussia, seems to have been much more rapid
than that of the smaller ones. Thus, for every 100
taxpayers, with an income of from 400 to 1,000 thalers,
there was an increase to 175.5; of from 1,000 to 1,600
thalers, for every previous 100, 210.2; from 1,600 to 3,200
thalers, 232.3; of from 3,200 to 6,000, 253.9; of from 6,000
to 12,000 thalers, 324.8; of from 12,000 to 24,000, 470.6;
of from 24,000 to 52,000 thalers, 576.3; of from 52,000 to
100,000 thalers, 568.4; of from 100,000 to 200,000 thalers,
533.3; of over 200,000, 2,200. Hence, probably, a greater
growth towards the top, than the general increase in the
population will account for.
This concentration of property took place most noticeably in
Berlin, where for instance, between 1853 and 1875 the
incomes of from 1,000 to 1,600 thalers increased 212.2 per
cent.; those from 24,000 to 52,000, 994.1 per cent. There
are now in the whole state 2.24 per cent. of the population
(including those dependent on them) subject to the income
tax; that is, estimated as having a yearly income of 1,000
thalers. Of the remaining 97.76 per cent., more than a
quarter, and probably more than one-half, are as a class
free from taxation, because their income is presumably less
than 140 thalers (6,049,699 against 532,367, exempt for
other reasons and 4,850,791 belonging to classes subject to
taxation: these three numbers probably not including
dependents). Among the payers of an income tax, there are
79,464 with an average income of 1,237 thalers per annum;
41,366 with 2,171 thalers; 12,305 with 4,279 thalers; 4,030
with 8,383 thalers; 1,655 with 16,527 thalers; 513 with
32,428 thalers; 163 with 65,595 thalers; 39 with 137,692
thalers; 21 with 427,142 thalers; and one with 1,700,000
thalers per annum. (Preuss. statist. Ztschr., 1875, 116,
132, 142, 145, 149.) As the reverse of this picture, we may
take the fact that, in 1870, of 1,047,974 cases of
guardianship, there were only 208,614 in which there was any
property to be looked after. (Justiz-Minist-Blatt, 1872, No.
6.)
The figures from Bremen are very favorable. The incomes
subject to taxation amounted, in 1847, to 71.6 thalers per
capita; in 1869, to 131.2. The incomes subject to taxation
in class No. 1, that is from 250 to 399 thalers, increased
78 per cent.; in class No. 2, 400 to 499 thalers, 45 per
cent.; in class No. 3, 500 thalers and more, by 57 per cent.
The average income of the third class amounted, in 1847-50,
to 1,952 thalers; 1866-69, to 2,439 thalers. In 1848, there
were, of estates of over 3,000 thalers subject to taxation,
only 38 to every 1,000 inhabitants; in 1866, 49. (Jahrb. f.
amtl. Statistik Bremens, 1871, Heft 2, p. 185 seq.)]
BOOK IV.
CONSUMPTION OF GOODS.
CHAPTER I.
CONSUMPTION OF GOODS IN GENERAL.
SECTION CCVI.
NATURE AND KINDS OF CONSUMPTION.
As it is as little in the power of man to destroy matter as it is to
create it, we mean by the consumption of goods, in the broad sense of
the word, the abolition of or the doing away with an utility without any
regard to the question whether another higher utility takes its place;
in its narrower sense (consumption proper), a decrease of resources of
any kind. Consumption is the counterpart of production (§ 30), the top
of the tree of which production is the roots, and the circulation and
distribution of goods the trunk. (_A. Walker._) There is, also, what
Riedel calls immaterial consumption, as when a utility disappears,
either because the want itself to which it ministers disappears or
because views have changed as to the means to be employed towards its
satisfaction.[206-1]
[Footnote 206-1: Diminutions of value, such, for instance,
as an almanac, a newspaper, etc., undergoes simply from the
appearance of the next years' etc.; of a shield or a part of
an officer's uniform with the initials of the reigning
sovereign, only because of the fact of a new succession to
the throne. A boot or a glove loses a great part of its
value when its mate is destroyed. (_Rau_, Lehrbuch, § 319.)]
