superabundance; and as those economists who have contested the
possibility of general superabundance, would none of them deny the
possibility or even the frequent occurrence of the phenomenon which we
have just noticed, it would seem incumbent on them to show, that the
expression to which they object is not applicable to a state of things
in which all or most commodities remain unsold, in the same sense in
which there is said to be a superabundance of any one commodity when it
remains in the warehouses of dealers for want of a market.
This is merely a question of naming, but an important one, as it seems
to us that much apparent difference of opinion has been produced by a
mere difference in the mode of describing the same facts, and that
persons who at bottom were perfectly agreed, have considered each other
as guilty of gross error, and sometimes oven misrepresentation, on this
subject.
In order to afford the explanations, with which it is necessary to take
the doctrine of the impossibility of an excess of all commodities, we
must advert for a moment to the argument by which this impossibility is
commonly maintained.
There can never, it is said, be a want of buyers for all commodities;
because whoever offers a commodity for sale, desires to obtain a
commodity in exchange for it, and is therefore a buyer by the mere fact
of his being a seller. The sellers and the buyers, for all commodities
taken together, must, by the metaphysical necessity of the case, be an
exact equipoise to each other; and if there be more sellers than buyers
of one thing, there must be more buyers than sellers for another.
This argument is evidently founded on the supposition of a state of
barter; and, on that supposition, it is perfectly incontestable. When
two persons perform an act of barter, each of them is at once a seller
and a buyer. He cannot sell without buying. Unless he chooses to buy
some other person's commodity, he does not sell his own.
If, however, we suppose that money is used, these propositions cease to
be exactly true. It must be admitted that no person desires money for
its own sake, (unless some very rare cases of misers be an exception,)
and that he who sells his commodity, receiving money in exchange, does
so with the intention of buying with that same money some other commodity.
Interchange by means of money is therefore, as has been often observed,
ultimately nothing but barter. But there is this difference--that in the
case of barter, the selling and the buying are simultaneously confounded
in one operation; you sell what you have, and buy what you want, by one
indivisible act, and you cannot do the one without doing the other. Now
the effect of the employment of money, and even the utility of it, is,
that it enables this one act of interchange to be divided into two
separate acts or operations; one of which may be performed now, and the
other a year hence, or whenever it shall be most convenient. Although he
who sells, really sells only to buy, he needs not buy at the same moment
when he sells; and he does not therefore necessarily add to the
_immediate_ demand for one commodity when he adds to the supply of
another. The buying and selling being now separated, it may very well
occur, that there may be, at some given time, a very general inclination
to sell with as little delay as possible, accompanied with an equally
general inclination to defer all purchases as long as possible. This is
always actually the case, in those periods which are described as
periods of general excess. And no one, after sufficient explanation,
will contest the possibility of general excess, in this sense of the
word. The state of things which we have just described, and which is of
no uncommon occurrence, amounts to it.
For when there is a general anxiety to sell, and a general
disinclination to buy, commodities of all kinds remain for a long time
unsold, and those which find an immediate market, do so at a very low
price. If it be said that when all commodities fall in price, the fall
is of no consequence, since mere money price is not material while the
relative value of all commodities remains the same, we answer that this
would be true if the low prices were to last for ever. But as it is
certain that prices will rise again sooner or later, the person who is
obliged by necessity to sell his commodity at a low money price is
really a sufferer, the money he receives sinking shortly to its ordinary
value. Every person, therefore, delays selling if he can, keeping his
capital unproductive in the mean time, and sustaining the consequent
loss of interest. There is stagnation to those who are not obliged to
sell, and distress to those who are.
It is true that this state can be only temporary, and must even be
succeeded by a reaction of corresponding violence, since those who have
sold without buying will certainly buy at last, and there will then be
more buyers than sellers. But although the general over-supply is of
necessity only temporary, this is no more than may be said of every
partial over-supply. An overstocked state of the market is always
temporary, and is generally followed by a more than common briskness of
demand.
In order to render the argument for the impossibility of an excess of
all commodities applicable to the case in which a circulating medium is
employed, money must itself be considered as a commodity. It must,
undoubtedly, be admitted that there cannot be an excess of all other
commodities, and an excess of money at the same time.
But those who have, at periods such as we have described, affirmed that
there was an excess of all commodities, never pretended that money was
one of these commodities; they held that there was not an excess, but
a deficiency of the circulating medium. What they called a general
superabundance, was not a superabundance of commodities relatively to
commodities, but a superabundance of all commodities relatively to
money. What it amounted to was, that persons in general, at that
particular time, from a general expectation of being called upon to meet
sudden demands, liked better to possess money than any other commodity.
