MATERIAL COMMODITIES.
Valuables fall naturally and exactly into three classes, Commodities,
Services, and Credits. The reasons are obvious at first glance, why
articles falling in the first class occupied the thoughts and the
efforts of men almost exclusively for the first thousand years of
recorded history. Commodities appealed to the senses of men: they are
visible, tangible, weighable. Some form of personal slavery existed
everywhere, and largely withdrew attention from personal services
bought and sold; and there was not apparently sufficient personal
confidence between man and man in the earlier ages to allow much
development of credits, whose ground is personal trust and whose
sphere is future time. Commodities, on the other hand, fitted by the
efforts of some men to satisfy the immediate wants of other men, all
ready for delivery, to be exchanged against other commodities
similarly fitted and at hand, took the field apparently in the
earliest ages of recorded Time, gradually became very large in volume,
opened new routes of travel and transportation, and served to connect
in a rough and ready way neighboring tribes and even neighboring
nations.
_Commodities are the class of Valuables comprising material things,
organic and inorganic, fitted by human efforts to satisfy human
desires._ Cattle were probably among the first things to become
valuable, that is, salable; and it is certain, that they became very
early in many quarters of the world a sort of Money or standard of
comparison among other things exchangeable, and indeed they continue
to be such in some quarters to this day. Near the middle of the sixth
book of the Iliad occur these lines:--
"Then did the son of Saturn take away
The judging mind of Glaucus, when he gave
His arms of gold away for arms of brass
Worn by Tydides Diomed,--_the worth
Of fivescore oxen for the worth of nine_."
Gold and silver also became valuable in the ordinary way in very early
times, and later became Money or a medium in exchanging other things;
and much later other metals came into use as commodities and then too
as money; for the Latin word for money, _pecunia_, derived from
_pecus_, cattle, seems to imply some original equivalence in value
between the bronze stamped with the image of cattle and the cattle
themselves. Parcels of land subdued and improved by human hands were
probably bought and sold in some portions of the world as early as
anything was,--at any rate very early. Land-parcels are a commodity
under the definition. Another passage from Homer, towards the end of
the seventh book of the Iliad, displays some of the commodities in
common use during the heroic age in Greece:--
"But the long-haired Greeks
Bought for themselves their wines; some gave their brass,
And others shining steel; some bought with hides,
And some with steers, and some with slaves, and thus
Prepared an ample banquet."
The earliest detailed record of a commercial transaction in
commodities, is the purchase by Abraham of the field and cave in
Hebron, more than 2000 years before Christ. It is narrated at length
in Genesis xxiii. Long before this purchase, however, it is said of
Abraham that he "went up out of Egypt very rich in cattle, in silver,
and in gold." This formal sale to him in Hebron of the field and cave
of Machpelah is in all its parts instructive to us, and full of signs
of the drift of those times. It was "_in the audience of the sons of
Heth, before all that went in at the gate of his city, that the field
and the cave were made sure unto him for a possession. And Abraham
weighed unto Ephron the silver which he had named in the audience of
the sons of Heth, four hundred shekels of silver, current money with
the merchant._" In the lack of written and recorded deeds to
land-parcels, as we have them now, the sale of them was "_made sure_"
before the faces of living men, who would tell the truth and pass on
the word. The market-place in those days was "_at the gate of the
city_," where the judges also used to hold their courts, the place
most frequented of all, and sales were made "_before all that went
in_" thither; "_in the audience of the sons of Heth_" was the silver
weighed out, and the field made sure in exchange. Then there were
"merchants" as a class; silver passed by weight rather than by tale,
although it had already passed beyond a mere commodity and had become
money, "_current money with the merchant_"; and even at this day the
Bank of England takes in and pays out gold and silver by balance
rather than by count, though they be in coined money: it is the more
accurate method.
The author of the book of Job, believed to be of great antiquity, and
certainly true to nature and to fact in its essential parts, knew very
well the modes in which the ancient mines were wrought, and the worth
of the commodities extracted:--
"Truly there is a vein for silver,
And a place for gold, which men refine.
Iron is obtained from earth,
And stone is melted into copper.
Man putteth an end to darkness;
He searcheth to the lowest depths
For the stone of darkness and the shadow of death.
From the place where they dwell they open a shaft;
Forgotten by the feet,
They hang down, they swing away from men.
The earth, out of which cometh bread,
Is torn up underneath, as it were by fire.
Her stones are the place of sapphires,
And she hath clods of gold for man.
The path thereto no bird knoweth,
And the vulture's eye hath not seen it;
The fierce wild beast hath not trodden it;
The lion hath not passed over it.
Man layeth his hand upon the rock;
He upturneth mountains from their roots;
He cleaveth out streams in the rocks,
And his eye seeth every precious thing;
He bindeth up the streams, that they trickle not,
And bringeth hidden things to light."
The prophet Ezekiel, who wrote in the sixth century before Christ,
incidentally described in his chapter xxvii the commerce in
commodities, that then centered in the city of Tyre on the eastern
Mediterranean. "_All the ships of the sea with their mariners were in
thee to traffic in thy merchandise: many islands were at hand to thee
for trade: with silver, iron, tin, and lead, they traded in thy fairs:
they brought thee for payment horns of ivory and ebony-wood._" Among
the commodities besides these exchanged in that market, are mentioned
by the prophet horses and mules and lambs and rams and goats, wine of
Helbon and white wool, fine linen and embroidered work, and riding
cloths and mantles of blue and chests of damask and thread, wheat and
pastry and syrup and oil and balm, precious spices and cassia and
sweet reed, and gold and carbuncles and corals and rubies. These old
Phoenicians of Tyre colonized Carthage, and thus bore a vast trade in
commodities to the West, going overland into the heart of Africa for
dates and salt and gold-dust and slaves, and by sea through the
Pillars of Hercules northward to the British Isles for the sake of the
trade in tin.
The amount of transactions in commodities, the first class of
Valuables, has been constantly increasing, under natural impulses
which we shall have shortly to describe, from the dawn of authentic
History down to the present moment; and figures are baffled in
expressing to our minds the sum of these transactions even in a single
country, still more their aggregate in the commercial world. The
foreign trade of every country is almost exclusively in commodities,
and is only a small fraction of its domestic trade in the same; and
so, when we remember that the foreign trade of the United States, for
example, under a commercial system designed and adapted to curtail
such trade, amounted in 1889 to about $1,600,000,000, and the foreign
trade by Great Britain the same year to about 4,000,000,000, we gain a
glimpse, we touch as it were the hem of the garment, of the gigantic
traffic of the world in commodities alone.
_The Production of Commodities is the getting them ready to sell and
the selling them._
1. We must look first at the REQUISITES of such production. They are
three, _Natural Agents_, _Human Efforts_, _Reserved Capital_. The
following lines of Whittier touch incidentally on these three
requisites, and may serve us as a general introduction to them:--
"Speed on the ship!--But let her bear
No merchandise of sin,
No groaning cargo of despair
Her roomy hold within.
"No Lethean drug for Eastern lands,
No poison-draught for ours:
But honest fruits of toiling hands,
And Nature's sun and showers!"
Natural Agents include not only "Nature's sun and showers," but also
all the forces and fertilities and materials of free Nature, that men
may and do avail themselves of in preparing commodities to exchange
with the commodities of other men. Of higher rank in Production than
these natural agencies are the Efforts of men in molding them so as to
answer other men's Desires, of which efforts the "toiling hands" of
the poet are a symbol. They include also the inventive brains and
eloquent tongues and the skilful manipulations of every name. The
poet's "ship" is an instance of capital, which is always a result of
previous toil reserved to help on some future sales. These three
elements, Nature, Labor, Capital, conspire in all production of
commodities. Nature comes first with her free forces and materials;
and then present toil aided by the results of past toil in the form of
capital does all the rest in getting commodities ready to sell and
selling them. Let us now note each of these three a little more
closely.
(a) Natural Agents. The most important point about these is, that they
are the free gifts of God, and continue so throughout the
complications and transformations wrought on them and through them by
Labor and Capital, until the material commodity of whatever kind is
finally sold, and so passes out of the purview of our Science. Many of
the gifts of God, like the air we breathe and the light in which we
recreate ourselves and the water of refreshment drunk from spring or
brook, do not connect themselves in any way with commodities bought
and sold, and nobody ever thinks of them as salable at all; but it has
seemed and still seems to many, as if the natural fertility in a
land-parcel, the water-fall along the course of river or stream, the
timber-growth which the hand of man planted not, the deposit of gold
or coal in the bowels of the earth, and other such-like cases in which
natural gifts _do_ connect themselves with human services and then are
sold, lifted the Value of the things sold above the point to which the
mere human efforts, whether past or present, would raise it. In point
of fact, this seeming is not a reality, as will fully appear in the
sequel. God is a Giver, and never a Seller; and he has arranged it so
in his great world of gifts, that, however much shrewd men may try to
monopolize these gifts and then dole them out to other men for pay,
they are always practically thwarted in the attempt. God himself never
takes pay for anything, and has never authorized anybody to take pay
in his behalf; and when this role of Seller of free gifts, which have
cost him nothing and which he has not improved, is taken up by any
one, he is shortly crowded off the stage in shame by other actors true
to Nature.