SECTION CCVII.
NATURE AND KIND OF CONSUMPTION.--THE MOST USUAL KIND.
The commonest kind of consumption is that caused by the use of a thing,
or by the employing of it for the purpose of acquisition or of
enjoyment.[207-1] From time immemorial, enjoyment-consumption has been,
preponderantly, the affair of women, as acquisition-consumption has been
the business of men.[207-2] Other circumstances being equal, the degree
or extent of consumption by use (use-consumption) is determined by
national character. Thus, for instance, the cleanliness and love of
order characteristic of the Dutch have contributed greatly to the long
preservation in good condition of their dwellings and household
articles.[207-3]
In the higher stages of civilization, the use of goods is wont to be
divided more and more into special branches, according to the different
peculiarities of the goods themselves, and of the different wants of
men; a course of things which is, both as cause and effect, intimately
related to the division of labor. I here speak of a principle of
_division of use_ (differentiation and specialization). Thus, for
instance, Lorenz Lange, in 1722, found only one kind of tea in the trade
between Russia and China; Müller, in 1750, found seven; Pallas, in 1772,
ten; and Erman, in 1829, about seven hundred.[207-4] As the number of
gradations of different kinds of the same goods increases with
civilization, there is, in times of war, a retrogression in this
respect, to a lower economic stage.[207-5]
Opposed to this, we have the principle of the combination of use. There
are numberless kinds of goods which may serve a great many just as well
as they can one exclusive user; and this either successively or
simultaneously, inasmuch as there is no necessity why, with the
increasing use of the object, the size of the object itself should
increase in an equal proportion. (According to Marlo: wealth usable by
one; wealth usable by many; wealth usable by all.) Thus, for instance, a
public library may be incomparably more complete, and accessible in a
still higher degree than ten private libraries which together cost as
much as it did. And so, a restaurant-keeper may serve a hundred guests
at the same time, with a much greater table-variety, more to their
taste, and at a more convenient time, than if each person made the same
outlay for his private kitchen.[207-6] While formerly, only the great
could travel rapidly, combination of use has enabled even the lower
classes to do so in our own days. There is, doubtless, a dark side to
this picture, too. Combination of use requires frequently great
sacrifices of personal independence, which should not be underestimated
when they affect individuality of character, or threaten the intimacy
and closeness of family life. It is, however, a bad symptom when the
division of use increases without any corresponding combination of
use.[207-7] [207-8]
[Footnote 207-1: We should also mention here destructive
consumption, where the defenders of a country destroy
buildings, supplies, etc., only that the enemy may not use
them.]
[Footnote 207-2: Compare Die Lebensaufgabe der Hausfrau,
Leipzig, 1853; _von Stein_, Die Frau auf dem Gebiete der
National Oekonomie, 1875, and the beautiful remarks of
_Schäffle_, N. Oek., 166; and _Lotz_, Mikrokosmus, II, 370
ff.]
[Footnote 207-3: In Germany horses are said to last, on an
average, 18 years; in England 25; in France and Belgium,
only 12 years. (See for the proofs of this _Rau_, Handbuch
II, § 168.) The more civilized a people are, the less do
they completely destroy values by use; and the more do they
use their old linen, etc. as rags; their remains of food as
manure, etc. (_Roesler_, Grunds., 552.)]
[Footnote 207-4: _Ritter_, Erdkunde, III, 209. Thus, the
French in the 13th century were acquainted with only three
kinds of cabbage; in the 16th, with six, about 1651, with
12; they are now acquainted with more than 50; in the 16th
century they knew only 4 kinds of sorrel; in 1651, 7; about
1574, only 4 kinds of lettuce; to-day they know over 50;
under Henry II., they were acquainted with 2 or 3 kinds of
melons; in the 17th century, with 7; now they are acquainted
with over 40. (_Roquefort_, Histoire de la Vie privée des
Fr., I, 179 ff.) Instead of the four kinds of pears
mentioned by de Serre (1600), there were, in 1651, about
400. (I, 272.) Liebaud, 1570, knew only 19 kinds of grapes;
de Serre, 41. (_Roquefort_, III, 29 ff.) According to the
"Briefen eines Verstorbenen," IV, 390, the first
kitchen-gardener in London had 435 kinds of salad, 240 of
potatoes, and 261 of pease.
