Chapter IV.

Principles Of Political Economy

By

William Roscher,

Professor of Political Economy at the University of Leipzig,

Corresponding Member of the Institute of France,

Privy Counsellor To His Majesty,

The King Of Saxony.

From the Thirteenth (1877) German Edition.

With Additional Chapters Furnished By The Author,

For This First English And American Edition,

On Paper Money, International Trade,

And The Protective System;

And A Preliminary Essay

On The Historical Method In Political Economy

(From the French)

By

L. Wolowski

The Whole Translated By

John J. Lalor, A. M.

Vol. I.

New York:

Henry Holt & Co.

1878

CONTENTS

Translator’s Preface.

Author’s Preface. (1st Edition.)

From The Author’s Prefaces. (2d to 11th Edition.)

Preliminary Essay.

Introduction.

Chapter I. Fundamental Ideas.

Section I. Goods—Wants.

Section II. Goods.—Economic Goods.

Section III. Goods.—The Three Classes Of Goods.

Section IV. Of Value.—Value In Use.

Section V. Value.—Value In Exchange.

Section VI. Value.—Alleged Contradiction Between Value In Use And

Value In Exchange.

Section VII. Resources Or Means (Vermögen).

Section VIII. Valuation Of Resources.

Section IX. Wealth.

Section X. Wealth.—Signs Of National Wealth.

Section XI. Of Economy (Husbandry).

Section XII. Economy.—Grades Of Economy.

Section XIII. Political Economy.—The Economic Organism.

Section XIV. Origin Of A Nation’s Economy.

Section XV. Diseases Of The Social Organism.

Chapter II. Position Of Political Economy In The Circle Of Related

Sciences.

Section XVI. Political Or National Economy.

Section XVII. Sciences Relating To National Life.—The Science Of

Public Economy.—The Science Of Finance.

Section XVIII. Sciences Relating To National Life.—Statistics.

Section XIX. Private Economy—Cameralistic Science.

Section XX. Private Economy. (Continued.)

Section XXI. What Political Economy Treats Of.

Chapter III. The Methods Of Political Economy.

Section XXII. Former Methods.

Section XXIII. The Idealistic Method.

Section XXIV. The Idealistic Method. (Continued.)

Section XXV. The Idealistic Method. (Continued.)

Section XXVI. The Historical Method—The Anatomy And Physiology Of

Public Economy.

Section XXVII. Advantages Of The Historical Or Physiological Method.

Section XXVIII. Advantages Of The Historical Method. (Continued.)

Section XXIX. The Practical Character Of The Historical Method In

Political Economy.

Book I. The Production Of Goods.

Chapter I. Factors Of Production.

Section XXX. Meaning Of Production.

Section XXXI. The Factors Of Production.—External Nature.

Section XXXII. External Nature.—The Sea.—Climate.

Section XXXIII. External Nature.—Gifts Of Nature With Value In

Exchange.

Section XXXIV. External Nature. (Continued.)

Section XXXV. External Nature.—Elements Of Agricultural

Productiveness.

Section XXXVI. External Nature.—Further Divisions Of Nature’s Gifts.

Section XXXVII. External Nature.—The Geographical Character Of A

Country.

Section XXXVIII. Of Labor.—Divisions Of Labor.

Section XXXIX. Labor.—Taste For Labor.—Piece-Wages.

Section XL. Labor.—Labor-Power Of Individuals.

Section XLI. Labor.—Effect Of The Esteem In Which It Is Held.

Section XLII. Of Capital.—The Classes Of Goods Of Which A Nation’s

Capital Is Made Up.

Section XLIII. Capital.—Productive Capital.

Section XLIV. Capital.—Fixed Capital, And Circulating Capital.

Section XLV. Capital.—How It Originates.

Chapter II. Co-Operation Of The Factors.

Section XLVI. The Productive Coöperation Of The Three Factors.

Section XLVII. Productive Co-Operation Of The Three Factors. The

Three Great Periods Of A Nation’s Economy.

Section XLVIII. Critical History Of The Idea Of Productiveness.

Section XLIX. Critical History Of The Idea Of Productiveness.—The

Doctrine Of The Physiocrates.

Section L. The Same Subject Continued.

Section LI. The Same Subject Continued.

Section LII. Idea Of Productiveness.

Section LIII. The Same Subject Continued.

Section LIV. Importance Of A Due Proportion In The Different

Branches Of Productiveness.

Section LV. The Degree Of Productiveness.

Chapter III. The Organization Of Labor.

Section LVI. Development Of The Division Of Labor.

Section LVII. Development Of The Division Of Labor.—Its Extent At

Different Periods.

Section LVIII. Advantages Of The Division Of Labor.

Section LIX. Conditions Of The Division Of Labor.

Section LX. Influence Of The Extent Of The Market On The Division Of

Labor.

Section LXI. The Division Of Labor—Means Of Increasing It.

Section LXII. The Reverse, Or Dark Side Of The Division Of Labor.

Section LXIII. Dark Side Of The Division Of Labor.—Its Gain And

Loss.

Section LXIV. The Co-Operation Of Labor.

Section LXV. The Principle Of Stability, Or Of The Continuity Of

Work.

Section LXVI. Advantage Of Large Enterprises.

Chapter IV. Freedom And Slavery.

Section LXVII. The Origin Of Slavery.

Section LXVIII. The Same Subject Continued.

Section LXIX. Origin Of Slavery.—Want Of Freedom.

Section LXX. Emancipation.

Section LXXI. Disadvantages Of Slavery.

Section LXXII. Effect Of An Advance In Civilization On Slavery.

Section LXXIII. The Same Subject Continued.

Section LXXIV. The Same Subject Continued.

Section LXXV. The Same Subject Continued.

Section LXXVI. (Appendix To Chapter IV.) The Domestic Servant

System.

Chapter V. Community Of Goods And Private Property. Capital—Property.

Section LXXVII. Capital.—Importance Of Private Property.

Section LXXVIII. Socialism And Communism.

Section LXXIX. Socialism And Communism. (Continued.)

Section LXXX. Socialism And Communism. (Continued.)

Section LXXXI. Community Of Goods.

Section LXXXII. The Organization Of Labor.

Section LXXXIII. The Organization Of Labor. (Continued.)

Section LXXXIV. The Organization Of Labor. (Continued.)

Section LXXXV. The Right Of Inheritance.

Section LXXXVI. Economic Utility Of The Right Of Inheritance.

Section LXXXVII. Landed Property.

Section LXXXVIII. Landed Property. (Continued.)

Chapter VI. Credit.

Section LXXXIX. Credit In General.

Section XC. Credit—Effects Of Credit.

Section XCI. Debtor Laws.

Section XCII. History Of Credit Laws.

Section XCIII. Means Of Promoting Credit.

Section XCIV. Letters Of Respite (Specialmoratorien).

Book II. The Circulation Of Goods.

Chapter I. Circulation In General.

Section XCV. Meaning Of The Circulation Of Goods.

Section XCVI. Rapidity Of Circulation.

Section XCVII. Freedom Of Competition.

Section XCVIII. How Goods Are Paid For.—The Rent For Goods.

Section XCIX. Freedom Of Competition And International Trade.

Chapter II. Prices

Section C. Prices In General.

Section CI. Effect Of The Struggle Of Opposing Interests On Price.

Section CII. Demand.

Section CIII. Demand.—Indispensable Goods.

Section CIV. Influence Of Purchaser’s Solvability On Prices.

Section CV. Supply.

Section CVI. The Cost Of Production.

Section CVII. Equilibrium Of Prices.

Section CVIII. Effect Of A Rise Of Price Much Above Cost.

Section CIX. Effect Of A Decline Of Price Below Cost.

Chapter CX. Different Cost Of Production Of The Same Goods.

Section CXI. Different Cost Of Production Of The Same Goods.

(Continued.)

Section CXII. Exceptions.

Section CXIII. Exceptions. (Continued.)

Section CXIV. Prices Fixed By Government.

Section CXV. Influence Of Growing Civilization On Prices.

Chapter III. Money In General.

Section CXVI. Instrument Of Exchange. Measure Of Value. Barter.

Section CXVII. Effect Of The Introduction Of Money.

Section CXVIII. The Different Kinds Of Money.

Section CXIX. The Metals As Money.

Section CXX. Money—The Precious Metals.

Section CXXI. Value In Use And Value In Exchange Of Money.

Section CXXII. Value In Exchange Of Money.

Section CXXIII. The Quantity Of Money A Nation Needs.

Section CXXIV. The Quantity Of Money A Nation Needs. (Continued.)

Section CXXV. Uniformity Of The Value In Exchange Of The Precious

Metals.

Section CXXVI. Uniformity Of The Value In Exchange Of The Precious

Metals. (Continued.)

Chapter IV. History Of Prices.

Section CXXVII. Measure Of Prices,—Constant Measure.

Section CXXVIII. Value In Exchange Estimated In Labor.

Section CXXIX. The Precious Metals The Best Measure Of Prices.

Section CXXX. History Of The Prices Of The Chief Wants Of Life.

Section CXXXI. History Of The Prices Of The Chief Wants Of Life.

(Continued.)

Section CXXXII. History Of The Prices Of The Chief Wants Of Life.

(Continued.)

Section CXXXIII. History Of The Prices Of The Chief Wants Of Life.

(Continued.)

Section CXXXIV. History Of The Prices Of The Chief Wants Of Life.

(Continued.)

Section CXXXV. History Of The Values Of The Precious Metals.—In

Antiquity And In The Middle Ages.

Section CXXXVI. Effect On The Discovery Of American Mines Etc. On

The Value Of The Precious Metals.

Section CXXXVII. Revolution In Prices At The Beginning Of Modern

History.

Section CXXXVIII. Revolution In Prices.—Influence Of The

Non-Monetary Use Of Gold And Silver.

Section CXXXIX. History Of Prices.—Californian And Australian

Discoveries.

Section CXL. Revolution In Prices.—Its Influence On The National

Resources.

Section CXLI. Effect Of An Enhancement Of The Price Of The Precious

Metals.

Section CXLII. The Price Of Gold As Compared With That Of Silver.

Section CXLIII. The Price Of Gold As Compared With That Of Silver.

(Continued.)

Appendix I. Paper Money.

Section I. Paper Money And Money-Paper.

Section II. Advantages And Disadvantages Of Paper Money.

Section III. Kinds Of Redemption.

Section IV. Compulsory Circulation.

Section V. Resumption Of Specie Payments.

Section VI. Paper Money—A Curse Or A Blessing?

Footnotes

DEDICATION.

TO

WILLIAM H. GAYLORD, ESQ.,

_COUNSELLOR AT LAW_,

OF CLEVELAND, OHIO,

TO WHOSE BROTHERLY CARE IT IS LARGELY DUE THAT I LIVED TO

TRANSLATE THEM,

THESE VOLUMES

ARE AFFECTIONATELY INSCRIBED.

TRANSLATOR’S PREFACE.

Our literature is rich enough in works on the principles of Political

Economy. So far as the translator is informed, however, it possesses none

in which the science is treated in accordance with the historical method.

We may therefore venture to express the hope that this translation will

fill a place hitherto unoccupied in the literatures of England and

America, and fill it all the more efficiently and acceptably, as Professor

ROSCHER is the founder and still the leader of the historical school of

Political Economy. Were this the only recommendation of our undertaking,

it would not be a useless one. But a glance at Professor ROSCHER’S book

will convince even the most hasty reader that its pages fascinate by their

interest and are rich in treasures of erudition which should not remain

inaccessible to the English student from being locked up in a foreign

tongue.

The present translation has received, throughout, the revision of the

author, and should any imperfections remain in the rendering of his

thought into English, the blame is certainly not his, for his revision has

been most minute.

The three appendices have been supplied by Professor ROSCHER expressly for

this edition. As they are intended to form a part of the work on the

Political Economy of Industry and Commerce, on which he is now engaged, he

authorizes their publication in English, only by the publishers of this

edition of his principles; and only for the purpose of being added to the

present translation. He desires especially that their appearance in their

present shape should not in any way interfere with any of his rights in

his forthcoming volume, and that they should not be translated into any

language nor translated back into German.

The essay of Mr. WOLOWSKI, on the historical method in Political Economy

constitutes no part of Professor ROSCHER’S book, and neither he nor its

author, but only the translator, is responsible for its appearance here.

In it the reader will find a short sketch of the life of Professor

ROSCHER, brought down to the date at which the essay was written. The

translator has little to add to that sketch, all the information he

possesses in addition to what it contains being embraced in the following

lines from a letter received by him from the author in answer to a request

that he would supply the biographical data not to be found in WOLOWSKI’S

essay: “You might perhaps say ... that I have repeatedly declined calls to

the Universities of Munich, Vienna and Berlin, but that I have never

regretted remaining in Leipzig.”

The acknowledgments of the translator are due, in the first place, to the

eminent author himself, for the revision of the plate-proof of the entire

work, and then to Professor WILLIAM F. ALLEN, of the University of

Wisconsin, for his interest in the progress of the enterprise, and for

many valuable suggestions; also to Professor W. G. SUMNER, of Yale

College, for some excellent hints as to the best translation of certain

words in the Appendix on Paper Money.

AUTHOR’S PREFACE. (1ST EDITION.)

My _System der Volkswirthschaft_ shall, _Deo volente_, be completed in

four parts. The second shall contain the national economy of agriculture

and the related branches of natural production; the third, the national

economy of industry and commerce; the fourth, of the economy of the state

and of the commune (_Gemeindehaushalt_). While the entire work shall

constitute one systematic whole, each part shall have its own appropriate

title, constitute an independent treatise, and be sold separately.

Of the peculiar method which I have followed in this work, and which will

produce still better fruits in the succeeding volumes, I have given a

sufficient explanation in §§ 26 ff., and all I desire now is to say a few

words on the relation the notes bear to the text. The careful reader will

soon be convinced that of the many citations in this work, not one has

been made from a vain desire of the display of erudition. Part of them

serves as the necessary proof of surprising facts adduced, but which are

little known. Another part of them is intended to incite the reader to the

study of certain questions nearly related to those treated in the text,

but which are still different from them. The object of the greater number

is to supply information concerning the history of economic principles. As

far as the sources at my command permitted, I have endeavored to point out

the first germs, the chief stages of development, the contrasts, and,

finally, what has been thus far attained in economic science. This

sometimes required some little victory over self, inasmuch as I was

conscious of having independently discovered certain facts, when I

afterwards found that some old and long-forgotten writer had made similar

observations. Thus, this work may serve both as a handbook and as a

history of the literature of Political Economy. Students of the science

know how little has thus far been done by writers in this direction. And

hence I shall be very grateful to those who labor in the same field, if

they will, either by writing to me personally, or through the medium of

the press, inform me when I have erred in ascribing a truth, or a

scientifically important error, to its earliest author.

I have already said in the title that this work is intended not for the

learned only, but for all educated men, for men of a serious turn of mind,

who desire truth and science for their own sake. Like that ancient

historian, whom I honor above all others as my teacher, I desire that my

work should be useful to those, ὅσοι βουλήσοντοι τῶν τε γενομένων τὸ σαφὲς

σκοπεῖν καὶ τῶν μελλόντων ποτὲ αὖθις κατὰ τὸ ἀνθρώπειον τοιούτων καὶ

παραπλησίων ἔσεσθαι. (_Thucydides_ I, 22.)

UNIVERSITY OF LEIPZIG,

_End of May, 1854._

FROM THE AUTHOR’S PREFACES. (2D TO 11TH EDITION.)

The preface to the second edition is dated October, 1856; that to the

third, April, 1858; that to the fourth, April, 1861; that to the fifth,

November, 1863; that to the sixth, November, 1865; that to the seventh,

November, 1868; that to the eighth, August, 1869; that to the ninth,

March, 1871; that to the tenth, May, 1873; that to the eleventh

(unaltered), December, 1873. Each successive edition, nearly, has been

announced as an improved and enlarged one; and the tenth edition contains

one hundred and fifty-six pages more than the first, although in places, a

large number of abbreviations had been made from previous editions. There

are many things in some of the previous editions which criticism induced

me, long since, to change. I have considered it my duty to the public, who

gave my work so warm and friendly a reception, to take into consideration,

in each successive edition, not only my own new investigations, but those

also of all others with which I became acquainted, and, whenever possible,

to correct statistical illustrations from the latest sources. I have

especially, in each following edition, enriched a number of paragraphs

with here and there historical, ethnographic and statistical features.

Plutarch is certainly right, spite of the fact that pedants may abuse him

for it, when he says, that trifling acts, a word and even a jest, are

often more important, as characterizing the life of a people or an age,

than great battles which cost the lives of tens of thousands of men.

I have changed the titles “Ricardo’s Law of Rent,” and “The Malthusian Law

of the Increase of Population,” which I formerly used, for others. But I

would not be misunderstood here. I hold it to be a duty of reverence in

the learned—as it has long been practiced in the case of the natural

sciences—in the sciences of the human mind to call the natural laws,

methods etc., in acquainting us with which, some one particular

investigator has won very distinguished merit, by the name of that

investigator. In the case of the law of rent, the application of this rule

would as unquestionably entitle Ricardo to this honor as it would Malthus

in that of the increase of population, spite of the fact that Ricardo may

not have succeeded in finding the best possible form of the abstraction,

and although Malthus even, in a one-sided reaction against a former still

greater one-sidedness, was not always able to steer clear of positive and

negative errors. Recent science has endeavored, and successfully, to

examine the facts which contradict the Ricardoan and Malthusian

formulations of the laws in question, and to extend the formulas

accordingly. I have myself contributed hereto to the extent of my ability.

But, in the interval, it is not hard to comprehend that, while this

process of elucidation is going on, most scholars, those especially

possessed more of a dogmatic than of a historical turn of mind, should

estimate these two leaders more in accordance with their few defects than

with the great merits of their discoveries. If, therefore, I now drop the

title “Malthusian law,” it is to guard hasty readers from the illusion

that §§ 242 seq. teach what the great crowd understand by Malthusianism;

when they might, perhaps, omit that portion entirely. For my own part, I

have no doubt that, when the process of elucidation above referred to

shall have been thoroughly finished, the future will accord both to

Ricardo and Malthus their full meed of honor as political economists and

discoverers of the first rank.(1)

PRELIMINARY ESSAY.

Preliminary Essay On The Application Of The Historical Method To The Study

Of Political Economy,

By M. Wolowski,

Member Of The Institute Of France.

“_Nunquam bene percipiemus usu necessarium nisi et noverimus jus

illud usu non necessarium. Nexum est et colligatum alterum alteri.

Nulli sunt servi nobis, cur quæstiones de servis vexamus? Digna

imperito vox._”—_Cuj._, vii, in titul. Dig. De Justitia et

Jure.(2)

“_Homo sum, humani nihil a me alienum puto._”—_Terence._(3)

“_Ista præpotens, ac gloriosa philosophia._”—_Cicero_, De Or., I,

43.(4)

I.

It is no foolish desire to make a vain display of citations, that induces

us, at the beginning of this essay, intended to point out the results of

the application of a new method to the study of Political Economy, to

invoke the authority of a poet and moralist, of a jurisconsult and of a

philosopher. The writer finds in the words just quoted the loftiest

expression of the thought which dictates these lines, viz.: that the

impartial researches of history, a profound feeling of man’s moral and

material wants, and the light of philosophy, should govern in the teaching

of a science, the object of which is to show us how those things which are

intended to satisfy our wants are produced and distributed among the

several classes or individuals of a nation; how they are exchanged one

against another, and how they are consumed.

The nineteenth century affords us something more than the admirable

spectacle of the rapid and fertile development of mechanical power and

natural forces. This is but one of the aspects, we might even say but one

of the results, of the general progress of the human mind. The renovation

of moral and intellectual studies has served as a starting point for the

application to facts of the conquests of thought. Science has preceded

art.

In the foremost rank of the studies just referred to is _philosophy_,

which initiates us into the knowledge of human nature, the basis of right,

and which translates its legitimate aspirations into a language which we

can understand; _history_, that _prophetess_ of the truth, as one of the

ancients called it, which places before us the faithful picture of times

past, not by simply putting together a skeleton of facts, but by following

the living progress of events and the organic development of institutions.

Such, at least, has been the work of those noble minds who have

consecrated their energies to the resuscitation of ages past, in their

true shape, and such is the service for which we are indebted to them for

the successful accomplishment of the reformation of historical studies,

which they attempted with such rare devotion and such marvelous sagacity.

This renovation of history has exerted the most fertile influence in the

region of philosophy, in that of law, and we believe that it will prove no

less useful in that of Political Economy. It has served to put us on our

guard against being easily misled by _a priori_ notions.

By exhibiting to us the results of the life and of the experience of

centuries, by teaching us by what steps the human mind has risen to its

present eminence, and what the education given it in the past has been, it

has enabled us to ascend from phenomena to the principles which preside

over them; from facts to the law; and it has substituted for arbitrary

assumptions and purely ideal systems, the slow but progressive work of the

genius of nations. Not that it turns a deaf ear to the exalted lessons of

philosophy, nor that it denies the _eternal relations resulting from the

nature of things_. Far from it. On the contrary, it supplies a solid basis

to intellectual investigations, and, so to speak, an answer for all the

moral sciences, to this saying of Rœderer: “Politics is a field which has

been traversed thus far only in a balloon; it is time to put foot on solid

ground.”

Neither does history, as thus understood, confine itself to mere

description; it also assumes the office of judge. While it pulls down much

that passion and inaccuracy have reared, and thus restores respect for the

past, it does not turn that past into a fetish. It looks it boldly in the

face and questions it, instead of prostrating itself before it and

worshipping it with downcast eyes. Thus, by plainly showing us the many

bonds which tie us to it, it escapes at once both the rashness of

impatience and the wearisomeness of routine.

The impartiality it inculcates is not indifference; and there is no danger

that the justice it metes out to past ages shall degenerate into a vain

scepticism or a convenient optimism.

The study of history, thus understood, has another advantage; it accustoms

us to those patient and disinterested investigations, to those lengthy

labors, the positive result of which at first escapes us for a time, only

to burst on our eyes, with so much more brilliancy, when rigorous research

has succeeded in discovering it. It frees us from the deadly constraint of

immediate utility.

There is nothing more fatal to science than the feverish impatience for

results which obtains only too much in our own days, and which induces

people to run after him who is in the greatest hurry, and which leads to

hasty conclusions.

“Research undertaken from a disinterested love of science,” says the

learned Hugo, one of the masters of the historical school of law in

Germany,(5) “that research which at first promises no other advantage but

truth and the culture of the mind, is precisely that which brings us the

richest rewards. Would we not be behind, in all the sciences, if we had

clung only to those principles, the utility of which in practice was

already known? Do we not, to-day, from many a discovery, reap advantages

of which its author never dreamed?”

Doubtless this tendency, unless restrained by other demands, is not exempt

from danger. We may be carried away by the attraction peculiar to these

noble studies, withdraw into antiquity and fall into a species of

historical mysticism which ends in the affirmation, that whatever has been

is true, absolutely, and which, instead of confining itself to the

explanation of transitory phenomena, invests them with all the dignity of

principles. We shall endeavor to avoid the peril pointed out by

Mallebranche. “Learned men study rather to acquire a chimerical greatness

in the imagination of other men, than to acquire greater breadth and

strength of mind themselves. They make their heads a kind of store-room,

into which they gather, without order or discrimination, everything which

has a look of erudition,—I mean to say everything which may seem rare or

extraordinary and excite the wonder of other people. They glory in getting

together, in this archæological museum, antiques with nothing that is rich

or solid about them, and the price of which depends on nothing but fancy,

chance or passion.”

A display of erudition may obscure the truth, and bury it under its

weight, instead of bringing it out into relief. By concentrating the mind

on the material vestiges of the past, it may withdraw it from the

intellectual movement of the present, and give us a race of scholars, of

great merit, doubtless, but who move about like strangers among their

contemporaries.

Without a sense for the practical, and without ideas of an elevated

nature, a person may, indeed, be a man of erudition—he cannot be a

historian. As the proverb says, the forest cannot be seen, for the trees.

That this noble study may bear its best and most useful fruit; that is,

that it should preserve us against ambitious _formulas_ and destructive

chimeras, we must pursue another way.

“The world,” says Montaigne, “is incapable of curing itself. It is so

impatient of what burthens it, that it thinks only of how it shall rid

itself of it, without inquiring at what price. A thousand examples show us

that it cures itself ordinarily at its own cost. The getting rid of the

present evil is not cure, unless there be a general amendment of

condition. Good does not immediately succeed evil. One evil, and a worse,

may follow another, like Cæsar’s assassins, who brought the republic to

such a pass, that they had reason to repent the meddling with it.” Such,

too frequently, is the lot of those who, abandoning themselves to their

imagination, and without consulting the past, mix together promises of

liberty and the despotism of Utopias which they would impose on nations

under pretext of enfranchising them. Despising the work of the ages, they

think they can build upon a soil shaken by destruction and crumbled, until

it may be likened to moving sand.

Contempt for the past is associated with a passion for reform. Men think

of destroying that which should only be transformed. They condemn

everything that has been, unconditionally, and launch out towards a new

future. The suffering which has been gone through irritates and troubles

the mind. The work of pulling down is so easy, it is supposed that the

work of building up is equally so. Hence systems rise, as if the world

were to begin anew. The pride of liberty and of human action becomes the

principle of science; and, like all new principles, it pretends to

exclusive and absolute dominion. Rationalism governs; abstract philosophy

ignores the traditions and the requirements of the life of nations; and

finds now in it, as in geometry, nothing but principles and deductions.

The memory of recent oppression causes us to act as Tarquin did, and to

level down the higher classes instead of elevating the inferior. Liberty

and equality then govern by their negative side, instead of exercising the

positive and beneficent influence they should have, to develop all forces

to their utmost, to ennoble the mind, to give more elasticity to the soul

and greater vigor to thought, to give birth to those varied forms and to

that moral energy, which should bring us nearer to final equality in the

bosom of God.(6)

We forget that no one is born _free_, and that every one ought to endeavor

to become so,

Feindlich ist des Mannes Streben

Mit zermalmender Gewalt

Geht der Wilde durch des Leben

Ohne Rast und Aufenthalt,

—_Schiller_.

and make himself worthy of liberty, by the exercise of manly virtue!

Because the form has been changed, we believe that we have changed human

nature.

It is easy to understand, why, where these ideas prevail, the study of the

past should be neglected and despised. Efforts are made to avoid it. Why,

it is asked, revive memories of oppression and misery? The old world is

wrecked. It is annihilated. Peace to its ashes! Or else, after it has been

destroyed, it is sought for again; and, under pretext of eradicating the

evils existing in it, an attack is made on the eternal basis on which

human society rests, on the laws not made by man, and which it is not

given to man to change. The world becomes one vast laboratory, in which

the rashest experiments are multiplied in number, in which mankind is but

clay in the hands of the potter which every pretended “thinker” may mould

at will, by giving him the false appearances of independence and of an

emancipated being.

And, indeed, if the will of man be all-powerful, if states are to be

distinguished from one another only by their boundaries, if everything may

be changed like the scenery in a play by a flourish of the magic wand of a

system, if man may arbitrarily make the right, if nations can be put

through evolutions like a regiment of troops; what a field would the world

present for attempts at the realization of the wildest dreams, and what a

temptation would be offered to take possession, by main force, of the

government of human affairs, to destroy the rights of property and the

rights of capital, to gratify ardent longings without trouble, and provide

the much coveted means of enjoyment. The Titans have tried to scale the

heavens, and have fallen into the most degrading materialism. Purely

speculative dogmatism sinks into materialism.

All is changed, both men and things. Yet we hear the same old style of

declamation. There are those who wish to plough up the soil which the

harrow of the revolution went over yesterday; and they believe they are

marching in the way of progress. They do not see that they have mistaken

their age, and that the bold attempts of the past have now come to possess

a directly opposite meaning. Without stopping to inquire to what side the

new world inclines, they repeat the same words, and swear _in verba

magistri_, and go the road of destruction, believing themselves to be

creating the world anew!

Nothing is more natural than that these excesses should produce other

excesses, in a contrary direction. Moved by hatred or fear of

revolutionary absolutism, nations seek an asylum in governmental

absolutism, or they retrograde towards the middle ages, and consider the

mutual bond of protection and dependence of that period as the ideal and

the realization of true liberty. History is no longer the organic

development of social life, and man, like a soldier that thoughtlessly and

capriciously has gone beyond his place of supplies, is obliged to retrace

his steps. The reaction is clearly defined. The past is opposed to the

present, not as a lesson to be turned to advantage, but as a model which

must be hastily accepted; and men become revolutionary in a backward

direction.

However, history, rigorously studied, knows neither these complaisances

nor these weaknesses. It does not descend to the apotheosis of a past

which cannot return again. The real historical spirit consists in rightly

discerning what belongs to each epoch. Its object is, by no means, to call

back the dead to life, but to explain why and how they lived. In harmony

with a healthy philosophy, it assigns a limit to the vagaries of arbitrary

will, beyond which the latter cannot go. It unceasingly calls us back,

from the heights of abstraction, to positive facts and things.

In the creation of systems, only one thing was wont to be forgotten, men,

who were treated, in them, like so many ciphers; for intellectual

despotism has this in common with all despotic authority. History teaches

us that we can reach nothing great or lasting, but by addressing ourselves

to the soul. If the soul decays, there can be no longer great thoughts or

great actions. Society lives by the spirit which inhabits it. It may, for

an instant, submit to the empire of force, but, in the long run, it

hearkens only to the voice of justice. It was thus that the greatest

revolution which history records, that of Christianity, was accomplished.

It addressed itself only to the soul; but by changing the hearts of men,

it transformed society entirely.

The violent struggle between an imperious dogmatism and an unintelligent

and mistaken attempt at a retrogressive movement is resolved into a higher

view, which permits the union of conservatism and progress. Violent

attempts and rash endeavors made, threatened to bring contempt on the

noblest teachings of philosophy, and to make them repulsive to man; and,

on the other hand, a blind respect for the institutions consecrated by

history threatened to stifle all examination and all freedom of judgment.

But a healthier doctrine has permitted us to understand, that we are

continuing the work of preceding generations; that we are developing the

germs which they successively sowed; that we are perfecting that which

they had only sketched, and that we are letting drop that which has no

support in the social condition of man. Every thing is connected; each

thing is linked to every other; nothing is repeated. The hopes of sudden

and total renovation, based on absolute formulas, vanish before the touch

of this solid study. This shows us how firm and unshaken are those reforms

which have begun by taking hold of the minds of men, the precise spirit of

which had penetrated into the souls of whole nations before they had

manifested themselves in facts.

Law and Economy constitute a part of the life of nations in the same way

that language and customs do. The power of history in no way contradicts

the supremacy of reason.

II.

These two tendencies, the rationalistic and the historical, are everywhere

found face to face. They carry on an eternal warfare, which is renewed in

every age, under new names and new forms. Accomplished facts and

renovating thought divide the world between them. They at one time

moderate its speed, and at others, spur it on its way. But these two

forces, instead of compromising the destinies of humanity by their

opposing action, maintain and balance them, as the contrary impulses given

by the hand of the Great Architect has peopled the universe with worlds

which gravitate in space.

Victor Cousin, a very competent authority on the subject, has said that

the history of philosophy is the torch of philosophy itself. The

remarkable works which have enriched it in this direction are well known.

History, on its side, is enlightened by philosophy. Thus, it teaches us

not to despise facts, but at the same time not to be slaves to precedent.

It does equal justice to the incredulous and to the fanatic, to too supple

practitioners and to intractable theorizers.

We may doubtless say with Henri Klimrath, who, in connection with a few

others, had undertaken the work of the restoration of historical study in

its application to French law, that there is an absolute, true, beautiful,

good and just, the _ratio recta summi Jovis_,(7) the supreme reason

founded in the nature of things.(8) The eternal truths taught by

philosophy constitute the higher law, a law which dates not from the day

on which it was reduced to writing, but from the day of its birth; and it

was born with the divine intelligence itself. “_Qui non tum denique

incipit lex esse, cum scripta est, sed tum cum orta est. Orta autem simul

est cum mente divina._”(9) And Troplong rightly adds: “There are rules

anterior to all positive laws. I cannot grant that the action of

conscience and the idea of right are the work of the legislator. It is not

law that made the family, property, liberty, equality, the idea of good

and evil. It may, indeed, give organization to all these things, but in

doing so, it is only working on the foundation which nature has laid, and

it is perfect in proportion as it comes nearer to the eternal, immutable

laws which the Creator has engraved on our hearts. What changes is not the

eternal law, the revelation of which comes to man incessantly and by a

necessary action, but the form in which humanity clothes it, the

institutions which man builds on its immutable foundation.”(10)

We therefore believe in the law of nature, and regret that our opinion is

not shared by Mr. Roscher, at least that he does not explicitly enough

express his faith in it, nor apply it broadly enough in the beautiful work

which we are happy to render accessible to the French public.(11) We

believe in it in its philosophical sense, and not simply in the juridical

sense attached to it by Ulpian. “Let us not,” observes Portalis, “confound

the physical order of nature, common to all animated beings, with the

natural law which is peculiar to man. We call _natural law_, the

principles which govern man considered as a moral being, that is, as an

intelligent and free being, intended to live in the society of other

beings, intelligent and free like himself.”(12) Ulpian’s famous tripartite

division, of natural law, the law of nations, and the civil law, is proof,

from the meaning he attaches to them, either of a misunderstanding or of

the imperfect idea which the Stoics had conceived of the essence of

natural law. In vain Cujas exhausted all the resources of his noble

intellect to explain it.(13)

It is necessary to draw a distinction between physical law and the law

(_droit_) of intelligent beings. Doubtless the existence of men as well as

that of animals is limited by time. They both live and die; but the soul

escapes the necessities of material nature.

The moment there is question of _right_, intelligence governs, reason

comes into play, and the science of right and wrong is appealed to as a

guide. Hence the _natural_ law of the human species is not the physical

law which all creatures obey.

It was necessary for us to insist upon these principles. It was necessary

for us to show that there is a law independent of positive and local law,

a law which is not the expression of an arbitrary will, but an emanation

from the nature of things.(14)

Hence come the features in common which we meet with everywhere, and the

variable forms which develop law in harmony with the special conditions of

each civil society.

We must descend into the very depths of human nature to discover these

eternal and permanent laws; and if the mere effort of the mind should not

reach them directly, they might be discovered in the phenomena of the life

of nations. History affords us the counter-proof and confirmation of the

philosophical doctrine.

The development of society does not afford a mathematical expression of

these higher truths. It gives them a form which is unceasingly modified in

the written law. The person who discovers in them nothing but an absolute

rule, looks upon the changes as evidences of caprice and error. He alone

understands the revolutions of things who knows their cause and the

necessity which produces them.

Solon was right when he gave the Athenians not the most perfect laws, but

the best which they could bear.

It is not in the attempts contemporary with the infancy of society, or

nearly so, that we are to look for the complete realization of the

precepts of the natural law; for principles obey the rule laid down by

Aristotle. “The nature of each thing is precisely that which constitutes

its end; and when each being has attained its entire development, we say

that that is its own proper nature.”(15)

The ideas of natural law are purified in proportion as society grows

enlightened and free; but the truth appears only successively in the

phases it passes through. It allows us to grasp one aspect of itself after

another, but does not surrender itself entirely, at any one moment, to the

investigations of the historian or the jurisconsult.

History and philosophy interpenetrate and complement one another.

III.

The two schools, that of philosophy and that of history have met in our

day, in the field of law. Who is there that does not remember the great

and noble contest carried on, about the beginning of this century, between

two descendants of Frenchmen who had sought a refuge in Germany, and who

united in their own persons, and in so marvelous a manner, the different

aptitudes of the country they owed their origin to, and of the land that

gave them birth,—between Thibaut and Savigny?

It would be difficult to find a scientific question of a higher character,

debated by champions more worthy to throw light upon it.

The _Code Napoléon_ had appeared. It had, to use Rossi’s happy expression,

transferred into law the social revolution produced by the destruction of

privilege. It was the practical formula expressive of the conquests which

had been made.

The philosophy of the eighteenth century had previously inspired the

Prussian Code. And yet, it was on the question of codification that this

memorable controversy was carried on. The two principal combatants, while

manfully battling, the one against the other, continued to hold each other

in high esteem, and the profound study of law was developed in the midst

of the _melée_.

We cannot delay long on this subject, nor analyze the arguments advanced

by Thibaut(16) and Savigny.(17) What interests us at present is not so

much the question debated, as the intellectual movement to which it gave

birth. Savigny sustained the ancient law, Thibaut attacked it. Numerous

and distinguished jurisconsults ranged themselves on the one side and the

other. A new school grew up which, with the most brilliant success, made

law throw light on history and history on law.

The application of the historical method to the study of law was

productive of the most happy results.

Without acknowledging it to themselves, the chiefs of the contending

parties were each obeying a political impulse. Savigny was by his birth

and his tastes carried into the camp of conservatism; Thibaut, led by his

convictions, into the liberal ranks. Nevertheless, the natural elevation

of their genius preserved them from all exaggeration. The glorious

defender of tradition preserved a liberal spirit, and the ardent advocate

of reform desired no upheaval.

In what more nearly concerns the question with which we are now occupied,

Savigny—while he maintained that law was something contingent, human,

national; and while he brought out into relief the practical and exalted

character of its successive developments which introduced reform and

guarded against revolution—developments which, not confiding in the letter

of the written law, unceasingly feed the living and created law, that law

called in the energetic language of a great jurisconsult, a law _écrit es

coeurs des citoyens_—is far from denying the importance of a high and

healthy philosophy which directs man in the uninterrupted labor to which

he is called, in the sphere of jurisprudence.

Men can no more renounce law than language, the forms of which last they

have gradually modified in order to better translate their thoughts into

words. The legislator’s task is the successive elaboration of obligatory

provisions. He will sometimes oppose and sometimes second the natural

progress of law; but, in doing so, it will ever be necessary for him to

ascend to the nature of things, and grasp their relations, if he would not

go astray in practice, or lose himself among the successive and partial

changes to which the illustrious Berlin professor would confine the

legitimate ambition of legislative power. To go beyond this, in an age

like ours, seemed to him to be a work of destruction. However, far from

denying the influence of thought, and therefore of philosophy, acting

within its sphere, Savigny invokes its fertile aid.

Thibaut, on the other hand, with more confidence in the powers of the

spirit of modern times, did not believe a good codification to be

impossible. His starting point had been a cry for national independence.