This is the place for a grand induction. When we study in detail the
free gifts of God to this world and its inhabitants, we find they come
and keep coming _in great classes_. This is one of the uniformities of
Nature, on whose solid ground men tread and stride in safe inductive
reasoning. Can a farmer get pay in the price of his grain for the
original fertility of his field, which neither he nor his fathers nor
his neighbors have bettered or made more available? Doubtless he would
be _glad_ to do so, doubtless he _would_ do so, were it not for the
primary fact, that such fertilities as his are in a _class_ of fields,
that other men in more or less proximity to him raise grain on other
fields, whose original fertility is equal to that in his field; and
some of these other men in common competition with the rest as sellers
will be willing to part with _their_ grain for a price which will be a
fair equivalent for the onerous human services rendered in getting
their grain ready to sell and selling it; and the free action of
_these_ men as sellers will tend to fix a general market-rate for
grain then and there, at which rate _all_ must sell whether they will
or nill; and where now is the effect on price of God's free gift? It
is still free.
Here is a fine water-fall on the bounding river, the banks are low at
this point, just the place for mill and factory, the weight of God's
free water will turn the wheels, a hamlet will grow up around
them--perhaps a city,--can the riparian owner charge a fancy price for
site of dam and mill? He might under some circumstances; but the same
river doubtless, above, below, rolling over similar geological strata,
leaps and falls at other points also; there are other owners of
mill-privileges within hail; besides, there are other streams and
tributaries in the region round about; and water has a knack of
dropping to the lower levels. God's gifts are broad in classes;
competition naturally has free play; natural agents are an essential
factor in commodities; so and more so are human efforts; but Values
tend perpetually and powerfully under natural competition between men
as sellers to proportion themselves to the onerous human efforts
involved, and to eliminate completely from all influence on themselves
the broad and bountiful gifts of Providence.
What has been observed to be true in respect to two or three or more
of the classes of God's free gifts _to_ men, or _in_ men, may almost
certainly be inferred to be true of all such classes. Therefore,
inductively, _such free gifts have no effect on Values to lift them,
their influence being eliminated by human competition_. Of course, if
there be unique cases of remarkable gifts, falling in no class,
subject consequently to no competition, one cannot say confidently
that the free element in conjunction with the onerous element may not
make the return-service greater than it would be otherwise. It may,
or it may not, make it greater. There is no living principle at work
in such cases, that makes it certain, that the return-service will
_not_ be greater. Still, unique cases, if they exist, are of little or
no consequence in Economics. They are most remarkably few, at all
events. Where come in the solitary gifts, that may later be connected
with Valuables, on the round earth as God fashioned it? Gold, silver,
diamonds, copper, coal, tin, amber, spice-shrubs, chinchona-trees, and
all such things, have been scattered too widely and liberally for
individuals to monopolize them, or even combinations of men unless
they be assisted by law. Where even are the unique cases of God-given
talent or genius in men themselves, such as may become connected with
Valuables of the second class? Daniel Webster had his competitors in
the Court-room and in the Senate, Ben Jonson did not let Shakspeare
have it all his own way on the stage, and even "Milton's starry
splendor" did not make Paradise Lost sell well.
We must just note here in passing the supreme importance in an
economical point of view of untrammelled competition in the sale of
commodities. It is the divinely-appointed means, and the only possible
means, of preventing wide-spread injustice through Monopoly. Nothing
else in the world can be made effective to estop men from robbing
their fellow-men through exchanges artificially restricted; from
charging more in the market for their wares than a just compensation
for their own efforts; from enriching themselves by impoverishing
their neighbors; from worsening the quality of their wares offered for
sale; and from relying upon the artificial restrictions put on their
competitors, rather than on their own skill and enterprise and the
goodness of their goods, for a market. The Common Law of England holds
monopolies to be illegal, and the reasons given (11 Coke, 84) are,
first, because the price of the commodity will be raised; second,
because the quality of the commodity will not be so good and
merchantable as it was before; and third, because they are apt to
throw many working people out of employment. It is nothing less than a
crime against Civilization, than a sin against the clear ordinance of
God, than an artificial obstruction to individual and national
Progress, to put up bars and barriers by law for the purpose of
cutting off competition, whether domestic or foreign, either by
putting disabilities in the path of any or through monopoly
tariff-taxes, in the buying and selling of useful commodities
anywhere.
(b) Human Efforts. Every way unlike the free forces and materials of
Nature, indispensable as these are in the production of commodities,
is the second requisite in such productions, namely, the onerous
efforts of men. Persons are very different from things, from powers,
from lifeless materials. Persons act from motives only. Minds lie back
of bodily exertions, impelling and guiding them. Such efforts as are
needful to mold materials into commodities are only put forth in view
of, and for the sake of, a remunerative return; and only rational
beings, acting under motives whose goal is in the future, capable of
foresight and of adapting means to ends, can put forth such efforts.
No degree of training can make even the most intelligent animals
capable in any degree of that kind of exertion, which we call _Labor_;
and there is no improvement whatever in the methods of animals in
reaching their instinctive ends,--the beaver builds his dam and the
bee gathers and deposits the honey exactly as bees and beavers did
ages ago.
In the strictest sense, accordingly, there is no such thing as
physical labor, because the mental must coöperate with the physical
even in the lowest forms of human exertion; and in the same sense
there can be no such thing as exclusively mental labor, for the bodily
powers conspire more or less in the highest intellectual efforts that
are ever sold. Nevertheless, both the phrases, physical labor and
mental labor, are convenient and not harmful, whenever on the one side
the bodily powers seem to be predominant in the effort, and on the
other the intellectual.
It is now to be noticed, that all that men can do, when they labor
physically, is _to move something_. When a man works with his hands or
his feet or his whole body, all that he does or can do, is to begin a
series of motions or resistances to motion, for this good reason,
human muscles in their very structure are capable only of starting
motion and stopping motion. All the marvellous results of physical
effort in all the world have flowed from so simple a matter as the
contraction and expansion of muscle; and the world of materials is so
cunningly constructed, that, when these are moved into right position
by human hands, or by some form of capital itself the result of
previous human handling, the free powers of Nature do all the rest,
and valuable commodities are the good outcome. For one example, when
the woodman fells a tree for sale, he brings a series of motions
(_labor_) to bear upon the trunk, by means of his sharp axe
(_capital_), and then the power of gravitation (_nature_) seizes the
tree and brings it crashing to the earth. For a second illustration,
wool and cotton have by nature a certain tenacity of fibre, and what
is more to the point, a certain _kinkiness_ of fibre easily
interlinking one with another indefinitely in length; men move these
separate fibres in certain relations to each other by an instrument
(_capital_) called a spindle, and the result is thread; then other men
move these threads into relations with each other by means of an
implement (_capital_) called a shuttle, and the outcome is a web of
cloth; lastly, the tailor moves his shears through the cloth, and then
his needles, and the issue is a coat, a commodity, the valuable for
which all these processes were gone through with, and by the sale of
which all the onerous factors therein are compensated.
Now, since human muscles are soon wearied in action, and since motion
is the only thing required of men in the production of commodities,
they naturally look around for outside help in this matter; and the
first help they lighted on for moving things was the domestic animals,
the ox and ass and horse, doubtless domesticated in the very
beginnings of society; and as these can be used in so many different
places, and for such a variety of purposes, and are so cheaply reared,
they are exceedingly useful as a motive power, and will probably never
be superseded as such. Inanimate auxiliaries in moving things into
right position for the production of commodities, such as the
water-wheel and wind-mill, were undoubtedly brought into use much
later; and much later still, steam and electricity and other more
subtle and recondite natural agents. All of these helps, whether
animate or inanimate, do but cause simple motions of the same kind as
those caused by the human hand. The most ponderous engine merely
reduplicates that which the arm of a child is capable of; while in
point of delicacy and firmness of touch, perhaps no machinery can
subdivide and apply this motion so skilfully as the human fingers can.
It is said that some of the lace made wholly by hand is finer and more
delicate than any yet woven by machinery, although the introduction of
machinery into lace-making has cheapened lace products in general to a
small fraction of their former cost.
What we commonly call "_Power_," then, by whatever instrumentality
furnished, is simple auxiliary motion, additional to that of physical
human Labor. Commodities are produced in unlimited quantity and
variety by such labor, assisted by the free forces of nature applied
by means of animals and implements, which are capital. But such labor
is irksome as well as wearisome, and is never expended except in view
of a reward, which is secured only from the sale of the finished
commodity.
(c) Reserved Capital. We must examine the nature of Capital with care,
and follow its varied forms without confusion, because it is the only
other factor besides labor in the production of commodities, that has
to be paid for out of their sale.
Simplest cases are always the best in economical discussions. Let us
take for illustration a recently observed case from the gold hills of
North Carolina. All the methods are strongly primitive, but all the
elements of production are present. A negro woman is the laborer, the
bits of gold scattered in the soil are the free gift of nature, a
bored log to divert the water from the mountain stream, and a tin pan
in which to gather and wash the sand and gravel, are two crude forms
of capital; free gravitation also brings the water through the log,
and free gravity carries down the particles of gold to the bottom of
the washing-pan, and many other agencies of free nature coöperate in
this very simple case of production; and besides the log and the pan,
there are doubtless some other forms of capital, at least the whittled
plug to stop at need the flow of water through the log. The chief
factor in these processes of production is still the laborer, the
motions of her hands in stirring the sand and picking out the precious
bits at the bottom of the pan are the chief motions, the labor is both
physical and mental,--no animal could be trained to adopt means to
ends like this negro woman.