And so precisely in ancient times. While the earlier Greeks
speak of but one oinos, even at the most sumptuous feasts
(compare, however, _Homer_, Il. XI, 641;) and while even in
the time of Demosthenes only very few kinds of wine were
known (_Becker_, Charicles, I, 455), _Pliny_, H. N. XIV, 13,
was acquainted with about 80. In this respect the moderns
have never returned to ancient simplicity; at least the
fabliau, La Bataille des Vins, introduces us to 47 kinds of
French wine in the 13th century. (Compare also _Wackernagel_
in _Haupt's_ Zeitschrift für deutsches Alterth., VI. 261
ff., and _Henderson_, History of ancient and modern Wines,
1824.) The Lacedemonians, with their intentional persistence
in a lower stage of civilization, used the same garment in
winter and summer (_Xenoph._, De Rep. Laced., II, 4); while
the contemporaries of Athenæos (III, 78 ff.) were acquainted
with 72 kinds of bread. With what a delicate sense for good
living the Romans in Caesar's time had discovered the best
supply places for chickens, peacocks, cranes, thunny-fish,
muraena, oysters and other shell-fish, chestnuts, dates,
etc., may be seen in _Gellius_, N. A., VII, 16. Compare
_Athen._, XII, 540.
In the middle age of Italy, the houses had almost always
three rooms: _domus_ (kitchen), _thalamus_, _solarium_.
(_Cibrario_, E. P. del medio Evo, III, 45.) The manors or
masters' houses built on the estates of Charlemagne had 3
and 2 rooms, sometimes only 1, and sometimes 2 rooms and 2
bedrooms. According to an old document of 895, a shed was
worth 5 sols, a well-built manor 12. (_Anthon_, Geschichte
der deutschen Landwirth., I, 249 ff., 311.) The Lex
Alamanorum, tit. 92, provided that a child, in order to be
considered capable of living, should have seen the roof and
four walls of the house! See an able essay, capable of being
still further developed, by _E. Herrmann,_ in which he
endeavors to explain the _division of use_ and of labor on
Darwin's hypothesis of the origin of species in the D.
Vierteljahrsschrift, Januar., 1867.]
[Footnote 207-5: Thus, 1785-1795, the best Silesian wool
cost 60, the worst 26, thalers per cwt.; in 1805, on account
of the great demand for cloth to make military uniforms, the
former cost 78, the latter 50 thalers. (_Hoffmann_,
Nachlass, 114.)]
[Footnote 207-6: The one large kitchen naturally requires
much less place, masonry, fuel, fewer utensils, etc., than
100 small ones. Think of the relatively large savings
effected by the use of one oven kept always heated! Even the
Lacedemonians called their meal associations pheidtia, i.
e., save-meals. Dainties proper can be consumed only in very
small portions, but cannot well be prepared in such
quantities. A guest at a first class Parisian restaurant
has, at a moderate price, his choice of 12 _potâges_, _24
hors d'oeuvres_, _15-20 entrées de boeuf_, _20 entrées
de mouton_, _30 entrées de volaille et gibier_, _15-20
entrées de veau_, _12 de pâtisserie_, _24 de poisson_, _15
de rôts_, _50 entremets_, _50 desserts_; and, in addition,
perhaps 60 kinds of French wine alone. What more can a
princely table offer in this respect? Compare
_Brillat-Savarin_, Physiologie du Goût, Médit., 28.]
[Footnote 207-7: In Diocletian's time, there was purple silk
worth from 2-1/2 thalers to 250 thalers per pound.
(_Marquardt_, Röm. Privatalterthümer, II, 122.)]
[Footnote 207-8: Concerning the application of the above
principle in industry and in the care of the poor, see
_infra_. The advantages afforded by consumption in common,
or the combination of use, have been enthusiastically dwelt
upon by _Fourier_, and the organization of his phalansteries
is based essentially on that principle. In these colossal
palaces, which, spite of all their magnificence, cost less
than the hundred huts of which they take the place, a ball
is given every evening, because it is cheaper to light one
large hall, in which all may congregate. The division of
use, or of consumption also, is here developed in a high
degree. When 12 persons eat at the same table they have 12
different kinds of cheese, 12 different kinds of soup, etc.