He well knew how much veneration was due those institutions which were the

slow and progressive work of national genius, and what was the power they

possessed. He wished, therefore, to reform, not to abolish them. He well

understood that the greatness of the _Code Napoléon_ itself, and the

respect which it inspired were due to the fact that its roots ran deep

into the soil of the past, even while the modern idea it contained shone

like a bright light in the world of things. Hence, without contesting the

value of history, he refused to acknowledge its right to exclusive

reign.(18)

The life and activity prevailing in the study of law, and the brilliant

successes that study has recently achieved, are due, in great part, to the

illustrious representatives of the historical school. We may add, here,

that the French historical school, which has so worthily inherited the

spirit of Montesquieu, has not achieved less in this direction than the

older German school. It has reconciled the opposing but not mutually

hostile, tendencies of Savigny and Thibaut. It has conscientiously

scrutinized facts to show their concatenation, and to allow their meaning

and bearing to be clearly grasped. A French jurisconsult, who is at the

same time our highest authority in the natural law, opened the way by his

excellent essays on the necessity of reforming the historical studies

applicable to law; on the influence of the legists on French

civilization(19) etc.; and by his prefaces, equal in value to whole works,

on hypothecation, sales, loans, partnership, charter-parties etc. He may

truly be said to have renewed the ancient and prolific alliance of history

and law.

Instead of pursuing a pure abstraction, this historical school has

confined itself to the knowledge of the life of man and the evolution of

society. It has applied to law, with what success is well known, the

principle which has regenerated the social sciences, philosophy, letters,

history, Political Economy,—sciences which are, so to speak, different

provinces of one intellectual empire, which interpenetrate one another

without being confounded one with another, between which no jealous

barrier should be raised, and between which reciprocity of exchange should

be encouraged by the suppression of factitious duties, which have existed

only too long.

IV.

We need not dwell any longer on the character of the historical method as

applied to law, nor on the services it has already rendered. On this

point, there can be no two opinions. And, if any one wonders that we

should speak of it at all, in a work on Political Economy, we can only say

to him, that we have done so to call his attention to an instructive

precedent, and for the further reason that the same method is peculiarly

well adapted to the study of Political Economy. Its advantages are the

same here, its tendencies the same, and the same motives exist to induce

us to use it here. In describing the successive phases of the question in

the case of law, we have performed an important part of the task we had

imposed upon ourselves, of vindicating the employment of the historical

method, in the sphere of Political Economy.

The study of history is the best and most powerful antidote against social

romances and ideal fancies. François Beaudouin was right when he said:

“_Cæca sine historia jurisprudentia_;” and we are very sure that, without

history as an element in it, Political Economy runs a great risk of

walking blindfold.

The human mind has need of being able to know where it is at any moment,

surrounded, as it is, by so many roads, running in so many different

directions. It ought to account to itself for its progress, its deviations

from the right path, and for its mistakes.(20) History alone can throw any

light on questions which are not simply intellectual curiosities, but

which, rather, are most deeply concerned with the vital interests of

society. It confirms the noble teachings of philosophy, by showing how our

life is made up of one unchanging tissue of relations, and how man, even

if he may vary their colors, and change their design, cannot renew their

texture.

It teaches us to admire nothing, and to despise nothing, beyond measure.

It enlightens us concerning questions of a very complicated nature.

Witnessing the evolutions of humanity, following the development of social

facts and theories, we better discern principles, and grow wary in

relation to the alchemists of thought, who imagine that society may be

made to undergo a transformation between the rising and the setting of the

sun.

As there is a natural law, so, too, there are certain principles of

Political Economy which emanate from philosophy, and may be reduced to one

supreme principle; that of liberty and responsibility. The domain of

Political Economy is the _labor_ of generations. But we reject with all

our strength, the materialistic doctrine which, inexplicably confusing

matters, endeavors to assimilate ideas so distinct as intelligence and

things; and which would descend so low as to employ the dynamometer to

measure the creative force of man and its results, and which sees only

figures where there is a living soul.

Man is an intelligent being, served by organs,(21) by _personal_ organs,

with which the Creator has endowed him, by giving him a body provided with

marvellous aptitudes, by _external_ organs which he finds in nature

subjected to his power. Man was created in the image of God, say the

Scriptures, and these words contain a deep meaning. He alone, of all

terrestrial beings, possesses a spark of divine intelligence. He alone has

been called to pursue the magnificent work of creation, by giving a new

face to a world to which he cannot add so much as an atom.

_Labor_ is nothing but the action of spirit on itself and on matter.(22)

Hence its dignity and grandeur. Hence, also, the difficulties in the way

of economic studies; since, to consider them only as concerned with

questions of material production, is to forget that the products of

industry are made for man, not man for industrial products; to ignore the

close relationship between their fruitful investigations and the whole

circle of the moral sciences; to debase them and to mutilate them.

From the moment that science concerns itself with man only, and the action

of the mind; from the moment that its end becomes not simply material

enjoyment, but moral elevation, the questions it discusses become indeed

more complex, but the answer, when found, is more prolific in results.

Wealth, then, is treated only as one of the forces of civilization. Other

interests than purely material ones occupy the first place. This

matter-of-fact philosophy which, according to Bacon’s precept, seeks to

improve the conditions of life, bears in mind, that the most fruitful

source of material development lies in intellectual development. It humbly

recognizes that it is not the first-born of the family, and draws new

strength from this avowal. From the moment that it is the mind which

_produces_ and which governs the world, intellectual and moral perfection

become the cause and effect of material progress. “But seek ye first the

kingdom of God and his righteousness, and all these things shall be added

unto you.”

The increase of production, then, appears an instrument of elevation in

the moral order.(23) It is energy of soul, intelligence and manly virtue

which constitute the chief source of the wealth of nations; which create

it, develop it, and preserve it. Wealth increases, declines, and

disappears with the increase, decline and disappearance of these noble

attributes of the soul.

Labor is the child of thought. Nothing happens in the external world which

was not first conceived in the mind. The hand is the servant of the

intellect; and its work is successful, beautiful or useful in proportion

to the activity and development of the intellect, and in proportion as the

just, the beautiful and the good exert their power over it.

Production is, therefore, not a material, but a spiritual, work. How,

then, can acts and their morality be separated? How not understand that

the market of labor has its own distinct laws, and that education, even

from a material stand-point, becomes the highest interest and the most

important duty of society, since on it depends the efficiency of labor?

From the time that, after a long series of years, the doctrine of

Christianity had permeated the law of the civilized world; from the time

that the teaching of Paul, that all men are children of one Father, took

form and body, and that the principle of the equality of all men before

their Maker, was supplemented by the doctrine and by the practice of that

equality before the laws, the thinking masses have endeavored to discover

the wherefore of their actions, and the why of their sufferings. They have

called the past to account, and inquired why they have obtained so limited

a share.

The people, therefore, think; and it is, therefore, a matter of importance

that they should think aright. It is of importance, that they should be

guarded against fallacious Utopian promises. Henceforth, there is no

security for the stability of the world but in the contentment of minds.

There is no rest for mankind, unless men will understand the conditions of

their destiny; unless, instead of running,

“Toujours insatiable et jamais assouvis,”

after the intoxicating cup of material enjoyment—for wants not governed by

the intellect and the heart are infinite in number, and the gratification

of one gives birth to another—they submit to the law of sacrifice, and

give play to the noblest faculty with which the Creator has endowed us,

moral empire over self.

We shall meet on this road, hard of ascent, not only peace of soul, but

goods, more real and more numerous, than those with which the allurements

of error would dazzle our eyes. The greatest obstacles to be overcome are

not material ones, but moral difficulties. As Franklin says, in substance,

he that tells you you can succeed, in any way but by labor and economy, is

a quack.

But labor is more productive in proportion as it is more intelligent, as

hand and mind keep pace with each other, as good moral habits generate

order and voluntary discipline.

Economy is sacrifice, binding the present to the future, widening the

horizon of thought, inspiring foresight, lengthening the lever of human

activity, by providing it with new instruments.

Life ceases to be a worry about how the body shall be sustained, and the

material world becomes the shadow of the spiritual. The former is made to

serve the latter, and man’s free effort lifts him into a higher region of

thought, and into a larger field of action. The more mind there is put

into a piece of work, says Channing, the more it is worth.

We, men of to-day, are lookers-on at a marvelous spectacle. Steam furrows

the earth. Industry has taken an immense start. Mechanical force bends the

most rebellious materials. Chemistry, physics and the natural sciences are

discovering a new world. But whence all this? What is the principle of

this new life? We answer: intellectual and moral progress. Mind has grown;

the soul has been expanded. God has permitted man to be free, and

furnished him with the means to be so.

Thus man, as Mignet has said, becomes that mighty creature to whom God has

given the earth for the vast theater of his action, the universe as the

inexhaustible object of his knowledge, the forces of nature for the

growing service of his wants, by allowing him, by ever increasing

information, to obtain an ever increasing amount of well-being.

Man is free.—1789 put in action the sublime precept of the gospel. He

holds his destiny in his own hands. But the rights which he enjoys impose

new duties on him. If _equality_ be the sentiment which predominates in

our day, we should take care not to confound it with the leveling of

Communism. Nor is it externally to us, but within ourselves, that it

should be developed, by intellectual and moral culture.

History preserves the student from being led astray by a too servile

adherence to any system. It exposes the folly of the “social contract,”

and of the idyllic dreams of the advantages of savage life. It shows that

nature, instead of being prodigal of her treasures, distributes them with

a niggardly hand, and that it is necessary to conquer her by labor,

intelligence and patience before we can control her.

It shows us human liberty growing stronger every day, thanks to moral and

intellectual progress, supported by the two powerful props of property,

the complement of man, the material reflection of his spiritual power; and

capital, the fruit of abstinence, the symbol of moral power and the result

of enlightened activity.

History walks with a firm step, because it feels secure in a knowledge of

the laws of human nature, and in its experience of the successive

manifestations of social life. Instead of the vagueness of ideal

conceptions, it allows us to grasp and to appreciate what is real in life.

It does not confine itself to the study of man. It makes us acquainted

with _men_, whose wants extend and are ennobled in proportion to the

perfection of their faculties. The feelings and the intellect are

simultaneously developed in man. The savage is the most egotistical of

men.

Hence, we believe that Political Economy cannot dispense with the services

of morals and philosophy, of history and law; for these are branches of

one common trunk, through all of which the self-same sap circulates.

V.

The isolation of the theory of Political Economy is peculiar to our own

day. In more remote times, we find this study confounded with the other

moral sciences, of which it was an integral part. When the genius of Adam

Smith gave it a distinct character, he did not desire to separate it from

those branches of knowledge without which it could only remain a bleached

plant from the absence of the sunlight of ethics.

We must renounce the singular idea,(24) that thousands of years could pass

away without leaving any trace of what enlightened men had thought and

elaborated in the matter of Political Economy, among so many nations, and

that people should never have thought of cultivating this rich

intellectual domain, while in every other direction, it is easy for us to

ascend by a road already cleared up to the most remote antiquity.

It has already been acknowledged, that the _classic domain_, fertilized by

intellectual culture on a large scale and on a small one, was exceedingly

rich in valuable indications, although they do not present themselves

under the distinct form, which later affected the different branches of

public life.

As to the pretended _primitive simplicity_ of the middle ages, which it is

claimed, prevailed during that period, a species of economic vegetation,

those who maintain it forget the long series of communistic theories

which, at near intervals, found expression in many a bloody struggle, and

whose repression required the combined efforts of Church and State.

Doubtless, it is not in their modern forms that the elements of

politico-economical science are to be found, in the past. But when we

succeed in reuniting the scattered and broken parts; when we have made our

way into the customs, decrees, ordinances, capitularies, laws and

regulations of those times; when, so to speak, we come, unaware, upon the

life of nations, in the most ingenuous and confidential documents which

reflect it most faithfully because most simply, we may well be astonished

at the results obtained. Where we expected, perhaps, to find only

erudition, we reap a rich harvest of lessons which are all the more

valuable for being disinterested.

Legislative and administrative acts frequently develop real economic

doctrines. It is easy to discover in them the onward course of a theory

which plunges directly into practical applications.

What results might we not expect from these efforts, if the genius of

investigation and of divination, which has so elevated historical studies

in our day, should have an observing and penetrating eye in this

direction! How limited was the field on which Guérard erected the

scientific monument which he has left us in his _Polyptique d’Irminon_;

and how precious are the lessons he leaves us, since we have here to do,

not with the history of professed doctrines or unlooked-for events, but

with the historical development of economic society which shows us the

living march of principles.

VI.

Political Economy is not, as we have just said, a new science. It has been

a distinct science only a short time. Until the eighteenth century, it was

confounded with philosophy, morals, politics, law and history. But it does

not follow, that, because it has grown so in importance, as to deserve a

place of its own, its intimate relationship with the noble studies which

had until then absorbed it should cease. There is another consequence also

to be deduced from this. From the moment that Political Economy ceases to

be considered a new science, it finds a long series of ancestors behind

it, since it is compelled to investigate a past to which so many bonds

unite it. This duty may increase its difficulties, but, at the same time,

it singularly adds to the attractions of a study which, instead of

presenting us only with the arid deductions of dogmatism, comes to us with

all the freshness and all the color of life.

We may allow those who make Political Economy simply a piece of arithmetic

to ignore these retrospective studies and their importance; for

mathematics has little to do with history. But it is otherwise with the

life of nations. These would discover whence they come, in order to learn

whither they are tending.

They are not obeying a vain interest of curiosity, as J. B. Say supposed,

when, in sketching a short history of the progress of Political Economy,

he said: “However, every kind of history has a right to gratify

curiosity.” It is a thing to be regretted, that this eminent thinker could

thus ignore one of the essential elements of the science to which he

rendered such great and unquestioned services. A sense for the historical

was wanting in him. “The history of a science,” he writes,(25) “is not

like the narration of things that have happened. What would it profit us

to make a collection of absurd opinions, of decried doctrines which

deserved to be decried? It would be at once useless and fastidious to thus

exhume them in case we perfectly knew the public economy of social bodies.

It can be of little concern to us to learn what our predecessors have

dreamed about this subject, and to describe the long series of mistakes in

practice which have retarded man’s progress in the research after truth.

Error is a thing to be forgotten, not learned.” As if that which was once

to be found in time is not to-day to be found in space; as if there ever

was an institution that did not have its _raison d’ etre_ and had not

constituted a resting place in the search after a higher truth or of a

more intelligent and salutary application of an old one! There are a great

many actual systems and a great many present facts which can be understood

only by the help of history; and how frequently would not an acquaintance

with history serve to keep us from taking for marvelous inventions the

antiquated machinery of other ages, whose only advantage and only merit

are that they have remained unknown. How much of the pretended daring of

innovators has been old trumpery which the wisdom of the times had cast

off as rubbish. Besides, as Bacon has said: “Verumtamen sæpe necessarium

est, quod non est optimum.”

VII.

It is not the result of mere chance that the greatest economists have been

both historians and philosophers. We need only mention Adam Smith, Turgot,

Malthus, Sismondi, Droz, Rossi and Léon Faucher. It is too frequently

forgotten that the father of modern Political Economy, Adam Smith, looked

upon the science as only one part of the course of moral philosophy which

he taught at Glasgow, and which embraced four divisions:

1. _Universal theology._—The existence and attributes of God; principles

or faculties of the human mind, the basis of religion.

2. _Ethics._—Theory of the moral sentiments.

3. _Moral principles relating to justice._—In this, as we learn from one

of Adam Smith’s pupils in a sketch preserved by David Stewart, he followed

a plan which seems to have been suggested to him by Montesquieu. He

endeavored to trace the successive advances of jurisprudence from the most

barbarous times to the most polished. He carefully showed how the arts

which minister to subsistence, and to the accumulation of property, act on

laws and governments, and are productive of advances and changes in them

analogous to those they experience themselves.

In the first part of his course, as we learn from the same authority, he

examined the various political regulations not founded on the principle of

justice but in expediency, the object of which is to increase the wealth,

the power and the prosperity of the state. From this point of view, he

considered the political institutions relating to commerce, finance, the

ecclesiastical and military establishments. His lectures on the different

subjects constitute the substance of the work he afterwards published on

the wealth of nations. A pupil of Hutcheson, Adam Smith always applied the

experimental method, “which, instead of losing itself in magnificent and

hazardous speculations, attaches itself to certain and universal facts

discovered to us by our own consciousness, by language, literature,

history and society.”(26) Before taking the professorship of philosophy,

Adam Smith had taught belleslettres and rhetoric in Edinburgh, in 1748. He

had written a work on the origin and formation of languages; and it was

because he had profoundly studied the moral sciences that it was given to

him to inaugurate a new science and to become a great economist. Mr.

Cousin has laid great stress on Adam Smith’s taste and talent for history.

“Whatever the subject he treats, he turns his eyes backward over the road

traversed before himself, and he illuminates every object on his path by

the aid of the torch which reflection has placed in his hand. Thus, in

Political Economy, his principles not only prepare the future but renew

the past, and discover the reason, heretofore unknown, of ancient facts

which history had gathered together without understanding them. It is not

saying enough to remark that Adam Smith possessed a great variety of

historical information; we must add that he possessed the real historical

spirit.” Thanks to this eminent faculty of his, the Glasgow philosopher

acquired great influence over minds. In 1810, when the French empire had

reached the zenith of its greatness, Marwitz wrote: “There is a monarch as

powerful as Napoleon: Adam Smith.” We need not recall Turgot’s historical

researches.

Malthus’ chief title to distinction, his work on Population, is as much a

historical work as a politico-economical one; and it is not sufficiently

known that he was professor of history and Political Economy in the

college of the East India Company at Aylesbury.

We need say no more on this subject. The works of the other writers whom

we have mentioned are too well known to permit any one to think that they

excluded history and moral science from the study of Political Economy.

Hence the school which has risen up in Germany,(27) and which is

endeavoring to do for Political Economy what Savigny, Eichhorn, Schrader,

Mommsen, Rudorff, and so many other illustrious scholars have done for

jurisprudence, cannot be rightly accused of rashness. It has done nothing

but unfurl the noble banner borne by the most venerated masters of the

science.

VIII.

At the head of this school stands William Roscher, professor of Political

Economy at the University of Leipzig, whose excellent work, The Principles

of Political Economy, in which he follows _the historical method_, we have

just translated. William Roscher is (1857) scarcely forty years of age. He

was born at Hanover, October 21, 1817. His laborious and simple life is

that of a worthy representative of the science. “You ask me,” he wrote us

recently, “to give you some information concerning the incidents of my

life. I have, thank God, but very little to tell you. Lives whose history

it is interesting to relate are seldom happy lives.” He confined himself

to giving us a few dates which are, so to say, the landmarks of a career

full of usefulness. Roscher, from 1835 to 1839, studied jurisprudence and

philology at the universities of Göttingen and Berlin. The learned

teachers who exercised the greatest influence on his intellectual

development were the historians Gervinus and Ranke, the philologist K. O.

Müller and the Germanist Albrecht. It is easy to see that he went to a

good school, and that he profited by it. He was made doctor in 1838;

admitted in 1840 as _Privat-docent_ at Göttingen; appointed in 1843

professor extraordinary at the same university, and called in 1844 to fill

the chair of titular professor at Erlangen. Since 1848 he has acted in the

same capacity in the University of Leipzig, where he was for six years

member of the Poor Board, where he teaches also in the agricultural

college. His fame has grown rapidly. Many of the German universities have

emulated one another for the honor of possessing him, but he has not been

willing to leave Leipzig. His first remarkable work was his doctor’s

thesis: _De historicæ doctrinæ apud sophistas majores vestigiis_, written

in 1838. In 1842, he published his excellent work, which has since become

classical: “The Life, Labors and age of Thucydides.”(28) From that time,

important works, all bearing the stamp of varied and profound scientific

acquirements, and of an erudition remarkable for sagacity and elegance,

have followed one another without interruption. In 1843, he treated the

question of luxury(29) with a master hand, and laid the foundation of his

great work—only the first part of which has thus far appeared—at the same

time tracing on a large scale the programme of a course of Political

Economy according to the historical method.(30) In 1844, he published his

historical study on Socialism and Communism,(31) and in 1845 and 1846, his

ideas on the politics and the statistics of systems of agriculture. He is,

besides, author of an excellent work on the corn-trade;(32) of a

remarkable book on the colonial system;(33) of a sketch on the three forms

of the state;(34) of a memoir on the relations between Political Economy

and classical antiquity;(35) of a work of the greatest interest, on the

history of economic doctrines in England in the sixteenth and seventeenth

centuries—a work full of the most curious researches;(36) of a book on the

economic principle of forest economy,(37) and lastly, of the great work,

the first part of which we have translated, under the title of The

Principles of Political Economy, and which is to be completed by the

successive publication of three other volumes, on the Political Economy of

Agriculture, and the related branches of primitive production, the

Political Economy of Industry and Commerce, and one on the Political

Economy of the State and the Commune. This work, when completed, will be a

real cyclopedia of the science.(38)

Side by side with William Roscher, we must mention a young economist,

Knies, formerly professor at the University of Marburg, but whom political

persecution compelled to accept a secondary position at the gymnasium of

Schaffhausen, for a time, and who fills, to-day, in the University of

Freiburg, in Breisgau, a position more worthy of his great talent. We

hope, in a work which we intend to publish, on Political Economy in

Germany, to make the public acquainted with the works of this writer. They

deserve to attract the most serious attention. We know of few works which

equal his Political Economy, written on the historical method.(39) We

shall also have something to say of another economist, formerly professor

at Marburg, a victim, also, of the power of the elector of Hesse,

Hildebrand, now professor at the University of Zurich. His

National-Œkonomie(40) is a book replete with interest, and we have nowhere

met with a better criticism of Proudhon’s system, than in its pages. If

the new school had produced but these three men, it would still have left

its impress on the history of the science.

Other works, no less important, will claim our attention in the book to

which we have already devoted many years of labor. If we carry out our

intention, we shall review the works of a great many scholars, of great

merit, whose names only are, unfortunately, known outside of Germany. The

works of Rau, of Hermann, of Robert Mohl, of Hannsen, Helferich, Schütz,

Kosegarten, Wirth etc., are a rich mine, from which we hope to draw much

valuable information. Nor shall we neglect the original productions of J.

Moser, the Franklin of Germany, nor the quaint, but sometimes striking,

ideas of Adam Müller. Lastly, our learned friend, Professor Stein of

Vienna, will afford us an opportunity to show forth the merit of important

and extensive works, animated by the philosophic spirit. For the present,

we must confine ourselves to a view of the application of the historical

method to Political Economy.

There is a rather widespread prejudice existing against this order of

works, a souvenir of the struggle carried on formerly, between Thibaut and

Savigny, which inclines people to suppose that the historical school leans

towards the political doctrines of the past, and that it is hostile to the

liberal spirit of modern times. Nothing can be farther from the truth. The

names of Roscher, Knies and Hildebrand are sufficient to remove this

prejudice. Their works, inspired by an enlightened love for progress, do

not allow of such a misconstruction. The historical point of view does not

consist in the worship of the past, any more than in the depreciation of

the present. It does not view the succession of phenomena as a fluctuation

of events without unity or purpose. On the contrary, the historical method

harmonizes wonderfully well with the wants of genuine progress. The

changes accomplished bear testimony to the free and creative power of man,

acting within the limit permitted to it by the degrees of intelligence

reached, of the development of morals, and of individual liberty. The

philosophy of Political Economy, which is the result of this calm

teaching, free from the passions of party—for science acknowledges no

adherence to party—is like that of law, opposed to the, more or less,

ingenious or rash dreams, which build the world over again in thought. In

showing how, at all times, humanity has understood and applied the

principles which govern the production of wealth, it may say, with the

Roman jurisconsult: “Justitiam namque colimus ... æquum ab iniquo

separantes ... veram nisi fallor philosophiam, non simulatam affectantes.”

“The human mind,” says Rossi, “endeavoring to attain to a knowledge of

itself, estimating its strength, taking a method, and applying it with a

consciousness of its mode of procedure to the knowledge of all things;

such is philosophy. Without it, there is no science in any branch of human

knowledge.” Thus do we rise, with the aid of a critical mind, by careful

investigation and great sagacity, to the truths founded on observations

made.

IX.

There is another method, which, starting out from principles, evident of

themselves, develops science by way of conclusions drawn, after the manner

of the geometricians. The apparent severity and simplicity of this method

are very seductive, and very dangerous, when we have to deal not with

figures, but with men; when the varied, complex and delicate exigencies

which accumulate when human nature comes into play do not exactly square

with the formula; and, when instead of dealing with abstractions, we have

to tackle realities. One of our venerated teachers, the illustrious Rossi,

thought he might remove the difficulty by drawing a distinction between

_pure_ Political Economy and _applied_ Political Economy. It is not

without a certain amount of hesitation that we dare differ with so high an

authority; but confess we must, this distinction is far from satisfying

us. The doubt it has left in our mind has been the principal cause which

has inclined us to the historical method. “Rational Political Economy,”

says Rossi, “is the science which investigates the nature, the causes and

the movement of wealth, by basing itself on the general and constant facts

of human nature, and of the external world. In applied Political Economy,

the science is taken as the mean. Account is taken of external facts.

Nationality, time and place play an important part.”

Let us for a moment accept these definitions; what is the consequence?

That there are two sciences, the one of which, purely speculative, has

more to do with philosophy than with the permanent conflicts which agitate

the world; the other of which could not alone furnish us with rules in

practice, nor with a formulary for the measures to be taken in a given

case, since such a pretension would be both vain and ridiculous, but which

would inform the practical judgment of men charged with the solution of

the numberless difficult and complicated questions which come up every

day. If pure science refuses to interfere in the affairs of this world;

if, as the learned originator of the doctrine we are just now considering

gives us to understand, it would compromise the solution of questions by

the intoxication of logic, and the ambition of perfect system; if,

consequently, it is to be worshipped like a motionless and inactive

divinity, how could this platonic satisfaction suffice us? Would not the

opponents of economic doctrines be disposed to acknowledge all the

principles, provided the consequences to be drawn from them were left to

themselves; and would they not come to us, bristling with arguments drawn

from the circumstances of nationality, time and space, to refute the

possibility of applying pure science?

On ne vaincra jamais les Romains que dans Rome.

This, therefore, is the ground we must explore. We must develop applied

Political Economy which takes cognizance of external circumstances. To do

this, no one will question that the best and most decisive of methods is

the historical, which concerns itself with time, space and nationality,

and which leads to proper reformation where reformation is wanted.

Moreover, principles will be no less firmly established by historical

induction than by dogmatic deduction, and, moreover, science will be

inseparable from art. We are not of those who deny principles, or who

challenge them. What we desire is, that they should not be worshiped as

fetiches, but that they should enter into the very life-blood of nations.

Further: the abstract deductions of pure science do not leave us without

disquietude, since they treat man much more like a material than like a

moral force. Under the vigorous procedure of speculative mathematics, man

becomes a constant quantity for all times and all countries, whereas he

is, in reality, a variable quantity. All the elements put in play are

ideal entities, the reverse of which we find in poetry, where

Tout prend un corps, une ame, un esprit, un visage!

and where everything loses the character of life, and is transformed into

inanimate units. Man is something different from the sum of the services

he may be made to render, and from the sum of enjoyments which may be

procured for him. We must not run the risk of lowering him to the level of

a living tool; and from the moment that we are required to take his moral

destiny into account, what becomes of abstract calculation?

X.

We have been wrong, says Rossi, in reproaching Quesnay for his famous

_laissez faire, laissez passer_, which is pure science. We, also, are of

opinion that the reproach was ill founded, for it proceeded from a wrong

conception of the principle itself. But it seems to us that, far from

condemning this doctrine in its serious application, the historical method

may serve to explain and to justify it. Employing less of rigidity and

dryness in form, it reaches consequences more in harmony with social life.

But it is not to be imagined that we do not meet in this way with many

ancient and glorious precedents. The great principles of industrial

liberty, as well as those of commercial liberty, originated in France.

Forbonnais was right when he said: “We may congratulate ourselves on being

able to find, in our old books and ancient ordinances, wherewith to

vindicate for ourselves the right to that light which we generally

supposed to have been revealed to the English and Dutch before us.” The

further Forbonnais carried his researches into our annals, the greater the

number of traces of opposition to the prejudices in favor of exclusion and

monopoly, so long made principles of administrative policy, did he

find.(41)

The famous axiom, _laissez faire_, and _laissez passer_, the subversive

tendencies of which people affect to condemn, was not invented by Quesnay.

He only gave a scientific bearing to what was the inspiration of a

merchant called Legendre. The latter, consulted by Colbert on the best

means of protecting commerce, dropped these words which have since become

so celebrated.

We must not lose sight of their real meaning, nor misunderstand the

intention which dictated them. What Quesnay said was this: “Let everything

alone which is injurious, neither to good morals, nor to liberty, nor to

property, nor to personal security. Allow everything to be sold which has

been produced without crime.” And he added: “Only freedom judges aright;

only competition never sells too dear, and always pays a reasonable and

legitimate price.” Far from being the absence of rule, liberty is the rule

itself. To _laisser faire_ the good is to prevent evil.(42)

There is need of institutions to complete the exercise of the independence

acquired by labor, and of laws to regulate that exercise. The _laisser

faire_ and _laisser passer_ of economists is, in no way, like the absolute

formula, which some have denounced and others sought to utilize, as

relieving authority of all care and all intervention.

To understand this maxim aright, we must go back to the oppressive regime

of ancient society. Quesnay’s formula was, first of all, a protest against

the restraints which hampered the free development of labor. But it did

not tend to abrogate the office of legislator, nor to deprive society or

the individual of the support of the public power which watches over the

fulfillment of our destiny.

It may have seemed convenient to find in the gravity of a

politico-economical principle, an excuse for the sweets of legislative and

administrative _far niente_, but it is generally conceded that the role of

authority has grown, rather than diminished, under the regime of the

liberty of labor. The task is, in our days, a hard one, both for

individuals and nations; for liberty dispenses its favors only to the

masculine virtues of a laborious and an enlightened people.

Liberty is not license. It refuses to bend under the yoke, but it submits

to rule. The mission of authority is not to constrain, but to counsel; not

to command, but to help accomplish; not to absorb individual activity, but

to develop it. It does not pretend to raise a convenient indifference on

the part of government, nor the indolent withdrawal of all protective

influence to the dignity of a principle. To say, on the other hand, that

the _laisser faire_ and _laisser passer_ of the economists means: Let

robbery alone; let fraud alone etc., is to amuse one’s self playing upon

words, and to argue in a manner unworthy of any serious answer. Under

pretext of painting a picture of economic doctrine, we are given its

caricature. Such has never been the system, to the elaboration of which

the purest hearts and noblest intellects have devoted themselves. A

negation does not constitute the science of Political Economy.

It is very convenient to inclose humanity within a circle of action, drawn

with rigorous precision, and to govern movements seen in advance. But such

artificial conceptions mutilate the activity of man. To guarantee man all

liberty, and prevent its abuse—such are the data of the problem. The work

is a great and difficult one. Far from yielding in point of elevation to

ideal systems, it is superior to them in extent and variety of

combinations. Those who ignore its bearing, yield, it may be, to a certain

indolence of intellect. Restrained within its natural limits, the famous

_laisser faire_ and _laisser passer_ of the Physiocrates deserves even

to-day our respect and our confidence. It ought to be preserved in the

grateful memory of men, side by side with the maxim which Quesnay

succeeded in having printed at Versailles, by the hand of Louis XV

himself: “Pauvres paysans, pauvre royaume; pauvre royaume, pauvre

souverain.”(43)

XI.

To return to the question of method. Rossi made use of an ingenious

example to explain his thought:(44) “Are,” he inquires, “these deductions

[of pure science] perfectly legitimate; are these consequences always

true? It is incontestably true that a projectile, discharged at a certain

angle, will describe a certain curve; this is a mathematical truth. It is

equally true, that the resistance offered to the projectile by the medium

through which it moves modifies the speculative result in practice, to

some extent; this is a truth of observation. Is the mathematical deduction

false? By no means; but it supposes a vacuum. I hasten to acknowledge it.

Speculative economy also neglects certain facts and leaves certain

resistances out of account.” Now, from the moment that we have to deal

with human interests, it is not possible to suppose a vacuum, to neglect

the most vulgar facts, and the most common instances of resistance, nor to

lose one’s self in abstraction. The correctives of applied Political

Economy either may not wipe out this original sin, or else they run great

danger of covering up the principles themselves. In ballistics, again, we

may measure the resistance which the medium in which we are obliged to

operate, makes the force of impulsion and the target both obey the same

law, and yield to the same process of calculation. But is it thus when you

touch upon man’s innermost and most sensitive part? Is there not danger

that the hypotheses may be deceitful, and that you may be accused of

toiling in a vacuum? We well know the solid reason that may be opposed to

sarcasm of this nature; but is it expedient to lay one’s self open to it?

Moreover, the consequences are not great enough to warrant us to expose

ourselves to the danger. The principles of pure science are very small in

number. They might even, be easily reduced to one, of which M. Cousin has

been the eloquent interpreter—human liberty. This liberty has no need of

Political Economy to shine with the luster of evidence; nothing can

prevail against it. We can prove that it is as fecund as it is

respectable; but if the science of wealth should endeavor to demonstrate

the contrary, the primordial bases of society, liberty, property and the

family would not be less sacred nor less necessary, for they are the right

of humanity. They could not be put aside, even under pretext of any

mechanism which would claim to produce more.(45) These sovereign

principles of economy flow from the moral law, and they have no reason to

dread the power of facts, for the prosperity of nations depends on the

respect with which they are surrounded and the guarantees by which they

are protected.

We have spoken of the moral law; and, indeed, in our opinion, it is

impossible to banish it from the domain of public economy. Any other point

of view seems to us too narrow. And when we see eminent men go astray in

the pursuit of an ideal which fails to take the human soul into account,

and which finds nothing but equations where there are feelings and ideas,

we cannot help thinking that they are unfaithful to the thought of the

founder of the science, Adam Smith. Man is not simply a piece of

machinery. He does not blindly submit to external impulse. Rather is he

himself, the greatest of impulses. But to govern things, he must first

learn to conquer himself. Personal interest is the powerful motive which

he obeys. Man does not live alone, in a state of isolation, in the world.

_Væ soli!_ He lives in society and profits by the relations which he forms

with other beings, intelligent like himself, and for whom he has a natural

feeling of sympathy.

The good that comes to them yields satisfaction to him, and the evil that

befalls them falls on him likewise. He cannot turn back entirely upon his

own personality. Besides his own interest, he feels and shares another

interest—the interest of all. Personal interest is perfectly legitimate.

The love of self cannot be condemned. The Savior himself has enjoined us

to love our neighbor as ourselves. To love him more than ourselves is a

very high and beautiful virtue. It is the self-abnegation which inspired

Christian heroes. But heroism is rare, and cannot be imposed, nor taken,

as a rule. Personal interest is a powerful stimulant, and the superior

harmony of social relations makes it contribute to the general good.

What must be condemned is a fatal deviation of this sentiment which

destroys its effect and narrows its actions. What we need to prevent is

the degeneration of personal interest into an egotism which parches,

instead of fertilizing, and which compromises the future by the exclusive

search after present advantage; for egotism is short-sighted. On the other

hand, the broader and more generous feeling which inclines us to

sympathize with our fellow beings in their sorrows, and to unite our

destiny to theirs; that is, the feeling of the general interest, has a

limit too.

It would be falsified if it absorbed the individual; if it destroyed the

most powerful motive-force by drying up the abundant source of activity;

if it attacked moral energy by enervating responsibility; if it extended

the circle of results obtained to such an extent that scarcely any one

should feel the rebound.

The evil produced by egotism, that sad travesty of personal interest,

appears under a form quite as formidable when the general interest takes

the form of communism. The coöperation of personal interest and of the

general interest is always necessary, both for individual profit and

social advantage. There is as much danger in annihilating the individual

as in exalting him. History furnishes us with memorable examples of this.

It does not allow us to go astray in the narrow ways of a peevish and

jealous personality, nor to lose ourselves in the vague labyrinth of a

chimerical and false communism. The latter would destroy what constitutes

the power and dignity of man. It would wipe out the most prominent

features of his noble nature, by destroying the support of energy and

activity and the food of moral force.

XII.

But, we are told, Political Economy is only the science of selfishness;

Adam Smith is the prophet of individualism; grow rich _per fas et nefas_

is its ultimate teaching. Such a judgment is evidence of much levity and

little enlightenment. How could the man who conceived the study of human

interests on so large a scale, the philosopher who acknowledged Hutcheson

as his master and gave his ideas a still more expansive character, be the

apostle of egotism; and how can the science which he founded be its

gospel? There is here an error of fact and a defect of appreciation.

Hutcheson had based moral philosophy on the feeling which, according to

him, engendered all the other virtues, on benevolence, which is

disinterested, busied with the welfare of others, with the public weal and

the general interest. Adam Smith went further, and sought to base it on a

still more energetic feeling, on sympathy.

The first sentence of his Theory of the Moral Sentiments, which is a full

resumé of his theory, is as follows: “How selfish soever man may be

supposed, there are evidently some principles in his nature which interest

him in the fortune of others, and render their happiness necessary to him,

though he derives nothing from it, except the pleasure of seeing it.” And

this is no empty declaration on his part. It is the thought which of all

in his book is nearest to his heart; and hence he energetically assails

those philosophers who look upon self-love and the refinements of

self-love as the universal cause of all our sentiments, and seek to

explain sympathy by self-love.

La Rochefoucauld, Mandeville and Helvetius never met with a more

determined or energetic adversary. Nowhere have the sweet and amiable

virtues, such as ingenuous condescension, indulgent humanity, and the

respectable and severe virtues, such as disinterestedness and self-control

which subject our movements to the requirements of the dignity of our

nature, been better understood or interpreted. Adam Smith is the

philosopher of sympathy.(46) His theory triumphs over the cowardly and

shameful egotism which concentrates the moral life of the individual in

himself, and separates it from the life of the human race of the _outré_

stoicism which refuses the aid of sentiment to reason.(47) According to

him, the law of private morals is sympathy; the law of natural

jurisprudence, justice; the law of the production of wealth, free labor.

But while he defended this principle with energy, he did not become guilty

of a real recantation by worshiping the idol he had just overthrown. He

would have been culpable of the strangest of all contradictions if he had

made the vice which he had just lacerated the very pivot of another part

of his teaching.