It is her capital that now engages our attention. _Any Valuable
outside of man himself reserved to assist in the production of further
valuables is Capital._ The idea of growth and increase inheres in the
very word, which is derived from the Latin noun, _caput_, a head, a
source, and gives intimation in its etymology of its scientific
meaning. The word, _caput_, is often used in classical Latin for a sum
of money put out at interest, and its derivative, _capitale_, is also
used in the same sense, at least in mediæval Latin; and from this form
of the word have come into English not only _Capital_, but also by
corruption _Cattle_ and _Chattels_. Flocks and herds were at one time
the principal riches of our Saxon ancestors, and also the principal
means of _increasing_ their riches, and in process of time the same
root-word came to be spelled differently as applied to animate or
inanimate things of value; while the notion implied in the Latin
_caput_, and in the English _source_, came along in all three of these
words; and hence the careful definition of Capital above given.
It makes no difference whether the colored woman bored her own log by
means of an item of capital already existing, namely, an auger, or
hired another person to bore it for her, or bought the log already
perforated, it is an article of Capital, a valuable kept to increase
future valuables; she might doubtless sell it for something to a
new-comer wishing to operate other sand in the neighborhood, but she
keeps it to help herself gather more gold for ultimate sale, she
practises what we call in Economics _abstinence_ and must have her
reward for this in the form of _profits_ from the ultimate sale of her
commodity, gold, as well as a reward for her labor in the form of
_wages_ from the same source. As one person furnishes both the labor
and capital in this case, there is no actual division of the gross
return into wages and profits, as there always must be when separate
parties furnish the two essential factors, both of which must be
remunerated by the sale of the commodity. What is thus true of the
log, is equally true of the tin-pan, and even of the plug also, if it
be capable of repeated use and cost something of labor and the help of
a previous item of capital, namely, the jack-knife. Our negro woman of
the South is a small capitalist as well as a rude laborer, and
practises _abstinence_ as well as puts forth _exertion_, and
consequently is entitled to receive _profits_ as well as _wages_ in
the return she gets for her gold-dust when she sells it.
We are now beginning to see what the nature of Capital is, and what
the motives are for employing it. In the production of commodities
Capital is always something that makes easier to the producers the
getting ready to sell and the selling of future commodities. The
capital always spares more or less of onerous and irksome human
exertion. It always mediates between some free force of Nature and
some otherwise more onerous effort of men. The sole motive to employ
capital in any one or in all of its multitudinous forms from the
simplest to the most complex is to throw off upon the ever-willing
shoulders of Nature some part of the irksome effort that would
otherwise come to the easily-wearied muscles of men. Nature is "good,"
to use a commercial term, for all she can be made to carry of men's
work, through implements devised and machinery contrived to apply, to
commodities in every stage of their transformation and transportation
till the last, the ever-present potencies of this physical world.
These potencies cost nothing. The implements and machinery cost much
in present labor and previously created capital. The ultimate sale of
commodities must make return for all the forms of capital employed in
their production, in the shape of Profits, the reward of
_abstinence_; and for all the forms of direct labor employed in their
production, in the shape of Wages, the reward of personal _effort_.
The beaver gnaws down the tree with his teeth from generation to
generation in precisely the same manner; but man is a being more nobly
endowed than the beaver, and no sooner had he occasion to fell trees,
than something of the nature of an axe suggested itself to his
ingenuity. It is true, that his earliest attempts at axe-making were
probably of the rudest sort, but just as soon as anything was devised,
whether of flint or shell or metal, that rendered easier the felling
of a tree, Capital made a beginning along that line of obstacles. Our
chief interest in studying the implements of the successive so-called
Ages of Stone and Bronze and Iron, is to witness the increasing
degrees of ingenuity displayed by those pre-historic men. Among the
more gifted races, progress in this direction was perhaps more rapid
than we are wont to think it was, since Tubal-Cain, the first
artificer of record, is said to have "_hammered all kinds of
implements out of copper and iron_" (Gen. iv, 22). Lucretius, writing
in the century before the Christian era, put down the following lines
in vigorous Latin, as translated by Mason Good:--
"Man's earliest arms were fingers, teeth, and nails,
And stones, and fragments from the branching woods;
Then copper next; and last, as later traced,
The tyrant iron."
We are at no loss, then, to explain the origin of Capital and its
motives. Tools are invented and employed for no other reason than
this, that, by means of their help, the human efforts are lessened
relatively to the given satisfactions. Since it requires tools to make
tools, the progress of this branch of capital must have been
relatively slow at first; but, since every advance in mechanical
contrivance makes still further advances easier, there is a natural
tendency, which facts abundantly exemplify, to a more and more rapid
progression in the number and perfection of all implements of
production. The same motive that impelled to the first invention, has
impelled to the whole series of inventions since, and will constantly
impel to further inventions till the end of time. Every step of this
progress gives birth to a larger and still larger proportion of
satisfactions relatively to efforts; marks an increasing control on
the part of man over the powers of Nature; and gives promise for the
time to come of greater advantages still in both of these directions.
The powers of Nature, such as those which make the grain grow, bring
the tree down, turn the water-wheel, impel the locomotive, and send
the message round the world, all stand ready to slave in the service
of man; but in order to make their aid available for human purposes,
there must be a plough, an axe, a wheel, an engine, an electric
machine; and it is because capital brings gratuitous natural forces
into service, and the more so as capital progresses, that the Value of
those commodities produced by the aid of capital tends constantly to
decline as compared with those commodities, in the production of which
capital conspires less.
It is already plain, that the class, Capital, is a smaller and a
peculiar sub-class under the great class, Valuables; nothing can
become Capital until it first become a Valuable, and then be
_capitalized_ by a distinct act or intention on the part of the owner
to reserve it in his own hands as an aid in further production, or
transfer it to other hands to be so used, he meanwhile receiving
profits as the reward of his abstinence; only a _transferable_
valuable, accordingly, can become Capital in any case, that is to say,
it must be either a Commodity or a Credit, since personal services,
though they may be sold, cannot be put over into the hands of another
to be used in production, and therefore cannot become Capital in any
case; and the chief peculiarity of this sub-class, Capital, is, unlike
the three great classes of Valuables, each of which is utterly
distinct from the other two, so that a Commodity can never become a
Credit or a personal Service either of the others, that Capital as a
class has extremely flexible limits, and consequently certain
Commodities and Credits may easily enough be Capital to-day, and fall
back to-morrow into their respective classes of mere Valuables and the
next day come out from the class Non-Capital into the class Capital
again. The same commodities and credits may be capital at one time,
and non-capital at another, though they must be valuable all the time,
or cease to be commodities and credits. When it is said that a young
man's talents and skill are his "capital," the word of course is used
in a metaphorical sense, and the meaning is, that skill and talents
are _like_ capital in some respects. Popular language is not
scientific.
Cicero wrote long ago: "Optimum et in privatis familiis et in
republica vectigal est parsimonia." _Abstinence is the best means of
revenue as well in private families as in the State._ The source of
Capital in a distinct act of will saving or sparing from present use
(_parsimonia_) a valuable commodity or credit, and the quick nature of
Capital as adding to itself (_vectigal_) in profits, are both brought
out in this Latin maxim, which is rather an expression of an old and
ingrained Roman sentiment than anything original with Cicero. It is
the very nature as well as the very name of "Capital" to increase
itself by rapid increments. It is as well the Stream as the Source.
For example, any sum of money soon doubles itself when put out at
compound interest, because the original sum increases day and night
until it be repaid. It is of the essence of every form of Capital _to
make growth_, because its sole purpose as such is to become an aid to
future and further production. A trowel in the hands of a mason, which
is capital, pays for itself every day he works with it, and perhaps
every hour of the day, in the increased production wrought by means of
it. The wheel, which free water turns, though a costly implement,
repays that cost a hundred fold in the additional bushels of wheat
turned into flour through its aid as capital. So of all implements. So
of all machinery. So of all means of transportation: ships, canals,
railroads.
There was a strange prejudice in ancient and mediæval times against
this natural increase of capital out of its own bowels, as it were,
owing probably to this dictum of Aristotle: "_For usury is most
reasonably detested, as the increase of our fortune arises from the
money itself, and not by employing it for the purpose for which it was
intended._" In 1360, a French bishop, Nicole Oresme, repeats the error
of Aristotle under the same rhetorical image: "_It is monstrous and
contrary to Nature that a barren stock should give birth, that a thing
sterile in its whole being should fructify and be multiplied from
itself, and such a thing is money._" Even Shakspeare catches up the
old figure: "_Is your gold and silver ewes and rams?_" Shylock
answers: "_I cannot tell; I make it breed as fast._" In the light of
the three requisites of Production, in the light of the purpose and
wisdom of God in arranging the active forces of this world, the
prejudice in question disappears, and intelligence rejoices in the
ever-increasing use of Capital as the handmaid of Labor, in the quick
and sure reward of him who practises abstinence, in the production of
commodities constantly made easier and cheaper in all directions, in a
scale of comforts for the masses of men assuredly rising, in a
divinely appointed force lifting like Christianity itself upon the
otherwise sagging condition of mankind.
