WAR WITH THE CANNIBALS, AND WHAT CAME OF IT.
But more serious matters than the making and issuing of money
soon claimed the attention of the people of the island. It will
be remembered that Friday was first brought to the island by the
cannibals, for the purpose of being cooked and eaten, and that he
was rescued from this fate by the valor of Robinson Crusoe, as was
subsequently also Friday's father and others of his countrymen. But
the cannibals, although then repulsed, did not at the same time lose
their appetites, or the remembrance of the good cheer that had escaped
them; and meat becoming scarce in their own country, they projected
a grand invasion of the island, with the intent of capturing and
cooking Friday, if he was still there, or, in default of Friday, any
body and every body they might happen to catch. The islanders all at
once, therefore, found themselves precipitated into a terrible war,
and were obliged to struggle not only for their homes, but for their
individual existence.
The Government was active and energetic, but to carry on the war a
vast expenditure of commodities was necessary; and as the Government
of the island--in common with all other governments--never had,
or could have, any commodities or money to buy commodities with,
other than what it obtained through loans and taxes, the people,
one and all, were called upon to help. There was, however, some fear
that if the calls for help were put in the form of taxes, the fires
of patriotism might not burn as brightly as was desirable, and it was
therefore deemed expedient to say little about taxes at the outset,
and rely mainly on loans, to be repaid after the war was over.
The people, on their side, responded most cheerfully. Some gave one
thing and some another. Some gave service as soldiers, laborers, and
artificers; others contributed timber for canoes, cloth for tents,
iron for spear-heads and guns, corn and flour, hay, medicines, and
money--in short, all sorts of useful things, the results of previous
labor and economy on the part of the individual contributors. In
return, the contributors received back from the Government a promise,
expressed on paper, to repay the commodities borrowed, or their value
in money. These promises were of two kinds. In one the promise was
made definite as to the time of its fulfillment, and the amount or
value of the promise carried interest. These were called bonds. In
the other, the promise, although definite, specified no particular
time for making it good, and its amount or value was not subject to
interest. These latter, from the circumstance that they were written
on blue paper, were popularly termed "bluebacks." When the people got
the bonds, they put them carefully away, for the sake of the interest
that would accumulate upon them; but when they got the bluebacks,
they were at first at a loss to know what to do with them. They were
in some respects unlike any thing they had ever seen before; and yet
there was a very close resemblance between them and the certificates of
deposits of gold in the public repository, which they had now been in
the habit for some time of using as currency. And as the one promised,
on the part of the Government, to pay money equally with the other,
there seemed to the public to be no good reason why one should not
be used as the representative and equivalent of money as readily as
the other.
The real difference was, that their former currency, composed of
tickets or certificates given in exchange for a deposit of actual
gold, represented an actual accumulation of an equivalent of every
thing desirable which labor could produce all the world over; while,
on the other hand, the promises to pay which the island authorities
issued in ex- change for the commodities loaned them by the people,
and subsequently used up in fighting the cannibals, represented an
actual destruction of almost every thing useful and desirable in place
of accumulation. The people, however, did not see this; and by reason
of not seeing it they continued to accept and regard the promises
to pay, which represented loss and destruction, as the same thing as
money, and naturally also as wealth; and as the creation and issue of
this sort of money or wealth increased as destruction increased, they
finally, one and all, came to the conclusion that the more and faster
they destroyed, the richer they should all be; and that, by a happy
series of accidents, they had at last solved that great problem which
the world had so long been anxious about--namely, "of how to eat your
cake and at the same time keep it." And, as a further illustration of
the extent to which this idea acquired a hold upon the public mind,
it may be mentioned that some of the most popular books which were
published about this time on the island had the following suggestive
titles: "A National Debt a National Blessing;" "Don't Pay as you Go,
a sure Way to Get Rich;" "Pulling at your Boot-straps the best Way
to Rise in the World," and the like.
Undoubtedly one great reason which encouraged the people of the
island in their delusion was the circumstance that the Government
promises to pay, although they had ceased to represent accumulation,
or a definite equivalent of any thing in particular, did not thereby
cease to be instrumentalities for effecting exchanges; but, on
the contrary, continued to constitute great labor-saving machines,
performing a work precisely similar in character to that performed
by a ship or a locomotive--namely, the removal of obstacles between
the producer and consumer. But, in becoming a representative of a
debt to be paid in place of representing a means of paying a debt,
the new currency lost at once the really most important quality of
good money; inasmuch as it ceased to be a common equivalent, or in
itself an object of value in exchange, and therefore became incapable
of properly discharging the function of a standard, or measure,
for estimating the comparative value of other things; resembling,
in this deficiency, a ship without a rudder, or a locomotive without
a track to run on. The removal of a rudder from a ship, or the taking
up the track in front of a locomotive does not impair the capacity of
the one for cargo, or the power of the other for pulling. But if it
is attempted to use a ship or a locomotive under such circumstances
for the purposes for which they were constructed--i.e., as agencies
for effecting and facilitating exchanges--the result of their work
will be so uncertain and hazardous that the owners of the things
to be exchanged would require large insurance against the possible
action of the exchanging agencies. And so it was with this blueback
currency of the island, which, ceasing to represent or be convertible
on demand into a constant quantity of any commodity, ceased to be a
constant equivalent or measure of value of any thing.