We regret that this essay, which has already very much exceeded the limits

we assigned it in the beginning, will not permit us to reproduce here

Knies’ beautiful demonstration, in which he so learnedly and eloquently

vindicates Adam Smith from this strange imputation, thereby placing

Political Economy on its true basis, the basis of morals, by removing in a

decisive way, all pretext of error and all means of subterfuge. This part

is one of the best features in his most excellent work on “Political

Economy, from the historical Point of View.” We shall return to this

matter.

XIII.

What is there that political economists have not been charged with? They

have been accused, above all, of a cold heartedness and cruelty, and the

sentence passed on them has been resumed in these words: “Political

Economy has no bowels!” Indeed, the representative of the science, who has

been most attacked and who has been held up as a picture of impassible

insensibility; on whom have been heaped the most bloody outrages, is

Malthus. Let us hear him. He tells us in his work on Political Economy,

that if a country had no other means to grow rich, except by seeking for

success in the struggle with other countries, at the cost of a reduction

of the wages of labor, he would unhesitatingly say: Away with such riches;

that it is much to be desired that the working classes should be well

remunerated, and this for a reason much more important than all the

considerations relating to wealth; that is, the happiness of the great

mass of society. And he goes on to say, that he knows nothing more

detestable than the idea of knowingly condemning the laboring classes to

cover themselves with rags, to lodge in wretched huts, to enable us to

sell a few more stuffs and calicoes to foreign countries. Certain it is,

that no defender, however determined, of the laboring classes, has said

anything stronger or more deeply felt. The reason is, that nothing was

more foreign to Malthus’ ideas than the systematic rigidity of

mathematical theories of wealth; that, a minister of the Gospel, he had

meditated on its high precepts. His whole doctrine is based on the moral

idea. “He was profoundly convinced that there are principles in Political

Economy which are true only in as far as they are restricted within

certain limits. He saw the principal difficulty of the science in the

frequent combination of complicated causes, in the action and reaction of

causes on one another, and in the necessity of setting limits or making

exceptions to a great number of important propositions.” Here we are ever

brought back to the undulating ground of living science, instead of having

to follow the rectilineal way traced out by the dead letter. We are always

driven back, whatever may be pretended to the contrary, to the realities

of which history alone possesses the secret. The idea of wealth cannot

absorb everything when there is question of judging and enlightening men.

To do this, it is necessary to know the various phases of social

housekeeping, what nations have thought of economic interests which have

never ceased to interest them greatly, what they have attempted and what

they have attained.

Hence, we must turn over the leaves of the book of the past, and study its

economic aspect, as we have studied its political and literary aspect. We

must follow living nations through their divers periods of development,

and fathom the causes of the destruction of those that are dead. When we

are dealing with the comparative study of the economic destinies of

nations, our investigations are limited to a small number of individual

nations—a further reason not to omit any, and above all, to scrutinize, as

an anatomist would with his scalpel, the principle of life of those which

are no more. We may, by accounting to ourselves for the immense variety of

phenomena which are brought to light by the _application_ of principles to

facts, and in which nothing is absolute or permanent, in which, on the

contrary, everything is relative and successive, acquire that sureness of

touch and correctness of vision which are among the most valuable

conquests of science.

It would be a mistake to suppose that theory simplifies practical

solutions. Far from providing us with a sort of formulary, it teaches us

to put our finger on a number of difficulties. It brings to the surface

the many aspects and fertile and varied considerations, the examination of

which is the mission of the real statesman and legislator. In this way,

the action of thought and the power of the moral idea are revealed with

most _éclat_. Man ceases to be an inert element, and manifests himself as

a sensible being, and the sublime thought of Pascal: “Humanity is like one

man who lives and learns always,” is verified by the result. The wish to

violently abdicate the past, it would be vain and rash to attempt to

realize. The lessons it transmits to us are as instructive as the picture

it unrolls before our eyes is attractive. We have no longer but to see and

hear, to be cured of the most generous impatience with what is, and to

retreat from the most perilous attempts.

XIV.

The unvarying testimony of ages affirms the continued and gradual

amelioration of man by individual energy and moral thought.(48) Want and

suffering have urged him forward. Foresight, labor, sacrifice and virtue

have in part redeemed him. No right has been lessened or usurped, and

every step in civilization has been a step in the way of freedom. Instead

of making the latter responsible for a material and moral wretchedness

which it is called upon to cure, we may prove, that, in proportion as real

liberty and legal guarantees increase, evil diminishes.

We do not desire to yield to a convenient optimism, and deny the

sufferings which weigh only too heavily on the world. We are far from

having reached the end assigned to our efforts; but let not the hope we

entertain of further progress blind us to that which has already been

accomplished. This latter shows us that we are on the right road, and that

we have not done unwisely in giving free rein to the human faculties.

Sudden changes are made only in theaters. In the real world, the march of

progress is slow and laborious. It may be accelerated by a happy hit; but

it would be vain to try to hurry it.

Man still suffers. No one desires to deny the evil, but only to estimate

its extent. Yet it cannot be gainsaid that its fatal empire is narrowing

instead of enlarging. Especially is it the progress accomplished in the

higher regions of intellect and of the feelings which here exerts its

beneficent influence. On our moral greatness depends our material power.

The elevation or debasement of character, the energy or debility of the

will—such is the first source of good or evil. The world, a Chalmers

rightly says, is so constituted that we should be materially happy if we

were morally good.

Industrial progress helps, we have said, towards moral perfection. It is

not the source of that perfection, but its instrument; for ignorance and

misery, its habitual attendants, are poor advisers. Political Economy

shows how the goods of this world are multiplied. It shows how modest

comfort may become more and more general, and thus an impetus be given to

all noble virtues without awakening a blind passion for riches. It teaches

moderation instead of exciting covetousness, nor does it come in conflict

with the sublime words of Saint Augustine: “The family of men, living by

faith, use the goods of the earth as strangers here, not to be captivated

by them or turned away by them from the goal to which they tend, which is

God, but to find in them a support which, far from aggravating, lightens

the burthen of this perishable body which weighs down the soul.”

XV.

Looked at from below, all things diverge. Looked at from above, all things

run into one another and combine with one another. It is one of the great

merits of the historical method, that it raises the point of observation

and gives the observer the support of tradition and good sense, that

master of life; that it prevents a divorce between different branches of

knowledge of the same order, which constitute but one intellectual family,

which there is no question of confounding, and which it would be dangerous

to isolate.

Aristotle, that universal genius, had discovered Political Economy, and it

was the historical method which revealed it to him. Be it added, that the

great philosopher had seen but one phase of the science, chrematistics,

and that his ideas here bear the impress of the age in which he lived.

Aristotle, however, distinguished this science from all others and from

domestic economy, which is so akin to it. Doubtless, he did not found the

modern study of Political Economy, but his powerful intellect gave him a

presentiment of it.

The honor of producing at once, Adam Smith, Quesnay and Turgot belongs to

the eighteenth century. It was in the course of philosophy at Glasgow that

this study found a definite place. The illustrious founder of the science

of Political Economy did not contemplate dissolving the ancient alliance

between it and the moral sciences, history, philosophy, jurisprudence,

belles-lettres—all of which he had explored and studied profoundly. Let

those whose ambition it is to walk, even at a distance, in the footsteps

of Adam Smith, not forget what was the cradle of the noble study to which

they have devoted their intellects.

L. WOLOWSKI.

INTRODUCTION.

Chapter I.

Fundamental Ideas.

Section I.

Goods—Wants.

The starting point, as well as the object-point of our science is Man.(49)

Every man has numberless wants, physical and intellectual.(50)(51) Wants

are either necessaries, decencies (_Anstandsbedürfnisse_) or luxuries. The

non-satisfaction of necessary wants causes disease or death; that of the

wants of decency endangers one’s social position.(52) The much greater

number, and the longer continuance of his wants are among the most

striking differences between man and the brute:(53) wants such as

clothing, fuel,(54) tools, and those resulting from his much longer period

of infancy; which last, together with other causes, has contributed so

largely to make marriage necessary and universal. While the lower animals

have no wants, but necessities, and while their aggregate-want, even in

the longest series of generations, admits of no qualitative increase, the

circle of man’s wants is susceptible of indefinite extension.(55) And,

indeed, every advance in culture made by man finds expression in an

increase in the number and in the keenness of his rational wants. No man

who distinguishes himself in anything, but feels spurred thereto by a

peculiar want; and this want is both the cause and the effect of the power

which is peculiar to him. No one but the poet feels the want of poetizing;

no one but the philosopher, of philosophizing. In every particular,

intellectual or physical, in which the man is in advance of the child, he

experiences new wants unknown to the child. Our education consists, for

the most part, in awakening wants and providing for their satisfaction.

Goods are anything which can be used, whether directly or indirectly, for

the satisfaction of any true(56) or legitimate human want,(57) and whose

utility, for this purpose, is recognized. Hence, the idea goods is an

essentially relative one. Every change in man’s wants, or knowledge, is

accompanied by a rapid, corresponding change, either in the limits of the

circle(58) of goods, or in their relative importance. Thus, the tobacco

plant has, probably, existed thousands of years. It became goods, however,

only from the time that man recognized its use for smoking, snuffing etc.,

and experienced the want of it for these purposes. In a similar way, the

limestone of the Solenhofen quarries has become _goods_, of considerable

importance, only since the invention of lithography; decaying bones, only

since that of bone-dust manure; caoutchouc since about 1825, and

gutta-percha, only since 1844. On the other hand, charms,(59) philters,

and even relics, since the decay of faith in their efficacy, have lost the

quality of goods. If the aggregate income of all mankind were, by some

sudden revolution, to be equally divided among all, diamonds, for

instance, would greatly decline in value, for the reason that it is

dependent, in great part, on the wants generated by vanity, or by the

desire of outshining others. Beer, tobacco etc., would rise in the scale

as goods, because the circle of those to whose wants they minister would

have been very greatly extended. On the whole, advancement in civilization

has uniformly the effect, of itself, to increase the quantity and number

of goods, the wants and knowledge of men being thereby increased. We

should reach the ideal here, if all men experienced only true or

legitimate wants, but these completely; if they could see their way,

clearly, to the satisfaction of them, and find the means of satisfying

them with just the amount of effort most conducive to their

physico-intellectual development.(60)

Section II.

Goods.—Economic Goods.

By economy (_Wirthschaft_=husbandry or housekeeping), we mean the

systematized activity of man, to satisfy his need (_Bedarf_=requisite) of

external goods.(61) This treatise is concerned only with economic goods

(ends or means of economy).(62) The greater the advance of civilization or

human culture, the less apt are men to pursue the satisfaction of their

wants, isolated from their fellows, or, in other words, to carry on their

economies or husbandries apart from one another. The more numerous the

wants of men, and the more different in kind their faculties are, the more

natural does exchange(63) become. Since all goods derive their character

as goods from the fact that they are destined to satisfy human wants, the

very possibility of exchange must greatly increase the possibility of

things to become goods. Think of the machinist, whose products are used

only by the astronomer, while the latter is never in a way to manufacture

them for himself. (_Hufeland._) Commerce is the series of combinations,

created by the interchange of services: “a living net of relations, which

wants and services are ever weaving and unweaving.” (_Hermann._) As a

rule, with an advance in civilization, there is an increase in the number

of goods, which become economic goods, and in the number of economic goods

which become commercial goods (objects or means promotive of

commerce).(64) But this is to be considered a real advancement only to the

extent that that which is obtained is superior to that which was possessed

before, in consequence of the specialization of callings or the greater

division of labor (§ 48 ff.). When a little street Arab exacts money from

a stranger for pointing out the way, we rightly censure him; but no one

would find it improper if he should first fit himself to play the part of

a guide, and then live by his calling.(65)

Section III.

Goods.—The Three Classes Of Goods.

All economic goods are divided into three classes:

A. _Persons or personal services._ It is entirely repugnant to the feeling

of humanity to regard a man’s person in its entirety as an instrument

intended to satisfy the wants of another.(66) Yet this happens wherever

slavery exists; in its coarsest form, in cannibalism. Among civilized

nations, we can speak, under this head, only of individual services or

capabilities of persons; or, indeed, of the aggregate of the services

rendered by them during a time determined at pleasure, or a short

time.(67)

B. _Things_, both moveable and immovable.(68)

C. _Relations_ to persons or things which may frequently be estimated just

as accurately as material goods. (The _res incorporales_ of the Roman

law.) I need only mention what is called good-will, which freely, and to

the advantage of customers themselves, but still with a limited amount of

certainty, attaches to certain localities, and for which tavern-keepers,

sometimes, as in theaters, dépôts and clubs, pay so enormous a rent.(69)

When a newspaper is sold, the purchaser frequently buys nothing but the

existing relations between his colaborers, subscribers etc. No small part

of the value of a good business firm consists in the confidence with which

it inspires all who deal with it, thus sparing them a world of care and

trouble.(70) A general may be of incalculable value to an army which he

has himself helped organize. In another, or in the service of a country

not his own, he might be entirely valueless, incapable of accomplishing

anything.(71) With the progress of civilization, as man becomes more

social, the number of valuable relations increases, while that of

legalized monopolies is wont to decrease. (_Schäffle._)(72)

Section IV.

Of Value.—Value In Use.

The economic value of goods is the importance they possess for the

purposes of man, considered as engaged in economy (housekeeping,

husbandry.(73))

Looked at from the point of view of the person who wishes to employ them

in his use directly, doubtless the oldest point of view, value appears

first as value in use; and here, according to the difference of subjective

purposes it is intended to subserve, we may speak of production value or

enjoyment-value; and of this last, in turn, as utilization-value, or

consumption-value. The value in use of goods, is greater in proportion as

the number of wants they are calculated to satisfy are more general and

more urgent, and in proportion as they are gratified by them more fully,

surely, durably, easily and pleasantly.(74) Hence, it is seldom possible

to find an accurate mathematical expression of the relation which exists

between the value in use of different goods.(75) Thus, it is possible to

estimate the nutritive power of different kinds of goods, the value of

wheat or of hay for instance, but not the goodness or quality of their

taste, of the attractiveness of their appearance, etc.

But, the more men become used to comparing the aggregate of human wants,

and the aggregate of the goods which minister to the satisfaction of these

wants, as if they were two great wholes, gradually shading each into the

other, the more does the value in use of the different kinds of goods

assume, for purposes of social rating or estimation, a fungible

character.(76) If a new kind of goods be produced or discovered, which

satisfies the same wants in a more complete manner than another, the

latter, although it has suffered no change, generally loses in the value

put upon it, especially if the new goods can be produced in any desired

quantity. An instance of this is the change effected in the value of the

dyers weed, woad, by the introduction of indigo.

Things present in quantities greater than the amount necessary to supply

the want they satisfy, preserve their full value in use, to the limit of

that want, after which they are simply an element of possible future

value, dependent on an increase of the want; but they have no value for

present use.(77)

The economic valuation of goods, however, is by no means exhausted, so far

as the isolated individual housekeeper is concerned, by the mere

establishing of its value in use. As the systematic effort of every

rational individual in his household management is directed towards the

obtaining, by a minimum of sacrifice of pleasure and energy, a maximum

satisfaction of his wants, even an Adam or a Crusoe is, in his economy,

compelled to estimate not only what the goods to be acquired accomplish

(value in use) but also what they will cost—cost-value. Even the most

indispensable kind of goods, for instance atmospheric air, is considered

to have no value, when it can be obtained in sufficient quantity, without

any sacrifice whatever.(78)

Section V.

Value.—Value In Exchange.

The value in exchange of goods, or the quality which makes them

exchangeable against other goods, is based on a combination of their value

in use with their cost-value, such as men in their intercourse with one

another will make.(79) Without value in use, value in exchange(80) is

unthinkable.

But there are many, and even indispensable goods which are not at all

susceptible of being exchanged; for instance, the light and heat of the

sun, the open sea etc.(81) Other goods, although capable of being

exchanged, have no value in exchange, because they exist in

superabundance, and may be obtained by everyone, without trouble and

without reward; for instance, drinking-water in most places, ice in

winter, and wood in the primeval forest.(82) Moreover, the idea of such

“free goods” is in great part relative. The water of a river may, for

drinking purposes, be “free” goods, and yet, for purposes of irrigation,

have great value in exchange. (_John Stuart Mill_).

But, goods, to obtain value in exchange, must, in addition to their value

in use, a value which must be recognized(83) by a certain number of

persons, at least, have the capacity of becoming the exclusive property of

some one individual, and therefore of being alienated or transferred; and

this alienation or transfer must be desired because of the difficulty to

become possessed of them in any other way.(84)

Section VI.

Value.—Alleged Contradiction Between Value In Use And Value In Exchange.

Recent, and especially socialistic,(85) writers have alluded to the great

“contradiction” between value in use and value in exchange. This

contradiction, however, vanishes when the above idea of economy, and the

two sides or aspects, which economic value presents, are kept steadily in

view. It is said, for instance, that a pound of gold has a much greater

value in exchange than a pound of iron; while the value in use of iron, is

incomparably greater than that of gold. I question this latter statement.

True it is, that the need of iron is much more universal and urgent than

the need of gold. On the other hand, a pound of gold yields satisfaction

to the want of that metal, much greater than is yielded by a pound of

iron, to the want of iron. We may speak of a contradiction between value

in use and value in exchange, at the farthest, only in case the existing

quantity of an article in trade, which can be done without, is not

estimated correspondingly lower than the whole existing supply of a thing

which is indispensable. But this is a case which cannot often occur. When,

for instance, wheat is very dear, as in years of scarcity, people prefer

to pay a very high price for it rather than to dispense, even in part,

with its use; and so of all the necessaries of life. As people progress in

economic culture, they become more expert in adapting the value in

exchange of related goods, not only to their cost-value, but also to their

value in use.(86)(87)

The lower the state of a nation’s economy, the more isolated men live from

one another, the greater is the prominence given by them to value in use,

as compared with value in exchange, a fact which makes a valuation of

resources, which shall be universally applicable, a more difficult

matter.(88)(89)(90)

Section VII.

Resources Or Means (Vermögen).

_Resources_, or _means_, in the sense in which we here use the term, are

the aggregate of economic goods owned by a physical or legal person, after

deduction is made of the person’s debts, and all valuable and rightful

claims have been added.(91) Hence, there are private resources,

corporative resources, municipal resources, etc., state resources,

national resources and the world’s resources. In estimating the resources

of a whole people, it is, of course, necessary to make deduction of the

debts due by the individual members of the nation to their fellow

countrymen.

Section VIII.

Valuation Of Resources.

It has often been made a question, whether the valuation of resources

should be based on the value in use, or the value in exchange of their

constituent parts.(92) The latter has, of course, no interest, except in

so far as we are concerned with the possibility of obtaining the control

of part of the resources, or means, of another, by the surrender of a part

of one’s own goods. In estimating the value of private resources, which

require to be made continually an object of trade, this point is, of

course, of the greatest importance. If certain of their component

elements, lands, for instance, belonging to a _fidei commissum_, are

incapable of entering immediately into the market, at least the revenue

they yield is measured by its value in exchange.

It is quite otherwise, even with the resources of a whole nation. Such

resources are, evidently, much more independent, and have much less need

of being exchanged against their equals, than private resources. The

foreign commerce, of the greatest and most advanced nations, has,

hitherto, been but a small quota of their internal commerce.(93) A

valuation, therefore, based on value in exchange, however interesting it

might be to enable us to determine how property is shared by the different

classes and persons that compose the nation, would afford but little

information concerning the absolute amount of the national wealth. This,

of course, applies in a much higher degree to the resources of the whole

world.

If, now, we were to estimate the resources of an entire people, or even of

the world, by summing up the value in exchange of their several component

parts, many very important elements would be left out of the account

entirely; as for instance, harbors, navigable streams, numberless

relations which have, indeed, no value in exchange whatever, but which are

of the highest importance, because promotive of the economy of the nation.

The same may be said of made roads of every description, the

politico-economical value of which may be much greater than the value in

exchange of their stock, than their cost of production etc. The increase

of the value in exchange of any of the branches of the resources of a

physical or legal person contributes towards really enriching the nation

or the world, only in case that the increased value in exchange is based

on an increased utility in quality or quantity. Should an earthquake

suddenly dry up a number of our springs, and thus give value in exchange

to the drinking water from the remaining ones, we should, indeed, witness

the introduction of a new object into the list of exchangeable goods; the

owners of springs would be able to command a larger portion of the

national resources, but at the expense of the rest of the population; and

the whole country would have become poorer in goods by the catastrophe.

Even the value in exchange of the national resources would not be

increased; for all other goods, which, hitherto, as compared with water,

had an unlimited capacity for exchange, would lose just as much of that

capacity as water had gained, as compared with them.(94) On the other

hand, if a new mineral spring should be discovered, the great value in use

of the water of which gave it value in exchange, the resources of the

nation would be really increased, not only in point of utility, but in

exchange value; for no other goods, formerly known, would, in consequence

of the discovery, lose in their exchange power.(95)

Section IX.

Wealth.

The possession of large and also of potentially lasting resources;

objectively, such resources themselves, we call wealth. But it must be

large in a two-fold sense; large as compared with the rational wants of

its possessor, and large, also, as compared with the resources of other

people, especially with the resources of those in the same condition of

life. To be called rich, it is not enough “to have a sufficiency,” (the

individual side); it is necessary to have more than others.(96) If all men

were possessed of a great deal, but all of an exactly equal amount, each

would be compelled, it may be conjectured, to be his own chimney-sweep,

his own scavenger and “boot-black.” And how could anyone, then, be

properly called wealthy? This is the social side of the idea of

wealth.(97) Hence, a person, with the same resources, might be very

wealthy in a provincial town, while, in the capital, he could enjoy only

moderate comfort.(98)

Section X.

Wealth.—Signs Of National Wealth.

We should have a very imperfect idea of the wealth of a people (§ 8) if we

should estimate it at the value in exchange of the sum(99)-total of the

component parts of the national resources. By the following signs,

however, an approximative notion of the value in use of the resources of a

nation may be obtained:

A. When, even the lower classes, who compose everywhere the greatest

portion of the people, are comfortable, in a condition worthy of human

beings. Thus, C. Dupin is surprised at the great quantities of meat,

butter, cheese and tea entered on the accounts of the poor-houses in

England, and the great care taken to have these of the best quality.(100)

A good symptom of such a state of things is a high average duration of

human life, especially when there is a relatively large number of births.

(§ 246.)

B. When a considerable outlay, devoted to the satisfaction of the more

refined wants, is voluntarily made, and by those only possessed of a

proper economic sense. Thus, in England, the various mission, bible, and

tract societies had, in 1841, an aggregate income of £630,000. The

expeditions in search of Franklin cost over a million pounds sterling. The

state outlay also belongs to this category, provided, that taxes are

collected and loans obtained, without any noticeable oppression. The sum

of 20,000,000 pounds sterling, voted, in 1833, by the British Parliament

for the abolition of slavery, is one of the happiest signs of the national

wealth of England.(101)

C. A large number of valuable buildings, and permanent improvements; for

instance, roads of every description, works for purposes of irrigation and

drainage. Thus, in London, from September, 1843, to September, 1845, there

were constructed squares and streets with an aggregate length of 11.1

geographical miles. The number of newly built houses in London, between

1843 and 1847, was nearly 27,000. And so, in England and Wales there are

492 geographical miles of navigable canals, while their navigable rivers

are estimated to have a length of only 449 miles. The number of miles of

railroad, in the British Empire, in 1865, was 2,897 geographical miles,

and they cost 459 million of pounds; in 1870, it was 3,270 geographical

miles, at an aggregate cost of 650 millions sterling.

D. The frequent occurrence of heavy commercial payments, which finds

expression especially in the magnitude and costliness of the most usual

medium of exchange. Thus, all payments are made in England in paper (for

sums of at least five pounds sterling) or in gold coin. Silver is used

only as small change, like copper in most other countries. (_Infra_, §

118, seq.)(102)

E. Frequent loans to foreign nations. Hence, Storch divides all countries

into borrowing or poor countries, loaning or rich countries, and

independent countries which hold a middle place between the two

former.(103)

Section XI.

Of Economy (Husbandry).

All normal economy(104) (husbandry) aims at securing a maximum of personal

advantage with a minimum of cost or outlay.(105) And there are always two

intellectual incentives at the foundation of this economy. There is,

first, self-interest, the positive manifestation of which is the effort to

acquire as much of the world’s goods as possible, and the negative

expression of which, the effort to lose as little of them as

possible—acquisitiveness—saving. Self-interest, losing its moral, and

assuming a guilty, character, degenerates into egotism; acquisitiveness,

into covetousness; and the disposition to save, into avarice—the

_solipsismus_ of Kant. The incentive to ameliorate one’s condition is

common to all men, no matter how varied the form or different the

intensity of its manifestation. It guides us all from the cradle to the

grave. It may be restricted within certain limits, but never entirely

extinguished. It is, in the domain of economy, what the instinct of

self-preservation is to our physical existence, a powerful principle of

creation, preservation and of renewed life (I. Thessal., 4, 11,

seq.).(106) Then there is the incentive of the demand of God’s voice

within us, the voice of conscience, whether we call it, in philosophic

outline “the adumbration of the ideas of equity, right, benevolence, of

perfection and inner freedom,” or, framing our lives in accordance with

them, the striving after the Kingdom of God.(107) It matters not, how much

the image of God may have been disfigured in most men, there is no one in

whom the longing for it has so far disappeared as to leave no trace

behind. This puts bounds to our self-interest, and transmutes it into an

earthly means to enable us to approximate to an eternal ideal.

As, in the structure of the world, the apparently opposing tendencies of

the centrifugal and centripetal forces produce the harmony of the spheres,

so, in the social life of man, self-interest and conscience produce in him

the feeling for the common good.(108) This sentiment of the common

interest is the foundation on which rise in successive gradation, the life

of the family, of the community, of the nation and of humanity, the last

of which should be coincident with the life of the Church. It, alone, can

realize the kingdom of heaven on earth. Through this sentiment alone can

religion be made active and moral. Only through it, can self-interest be

made really sure and always to the purpose. Even the most calculating mind

must acknowledge, that numberless institutions, relations etc., are useful

and even necessary to many individuals, which can be established or

maintained only from a sense of the general welfare, for the reason that

no one individual could make the sacrifice required to establish or

maintain them. And so, since commerce has wrought the interests of all men

into one great piece of net-work, the best means of obtaining wherewith to

satisfy our own wants is to help others satisfy theirs. Self-interest

causes every one to choose the course in life in which he shall meet with

the least competition and the most abundant patronage; in other words,

that which answers to the most pressing and least satisfied want of the

community. As a rule, the physician who cures the greatest number of

patients with the greatest skill, and the manufacturer who produces the

best goods cheapest, will grow to be the richest. It is, moreover, easy to

see that, according as the circle of common interests grows smaller, it

approximates to self-interest; and to “the Kingdom of God”(109) as it

grows larger. And yet, all these circles respectively condition one

another. Cosmopolitanism or church-zeal, without love of country;

patriotism, without fidelity to the community in which one lives, or love

of one’s family, are more than suspicious. The reverse is also true. This

is a chief connecting link between the great apparent opposites.(110)(111)

Section XII.

Economy.—Grades Of Economy.

Thanks to this feeling for the common weal, the eternal and destructive

war—the _bellum omnium contra omnes_—which an unscrupulous self-interest

would not fail to generate among men engaged in the isolated prosecution

of their own economic interests, ceases in the higher, well-ordered

organization(112) of society. On it are based the various forms of economy

in common: family-economy, corporation or association-economy, municipal

economy, and national economy.(113) And these forms of economy in common

are so essentially the condition and complement of individual economy,

that the latter, without them, could either not be maintained at all, or,

at least, only in the very lowest stage of civilization.

Although the higher science of Political Economy has, nearly always, been

conceived(114) as treating of the aggregate national activity of a people,

there have been many, recently, who consider Political Economy as no real

whole, but only as a mere abstraction. This is true, especially of many

unconditional free-trade theorizers, partly from a repugnance toward the

governmental guardianship of private businesses or economy. It is true,

also, of certain philosophers who consider the idea, “the people,” as

merely nominal.(115) There are, however, two things necessary to warrant

us to call a thing made up of a number of parts, one real whole: the parts

and the whole must have a reciprocal action upon one another, and the

whole, as such, must have a demonstrable action of its own. (_Drobisch._)

In this sense, “the people” is, unquestionably, a reality, and not alone

the individuals who constitute the “people.” Besides, it is truly said

that all husbandry or economy supposes a will (“systematized activity”

etc., _supra_, § 2). Such a will is ascribed to individuals, to legal

persons, to the state, but not, however, to “the people,” as a whole. But

this will need not be an entirely conscious one, as is plain from the case

of the less gifted and less cultured individuals engaged in household

economy. The systemization in the public economy of a people finds its

clearest expression in economic laws, and in the institutions of the

state. But it finds expression, also, without the intervention of the

state, in the laws established by use, and by the opinions of jurists or

courts, in community of speech, of customs and tastes etc.: things which

have an important economic meaning, which depend on the common nature of

the land, of race and history, and which influence the state, at least as

much as they are influenced by it.(116)(117)

The most that can be said, at present, so far as an economy of mankind, or

a world-economy, is concerned, is, that it may be shown that important

preparations have been made for it. We are approaching more nearly to it

by the ways of the more and more cosmopolitan character of science, the

increasing international coöperation of labor, the improvement in the

means of transportation, growing emigration, the greater love of peace,

and the greater toleration of nations etc.

Section XIII.

Political Economy.—The Economic Organism.

The idea conveyed by the word _organism_, is doubtless, one of the most

obscure of all ideas; and I am so far from desiring to explain(118) by

that idea, the meaning of public or national economy, that I would only

use the word _organism_ as the shortest and most familiar expression of a

number of problems, which it is the purpose of the following investigation

to solve.

There are two points, especially, of importance here. In the motion of any

machine, it is possible to distinguish with the utmost accuracy, between

the cause and the effect of the motion: the blowing of the wind, for

instance, is simply and purely, the cause of the friction of the

mill-stones in a wind-mill, and is not in the least influenced or

conditioned by the latter. But, in the public economy of every people,

patient thought soon shows the observer, that the most important

simultaneous events or phenomena mutually condition one another. Thus, a

flourishing state of agriculture is impossible without flourishing

industries; but, conversely, the prosperity of the latter supposes the

prosperity of the former, as a condition precedent. It is as in the human

body. The motions of respiration are produced by the action of the spinal

cord; and the spinal cord, in turn, continues to work only through the

blood, that is, by the help of respiration. In all cases like this, we are

forced, when accounting for phenomena, to move about in a circle, unless

we admit the existence of an organic life, of which every individual fact

is only the manifestation.(119)(120)

It is, also, undeniable, that human insight into the operation and utility

of a machine must always precede the existence of the machine itself. This

human insight is parent to the plan, and the plan, in turn, is parent to

the machine. The very reverse of this is true in the case of organisms,

those “divine machines” as Leibnitz called them. Men had digested food and

reproduced their kind, thousands of years before physiologists had

attained to a true theory of digestion or reproduction. I do not, indeed,

by any means, pretend, that the public economy of nations is governed by

natural necessity, in the same degree, as for instance, the human body. We

shall find, however, that the minute arbitrary variations usual here and

there in the course of its development, generally compensate for one

another, in accordance with the law of large numbers. Here, too, we find

harmonies, frequently of wonderful beauty, which existed long before any

one dreamt of them; innumerable _natural laws_,(121) whose operation does

not depend on their recognition by individuals, and, over which, only he

can obtain power who has learned to obey them. (_Bacon_)(122)(123)(124)

But it should never be lost sight of, that the natural laws governing the

public economy of a people, like those of the human mind, are

distinguished in one very essential point from those of the material

world. They have to do with free rational beings, who, because they are

thus free and rational, are responsible to God and their conscience, and

constitute in their aggregate a species capable of progress.

Section XIV.

Origin Of A Nation’s Economy.

The public economy of a people has its origin simultaneously with the

people. It is neither the invention of man nor the revelation of God. It

is the natural product of the faculties and propensities which make man

man.(125) Just as it may be shown, that the family which lives isolated

from all others, contains, in itself, the germs of all political

organization,(126) so may it be demonstrated, that every independent

household management contains the germs of all politico-economical

activity. The public economy of a nation grows with the nation. With the

nation, it blooms and ripens. Its season of blossoming and of maturity is

the period of its greatest strength, and, at the same time, of the most

perfect development of all its more important organs.(127) In respect to

it, the economic endeavors of any epoch may be said to be represented by

two great parties, the one progressive, the other, conservative. The

former would hasten the period of the nation’s richest and most varied

development, the latter postpone its departure as long as possible; and

hence it comes, that a people’s economic decline is sometimes taken for

progress, by the former class, and their progress for decline, by the

latter. As a rule, the union and equilibrium of these parties are wont to

be the greatest at the period of maturity, because, then, intelligence and

the spirit of sacrifice for the common good are most general.(128)

Finally, the public economy of a nation declines with the people.

(_Infra_, § 263 ff.)

Section XV.

Diseases Of The Social Organism.

If the public economy of a people be an organism, we must expect to find

that the perturbations, which affect it, present some analogies to the

diseases of the body physical. We may, therefore, hope to learn much that

may be of use in practice, from the tried methods of medicine.(129) In the

diseases of the body economic, it is necessary to distinguish accurately,

between the nature of the disease and its external symptoms, although it

may be necessary to combat the latter directly, and not merely with a view

to alleviation. Following the example of the physician, we should

particularly direct our attention to the curative method which nature

itself would pursue, were art not to intervene. “The curative power of

nature is no peculiar power; it is the result of a series of happy

adjustments, by means of which the morbid perturbation itself sets in

motion the springs which may either destroy the evil or paralyze its

action. It is, in fact, nothing but the original power which formed the

body and preserves its life in contact with the external causes of

perturbation and the internal disorder provoked by these causes.”

(_Ruete._)

Chapter II.

Position Of Political Economy In The Circle Of Related Sciences.

Section XVI.

Political Or National Economy.

By the science of national,(130) or Political Economy, we understand the

science which has to do with the laws of the development of the economy of

a nation, or with its economic national life. (Philosophy of the history

of Political Economy, according to von Mangoldt.) Like all the political

sciences, or sciences of _national life_, it is concerned, on the one

hand, with the consideration of the individual man, and on the other, it

extends its investigations to the whole of human kind.(131)

National life, like all life, is a whole, the various phenomena of which

are most intimately connected with one another. Hence it is, that to

understand one side of it scientifically, it is necessary to know all its

sides. But, especially, is it necessary to fix one’s attention on the

following seven: language, religion, art, science, law, the state and

economy.(132) Without language, all higher mental activity is unthinkable;

without religion, all else would lose its firmest foundation and highest

aim. Through art, alone, do all these sides attain to beauty; through

science, alone, to clearness. Law arises, the moment conflicts of will

become inevitable and an adjustment is desired. The state has to do with

them, in so far as they have any external force or validity. Indeed, there

is no human relation, not even the highest and the sweetest, but has its

economic interests. It is, therefore, natural, that each of the sciences

which relate to these various regions of human life should, in part,

presuppose all others, and, in part, serve as a basis for them.(133)

But in the midst of this universal relationship, it is easy to see that

law, the state and economy constitute a family, as it were apart and more

closely connected. (The social sciences, in the narrower sense of the

expression.)

They are confined almost exclusively to what Schleiermacher has called

“effective action” (_wirksame Handeln_), while art and science belong

almost entirely to the “action of representation” (_darstellenden

Handeln_); and religion and language combine both kinds. Law, the state,

and economy too, have their roots so deep in the physical and intellectual

imperfection of man, that we can scarcely imagine their continuance beyond

his life on earth (Gospel of Matthew, 22, 30). But within these limits,

their several provinces and the subjects with which they are concerned are

almost coincident. They only consider these from different points of view:

the science of politics from that of sovereignty; the science of Political

Economy from that of the satisfaction of the requirement of external goods

by the people; the science of law from that of the prevention or the

peaceable adjustment of conflicts of will. As every economic act,

consciously or unconsciously, supposes forms of law, so, by far the

greater number of the laws relating to rights, and the greater number of

judgments in the matter of rights, contain an economic element. In

numberless cases, the science of law gives us only the external _how_; the

deeper _why_ is revealed to us by the science of Political

Economy.(134)(135) And, as to the state, who, for instance, can appreciate

the political significance of a nobility, without understanding the

economic character of rent, and of the possession of large landed estates?

Who can politically appreciate the inferior classes of society, unless

initiated into a knowledge of the laws that govern wages and population?

It were much easier to cultivate psychology without physiology! “The state

is society protected by force” (_Herbart_). There are two bases to all

material power:(136) wealth and warlike ability (χρήματα—ναυτικά,

according to Thucydides); and how much the latter has need of the former

is well expressed by the familiar saying of Montecuccoli: “Money is not

only the first, but the second and third condition of war.”(137)

Frederick the Great calls finance the pulse of the state, and Richelieu,

the point of support which Archimedes was in search of, to move the world.

In all modern nations, the history of the debates on the raising of

revenue and of the passing of budgets is, at the same time, the history of

parliamentary life; and most great revolutions, the Reformation of the

sixteenth century not excepted, if not caused have been promoted, by

financial embarrassment.

Section XVII.

Sciences Relating To National Life.—The Science Of Public Economy.—The

Science Of Finance.

If, by the public economy of a nation, we understand economic legislation

and the governmental guidance or direction of the economy of private

persons,(138) the science of public economy becomes, so far as its form is

concerned, a branch of political science, while as to its matter, its

subject is almost coincident with that of Political Economy. Hence it is,

that so many writers use the terms public economy, or the economy of the

state (_Staatswirthschaft_), and National Economy (_Volkswirthschaft_), as

synonymous.(139) The hypothesis, in accordance with which, this science

should discard all consideration of the state, or should refuse to

presuppose its formation,(140) would lead us into an ideal region,

difficult to define, probably entirely impossible, and inaccessible to

experience.