Money, consequently, was in request, and all other commodities were in
comparative disrepute. In extreme cases, money is collected in masses,
and hoarded; in the milder cases, people merely defer parting with their
money, or coming under any new engagements to part with it. But the
result is, that all commodities fall in price, or become unsaleable.
When this happens to one single commodity, there is said to be a
superabundance of that commodity; and if that be a proper expression,
there would seem to be in the nature of the case no particular
impropriety in saying that there is a superabundance of all or most
commodities, when all or most of them are in this same predicament.
It is, however, of the utmost importance to observe that excess of all
commodities, in the only sense in which it is possible, means only a
temporary fall in their value relatively to money. To suppose that the
markets for all commodities could, in any other sense than this, be
overstocked, involves the absurdity that commodities may fall in value
relatively to themselves; or that, of two commodities, each can fall
relatively to the other, A becoming equivalent to B-_x_, and B to A-_x_,
at the same time. And it is, perhaps, a sufficient reason for not using
phrases of this description, that they suggest the idea of excessive
production. A want of market for one article may arise from excessive
production of that article; but when commodities in general become
unsaleable, it is from a very different cause; there cannot be excessive
production of commodities in general.
The argument against the possibility of general over-production is quite
conclusive, so far as it applies to the doctrine that a country may
accumulate capital too fast; that produce in general may, by increasing
faster than the demand for it, reduce all producers to distress. This
proposition, strange to say, was almost a received doctrine as lately as
thirty years ago; and the merit of those who have exploded it is much
greater than might be inferred from the extreme obviousness of its
absurdity when it is stated in its native simplicity. It is true that if
all the wants of all the inhabitants of a country were fully satisfied,
no further capital could find useful employment; but, in that case, none
would be accumulated. So long as there remain any persons not possessed,
we do not say of subsistence, but of the most refined luxuries, and who
would work to possess them, there is employment for capital; and if the
commodities which these persons want are not produced and placed at
their disposal, it can only be because capital does not exist, disposable
for the purpose of employing, if not any other labourers, those very
labourers themselves, in producing the articles for their own consumption.
Nothing can be more chimerical than the fear that the accumulation of
capital should produce poverty and not wealth, or that it will ever take
place too fast for its own end. Nothing is more true than that it is
produce which constitutes the market for produce, and that every increase
of production, if distributed without miscalculation among all kinds of
produce in the proportion which private interest would dictate, creates,
or rather constitutes, its own demand.
This is the truth which the deniers of general over-production have
seized and enforced; nor is it pretended that anything has been added
to it, or subtracted from it, in the present disquisition. But it is
thought that those who receive the doctrine accompanied with the
explanations which we have given, will understand, more clearly than
before, what is, and what is not, implied in it; and will see that, when
properly understood, it in no way contradicts those obvious facts which
are universally known and admitted to be not only of possible, but of
actual and even frequent occurrence. The doctrine in question only
appears a paradox, because it has usually been so expressed as
apparently to contradict these well-known facts; which, however, were
equally well known to the authors of the doctrine, who, therefore, can
only have adopted from inadvertence any form of expression which could
to a candid person appear inconsistent with it. The essentials of the
doctrine are preserved when it is allowed that there cannot be permanent
excess of production, or of accumulation; though it be at the same time
admitted, that as there may be a temporary excess of any one article
considered separately, so may there of commodities generally, not in
consequence of over-production, but of a want of commercial confidence.
NOTE:
[6] Probably; because most articles of an ornamental description being
still required from the same makers, these makers, with their capital,
would probably follow their customers, Besides, from place to place
within the same country, most persons will lather change their
habitation than their employment. But the moving on this score would be
reciprocal.
ESSAY III.
ON THE WORDS PRODUCTIVE AND UNPRODUCTIVE.
It would probably be difficult to point out any two words, respecting
the proper use of which political economists have been more divided,
than they have been concerning the two words _productive_ and
_unproductive_; whether considered as applied to _labour_, to
_consumption_, or to _expenditure_.
Although this is a question solely of nomenclature, it is one of
sufficient importance to be worth another attempt to settle it
satisfactorily. For, although writers on political economy have not
agreed in the ideas which they were accustomed to annex to these terms,
the terms have generally been employed to denote ideas of very great
importance, and it is impossible that some vagueness should not have
been thrown upon the ideas themselves by looseness in the use of the
words by which they are habitually designated. Further, so long as the
pedantic objection to the introduction of new technical terms continues,
accurate thinkers on moral and political subjects are limited to a very
scanty vocabulary for the expression of their ideas. It therefore is of
great importance that the words with which mankind are familiar, should
be turned to the greatest possible advantage as instruments of thought;
that one word should not be used as the sign of an idea which is already
sufficiently expressed by another word; and that words which are
required to denote ideas of great importance, should not be usurped for
the expression of such as are comparatively insignificant.