Capital assumes but two economical forms, namely, Circulating Capital
and Fixed Capital. _Circulating Capital is all those capitalized
products, whether commodities or credits, the returns for the sale or
use of which are derived at once and once for all._ All circulating
capital will be found in one or other of the following sub-forms: (1)
raw materials; (2) wages paid out in view of an ultimate profit; (3)
completed products on hand for sale; and (4) products bought and held
for the sake of resale. The crucial test of circulating capital is the
question, Are the returns to be secured by the single use or single
transfer of that particular product? Tools, for example, in the hands
of him who has manufactured them for sale is circulating capital.
_Fixed Capital is all those capitalized products, which are purchased
or held with a view of deriving an income from their delayed and
repeated use._ All fixed capital will probably be found in one or
other of the sub-forms following: (1) tools and machinery in use; (2)
buildings used for productive purposes; (3) permanent improvements in
land parcels; (4) investments in aid of locomotion and transportation;
(5) products rented or retained for that purpose; and (6) the national
money considered as a whole.
2. We will next look at the essential CONDITIONS of the production of
Commodities. These are also three, as are the Requisites, namely,
_Association_, _Invention_, _Freedom_. More or less will men make and
sell to one another commodities in any state of society, in which
there is permitted any considerable degree of association of men with
men locally or commercially, in which is encouraged in any way the
universal spirit of invention or the desire to get hard things done
easier, and in which some degree of liberty of action and security of
property and equality of privileges is guaranteed; but it is very
plain, that the production of commodities will increase in all
directions and become the greatest in that age and country when and
where are allowed the closest ties of human association both in place
and in commerce, the freest scope and largest rewards of inventive
genius, and the highest possible degree of liberty and security and
equality of rights. Let us illustrate from a state of things in the
southern half of the United States during the first half of the
nineteenth century. For the most part the land owners lived on
isolated plantations widely separate from one another, these
plantations were cultivated by gangs of slaves, a system that tends to
bring all manual labor into contempt, the poor whites scattered in
hamlets felt themselves above the slaves and beneath the masters,
intercourse between the three classes was little, opportunity to
better essentially their condition was denied to all three alike,
there were but few cities sprinkled over the vast territory and these
relatively small, the only commodity produced on a large scale was raw
cotton, the simple device for ginning this had been invented in the
decade preceding by a college boy from Connecticut, the agricultural
implements were of the rudest kind, even the coarse shoes for the
slaves were bought at the North;--in short, the degree of association
and invention and freedom was each so low, that the production of
commodities was exceedingly small, even as compared with what that
production became in one quarter of a century after the abolition of
slavery.
(a) Association. If we may continue for purpose of illustration our
childhood trust in the story of De Foe, Robinson Crusoe came to lead a
very tolerable life upon his desolate island by means of his own
industry directed so as to satisfy his own wants by his own efforts.
He did everything for himself, and had no opportunity to buy anything
or sell anything. The whole course of such an isolated life could
never develop the idea of Value, would require no such word as
Commodities or suggest their production, and such a man while solitary
upon his island could not possess Property in the true sense of that
word. Association is the first main condition of Production, because
of the natural obstacles interposed between the isolated man and the
supply of his various wants. If any one man try to surmount a
considerable number of these natural obstacles, he must miserably
fail, because his powers are not adequate to the task; and hence it
follows, that, in a state of isolation, _men's wants exceed their
powers_; but now let the same man devote himself to overcome a single
class of obstacles, for instance, those in the way of procuring
suitable clothing, and his powers are adequate to this, he soon
acquires skill in it, he learns to avail himself of the free help of
Nature and the facilitating processes of art, he is able to realize
large products along his line, and is now ready to offer his surplus
in exchange with other men, who meanwhile have been giving themselves
each to another class of obstacles, have concentrated efforts and
skill upon them, have succeeded by the help of Nature and art in
surmounting them, and are now ready to offer their surplus commodities
in exchange for others; and, the exchanges beginning to be made in all
directions, men find that they thus obtain vastly greater
satisfactions for their various desires than they could possibly get
by direct efforts: so that we may even say, that, in a state of
society through association, _men's powers tend to overtake their
wants_.
Without association with his fellow-men, there is no creature so
helpless, so unable to reach his true end, as is man; and therefore it
is, that the impulse to association is one of the strongest of our
natural impulses. Men come together, as it were by instinct, into
society; and, thus associating themselves together, it is soon
discovered, not only that there are various desires in the different
members of the community, which are now readily met by coöperation and
mutual exchange, but also that there are very different powers in the
different individuals in relation to those obstacles which are to be
surmounted. The tastes and aptitudes of different men are very
diverse. There is a great diversity in natural gifts. One man has
physical strength, another mechanical ingenuity, a third a
philosophical turn, and a fourth a bent and genius for traffic. Now,
then, Nature speaks in as loud a voice as she can utter, in favor of
such a degree of association and exchange as shall allow a free
development of these varying capacities, while they work upon the
obstacles to the gratification of men's wants, which lie appropriately
opposite to them.
Men must come together either locally or commercially, must learn each
other's wants, must compare with each other powers and tastes and
opportunities, must come to have some confidence in each other, and
then they will begin by rendering mutual services back and forth to
experience the better satisfactions and the new strength that
exchanges bring. Whatever improves the character of men, and thus
leads to greater confidence among them, will enlarge their commerce,
and knit closer and wider ties of association and production.
Neighborhood associations and productions soon create a surplus to be
exchanged for something else with other neighborhoods; parts of single
nations however remote from each other find a relative diversity of
advantage and an increasing profit in connecting themselves by the
ties of trade; and the separate nations learn, though late, that they
are only one great family for the grand ends of production and
progress. Even within the single nation, there is a strong tendency
for particular trades to localize themselves in one spot, as for
instance, the manufacture of skin gloves has centered itself for the
United States in Gloversville, N. Y.; and so in the great cities that
are centres of distribution, for example, the wholesale grocers of St.
Paul are on one street, the dry goods houses of Boston are in close
proximity, and the booksellers of New York are tending towards each
other in place.
Now, this broad association as between persons and nations, instead of
detracting at all from the individuality and power of each, is the
very thing that brings out the individuality and intensifies the power
of each; because it is only thus that full scope is given to the
exercise and development of each peculiar power whether of the
individual or the nation. Hence the strong tendency everywhere visible
in the world of commerce towards Specialties: the old single trades
and vocations and professions are constantly breaking themselves up
into parts, and each man is taking up that for which he is naturally
best fitted and has specially trained himself, and all to the great
advantage of individuality and personal power and progress. Mr. Carey
is certainly right in his principle (much insisted on in all his
books), that the degree of individuality depends on the degree of
association, each advancing hand in hand with the other; and he is as
certainly wrong in lacking confidence in the natural forces at work
tending to the highest degree of association and consequently to the
highest degree of individuality. These forces are immensely strong.
Men come together as it were by instinct, being conscious of
individual feebleness; personal interest is soon seen to follow the
bent of social attraction; a just sense of personal dignity and
importance in being a substantive part in the ongoings of society
enormously strengthens the impulse to association and individuality;
the progress of each and all in achievement and elevation still
further knits the ties of union; and lastly, a strong feeling of
social justice, of what is _due_ to others as well as to one's
self,--that every man has an inalienable right to his full
_opportunity_ and all that that implies, to buy and sell and get gain,
to life and liberty and the pursuit of happiness. When motives and
powers and potencies such as these, proven to be universal by broad
and constant inductions, fail as economical forces to secure
association and individuality, then it will be time to look around
with Mr. Carey for some inferior and factitious force.
(b) Invention. This is the second main condition in the production of
commodities; because production is processes, getting something ready
to sell and selling it; and Nature stands ever ready with her free
agencies to facilitate these processes, just so far as the inventive
brain of man can contrive to unite the two. Invention is the marriage
of a gratuitous force to an onerous process, and the fruit of that
union is an easier way and multiplied utilities. There are some in
every considerable community, and more in every community enlarged by
the natural association but just now described, who have the knack of
contrivance, who find their joy in finding a new power in Nature or
some new application of an old power; were it not for unhindered
association and free exchange, the individuality of these would be
effectually repressed, and they would have to drudge for their daily
bread; but the importance of inventors is well understood in every
progressive community, and under advanced exchanges their livelihood
is guaranteed by those who hope to profit by its results while their
work is maturing; and Production rejoices and grows strong and throws
out unnumbered hands to make instant use of the new power and the
easier processes, in order to multiply commodities in number and
variety.
As an illustration of all this, the reader will be interested in a
brief account of the series of Inventions made in Great Britain during
the last third of the eighteenth century, in consequence of which the
Cotton Industry was established in that country in such preëminence as
has to this day baffled the attempts of all other countries even to
approximate it.