Just as clear, is the close connection between politics and Political

Economy, in the case of the science of finance, or of the science of

governmental house-keeping, otherwise the administration of public

affairs. The latter, evidently, so far as its end is concerned, belongs to

politics, but so far as the means to that end are concerned, to National

Economy. As the physiologist cannot understand the action of the human

body, without understanding that of the head; so we would not be able to

grasp the organic whole of national economy, if we were to leave the

state, the greatest economy of all, the one which uninterruptedly and

irresistibly acts on all others, out of consideration.(141)

By the term _police_, we mean the state power whose office it is, without

mediation, to prevent all disturbances of external order among the

people.(142) It may extend its action into all the domains of national

life mentioned above, whenever external order is there threatened, or

calls for protection; but its action is important especially in the

domains of law and economy. The science of the _police power_, therefore,

of all those doctrines resulting from investigation into national life,

takes up only one phase of each of them; and the phases of doctrine thus

taken up, it combines into a whole, for practical ends. Its relation to

those sciences is like that of surgery to the medical sciences, or like

the science of legal procedure to the science of law.

Section XVIII.

Sciences Relating To National Life.—Statistics.

Statistics we call the picture or representation of social life at given

periods of time, and especially at the present time, drawn on a scale in

accordance with the laws of development discovered by means of the

theoretical sciences above named; as it were, a section through the

stream. (_Schlözer_ calls them: history standing still.)(143) Statistics,

as thus defined, are as far removed from saying too much as from saying

too little. To give a complete tableau of their object, statistics should,

of course, take in the life of a people, in all its aspects. But they

should look upon such facts only as their own property, the meaning of

which they are able to understand; that is, such only as can be ranged

under known laws of development. Unintelligible facts are collected only

in the hope of penetrating into their meaning in the future, by comparing

them with one another. In the meantime, they are to the statistician only

what unfinished experiments are to the investigator of nature.

The view is daily gaining ground, that statistics should be

occupied—without, however, confining themselves to them—with present

facts, with “facts affecting society and the state, which are susceptible

of being expressed in figures.”(144) The more deceptive the immediate

observation of an individual, isolated fact is, in cases where a great

number of simultaneous or scattered individual isolated facts of national

life should be observed, the more important it is to discover proper

numerical relations, by noting all the like acts or experiences of men,

the time and place in question, and the relation of the aggregate of these

phenomena, to the sum-total of the population, or to the sum-total of

corresponding phenomena in other places. When this is done, and the facts

are completely enumerated and correctly recorded, there is no danger of

subjective error. And this species of “political and social measuring,” as

Hildebrand calls it, may be applied, not only to quantities, but to all

qualities accessible to the observation of the senses; since the

individual or isolated qualities of the things enumerated, may be again

made objects of enumeration. Without doubt, this mode of numerical

procedure is the most perfect for all those divisions of statistics in

which it can be followed; and hence, it should be our endeavor to make the

numerical side of statistics as comprehensive as possible. But, one side

of a science is not a science itself. As there is no natural science

proper called microscopy, embracing all the observations made by means of

the microscope, so care should be taken not to deduce the principle of a

science from the chief instrument it employs. There will always be many

and important facts in national life which can not be subjected to

numerical calculation, although they may be established with the usual

amount of historical certainty. Were statistics to be limited, in the

manner mentioned above, they would remain a collection of fragments, and

instead of being a science, properly so-called, become a method.(145)

Besides, it is evident, that, of statistics in general, economic

statistics constitute a chief part, and precisely the part most accessible

to numerical treatment. As these economic statistics need to be always

directed by the light of Political Economy, they also furnish it with rich

materials for the continuation of its structure, and for the strengthening

of such foundations as it already has. They, are, moreover, the

indispensable condition of the application of economic theorems to

practice.

Section XIX.

Private Economy—Cameralistic Science.

The meaning of the term cameralistic science (_Cameralwissenschaft_) can

be explained only by the history of the cameralistic system.(146) From the

end of the middle ages, we find, in most German countries, an institution

called the Council (_Kammer_) whose province it was to administer the

public domain, and to watch over regal rights. At first, a mere

governmental commission, it was not long before it developed into an

independent board. This change had taken place in Burgundy as early as the

year 1409. It was in that country that the emperor Maximilian became

acquainted with the institution; and by the erection of the aulic councils

at Innspruck and Vienna (1498 and 1501), he gave the principal impulse to

the imitation of it in Germany. As, at that time, the division of labor

was very little developed, and personal and collegial authority all the

more developed in consequence, it is easy to conceive that a great part of

all the new and rapidly increasing business of police administration was

confided to these councils. They were charged especially with what is

known to-day as economic police (_Wirthschaftspolizei_) and an important

part of the administration of justice, in its lower departments, was

turned over to their subordinates. The most eminent men who wrote, in the

seventeenth century, on cameralistic matters, laid great stress on the

point, that it was the duty of the aulic councils to entertain not only

fiscal questions, but that it was within their province also, to determine

questions of economic police.(147) The interest of absolute princes must

have greatly favored these cameralistic institutions, for they were in

their hands docile tools, which escaped the annoying intervention of the

states of their realms.

By degrees, the knowledge necessary to these council officials, and which

found no place in the lectures on law, were formed into a special body of

doctrine. After such men as Morhof and Thomasius had prepared the

way,(148) Frederick William I., himself a clever cameralist, and author of

the masterly financial system of Prussia, took the important step of

founding, at Halle and Frankfurt on the Oder, special chairs of economy

and cameralistic science; which, considering the time, were very ably

filled by Gasser and Dithmar. (1727.) There was thus formed in the German

universities a distinct school of cameralists, which, through Jung, Rössig

and Schmalz, reached to the nineteenth century. The term cameralistic

science, the creature of chance, was used, it must be said, with very

various limits to its meaning.(149)

However, Political Economy in Germany developed out of the science of law

and the cameralistic sciences, while in England and Italy it had its

origin chiefly in the study of questions of finance and foreign commerce.

Section XX.

Private Economy. (Continued.)

If we abstract from cameralistic science as it was understood in the last

century, what it has in common with all economy,(150) and therefore with

public economy, next that which belongs to the aggregate of governmental

economy, there remains only a number of rules, such as those which govern

the principal branches of private business, and which indicate how they

are to be carried on with the greatest advantage to those who engage in

them. Such are forest and rural economy, mining science, technology,

including architecture, and all that concerns founderies, and commercial

science. Now that the expression cameralistic science is altogether

obsolete, the aggregate of these might be designated by the name private

economy. Obviously, we should have here, neither a simple nor pure

science, but only a compilation of natural-philosophical and economic

lemmas. Thus, in agriculture, for instance, a knowledge of the different

kinds of soil, of the tillage of land, of the different plants and animals

etc., belongs to the domain of natural science; while all that relates to

the cost of production, the employment of capital, the wages of labor, the

exchange of products, net product and the price of land, are purely

politico-economical. The political economists also require a knowledge of

the natural side of the cameralistic sciences. Such a knowledge is

indispensable to every detailed and living theory, and especially to the

application of economic science to practice. The great difference lies in

this, that the cameralist interests himself in the production of material

goods for their own sake, while the political economist regards them only

in their relations to national life.(151)

It would seem, moreover, that political economists, especially in Germany,

have attached too much importance to putting formal bounds to their

special science. Why not rather follow the example of the students of

nature who care little whether this or that discovery belongs to physics

or chemistry, to astronomy or mathematics, provided, only, very many and

important discoveries are made?(152)

Section XXI.

What Political Economy Treats Of.

Political Economy treats chiefly of the material interests of nations. It

inquires how the various wants of the people of a country, especially

those of food, clothing, fuel, shelter, of the sexual instinct etc., may

be satisfied; how the satisfaction of these wants influences the aggregate

national life, and how in turn, they are influenced by the national life.

(Gospel of Matth., 4, 4.) This alone suffices to enable us to estimate the

importance of the science. The relation of virtue to wealth is likened by

Bacon to that of an army to its baggage. In Xenophon’s opinion, wealth is

really useful only to him who knows how to make a good use of it. From an

economic point of view, the happiest man is he who has accumulated most,

honorably, and used it best.(153) That, even in a material sense, the

intellect of a people is their most important element, is evident from the

example of the Chinese, who were so long acquainted with printing, powder,

and the mariner’s compass, without, by their means, attaining to

intelligent public opinion, forming a good army, or coming to an

understanding of the art of navigation, to any great extent.

The undervaluing of economic matters, for which ages of inferior

cultivation, our own middle ages for instance, are now praised and now

blamed, was really a rare exception even during these ages.(154) Other

kinds of acquisition and enjoyment then occupied the foreground; but there

never was a time, when gain and enjoyment in general were not favorite

objects of pursuit, and held in high esteem. The physical wants of

uncultured men cry out much louder than intellectual ones. (§ 2, 14.)(155)

On the other hand, in over-cultivated ages, when decay begins, an

over-estimation of material things is wont to become general.(156) The

mere servants of mammon, whether as political economists or as private

individuals, may see their depravity faithfully reflected in communism as

in a mirror. We should not overlook the fact that it is with whole nations

as with the individual man who amasses his own fortune. He reaches the

culminating point of his wealth generally after he has passed the prime of

life. The most flourishing period of a nation’s existence is wont just to

precede its decay, and to introduce it.(157) Hence, here nothing could be

more untrue, as Macchiavelli has remarked, than the general opinion that

money is the sinew of war.(158)

Chapter III.

The Methods Of Political Economy.

Section XXII.

Former Methods.

The methods(159) which would apply to any science of national life,

principles borrowed from any other science, are now generally looked upon

as obsolete. This is true, especially, of the theological method which

prevailed, almost exclusively during the middle ages,(160) and of the

juridical method of the seventeenth century.

It would be much more in harmony with the intellectual tendencies of the

time, to adopt a mathematical mode of treatment in Political Economy,

involving, as such a mode of treatment does, not the matter of the

science, but only a formal principle. That which is general in Political

Economy has, it must be acknowledged, much that is analogous to the

mathematical sciences. Like the latter, it swarms with abstractions.(161)

Just as there are, strictly speaking, no mathematical lines or points in

nature, and no mathematical lever, there is nowhere such a thing as

production or rent, entirely pure and simple. The mathematical laws of

motion operate in a hypothetical vacuum, and, where applied, are subjected

to important modifications, in consequence of atmospheric resistance.

Something similar is true of most of the laws of our science; as, for

instance, those in accordance with which the price of commodities is fixed

by the buyer and seller. It also, always supposes the parties to the

contract to be guided only by a sense of their own best interest, and not

to be influenced by secondary considerations. It is not, therefore, to be

wondered at, that many authors have endeavored to clothe the laws of

Political Economy in algebraic formulæ.(162) And, indeed, wherever

magnitudes and the relations of magnitudes to one another are treated of,

it must be possible to subject them to calculation. Herbart has shown that

this is so in the case of psychology;(163) and all the sciences which

treat of national life, especially our own, are psychological.(164) But

the advantages of the mathematical mode of expression diminish as the

facts to which it is applied become more complicated. This is true even in

the ordinary psychology of the individual. How much more, therefore, in

the portraying of national life! Here the algebraic formulæ would soon

become so complicated, as to make all further progress in the operation

next to impossible.(165) Their employment, especially in a science whose

sphere it is, at present, to increase the number of the facts observed, to

make them the object of exhaustive investigation, and vary the

combinations into which they may be made to enter, is a matter of great

difficulty, if not entirely impossible.(166) For, most assuredly, as our

science has to do with men, it must take them and treat them as they

actually are, moved at once by very different and non-economic motives,

belonging to an entirely definite people, state, age etc. The abstraction

according to which all men are by nature the same, different only in

consequence of a difference of education, position in life etc., all

equally well equipped, skillful and free in the matter of economic

production and consumption, is one which, as Ricardo and von Thünen have

shown, must pass as an indispensable stage in the preparatory labors of

political economists. It would be especially well, when an economic fact

is produced by the cooperation of many different factors, for the

investigator to mentally isolate the factor of which, for the time being,

he wishes to examine the peculiar nature. All other factors should, for a

time, be considered as not operating, and as unchangeable, and then the

question asked, What would be the effect of a change in the factor to be

examined, whether the change be occasioned by enlarging or diminishing it?

But it never should be lost sight of, that such a one is only an

abstraction after all, for which, not only in the transition to practice,

but even in finished theory, we must turn to the infinite variety of real

life.(167)

There are two important inquiries in all sciences whose subject matter is

national or social life: 1. What _is_? (What has been? How did it become

so? etc.) 2. What _should be_? The greater number of political economists

have confounded these questions one with the other, but not all to the

same extent.(168)

When a careful distinction is made between them, the contrast between the

(realistic) physiological or historical, and the idealistic methods is

brought out.(169)

Section XXIII.

The Idealistic Method.

Any one who has read a goodly number of idealistic works treating of

public economy (the state, law etc.) cannot have failed to be struck by

the enormous differences, and even contradictions, as to what theorizers

have considered desirable and necessary. There is scarcely an important

point which the highest authorities may not be cited for or against. We

must not close our eyes to this fact. “The giddiness that comes from

contemplating the depths of knowledge is the beginning of philosophy, as

the god Thaumas was, according to the fable, the father of Iris.”

(_Plato._) In a precisely similar manner, the student of public economy

(politics, the philosophy of law etc.) must familiarize himself with the

variations that have taken place in what men, at different periods of

history, have required of the state and public economy, until he is lost

in wonder at the contemplation.

Section XXIII.

The Idealistic Method. (Continued.)

It is impossible to fail to notice at once that those ideal descriptions

which have enjoyed great fame and exerted great influence, depart very

little from the real conditions of the public economy (of the state, law

etc.) surrounding their authors.(170) This is not mere chance. The power

of great theorizers, as, indeed, of all great men, lies, as a rule, in

this, that they satisfy the want of their own time to an unusual extent;

and it is the peculiar task of theorizers to give expression to this want

with scientific clearness, and to justify it with scientific depth. But

the real wants of a people will, in the long run, be satisfied in

life,(171) so far as this is possible to the moral imperfection of man. We

should at least be on our guard when we hear it said that whole nations

have been forced into an “unnatural” course by priests, tyrants and

cavilers. For, to leave human freedom and divine Providence out of

consideration entirely, how is such a thing possible? The supposed tyrants

are generally part and parcel of the people themselves; all their

resources are derived from the people. They must have been new

Archimedeses standing outside of their own world. (Compare, however,

_infra_, § 263.)

It is true, that if the result of the growth of generations be to

gradually produce a different people, these different men may require

different institutions. Then a struggle arises between the old and those

of the younger generation; the former wish to retain what has been tested

by time, the latter to seek for the satisfaction of their new wants by new

means. As the sea always oscillates between the flowing and ebbing of the

tides, so the life of nations, between periods of repose and of crisis:

periods of repose, when existing forms answer to the real substance of

things, and of crisis, when the changed substance or contents seeks to

build up a new form for itself. Such crises are called _reforms_ when they

are effected in a peaceful way, and in accordance with positive law. When

accomplished in violation of law, they are called revolutions.(172)

That every revolution, it matters not how great the need of the change

produced by it, is as such an enormous evil, a serious, and sometimes,

fatal disease of the body politic, is self-evident. The injury to morals

which the spectacle of victorious wrong almost always produces can be

healed, as a rule, only in the following generation. Where law has been

once trampled on, the “right of the stronger” will prevail; and the

stronger is, to some extent, the most unscrupulous and reckless in the

choice of the means to be employed. Hence, the well-known fact, that in

revolutionary times the worst so frequently remain the victors. The

counter-revolution which is wont to follow on the heels of revolution, and

with a corresponding violence, is a compensation only to the most

shortsighted. It allows the disease, the familiarizing of the people with

the infringement of law, to continue, until the hitherto sound parts are

attacked. Hence, a people should, if they would have it go well with them,

in the changes in the form of things which they make, take as their model

Time, whose reforms are the surest and most irresistible, but, at the same

time, as Bacon says, so gradual that they cannot be seen or observed at

any one moment. It is true, that, as all that is great is difficult, so

also is the carrying out of uninterrupted reform. Its carrying out,

indeed, supposes two things: a constitution so wisely planned as to keep

the doors open both to the disappearing institutions of the past and to

the coming institutions of the future; and, among all classes of the

people, a moral control of themselves, so absolute that, no matter what

the inconvenience, or how great the sacrifice, legal ways shall alone be

used. In this manner, two of the greatest and apparently most

contradictory wants of every legal or moral person, the want of

uninterrupted continuity and that of free development, may be satisfied.

Section XXV.

The Idealistic Method. (Continued.)

It is doubtless true that all economic laws, and all economic institutions

are made for the people, not the people for such laws and institutions.

Their mutability is, therefore, by no means such an evil as mankind should

endeavor to remove, but is wholesome and laudable, so far as it runs

parallel with the transformation of the people, and the changes which

their wants have undergone.(173) Hence, there is no reason why the most

various ideal systems should contradict one another. Any one of them may

be right, but, of course, only for one people and one age. In this case,

the only error would be, if they should claim to be universally

applicable. There can no more be an economic ideal adapted to the various

wants of every people, than a garment which should fit every individual.

The leading-strings of children and the staff of age would be great

annoyances to the man. “Reason becomes nonsense and beneficence a

torment.” Hence, whoever would elaborate the ideal of the best public

economy—and the greater number of political economists have really wished

to do this—should, if he would be perfectly true, and at the same time

practical, place in juxta position as many different ideals as there are

different types of people.(174) He would, moreover, have to revise his

work every few years; for, in proportion as a people change, and new wants

originate, the economic ideal suitable to them must change also. But it is

impossible to accomplish this on so large a scale. Besides, to appreciate

the present thus instantaneously, and to perfectly feel the pulse of time

thus uninterruptedly, requires a species of talent different from what

even the most distinguished scientists are wont to possess; talents of an

entirely practical nature, such as become a great minister of the interior

or of finance. And it is an acknowledged fact, that even the cleverest of

such practicioners, as the younger Pitt said of himself, generally feel

their way instinctively, and do not see it with the clearness necessary to

indicate it to others.

Section XXVI.

The Historical Method—The Anatomy And Physiology Of Public Economy.

We refuse entirely to lend ourselves in theory to the construction of such

ideal systems. Our aim is simply to describe man’s economic nature and

economic wants, to investigate the laws and the character of the

institutions which are adapted to the satisfaction of these wants, and the

greater or less amount of success by which they have been attended.(175)

Our task is, therefore, so to speak, the anatomy and physiology of social

or national economy!

These are matters to be found within the domain of reality, susceptible of

demonstration or refutation by the ordinary operations of science;

entirely true or entirely false, and, therefore, in the former case, not

liable to become obsolete. We proceed after the manner of the investigator

of nature. We, too, have our dissecting knife and microscope, and we have

an advantage over the student of nature in this, that the self-observation

of the body is exceedingly limited, while that of mind is almost

unlimited. There are other respects, however, in which he has the

advantage over us. When he wishes to study a given species, he may make a

hundred or a thousand experiments, and use a hundred or a thousand

individuals for his purpose. Hence, he can easily control each separate

observation, and distinguish the exception from the rule. But, how many

nations are there which we can make use of for purposes of comparison?

Their very fewness makes it all the more imperative to compare them all.

Doubtless, comparison cannot supply the place of observation; but

observation may be thus rendered more thorough, many-sided, and richer in

the number of its points of view. Interested alike in the differences and

resemblances, we must first form our rules from the latter, consider the

former as the exceptions, and then endeavor to explain them. (_Infra_, §

266).

Section XXVII.

Advantages Of The Historical Or Physiological Method.

The thorough application of this method will do away with a great number

of controversies on important questions.(176) Men are as far removed from

being devils as from being angels. We meet with few who are only guided by

ideal motives, but with few, also, who hearken only to the voice of

egotism, and care for nothing but themselves. It may, therefore, be

assumed, that any view current on certain tangible interests which concern

man very nearly, and which has been shared by great parties and even by

whole peoples for generations, is not based only on ignorance or a

perverse love of wrong. The error consists more frequently in applying

measures wholesome and even absolutely necessary under certain

circumstances, to circumstances entirely different. And here, a thorough

insight into the conditions of the measure suffices to compose the

differences between the two parties. Once the natural laws of Political

Economy are sufficiently known and recognized, all that is needed, in any

given instance, is more exact and reliable statistics of the fact

involved, to reconcile all party controversies on questions of the

politics of public economy, so far, at least, as these controversies arise

from a difference of opinion. It may be that science may never attain to

this, in consequence of the new problems which are ever arising and

demanding a solution. It may be, too, that in the greater number of party

controversies, the opposed purposes of the parties play a more important

part even than the opposed views. Be this as it may, it is necessary,

especially in an age as deeply agitated as our own, when every good

citizen is in duty bound to ally himself to party, that every honest

party-man should seek to secure, amid the ocean of ephemeral opinions, a

firm island of scientific truth, as universally recognized as truth as are

the principles of mathematical physics by physicians of the most various

schools.

Section XXVIII.

Advantages Of The Historical Method. (Continued.)

Another characteristic feature of the historical method is that it does

away with the feeling of self-sufficiency, and the braggadocio which cause

most men to ridicule what they do not understand, and the higher to look

down with contempt on lower civilizations. Whoever is acquainted with the

laws of the development of the plant, cannot fail to see in the seed the

germ of its growth, and in its flower, the herald of decay. If there were

inhabitants of the moon, and one of them should visit our earth, and find

children and grown people side by side, while ignorant of the laws of

human development, would he not look upon the most beautiful child as a

mere monster, with an enormous head, with arms and legs of stunted growth,

useless genitals, and destitute of reason? The folly of such a judgment

would be obvious to every one; and yet we meet with thousands like it on

the state and the public economy of nations when in lower stages of

civilization, and this, even among the most distinguished writers.(177)

We may, indeed, make a critical comparison of different forms, each of

which answers perfectly to its object or contents; but such a comparison

can possess historical objectivity, only when it is based on a correct

view of the peculiar course of development followed by the people in

question.

The forms of the period of maturity may be considered the most perfect;

earlier forms as the immature, and the later as those of the age of

decline.(178) But it is a matter of the greatest difficulty, accurately to

determine the culminating point of a people’s civilization. The old man

believes, as a rule, that the times are growing worse, because he is no

longer in a way to utilize them; the young man, as a rule, that they are

growing better, because he hopes to turn them to account. It is, however,

always a purely empirical question; and in the solution of it, the

observer’s eye may acquire a singular acuteness by the comparative study

of as many nations as possible, especially of those which have already

passed away.(179)

Could anyone contemplate the history of mankind as a a whole, of which the

histories of individual nations are but the parts, the successive steps in

the evolution of humanity would of course afford him a similar objective

rule for all these points in which whole peoples permanently differ from

one another.(180)

Section XXIX.

The Practical Character Of The Historical Method In Political Economy.

Before I close, I must refer to a possible objection which may be made to

historical or physiological Political Economy: that it may indeed be

taught, but that it cannot be a practical science. If it be assumed that

those principles only are practical, which may be applied immediately by

every reader, in practice, this work must disclaim all pretensions to that

title. I doubt very much if, in this sense, there is a single science

susceptible of a practical exposition.(181) Genuine practitioners, who

know life with its thousands of relations by experience, will be the first

to grant that such a collection of prescriptions, when the question is the

knowledge and guidance of men, would be misleading and dangerous in

proportion as such prescriptions were positive and apodictic, that is

non-practical and doctrinarian.

Our endeavor has been, not to write a practical book, but to train our

readers to be practical. To this end, we have sought to describe the laws

of nature which man cannot control, but, at most, only utilize. We call

the attention of the reader to the different points of view, from which

every economic fact must be observed, to do justice to every claim. We

would like to accustom the reader, when he is examining the most

insignificant politico-economical fact, never to lose sight of the whole,

not only of public economy but of national life. We are very strongly of

the opinion, that only he can form a correct judgment and defend his views

against all objections, on such questions as to where, how and when

certain liens and charges, monopolies, privileges, services etc., should

be abolished, who fully understands why they were once imposed or

introduced. Especially, do we not desire to impress a certain number of

rules of action on those who have confided themselves to our guidance,

after having first demonstrated their excellence. Our highest ambition is

to put our readers in a way to discover such rules of direction for

themselves, after they have conscientiously weighed all the facts,

untrammeled by any earthly authority whatever.(182)(183)

Book I.

THE PRODUCTION OF GOODS.

Chapter I.

Factors Of Production.

Section XXX.

Meaning Of Production.

To create new matter is more than it is given to man to do. Hence, by the

term production, in its widest sense, we mean simply the bringing forth of

new goods—the discovery of new utilities, the change or transformation of

already existing goods into new utilities,(184) the creation of means for

the satisfaction of human wants, out of the aggregate of matter originally

present in the world. (_Producere!_) We confine ourselves, however, in

this to economic goods, as defined in § 2. In a secondary and more limited

sense, production is an increase of resources, in so far as the goods

produced satisfy a greater human want, than those employed in the

production itself.(185)(186)(187)

It would, however, be an error to suppose, that the creation of certain

utilities for the producer himself, or for others, constitutes the only

end of economic production. The more perfect economic production becomes,

the greater grows the pleasure the producer feels in his products, which

pleasure is at once the effect and the cause of his success. Hence,

production is to a great extent its own end. That this is so in the case

of artists is well known. “If you want only progeny from her, a mortal can

beget them as well. Let him who rejoices in the goddess, not seek in her

the woman,” says Schiller. There is not a really clever workman but has

something artistic in his mode of production. And even the meanest

productive activity, provided it is neither over-driven nor misdirected,

must of itself exert a good influence on the physical and moral

development or preservation of the producer. An idle brain is the devil’s

workshop.(188)

Section XXXI.

The Factors Of Production.—External Nature.(189)

The division of natural forces which formerly obtained, into organic,

chemical and mechanical, is of no great importance in Political Economy.

The tendency is more and more to resolve organic forces partly into

chemical and partly into mechanical. Between mechanical and chemical

forces, again, the boundary is not fixed, heat being always capable of

producing motion, and motion always of producing heat. Hence, it is all

the more important for us to find a division of the economic gifts

(matter, forces(190) and relations) of external nature, into such as are

capable of acquiring exchange value, and such as are not. (See § 5.)

A. Those gifts of nature which, because they cannot be appropriated by any

one, or which at least are inexhaustible as compared with the wants of

man, and therefore never have a direct value in exchange, belong either to

the class of _free_ goods, in the fullest sense of the word, as, for

instance, sunlight and the atmosphere (_supra_, § 5);(191) or they

constitute, by reason of their peculiar and intransmissible connection

with the whole country, an essential element of the national resources.

Section XXXII.

External Nature.—The Sea.—Climate.

To the last category belongs, for instance, the sea, the only natural

boundary of a country, which from a military point of view, constitutes a

protection to it, without, at the same time, disturbing peaceful traffic.

(_Riedel._) Here, also belong ocean currents, especially when uniformly

supported by regular winds,(192) the ebb and flow of the tides, which

constitute a piece of commercial machinery of the very greatest

importance, particularly when they affect the waters of rivers to a great

distance.(193) In this age, when the love of travel is so great and so

universal, what prices are paid in many places by strangers for the beauty

of a landscape, to its owner.

Special mention should be here made of climate, and of its heat or

moisture. The lines called isothermal, that is, lines of equal annual

heat, are, therefore, of greatest importance to public economy, because

the “zones of production” depend mainly on them.(194) However, we are

concerned here, not only with the average temperature of the whole year,

but especially with the distribution of heat among the several parts of

the day and the different seasons of the year, and the maximum summer heat

and winter cold (the isothermal and iso-cheimenal lines). Coast lands are

wont to have a milder winter and a cooler summer than continental ones

with an equal average yearly heat. This produces a great difference in

vegetation, because there are a great many plants which can endure the

winter’s cold very well, but require a hot summer; and _vice versa_.(195)

Were it not for this fact, in connection with the winter-sleep of plants,

a large portion of the north would be entirely uninhabitable. Besides, the

temperature of a place does not depend exclusively on its latitude, or on

its height above the sea-level.(196) The humidity of the climate is, as a

rule, great in proportion to the quantity of water in its neighborhood,

and to the height of its temperature; although, for instance, in Europe,

the number of rainy days increases, the further we advance towards the

north.(197) Although the distance of a place from the equator and its

height above the level of the sea have, in many respects, a similar effect

(vertical, horizontal isothermal lines and zones of production),

mountainous regions are uniformly distinguished by a greater degree of

humidity, which makes them better adapted for pasturage and

forest-culture. But the flora of a locality, being the resultant of all

its conditions, affords us a much better criterion of the value of the

climate for economic purposes, than the most accurate thermometric

observations. Other things being equal, the productive force of nature

operates, doubtless, with most energy, in warm climates. The more remote a

country is from the equator, the more is its fertility confined to its

lowest parts.(198) Greater heat will, as a rule, ripen the same product

sooner, and thus permit the same land to be used several times in the same

year.(199) Each individual harvest, as a rule, is more abundant,(200) and

the products better in many respects. The fruit, for instance, and wine,

contain more sugar,(201) and oleaginous plants contain more oil. Lastly,

since nature in warm countries is so much more generous, it may be

utilized by man with less regard for consequences. There is less need of

extensive woods, of large winter supplies, especially for animals;(202)

fewer buildings are demanded, and there is also less demand for human and

brute labor, since the work of plowing, sowing etc., extends over a

greater portion of the year.(203) It is true, on the other hand, that also

the destructive force of nature is greater in warmer than in colder

countries. (§ 209.)(204)

Section XXXIII.

External Nature.—Gifts Of Nature With Value In Exchange.

B. Those gifts of external nature which may become objects of private

property, and at the same time possess sufficient relative scarcity to

give them value in exchange, are either movable, and exhaustible in a

given place, or firmly connected with the land. The first category

embraces, for instance, such wild animals and plants as serve some useful

purpose, minerals, above all, fossil combustible matter(205)—the “black

diamonds,” coal, of which, with its canals, Franklin said that it had made

England what it is. The economical effect of their moveable character is

best seen, when the use made of an ordinary stratum of coal is compared

with that of a protracted subterranean fire in a coal mine.(206) The

latter can be directly useful only to those in its immediate vicinity.

Every lower layer of the burning coal would be less useful. An increase of

its actual power by accumulation in time or place is scarcely possible. In

all these respects, the movable coal is incomparably better adapted to the

satisfaction of man’s wants. It may be said that the capacity of heat for

drying, distilling, melting and hardening purposes, of imparting rapid

motion to heavy objects by the production of confined steam, is, at least,

a thousand times as great when a thousand bushels of coal are consumed as

when one is consumed. In most cases even the concentration of a large

quantity of coal will increase, the result not only absolutely, but

relatively.(207)(208)

Section XXXIV.

External Nature. (Continued.)

The materials, forces and relations or conditions of external nature,

immovably connected with parts of the land, even when in themselves

exhaustless, either allow only of a definite amount of economic

utilization, as, for instance, the mechanical force of a given waterfall,

which can drive only a definite number of mills of a definite size;(209)

or their increased utilization is accompanied by difficulties which

increase with still greater rapidity. This last is the case, especially in

the employment of land for agricultural purposes. It is, according to

Senior, one of the four fundamental axioms of Political Economy, that

additional labor, spent on a given quantity of land, produces, as a rule,

a relatively smaller yield; assuming, of course, that the art of

agriculture remains the same. It is not possible to determine either

generally, or in particular cases, the precise point at which agriculture

should stop, to prevent relatively smaller returns from increased

expenditure of labor and capital. Improvements in the art of agriculture

may remove it a great distance. But, that there is such a point admits of

no doubt. No one will believe that an acre of land can be made to produce

a quantity of the means of subsistence sufficient to support all Europe,

no matter what the amount of seed used, or of manure etc. employed.(210)

This is most apparent in forest-economy, where the absolute increase of

the so-called wood-capital becomes, after a certain time, smaller from

year to year.(211)

Section XXXV.

External Nature.—Elements Of Agricultural Productiveness.

In treating of the agricultural productiveness of a piece of land, it is

necessary to distinguish three things,—its bearing-capacity, its capacity

for cultivation, and its direct capacity to afford food to plants.(212)

Plants grow by drawing a part of the elements which enter into their

composition from the atmosphere, and a part from the earth through the

agencies of sunlight and of water. While the air, the sun’s heat, and in

most parts of the world, water, are free and inexhaustible goods, the

earth’s supply of food for plants must be considered as analogous, so far

as its exhaustibility and capacity to be appropriated are concerned, to

the beds of coal and of ore etc. which occur in mining districts. This is

certainly true, with a few important differences, however, as for

instance, that, as a rule, it is impossible, except through the

cultivation of plants, to obtain from the earth the stores of plant food

which it contains;(213) and that it is possible to husbandry to replace

the portion of these stores taken from the earth by the harvest, through

the agency of manures.(214)

Incomparably more important in the economic valuation of a piece of land

is its capacity for cultivation, because this depends much less on the

good or bad quality of the husbandman’s art. I mean here the so-called

physical constitution of the vegetable soil; its water-holding power, its

consistency (light or heavy soil) on which the difficulty of working it

depends; its ability to dry, in a shorter or longer time, and its

accompanying diminution in volume; its ability to draw moisture from the

atmosphere and to absorb the various kinds of gases; its heat-absorbing

and heat-containing power (hot, warm and cold soils).(215) Much depends

here on the depth of the vegetable soil and on the constitution of the

sub-soil, which, for instance, when it is very permeable, improves a very

moist soil, but in the form of meadow iron-ore (_Wiesenerz_), works great

injury. The vertical form of the land is also a very important element in

estimating the natural fertility of the soil. In mountainous districts,

the quantity of land which can be used (and with what labor!) is wont to

be relatively smaller than in low lands. Hence it is, that the former

become too small for their inhabitants; who, therefore, swarm over the

plains lying before them either as settlers or conquerors.(216) In the

eastern hemisphere, the northern slopes of mountain regions are most

unfavorably situated, although the southern slopes are frequently

subjected to more trying and more sudden variations of thawing and

freezing weather.(217)

But all these more special qualities of the soil must be distinguished

from their general basis, the bearing or carrying capacity which land

possesses as a mere superficies, and which the most naked rock (Malta!),

and the bed of a flowing stream (the floating gardens of China!) possess

to some extent, since there is a possibility of establishing a

plant-feeding surface on them. This bearing capacity, which in most

instances is given only by nature, and which can be added to only to a

very limited extent and at great outlay, is wont, when the population is

very dense, to acquire considerable exchange value in the

vicinity.(218)(219)

Section XXXVI.

External Nature.—Further Divisions Of Nature’s Gifts.

The gifts of nature, we further divide into those which can be directly

enjoyed and those which are of use only indirectly, by facilitating

production. (Natural means of enjoyment,—means of acquisition.)(220) An

extreme superfluity of the former is as disastrous to civilization as a

too great scarcity of them. How simple the economy of a tropical country!

A banana field will support twenty-five times as many men as a wheat field

(_K. Ritter_); and with infinitely less labor; for all that is needed is

to cut the stems with their ripened fruit, to loosen the earth a little

and very superficially, when new stems shoot up.(221) At the base of the

mountains of Mexico, a father needs labor only two days in the week to

support his family. Hence, nothing so much excites the wonder of the

traveler there as the diminutiveness of the cultivated ground surrounding

each Indian hut.(222) But in these earthly paradises, where, as Byron

said, even bread is gathered like fruit, the powers of man slumber as

certainly as they grow torpid in polar deserts.(223) The sentence: “In the

sweat of thy brow shalt thou eat bread,” has been a blessing to mankind.

Athens was not only the literary and political, but also the economic

capital of Greece; and yet Attica was one of the most sterile countries in

the world.(224) Unfortunate Messina, on the other hand, was the most

fertile province of Greece. In modern times, no countries of equal extent

have produced as many great captains, statesmen, savants and artists as

Holland, whose securest portions are as unfertile as those which are

fertile are threatened by the sea. On the other hand, how lately and

imperfectly has the so-called black-earth of southern Russia fallen under

the influence of civilization!(225)

Section XXXVII.

External Nature.—The Geographical Character Of A Country.

The geographical character of a country is, as a rule,(226) most

intimately connected, not only with its flora and fauna, but also with the

character of its people. One of the crowning glories of the progress of

modern science is, that it has recognized anew the power of this wonderful

organism, and that it has made geography an explanatory medium between

nature and history. The conditions most favorable to the development of

civilization are found in a well developed country which slopes gradually

through a series of intermediate terraces from a mountain summit to a

plain; especially when they are connected with one another by a good

system of streams; since here the opposite peculiarities of the

populations of the highlands and coast-lands(227) tend to produce a

nationality both one and varied. Where the transitions are too abrupt, as

for instance, in New Holland, they easily impede inter-communication; and,

still more, where the several parts of the country are of very great

extent; as, for example, the desert of North Africa, the plateau of South

Africa or that of Central Asia. Europe is favored above all other parts of

the world by the happy combination of mountain and plain.(228) We might

pursue the parallel existing between the soil and the character of a

people into the minutest details, and discover, even in the difference

between Spanish, French, German and Hungarian wines, a reflection of the

different characters of the people.(229)

But whence is this? Can it be that dead nature has thus irresistibly

affected the living mind? We do not need to give a materialistic answer to

the question.(230) Almost every people has migrated at some period of its

existence. Urged on by their peculiar tastes and tendencies, they settled

in the places most in harmony with their character. A higher hand was over

them; one which, we should unreservedly trust, placed them in such

external circumstances as were most favorable to the development of all

their faculties.

But the influences of man on nature are no less notable than those of

nature upon man. The greater number of domestic animals and plants which

Europe possesses to-day, it has been obliged to introduce from other parts

of the globe.(231) In the interior of Gaul, the vine rarely ripened, at

the time of Christ.(232) On the other hand, Mesopotamia, formerly one of

the gardens of the world, is now covered with dried-up canals, filled a

little below the surface with heaps of brick and broken vases, the remains

and other vestiges of a once dense population. Its former rich alluvial

soil, now almost calcined, produces at present scarcely anything except a

few saline plants, mimosas etc.(233) The higher the civilization of a

people, the less does it depend on the nature of the country.

Section XXXVIII.

Of Labor.—Divisions Of Labor.

Man’s capacity for most economic labor is so closely connected with the

exquisite articulation of the human hand, that Buffon could say without

exaggeration that reason and the hand made man man.(234) But it is true of

economic labor, as of all other labor, that it is more efficient in

proportion as mind predominates over matter.

The best division of economic labor is the following:(235)

A. Discoveries and inventions.(236)

B. Occupation of the spontaneous gifts of nature, as, for instance, of

wild plants, wild animals, and of minerals.(237) Where this is the only

kind of economic labor, man is necessarily dependent on nature in a high

degree.

C. The production of raw materials; that is, a direction given to nature

in order to the production of raw materials, by stock-raising,

agriculture, forest-culture etc., but not by mining.