If the news came one day that the cannibals had been repulsed, a given
number of the bluebacks would buy a bushel of wheat. If the news came
the next day that the black troops, although they had fought nobly,
had been driven back, and that there was some prospect that every
body, sooner or later, would be cooked and eaten, then the same number
of bluebacks bought only half the quantity of wheat. Consequently,
every body, in selling commodities representing expenditure of time
and labor, added to the price of the same, in order to insure himself
against the fluctuations of the purchasing power of the currency he
received; or, in other words, to make sure that what he received should
remain, for a greater or less length of time, the equivalent of what
he gave. But as no one could tell what the cannibals were likely to do
from day to day, and therefore what were to be the fluctuations in the
purchasing power of the currency, every body in selling any thing felt
that he incurred a risk, in addition to the risks usually attendant
upon ordinary buying and selling. And as the data for estimating these
risks were just as uncertain as the data for estimating the results
of dice-throwing, every body guessed at the amount of insurance
needed, or, what is the same thing, bet on the purchasing power
of the currency at future periods. An abnormal gambling character,
therefore, necessarily became a part of every business transaction,
and worked to the great detriment of all that class of people on the
islands, who had only labor to sell, which loses its entire value
for the time, if not bought at the moment it is offered for sale,
and the selling price of which, when once established, can only be
changed with difficulty. And as this was a very important matter in
the financial history of the island, it is desirable to illustrate
it by relating the details of what actually happened:
The people on the island clothed themselves largely in cloth made
in foreign countries; and as the island currency was non-exportable,
the cloth was paid for by exporting gold, or commodities which could
readily be exchanged in other countries for gold. The cloth thus
purchased with gold was made up into clothing by the "ready-made"
clothing dealers in the cities, and sold in this form for currency,
to smaller or retail dealers on a credit of from three to six or nine
months. Had the currency involved in this transaction throughout been
gold, or certificates representing deposits of gold, the credit price
of the ready-made clothing would have been the cash price, with a
small amount additional to represent interest on the credit-time,
and a possible risk of non-payment; and the seller would never for
one moment have taken into consideration the question whether the
currency, or representation of money in which he was to be paid,
three, six, or nine months afterward, would have the same value or
purchasing power that it had on the day the debt was contracted. He
might have doubted whether his customer would pay him at all, but he
never would as to the quality of that which he was entitled to receive
as payment. But as the currency involved in so much of the transaction
as occurred after the cloth was made into clothing was neither gold nor
any thing which represented gold, nor any other valuable commodity,
and therefore, like a ship without a rudder, or a locomotive without
a track, was sure to be unreliable as an exchanging instrumentality,
the seller knew to a certainty that what he was to receive in payment
of his goods, three, six, or nine months afterward, would not have
the same value or purchasing power that it had on the day the debt
was contracted. It might be greater, it might be less; but the seller
never bet on the former contingency, or allowed for it by deducting
any thing from the time price of his goods, for to do so would be to
discard in anticipation a possible incidental profit. But he always,
as a matter of safety, felt obliged to bet on the latter contingency,
and then cover the bet by adding correspondingly to the price of
every thing he sold on credit. When, by reason of the disturbed
condition of things, the purchasing power of the currency fluctuated
greatly in brief intervals, the seller on all his time sales bet in
favor of great risks, and bet differently every day, and added ten,
fifteen, twenty, or even thirty per cent. to his prices over and
above the general aggregate representing cost, profit, interest,
and ordinary risk, in order to make sure of receiving currency of
sufficient purchasing value to enable him to buy back as much gold
as he was obliged to give for the cloth originally.
When, on the other hand, the fluctuations in the purchasing power of
the currency became limited, the insurance percentage added to price
became also limited, and followed a somewhat general rule. Thus, when
a clothing-dealer sold goods on three months' credit, for currency
whose purchasing power was so much less than gold that it took one
hundred and fifteen of currency to buy one hundred in gold, he added
five per cent. to his sale price, or he bet that the depreciation of
currency at the end of three months would be indicated by one hundred
and twenty for gold; while for a credit longer than three months he
bet that the risk of depreciation would be greater, and added, to
cover this risk, an average of ten per cent. to his price. If now,
at the end of three months, it required one hundred and twenty-five
in currency to buy one hundred in gold, the dealer lost five per
cent. through the payment of his debt. But if, on the other hand,
the fluctuation of the purchasing power of the currency was the
other way, and it required at the end of the three months only
one hundred and ten of currency to buy a hundred in gold, he made
ten per cent. over and above his ordinary and legitimate profit,
while an equivalent burden or loss fell on the consumers. [17] As
the dealers were shrewd, the result of this betting and insurance
was rarely loss, and so constantly profit, that some dealers after a
while came to regard the obtaining of this species of profit as the
main thing for which all business was instituted; while others, more
clear-headed and discerning, concluded that the wisest and easiest way
to get rich was to bet directly on the varying quantity of currency
which it would take from day to day to buy the same quantity of gold,
or other valuable commodities, instead of attempting to do the same
thing indirectly, through the agency of stores, stocks of goods,
clerks, books, credits, and the like. The last, accordingly, wound
up their business, and, in the language of the day, "went on to the
street," and made their living by selling on time what they did not
possess, and buying on time what they never expected to receive, and
reckoning profit or loss according to the difference in prices growing
out of the fluctuations of the currency between the day of buying or
selling, and the day of receiving or delivering. In short, as with
the magic fiddle in the fairy tale, which, when played upon, made
every body dance, no matter whether in the brambles or on the plain,
so the use on the island of a currency which continually fluctuated
in purchasing power, because it was not a constant equivalent of any
thing, made every body gamble that could; some because they liked to,
and others because they had to, to protect themselves from losses. The
masses who could not conveniently gamble tried to protect themselves
by asking high prices in return for their services, or by giving
less in proportion to what they received; [18] but, in the long run,
they learned by hard experience that they were not as well off as
they expected to be; and that if one effect of an overabundant,
non-equivalent-to-any-thing currency was to stimulate production,
another and greater effect of it was to unequally distribute the
results of production, transferring from those who had little to those
who had much, and thus making the rich richer, and the poor poorer.