We catch our first glimpse of Cotton in the pages of Herodotus, who
wrote more than 400 years B.C. in relation to India as follows:
"_There are trees, which grow wild there, the fruit whereof is a wool
exceeding in beauty and goodness that of sheep. The natives make their
clothes of this tree-wool._" This passage is interesting, as showing
that the first comparison of cotton with wool exhibited their
resemblance in whiteness and in _kinkiness_, which latter quality
enables them both to be spun into yarn; as showing also, that the
Hindoos very early both spun and wove cotton, and then made it into
clothes; and as showing lastly, the appropriateness of the original
name given to cotton in Europe, namely, "tree-wool," a name by which
the Germans still designate it (Baumwolle). If the extreme East
furnishes the first notice of cotton, the extreme West follows it next
in order. When the Spaniards discovered Central and Southern America
in the first quarter of the sixteenth century, they reported that they
found the Mexicans clothed in cotton cloth.
But wool was the staple of England. Parliament and people were jealous
of cotton, lest it might prove a rival to wool, and actually
prohibited the introduction of printed calicoes (so called from
Calicut in India whence they were exported). The taste, however, for
calicoes increased in spite of the prohibition, which was afterwards
intermitted for a revenue duty on plain cotton, which was then rudely
printed on blocks in London, Manchester, and elsewhere; but the
prohibition of Parliament against wearing printed calicoes was first
repealed in 1736. Fifteen years later the United Kingdom imported only
2,976,610 lbs. of raw cotton, and exported only £45,986 of cotton
goods; in one century the import of cotton became 500 times larger
than that, and the export of cottons 1300 times larger than that; and
this prodigious result was due mainly to three or four inventions
occurring within short times of each other, by means of which the free
forces of nature took the place of the onerous efforts of men.
John Hargreaves, a poor weaver in the neighborhood of Blackburn in
Lancashire, was returning home from a long walk, in which he had been
purchasing a further supply of yarn for his own loom. Spinning at that
time only admitted of one thread spun at a time by one pair of hands,
one of which turned the wheel and thus made the single spindle rapidly
revolve, and the other hand pulled gently upon the "roving" attached
to the spindle and thus drew it out to the requisite tenuity twisted
into yarn. The "carding," then effected by rude instruments called
hand-cards, by means of which the fibres of the cotton were
disentangled and straightened and laid parallel with each other; and
the "roving," a process by which the short fleecy rolls stripped off
the hand-cards were applied to the spindle and made into thick threads
only slightly twisted, were the two preparatory operations for the
spinning. All these operations were slow and clumsy, and the
consequent expensiveness of the yarn formed a great obstacle to the
establishment of the cotton manufacture in England. The improvements
made in the loom of that period by Kay, father and son, had shortly
before doubled the power of each weaver, and the spinners could not
keep up in furnishing material to the weavers.
As Hargreaves entered his cottage from this excursion to get yarn to
keep his loom agoing, his wife, Jenny, accidentally upset the spindle,
which, as was her wont, she was diligently using. Her husband noticed
that the spindle, which was now thrown into an upright position,
continued to revolve just as when horizontal, and that the thread was
still spinning in his wife's hands. The idea immediately occurred to
him, that it might be possible to connect a considerable number of
upright spindles with the revolutions of one wheel, and thus multiply
the power of each spinster. "_He contrived a frame in one part of
which he placed eight rovings in a row, and in another part a row of
eight spindles. The rovings, when extended to the spindles, passed
between two horizontal bars of wood, forming a clasp which opened and
shut somewhat like a parallel ruler. When pressed together this clasp
held the threads fast; a certain portion of roving being extended from
the spindles to the wooden clasp, the clasp was closed, and was then
drawn along the horizontal frame to a considerable distance from the
spindles, by which the threads were lengthened out and reduced to the
proper tenuity; this was done with the spinner's left hand, and his
right hand at the same time turned a wheel which caused the spindles
to revolve rapidly, and thus the roving was spun into yarn. By
returning the clasp to its first situation and letting down a piercer
wire the yarn was wound upon the spindle._"
The powers of Hargreaves' machine soon became known among his ignorant
neighbors, notwithstanding his strenuous efforts to keep his admirable
invention a secret, and these neighbors naturally enough concluded
that a contrivance, which enabled one spinster to do the work of
eight, would throw many people out of employment. A mob broke into his
house and destroyed his machine. Hargreaves retired in disgust to
Nottingham, where by means of the friendly assistance of one other
person he was enabled to take out a patent for his invention, which he
called in compliment to his industrious wife the "_Spinning-Jenny_."
This invention gave a new impulse to the cotton manufacture, but had
it been unaccompanied by other improvements, no purely cotton goods
could have been made in England; because the yarn spun by the new
jenny, like that previously spun by hand, was not fine enough nor hard
enough to be used as warp, and linen or woollen threads had
consequently to be employed for that purpose.
In the very year, however, in which John Hargreaves, the poor weaver,
migrated to Nottingham, Richard Arkwright, a poor barber's assistant,
took out a patent for his still more celebrated machine for spinning
by rollers. In one respect Arkwright was much worse off than
Hargreaves: the latter had a helpmate meet for him, the former had a
wife who is said to have destroyed the models her husband had made and
to have opposed him in every step of his career. But Arkwright was not
deterred from his life pursuit by the poverty of his circumstances or
the scandalous conduct of his wife. After many years of intense and
opposed devotion to the possible application of a simple principle he
had conceived in his mind, namely, that of spinning by means of
rollers revolving at varying rates of rapidity, he succeeded in
contriving and patenting his memorable machine, which, more than any
other one invention, localized and concentrated in England the
gigantic cotton-industry of the world. Arkwright's idea and
achievement was to pass the coarse thread drawn out from the rovings
over two pairs of rollers in succession, the first of which revolving
slowly fined the thread down evenly and gradually, and then this
thread was passed over a second pair of rollers turning with a high
velocity and drawing out the line into any requisite tenuity. Thus a
cotton thread was spun capable of being used as warp. Cotton cloth as
such could now be manufactured in England.
From the circumstance that the mill, at which Arkwright's machinery
was first erected, was driven by water power, the machine received the
inappropriate name of the "water-frame"; and the thread spun on these
rollers was commonly called the "water-twist." The old mode of carding
the cotton by hand now furnished the "rovings" too slowly to meet the
wants of the new spinning-jenny and the new water-frame; and these
great inventions would consequently have proven comparatively useless,
had not a more efficient and rapid process of carding the cotton
superseded just at the right time the old system of hand-carding.
Lewis Paul introduced revolving cylinders for carding the raw cotton
into rovings preparatory to spinning, in partial imitation perhaps of
Arkwright's principle of spinning the rovings by the rotatory motion
of rollers. Paul's machine consisted "_of a horizontal cylinder,
covered in its whole circumference with parallel rows of cards with
intervening spaces, and turned by a handle. Under the cylinder was a
concave frame, lined internally with cards exactly fitting the lower
half of the cylinder, so that when the handle was turned, the cards of
the cylinder and of the concave frame worked against each other and
carded the wool. The cardings were of course only of the length of the
cylinder, but an ingenious apparatus was attached for making them into
a perpetual carding. Each length was placed on a flat broad riband,
which was extended between two short cylinders, and which wound upon
one cylinder as it unwound from the other._"
While the foregoing series of inventions placed an almost unlimited
supply of cotton yarn at the disposal of the weaver, the machinery as
yet introduced was still incapable of providing yarn fit for the
finest grades of cotton cloth. The "water-frame" indeed spun abundant
twist for warps, but it could not furnish the finest qualities of
yarn, because these were too tenuous to bear safely the pull of the
rollers while they wound themselves on the bobbin. Samuel Crompton, a
young weaver living near Bolton, possessed the ingenuity needful to
remove this difficulty. He succeeded in combining in one machine,
which from its nature is happily called the "mule," the several
excellences of Hargreaves' spinning-jenny and Arkwright's water-frame.
Copying after the latter, the mule has a system of rollers to reduce
the roving; copying after the former it has spindles without bobbins
to give the twist; and the thread is stretched and spun at the same
time by the spindles after the rollers have ceased to give out the
rove. "_The distinguishing feature of the mule is that the spindles,
instead of being stationary, as in both the other machines, are placed
on a movable carriage which is wheeled out to the distance of
fifty-four or fifty-six inches from the roller beam, in order to
stretch and twist the thread, and wheeled in again to wind it on the
spindles. In the jenny, the clasp which held the rovings was drawn
back by the hand from the spindles; in the mule, on the contrary, the
spindles recede from the clasp, or from the roller-beam which acts as
a clasp. The rollers of the mule draw out the roving much less than
those of the water-frame, and they act like the clasp of the jenny by
stopping and holding fast the rove, after a certain quantity has been
given out, whilst the spindles continue to recede for a short distance
farther, so that the draught of the thread is in part made by the
receding of the spindles. By this arrangement, comprising the
advantages both of the roller and the spindles, the thread is
stretched now gently and equably, and a much finer quality of yarn can
therefore be produced._"
The ingenuity of Hargreaves, Arkwright, and Crompton had been
exercised to provide the weaver with yarn, and had now indeed provided
him with more yarn than he could use; the spinster had beaten the
weaver, just as the weaver had previously beaten the spinster; and the
making of cotton cloth seemed likely to continue sluggish, because the
yarn could not be woven any faster than a skilled workman could weave
it with Kay's improved fly-shuttle. In the summer of 1784, a Kentish
clergyman named Edmund Cartwright, being in conversation with some
Manchester gentlemen, one of whom observed that, "as soon as
Arkwright's patent expired so many mills would be erected and so much
cotton spun that hands would never be found to weave it," replied,
"Arkwright must then set his wits to work to invent a weaving-mill."