D. The transformation (_Verarbeitung_) of raw material by means of

manufactories, factories, the trades etc.

E. The distribution of stores of goods among those who are to use them

directly, whether from people to people or from place to place

(wholesale), or among the individuals of the same place (retail).(238) To

this class also belong leasing, renting, loaning, etc.

F. Services, in the more limited sense of the term, which embraces

personal as well as incorporeal goods; as, for instance, the labors of the

doctor, teacher; virtuoso, of the statesman, judge, and of preachers,

whose office it is, by way of eminence, to produce and preserve the

immaterial wealth, known as the State and the Church.(239)

The order followed in the above classification is that in which the

different classes of labor are wont to be historically developed.

Section XXXIX.

Labor.—Taste For Labor.—Piece-Wages.

Man’s taste for labor is conditioned especially by the extent to which,

and the security with which, he may hope to enjoy the fruit of his labor

himself. Hence it is that, as a rule, the slave (§ 71, ff.) and socager

work least willingly, the day laborer with less industry than the

piece-worker,(240) who is at the same time more satisfied with himself,

and gives most satisfaction to his master,(241) since he acquires more

both for himself and for his master. The superiority of piece-paid labor

is greater in proportion as the workman calculates his own advantage. It

is, therefore, smallest in the case of ingenuous uneducated workmen, and

in that of the really conscientious.(242) The fear of seeing one’s

condition grow worse, through want of industry, exerts an influence

precisely similar to the hope of improving it. In both respects, free

competition (§ 97) must be considered one of the principal means of

furthering the taste for labor.(243)

Among the causes which have contributed to make England the first country

in the world, viewed from a politico-economical stand-point, English

writers on Political Economy have pointed out as one of the principal, the

prevalence there of piece-wages.(244) Payment by the piece should, of

course, be practiced, only in cases in which the work may be broken up

into a series of isolated tasks, and is completed by such a series. Hence,

it is not applicable where a great many different things are required of

the same workman; nor in relations in which continuity, as, for instance,

of the inclination or disposition of the workman is the chief thing.(245)

The further the division of labor is carried in our day, the greater the

part money plays in our social economy, and the more lasting relations are

dissolved, the more general becomes piece-work, which, with all its

material advantages, has, speaking morally, its dark side.

(_Atomism!_)(246) In a great many branches of manufactures it has been

relinquished because the excellence of his work suffered from the

workman’s haste, and because he could not be properly controlled.(247) It

is rather the quantity than the quality of work which increases with

piece-work, and where the quality of the work is what is desired, this

system has not the same field. And where it obtains, as, for instance, in

the case of ordinary type-setters, resort is had to payment by the day for

compositors engaged on mathematical treatises, fac-similes, inscriptions

etc. On the side of the workman, it is generally only the idle and awkward

who oppose piece-work on principle. It is a subject of regret that the

best and most industrious workmen are carried away by it to an extent

detrimental to their health.(248) However, many of the deficiencies of the

piece-wage principle may be removed by agreements made with whole groups

of workmen; provided, always, that the groups are not too large to prevent

the mutual knowledge and surveillance of their members.(249) The quantity

of work is greatest, its quality best, and the material(250) employed used

most sparingly, when the workman works on his own account, or has a share

in the profits. This last is proper only in those branches of the business

the success of which depends on the quality of the work. To compel the

workman to share in the profits alone will not do, because he is generally

too poor to run any risk or to do long without his earnings. The system of

paying “commissions,” therefore, is to be recommended all the more

strongly, since it is a combination of fixed wages with a share in the

profits. This system is very prevalent in North America, where a great

deal has to be confided to the workmen. It is practiced, also, in the

whale fisheries, and on the Greek ships in the Levant engaged in coasting,

where much more depends on the care of the sailors than on the ability of

the captain.(251) It presupposes good workmen, equal almost to their

master in education,(252) for instance, in the case of overseers of labor;

since every better inducement to the taste for labor which is not only

juster but more complicative, is not only a condition but also the effect

of higher culture. But if the economy of a people is ripe for share-wages,

and masters begin to introduce them in earnest in individual cases, the

work produced will be improved to such a degree that it can not be long

before all others will be necessitated to follow them.(253)

If, however, workmen are to enjoy the fruit of their industry, it is

necessary, first of all, that public order should be secure. Even the most

industrious become discouraged where despotism or anarchy prevails. On the

other hand, even the greatest security is no sufficient incentive to a

nation of fatalists.(254)

Section XL.

Labor.—Labor-Power Of Individuals.

The average labor-power of individuals varies very much in different

nations.(255) The reason of this is, in part, doubtless a difference in

natural endowments. Thus, for instance, no people surpass the English and

Anglo-American in energy, none the German in intelligence in work or the

French in taste. Where we can assume that the same meaning is attached to

the expression, “military capacity,” by the different recruiting bureaus,

important conclusions as to the physical labor-power of different

localities may be drawn from the ratio existing between the number of

those fit for military service and those who are legally liable to

military duty.(256)

But these conclusions are greatly modified by the state of civilization

and that of society. Where the laboring classes are despised and paid in a

manner unworthy of human beings, the badness of their work will be in

keeping with the estimation in which it is held. The reverse of this,

also, is usually true under different circumstances. (§ 173.) Thus, it has

been noticed in France, that native workmen, provided with as substantial

food as English workmen, are scarcely inferior to the the latter in the

technic value of their labor.(257) A Mecklenburg day laborer eats almost

twice as much as a Thuringian workman, but then he accomplishes almost

twice as much. Hence, employers gain in the long run by paying their

workmen well. As civilization advances, the same number of workmen become,

not only more industrious and more capable, but the same quantity and

quality of labor becomes, as a rule, cheaper.(258)

The moral culture of a people exerts the greatest influence here. In every

private undertaking, a great part of the expense attending it, and in

every state, a great part of the expense of its police system, and of its

system of administering justice, is occasioned only by the dishonesty of

men. If all this expense could be dispensed with, and full confidence

placed in individuals, it would be possible to devote much more time and

energy to positively useful labor.(259) In estimating the labor-power of

different nations or different periods of time, the division of population

according to age is also of importance. As a rule, the labor-power of

males is greatest from the age of twenty-five to the age of forty-five.

The more numerous, therefore, the class of the population between these

ages is, the more favorably, other things being equal, is it situated as

regards labor.(260)(261) But, as a rule, the relative number of full-grown

people is greatest in highly civilized nations. (§ 248.)(262)

Section XLI.

Labor.—Effect Of The Esteem In Which It Is Held.

As civilization advances, labor becomes more honorable. All barbarous

nations despise it as slavish. _Pigrum et iners videtur sudore adquirere

quod possis sanguine parare_: has been the motto of all medieval times. In

heathen Iceland, the owner of a piece of land might be deprived of it by

an adversary who could overpower him in single combat. This mode of

acquisition was considered more honorable than purchase. It was Thor’s own

form of investiture. The ideas of the Romans on rightful acquisition may

be inferred from the word _mancipium_ (manu capere).(263) Pure

Christianity, on the other hand, preached the honorableness of labor from

the first (Thess. 4, 11; II. Thess. 3, 8 seq.; Eph. 4, 28). And so in the

time of the Reformation,(264) when Christendom was returning to its

primitive purity.

In keeping with this is the fact, that the most cultivated nations, and

the same may be said of individuals, value time most highly. “Time is

money.” (_Benjamin Franklin._) An English proverb calls time the stuff of

which life is made.(265) While in negro nations, individuals do not even

know their own age; while in Russia, there are very few clocks to strike

the hours, even in the towers of churches, in England, a watch is

considered an indispensable article of apparel, even for very young people

and for some of the lower orders of society.(266) Railroads operate in

this respect as a kind of national clock. The introduction of machinery

and the more minute division of labor, make punctuality a necessity. While

South Americans and West Indians are frightfully careless in their every

movement, a carelessness which betrays itself even in their drawling

speech,(267) the life of a New Englander has been compared to the rush of

a locomotive. In the markets of Central Asia, nothing strikes the European

with so much surprise as the little value put upon time by the merchants

of India and Bucharia, who are fully satisfied when, after endless

waiting, they succeed in obtaining a somewhat higher price for their

wares.(268)

Section XLII.

Of Capital.—The Classes Of Goods Of Which A Nation’s Capital Is Made Up.

Capital(269) we call every product laid by for purposes of further

production. (§ 220).(270)

Hence, the capital of a nation consists especially of the following

classes of goods:

A. _Soil-improvements_, for instance, drainage and irrigation works,

dikes, hedges etc., which are, indeed, sometimes so far part of the land

itself that it is difficult to distinguish them from it.(271) To this

class belong all permanent plantations.

B. _Buildings_, which embrace workshops and storehouses as well as

dwellings; also artificial roads of all kinds.

C. _Tools, machines and utensils_ of every description;(272) the latter

especially for personal service, and for the preservation and

transportation of other goods. A machine is distinguished from a tool in

that the moving power of the former is not communicated to it immediately

by the human body, which only directs it; while the latter serves as a

species of equipment, or as a better substitute for some member of man’s

body.(273) To be of advantage, these three kinds of capital must save more

labor or fatigue than it has cost to produce them. Tools are, however,

older than machines. The aborigines of Australia used only a lance and a

club in hunting; the somewhat more civilized American Indians, the bow and

arrow; Europeans use firearms: in all of which a gradual progress is

observable. Of the blind forces which communicate motion to machines,

water was the first used, then the wind, and last of all, steam.(274)

D. _Useful and laboring animals_, in so far as they are raised, fed and

developed by human care.

E. _Materials for transformation_ (_Verwandlungsstoffe_): either the

principal material which constitutes the essential substance of a new

product, the yarn of the weaver for instance, the raw wool, silk or cotton

of the spinner; or the secondary material which, indeed, enters into the

work, but only for purposes of ornamentation, as gold-leaf, lac, colors

etc.

F. _Auxiliary substances_, which are consumed in production, but do not

constitute a visible part of the raw product,(275) as coal in a smithy,

powder in the chase or in mining, muriatic acid, in the preparation of

gelatin, chlorine in bleaching etc.

G. _Means of subsistence_ for the producers, which are advanced to them

until production is complete.

H. _Commercial stock_, which the merchant keeps always on hand to meet the

wants of his customers.

I. _Money_ as the principal tool in every trade that is made.

K. There is also what may be called _incorporeal capital_ (quasi-capital

according to _Schmitthenner_), which is as much the result of production

as any other capital, and is used in production, but which, for the most

part, is not exhausted by use. There are species of this kind of capital

which may be transferred, as for instance, the good will of a

well-established firm. Others are as inseparably connected with human

capacity for labor as soil-improvements with a piece of land; e.g., the

greater dexterity acquired by a workman through scientific study, or the

greater confidence he has acquired by long trial.(276) The state itself is

the most important incorporeal capital of every nation, since it is

clearly indispensable, at least indirectly, to economic production.(277)

The greater portion of the national capital is in a state of constant

transformation. It is being continually destroyed and reproduced. But from

the stand-point of private economy, as well as from that of the whole

people, we say that capital is preserved, increased or diminished

according as its value is preserved, increased or diminished.(278)

_Pretium succedit in locum roi et res in locum pretii._ “The greater part

in value of the wealth now existing in England, has been produced by human

hands within the last twelve months. A very small proportion indeed of

that large aggregate was in existence ten years ago; of the present

productive capital of the country, scarcely any part except farm-houses

and a few ships and machines; and even these would not, in most cases,

have survived so long, if fresh labor had not been employed within that

period in putting them into repair.... Capital is kept in existence from

age to age like population, not by preservation, but by reproduction.”

(_J. S. Mill_.)

Section XLIII.

Capital.—Productive Capital.

Capital, according to the employment that can be given it, may be divided

into such as affects the production of material goods, and such as affects

personal goods or useful relations. The former, under the name of

productive capital, is, in recent politico-economical literature, usually

opposed to capital in use.(279) Evidently any one of the two kinds of

capital mentioned above, may be used for both purposes.(280) Indeed, the

two classes are, in many respects, coincident. Thus, a livery-stable

carriage or a circulating library is productive capital to its proprietor,

and capital in use(281) (_Gebrauchskapital_) to the nation in general;

although the circulating library from which an Arkwright obtains technic

information, or the livery-stable vehicle which carries a Borsig to his

counting-room, has certainly been used in the production of material

goods. Almost all capital in use may be converted into productive capital,

and hence, the former might be called quiescent capital, and the latter

working capital.(282) One of the principal differences between productive

capital and capital in use is, that the former, even when most judiciously

employed, does not so immediately replace itself, as the latter, by its

returns.(283) On the other hand, the real dividing line between capital in

use, and objects consumed which are not capital, is, and it is in complete

harmony with our definition of capital, that the latter are subject not

only to a more speedy destruction and one which is always contemplated,

while in the case of the former, its destruction is only the unintended

reverse-side of its use.

Among a highly civilized people, a great amount of capital in use, as

compared with the productive capital of the country, may be considered a

sure sign of great wealth. When this is the case, the people, without

losing the desire of further acquisition, think that they have enough to

richly enjoy the present. I need only call to mind the munificence

displayed by the middle classes in England, in their silver plate and

other domestic utensils. But the people of Russia, and Mexico also, can

make no mean display of silverware.(284) Here luxury is only a symptom of

the disinclination or inability of the inhabitants of the country to use

their capital in the production of wealth. How much richer would Spain be

to-day, if it had employed the idle capital spent in the ornamentation of

its churches in constructing roads and canals!(285) Most nations in a low

state of civilization suffer from the absence of legal guarantees. Each

one is compelled to turn his property into a shape in which it can be most

easily transferred from one place to another and hidden. This is the

principal reason why the Orientals possess, relatively speaking, so many

precious stones and so much of the precious metals. The same cause

accounts for the simplicity of their dwellings.(286) On the other hand,

productive capital is to be found in the greatest proportion among

civilized nations which are making very rapid strides towards wealth, the

people of the United States, for instance.

Section XLIV.

Capital.—Fixed Capital, And Circulating Capital.

Capital, according as it is employed, is divided into fixed capital and

circulating capital. Fixed capital may be used many times in production by

its owner; circulating capital only once. The value of the latter kind of

capital passes wholly into the value of the new product. In the case of

the former kind of capital, only the value of its use passes into the new

product. (_Hermann._) Hence, the farmer’s beasts of burthen belong to his

fixed capital; their food, and his cattle intended for the slaughter, to

his circulating capital. In a manufactory of machines, a boiler intended

for sale is circulating capital; while a similar one, held in reserve for

the machines used in production, is fixed capital. Ricardo attributes a

somewhat different meaning to these two terms: he calls fixed capital that

which is slowly consumed, and circulating, that which disappears

rapidly.(287) Fixed capital is, indeed, produced and preserved by

circulating capital; but it is, for the most part, transformed again into

circulating capital.(288) Besides, it is only by means of the latter, that

the former can be productively employed.(289) The relative importance of

fixed and circulating capital to a country depends upon whether the

country is an advanced or only an advancing one. A people with very much

and very fixed capital are indeed very rich; but run the risk of offering

many vulnerable points to an aggressive enemy, and of thus turning the

easily jeopardized mammon into an idol. To make a passing sacrifice of the

country that the people and the state may be saved, as did the Scythians

against Darius, the Athenians against Xerxes, and the Russians against

Napoleon, becomes difficult, in proportion as the nation has become richer

in fixed capital.(290) But, as the destination of the latter is changed

with much greater difficulty than that of circulating capital, highly

cultivated nations would find it very hard to satisfy new wants, if they

could not always appropriate the results of additional savings to the

production of new fixed capital.

Section XLV.

Capital.—How It Originates.

Capital is mainly the result of saving which withdraws new products from

the immediate enjoyment-consumption of their possessor, and preserves

them, or at least their value, to serve as the basis of a lasting

use.(291) As capital represents the solidarity of the economic past,

present and future, it, as a rule, reaches back into the past and forward

into the future, through a period of time longer in proportion as its

amount and efficiency are greater.(292) Those producers, too, whose

products perish rapidly may, also, effect savings by exchanging their

products and capitalizing their counter-value. Thus, the actor, whose

playing leaves after it nothing but a memory, may use the wheat received

by him from a farmer who came to listen to him, in the employment of an

iron-worker, and invest the product permanently in a railroad. The

transformation may be effected by means of money, bonds etc., but it is

none the less real on that account. Order, foresight and self-restraint

are the intellectual conditions precedent of saving and capital. The

childish and hail-fellow-well-met disposition which cares only for the

present is inimical to it. True, the desire of saving can be developed

only where there are legal guarantees to ownership;(293) guarantees which

are both the conditions precedent and the effect of all economic

civilization.(294) The Indians, Esquimaux etc., had to be taught for the

first time by the missionaries and merchants—and it was with the greatest

difficulty it was done—to save their booty, and spare the natural sources

of their acquisition. Originally, they were, in the heat and excitement of

their wild hunting and fishing, wont to destroy on the spot what they

could not enjoy in the moment.(295) In the lowest stages of civilization,

the first saving of capital of any importance is effected frequently

through robbery or in the way of slavery.(296) In both cases, it is the

stronger who compel the weaker to consume less than they produce. See

_infra_, § 68. Where civilization is at its highest, the inclination to

save, as a rule, is very marked.(297) It begins to decline where a people

are themselves declining in civilization, and especially where legal

guarantees have lost their force.

But capital may be increased even without personal sacrifice; as for

instance, by mere occupation, as of certain goods, not hitherto recognized

as such. Thus, also, by the establishment of valuable relations, the

advantages of which either become the common good of all; or which,

because at the exclusive command of one individual, obtain value in

exchange. The progress of civilization itself may increase the value of

existing capital. Thus, for instance, a house, considered as capital, may

double in value if a frequented street be opened in its neighborhood. To

this category belong all improvements in the arts which enable existing

capital to achieve more than it could before. The invention of the compass

increased the value of the capital employed in the merchant marine to an

extent that cannot be calculated.(298) The increase of capital effected by

saving soon finds a limit unless such limit is widened by the progress of

civilization.(299)(300)

Chapter II.

Co-Operation Of The Factors.

Section XLVI.

The Productive Coöperation Of The Three Factors.

All economic production generally demands the coöperation of the three

factors: external nature, labor and capital. But with the political

economist, labor is the principal thing; and not merely because all

capital presupposes labor, nor because every combination of the three

factors is an act of labor; but, in general, because “the human mind’s

idea of means and ends makes all goods goods for the first time.”

(_Hufeland._)

Leaving the free forces of nature, surrounded by which we live and work,

out of consideration, and also the fact that all raw material is due to

nature, land is the indispensable foundation of all economy. But how

little can unassisted nature do to satisfy human wants! How much less to

produce goods possessed of value in exchange! A virgin forest, for

instance, sold in its natural state, has, indeed, value in exchange, but

only because it is taken into account that it can be cleared, and that

there are means of transportation already existing.(301) The greater part

of the forces of nature are latent to nomads and nations of hunters. When

labor develops, they are set free to assist it.(302) It is very seldom

that any thing can be produced without capital. Even the poorest gatherer

of wild berries needs a basket and must be clothed.(303) Were there no

capital, every individual would have to begin at the very beginning every

moment. Life would be possible only in a tropical climate. No man, since

the days of Adam, has been able to labor, except on the condition that a

considerable advance of capital had been made upon him. There is not a

nail in all England, says Senior, which cannot directly or indirectly

directly be traced back to savings made before the Norman conquest.(304)

Section XLVII.

Productive Co-Operation Of The Three Factors. The Three Great Periods Of A

Nation’s Economy.

The relation of the three factors to one another is necessarily very

different in different branches of production. For instance, in the case

of cattle-raising on a prairie, labor does very little, land almost

everything. Hence an extensive, thinly populated country is best adapted

to this species of production. But where land is scarce, as in wealthy and

populous cities, human activity should be directed into those branches of

industry which need capital and labor, as manufactures and the trades. (§

198.)(305)

Looked at from this point of view, the history of the development of the

public economy of every people may be divided into three great periods. In

the earliest period, nature is the element that predominates everywhere.

The woods, waters and meadows afford food almost spontaneously to a scanty

population. This is the Saturnian or golden age of which the sagas tell.

Wealth, properly speaking, does not exist here, and those who do not

possess a piece of land run the risk of becoming completely dependent on,

or even the slave of a land owner. In the second period, that through

which all modern nations have passed since the later part of the middle

ages, the element, labor, acquires an ever increasing importance. Labor

favors the origin and development of cities as well as exclusive rights,

the rights of boroughs and guilds by means of which labor is, so to speak,

capitalized. A middle class is formed intermediate between the serfs and

the owners of the soil. In the third period, capital, if we may so speak,

gives tone to everything. The value of land is vastly increased by the

expenditure of capital on it, and in manufactures, machine labor

preponderates over the labor of the human hand.(306) The national wealth

undergoes a daily increase; and it is the “capitalism” which first gives

an independent existence to the economic activity of man; just in the same

way that law is, as it were, emancipated from land-ownership, from the

church and the family only in the constitutional state

(_Rechtsstaat_).(307) But, during this period, the middle class with its

moderate ease and solid culture may decrease in numbers, and colossal

wealth be confronted with the most abject misery.(308) Although these

three periods may be shown to exist in the history of all highly civilized

countries, the nations of antiquity, relatively speaking, never advanced

far beyond the second, even in their palmiest days. A great part of that

which is accomplished among us by means of capital and of machines, the

Greeks and Romans performed by the labor of slaves. Leaving Christianity

out of the question, nearly all the minor differences between the public

economy of the ancients and that of the moderns may be reduced to this

fundamental distinction.(309)(310)

Section XLVIII.

Critical History Of The Idea Of Productiveness.

In this chapter, the dogma-historical (_dogmengeschichtliche_) part is of

the utmost importance, because it treats of the connection between the

deepest fundamental notions and the principal branches of practical life.

It is clear that every political economist must construct his exposition

of productiveness on his prior notions of goods and value. We must,

therefore, draw a distinction between expositions which are logical but

altogether too narrow, and wholly erroneous ones.(311)

Thus, the Mercantile System admits every mode of applying the three

factors of production, but considers them really productive only in so far

as they increase the quantity of the precious metals possessed by the

nation, either through the agency of mining at home, or by means of

foreign trade. This view stands and falls with the altogether too limited

idea of national wealth before mentioned (§ 9), which this system

advocated.(312) The majority of the followers of the Mercantile System

ascribe more power to industry to attract gold and silver from foreign

parts, than to agriculture, and to the finer kinds of industry than to the

coarser; to active and direct trade, more than to passive and indirect

trade.

Section XLIX.

Critical History Of The Idea Of Productiveness.—The Doctrine Of The

Physiocrates.

The doctrine of the Physiocrates is to be explained in part by a very

natural reaction from the narrow-heartedness of the Mercantile System, and

at the same time, by a presentiment, misunderstood, of the true theory of

rent. (§ 150 ff.). Of the six classes of labor mentioned above (§ 38),

those only are called productive which increase the quantity of raw

material useful for human ends. All the other classes, it matters not how

useful, are called sterile, salaried, because they draw their income only

from the superabundance of land-owners and the workers of the soil.

Tradesmen, in the narrower sense of the term, produce only a change in the

form of the material, the higher value of which depends on the quantity of

other material consumed for the purposes of the tradesman’s labor. If any

of this material is saved, the value of their products sinks, although to

the advantage of the economy of the whole nation. In any case, industry

could create no wealth, but only make existing wealth more lasting. It

might, so to speak, accumulate the value of the quantity of food consumed

during the building of a house in the house itself.(313)

But if tradesmen really earned, in the value of their products, only what

they had consumed during their labor, it would be difficult for them to

find employers to provide them with capital. Everyone will acknowledge,

that a Thorwaldsen and an ordinary stone-cutter, with the same block of

marble, the same implements, the same food, would necessarily, after the

same time, turn out exceedingly different values.(314) And, even in the

case that industry should add to the raw material only precisely the same

amount of value as had been consumed by the workmen, can it be said that

the work ceases to be productive simply because it is consumed by the

workmen themselves? If that were so, agriculture even, would, in most

countries with a low civilization, be unproductive.(315)

Commerce, according to the theory of the Physiocrates, only transfers

already existing wealth from one hand to another. What the merchants gain

by it is at the cost of the nation. Hence, it is desirable that this loss

should be as small as possible. Hence sterility!(316) But, the more

important branches of business, especially wholesale trade, are connected

with a transportation of goods (_Verri_), either from one place or from

one period of time, into another. Here the genuine merchant speculates

essentially on the difference of the values in use which are afterwards

greater than before.(317) The ice shipped yearly from Boston to tropical

lands met a much more urgent and wide-spread want there than it would if

it had remained at home. And thus the storage of grain in large quantities

after a bountiful harvest withdraws, indeed, an object of enjoyment from

the consumption of the people; but its sale, after a bad harvest,

undoubtedly increases their enjoyment in a much greater degree than it was

before diminished. Besides, the condition of both parties to the contract

is usually improved in all normal trade. (_Condillac._)(318) No one parts

with exchangeable goods unless they are of less use to him than the ones

he receives in return.(319) And so, the value in use of a nation’s

resources is really increased by commerce. To the other attributes of

goods it adds one of the principal conditions of all use, accessibility

(_Kudler_), with which it either newly endows them, or which it increases

in degree. To this end, the merchant makes use of tools, just as the

manufacturer does. What spinning-wheels, looms and workshops are to the

latter, ships, warehouses, cranes etc., are to the former. If production

be not complete until the thing produced is made fit for its last end,

consumption, commerce may be looked upon as the last link in the chain of

productive labor. It, at the same time, constitutes a series of

intermediate links; as without it no division of labor is possible, and

without a division of labor, no higher economic productiveness.(320) How

commerce may increase the value in exchange of goods, and without in any

way injuring the purchaser, needs no further illustration.(321)

Section L.

The Same Subject Continued.

Even Adam Smith called services, in the narrower sense of the term (§ 3),

the grave and important ones of the statesman, clergyman and physician, as

well as the “frivolous” ones of the opera singer, ballet-dancer and

buffoon, unproductive. The labor of none of these can be fixed or

incorporated in any particular object.(322)(323) But how strange it is

that the labor of a violin-maker is called productive, while that of the

violin-player is called unproductive; although the product of the former

has no other object than to be played on by the latter? (_Garnier_.) Is it

not strange that the hog-raiser should be called productive, and the

educator of man unproductive (_List_); the apothecary, who prepares a

salve which alleviates for the moment, productive, the physician,

unproductive, spite of the fact that his prescription in relation to diet,

or his surgical operation, may radically cure the severest disease?

If the productiveness of an employment of the factors of production be

made to depend on whether it is attended by a material result, no one will

deny that the labor of the plowman, for instance, is productive; and no

one, of Adam Smith’s school, at least, that that of the clerk, who orders

the raw material for the owner of the manufactory, is. They have

participated indirectly in the production. But, has not the servant of the

state, who protects the property of its citizens, or the physician, who

preserves the health of the producer, an equally mediate but indispensable

share in it? The field-guard who keeps the crows away, every one calls

productive; why, not, then, the soldier, who keeps away a far worse enemy

from the whole land? (_McCulloch._) But the entire division of business

into two branches, the one directly, and the other indirectly productive,

can be defended only as respects certain kinds of goods.

(_Schmitthenner._) The labor of the judge, for instance, is only

indirectly productive in the manufacture of shoes, inasmuch as he

guarantees the payment of the shoemaker’s account. On the other hand, the

shoemaker contributes only very indirectly to the general security which

the law affords, by protecting the judge’s foot.(324)

Nor can any effectual inferiority of service be claimed, simply because

the productive power of one branch of business is, measured by the

duration of its results, greater than another.(325) What is more

perishable than a loaf of bread bought for dinner? What more imperishable

than the _monumentum ære perennius_ of a Horace? The labor expended on

persons and on relations (_Verhältnissen_) is, both as to the extent and

duration of its results, much less capable of being estimated than any

other; but its capacity of accumulation and its power of propagation are

greater than any other. It is in the domain of the “immaterial,” that man

is most “creative.” (_Lueder._)(326) Finally, neither should the greater

indispensableness of the more material branches of business be too

generally asserted. Agriculture produces grain which is indispensable, and

tobacco which is not; industry, cloth, as well as lace; commerce draws

from the same part of the world rhubarb and edible bird’s-nests; and so,

to _services_ belong the indispensable ones of the educator and judge, as

well as those of the rope-dancer and bear-leader, which can be dispensed

with.(327) Indeed, the dividing line between material and intellectual

production cannot, by any means, be closely drawn.(328)

Section LI.

The Same Subject Continued.

The greater number of recent writers(329) have, therefore, come to be of

the opinion that every useful business which ministers to the whole

people’s requirement of external goods possesses economic

productiveness.(330) But it makes a great difference to science, whether a

view is considered true because no one has suggested a doubt of its

correctness, or because all doubts as to its truth have been triumphantly

removed.

Section LII.

Idea Of Productiveness.

It should never be lost sight of, that the public economy of a people

should be considered an organism, which, when its growth is healthy,

always develops more varied organs, but always in a due proportion, which

are not only carried by the body, but also in turn serve to carry it. The

aggregate of the wants of the entire public economy etc., is satisfied by

the aggregate activity of the people. Every individual who employs his

lands, labor or capital for the whole, receives his share of the aggregate

produce, whether he contributed or not to the creation of the kind of

produce in which he is paid. Thus, in a pin-manufactory, the workman who

is occupied solely in making the heads of pins is not paid in pins or

pin-heads, but in a part of the aggregate result of the manufacture, in

money. Every department of business, therefore, for the achievements of

which there is a rational demand, and which are remunerated in proportion

to their deserts, has labored productively. It is unproductive only when

no one will need what it has brought forth, or when no one will pay for

it; but, in this case, what is true of the writer without readers—that he

is unproductive—and of the singer without hearers, is equally true of the

peasant whose corn rots in his granary, because he can find no sale for

it.(331)

Section LIII.

The Same Subject Continued.

In this matter, again, there is an important difference to be observed

between private or individual economy and economy in its widest sense, in

the sense of a world-economy. The productiveness of labor is estimated in

the case of the former, according to the value in exchange of its result;

in the case of the latter, according to its value in use. There is a great

number of employments which are very remunerative to private individuals,

but which are entirely unproductive, and even injurious, so far as mankind

is concerned; for the reason that they take from others as much as, or

even more than they procure to those engaged in them. Here belong, besides

formal crimes against property, games of chance,(332) usurious

speculations (§ 113) and measures taken to entice customers away from

other competitors. Again, scientific experiments, means of communication

etc., may be entirely unproductive in the individual economy of the

undertaker, and yet be of more profit to mankind in general, than they

have cost the former.(333) In this respect the nation’s economy holds a

middle place between individual economy and the world’s economy.(334)

Strictly speaking, only those employments should be called productive

which increase the world’s resources. Hence, the work of government should

be called so, only in so far as its expenses are covered by the taxes paid

willingly by the more reasonable portion of the citizens; and also only in

so far as its work is really necessary to the attainment of its end.(335)

The productiveness of an employment supposes, also, that it is not carried

on at the cost of other employments which it is more difficult to do

without. In a healthy nation we may, in this matter, rely, to a certain

extent, on the judgment of public opinion, which knows how to appreciate,

at their just value, professional gamblers, pettifoggers and the luxury of

soldiers. The greater, freer and more cultivated a nation is, the more

probable is it that the productiveness of private economy is also

national-economical productiveness, and that national-economical

productiveness is world-economical productiveness.(336)

Section LIV.

Importance Of A Due Proportion In The Different Branches Of

Productiveness.

Much always depends on the due proportion of the different branches of

productiveness to one another. Thus, Spain, for instance, has remained

poor under the most advantageous circumstances in the world,(337) because

it allowed a disproportionate preponderance of personal services. The

character of the Spanish people has always given them a leaning towards

aristocratic pride and economic idleness. Tradesmen, in that country,

sought, as a rule, to amass merely enough to enable them to live on the

interest of their capital; after which they, by way of preference, removed

it into some other province, where they might be considered as among the

nobility; or they withdrew into a monastery. Even in 1781, the Madrid

Academy thought it incumbent on it to propose a prize for the best essay

in support of the thesis: “The useful trades in no way detract from

personal honor.”(338) During the century in which the country was in its

greatest glory, the whole people were bent on being to all Europe what

nobles, officers and officials are to a single nation. “Whoever wishes to

make his fortune,” said Cervantes, “let him seek the church, the sea

(i.e., go as an adventurer to America) or the king’s palace.” Under Philip

III., there were in Spain nine hundred and eighty-eight nunneries, and

thirty-two thousand mendicant friars. The number of monasteries trebled

between 1574 and 1624, and the number of monks increased in a yet greater

ratio. A great many of its manufactories, much of its commerce, and not a

few of its most important farms were controlled by foreigners, especially

by Italians. There were, it seems, in 1610, one hundred and sixty thousand

foreign tradesmen living in Castile. In 1787, there were still 188,625

priests, monks, nuns, etc.; 280,092 servants; 480,589 nobles; 964,571 day

laborers; 987,187 peasants; 310,739 mechanics and manufacturers; 34,339

merchants.(339) As a counterpart to this, the United States had, in 1840,

about 77.5 per cent. of its population engaged in agriculture, 16.8 in

manufactures and mining, 4.2 in shipping and commerce, 1.3 in the learned

professions.(340)

We might be tempted, in view of this contrast, to return once more to the

unproductiveness of personal services. It is not, however, the direction

given to the forces of production, but the squandering of them, that is

injurious. When the Magyar, through mere vanity, drives a yoke of from

four to six horses where two are enough; or when, as in 1831, Irish

agriculture employed 1,131,715 workmen to produce a value of thirty-six

million pounds sterling, while that of Great Britain(341) produced one

hundred and fifty millions a year, and employed only 1,055,982 workmen,

these causes are as sure to impoverish the country, as the waste of the

Spaniards in supporting such an army of clergy and servants. Of course,

the temptation to waste wealth on parks is greater than to waste it in

vegetable gardens! The probability that a man will ruin himself by keeping

too many servants is greater than that he will do the same by employing

too many operatives.(342) And all the more, as there are many and

especially important services which regulate their own remuneration: thus,

as a rule, those of the statesman, those of the military in times of war,

and those of the priest in the age of superstition.(343)

Section LV.

The Degree Of Productiveness.

Concerning the degree of productiveness, it may be remarked that that

application of the factors of production is most productive, which, with

the least expenditure of means, satisfies the greatest want in the economy

of a people. Here, there is a continual change, corresponding precisely to

the change in wants and faculties. After a bad harvest, for instance, the

labor which procures grain from foreign countries or the supplies of

former years, is most productive; and, after an earthquake which has

destroyed a large city, the labor of the builder. Agriculture is, as a

rule, the more productive labor of undeveloped nations, and industry of

highly developed nations.(344)(345)

Chapter III.

The Organization Of Labor.

Section LVI.

Development Of The Division Of Labor.

The larger a tree grows to be, the more boughs and branches does it put

forth. The more perfect any species of animal is, the more does it stand

in need of a special organ for each special purpose. And thus the division

of labor has developed and kept pace with the development of human

society. While Crusoe was obliged to provide for all his wants by his own

labor, we find that in the wildest Indian family the male is employed in

war, the chase, in fishing, in the manufacture of arms and boats, and in

the transportation of the latter during long marches; the female, on the

other hand, in the preparation of food, in the hewing of wood, the curing

of skins, the sewing of clothes, in the building and preservation of the

wig-wam, the care of children, and the carriage of baggage when on the

march.(346) These occupations, at first entirely domestic, became, by

degrees, separate industries, which are constantly subject to further

subdivision.(347)

Section LVII.

Development Of The Division Of Labor.—Its Extent At Different Periods.

In the middle age of a people, the division of labor is not carried to any

great extent. The courtiers of King Frotho III. advised him to marry,

“since otherwise his majesty’s ragged linen would never be mended.” Saint

Dunstan, although he occupied a high position in politics and in the

Church, was an excellent blacksmith, bell-founder and designer of ladies’

robes. Chriemhild in the Nibelungenlied was an industrious and skillful

milliner. In the corresponding period of Grecian and Roman history, we

find Penelope and Lucretia at the loom, Nausicaa, a laundress, the

daughter of the king of the Lestrigons, fetching water from the spring,

Odysseus, a carpenter, a queen of Macedonia as a cook, and finally the

distaff of Tanaquil.(348) In the highlands of Scotland, in 1797, there

were a great many peasants all of whose clothing was home-made, with the

exception of their caps; nothing coming from abroad except the tailor, his

needles and iron tools generally. But the peasant himself was the weaver,

fuller, dyer, tanner, shoemaker etc. of his own family:(349) every man

jack of all trades.(350)

In present England, on the other hand, the manufacture of watches is

divided into one hundred and two branches which have to be specially

learned; only the so-called “watch-finisher” carries on other branches

besides. In Wolverhampton, it may happen that a man, employed in the

manufacture of keys, may not be able to make a whole key after an

apprenticeship of ten years, for the reason that during all that time he

may have been engaged only in filing.(351) In English agriculture there

are, according to German notions, very few complete wholes. A well-marked

distinction exists there between the cultivators of corn and breeders of

cattle; and the latter are again divided into breeders of young cattle,

into fatteners of cattle etc. Its industries are, in large part, separated

into provinces. Thus, linen manufactures are confined almost exclusively

to Leeds and Dundee, woolen manufactures, to Leeds,(352) cotton

manufactures, to Manchester, and Glasgow, pottery to Stafford, coarse iron

to South Wales, hardwares to Birmingham, cutlery to Sheffield. And so in

the different quarters of the city. Thus, in large towns, the banks,

stores, offices etc., are found in one portion, with scarcely any

intervening dwelling houses.

On the division of labor depends all differences of estate and class, and

all human culture. It cannot be claimed that a division of labor does not

exist among animals;(353) but those animals among which something

analogous to a division of labor among men exists, are raised far above

all others by their human-like economy and the relative importance of

their achievements.(354)

Section LVIII.

Advantages Of The Division Of Labor.