Even little children are allowed to yield to the full to
their gluttonous propensities, since on them depends the
productive activity of the so-called _séries passionnées_.
Compare Nouveau Monde, 272. The Saint-Simonists also
characterize the _association universelle_ as the highest
goal of human development. (_Bazard_, Exposition, 144 ff.)
On the danger of this development to family life, see
_Sismondi_, Etudes I, 43.]
SECTION CCVIII.
NATURE AND KINDS OF CONSUMPTION.--NOTIONAL CONSUMPTION.
By the notional consumption (_Meinungsconsumtion_), as Storch calls it,
operated by a change of fashion, many goods lose their value, without as
much as suffering the least change of form or leaving the merchant's
shop. This kind of consumption, too, is exceedingly different in
different nations. Thus, in Germany, for instance, fashions are much
more persistent than in France.[208-1] In the most flourishing times of
Holland, only noblemen and officers changed with the fashions, while the
merchants and other people wore their clothes until they went to
pieces.[208-2] In the East, fashions in clothing are very
constant;[208-3] but the expensive custom there prevails, for a son,
instead of moving into the house occupied by his father, to let it go to
ruin, and to build a new one as a matter of preference. The same is true
even in the case of royal castles. Hence, in Persia, most of the cities
are half full of ruins, and are in time moved from one place to
another.[208-4]
The national income of a country is, on the whole, much less affected by
a change of fashion than the separate incomes of its people. The same
whim which lowers the value of one commodity increases the value of
another; and what has ceased to be in fashion among the rich, becomes
accessible, properly speaking, to the poorer classes of the community
for the first time.[208-5] The want of varying his enjoyments is so
peculiar to man, and so intimately connected with his capacity for
progress, that it cannot in itself be blamed. But if this want be
immoderately yielded to, if the well-to-do should despise every article
which has not the charm of complete novelty, the advantages of the whole
pattern-system, by means of which the preparation of a large number of
articles from the same model at a relatively small cost, would be lost.
Besides, fashion, which makes production in large quantities, for the
satisfaction of wants that are variable and free, possible, frequently
means even a large saving in the cost of production.[208-6]
[Footnote 208-1: The consequences of this are very important
to the character of French and German industry.
(_Junghanns_, Fortschritte des Zollvereins, I, 28, 51, 58.)
Rapidly as the Parisian fashions in dress make their way
into the provinces, their fashions in the matter of the
table are very slow to do so. (_Rocquefort_, Hist. de la Vie
privée des Fr., I, 88 seq.)]
[Footnote 208-2: _Sir W. Temple._ Observations on the U.
Provinces, ch. 6.]
[Footnote 208-3: As most persons adorn themselves for the
sake of the opposite sex, this invariability is caused by
the oriental separation of two sexes. Our manufacturers
would largely increase their market, if they could succeed
in civilizing the East in this respect. In Persia, shawls
are frequently inherited through many generations, and even
persons of distinction buy clothes which had been worn
before. (_Polak_, Persien, I, 153.) In China, the Minister
of Ceremonies rigidly provided what clothes should be worn
by all classes and under severe penalties. (_Davis_, The
Chinese, I, 352 seq.)]
[Footnote 208-4: _Jaubert_, Voyage en Perse, 1821. While
cities like Seleucia, Ctesiphon, Almadin, Kufa, and even
Bagdad, were built from the ruins of Babylon.]
[Footnote 208-5: In Moscow, merchants close their accounts
at Easter. Then begins a new cycle of fashions, after which
all that remains is sold at mock-prices. (_Kohl_, Reise,
98.) In Paris, there are houses which buy up everything as
it begins to go out of fashion and then send it into the
provinces and to foreign parts. Thus, there are immense
amounts of old clothing shipped from France and England to
Ireland. Hence, the latter country can have no national
costume appropriate to the different classes; and the
traveler sees with regret, crowds of Irish going to work in
ragged frock-coats, short trowsers and old silk hats. In
Prussia, many of the peasantry, in the time of Frederick the
Great, wore the discarded uniforms of the soldiery.]