Notwithstanding the unanimous opinion expressed by the Manchester
gentlemen, that such a weaving-machine was wholly impracticable, the
clergyman himself within three years had invented and brought into
successful operation the "_power-loom_." Subsequent inventors improved
the idea which Cartwright originated, and before 1834 there were not
less than 100,000 power-looms at work in Great Britain alone.[3]
Substantially the same machinery invented for carding and spinning and
weaving cotton was very shortly and successfully applied to the
carding and spinning and weaving of wool, because the wisdom of Nature
imparted to them both the same sort of tenacity of fibre, the same
capacity in that fibre to be spun into a thread of indefinite length
by means of the little loops or kinks easily interlocking contiguous
fibres into a single thread, which two obvious resemblances gave an
identical name to the animal and vegetable products otherwise so
different from each other.
The spirit of Invention, one of the chief conditions in the production
of material commodities, thus simply illustrated along the line of a
single manufacture, may serve us for a sample of similar improvements
taken and taking place in scores upon scores of other lines of effort
and production. The principle is the same in all cases past and
present and still to come, namely this, to throw the strain from the
mind and muscles of men upon the forces and agencies of free Nature,
with which the world around us is crowded in our behalf, and which are
waiting to slave in the service of mankind without rest and without
fatigue,--without money and without price.
(c) Freedom. By far the most important of all the conditions, under
which the production of material commodities goes broadly forward, is
liberty of action on the part of the individual; because, wherever
such liberty is conceded, association and invention and all other
needful conditions follow right along by laws of natural sequence. By
liberty of individual action is meant the practical right of every man
to employ his own efforts for the satisfaction of his own wants in his
own way, whether directly or through exchange. Each man's right of
individual freedom is limited of course by every other man's right to
equal freedom, which the first man is not at liberty to infringe; and
also, in certain few and limited respects, by what is sometimes called
the "general good," the judge of the application of which must be the
government under which the man lives. With these limitations, which
are few in number and never serious in degree when rightly applied,
and which limit in common all other rights whatsoever, the right of
every man to buy and sell and get gain is just as fully a right as the
right of breathing. It stands on the same impregnable ground. It is a
natural and self-evident and inalienable right, with which each man
has been endowed by his Creator, to put forth efforts for his own
well-being and for those dependent upon him, either directly or by
means of efforts exchanged with other men equally free; and he is a
slave in spirit and position, who tamely submits to have his own
rights of buying and selling curtailed, or to stand by and see the
rights of his fellow-citizens similarly curtailed, unless such act of
interference and curtailment on the part of his Government be
justified by a solid proof that some other public or private rights,
which are at least as well based as his own, would be endangered by
the exercise of his own.
In what cases may a Government properly step in to regulate or
prohibit the buying and selling of its citizens? Hundreds of
inductions extending through hundreds of years have been carefully and
logically conducted in order to reach a just and comprehensive answer
to this question; and in all probability the cases have been
inductively ascertained for all time, and they are these: _such buying
and selling may be controlled and prohibited, as are proven to be
contrary_ (1) _to the public Morals_, (2) _to the public Health_, (3)
_to the public Revenue_. All other buying and selling may be safely
assumed to be both profitable to the parties to it, and also useful to
the Commonwealth in general; and any interference with it by public
authority is a high-handed infringement of natural rights, a blow
aimed at the life and source of property. These wrongful strokes at
private rights, this restriction on the freedom of individuals to
exchange products for their own welfare, is now mostly confined in
civilized countries to the region of Taxation. Within this region the
wrongs are still frightful. Judge Cooley, in his "Principles of
Constitutional Law," states the matter as follows: "_Constitutionally
a tax can have no other basis than the raising of revenue for public
purposes; and whatever governmental action has not this basis is
tyrannical and unlawful. A tax on imports, therefore, the purpose of
which is not to raise a revenue, but to discourage and indirectly
prohibit some particular import for the sake of some home
manufacturer, may well be questioned as being merely colorable, and
therefore not warranted by constitutional principle._"
Formerly, governments interfered almost beyond belief with the freedom
of their people in all industrial and commercial action; dictating
what should and what should not be grown and manufactured, what should
and what should not be exported and imported; decreeing by
proclamation or enacting by statute, the number of apprentices each
artisan might employ, and the years during which these must serve as
such, and the conditions under which they might then work as
journeymen; the materials to be used in woven fabrics, and even the
widths and other minor features of such fabrics, were prescribed in
the foremost of the European nations; in the reign of St. Louis of
France, a "Book of Trades" was issued under royal authority and is
still extant, which organizes minutely and subjects to cumbersome
rules more than one hundred separate industries as then practised;
England was the country of the great trading "Companies," and of all
of these the same may be said as Adam Smith said of the Turkey Company
formed in 1579, namely, it was "a strict and oppressive monopoly";
among others there were the African Company established in 1530, the
Russia Company beginning its operations in 1553, the East India
Company chartered on the very last day of the seventeenth century and
going out of existence in our own time, and the Hudson's Bay Company,
chartered in 1670 and so having the sole control in trade of a region
forty times larger than all England; while the colonial system
prevailing for two centuries in all the countries of Western Europe
regulated the commerce and controlled the manufactures in the colonies
with a single eye to the benefits of the mother country, as those were
conceived of under the wretched Mercantile system.
Happily, since governments have become more enlightened than formerly,
they are perceiving for the most part that they have not the least
right to interfere in those ways or in any ways with the natural right
of their people to make and grow freely all material commodities, and
to buy and sell these freely in the best markets wherever these
markets are to be found; and they are also perceiving, that by such
interference incalculable losses of property and indefinite
retardations of progress are caused to their people, as well as
weakness to themselves as governments through a more difficult
gathering of taxes and a harder maintenance of prestige and power.
The only motive to a mutual exchange of services, whether in one or in
all of their three kinds, that is to say, to a free production of
commodities and services and credits, is always and everywhere the
mutual benefit of the two parties exchanging. After all the processes
have been gone through with and the exchanges are consummated, all the
parties are richer than before, that is, they have more
_satisfactions_, otherwise the processes and exchanges would instantly
cease. Therefore, a universally free production benefits everybody,
and harms nobody. Moreover, under a system of free production, every
man is allowed under the stimulus of self-interest to work away at
those obstacles to the gratification of human desires which he feels
himself best able to overcome, to follow the bent of his own mind, and
to avail himself of all those free helps in his peculiar work which
Nature offers to him. Under these circumstances, obstacles give way
in all directions; the amount of material products produced is vastly
augmented, the number and variety and excellence of personal services
proffered are indefinitely increased, and credits compelling the
Future to pay tribute to production are multiplied; the diversified
and rapidly increasing desires of all persons in such a community are
readily met through profitable exchanges; while all peculiar
facilities natural and acquired are taken immediate advantage of, the
diversities of relative advantage in production become marked in all
directions, and a new day of industrial and commercial prosperity is
ushered in. Because under freedom all men are sure to dispose of their
industrial efforts to the best advantage, they have the strongest
possible motives to put them forth; since they can purchase with them
what they will and when they will, and where they will. Thus freedom
leads to extended association, and also to the invention of machinery
and all labor-saving appliances.
3. We are now in position to understand thoroughly the ultimate
GROUNDS of the production of material commodities. We have seen, that
these commodities have been multiplying in number and variety and
excellence ever since the beginnings of history, that they are
everywhere multiplying now at a rate hitherto unprecedented and
undreamed of, and that improved and improving methods of
transportation by land and sea are now carrying these back and forth
to the ends of the earth. What is the _principle_, under which these
things have been done, are now being done, and are certain to be done
in the time to come?
The physical and moral obstacles, that Nature has interposed to the
gratification of the multitudinous and constantly increasing desires
of men, are so great in all directions, that the powers of the
individual man are utterly unable to surmount any considerable number
of them; while at the same time, the physical and moral powers,
adapted under sufficient motives to overcome these obstacles, are very
diverse in the different individuals of mankind. Not only is there a
surprising diversity in original gifts, but also the powers acquired
by gradual concentration of personal effort upon one set of obstacles
become exceedingly diverse, as does moreover familiarity in the use of
the gratuitous forces of nature which lend their aid towards
overcoming these particular obstacles. As the result of one or two or
all of these, one man naturally comes to have a vast advantage over
others in his particular branch of business, whatever that may be;
each of these others by precisely the same means comes to have a
legitimate advantage over the first in his own branch of effort,
whatever that may be; and if, as always happens practically, the first
has desires which the varied efforts of the others can satisfy, and
they too desires which his efforts can satisfy, nothing more is
necessary to profitable exchanges between them than this diversity of
relative advantage at different points.