The advantages of all suitable division of labor, consequent upon the

natural differences of human faculties and dispositions, are the

following:

A. _The greater skill of the workman._ Even physically, many capacities

are, by an indefinite number of repetitions of the same operation,

enhanced to an extraordinary degree; which, however, renders the

performance of other operations more difficult. Thus, the man who has

developed his muscles and hardened his hands working in a smithy, renders

himself incapable of becoming a violin-player or an operating

oculist.(355) Here belongs especially the possibility of turning every

kind of labor-power to greatest account. Even children(356) and old men

may be made, in this way, to play a part in the production of goods. It

becomes practicable, too, to relieve men endowed with superior faculties

from common labor, and allow them to devote themselves exclusively to the

development of the peculiar powers with which nature has gifted them.(357)

B. _A great saving of time and trouble._ The simpler the operation

performed by a single workman, the more easily is it learned; the smaller

is the price paid or apprenticeship, which depends on this, at least, that

beginners perform poorer work and are paid more poorly. “The shortest way

to the end is most easily found when the end itself is near, and can be

kept continually in view.” (_J. B. Say_.) Where the same workman combines

different operations, a great deal of time is lost in changing tools etc.

Besides, it always takes some time for a workman to get rightly under way

of his work. The person who changes thus frequently becomes more easily

indolent. Lastly, there is a great number of operations which demand the

same aggregate amount of effort, no matter what the number of objects on

which they are performed. It is thus, for instance, with shepherds,

mail-carriers etc.(358) The post carries a thousand letters with almost as

much ease as one; and the entire life of a wholesale dealer would scarcely

suffice to carry all the letters which he mails in a single day, to their

place of destination. During the middle ages, every man was obliged to

watch over his own personal safety and the maintenance of his own rights;

while in 1850, in Great Britain, twenty-one million people are protected

in their persons and property, in an infinitely more effectual manner, and

at less cost, by fifteen thousand soldiers, and by a much smaller number

of policemen, whose place it is to preserve public order. (_Senior_.)

Something similar takes place among merchants, and it may be admitted as

correct in principle, that every new intermediary, freely recognized by

both sides in commerce,(359) makes labor better or less expensive.

C. As the land of a country is, in a sense, the natural extension of the

national body, _the international division of labor_ affords an indirect

means, but frequently an indispensable one, of procuring the products of

foreign countries and climates.(360) If the English people wished to

obtain themselves, and without having recourse to any intermediary, the

quantity of tea which they annually consume, it is possible that its whole

agricultural population would not suffice to procure it; while, at

present, it is obtained by the labor of forty-five thousand industrial

workmen. (_Senior_.) Moreover, the division of labor increases not only

the aptitude of the workman but also his incentive to productive labor,

since it guarantees to every one the certainty of being able, by means of

exchange, to enjoy the productions of every other person.(361)

Section LIX.

Conditions Of The Division Of Labor.

It is by its division, that labor, considered as a factor of production,

is raised to the highest degree of efficiency. Its results in any given

industry are, therefore, more important in proportion as the element labor

predominates in it. Hence, these results are much smaller, in agriculture,

for instance, than in the trades, or in personal services.(362) The most

expert sower or harvester cannot be employed the whole year through in

sowing or harvesting. Some kind of rotation of crops, some kind of

combination of tillage and stock-raising is necessary to every

agriculturist. On this depends the importance of the technic secondary

industries of agriculture, which are, in principle, opposed to the

division of labor. Hence, too, almost any person engaged in a trade, no

matter of what kind, supposes a greater number of customers than a tiller

of the land of the same rank.

The more labor is divided, the greater is the amount of capital necessary

to it.(363) It may be even said, that all preparatory labor becomes

capital in its relation to subsequent labor. If ten isolated workmen can

produce ten dozen articles of any kind, daily, and, after the introduction

of a more efficient division of labor, fifty dozen, the employer must

provide them, in the latter case, not only with five times as much

capital, but probably with fifty times as much, as then, five hundred

dozen are making continually.

Section LX.

Influence Of The Extent Of The Market On The Division Of Labor.

But it is the extent of the market especially which determines the limits

of the division of labor; for there is a direct and necessary relation

between the division of labor and the exchange of its surplus. Hence, the

division of labor may be carried farthest in the case of those products

which are most easily transported from place to place, and which, at the

same time, possess the utility that is most widely recognized. The

smallness of the market may depend upon the scantiness of the population,

or upon its scattered condition;(364) upon their smaller ability to pay,

or upon the bad means of communication at their disposal.(365) Hence it

is, that in villages, small cities, and still more on isolated farms, many

branches of business are carried on by one person, which are divided among

many in larger cities; and this is especially true in the case of

businesses which have a chiefly local demand.(366) While, in small places,

the barber is also frequently the physician, in larger ones there are

dentists, oculists, accoucheurs, surgeons etc.(367); and while, in the

former, the tavern keeper is both dry goods merchant and grocer, there

are, in the latter, tea merchants, cigar-dealers, dealers in mourning

goods (in London childbed-linen warehouses) etc., and hotels for all the

different classes of travelers. There can be a distinct class of porters,

hack-men etc., only where commerce is very active.(368) And even in cities

like Paris, where the costly industries that minister to luxury, that of

the jeweler, for instance, admit of only a limited division of labor, this

effect depends on the smallness of the market; a market, indeed, which

geographically may extend over the whole earth, but which, in an economic

sense, must always remain small, on account of the small number of

customers who have the ability to pay for their products. The real wonders

produced by the division of labor and the employment of machinery we must

look for in the manufacture of the cheapest and commonest

commodities.(369)

Section LXI.

The Division Of Labor—Means Of Increasing It.

Whoever, therefore, would increase the division of labor among the people,

must, first of all, extend their market; and this is done most efficiently

by improving the means of communication. Even in our day, it is over the

water-highroads that the heaviest articles are carried with the least

expenditure of force;(370) but where civilization is not advanced, these

highroads possess still greater advantages, because of their safety,

convenience and priority. And here is the explanation of the intimate

connection of the beginnings of all civilizations with the existence, near

the scene of such beginnings, of good natural water-roads. “Even the

wildest inhabitant of the sea coast very soon obtains the idea of

distance, which is altogether wanting to the inhabitant of the primeval

forest. No sooner does he catch sight of the far-off island than his

yearning after the distant assumes a well-defined character. Bits of wood

floating past him suggest to his mind the best material to buoy himself up

upon the water, and a fish the best form for his craft.” (_Klemm._) Hence

the Mediterranean sea, especially the eastern portion, with the various

peoples and products of its coasts, with its numerous islands, peninsulas

and bays, its easy navigation, but little influenced by the tides or by

ocean currents, was the principal seat of ancient civilization.(371) The

literal meaning of Attica is coast-land. (_Strabo._) The colonization of a

new country is wont, where possible, to begin on the coast, especially on

islands near the coast; and to follow the course of rivers into the

interior. Even whole continents occupy, for the most part, in the history

of the world, the position assigned them by their coast-development.(372)

While it is hard to determine whether, in the case of the European

continent, its limbs predominate or its trunk, Africa may be said to be a

trunk without members. Its islands, most of them insignificant in

themselves, are almost entirely cut off from it by ocean currents. This

explains why Madagascar had not, by any means, the influence on African

civilization which Crete, Sicily and Britain have had on the civilization

of Europe. Asia occupies, in this respect, about a middle position between

Europe and Africa. The trunk of that continent bears to its members about

the proportion of 670,000 to 150,000 square miles. And what is worst of

all, the middle of the whole is an almost insurmountable wall between

north, south, east and west Asia. Hence the tenacious peculiarity and

isolated development of the Chinese, Malayan, Indian and Arabic

civilizations; while the three peninsulas of southern Europe, for

instance, have affected one another so largely, and in so many different

ways.(373) The northern hemisphere compared with the southern, presents a

contrast similar to that between Europe and Africa, or of the rich

coast-groups of the Atlantic compared with the poor ones of the

Pacific.(374) But it is most especially, large, well-watered plains that

are best adapted to the construction of roads, and thus to facilitate the

division of labor. And while we find, in many countries, that the

mountainous regions reached a certain stage of development earlier than

any others, because they were more easily protected by military force, we

find, too, that even here, plains, have, for the most part, had the

largest share of power and of civilization (northern Italy, northern

France, the plains of Switzerland and north Germany). See § 36.(375) We

must not, however, fail to consider the reverse side of the picture of the

great highways of the world. The same reasons that raise them to the

dignity of lines of commerce, make them lines of war; and even the

contagion of great plagues and of the ruling vices follows, as a rule, the

avenues of trade.

Section LXII.

The Reverse, Or Dark Side Of The Division Of Labor.

There are hardships often attending the highly developed division of

labor, the dark and bright sides of which are most strikingly observable

only in large cities. However, when it is charged with adding to the

natural inequality of men, the accusation can be met only by the answer,

that, without the division of labor, we should be all equally poor and

equally coarse; for each one would be absorbed by the necessity of

providing for his lower wants, and no one would be in a way to develop his

higher faculties. Even the poorest man has more enjoyment in consequence

of the division of labor, than he could have living in a state of

isolation from his fellow men. The most wretched among us, the invalid

without property of any kind, the father of a family with more children

than he can support, would simply starve in the primeval forest.

Those socialists who never tire of preaching “association,” overlook for

the most part, the great, free association which our needs, wants or

tastes are ever changing, and which is given us, as of course, by the

division of labor.(376) Yet the skill produced by the division of labor is

unavoidably connected with a corresponding one-sidedness. The Russians,

for instance, are exceedingly apt, but they rarely distinguish themselves

in any thing.(377) Love of his avocation, or pride in it, is a thing

unknown to the Russian workman. He shirks all continuous labor.(378)

Experience has shown that the Neapolitans and Italians, in general,

exhibit great skill when they work alone; but that when a great many of

them work together, they become rapidly confused. The English, on the

other hand, are slow to learn anything new, or to overcome unlooked for

difficulties; but they have no equals as workmen in organized

industries.(379) The difficulty experienced in seeking a new calling,

where a high division of labor obtains, arises as much from the fact that

each person here has received a more one-sided training, as from the

necessity he is under of competing from the first with only consummate

workers. Rousseau’s school has laid too much stress on the tendency of

higher civilization to diminish individual independence. _Quand on sait

creuser un canot, battre l’ennemi, construire une cabane, vivre de peu,

faire cent lieues dans les forêts sans autre guide que le vent et le

soleil, sans autre provision qu’un arc et des flêches; c’est __ alors

qu’on est un homme!_(380) We might reply that to build a steamship or a

palace, and to travel around the world are far better. (_Dunoyer._) Even

physically, civilized man is superior to the savage, as might be inferred

from the greater average duration of life of the former. Of course,

extremes should not be compared, nor should we contrast the frame of a

weaver or student with that of a savage chief.(381)

In a similar way, the one-sidedness of the international division of labor

may be pregnant with great danger to national independence.

Section LXIII.

Dark Side Of The Division Of Labor.—Its Gain And Loss.

Where, indeed, the one-sidedness produced by the division of labor goes so

far as to cause the degeneration(382) of the workman’s personality, the

human loss of the nation is greater than the material gain purchased by

it. Thus the occupation of polishing metals or gilding, when continued for

a long time without interruption, invariably ruins the health. What must

be the aspect of the soul of a workman who, for forty years has done

nothing but watch the moment when silver has reached the degree of fusion

which precedes vaporization! who is blind to all else, but receives a good

fat salary for his services.(383) Schleiermacher rightly declared all

human action which is purely mechanical, through which man becomes a

living tool (slave!) immoral. When the division of labor has reached this

point, machines should take the place of men. The morality of a profession

may be measured by the degree in which it corresponds with the universal

calling of the race.(384) It is not, therefore, a piece of inconsistency

but rather a deeply felt want, when, where civilization is at its highest,

so many demands are made that the division of labor should take a

retrograde path. The practice of gymnastic exercises by the sedentary

classes, universal military duty, the participation of citizens in

municipal government and in political affairs, of laymen in the government

of the church, of the wealthy in the administration of charity; all these

things are, from a materialistic stand-point, considered a great

squandering of time. It may be, that, if the division of labor were more

rigidly carried out, we might, by its means, obtain more perfect results

with less economic expense. But the whole man is of more importance than

the sum of his achievements and enjoyments. (Luke, 9:25.) Wo to the nation

where only jurists have a developed sense of the right, where political

judgment and cultivated patriotism are the portion of only officials and

placemen, where only the standing army has warlike courage, and the clergy

only conscious religiousness; where parents leave all care for education

to the teachers of the various branches of learning, and where physical

vigor is to be found only among the proletarians. Hence there is nothing

more ruinous than premature one-sided education in a single trade or

profession—a thing which often happens from poverty before the foundations

of the general education becoming a human being have been laid. The higher

a man’s position, the more should he, so to speak, be a representative of

the whole human race. Who, for instance, would wish to see a ruler brought

up as men are to a special branch of science or to a special

profession?(385)(386) The best corrective for the one-sidedness produced

by a high division of labor consists in the extension and many-sided

employment of leisure time, both of which are made more easy by the same

high civilization which always accompanies the division of labor.(387)

Section LXIV.

The Co-Operation Of Labor.

The coöperation or combination(388) of labor must, however, always

correspond to the division of labor. Both are but different sides of the

one idea of social labor; the separation of different kinds of labor, in

so far as they would disturb one another, and the union or combination of

them so far as they help one another.(389) The vintner or grower of flax

would necessarily die of hunger if he could not certainly count on the

grower of corn. The workman in a pin-factory, who prepares only the heads

of pins, must be sure of his colleagues who sharpen the points, if his

labor would not be entirely in vain. The labor of the merchant is not even

thinkable without that of the different producers between whom he

mediates. Where the production of a certain article depends on the

services of six different kinds of labor, one of which, however, demands

thrice the time, and another twice the time of the rest, it is clear,

that, in order that the business may be properly carried on, so many

workmen should be employed that their number divided by 9 should leave no

remainder. (_Rau._) The union or combination of different kinds of labor

is most perfect when the workmen live nearest together; when, therefore,

they are not separated by great difficulties of transportation; or in

different countries, in which case, a war might tear all to pieces.

Section LXV.

The Principle Of Stability, Or Of The Continuity Of Work.

Coöperation in time is of equal importance: the principle of the

stability, or of the continuity of labor. When a workman dies, it is

necessary to be able to calculate on a substitute. It is well known that

it is much harder to begin a business, than it is, afterwards, to improve

and enlarge it; and this, the more complicated it is. A new enterprise

will take root easily, only where there are several similar ones already

in existence; a new manufacturing establishment, for instance, where by

the existence of other such establishments, the requisite habits of the

workmen, of capitalists and of the public in general, have been previously

developed. The skill of workmen is propagated especially by observation

and the personal emulation of the young; whence it is, that the

introduction of new industries is best made by the immigration of skilled

workmen.(390) Hence the baleful influence of such interruptions, as for

instance, the repeal of the edict of Nantes. Hence too, it is, that

despotism and the reign of the populace are so unfavorable to the economy

of a country, where there can be no guarantee of a consistent observance

and development of the laws. To the best applications of the principle of

the continuity of labor belong the church-building of the middle ages, the

national canals, the street and fortification systems of modern times; all

of which have been created only by the coöperation of several generations

to the same end.(391) The most striking means by which such a coöperation

has been advanced in modern times is public credit, “a draft on

posterity;” yet, all saving is, in principle, the same. The most powerful

element in the coöperation in time of labor is the economy in common of

the family, although it differs in degree, according to the different

kinds of family inheritance. Where, as among the English middle classes,

it is customary to secure the business property of the family to one child

by will, and to entrust the conduct of the business, during the life of

the father, to the devisee, to provide for the other children by

insurance, by savings etc., made from the surplus of the business, there

may be old firms which remain always new, however; because they combine

the experience of age with the energy of youth, and are never broken up by

a division of the inheritance. But the compulsory equality of heirs, which

actually obtains in France, compels almost every new generation to begin

with a new firm. (See § 85 seq.)(392)

Section LXVI.

Advantage Of Large Enterprises.

On the results of the division and coöperation of labor rests the superior

advantage of all great undertakings, and they are, therefore, smaller in

agriculture than in industry. “It is harder to acquire the first thousand

than the second million.” Abstraction made of the conditions of capital

and of the market, the limit up to which the growing magnitude of an

enterprise becomes more advantageous, lies in the increasing difficulty of

superintendence. Numberless commercial improvements, such as the

post-office, railroads, telegraphs, exchange, banks etc., have operated

powerfully to extend these limits. It is frequently possible, even in

small enterprises, to secure the advantages of large enterprises, by

association among those concerned. They must, of course, possess the

necessary capital. If they have not got it, as property, they must borrow

it. It is, of course, peculiarly difficult here to preserve the necessary

unity, without which the coöperation of labor becomes the confusion of

labor. The more moral and intelligent the participants are and the simpler

the business, the more extensive may it become, and the more probable will

be its success. (§ 90.)(393)(394)(395)

Chapter IV.

Freedom And Slavery.

Section LXVII.

The Origin Of Slavery.

An institution like that of personal bondage, which, it can be shown, has

existed, among all nations of which history gives us information, at one

time or another, must have very general causes. Among these may be

mentioned especially subjection through war. It is not possible to

calculate how much the principle, that it was proper to reduce the man to

slavery whom it was considered right to kill, contributed to make war less

bloody in an uncivilized age.(396) A nation of hunters is almost compelled

to grant no quarter; the conqueror would be obliged either to feed his

prisoner or to put arms in his hands. It is certainly a great humanitarian

advance, when this state of things is superseded by slavery among nomadic

nations.(397)

In times of peace, economic dependence is the result of poverty, excessive

debt etc.(398) Where there is no division of labor, the individual has no

means of supplying his wants, except by cultivating a spot of ground. But,

how can the poor wretch who has neither capital(399) nor land exchange

anything of value for either? Such an advance, where there is no security

in law, can be made only on the credit of a very important pledge. But the

man who is destitute of all property can offer nothing but the productive

power of himself or of his family.(400) And so it is with the small landed

proprietor who has lost all his capital;(401) for, considering the

superabundance of land, the part which he possesses has value in exchange

only to the extent that it is joined with the certainty of being

cultivated; and here is the origin of the _glebæ adscriptio_. The

hereditary transmission of the relation to the children seems to be

equally useful to them; or who, were this not the case, would think of

providing them with food? It also frequently happens that poor parents

prefer to sell their children to seeing them starve.(402) Hence the

strange fact that most nations have the most rigid system of slavery

precisely at the time that the soil produces food most readily. We need

only cite the instance of the South Sea Islands, at the time of their

discovery. In many negro countries, where the people have not yet learned

to use animals for transportation, the lowest classes, although they enjoy

a nominal liberty, are used as beasts of burden.(403)

Section LXVIII.

The Same Subject Continued.

In all very low stages of civilization, the greatest absence of the

feeling of wants, and the greatest indolence, are wont to prevail, and in

the highest degree. As soon as their merest necessities are provided for,

men begin to look upon labor as a disgraceful occupation, and indolence as

the highest kind of enjoyment. (§ 41, 213 ff.) Sustained and voluntary

efforts, in any number, then become possible only by the creation of new

wants; but these new wants suppose a higher civilization. Escape from this

sorry circle is then effected in the most humane manner, through the

agency of foreign teachers; inasmuch as the representatives of a more

highly cultivated people (missionaries, merchants etc.), by their own

example, make the nation acquainted with more wants, and at the same time

help toward their satisfaction.(404) But, in the case of nations whose

civilization is completely isolated, or having intercourse only with

others equally low, progress is the creature of force exclusively. The

barbarous isolation of families ceases when the strongest and most

powerful force the weaker into their service. It is now that _the division

of labor really begins_: the victor devotes himself entirely to work of a

higher order, to statesmanship, war, worship etc.; the very doing of which

is generally a pleasure in itself. The vanquished perform the lower. The

one-half of the people are forced to labor for something beyond their own

brute wants. And it is, here as elsewhere, the first step that costs.(405)

(§ 45.)

Section LXIX.

Origin Of Slavery.—Want Of Freedom.

It is not to be supposed that slavery, at this stage, is so oppressive

even to those who have been deprived of their freedom. The feeling of

moral degradation which slavery, abstraction even made of its abuses,

awakens in us, is unknown in a very uncivilized age.(406) The child

willingly obeys the orders of strangers, and is hired out to service by

his parents etc. The want or craving for liberty keeps pace with the

intellectual growth of a people. The systematic over-working of servants

or slaves, in the interest of their masters, is scarcely thinkable in an

uncultured age, when, in the absence of commercial intercourse, every

family consumes what it produces.(407) The only thing which the slave has

to fear is an occasional outburst of tyranny on the part of the master, a

thing which is far from unfrequent in all the relations of low

civilizations. Fear restrains masters to a certain extent; for, in those

early days, how few were the institutions of state which could protect

them against the vengeance of their slaves!(408)(409)

Section LXX.

Emancipation.

As states grow greater and men’s manners gentler, the ranks of slavery are

less and less liable to be recruited through the agency of war.(410) It

then becomes necessary to have recourse to the family to keep up their

number, which makes their condition much more endurable, and which

supposes that it has been made more endurable in other respects

beforehand. Modern states, are, as a rule, larger than the ancient were.

The Germans had, long before the time of Charlemagne, treated prisoners of

war of German origin more mildly than those of Gallic or Slavic

origin.(411) The condition of the latter even improved from the time that

nations began to think of making permanent conquests. Since the Slavic

wars of the tenth century, certainly since the Lithuanian contests, it

seems that prisoners of war were not reduced to slavery.(412) Chivalry,

and allowing prisoners to go free, on their word of honor, contributed

largely to this result.

The more productive agriculture is, the more numerous the wants of land

owners, the more extensive the division of labor and commercial

intercourse become, the easier it is for a large class of the community to

obtain support for themselves and families without cultivating land of

their own. (Wages.) When exchanges through the medium of money become

customary, the chief argument for slavery disappears; and the strong, rich

and able man can, without having recourse to force, command the labor of

other men. Every further advance in economic culture must necessarily help

forward in this direction. Thus, without the plow, for instance, we should

all be really only so many _glebæ adscripti_. It is due especially to the

ever increasing perfection of tools, machines and operations, that the

slave of antiquity was transformed into the serf of the middle ages, and

afterwards into the day laborer of modern times.(413) It is more

particularly to be remarked, that machines, since 1750, “first made the

constitutional liberty of many, instead of the feudal freedom of a few,

possible.” (_Schäffle._)

Section LXXI.

Disadvantages Of Slavery.

Slavery promotes the division of labor only in the very beginning. The

more dependent the slave is, the worse he works. Whatever he spoils or

allows to go to waste injures only his master. Hence it is that

slave-husbandry is only one degree removed from what the Germans call

_Raubbau_, and which means, as nearly as we can translate it, the most

thoughtless and wasteful management possible.(414) Whatever he consumes is

simply so much gain to himself. Industry and skill are injurious to him,

because, if remarkable for these qualities, his master exacts more work

from him and is more adverse to setting him at liberty. Instead of the

numberless incentives of the free workman: care for the future, for his

family, honor and comfort, the slave is generally moved by one—the fear of

ill-treatment, and to this he gradually becomes insensible.(415) The

division of labor demanded by manufactures, and which is to be found for

the most part only where each person is at liberty to choose his own

avocation, is scarcely supposable where slavery, in the strict sense of

the word, prevails. The same is true of the spirit of invention and

improvement.(416) And even where the milder _glebæ __ adscriptio_ obtains,

the division of labor is much hindered. Hence, competent judges all agree

on the badness of slave labor;(417) which, as for instance in the United

States, was used only where the slaves were crowded together in large

numbers and could therefore be easily superintended. And not only are the

slaves themselves indolent, but their masters as well; more particularly

in slave countries where all labor is considered disgraceful. What must be

the national husbandry of a people, one half of whom refuse to do anything

that is right and proper, through malice, and the other half through

pride! As soon as, on account of increased population and consequent

increased consumption, this enormous waste of force can be endured no

longer, free workmen become more profitable, not only to themselves and to

the whole community, but to the greater number of the individuals who

compose it.(418) On the Bernstoff estates the quantity of rye harvested

before and after emancipation was as 3:8-⅓; of barley-corn as 4:9-⅓; of

oat-grain as 2-⅔:8.(419)

The owners of serfs, especially, are apt to be very wasteful of their

labor, because they imagine that they obtain it gratis. Tucker has made a

curious calculation tending to show that when civilization reaches a

certain point, the master’s self-interest leads to emancipation. In

Russia, where there are seventy-five persons to the English square mile,

it seemed to him that serfdom was still a good economic speculation. In

western Europe, where there were one hundred and ten persons to the square

mile, freedom, in all relations of master and servant, he considered more

advantageous to all parties. Emancipation began in England in the

fourteenth century, when that country had a population of forty to the

square mile, and was completed in the seventeenth, when the population was

ninety-two to the square mile.(420) Tucker concludes, that the turning

point comes, when the population is relatively to the number of square

miles as 66:1.(421) Such a calculation cannot, of course, be universally

true. The free workman can usually command a much larger portion of the

sum total of economic profits than can the slave or serf, who must be

satisfied with the minimum necessary to support life.(422) Hence, free

labor is more profitable to masters only when production in general is so

much enhanced thereby that a greater quantity of goods falls to their

share also. But this will always be the case where workmen are capable of

development.(423)

Section LXXII.

Effect Of An Advance In Civilization On Slavery.

At the same time, the same degree of servitude becomes more and more

oppressive to the bondman as civilization advances. The greater his

intellectual progress, the more does he feel the want of liberty, and the

more keenly he experiences the degradation of his condition. The

development of luxury digs a gulf between master and servant which grows

wider every day. (§ 227 ff.) As commerce extends, it becomes more

profitable for the master to exact excessive work from his slave. In the

West Indies, it was a problem which every slaveholder solved for himself,

whether, by immoderately increased production, which cost the lives of

many slaves, the gain in sugar was greater than the loss occasioned by the

consequent death of the negroes.(424) When, with the advance of

civilization, the state guarantees to all more certain protection of their

rights than they enjoyed in a less advanced stage of social improvement,

the last check on masters, the fear of the vengeance of their slaves, is

removed.(425) Demoralization naturally increases in the same proportion;

and that of the master as well as that of his servants.(426)

Section LXXIII.

The Same Subject Continued.

This explains why it is that, in all countries, the power of the state, in

a period of transition towards a higher civilization, has endeavored to

render slavery milder. Great credit is due the Church in this regard. It

soon extinguished slavery entirely in Scandinavia,(427) and in portions of

Europe it abolished at least the sale of prisoners to foreign

countries.(428) The _Concilium Agatheuse_, in the year 506, decreed that

serfs should not be killed by their masters at pleasure,(429) but that

they should be brought before a tribunal of justice. (The manorial

tribunals of more recent times.) Moreover, the numberless holidays of the

church operated greatly in favor of the bondmen. Pope Alexander III.

recommended their gradual emancipation.(430) One of the principal steps in

the way of progress was made when they could no longer be sold singly, but

only with the village or on the estate to which they belonged.(431) The

feudal aristocracy improved the condition of the bondmen by reducing a

great number of freemen to their level.(432) This could not be effected

without a real amelioration of slavery; and, later, when the feudal

aristocracy declined, the older serfs were, with those who had been

formerly free, raised from their abject condition. The sense of chivalry

would not permit a lord to be served by a bondman. The old adage “the serf

lives to serve and serves to live,” by degrees, lost its force. Serfs were

required to perform certain tasks on the lands of their master and to pay

him a certain quantity of the produce of their own. Heriots

(_mortuarium_), which became usual from the 8th century (_J. Grimm_), may

be considered evidence that even bondmen were permitted to acquire and

hold property in their own right. Thus was one of the chief disadvantages

of slavery, in an economic sense, removed.(433) It may be affirmed, as

characteristic of the aristocracy of feudal times, that they treated

those, who like the serfs were entirely at their mercy, with much more

consideration than those who were free, and, although dependent on them,

had certain rights guaranteed by contract. The absolute monarchy found in

nearly all nations, at the opening of modern times, was forced by its

struggle with the mediæval aristocracy to favor the emancipation of the

serfs and of the lower classes. Even in Russia, Iwan III. (1462-1505)

seems to have restored to the peasantry the right of migration, of which

they had been deprived by the invasion of the Mongols, nor did they lose

it again until the great troubles at the beginning of the seventeenth

century, which gave the ruling power to the nobility.(434)

Where civilization has reached its highest development, the irresistible

power of public opinion, governed by the ideas of the universal

brotherhood of man and of democratic equality, causes the abolition of all

irredeemable and of all hereditary relations of servitude.(435)(436)(437)

Section LXXIV.

The Same Subject Continued.

It cannot be doubted, that an entirely direct leap from complete servitude

to complete freedom may be attended by many evils. No man is “born

free,”(438) but only with a faculty for freedom; but this faculty must be

developed. The knowledge and respect for law, and the self-control, which

are the conditions and limits of freedom, are never acquired without

labor, seldom without the making of grave mistakes, and never except

through the practice of them. As a rule, both parties, masters as well as

servants, would like to get rid immediately of all the inconveniences of

the former condition and yet continue to enjoy its advantages. The

servant, for instance, will now yield no more the specific obedience of

former times, but demands still specific mildness from the land-owner, or

loaner of capital, his former master. It is inevitable that there should

be complaints on both sides.(439) But in the higher stages of economic

culture, the relation of paternal protection and childlike obedience

between the different classes of the people, which, even in medieval

times, never obtained in all its purity, is certainly unrecallable. Hence

it is, that all hope of a better condition of things is based only on

this, that the lower classes may as soon as possible attain to true

independence.(440)

Section LXXV.

The Same Subject Continued.

Even in antiquity, the principal nations of the world could not keep the

humanizing influence of civilization from making itself felt on their

slaves. And if they did not go so far as to bring about the total

abolition of slavery, it is unhesitatingly to be attributed to their

religious inferiority.(441) In Athens, during the Peloponnesian war, it

was almost impossible to distinguish the slaves from the poorer freemen by

their looks or dress. Their treatment was mild in proportion as desertion

was easier by reason of the smallness of the state or the frequency of

war. It was forbidden to beat them; and only a court of justice could

punish them with death.(442) Emancipation, in individual cases, was very

frequent, and the names of Agoratos and of the law-reviser Nicomachos show

how great a part an emancipated slave might play in the nation.(443) The

helot system of the Lacedemonians preserved much longer a great deal more

of medieval barbarism; but even here, we may infer from the frequent

uprisings and emancipations of the helots, from their services in war

etc., that their lot was made less hard than it had been.(444)

Among the Romans, with whom war and conquest were so long considered(445)

the principal means of acquisition, slavery was relatively very hard.(446)

But, later, there came to be several different grades of slavery (_servi

ordinarii_ and _mediastini_ etc.); and in slavery, every gradation denotes

some amelioration of condition.(447) The slave obtained the right to

possess resources of his own (_peculium_).(448) In addition to this,

emancipation became much more frequent in the later republic; so much so,

that Augustus considered it necessary to pass laws taxing frivolous

emancipation. (_L. Aelia Sentia_ and _Furia_.)(449) Where men like

Terence, Roscius, Tiro, Phædrus and the father of Horace rose from the

condition of slavery, the treatment of slaves cannot have been entirely

brutalizing.(450) Under the emperors who oppressed the free citizens,

legislation was directed more than ever towards the protection of the

slaves.(451) Instead of permanent slavery, a condition of things was

introduced and became more general every day, one in which the bondman

might contract a legal marriage, have property of his own, and in which he

was protected against an arbitrary increase of the quota he had to pay his

master, whether in money or produce, although he still remained bound to

the land. This class was formed not only of the _originarii_, or those

born into it, but also of a large number of impoverished freemen,

barbarian prisoners of war etc.(452)(453)

Section LXXVI. (Appendix To Chapter IV.)

The Domestic Servant System.

In most countries the servant system developed itself gradually out of

serfdom, or of some condition of tutelage analogous thereto. This is seen

most clearly in the long continuance of forced service, by which the

subjects of the lord of the fee were compelled to allow their children to

remain in the court of the lord as servants, either without any

remuneration whatever, or for very low wages fixed by long continued

custom.(454) Here, also, belongs the right of correction, so generally

accorded to masters in former times. In the higher stages of civilization,

the whole relation is wont to be resolved more and more into freedom of

competition; and this process is wont to take place earliest and most

strikingly in the cities. Where vast numbers of men are brought together,

demand and supply of services meet most easily. The nearer in the course

of this development the servant system approaches to piece-wages and

day-wages, the shorter does the customary (presumptive) duration of the

contract last,(455) the more voluntary is the period of leave-taking by

both parties;(456) the more does the entire relation tend to be limited to

single acts of service agreed upon in advance (§ 39), and the more

frequently do both parties endeavor to supply the place of the domestic

servants by workmen who receive wages and live outside of the family.(457)

The extreme of this direction at present is the servant-institutes in

cities, the more movable and more democratic character of which finds

expression in this, that they have extended the use of personal services

to a lower circle of consumers than could previously have thought of

employing them. In English agriculture this transition was completed

mainly in the third decade of this century. The change was unquestionably

favorable to the improvement of the art of agriculture, but it was

frequently damaging to the social relation existing between the rich and

the poor in the country.(458) In Germany, the sale of the public domains,

conscription and _Landwehr_ duty have operated in this direction.(459)

Hence it is, for instance, that in Prussia, the servants, in 1816, were

15.18 per cent. of the entire male population over 14 years of age, and

17.84 per cent. of the entire female population over 14 years of age. In

1861, on the other hand, there were only 11.88 and 12.93 per cent.,

respectively, while the number of day laborers and workmen, in the same

time, increased from 16.29 per cent. males, and 10.87 per cent. females,

to 20.95 and 16.65 per cent., respectively.(460) In most civilized

countries, the grade of society from which servants are recruited grows

lower and lower as the spirit of independence extends to the deeper strata

of humanity.(461)

The servant class may continue a long time yet to be a school of

development for those of the lower classes, who, ripe in body, are not

intellectually independent; just as the duty of bearing arms has been a

school of improvement for all male youth. Life-long servants are as seldom

to be desired as life-long soldiers.

In most places, the long transition period from complete bondage to free

competition was governed by a police system of wardship, which was very

unfavorable to the servant class. Such especially was the provision that

all young people of the lower classes, who could not expressly show that

they were employed under the paternal roof or at some trade, should be

compelled to seek some outside or inland work;(462) such also was the

strict prohibition of “usurious” wage-claims, and the “decoying” of

servants from their masters.(463) Besides, a great many provisions

relating to servants, and based on views belonging to an older economic

condition, were intended to throw obstacles in the way of farm hands and

country servants(464) becoming servants in towns; and, on the other hand,

to facilitate the speedy abandonment of service in all cases in which the

servant desired to marry.(465) All these preferences in favor of one class

of contractors, and at the cost of another, are radically opposed to the

modern political spirit. The laws relating to servants are wont, in our

day, to have but one object, the prevention, by registration with the

police, of fraud and breach of contract, and of all strife and litigation

by the legally formulating of the conditions which are very frequently

tacitly understood.

The ideal of the relation of master and servant is attained when it is

considered by both as a part of the life of a Christian family.(466)

Hence, benevolence on the one side and devotedness on the other, fidelity

on both sides, disinterested care for the present and future interests

each of the other _tanquam sua_; and especially for each other’s eternal

future. Whether this state of mutual feeling is best furthered by the

patriarchal system, by a police system, or by free competition, it is

scarcely possible to say. It may, however, be affirmed that it depends

upon a mutual and continued denial of self not easy to attain. Where it

really prevails, all the advantages of the piece-work system are obtained

in a worthy and organic manner, and without its atomistic drawbacks.(467)

Chapter V.

Community Of Goods And Private Property. Capital—Property.

Section LXXVII.

Capital.—Importance Of Private Property.

As human labor can attain its full development, only on the supposition

that personal freedom is allowed to develop to its full economic

importance and dimensions, so capital can develop its full productive

power only on the supposition of the existence of the freedom of personal

property. Who would save anything, that is, give up present enjoyment, if

he were not certain of future enjoyment?(468) The legitimacy of private

property has, since the time of Locke,(469) been based, by the greater

number of political economists, on the right inherent in every workman,

either to consume or to save the product of his labor. But it should not

be forgotten here that, at least in the higher stages of the economy of a

nation, scarcely any work or saving is possible without the coöperation of

society. And society must be conceived not only as the sum-total of the

now living individuals that compose it, but in its entire past, present

and future, and also as being led and borne onward by eternal ideas and

wants.(470)

Section LXXVIII.

Socialism And Communism.

In opposition to this, the idea of a community of goods has found favor,

especially in times when the four following conditions met:(471)

A. _A well-defined, confrontation of rich and-poor._ So long as there is a

middle class of considerable numbers between them, the two extremes are

kept, by its moral force, from coming into collision. There is no greater

preservative against envy of the superior classes and contempt for the

inferior, than the gradual and unbroken fading of one class of society

into another. _Sperate miseri, cavete felices!_ In such a state of social

organization, we find the utmost and freshest productive activity at every

round of the great ladder. Those at the bottom are straining every nerve

to rise, and those higher up, not to fall below. But where the rich and

the poor are separated by an abyss which there is no hope of ever

crossing, how pride on the one side and envy on the other rage! and

especially in the _foci_ of industry, the great cities, where the deepest

misery is found side by side with the most brazen-faced luxury, and where

the wretched themselves conscious of their numbers, mutually excite their

own bad passions. It cannot, unfortunately, be denied, that when a nation

has attained the acme of its development, we find a multitude of

tendencies prevailing to make the rich richer and the poor, at least

relatively poorer, and thus to diminish the numbers of the middle class

from both sides; unless, indeed, remedial influences are brought to bear

and to operate in a contrary direction.(472)

B. _A high degree of the division of labor_, by which, on the one hand,

the mutual dependence of man on man grows ever greater, but by which, at

the same time, the eye of the uncultured man becomes less and less able to

perceive the connection existing between merit and reward, or service and

remuneration. Let us betake ourselves in imagination to Crusoe’s island.

There, when one man, after the labor of many months, has hollowed out a

tree into a canoe, with no tools but an animal’s tooth, it does not occur

to another who, in the meantime was, it may be, sleeping on his bear-skin,

to contest the right of the former to the fruit of his labor. How

different this from the condition of things where civilization is

advanced, as it is in our day; where the banker, by a single stroke of his

pen, seems to earn a thousand times more than a day-laborer in a week;

where, in the case of those who loan money on interest, their debtors too

frequently forget how laborious was the process of acquiring the loaned

capital by the possessors, or their predecessors in ownership. More

especially, we have, in times of “over-population,” whole masses of honest

men asking not alms, but only work, an opportunity to earn their bread,

and yet on the verge of starvation.(473)

C. _A violent shaking or perplexing of public opinion in its relation to

the feeling of Right, by revolutions_, especially when they follow rapidly

one on the heels of another, and take opposite directions. On such

occasions, both parties have generally prostituted themselves for the sake

of the favor of the masses; and the latter have become conscious of the

changes which the force of their arms may effect. In this way, it is

impossible that until order is again entirely established, the reins of

power should not be slackened in many ways at the demands of the

multitude. In this way, too, they are stirred up to the making of

pretentious claims which it is afterwards very difficult to silence. In

every long and far-reaching revolution, whether undertaken in the interest

of the crown, the nobility or the middle classes, we find, side by side

with the seed it intended to sow, the tares of communism sprout up.