The phrases _productive labour_, and _productive consumption_, have been
employed by some writers on political economy with very great latitude.
They have considered, and classed, as productive labour and productive
consumption, all labour which serves any _useful_ purpose--all
consumption which is not _waste_. Mr. M'Culloch has asserted, _totidem
verbis_, that the labour of Madame Pasta was as well entitled to be
called productive labour as that of a cotton spinner.
Employed in this sense, the words _productive_ and _unproductive_ are
superfluous, since the words _useful_ and _agreeable_ on the one hand,
_useless_ and _worthless_ on the other, are quite sufficient to express
all the ideas to which the words _productive_ and _unproductive_ are
here applied.
This use of the terms, therefore, is subversive of the ends of language.
Those writers who have employed the words in a more limited sense, have
usually understood by productive or unproductive labour, labour which is
productive of wealth, or unproductive of wealth. But what is wealth? And
here the words productive and unproductive have been affected with
additional ambiguities, corresponding to the different extension which
different writers have given to the term wealth.
Some have given the name of wealth to _all things_ which tend to the use
or enjoyment of mankind, and which possess exchangeable value. This last
clause is added to exclude air, the light of the sun, and any other
things which can be obtained in unlimited quantity without labour or
sacrifice; together with all such things as, though produced by labour,
are not held in sufficient general estimation to command any price in
the market.
But when this definition came to be explained, many persons were
disposed to interpret "_all things_ which tend to the use or enjoyment
of man," as implying only all _material_ things. _Immaterial_ products
they refused to consider as wealth; and labour or expenditure which
yielded nothing but immaterial products, they characterised as
unproductive labour and unproductive expenditure.
To this it was, or might have been, answered, that according to this
classification, a carpenter's labour at his trade is productive labour,
but the same individual's labour in learning his trade was unproductive
labour. Yet it is obvious that, on both occasions, his labour tended
exclusively to what is allowed to be production: the one was equally
indispensable with the other, to the ultimate result. Further, if we
adopted the above definition, we should be obliged to say that a nation
whose artisans were twice as skilful as those of another nation, was
not, _ceteris paribus_, more wealthy; although it is evident that every
one of the results of wealth, and everything for the sake of which
wealth is desired, would be possessed by the former country in a higher
degree than by the latter.
Every classification according to which a basket of cherries, gathered
and eaten the next minute, are called wealth, while that title is denied
to the acquired skill of those who are acknowledged to be productive
labourers, is a purely arbitrary division, and does not conduce to the
ends for which classification and nomenclature are designed.
In order to get over all difficulties, some political economists seem
disposed to make the terms express a distinction sufficiently definite
indeed, but more completely arbitrary, and having less foundation in
nature, than any of the former. They will not allow to any labour or to
any expenditure the name of productive, unless the produce which it
yields returns into the hands of the very person who made the outlay.
Hedging and ditching they term productive labour, though those
operations conduce to production only indirectly, by protecting the
produce from destruction; but the necessary expenses incurred by a
government for the protection of property are, they insist upon it,
consumed unproductively: though, as has been well pointed out by Mr.
M'Culloch, these expenses, in their relation to the national wealth, are
exactly analogous to the wages of a hedger or a ditcher. The only
difference is, that the farmer, who pays for the hedging and ditching,
is the person to whom the consequent increase of production accrues,
while the government, which is at the expense of police officers and
courts of justice, does not, as a necessary consequence, get back into
its own coffers the increase of the national wealth resulting from the
security of property.
It would be endless to point out the oddities and incongruities which
result from this classification. Whether we take the words wealth and
production in the largest, or in the most restricted sense in which they
have ever yet been employed, nobody will dispute that roads, bridges,
and canals, contribute in an eminent degree, and in a very direct
manner, to the increase of production and wealth. The labour and
pecuniary resources employed in their construction would, according to
the above theory, be considered productive, if every occupier of land
were compelled by law to construct so much of the road, or canal, as
passes through his own farm. If, instead of this, the government makes
the road, and throws it open to the public toll-free, the labour and
expenditure would be, on the above system, clearly unproductive. But if
the government, or an association of individuals, made the road, and
imposed a toll to defray the expense, we do not see how these writers
could refuse to the outlay the title of productive expenditure. It would
follow, that the very same labour and expense, if given gratuitously,
must be called unproductive, which, if a charge had been made for it,
would have been called productive.