It is solely because a given effort irksome in itself put forth for
another person, in view of and for the sake of a return-service from
him, realizes more of satisfaction to both parties than when put forth
for one's self directly, that commercial exchanges ever take place
among men. The sole ground of these, the principle underlying them
everywhere, is DIVERSITY OF ADVANTAGE BETWEEN DIFFERENT MEN AND
BETWEEN DIFFERENT NATIONS IN DIFFERENT RESPECTS. All exchanges
whatsoever depend on diversity of relative advantage in the production
of commodities or services or credits as between the persons
exchanging; and this diversity of relative advantage exists by God's
appointment primarily among individual men as such, and only
secondarily on the ground of the varied soil and climate and position
and natural gifts of different parts of the earth. Reserving these
secondary considerations, which are quite secondary in importance
also, to a later detailed discussion, it is very clear and of central
consequence in our science that a diversity of relative advantage in
different things displays itself as between the individuals of every
community and country large and small. There is no hamlet in any land
in which one man has not an advantage over his neighbors in the making
of clothes, another in the making and setting of horse-shoes, a third
in the building of houses, a fourth in the curing of diseases, and
another in the keeping a school; while each of those neighbors has
undoubtedly some advantage or other over each of these in some trade
or means of livelihood. As a natural result of this diversity any two
of these villagers may profitably exchange their respective efforts
with each other, provided of course each has a desire for the product
of the other, to the manifest lessening of the effort of each
relatively to the satisfaction of each, and the more so as the
relative superiority of each to the other in his own trade is the
greater.
This point will repay some pains in minute illustration. If the
blacksmith can make and set horse-shoes only a trifle better than the
tailor could do this if he tried, and the tailor can make coats only a
little better than the blacksmith could make one if he chose, there
will be but a slight benefit to each in their changing works with one
another. For the sake of definiteness, let us say, that the tailor's
capacity for making coats is 6, and his capacity in making and setting
horse-shoes is 5; and also that the blacksmith's capacity for shoeing
horses is 6, and his ability in making coats is 5. Each has a relative
superiority to the other of 1 in his own trade; and if they exchange
efforts, as they probably would under these circumstances, there is
only an advantage of 2 to be divided between them.
Now let us suppose (what might easily become a fact), that the tailor
by exclusive and augmented attention to the conditions of his own
craft carries up his capacity for making coats to 15, the blacksmith's
efficiency in both the trades remaining the same as before. There will
now be an increased motive to both the artisans for exchanging
products with one another, and a larger gain to each than before as
the result of such exchange. The diversity of relative advantage as
between the two has now gone up from 2 to 11. The tailor can now make
a coat much better and quicker than before; and though the blacksmith
owing to his inertness can neither make nor set horse-shoes any better
than before, still less make coats any better, he will after all by
still trading with the tailor reap a part of the benefit of the
latter's increased efficiency in making coats; the new coat is at once
better and costs less than the previous one; the tailor is still less
inclined than before to leave his new and greater advantage over the
blacksmith to set himself to shoeing his own horse; even on the old
terms the blacksmith can do that 1 better than he himself can, and
rather than forego the trade he will naturally offer the blacksmith
somewhat better terms than before, or in other words will feel
impelled to share with the blacksmith a part of the proceeds and
rewards of his own now superior skill and diligence. The trade began
on the sole basis of a relative diversity of advantage as between the
two mechanics, each in his own craft; this relative diversity, without
which no exchange ever takes place between any two persons, has now
gone up as between these two from 2 units of advantage to 11 units of
advantage; how will these 11 units be divided in this case? Nobody can
tell exactly how they will be divided. Two things about it, however,
are _certain_ at least in their tendencies and potencies. The
blacksmith is sure to get some part of the extra fruit of his
neighbor's new push and spirit, while the tailor is sure to get as his
own reward by much the larger part of the whole blessed 11.
We must by no means omit to notice the logical inference from this
instance, nor fail to make the proper inductive generalization from a
sufficient number of similar instances. It is this: no man can make
any essential improvement in any of the methods of producing material
commodities, without at the same time benefiting other people as well
as himself. Under natural law, which is no respecter of persons, he
can by no possibility selfishly take to himself the entire fruits of
his own growing skill and vigor. The only way in which he can gather
in at all the fruits of these is to sell their proceeds in the open
market. To broaden his own market for now better and more abundant
goods he must offer them to everybody on somewhat better terms than
formerly--and the better the terms the broader the market--and he can
well afford to do this, because the goods now cost him less of irksome
human effort. Every improvement in the production of commodities is
precisely of that complexion. The issue of every invention, of every
improved process of every kind, is, so far forth, a cheaper product.
And this public gain follows, must follow, individual enterprise at
single points, even when the great mass of exchangers remain at the
old stage of sluggishness. Whatever increases at one point even, and
_a fortiori_ at two points, the diversity of relative advantage as
between any two exchangers, is of benefit to them both, and the
greater this relative diversity becomes the greater the benefit to
both.
Now let us see how the matter stands, when tailor and blacksmith at
the same time feel and obey the impulses to a more skilled and
vigorous artisan life. Suppose the blacksmith too carries up his
efficiency in his own trade to 15, just as the tailor has done, the
potency of each in the trick of the other remaining as before at 5;
under these circumstances when the two come to trade with each other,
each has a relative superiority over the other of 10, and there is an
advantage of 20 points to be divided between the two; the trade is now
ten times more profitable to each than it was at the outset, when
there was only an aggregate of 2 units for the division between two
parties; and accordingly the motive to an exchange and the gain of an
exchange as between tailor and blacksmith are ten times greater than
they were before. Therefore we lay down the principle, as inductively
ascertained and as universally applicable to all exchanges, that the
greater the relative superiority at different points as between the
parties exchanging, the more beneficial and profitable do the
exchanges become to all the participators in them. If this principle
be just, and we may well flatter ourselves that it will be found to be
just, it follows, that every man who has anything to buy or sell, is
directly interested in the highest success of his fellow-exchangers,
that every trade finds its own advantage in the success of all other
trades, and that all discoveries and inventions by which Nature is
made to pay tribute to art is, restrictions apart, so much clear gain
to the world at large. In the light of sound and broad principles,
what David Hume called the "Jealousy of Trade" is simply silly.
The mainspring that impels all buyers and sellers to quicken their
movements and to improve their methods and thus and otherwise to
cheapen their costs of production, is the natural press of
_competition_. Somebody else is offering this product, or will offer
it, for less than we are now selling it for, and we must contrive
some way by shortened times or cheaper processes or a quicker zeal not
to be beaten in this market-race, is the silent argument ever making
itself felt on the mind and hand of the producer. Such natural action
always increases the general diversity of relative advantage as among
buyers and sellers.
But, on the other hand, whatever lessens or threatens to lessen this
natural and most beneficial stress of competition among producers of
similar commodities at home or abroad, necessarily lessens the motive
on the part of these producers to excellence of quality in their goods
and to cheapness of their cost, because it makes less the diversity of
relative advantage as between these producers and those producers of
other commodities against which the first exchange. The units of
advantage that would otherwise be divided between the exchangers are
diminished; the motives to trade and the rewards of trade are thus
lessened to each pair of parties subject to such diminution of
competition, and consequently to the community, or nation, or family
of nations, as a whole; and accordingly this is the precise place for
us to look into the nature and effects of _Monopoly_, so called, and
to perceive once for all, that Monopoly is the enemy of mankind.
Monopoly is a word derived from two Greek words, which mean when
combined _selling alone_, that is, the privilege of selling one's
commodity free from the competition to which it is naturally subject
by other sellers than the privileged one. Monopoly is thus artificial
restraint imposed on some buyers and sellers for the supposed benefit
of other buyers and sellers. It is wholly unnatural. It is usually
enjoyed under the forms of law. Its beneficiaries commonly cajole or
extort from Government by hook or by crook the exclusive privilege of
selling certain commodities in a designated market. Their motive is
purely selfish: it is simply and solely to get for themselves a
return-service artificially enhanced by selling commodities in a
legally restricted market. The effect in the first instance usually
corresponds to their expectations. The public are at their mercy so
far as the designated commodities are concerned.
The general story of monopolies is a dreary stretch of record of human
greed and wrong on the one hand, and of wide-spread poverty and
suffering and slowly-gathering resistance on the other. We will look
at only two instances at present in the long account, premising that,
the motives of greed and grab are the same in all instances, and the
results of wrong and hate on the part of those oppressed by them are
the same also in all instances. Let Macaulay (I, 40) tell us something
of the first instance selected for illustration. "_But at length the
Queen took upon herself to grant patents of monopoly by scores. There
was scarcely a family in the realm which did not feel itself aggrieved
by the oppression and extortion which this abuse naturally caused.
Iron, oil, vinegar, coal, saltpetre, lead, starch, yarn, skins,
leather, glass, could be bought only at exorbitant prices. The House
of Commons met in an angry mood. It was in vain that a courtly
minority blamed the Speaker for suffering the acts of the Queen's
Highness to be called in question. The language of the discontented
party was high and menacing, and was echoed by the voice of the whole
nation. The coach of the chief Minister of the Crown was surrounded by
an indignant populace, who cursed the monopolies, and exclaimed that
the prerogative should not be suffered to touch the old liberties of
England. There seemed for a moment to be some danger that the long and
glorious reign of Elisabeth would have a shameful and disastrous end.