D. _Pretensions of the lower classes in consequence of a democratic

constitution._ Communism is the logically not inconsistent exaggeration of

the principle of equality. Men who always hear themselves designated as

“the sovereign people,” and their welfare as the supreme law of the state,

are more apt than others to feel more keenly the distance which separates

their own misery from the superabundance of others. And, indeed, to what

an extent our physical wants are determined by our intellectual mould! The

Greenlander feels comfortable in his mud hut, with his oil-jug. An

Englishman in the same condition would despair.(474)(475)

Section LXXIX.

Socialism And Communism. (Continued.)

What has just been said will serve to explain why, in the following four

periods of the world’s history, socialistic and communistic ideas have

been most widespread: among the ancients at the time of the decline of

Greece,(476) and in that of the degeneration of the Roman Republic;(477)

among the moderns in the age of the Reformation,(478) and again, in our

own day.(479)

Section LXXX.

Socialism And Communism. (Continued.)

We thus see, that the attempts made by socialism and communism are, by no

means, phenomena unheard of in the past, and peculiar to modern times, as

the blind adherents and opponents of them would have us believe. They are

rather diseases of the body social, which have affected every highly

civilized nation at certain periods of its existence. If the body be too

weak to react healthily and curatively (§ 84), the evil is very apt to

lead to the decline of all true freedom and order. The communist, viewing

all other things, especially the organization of the state, only as

instruments to supply his material and absolute wants, considers the

liberal either as a fool who is ever pursuing the phantoms of the brain,

or as a knave who covers his own selfishness under the mask of the public

welfare.(480) Hence the adherents of communism are satisfied with any form

of government which seems to offer them most, and this a ruthless

despotism can do, at least, for the moment. And, although they are ever

ready for any revolution in the form of government, and easily to be won

over to it, they are most readily captivated by a despotic revolution. On

the other hand, when communism seriously threatens all that constitutes

the wealth of a people, the owners of that wealth are compelled to fly to

any refuge which holds out the promise to protect them from it, although

by seeking that same refuge they may destroy their own political

freedom.(481) The Achean league, which under the leadership of Aratos, the

“enemy of tyrants,” had come into existence, promising so much hope,

beheld itself later, and mainly through fear of the contagious effects of

Spartan socialism under Cleomenes, compelled to unite with the

Macedonians, that is, to give themselves up entirely. (§ 204).

Section LXXXI.

Community Of Goods.

We now, for the present, turn our gaze from the frightful revolution,

destructive of all civilization, which would necessarily precede the

establishment of a community of goods,(482) and inquire what would be the

consequences. Among angels (“gods and sons of gods” of Plato) and mere

animals, a community of goods might, perhaps, exist without producing

injury. And so, too, it might exist among men bound one to the other by

the bonds of the truest love. The life of every model family is

accompanied by a species of community of goods.(483) But in more extensive

social organizations, this love is never found except as an element of the

most exalted religious enthusiasm, which, as a rule, is of very short

duration; of which the Acts of the Apostles (II, 44 ff, 32 ff, V, I, II)

affords us the best known and most beautiful example.(484)

Where this love does not exist, each participant in the community of goods

will, as a rule, seek to do the least and enjoy the most possible.(485) In

a society of one hundred thousand members, each individual would be

interested in the results of its aggregate frugality only indirectly, and

only to the extent of a one-hundred thousandth part of the whole; that is,

practically, not at all.(486) Individual selfishness would expend itself

entirely on the division of what the whole community produced. It would,

consequently, and almost always be detrimental to the whole, and to the

other individuals of the society; whereas, at present, it does so only in

exceptional cases. When Louis Blanc, as Mably had before him, recommended

that the _point d’ honneur_ should take the place of the _interêt

personnel_, as a spur to production, and a check on consumption, and cited

the army as an illustration of its workings, he forgot, among other

things, the thirty cases in which the _code militaire_ pronounces sentence

of death on the violators of its provisions. And, as a matter of fact, the

Münster Anabaptists could not help punishing with death every

transgression of their communistic precepts.(487) If, in a community in

which the principles of communism were rigorously carried out, all the

burthens and enjoyments of life were equal, and equally divided according

to the ideas of the crowd, men like Thaer, Arkwright, and others of their

class, who now provide bread for hundreds of thousands from their studies

and laboratories, would then be able, at most, with a rake and shovel, to

provide food for three or four. The division of labor, with its infinite

amount of productive force, would, for the most part, cease. Nor would the

consequence be that the humbler classes would be freed from work of a

coarse, mechanical, unintellectual and severe nature; but that the higher

classes would be dragged down to engage in it likewise. And what an

increase there would be in the number of consumers at the same time! Every

man would, with a light heart, follow the most imperious of human impulses

if the whole community were to educate his children. But we have seen that

a community of goods is desired most urgently in times of over-population.

Hence, here it would make the evil greater yet, by increasing consumption

and diminishing production.

Where there are now one thousand wealthy persons, and one hundred thousand

proletarians, there would be, after one generation, no one wealthy and two

hundred thousand proletarians. Misery and want would be universal.(488)

For the purpose of giving the crowd a very agreeable,(489) but rather

short-lived period of pleasure, a period simply of transition, almost all

that constitutes the wealth of a nation, all the higher goods of life,

would have to be cast to the waves, and henceforth all men would have to

content themselves with the gratifications afforded by potatoes, brandy

and the pleasures of the most sensual of appetites. And then, the equal

education of all, demanded by the communists, would have no result but

this, that no one would acquire a higher scientific training.(490) But,

after all, there lurks concealed in communism much more of envy than is

generally supposed.

Section LXXXII.

The Organization Of Labor.

Most theoretical adherents of the doctrine of a community of goods,

feeling(491) more or less the weight of the above objections, have

supplemented it with the idea of an organization of labor(492) or the

centralized superintendence of all production and consumption, either by

the government already existing, or by one to be created anew. Such a

government would be, of course, a despotism such as the world has scarcely

yet seen, a Cæsaro-Papacy, usurping both the place and power of Father of

the universal Family.(493) But the evils mentioned above would be entailed

none the less. Every incentive which now moves man to industry or

frugality would disappear, and nothing remain but universal philanthrophy;

or, if you will, but patriotism, virtues which are not wanting even now.

Even guardianship of the government newly created would be carried on in a

very loose manner; for it would be exercised without any feeling of

personal interest, even in the most favorable case supposable. It is well

known and easily understood, that state industries are never engaged in,

in the long run, with the same zeal, nor crowned with the same success, as

competing private industries. It is well known, too, how intimate the

connection is between the political freedom of a people and their economic

production; that, for instance, England’s greater wealth, as compared with

that of Turkey, depends, most largely, on the freedom that obtains in the

former country and the servitude that prevails in the latter.(494) And we

may inquire just here, what the result would be, if the despotism of

government should go ten times farther that it has ever gone in Turkey,

when, moreover, the despot who led the state, was not an individual with

his few officials, but the whole crowd, with its million eyes and million

hands. It would, practically, be to give every producer an escort of a

policeman and a revenue agent, as if he were a prisoner.

And where would be the gain? A division of wealth which would seem unjust

to many would exist now as well as before, because the idle and the

unskillful would receive the same reward as the most industrious and

skillful.(495) The opposition of one class of society to another, so much

complained of, would continue. The only difference would be, that whereas,

it now comes from the weak, it would then come from the strong.(496)

Compulsory association is certainly more prolific in strife and crime than

is a state of society in which everybody manages his own affairs.

A journey on foot, in company with others, is allowed, on all hands, to be

a very good test of friendship. But, a community of goods would, in the

strictest sense of the word, be a journey on foot through the whole of

life with numberless “friends.” Here, every one would believe himself

entitled to possess whatever pleased him. And, who would decide; since so

many communists preach the dissolution and extinction of all government,

and the reign of anarchy? Besides, there can be no doubt, that the

difference of human talents and human wants, would soon, spite of every

law, lead to a difference in property again. Hence, that first revolution

would have to be repeated from time to time—a real Sisyphus labor! No

sooner have the bees produced anything, than the drones come, and divide

anew!

Section LXXXIII.

The Organization Of Labor. (Continued.)

Experience, however, teaches us, that, in all the lower stages of

civilization, a community of goods exists to a greater or lesser

extent.(497) The institution of private property has been more fully

evolved out of this condition of things, only in proportion as well-being

and culture have been developed as cause and effect of such well-being.

Thus, among most nations of hunters and fishermen, the idea of private

property was unknown when these nations were first discovered. This is,

indeed, very natural. Their chief spring of production flows as if of

itself, apparently inexhaustible; and the hunter can hardly think of such

a thing as saving any of his booty.(498) And, among nomadic nations, the

land is a great meadow held in common; and the industry of plunder is

considered, as it is in all inferior stages of civilization, especially

honorable.(499) The _conquistadores_ of Peru found there something very

like a community of goods, under the despotic guardianship of the state,

viz.: a yearly division of all lands among the people, in proportion to

their rank; the cultivation of these lands in common, under the

superintendence of the state, and to the sound of music. But, at the stage

of civilization that Peru was then in, land is about the only resource

possessed. The results were the usual ones. A country like Peru, with only

one city, no beasts of burthen, no plows, no trades and no commerce,

cannot possibly be rich.(500) That the constitution of Lycurgus

established a sort of community of goods among the Spartans, is well

known. I need only recall the public education, the meals in common, the

authorization of stealing,(501) the prohibition of trade, of the precious

metals and fine furniture, the equal division of property and the

inalienable character of the land(502) etc. With such laws, Sparta could

neither be, nor desire to become, wealthy. Of all Greek states of any

historical importance, it preserved longest the economic peculiarities

belonging to a low stage of civilization. Among most modern nations, the

fundamental idea of their land laws, which had their origin in the middle

ages, is, that each family is only the usufructuary, and that the

community is the sovereign proprietor of the soil. This community of

landed possession finds expression, among other things, in the vast extent

of communal woods and pasturages, in the varied intersecting of parcels of

land one by the other, which, indeed, change proprietors from time to

time, and in the common working of the land, carried as far as possible

etc.(503) In all medieval times,(504) not only the individual is

considered an owner of the land, but, over and above him, the family. At

the same time, we are wont to find existing an amount of mortmain property

in the hands of corporations, monastery lands, crown lands and domains of

very great importance.(505) All these institutions have declined in number

and shown a disposition to disappear, in proportion as national husbandry

or economy has grown more productive.

Section LXXXIV.

The Organization Of Labor. (Continued.)

To this tendency we find, indeed, another, and a no less powerful one,

opposed. Everywhere as civilization advances, the sphere of action of the

state grows larger, and the ends it serves more numerous.

In its origin, government was established to preserve only the external

security of its subjects. By degrees, it comes to look after their

internal legal security, by enforcing internal peace, prohibiting revenge

for bloodshed etc. It next extends its care to the well-being, the

culture, and even to the comfort of the people. But the claims of the

state must grow in the same proportion as the service it renders. While

Lowe, in 1822, estimated the yearly net income of the British people at

£251,000,000; the government expenses,(506) in 1813 and 1814, averaged

£106,000,000, and these sums were voluntarily devoted to public purposes

by parliament. And so, between 1685 and 1841, the population of England

more than trebled its numbers, But, in the same period of time, the outlay

of the state increased forty fold. (_Macaulay_.) Simultaneously with this

development of things, it becomes more and more usual by the exercise of

the power of eminent domain and others like it, to sacrifice private

rights, acquired by the very best of titles, to the preponderating common

good. We may allude, further, to the duty, universally imposed in modern

times, of performing military service, to the national systems of public

instruction in so many countries; to the large number of societies,

joint-stock companies, popular holidays; but particularly to the

associations for insurance of every description. And so it may, indeed, be

claimed that we have come nearer to a community of goods than could have

been dreamed of a hundred years ago.(507) And yet, these are, for the most

part, institutions in which we find reflected the peculiar strength and

solidity of our age. Whoever wishes to compare the power of one people

with that of another, must take into account not only the elements which

constitute their intellectual and physical force, but especially their

inclination to permit these elements to coöperate for public

purposes.(508)

We may now inquire: At what point does this increasing community cease to

be a gain? This is as easily determined generally, as it is difficult to

say what the limit to it is in particular instances. Progress in the

direction of a community of interests of this nature is beneficial, only

so long but certainly as long as it corresponds with the feeling

entertained by the community, that they have interests in common. Hence it

is, that such a noble kind of communism reigns in art and literature, one

which causes the stronger to willingly labor for the weaker, and with the

greatest success.(509) And so, too, the christian care of the poor, even

were it carried to the height of the Gospel counsels (Luke, 3:11), would

be no direct obstacle in the way of the development of a nation’s public

economy, provided it were given, and accepted, only as christian

benevolence. Every approximation towards a community of goods should be

effected by the love of the rich for the poor, not by the hatred of the

poor for the rich. If all men were true Christians, a community of goods

might exist without danger. But then, also, the institution of private

property would have no dark side to it. Every employer would give his

workmen the highest wages possible, and demand in return only the smallest

possible sacrifice.(510)(511)

Section LXXXV.

The Right Of Inheritance.

The right of inheritance to resources has its origin in a combination of

the idea of the family with the idea of property. And, indeed, this

combination of ideas is a very natural one. The larger portion of mankind

consider the pleasures of the family as the highest attainable, and

endeavor, whenever their economic means make it at all possible, to secure

them. At the same time, the selfishness of most men is not confined to

their own persons, but extends also to their posterity. Hence it is that

bed and board, _eonnubium_ and _commercium_, have, from time immemorial,

been considered correlative ideas; and, to all the more logical

socialists, a community of wives (or celibacy)(512) is as dear as a

community of goods.(513) (§ 245.) And in practice, the greater number of

nations of hunters, who, according to our conceptions, have no knowledge

of a real family and no knowledge of property, have a custom of burying

with the dead the things they used, to kill their cattle etc., or to

deprive minor children of their inheritance.(514)

Section LXXXVI.

Economic Utility Of The Right Of Inheritance.

The certainty, that the material welfare of their children depends, in

great part, on their industry and frugality, is one of the most powerful

incentives to good, in the case of most men. And this is the basis of the

economic utility of the family right of inheritance.(515) There is

scarcely any other institution which opposes over-population with such

efficiency, for the reason, that the obstacle placed in its way here is

placed very directly, at the point where it can make itself felt most,

viz.: in the life of the family itself. The weaker the family feeling, the

less does the abolition of the right of inheritance interfere with the

economic interests of a nation. Hence, for instance, it is, that taxes

imposed upon legacies, bequests, testamentary gifts etc., are less

objectionable in proportion as they affect only those in the more remote

degrees of relationship in which inheritance is something merely

accidental. While, when a nation is yet in the intermediate stages of

civilization, the _family_ right of inheritance seems to be very strong,

especially as regards landed property, a consequence of the fact, that a

superior kind of title to such property is recognized to exist in the

family; at a period, when individualism becomes more developed, the

liberty of devise by will is wont to prevail more and more.(516) Then the

right of inheritance becomes, so to speak, a more elevated species of

personal property, a prolongation of the same beyond the grave. Should

testamentary freedom be too much hampered, selfishness would manifest

itself in a way much more detrimental to economic interests, viz.: in the

consumption of wealth, during the lifetime of its owner. Every man would

be but a life annuitant of his own property.

But, at the same time, in periods of moral decline, complete freedom may

degenerate so as to produce evils equally great. The wealthy Bœotians, in

the later days of Hellenic history, were wont to form themselves into

dissolute drinking companies; and not only the childless, but even fathers

of families made over their property to these companies, limiting their

offspring to a portion which it was made their duty to let them have. It

was so in Rome, also, in Cicero’s time, when every acquaintance of

standing took it very ill if not remembered in the will of the testator,

and where Octavian, for instance, in the last twenty years of his reign,

received about 70,000,000 thalers through legacies left him by his

“friends.”(517) Here, the repeal of the law making it obligatory on

testators to leave a certain proportion of their wealth to their children

would remove the last safe-guard of their material welfare.(518)

Section LXXXVII.

Landed Property.

As land, in its uncultivated state, has neither been produced by man, nor

can be entirely consumed by him, the above demonstration of the necessity

of private property cannot without any more ado, be extended to land.(519)

Hence, individual property in land is everywhere much more recent than

individual property in capital.(520)

But a certain expenditure of capital and labor is necessary that land may

be used productively, and, in most instances, this employment of capital

and labor is of long duration, irrevocable in the very nature of things,

and one the fruits of which can be reaped only after some time has

elapsed. Now, this cooperation of capital and labor is such, that no one

would undertake to employ them in the cultivation of the land, had he not

the strongest assurance of possessing it. Hence, agriculture in its most

rudimentary stage supposes ownership of the land, at least from the time

that it is “tickled with the hoe,” until it “smiles with the harvest;” or,

to express it more accurately, all the time intervening between the work

of the plow and the labor of the sickle. The more, afterwards, population

and civilization increase, the more products must be wrung from the soil.

But this can be accomplished only by means of its more _intensive_

cultivation (higher farming), by lavishing a greater amount of capital and

labor on it, and, as a rule, by extending the circle of agricultural

operations by means of combinations more and more artificial. Hence, the

progress of civilization demands an ever increasing fixity, and a more

pronounced shaping of landed property (the _specification_ of jurists), in

the interests of all who share in this progress, and even of those who own

no landed property themselves. Were there no property in land, every one

would find it more difficult and laborious to gratify his want of

agricultural products;(521) and the products themselves would be of an

inferior kind.

Thus, for instance, in Camargo, the lackmus was formerly prepared from

plants to be had “free” in the woods. It was then, however, much dearer

than it is now that the plants are artificially raised on landed

property.(522) It is otherwise with the fisheries. The appropriation of

rivers or seas would not tend to increase the abundance of their products,

and hence this appropriation is, on the whole, rare.(523)

Section LXXXVIII.

Landed Property. (Continued.)

Whenever this admixture of capital and labor with land has taken place to

no great extent, private property in land is not found developed in any

degree. Thus, there are even now many half-civilized countries in which

the land is forfeited because not tilled for many years, and where it may

be occupied by the first person who will cultivate it.(524) In Europe,

common possession of forests and pasture lands asserted itself much longer

than that of arable land, because, in the case of the former, labor and

capital play a much less important part in the management of them. And

yet, even in the case of arable land etc., and, in the highest stages of

civilization, the property-quality is yet less developed than the

property-quality of capital. How seldom do we find _fidei commissa_ of

capital, or capital juridically tied up. We find that the law of all

ancient nations drew a marked distinction between moveable and immoveable

property, and that the power of disposing of the former by sale, pledge,

in dowry, partition etc., was a much freer one. And even now, the police

power which may be exercised over moveable property is much more

restricted than that over houses and land.(525) The justice of the

exclusive right of possession to what one has earned and saved is obvious

to every one. On the other hand, the appropriation of “original and

indestructible natural forces” has its basis not so much in justice as in

the general good; and the state has always considered itself entitled to

attach to the “monopoly of land,” which it accorded to the first

possessor, all kinds of limitations and conditions in the interest of the

common good, and sometimes to consider private property in land in the

light of a semi-public function.(526) I may instance the feudal principles

of the latter portion of the middle ages, which are so far removed from

our ideas of private property in land; and yet, of which many echoes are

heard, even in our day, and are not without their influence in practice.

Thus, further, for instance, even in England, the greater number of the

poor-rates, of taxes for the support of the established church, the

maintenance of public highways etc., are heaped upon the rent of land.

Many socialists have proposed to make the state the sole proprietor of the

soil,(527) sometimes adding the condition, that the previous private

owners should be compensated in capital, when it would be at least

supposable that private capital might be enticed to cultivate it, if long

and sure leases of it were made. This would be a “good” demesne-husbandry,

extending over the entire country. We need only glance at those kingdoms

in which something analogous is to be found, especially the despotisms of

the east,(528) to divine that such a system does not suffice to insure the

real productiveness of a nation’s economy.(529)

Chapter VI.

Credit.

Section LXXXIX.

Credit In General.

Credit(530) is the power of disposition over the goods of another,(531)

voluntarily granted in consideration of the mere promise of the

counter-value.(532) As Franklin says: A good pay is master of another

man’s purse. Hence, it is evident that whoever would obtain credit must be

believed to possess the ability as well as the intention to fulfill his

promise. Where this belief is based simply on the opinion entertained of

the person of the debtor, we speak of personal credit,(533) in

contradistinction especially to the credit based on bailment, pledge,

hypothecation etc. The longer the time between the making of the promise

and the period fixed for its fulfillment, the less certain is the latter,

where the security is simply the person of the debtor. It is chiefly in

very uncivilized nations and also in nations in their decrepitude, and

during periods of anarchy, and in despotisms, that personal security

stands higher than any other. The same is true, though for other reasons,

in very energetic civilized nations, where the people put a high estimate

on the element of labor in their economy, among whose members legal

security is, indeed, found, but where the peculiar sensitiveness of

speculation would be too much hampered by the more sluggish nature of

other credits; as, for instance, in North America, and even in ancient

Rome. Civilized nations that have reached the stationary economic state,

on this account much prefer the greater security and the absence of care

which accompany non-personal credit.(534) In estimating the ability of the

debtor to meet his promise, we must take into account, especially, the

disposable character of his resources; otherwise it would be impossible to

understand why the merchant may so frequently obtain a loan on his stock

equal to its whole value, while the owner of land can place it as security

only to the extent of half its value.

Credit, on the whole, grows in importance with an advance in civilization,

and this is true especially of credit intended for productive purposes.

This is a consequence of the greater division of labor which causes

unfinished products to be put on the market more and more

frequently,—products which come to have a value only after some time, but

which, when that time has elapsed, have present value. And, indeed, as the

world advances and civilization grows, it becomes much easier to forecast

the future with certainty. The future, also, then becomes more a source of

solicitude, and fixed capital, as a consequence, plays a part which grows

daily more important. The limit to the development of credit is this: it

is safe only when the debtor invests his borrowed goods in the production

of, to say the least, their equivalent. This is why the personality of the

state, clothed with immortality and with a formally boundless power of

taxation, is so often seduced into engaging in transactions of credit

which are never self-discharged.(535) The social diseases of panics and of

extravagant enterprises stand in the same relation to credit that unbelief

and superstition do to true religion.(536) (_Schäffle_.)

Section XC.

Credit—Effects Of Credit.

As regards the effects of credit, we may remark, that it is as powerless

directly to produce new capital as is the division of labor to produce new

workmen. To every credit of the creditor corresponds a debit of the

debtor. As Turgot said: _Tout credit est un emprunt_.(537)(538)(539) But,

on the other hand, credit facilitates the transmission of the elements of

production, especially of capital, from one hand to another.(540) When,

therefore, the debtor employs the capital that he has borrowed, more

productively than the creditor would have done, the whole country is a

gainer; as it is a loser, on the contrary, when a person engaged in

industry advances to the idler, the frugal man to the spendthrift, the

solid man to the wild speculator. In declining nations, where every new

development hastens decay, the latter alternative may be the prevailing

one; and, especially here, may the usurious giving of credit by the shrewd

to the simple lead to ruinous debtor-slavery. Among a vigorous and

energetic people, the former is apt to govern, as it is only by the

productive employment of the loans made that they are permanently enabled

to pay interest. Here credit is an invaluable means, not only of putting

idle capital in motion, and of making active capital still more active,

but especially of concentrating capital, by which it may gain as much in

productive power as labor does by the coöperation of labor. This is

effected, very frequently, by means of joint-stock companies, the

principle of which recommends them especially in enterprises where

stationary capital is required rather than circulating capital, and where

capital generally plays a greater part than labor; and where this labor

can be subjected to provisions which may be accurately laid down

beforehand; as, for instance, in the case of docks, insurance companies,

banks,(541) etc. Banks, then, become real reservoirs of capital, provided

they are properly and judiciously established and managed; real reservoirs

which receive in one place the capital which is superfluous elsewhere, in

order to supply some other place with that which is necessary to it. The

more confidence increases, the more are even the smallest driblets of

capital awakened from their slumbers, and made active and productive. It

is only by means of credit that the help of foreign capital can be

obtained for home production. Indeed, credit, considered as an exchange of

probable future goods against actually existing goods, is one of the

principal functions of the temporal solidarity of the economy of nations.

(_Schäffle_.) Without credit, there would be very little place for

speculation proper.

We may see how the possibility of giving and receiving credit promotes

wealth, by contemplating the poorer classes, whose poverty, both as cause

and effect, is very closely related to the absence of credit. And here we

have a suggestion of the reverse to the bright side of the picture of

credit, analogous to that mentioned in § 62 of the coöperation of labor,

viz.: that it tends to intensify inequality among men. The man who is

distinguished by the amount of his wealth, or by his position is naturally

known to a much wider circle than others are. From which it follows, that

he may, by the way of credit, increase his power, already so much greater

in the economic world, by a much larger multiplier.(542) Hence, it need

not surprise us, that the great obtain credit from those in a lower

position, at least as frequently as they give them credit in turn.

On the side of the creditor, the possibility of making loans is a powerful

incentive to frugality. Were there no credit, those who were not in a

condition to employ their capital productively would make savings only

within very narrow limits.(543)

Section XCI.

Debtor Laws.

Private credit is always conditioned, and in a great many ways, by the

situation of the whole nation’s business; in other words, by their

politico-economical situation. It is especially in the higher stages of

civilization, that one bankrupt may easily drag numberless others down

with him; and where the laws are bad or powerless, not even the wealthiest

man can predicate his own solvency for any length of time in advance. One

of the most important conditions of credit is the certainty that, if the

debtor’s good will to meet his obligations should fail, it shall be

supplied by the compulsory process of the courts. Hence, the importance of

a judicial procedure, at once impartial, enlightened, prompt and

cheap.(544) The more vigorous the laws relating to debt are in preventing

dishonesty on the part of the debtor, the more advantageous are they to

honorable and honest debtors. Adam Smith has rightly said, that in

countries in which creditors are not completely protected by the courts,

the honorable man who borrows money is in the same condition as the

notoriously dishonest man or the spendthrift, in better governed

countries. He finds it more difficult to borrow and is obliged to pay a

higher rate of interest.(545) Rigorous debtor laws, on the other hand,

diminish in the whole nation the amount of “bad debts,” that is, a not

insignificant portion of the cost of production. They, at the same time,

promote, as far as it is in the power of laws to do it, national honor and

the mutual confidence of man in man. The excellence of their debtor laws,

in their most flourishing period, was one of the principal elements which

contributed to make Athens and Rome of such importance in the history of

the world.(546)

Section XCII.

History Of Credit Laws.

In the history of laws relating to credit, we may distinguish, in a great

many countries, three stages of development.

A. The laws, in the first stage, are very severe. In the Germanic middle

age the insolvent was disgraced. He became the slave of his creditor (_zu

Hand und Halfter_), who might imprison him, fetter him (_stöcken und

blöcken_), and probably kill him. A Norwegian law allowed the creditor,

when his debtor would not work and his friends would not ransom him, to

take him before the court, and “to lop off from his body what part he

will, above or below.”(547) To judge of these provisions correctly, it is

necessary to bear in mind the many ways in which family resources were at

this time bound and tied up, and not forget “the power of defiance in

these iron natures.”(548) (_Niebuhr_.)

B. The canon law introduced milder principles. Gregory the Great had

already prohibited the holding on to the body of the debtor.(549) On this

account, during the latter portion of the middle ages, it was customary to

stipulate by contract that the provisions of the ancient law should govern

in this matter, to submit to imprisonment etc.(550) The influence of the

Roman law made it gradually more usual, in the case of insolvent debtors,

to demand no more from them than the assignment of their property for the

benefit of their creditors. This, however, led to numerous frauds; and

these became more frequent in proportion as the laws governing the

property of parties while the marriage relation existed between them, and

as executions against landed property etc. were defective.

C. Hence, in more highly civilized times, there has been a return to the

severity of earlier ages. Persons engaged in commerce, especially those

whose capital is so volatile, and to whom time is a thing so precious, can

scarcely dispense willingly with personal imprisonment for debt. Hence,

legislation on bills of exchange, sanctioned especially by imprisonment of

the person, plays a very important part in the commercial cities of the

seventeenth century, as it did, naturally, much earlier in Italy and the

Netherlands.(551) Modern laws in many cases punish the bankrupt whenever

an examination of his books, kept after approved methods, does not

demonstrate his innocence.(552) The great facility of fraudulent

bankruptcy, where commerce has attained a high degree of development and

complication; the absence of honor shown in engaging in speculation for

one’s own gain with a stranger’s capital, and without the real owner’s

knowledge; the comparatively small number of blameless and irreproachable

bankruptcies,(553) certainly justify these provisions.(554)(555)

Section XCIII.

Means Of Promoting Credit.

One of the most efficient means of promoting credit consists in

legislation intended to dry up the source of bad debts, by placing

obstacles in the way of reckless or usurious credits for objects of luxury

or pleasure, to bad customers.(556) But the application of these laws

should be clear and simple as to their matter, and require no inquiries,

relating to the person, impracticable for a business man to make.(557)

Thus, for instance, a short period of limitation established by statute in

the matter of advances made for ordinary money-claims is a beneficial

restraint, as well on the creditor as on the debtor, since it prevents the

accumulation of a multitude of small debts which almost imperceptibly but

at the same time irresistibly overpower the debtor under their

weight.(558) Another efficient means is associations of business men to

circulate lists of bad debtors, and to prosecute their own demands in

common.(559) On the other hand, experience has shown that imprisonment for

debt, as a means of enforcing a creditor’s claim, where the amount of the

debt is very small and such as only very poor debtors are apt to incur, is

of little service. It is even injurious, because a great many sellers

would rely on that means of compelling payment in the future instead of

demanding it immediately, as they should do in the interest both of

themselves and of their customers. As a rule, it is only rich creditors

who can resort to it with success, a class who compel payment through this

means by wringing it from the debtor’s relations more frequently than from

the debtor himself. The working out of debts in correctional institutions

seems, for the same reasons, to fail of its object, since even well

governed institutions scarcely cover their current expenses from the

income derived from this source.(560) The inequitable character of

imprisonment for debt lies in this, that it punishes the unfortunate

debtor as severely as it does the malicious one. It must be clearly

distinguished from the imprisonment recognized by the courts as a

punishment for reckless or fraudulent bankruptcy.(561) We must pass a

judgment similar to that on the imprisonment of the person of the debtor

on the seizure of his wages not yet due, so far, at least, as an amount

absolutely necessary to save himself and family from want, is not

excepted. The prohibition of such seizure, beyond this, would amount to a

declaration that all workmen without capital, even the best, should be

considered unworthy of credit.(562) We may also include in this category

such laws as except from execution the necessary tools of a tradesman,

since to deprive him of them would be to prevent his employing even his

labor to satisfy(563) his creditors’ claims.

Section XCIV.

Letters Of Respite (Specialmoratorien).

_Special letters of respite_ (_Specialmoratorien_) are a suspension of the

laws relating to debt, made in favor of an individual. (_Quinquennalia._)

They were intended to protect not only the debtor, but also the aggregate

of creditors against the short-sighted severity of one of their number.

They were wont to be given especially when the debtor showed that

immediate execution would not only have the effect of ruining himself, but

of sending his creditors away empty handed; while, if time were given him,

he would be able to satisfy every one.(564) But the granting of such

letters has, in recent times, been prohibited(565) in nearly all countries

as arbitrary, and as a species of cabinet-justice. Nor should the granting

of them be compared with the pardoning power. In the case of a pardon, the

offended State forgives. In this case it sacrifices the unquestionable

right of one party to the very doubtful advantage of another. Where such

letters are granted in great numbers, credit cannot fail to suffer.

“_Quinquinnellen gehören in die Hollen!_”

Yet in troublous times, when a great many debtors are insolvent at the

same time, the question of modifying the laws relating to debt,

temporarily, has been mooted. It has been urged on such occasions, that it

would be a matter of enormous difficulty to treat, _lege artis_, thousands

as bankrupts at once; that thousands of businesses would have to be

closed, their stocks cast upon the market at mock prices, and their

employees thrown out of employment. But, if certain privileges were to be

accorded to all who should declare themselves unable to meet their

obligations before a certain day, it would be known, at least, that the

others were in a solid condition; and this would have the effect to

strengthen the credit which had been before universally shaken. We must,

however, leaving all cases of abuse out of the question, remember, that a

really unrightful favor, granted to the debtor, may possibly entail the

ruin of his creditor. Besides, the uncertainty of the law would have a

much worse effect on credit than uncertainty as to the personal status of

individuals.(566) Where, as is the case generally in inferior stages of

civilization, debtors and creditors form two distinct classes, the

question of right is not, indeed, changed, but there is a solid basis

afforded for the political admeasurement of opposing interests. In another

work I have shown how, after great wars, land owners, who became involved

in debt, have been protected against capitalists. (See _Roscher_,

Nationalökonomik des Ackerbaues, § 137, ff.)(567)(568)

Book II.

THE CIRCULATION OF GOODS.

Chapter I.

Circulation In General.

Section XCV.

Meaning Of The Circulation Of Goods.

The more highly developed the division of labor is, the more frequent and

necessary do exchanges become. While the hermit engaged in production

thinks only of his own wants, and the mere housekeeper of the wants of his

household, the man who is part of a nation and who plays a part in its

general economy, must bear in mind the MARKET in which goods of one kind

are exchanged against goods of other kinds. The greater, more various and

more changeable the conditions of this market are, the greater are the

intellectual faculties demanded to engage in it successfully, and to the

advantage of everybody concerned in it.(569) Goods intended to be

exchanged are called commodities. By the circulation of commodities is

meant their going over from one owner to another.(570) Among the principal

causes of circulation, we may mention the difference in the nature and

civilization of countries and peoples, the distinction between city and

country, the division of people into classes etc.(571) The rapidity of

circulation depends, on the one hand, on the quantity of commodities, and

on the other, on the degree to which the division of labor has been

carried. In both respects it is, therefore, an important indication of the

wealth of the nation, and of the world.

Different commodities have very different degrees of capacity for

circulation (_Circulationsfähigkeit_), that is, of certainty of finding

purchasers, and of facility of seeking purchasers. The smaller, compared

with its value, the volume and weight of a commodity are; the longer and

more conveniently it can be stored away; the more invariable and

well-known are its value in use and value in exchange: the more readily

does it go from one place to another, the more easily is it transmitted

from one period of time to another and from the possession of one person

into the possession of another. Thus, for instance, the precious metals

circulate more rapidly than industrial products; these in turn more than

raw material,(572) and immovable property circulates least rapidly of all.

An improvement in the means of transportation naturally increases the

capacity of circulation of the entire wealth of a people, and especially

of those commodities which were not before transferable as well as of

those of which the cost of transportation constituted a peculiarly large

component part of the price.(573) The greater the capacity for circulation

of any kind of goods, the greater is the power of control of its owner in

the world of trade. If we compare two men, each of whom possesses a

million of dollars, but one of whom has that million in money and the

other in land, we shall find that the former is able, for present

purposes, such as loaning to the state in case of need, aiding a

conspiracy etc., to command resources much more readily and effectively

than the latter. Under the ordinary circumstances of a nation’s economy,

we find that the owner of money is very seldom in want of bread, fuel or

clothing, whereas very many owners of other property may be in want of

money.(574) True, resources which may, so to speak, take the offensive

most energetically, offer less resistance to unforeseen misfortune. The

possessor of such resources is in a condition to lose his all on the turn

of a single die. As civilization advances, the circulating capacity of a

nation’s wealth increases.(575)

Section XCVI.

Rapidity Of Circulation.

With an advance in a people’s public economy, we find an increased

rapidity of circulation connected, both as cause and effect. Every

improvement, every thing which shortens the process of production, must

facilitate and accelerate the circulation of commodities. And so, the

perfecting of the means of transport of commodities, of the media of

exchange and of credit, an increase in the number of middlemen who make it

their business to purchase in order to sell again. On the other hand, the

more rapid the circulation of wealth, the more can it promote production.

The more rapidly, for instance, the manufacturer of cloth exchanges his

wares for money, the more rapidly may he employ the money in the purchase

of new tools and the hiring of new labor; and the sooner may he appear in

the market with new cloth. It is here precisely as it is in agriculture,

which is more productive where the seed returns several times in a year

(several crops(576)) to the hand of the peasant than it is where this

happens only once. The nearer the members of the commercial organism are

to one another, the more rapid is circulation wont to be. Hence, it is

more rapid in industry than in agriculture; in retail trade than in

wholesale; in large cities than in the country; among a dense population

than among a sparse population.

The _regularity_ of circulation increases with economic culture. Its

concentration at large terminal points, its interruption by bad seasons of

the year, belong to the lower stages of the political economy of a people;

although bad harvests, floods, wars, revolutions etc. may, at any time,

lead to a sluggishness or to an arrest of circulation.

Section XCVII.

Freedom Of Competition.

But it is especially the freedom of circulation that increases with an

advance in civilization, and this advance, like the two preceding, first

affects the home or inland circulation. Freedom of competition, the

freedom of commerce and industry, technical expressions used to designate

freedom in general in the domain of a nation’s economy, is the natural

conclusion drawn from the principles of individual independence and of

private property. Hence its development is as slow as the development of

these, and attains its full growth only in highly cultivated nations,

their colonies and dependencies. In very low stages of economic

development, the circulation of goods is hampered by the absence of legal

security; later, by privileges accorded to a great number of families,

corporate bodies, municipalities, classes, etc., and later yet by the

mighty guardianship which the state exercises by its power of legislation

and even of education.(577) Each one of these epochs constitutes the end

of the preceding one, and is milder than it was. Finally comes the period

of complete freedom, when every man is permitted to manage his own affairs

even with injury to himself, provided the injury is confined to himself.