When these consequences of the purely arbitrary classification to which
we allude have been pointed out and complained of, the only answer which
we have ever seen made to the objection is, that the line of demarcation
must be drawn somewhere, and that in every classification there are
intermediate cases, which might have been included, with almost equal
propriety, either in the one class or in the other.
This answer appears to us to indicate the want of a sufficiently
accurate and discriminating perception, what is the kind of inaccuracy
which generally cannot be avoided in a classification, and what is that
other kind of inaccuracy, from which it always may be, and should be,
exempt.
The classes themselves may be, mentally speaking, perfectly definite,
though it may not always be easy to say to which of them a particular
object belongs. When it is uncertain in which of two classes an object
should be placed, if the classification be properly made, and properly
expressed, the uncertainty can turn only upon a matter of fact. It is
uncertain to which class the object belongs, because it is doubtful
whether it possesses in a greater degree the characteristics of the one
class or those of the other. But the characteristics themselves may be
defined and distinguished with the nicest exactness, and always ought to
be so. Especially ought they in a case like the present, because here it
is only the distinction between the ideas which is of any importance.
That we should be able with ease to portion out all employments between
the two classes, does not happen to be of any particular consequence.
It is frequently said that classification is a mere affair of
convenience. This assertion is true in one sense, but not if its meaning
be, that the most proper classification is that in which it is easiest
to say whether an object belongs to one class or to the other. The use
of classification is, to fix attention upon the distinctions which exist
among things; and that is the best classification, which is founded upon
the most important distinctions, whatever be the facilities which it may
afford of ticketing and arranging the different objects which exist in
nature. In fixing, therefore, the meaning of the words productive and
unproductive, we ought to endeavour to render them significative of the
most important distinctions which, without too glaring a violation of
received usage, they can be made to express.
We ought further, when we are restricted to the employment of old words,
to endeavour as far as possible that it shall not be necessary to
struggle against the old associations with those words. We should, if
possible, give the words such a meaning, that the propositions in which
people are accustomed to use them, shall as far as possible still be
true; and that the feelings habitually excited by them, shall be such as
the things to which we mean to appropriate them ought to excite.
We shall endeavour to unite these conditions in the result of the
following enquiry.
In whatever manner political economists may have settled the definition
of productive and unproductive labour or consumption, the consequences
which they have drawn from the definition are nearly the same. In
proportion to the amount of the productive labour and consumption of
a country, the country, they all allow, is enriched: in proportion to
the amount of the unproductive labour and consumption, the country is
impoverished. Productive expenditure they are accustomed to view as
a gain; unproductive expenditure, however useful, as a sacrifice.
Unproductive expenditure of what was destined to be expended
productively, they always characterise as a squandering of resources,
and call it profusion and prodigality. The productive expenditure of
that which might, without encroaching upon capital, be expended
unproductively, is called saving, economy, frugality. Want, misery, and
starvation, are described as the lot of a nation which annually employs
less and less of its labour and resources in production; growing comfort
and opulence as the result of an annual increase in the quantity of
wealth so employed.
Let us then examine what qualities in expenditure, and in the employment
of labour, are those from which all the consequences above mentioned
really flow.
The end to which all labour and all expenditure are directed, is
twofold. Sometimes it is _enjoyment_ immediately; the fulfilment of
those desires, the gratification of which is wished for on its own
account. Whenever labour or expense is not incurred _immediately_ for
the sake of enjoyment, and is yet not absolutely wasted, it must be
incurred for the purpose of enjoyment _indirectly_ or mediately; by
either repairing and perpetuating, or adding, to the _permanent sources_
of enjoyment.
Sources of enjoyment may be accumulated and stored up; enjoyment itself
cannot. The wealth of a country consists of the sum total of the
permanent sources of enjoyment, whether material or immaterial, contained
in it: and labour or expenditure which tends to augment or to keep up
these permanent sources, should, we conceive, be termed productive.
Labour which is employed for the purpose of directly affording
enjoyment, such as the labour of a performer on a musical instrument, we
term unproductive labour. Whatever is consumed by such a performer, we
consider as unproductively consumed: the accumulated total of the
sources of enjoyment which the nation possesses, is diminished by the
amount of what he has consumed: whereas, if it had been given to him in
exchange for his services in producing food or clothing, the total of
the permanent sources of enjoyment in the country might have been not
diminished but increased.