[Footnote 208-6: _Schäffle_, N. Oek. _Hermann_, Staatsw.
Untersuchungen, II, Aufl., 100.]
SECTION CCIX.
CONSUMPTION WHICH IS THE WORK OF NATURE.
The least enjoyable of all consumption (_loss-consumption_) is that
which is the work of nature; and nature is certainly most consuming in
the tropics. During the rainy season, in the region of the upper Ganges,
mushrooms shoot up in every corner of the houses; books on shelves swell
to such an extent that three occupy the place previously occupied by
four; those left on the table get covered over with a coat of moss
one-eighth of an inch in thickness. The saltpetre that gathers on the
walls has to be removed every week in baskets, to keep it from eating
into the bricks. Numberless moths devour the clothing. Schomburgk found
that, in Guiana, iron instruments which lay on the ground during the
rainy season became entirely useless within a few days, that silver
coins oxydized, etc.; evidently a great obstacle in the way of the
employment of machinery. In summer, the soil of this same region, so
rich in roots, is so parched by the heat, that subterranean fires
sometimes cause the most frightful destruction.
In Spanish America, there are so many termites and other destructive
insects that paper more than sixty years old is very seldom to be found
there.[209-1]
The warmer portions of the temperate zone are naturally most favorable
to the preservation of stone monuments. Thus, for instance, in
Persepolis, where there has been no intentional destruction, the stones
lie so accurately superimposed the one on the other that the lines of
junction can frequently be not even seen. The amphitheatre of Pola has
lost in two thousand years only two lines from the angles of the
stones.[209-2] The Elgin marble statues would certainly have lasted
longer in Greece than they will in England. On the other hand, warm and
dry climates have a very peculiar and exceedingly frightful species of
nature-consumption in the locust plagues. The principal countries
affected by such consumption are Asiatic and African Arabistan, the land
of the Jordan and Euphrates, Asia Minor, parts of Northern India. On
Sinai, locust plagues occur, on an average, every four or five years;
but from 1811 to 1816, for instance, they destroyed everything each
year. Their course is in its effects like an advancing conflagration. It
turns the green country, frequently in a single day, into a brown
desert; and famine and pestilence follow in its path.[209-3]
The colder regions of the temperate zone are exposed to danger and
damage from land-slides in their long series of mountains, and from
avalanches, from quicksands in many of their plains, from floods and the
total destruction of land along their coasts;[209-4] but, on the other
hand, they are, relatively speaking, freest from hurricanes, earthquakes
and volcanoes, the ravages of which no human art or foresight is
competent to cope with. From the point of view of civilization and of
politics there is here a great advantage. See § 36. The former maritime
power of Venice and of Holland is closely allied to the dangers with
which the sea continually threatened them, and which was a continual
spur to both. But, on the other hand, the danger from earthquakes which
always impends over South America and Farther India, must produce
consequences similar to those of anarchy or of despotism, because of the
uncertainty with which they surround all relations. See § 39.[209-5]
[Footnote 209-1: _Ritter_, Erdkunde VI, 180 ff; _Schomburgk_
in the Ausland, 1843, Nr. 274; _Humboldt_, Relation hist.,
I, 306; Neuspanein, IV, 379; _Pöpping_, Reise, II, 197 ff.,
237 ff. The ant, even in Marcgrav's time, was called the
_rey do Brazil_.]
[Footnote 209-2: _Ritter_, Erdkunde VIII, 895; _Burger_,
Reise in Oberitalien, I, 7. The monuments of Nubia have
suffered much less from the hand of time than those of Upper
Egypt, because the air of the plateau is drier. The effects
of climate have been most severely felt in Lower Egypt,
where the air is most moist. (_Ritter_, I, 336, 701.) In the
case of wood, on the other hand, dryness may be a great
agent of destruction. Thus, in Thibet, wooden pillars,
balconies, etc., have to be protected with woolen coverings
to keep them from splitting. (_Turner_, Gesandtsreise,
German translation, 393 ff.)]