She, however, with admirable judgment and temper, declined the
contest, put herself at the head of the reforming party, redressed
the grievance, thanked the Commons in touching and dignified language
for their tender care of the general weal, brought back to herself the
hearts of the people, and left to her successors a memorable example
of the way in which it behooves a ruler to deal with public movements
which he has not the means of resisting._"
Perhaps some one of my readers may suggest, that these are the words
of a Whig-Liberal, and may thus exaggerate the cause of the people as
against the monopolists. Well, then, let us hear the words of a high
Tory-Loyalist, the historian Hume (IV, 335, 350), in relation to the
same monopolies. "_The active reign of Elizabeth had enabled many
persons to distinguish themselves in civil and military employments;
and the Queen, who was not able from her revenue to give them any
rewards proportioned to their services, had made use of an expedient
which had been employed by her predecessors, but which had never been
carried to such an extreme as under her administration. She granted
her servants and courtiers patents for monopolies; and those patents
they sold to others, who were thereby enabled to raise commodities to
what price they pleased, and who put invincible restraints upon all
commerce, industry, and emulation in the arts. It is astonishing to
consider the number and the importance of those commodities which were
thus assigned over to patentees. Currants, salt, iron, powder, cards,
calf-skins, felts, pouldavies, ox-skin-bones, train oil, lists of
cloth, potashes, anise-seeds, vinegar, seacoals, steel, aquavitæ,
brushes, pots, bottles, saltpetre, lead, accidences, oil, calamine
stone, oil of blubber, glasses, paper, starch, tin, sulphur, new
drapery, dried pilchards, transportation of iron ordnance, of beer, of
horn, of leather, importation of Spanish wool, of Irish yarn; these
are but a part of the commodities which had been appropriated to
monopolists. These monopolists were so exorbitant in their demands,
that in some places they raised the price of salt from sixteen pence a
bushel to fourteen or fifteen shillings. Such high profits naturally
begat intruders upon their commerce; and in order to secure themselves
against encroachments, the patentees were armed with high and
arbitrary powers from the Council, by which they were enabled to
oppress the people at pleasure, and to exact money from such as they
thought proper to accuse of interfering with their patent. The
patentees of saltpetre, having the power of entering into every house,
and of committing what havoc they pleased in stables, cellars, or
wherever they expected saltpetre might be gathered, commonly extorted
money from those who desired to free themselves from this damage or
trouble. And while all domestic intercourse was restrained, lest any
scope should remain for industry, almost every species of foreign
commerce was confined to exclusive Companies, who bought and sold at
any price that they themselves thought proper to offer or exact._"
"_The Government of England during that age, however different in
other particulars, bore in this respect some resemblance to that of
Turkey at present: the Sovereign possessed every power, except that of
imposing taxes; and in both countries, this limitation, unsupported by
other privileges, appears rather prejudicial to the people. In Turkey,
it obliges the Sultan to permit the extortion of the pashas and
governors of provinces, from whom he afterwards squeezes presents and
takes forfeitures: in England, it engaged the Queen to erect
monopolies, and grant patents for exclusive trade; an invention so
pernicious, that had she gone on during a tract of years at her own
rate, England, the seat of riches, and arts, and commerce, would have
contained at present as little industry as Morocco or the coast of
Barbary._"
But, some one will say, Hume and Macaulay are historians, writing
long after these events took place, and may likely have been too
favorable in their judgment to freedom of trade domestic and foreign.
It is indeed true, that both of them were firmly convinced that
freedom of trade is an inalienable right as well as an unspeakable
blessing to all men everywhere. So, then, let us go back to
contemporaries. Let us hear the eye and ear witnesses of the
grievances complained of in 1601. Robert Cecil was then prime minister
of Queen Elizabeth. He and his father had had more to do in granting
the monopolies than any other persons in the realm except the Queen.
Said he from his place in the Commons on the 25th of November: "_I
say, therefore, there shall be a proclamation general throughout the
realm, to notify Her Majesty's resolution in this behalf. And because
you may eat your meat more savory than you have done, every man shall
have salt as good and cheap as he can buy it or make, freely without
danger of that patent which shall be presently revoked. The same
benefit shall they have which have cold stomachs, both for aqua vitæ
and aqua composita and the like. And they that have weak stomachs, for
their satisfaction, shall have vinegar and alegar, and the like, set
at liberty. Train oil shall go the same way; oil of blubber shall
march in equal rank; brushes and bottles endure the like judgment.
Those that desire to go sprucely in their ruffs, may at less charge
than accustomed obtain their wish; for the patent for starch, which
hath so much been prosecuted, shall now be repealed. The patents for
calf-skins and felts, for leather, for cards, for glass, shall also be
suspended, and left to the law._"
Five days later one hundred and forty members of the House were
formally received by Elizabeth in person, the Speaker having been
instructed to convey their thanks to her majesty; and, after the
Speaker's address, he with the rest knelt down, and the Queen gave her
answer as follows: "_Mr. Speaker, you give me thanks, but I doubt me,
I have more cause to thank you all, than you me: for had I not
received a knowledge from you, I might have fallen into the lap of an
error, only for lack of true information. Since I was queen, yet never
did I put my pen to any grant, but that upon pretext and semblance
made unto me that it was both good and beneficial to the subjects in
general, though a private profit to some of my ancient servants who
had deserved well; but the contrary being found by experience, I am
exceeding beholding to such subjects as would move the same at first.
I have ever used to set the last judgment-day before mine eyes, and so
to rule as I shall be judged to answer before a higher judge. To whose
judgment-seat I do appeal, that never thought was cherished in my
heart that tended not to my people's good. And now if my kingly bounty
hath been abused, and my grants turned to the hurt of my people,
contrary to my will and meaning; or if any in authority under me have
neglected or prevented what I have committed to them, I hope God will
not lay their culps and offences to my charge. Though you have had,
and may have, many princes more mighty and wise, sitting in this seat,
yet you never had, or shall have, any that will be more careful and
loving._"[4]
These were the last words of Elizabeth to the Commons of England. She
died in a little more than a year. In a little less than a year before
the death of her successor, the famous Act of Parliament of 1624
declares, that all monopolies, grants, letters patent for the sole
buying, selling, and making of goods and manufactures, shall be
thereafter wholly null and void. Though this Act, and many others, was
violated more or less in the next reign, it effectually secured in the
long run the freedom of industry in England; and in the opinion of
excellent authorities, has done more to excite the spirit of invention
and industry, and to accelerate the progress of commerce in that
country, than any other law on the statute book.
Our second instance of Monopolies shall be drawn from the state of
things in the United States in this year of Grace, 1890. The
monopolies of to-day are secured by means of an instrument called a
Tariff, which, later on in these pages, will be fully discussed in its
history, inmost nature, and invariable effects. Here it will suffice
to say, that a tariff is nothing in the world but a combination of
Taxes, which taxes the people of the country, on which the tariff is
imposed, are obliged to pay in one form or another. The only word ever
uttered by a tariff, the only word a tariff from its own nature can
utter, is, _Thou shalt pay_! The ostensible reason for levying these
taxes is the constitutional one of getting money into the national
Treasury,--"_to pay the debts and provide for the common defence and
general welfare of the United States_"; but the real purpose of laying
these tariff-taxes at present is only secondarily and remotely the
ostensible and constitutional one; because, on the authority of
Professor Taussig of Harvard University, there is not a single one of
over 4000 items of taxes in this tariff, that is designed primarily to
get money into the treasury from the pockets of the people, but every
one of them is designed more or less and more rather than less to
raise the price of domestic goods to our own people artificially by
keeping out of the country by means of these taxes on them the foreign
goods, which would otherwise come into a profit. In other words, there
is no purely revenue-tax in our immense tariff at present, but every
item in the enormous list is a so-called and mis-called
"protective"-tax.
By this shutting off from domestic goods the natural competition of
corresponding foreign goods by means of such tariff-taxes, a monopoly
is created at the instance and for the sole benefit of certain classes
of privileged home-producers. They can sell alone (monopoly) just so
far as other sellers are kept out by these heavy taxes. The goal of
all their striving is to get an artificially-enhanced price for their
own products at the cost of their countrymen by means of a market
restricted to themselves through obstacles excluding foreign sellers.
The end proposed by these shrewd manipulators is realized in fact.
Domestic prices are lifted on so-called "protected" goods. This is the
first effect of the monopoly. It has often been alleged, and with
great vehemence by the late Horace Greely, that competition among the
domestic producers of such wares will lower their price again to the
natural point; but if this is so, what _motive_ have the individual
producers to work so assiduously in elections and lobbyings to get on
and keep on these tariff-taxes? Again, Mr. Greely, and all others of
like association, forgets the admirable generalization of Robert
Stephenson,--"_Where combination is possible, competition is
impossible._" Combination among producers to keep up prices is always
possible in a market restricted by law. This has been proven on a
large scale in the United States during each of the past thirty years:
combinations among coal operators to keep up the prices of "protected"
coal by restricting the annual output of their collieries;
combinations among carpet and other woollen manufacturers to maintain
high prices of their fabrics by restricting their workmen to certain
hours per day or to certain months per year; have been among the
commonest of industrial events in all this interval. Within a very few
years past there has come into almost universal vogue among these
monopolists a new kind of combination called "_Trusts_,"--again
abusing a good word by making it cover an abominable purpose,--which
are probably illegal at Common Law, which only become possible under
monstrously unjust tariff laws, and which work wide-spread wrong among
the masses of the people.