[Footnote 209-3: Compare _Ritter_, Erdkunde, VIII, 789-815,
especially the beautiful collection of passages from the
Bible bearing on the locust plague, 812 ff. _Pliny_, H. N.,
XI, 85. _Volney_, Voyages en _Syrie_, I, 305. For account of
an invasion of locusts, which, in 1835, covered half a
square mile, four inches in thickness, see _v. Wrede_, R. in
Hadhrammaut, 202. It is estimated that, in England, the
destruction caused by rats, mice, insects, etc., amounts to
ten shillings an acre per year; i. e., to £10,000,000 per
annum. (_Dingler_, Polyt. Journal, XXX, 237.)]
[Footnote 209-4: Origin of the gulf of Dollart in Friesland,
2-1/2 square miles in area between 1177 and 1287; and of
Biesboch of 2 square miles in 1421. On the repeated
destruction of lands in Schleswig by inundations, see
_Thaarup_, Dänische Statistik, I, 180 seq. It is a
remarkable fact that in relation to the Mediterranean,
_Strabo_, VII, 293, considers all such accounts fables.]
[Footnote 209-5: As to how the grandeur and
irresistibleness, etc. of this nature-consumption in the
tropics leads men to superstition and the indulgence of wild
fancies, see _Buckle_, History of Civilization in England,
1859, I, 102 ff. Since the conquest of Chili, sixteen
earthquakes, which have destroyed large cities totally or in
part, have been recorded.]
SECTION CCX.
NECESSITY OF CONSIDERING WHAT IS REALLY CONSUMED.
Whenever there is question of consumption, it is necessary to examine
with rigid scrutiny, what it is that has been really consumed; that is,
that has lost in utility. The person, for instance, who pays twenty
dollars for a coat, has consumed that amount of capital only when the
coat has been worn out.[210-1] What is called the consumption of one's
income in advance is nothing but the consumption of a portion of capital
which the consuming party intends to make good from his future
income.[210-2] Fixed capital, too, can certainly be directly consumed;
for instance, when the owner of a house treats the entire rent he
receives from it as net income, makes no repairs, and no savings to put
up a new building at some future time. As a rule, however, the owner of
fixed capital must, in order to consume it, first exchange it against
circulating capital. Thus the prodigality and dissipation, especially of
courts of absolute princes, have found numerous defenders who have
claimed that they are uninjurious, provided only the money spent in
extravagance remained in the country.[210-3] The prodigality itself,
that is, the unnecessary destruction of wealth is not, on that account,
any the less disastrous.[210-4] If, for instance, there are fire-works
to the amount of 10,000 dollars, manufactured exclusively by the workmen
of the country, ordered for a gala day; the night before they are used
for purposes of display, the national wealth embraces two separate
amounts, aggregating 20,000 dollars; that is, 10,000 dollars in silver
and 10,000 in rockets, etc. The day after, the 10,000 in silver are
indeed still in existence, but of the 10,000 in rockets, etc., there is
nothing left. If the order had been made from a foreign country the
reverse would have been the case, the silver stores of the people would
have been diminished, but their supply of powder would remain intact.
In a similar way, there is occasion given for the greatest
misunderstanding when people so frequently speak of producers and
consumers as if they were two different classes of people. Every man is
a consumer of many kinds of goods; but, at the same time, he is a
producer, unless he be a child, an invalid, a robber, a pick-pocket,
etc.[210-5] At the same time, Bastiat is right in saying that in case of
doubt when the interests of production and of consumption come in
conflict, the state, as the representative of the aggregate interest,
should range itself on the side of the latter. If we carry things on
both sides to their extremest consequences, the self-seeking desire of
consumers would lead to the utmost cheapness, that is, to universal
superfluity, and the self-seeking wish of producers to the utmost
dearness, that is, to universal want.[210-6]
[Footnote 210-1: Compare _Mirabeau_, Philosophie rurale, ch.
1; _Prittwitz_; Kunst reich zu werden, 474.]
[Footnote 210-2: A very important principle for the
understanding of the real effects of the spending of a state
loan!]