The later times of the Roman Empire are the best illustration of how, with

the decline of the conditions which must precede freedom of competition,

that freedom itself decays.(578)

Freedom of competition unchains all economic forces, good and bad. Hence,

when the former preponderate, it hastens the time of a people’s grandeur,

as it does their decline where the latter gain the upper hand.(579) We may

say of economic freedom what may be said of all other freedom, that the

removal of external constraint can be justified and produces the greater

good of the greater number only where a stern empire over self takes its

place. Without this it would not prevent or avoid idleness, usury or

over-population. Freedom must not be simply negative. It must be positive.

If on account of the immaturity or over-maturity of a people, there be no

sturdy middle class among them, unlimited competition may become what

Bazard calls a general _sauve-qui-peut_ (let the devil take the hindmost);

what Fourier designates as a _morcellement industriel_, and a _fraude

commerciale_; what M. Chevalier denominated “a battle-field on which the

little are devoured by the big;” and in such case, as Bodz-Reymond says,

the word competition, meaning simply that each one is permitted to run in

whatever direction he may see a door open to him, is but another and a new

expression for vagabondizing. But here the evil does not lie in too great

competition, but in this, that on one side there is too little

competition.(580) The opposing principle of competition is always

monopoly, that is, as John Stuart Mill says, the taxation of industry in

the interest of indolence and even rapacity; and protection against

competition is synonymous with a dispensation from the necessity to be as

industrious and clever as other people.

A protection of this nature, sufficiently effective to attain its end,

would not fail to arrest the efforts of those who had accomplished

something, and even to turn them backward. That freedom of competition is

a species of declaration of war,(581) among men considered as producers,

is certain; but, at the same time, it makes all men considered as

consumers members of one society, in which all the members are equally

interested, a fact too much overlooked by socialists.(582) It is the means

especially by which the greatest and ever increasing portion of the forces

of nature are raised to the character of the free and common property of

the human race.(583) “Man is not the favorite of nature in the sense that

nature has done everything for him, but in the sense that it has endowed

him with the ability to do everything for himself. The right of freedom of

competition may, therefore, be considered both the protection and the

image of this provision of nature.” (_Zachariä._)(584)

The person, therefore, who claims or asserts an exception from the rule of

free competition, has to prove his position in every individual case,

since the burthen of proof is on him. But the duty of interference on the

part of the state is positively pointed out where any interest common to

the whole people is not in a condition to assert itself; and negatively,

when the custom which hitherto had prevented an undoubted abuse has grown

too weak to continue to perform that service. In _both_ regards I would

call attention to the protection of factory children against the

concurrent selfishness of their parents and masters.(585)(586) _Supra_, §

39.

Section XCVIII.

How Goods Are Paid For.—The Rent For Goods.

Payment for goods (§ 1 ff.) of any kind can be made only in other

goods.(587)(588) Hence, the greater, more varied, and the better adapted

to satisfy wants, production is, the more readily does any product find a

remunerative market; more readily in England, for instance, in spite, or

rather, because of, the great competition there, than in Greenland or

Madagascar. From this it follows that, as a rule, a person is in a better

condition to purchase more goods in proportion as he has produced more

himself. According to official accounts, the average value of a harvest of

wheat and potatoes in Prussia was formerly 332,500,000 thalers. In the

year 1850, however, it was only 262,000,000 thalers. As a matter of

course, the country people in that year could not purchase from the cities

as much as in ordinary years, by a difference of 70,000,000 thalers. This

illustrates how every class of people, who live by finding a free market

for their products, are interested in the prosperity of all other classes.

As Bastiat says: “All legitimate interests are harmonious.” The more

flourishing a city, the better off are the towns around it, which furnish

it with provisions; and the richer these towns, the more flourishing is

the industry of the city which ministers to their wants.(589) It is

important that this fact should be borne steadily in mind, especially in

times of advanced civilization, when the feeling that we all have

interests in common, is too apt to grow dormant. Nothing can better serve

to awaken it again when it has become so. A nation, says Louis Blanc, in

which one portion of the people is oppressed by another, is like a man

wounded in the leg. The healthy limb is prevented by the sick one from

performing its functions.(590)

Section XCIX.

Freedom Of Competition And International Trade.

Does the same rule apply to the commercial intercourse of nations? Where

the feeling that all mankind constitute one vast family is stronger than

that of their political and religious diversity; where the sense of right

and the love of peace have extinguished every dangerous spark of ambition

for empire and all warlike jealousy; where, especially, their economic

interests are rightly understood on both sides, a real conflict between

the interests of two nations must always be a phenomenon of rare

occurrence, and an exception to the general rule, which should not be

admitted until it has been clearly demonstrated to exist.(591) Highly

cultivated nations generally look upon the first steps in the civilization

of a foreign people with a more favorable eye than they do on the

subsequent progress which brings such nations nearer to themselves.(592)

Yet the realization of the above mentioned conditions on all sides is

something so improbable, unpatriotic “philanthropy” something so

suspicious,(593) the greater number of mankind so incapable of development

except under the limitations of nationality, that I should observe the

total disappearance of national jealousies only with solicitude. Nothing

so much contributed to the Macedonian and Roman conquests as the

cosmopolitanism of the later Greek philosophers.(594)

As all commerce is based on the mutual dependence of the contracting

parties, we need not be surprised to find international commerce so

dependent. But this dependence need not, by any means, be equally great on

both sides. Rather is the individual or the nation which stands in most

urgent need of foreign goods or products the most dependent. Hence, it

seems that, in the commercial intercourse between an agricultural and an

industrial people, in which the former furnish food and the raw material

of manufactures, and the latter manufactured articles, the latter are the

more dependent. In case of war, for instance, it is much easier to

dispense for a long time with manufactured articles than with most

articles of food.(595) However, this condition of things is very much

modified, for the better, by all those circumstances on which the dominant

active commerce of a nation depends. It is, for instance, much easier for

the English, on account of their greater familiarity with, and knowledge

of the laws and nature of commerce, on account of their business

connections, their capital, credit and means of transportation, but more

particularly on account of the greater capacity of circulation of their

national resources, to find a new market in the stead of one that has been

closed to them, than it is for the Russians with their much more

immoveable system of public economy.(596) It is true, however, that an

effective blockade, which excluded both of these nations from all the

markets of the world, would be much more injurious to England than to

Russia.

Chapter II.

Prices.

Section C.

Prices In General.

The price of a commodity is its value in exchange expressed in the quantum

of some other definite commodity, against which it is exchanged or to be

exchanged. Hence, it is possible for any commodity to have as many

different prices as there are other kinds of commodities with which it may

be compared.(597) But whenever price is spoken of, we think only of a

comparison of the commodity whose value is to be estimated, with the

commodity which, at that time and place, is most current and has the

greatest capacity for circulation. (Money.)(598) When two commodities have

changed their price-relation to each other, it is not possible, from the

simple fact of such change of relation, to determine on which side the

change has taken place. If we find that a commodity A stands to all other

commodities, C, D, E etc., in the same relation as to price as before,

while commodity B, compared with the same, has changed its place in the

scale of prices, we may infer that B, and not A, has left its former

position.(599)

The words costly and dear, as contradistinguished from common and cheap,

both indicate a high price. We, however, call a commodity costly whose

price, compared with that of other similar commodities, is high. On the

other hand, we call a commodity dear when we compare it with itself, and

with its own average price in other places and at other times.(600)

In individual cases, the price of a commodity is determined most usually,

and at the same time most superficially, by custom; people ask and pay for

a commodity what others have asked and paid for it. If we go deeper and

inquire what originated this customary price and may continually change

it, we come to the struggle of interests between buyers and sellers. And

if science would analyze the ultimate elements of the incentives to this

struggle and the forces engaged in it, it is necessary that it should keep

in view the entire economy of the nation, and even all national life.

Section CI.

Effect Of The Struggle Of Opposing Interests On Price.

No where in the public economy of a people are the workings of

self-interest so apparent as in the determination of prices. When the

price of a commodity is once fixed by the conflict of opposing

interests,(601) the self-seeking of every individual dictates that he

should thereby gain as much as possible of the goods of others, and lose

as little as possible of his own. In this struggle, the victory is

generally to the stronger, and the price is higher or lower, according to

the superiority of the buyer or seller.(602) But who, in such case, is the

stronger? Political or physical superiority can turn the balance one way

or another only in very barbarous times, and especially in times when

legal security is small.(603) As a rule, it is the party in whom the

desire of holding on to his own commodities is strongest, and who is least

moved by the want of the wares of others. As in every conflict, confidence

in self, sometimes even unbounded confidence in self, is an important

element of success. A party to a contract of sale or barter, who considers

his immediate position decidedly stronger than that of the other party,

will scarcely depart from his demands. Hence it is, that in exchange, one

party so frequently holds back until the other has expressed his

terms.(604) How different is the price of the same pieces of land which a

new railroad enterprise is compelled to pay and the prices it would get

for them, from the adjoining owners, in case of the dissolution of the

company.

But the struggle to raise prices or to lower them, which is always going

on, undergoes modifications of every description among all really

commercial nations, partly through the influence of the public conscience,

which brands as inhuman and blameworthy the spoilation of the opposing

party by acts which the laws do not reach. And this consideration by the

public conscience is all the more severe in proportion as real competition

in the article sold is wanting.(605) But the chief modification in this

struggle is produced by the fact, that where civilization has advanced

farthest, every commodity is offered for sale by a great many and wanted

by a great many.(606) As soon as several seek the same object, there

naturally results a rivalry among them, which induces each to attain the

desired end, even by the making of greater sacrifices than others. The

greater the supply of a commodity is, as compared with the demand for it,

the lower is its price; the greater the demand as compared with the

supply, the higher it is. And, indeed, there is question here, not only of

the _mass_ of things supplied or demanded, but also of the _intensity_ of

the supply and demand.(607)

If the exchange-force of both contractants be equal, or, in other words,

if both, with equal knowledge, are interested in the completion of the

exchange, there results from this attitude of the parties toward each

other, what is called an equitable, or average price, in which both meet

with their deserts. Here each is a gainer, since each has parted with the

commodity which was less necessary to him, and received in exchange the

commodity which was more necessary to him. Looked at, however, from the

stand-point, not simply of a nation’s but of the world’s economy, the

value given and the value received are equal.(608)(609)

As a rule, the price-relation of two commodities is determined by this

relation of demand and supply,—by the desire to possess and the difficulty

of obtaining them. We must, therefore, examine on what deeper relations

supply and demand themselves depend.(610) In the case of the purchaser,

the value in use of the commodity and his own ability to pay constitute

the maximum limit of its price, which price may, however, be modified by

the cost of producing it(611) elsewhere or at another time. In the case of

the seller, the cost of production is the minimum limit, which may,

however, be extended by the cost of procuring the commodity by the

purchaser at another time or place.(612)

Section CII.

Demand.

The purchaser in his demand is wont to consider principally the value in

use of a commodity, according as it, in a higher or lower degree,

ministers to a necessary want, to a decency or to a luxury. The difference

of opinion as to which of these categories any given want belongs depends

not only on the nature of the country and the customs of its people, but,

for the most part, also, on the prejudices of class and on personal

individuality.(613) A reasonable man will employ only the surplus of the

first class in the satisfaction of wants of the second, and again only the

surplus of the second in the satisfaction of wants of the third.(614)

If the value in use of a commodity rises or falls, and surrounding

circumstances remain unchanged, its price also rises or falls.(615)(616)

Section CIII.

Demand.—Indispensable Goods.

When the supply of articles of luxury diminishes, the price of them, it is

true, rises. But as now there is a number of purchasers no longer able to

pay for them, the demand for them also decreases, and their price, as a

consequence, rises in a less degree than might be inferred from the amount

and condition of the supply merely. And so, on the other hand, an increase

of the supply which lowers the price is wont, in the case of pleasures

capable of a wide extension, such as are ministered to by fine roots,

vegetables, etc., to produce an increase of the demand, and this operates

to arrest the falling price.

It is quite otherwise, in the case of indispensable goods, as for

instance, wheat. When there is a want of such an article, men prefer to

dispense with all other articles, to some extent, rather than to practice

frugality in bread; and all the more, as bread is not so much used as

consumed rapidly, while clothes and metallic articles last a long time.

And even after an over-abundant harvest, leaving voluntary waste out of

the question, consumption is increased by a finer separating of the flour,

an increase in the amount of corn fed to cattle, and the distillation of

spirits. Hence, demand and supply by no means run in parallel lines at

every moment; and indispensable articles tend to greater perturbations in

price than those which can be dispensed with.(617)(618) The price of

grain, especially, varies in a ratio very different from the inverse ratio

of the amount of the harvest;(619) although a formula therefor expressed

in figures, like that of Gregory King, can never be applicable

universally.(620) Farmers must everywhere and always withhold a certain

amount of their harvest for seed, for home use etc., from the market. Only

absolute necessity can induce them to draw on the quantity thus laid by.

But the ratio of this part to the whole is very different in different

countries.(621) In the higher stages of civilization, where payment in

money has taken the place of payment in produce, and all other kinds of

payment, and where the cultivator of the ground pays the wages of his

laborers almost exclusively in money, so that they, like all others,

purchase what bread they require in the market; a given deficit in the

harvest must be spread over a much larger market supply; and prices,

therefore, remain much less affected than in the lower stages of

civilization.(622) And so, it is clear that a like bad harvest must affect

prices very differently, if there be a large importation or exportation of

the means of subsistence, and if several bad harvests, or several harvests

yielding more than the average have preceded.

In another respect yet, the price of indispensable commodities is very

sensitive, because here the mere fear of a future want of them has a far

deeper and wider influence, than has the fear of want of articles of

luxury. No matter how good the wheat crop may have been, if the weather

afterwards interferes with its harvesting, the price of wheat, in

countries in which the spirit of speculation is on the alert, will

certainly rise, because the prospect of the future crop then becomes

somewhat doubtful.(623)

Section CIV.

Influence Of Purchaser’s Solvability On Prices.

The purchaser, besides the value in use of the goods he desires to buy,

considers his own solvability (_Zahlungsfähigkeit_ = ability to pay). It

is only solvent demand which can influence prices.(624) For instance,

among a people made up almost entirely of proletarians, there will be a

great many cases of starvation and death after a bad harvest, but the

price of corn will undergo only a slight increase.(625) But where the

greater number of inhabitants own property, and where the wealthy come to

the help of the poorer classes by means of poor-rates and acts of

benevolence, it is scarcely possible to assign limits to the increase of

the price of corn. By a necessary connection, when indispensable articles

grow dear, the demand for articles that can be dispensed with generally

decreases, and _vice versa_.(626) Every merchant, engaged in an extensive

business, is interested in knowing in advance the results of the corn

crop. The higher the price of a commodity rises, the narrower, of course,

grows the circle of those who can pay for it.(627)(628)

Section CV.

Supply.

In the case of isolated chance exchanges, the seller, too, takes into

consideration, first of all, value in use, and compares the satisfaction

which the commodity to be parted with and that to be received are able to

afford. It is true that in making this estimate, he is subject in the

highest degree to error and deception.(629) In the well ordered trade of a

nation whose economy is highly developed, the seller, who had this very

trade in view in his production, is wont to consider almost exclusively

the value in exchange of his commodity.

Section CVI.

The Cost Of Production.

As no one is willing to lose anything, every seller will consider what his

goods have cost him, and the cost of producing or procuring them as the

minimum price to be asked for them.(630) At the same time, the idea

covered by the expression cost of production, although it always embraces

whatever disappears from the resources of the producer to enter into

production, varies very much according as it is considered from the point

of view of the individual’s, the nation’s or the world’s economy.

An individual who pays taxes to his government, and who has rented land

and employed labor and capital to engage in production, must indeed,

besides the capital he has used in such production, call all his outlay in

interest, wages, rent, and taxes, by the name of cost of production;(631)

since, unless they all come back to him in the price of the commodity, the

entire enterprise can only injure him.(632) He will, of course, add an

equitable profit to remunerate him for his enterprise, since without such

profit, he would not be able to live or produce; or else, he would be

compelled to consume his capital. The moment the current rates of

taxation, interest, wages and rent change in a country, the cost of

production is also changed in the case of the individual engaged in

production, however unaltered the technic process may remain.(633) But

taking the nation, or all mankind into consideration, we must not lose

sight of the fact that these three great sources of income, as well as

taxation, are not, rightly speaking, sources from which income flows, but

rather channels through which the aggregate income of the nation or the

world is distributed among individuals.(634) Hence the wages of labor, for

instance, which afford the means of living to the greater part of the

population, cannot possibly be looked upon simply as a factor in economic

production. The people considered in their entirety have the soil gratis.

All saving made from rent, interest on capital, or wages, is nothing but a

change of the proportion in which the results of production were

distributed hitherto among coöperators in production. Such a change may be

either advantageous or the reverse; but it is not a diminution of the

amount of sacrifice which the people in general must make for purposes of

production. Hence, in a politico-economical sense, to the cost of

production, belongs only the capital necessarily expended in production,

and which has disappeared as a part of the nation’s resources, abstraction

made of the personal sacrifices in behalf of production.(635) The value of

the circulating capital which in the process is entirely used up, must, of

course, be entirely restored in the price, that of the fixed capital used

only to the extent that it has been used.(636)

The risk, which the producer runs until the commodity produced is actually

consumed must also be borne in mind.(637) There are things which are a

real risk in small enterprises that by the intervention of an insurance

company, or where the enterprises are large and insure themselves, become

a more or less variable portion of the cost of production. The price of

the product, in the latter instance, rises, by this means, very regularly.

In the former case, the rise depends partly on the feeling of the people

whether their pleasure in gain is greater than their grief over a

corresponding loss.(638)

Those enterprises which necessarily produce different products at the same

time deserve special consideration.(639) Here we may speak of “_united_

costs of production,” and all that is needed is that the aggregate of

these costs should be covered by the aggregate price of both products.

This complicates to a certain extent the calculations which the seller

must make to determine his minimum demand for each product. To ascertain

this, he must subtract from the united costs of production the amount of

value which he expects with certainty for the other product.(640)

Section CVII.

Equilibrium Of Prices.

Goods whose cost of reproduction,(641) that is, the highest necessary cost

of reproduction is the same, have uniformly the same value in exchange.

Every deviation from this level immediately sets forces in motion which

endeavor to restore the level, just as the water of the sea seeks its

level, notwithstanding the mountains and abysses which the winds bring

forth from its bosom.(642)(643)

Section CVIII.

Effect Of A Rise Of Price Much Above Cost.

If the market price rises high above the cost of production, producers

make a profit greater than the average profit made in the country. This

induces them, by the appropriation of new land and the employment of new

labor and capital, to increase their business. Other parties also engage

in this profitable department of trade. This competition not only makes

the means of production dearer, but must eventually, by increasing the

demand, reduce the price of the product to the ordinary level of profit,

that is to an equilibrium with other commodities.(644) Hence, in the

beginning, every diminution of the cost of production(645) turns to the

advantage of the producer; but afterwards and permanently to that of the

consumers: an economic law exceedingly beneficent in its operations, and

not unlike the action of positive legislation in the matter of patents.

There is no greater stimulus to the making of improvements than the

certainty of reward to the person who first introduces one. The moment,

however, that the improvement is imitated by all producers, the advantage

gained by it becomes the common good of the whole nation.(646) These are,

as J. B. Say says, conquests made over the gratuitous productive force of

nature. As a consequence, the value in use of a people’s resources

increases; generally, also, their value in exchange, in so far as the

production of the now cheaper goods increases in a degree greater than

their cost of production has diminished.(647)

As to the alternative so frequently discussed, whether it is preferable to

make a large percentage of profit on the sale of a small quantity of

goods, or a small percentage on a large quantity, we find that, in the

lower stages of civilization, the former is preferred, and the latter in

the higher.(648) And, indeed, the latter is not only more humane, but, in

the long run, it is more profitable to the person who adopts it as his

rule in business. In the case of commodities, he now runs but little risk

from a change of fashion, because the fashions of the masses change much

less rapidly than those of the upper circles of society. In the case of

indispensable goods, on the other hand, he may now calculate with more

certainty on the increase of population, and, therefore, on a future

market for his wares. Competition, which in former times, devoted all its

efforts to bringing about the exclusion, by law, of all rivals, is now

engaged, principally, in devising means of surpassing them by superiority

of workmanship, and in thus increasing the power of the real sources of a

nation’s wealth.

Section CIX.

Effect Of A Decline Of Price Below Cost.

If the market price sinks below the cost of production, the producer

naturally suffers a loss, and diminishes his stock as soon as possible.

That whole establishments engaged in industry should forsake a branch of

it which is suffering from depression and enter a flourishing one, must

ever remain a rare exception.(649) But the discouraged manufacturer may

delay renewing his stock on hand,(650) replacing his machinery by new

machinery; he may dismiss some of his workmen and diminish the number of

days during which the others shall work. Moreover, most industries are

operated by means of borrowed capital, capital which must therefore, be

returned to the lender. Under certain circumstances, however, the industry

may be continued for some time, even at a real loss,(651) so long as the

loss of interest etc., which would follow the entire suspension of the

work, exceeds the loss produced by the lowering of price, but hardly any

longer. If the supply of the commodity the price of which has fallen has

been diminished, the subsequent result depends on the causes which, in the

first place, brought about the fall in price. If the diminution in price

was caused solely by a too great supply, when this superabundant supply is

gotten rid of, the price will rise again.(652) If it were produced by a

decrease in the value in use of the commodity, the diminution of the

supply can restore the former state of things only in so far as at least a

part of the purchasers ascribe to the commodity the same value in use as

before.(653) Lastly, if the lowering of the price came from a decrease in

the number of buyers, or from a decrease in their ability to purchase, the

former price will be restored when production has been adapted to a

correspondingly smaller circle of consumers.(654) This last is true

especially when the price, without having suffered any absolute change,

has become relatively too low, on account of an increase in the cost of

production.(655)

Chapter CX.

Different Cost Of Production Of The Same Goods.

Most goods are produced at the same time, but under different

circumstances, at a very different cost. In order to estimate the

influence of this fact upon price, we must distinguish between those

commodities the cheapest manner of the production of which may be extended

at pleasure, and those in the production of which it is necessary, in

order to satisfy the aggregate want of them, to call in the dearest mode

of production to aid the cheapest.

In the former instance, the price of commodities is naturally regulated by

the least cost of production. The person who is unable to sustain this

competition permanently, would do a great deal better to abandon the

industry altogether; for it is not in his power to raise the price by

diminishing the supply; more powerful rivals would then only need to

correspondingly increase theirs.(656)

If the same law were applicable, in the latter case, producers placed in a

less favorable situation would be compelled to immediately abandon the

market. The market, in consequence, would no longer be able to provide for

the aggregate need; and the price of the commodity would continue to rise

until the producers who had been driven from the market returned to it

again. Hence, here, price in the long run is determined by the cost of the

production of the commodity, produced under the least advantageous

conditions, while such production is necessary in order to satisfy the

aggregate need. The person engaged in production under more advantageous

conditions receives in the same price of the goods, which are cheaper to

him, an excess of profit; one which is greater in proportion as his

situation, _vis-a-vis_ of production, is superior to that of his less

favored competitors.(657)(658)

Section CXI.

Different Cost Of Production Of The Same Goods. (Continued.)

Hence the price of a commodity and the ratio between its supply and demand

mutually condition each other. On the height of the price depends, in

great part, how many purchasers shall resolve to make an effectual demand;

but, at the same time, to what amount of cost of production, sellers shall

extend their supply.(659) We can speak of an equilibrium between supply

and demand only when the former corresponds with the _wish_ of those who

are ready to make good the full cost of production. (_Malthus._) It has

been asked, indeed, whether it were more natural and better that demand

should precede supply or supply demand.(660) But the inquiry is an

illogical one, when expressed in so general a manner, since supply and

demand are only two sides of the same transaction. But, we may say that in

the case of indispensable goods, the want of them (demand) is always felt

sooner than the excess of them (supply), and that in the case of goods

which may be dispensed with, including, originally, money, the reverse is

true. Besides, a person engaging in the production of any kind of goods,

can, as a rule, only seldom directly investigate the relation between

supply and demand. Generally, he can do no more than compare the market

price of the commodity with the cost at which he can produce it. Many

mistakes are inevitable here; but the making of them is the necessary

sacrifice which must be endured to purchase the more than counterbalancing

advantages of free competition.(661)

Section CXII.

Exceptions.

The rule that goods which have the same cost of production have also equal

value in exchange, is applicable only to the extent that it is possible to

transfer the factors of production at will from one branch of production

to another. Where this really free competition does not exist, the price

depends entirely on the quantity of the supply, compared with the

solvability or capacity to pay of the purchaser; and hence, it may

sometimes rise far above the cost of production (monopoly-price), and

sometimes sink far below it (forced price, or under-price).(662) Such

hindrances to competition depend, in part, upon natural causes. Thus, in

the case of the works of art of a deceased artist, which cannot be

increased in number;(663) or in that of living celebrities who cannot

extend their mental activity in the same degree that their reputation has

grown. So, also, in the case of precious stones, which are sometimes found

free, and therefore cost nothing, but which, at the same time, have a high

price.(664) Many valuable agricultural products are, together with their

production, limited to a definite and sometimes very small district.(665)

It is to be regarded as a modification of such natural monopolies when

substitutes for a kind of goods which diminish, at least in part, the

demand for them, are found, at a cheaper price; for instance, ordinary

table-wines in the stead of fine wines. The rule applies much more

strictly to those goods which, on account of their greater quantity, can

replace inferior ones,(666) than it does to those where this is not

possible.

The principal cause of forced or under-prices (_Schleuderpreise_) is the

facility with which the product deteriorates, and must, therefore, find a

quick sale, especially when its storage or transportation is attended by

further difficulties.(667) But, very durable commodities are also subject

to under-prices, and especially those which last longest, because the

supply of them can be diminished only very slowly. Thus, for instance,

houses, in a declining city. Distress-prices are found most usually in the

case of such commodities as are produced without any intention to produce

them, as for instance, rags and excrementitious substances. The more the

mere forces of nature preponderate in production, the less can the supply

be increased or decreased at pleasure, the more frequently, as a

consequence, do we find monopoly-prices and under-prices. (Compare § 131

ff.) Thus the production of wheat is invariably connected with the order

of the seasons. Between seed-time and harvest, there are a number of

months which neither capital nor skill can shorten to any extent. The

cultivation of land, to be very much greater and more lasting, supposes so

many conditions precedent, increase of live stock, buildings etc., that it

can be attained only after a series of years. Hence it happens that wheat,

much more than manufactured products, is subject to oppressively high

prices and oppressively low ones, during a long period of time. No matter

what the influence of the forces operating in the opposite direction may

be, the price of wheat depends most largely on the result of the last

crop.(668)

Section CXIII.

Exceptions. (Continued.)

Other impediments in the way of freedom of competition have their origin

in social conditions. The rule governing prices applies only where the

vendor and purchaser are equally ready to exchange. But in every case in

which the producer carries on his business, not for the sake of free gain,

but simply to obtain a means of livelihood, it may be subject to many

important exceptions.(669) The richer a seller is, the longer can he wait

for a favorable opportunity to sell. Thus, for instance, wheat is somewhat

lower in price at times when payments are universally made than at other

seasons of the year, because a great many country people are then

compelled to sell. Where the country population are universally needy, it

sinks after a harvest to an unusually low figure, and in spring rises

again very high.

Sometimes price is affected by the agreements of the purchaser or seller,

but most readily by those of middlemen between consumer and producer.(670)

Customs peculiar to whole classes may exert the same influence, and such

customs are especially powerful in the lower stages of business and

industrial development. They, even at the present time, take the place,

frequently, of freedom of competition in retail business, in the book

business, and in the determination of lawyers’ and doctors’ fees, as well

as in the distribution of a nation’s income among the three great branches

of its general economy,(671) deciding, instead of competition, how much

shall go to each. Wherever there are guilds, communities, castes etc. with

legal privileges; wherever there are difficulties placed in the way of

exportation and importation; wherever preëmption rights or

monopolies,(672) in the strict sense of the word, exist, the leveling ebb

and flow of the elements of production may be still more seriously

interfered with. Legislation(673) of this sort injures the non-privileged

portion of the population more than it helps the privileged portion. (See

§ 97.)(674)

The word _usury_, so arbitrarily used in every-day language, should be

admitted in science only to designate a famine-price, fraudulently and

intentionally caused or intensified.

Section CXIV.

Prices Fixed By Government.

No power can, of course, fix the price of a commodity in the long run,

which cannot at the same time fix the relation of supply and demand.

Hence, set prices fixed by governmental authority can be made to play a

part in practice only in so far as they do not establish a price in

opposition to the real state of things, only to the extent that they give

undoubted expression to it in a manner in harmony with natural conditions.

With this restriction, set or fixed prices may, in the absence of real

competition, which can always best determine prices, be useful to both

parties; otherwise one party would at one time, and the other at another,

profit by an unjust advantage; but it would not be long before both would

suffer from the perturbation caused thereby in all commercial

transactions. How pleasant it is for a traveler in Switzerland, or even in

Italy, to find set prices established there.(675) Especially where

competition is prevented by state privileges, the establishment of set

prices by the state for the protection of the public may be

necessary.(676) It is more difficult to fix a set price for a commodity in

proportion to its complexity and to its variableness in quality; and where

there are different grades of quality of the same commodity, and the

transition from one grade to another is almost imperceptible, such price

is easily evaded.(677) In the case of every enterprise carried on by many

in common, where no competition is possible, it is necessary to supply the

defect by means similar to the establishment of fixed prices; as in the

case of government, by fees for governmental services, and the coöperation

of a chamber of deputies in the imposition of taxes and the determination

of official salaries etc.(678)

Section CXV.

Influence Of Growing Civilization On Prices.

On the whole, prices become more and more regular as national-economic

civilization advances. Progress in civilization tends to bring the parties

engaged in the struggle for prices that is buyers and sellers, nearer to

one another, in so far as it uniformly decreases the cost of production,

and increases the purchaser’s ability to pay.(679) (See § 101.) The more

universal division of labor makes commercial intercourse more necessary to

every one, at the same time that it makes it more of a habit to him; and

hence exchange ceases more and more to be a matter of caprice or chance.

The better means of transportation and communication render it easier, in

every way, for supply and demand to meet. With the advance of general

enlightenment and education, an acquaintance with commodities also becomes

more general, and every purchaser is on a better way to be able to

estimate the cost of production which the seller has to bear. Hence,

fraudulent prices and prices founded in error become less frequent; and

all this is helped forward by the greater accuracy of weights and

measures. The increase of population makes competition more active in all

branches of trade, while at the same time, with the greater freedom of

circulation, a number of causes which previously operated to produce very

high prices in one place and very low ones in another are removed.(680)

But especially, the growth of a distinct class of merchants leads to a

uniformity in price. This class are incited by their own interest to

purchase at low prices and sell at high prices. Thus, their competition in

the former case raises prices, and lowers them in the latter.(681) In all

lower stages of civilization, the custom of making offers and beating down

in price plays a great part, while where culture is higher, the system of

fixed prices (but not by government) gains ground continually. Here

Turgot’s principle is applicable, viz.: that the current price of an

article is tacitly understood when one asks a merchant the price of his

wares.(682)

This proposition is true in the case of individuals, as well as of classes

and of whole nations.(683) It is plain, that under a system of fixed

prices we can more certainly discover what the equitable price is, than in

the heat of higgling which besides consumes a great deal of precious time.

Lastly, one of the principal requisites of a well developed scale of

prices is national honor, and this, doubtless, increases in the higher

stages of civilization, not only because of the greater moral culture

which then prevails, but also and especially because that which

constitutes a people’s real and best interests is better understood.(684)

Among declining nations, many of these developments take a retrogressive

road. The very great distinction between rich and poor, between educated

and uneducated, again produces great fluctuations in price. A proletarian

people who have sunk so low as to live on potatoes will suffer much more

from variations in price and of the means of subsistence than a people who

live on wheat; for the reason that it is so difficult to export or to

preserve(685) potatoes. Nor can it be doubted, that the greatest possible

constancy of prices is the most beneficial condition that the general

economy of a people can be in. Where prices change while the cost of

production remains the same, one person can only gain what the other has

lost. But such unmerited gains and undeserved losses have an invariable

tendency to destroy the deepest roots of a people’s economic activity; and

intentional speculation based upon such change usually assumes an immoral

character. (Stock-jobbing.)(686) Even if Macleod be right, that an

increase or decrease in prices is to be regarded as a warning of excess,

the former of excess of consumption, the latter of production, no one will

doubt that it is the interest of every organism to confine pain within the

smallest possible limits, even if its consequences are so beneficial to

the preservation of the whole body.

Chapter III.

Money In General.

Section CXVI.

Instrument Of Exchange. Measure Of Value. Barter.

Wherever the division of labor is very highly developed, the continuance

of barter, or the direct exchange of one object of consumption for

another, presents difficulties well nigh insurmountable. How difficult it

would be always to find the person who could supply us with precisely what

we wanted, and at the same time have need of what we had a surplus

of.(687) But how much less frequently would it happen that one’s want and

another’s surplus would correspond exactly the one to the other in

quantity; that, for instance, the manufacturer of nails, desirous of

exchanging his nails for a cow, should meet a cattle-dealer who should

want exactly as many nails as a cow is worth! Here there is one chief

difficulty in the way, viz.: that there are so many commodities which

cannot be divided without causing a diminution or even a destruction of

their value; and that others cannot be stored away in any quantity without

becoming a very heavy burthen to their owner. How useful it would

therefore be, if there was one commodity which should be acceptable to

every person, at all times, especially if in addition to this, it

possessed the qualities of durability, capacity for transportation and for

being stored up and preserved. Any person who possessed a proper supply of

this one commodity would then be certain of being able to obtain all other

exchangeable commodities through its instrumentality; and every seller

would be satisfied to exchange what he had to dispose of against this

“universal commodity.” If two values are equal to a third, they are equal

to each other. It is, therefore, a simple matter to use this most current

of all commodities, with which all others are most frequently compared, as

a measure of the relative values of all other exchangeable commodities.

There is need of such a measure, and it is analogous to the want

experienced by the mathematician who has a column of fractions to sum up,

and who does it by first reducing them all to a common denominator.

(_Storch._)(688) A person entrusted with the duty of assessing the values

of two hundred different articles would be obliged, if he had no such

measure to use, to burthen his memory with at least 19,900(689) different

ratios. With it, he need carry only 199 in his head.

Such a commodity, universally in favor, and which, on that account, is

employed as an intermediary in the effecting of exchanges of the most

varied nature, in the measuring of all exchange-values and as a

value-carrier (_Werthträger_) in time(690)(691) and space, we call money.

(_Merce universale: Berri; produit préféré: Ganilh; marchandise

intermédiare; Bastiat._)(692)

The more enlightened portions of every business community gradually come

to require payment in the commodity which has for the time being the

greatest circulating capacity. If to this be added the sanction of the

government, and if the government itself recognizes this same “universal

commodity” as the means of payment of all debts, or as “legal tender”

(_puissance libératoire_), where no other is expressly agreed upon, the

“universal commodity” in question then becomes money in the fullest sense

of the idea conveyed by the word.(693)

Section CXVII.

Effect Of The Introduction Of Money.

By the introduction of money, most exchanges are divided into two halves:

purchase and sale.(694) We may also say with Schlözer, that by its means,

exchange, for the first time, becomes a sale, and obscure value in

exchange, clear and definite price. (_Permatio vicina emtioni_). Were

there no money, the party to an exchange, occupying the most advantageous

economic position, would possess a much greater superiority over the other

than he does now. Many a bread-buyer, especially, would be half starved

before he could agree with the seller on the quantity of bread to be

received in exchange for the commodity he had to dispose of. The producer

of the means of subsistence would here possess an extreme advantage, since

the urgent necessity of the exchange for the one party, and the power of

the other to postpone it, would make the determination of the price an

entirely arbitrary matter.(695) Hence, the development of money as the

instrument of trade, keeps pace with the development of individual

liberty. Payment of wages in money makes the workman more responsible for

his husbandry etc., but at the same time, freer, than payment in produce.

Now, also, a higher division of labor becomes possible; for the easier it

is to obtain everything else for money, the easier it is for each person

to devote himself exclusively to one branch of business.(696) Without

money, too, only ready commodities could be exchanged one against another.

Only when money has become the instrument of trade, is it possible to

separate the net from the gross returns, and, therefore, to manage income

properly. (_Schäffle_). Now, also, it becomes for the first time really

remunerative to produce more than one needs for his own use, and to save.

Without money, the owner of any one kind of capital, who could not employ

it himself, would be obliged, if he desired to loan it, to find not only a

person who was in need of capital, but one who needed the very kind of

capital he had. For instance, the person who had one horse too many, would

be obliged to look for another who was in need of one etc. And how

difficult a task it would be to determine the amount of interest, if it

had to be paid in produce or kind, and even to make a return in produce or

kind of capital which had been presumably used. (_Storch_). Moveable

property or resources can attain importance only after the introduction of

good money, since, previous to such introduction, it was by reason of its

great variety,(697) and of its perishable nature, immensely inferior to

landed property. Hence it is, that money, in a nation’s economy, is what

the blood is in the life of the animal. It is, so to speak, the common

reservoir in which all food is first dissolved, and by which, at a later

stage, the elements of nutrition and preservation are distributed to the

several organs.(698) There is, indeed, no machine which has saved as much

labor as money. (_Lauderdale_). It is true that the shadows which wealth

is wont to cast, extravagance, avarice and inequality of every kind, may

readily grow longer and darker in consequence of the introduction of

money.(699) But may not the knife which, in the hands of the surgeon, does

so much for life, become an instrument of danger in the hands of a child?

The invention of money has been rightly compared to the invention of

writing with letters.(700) We may, however, call the introduction of money

as the universal medium of exchange (money-economy),(701) in which goods

intended for use are exchanged against money(702)—instead of barter

(barter economy), which is a system of public economy (_Schäffle_), in an,

as yet, very little developed form, man being there less sociable with his

fellow men—one of the greatest and most beneficent advances ever made by

the race.(703)

Section CXVIII.

The Different Kinds Of Money.

Very different kinds of commodities have, according to circumstances, been

used as money; but uniformly only such as possess a universally recognized

economic value.(704) On the whole, people in a low stage of civilization

are wont to employ, mainly, only ordinary commodities, such as are

calculated to satisfy a vulgar and urgent want, as an instrument of

exchange. As they advance in civilization, they, at each step, choose a

more and more costly object, for this purpose,(705) and one which

ministers to the more elevated wants.

A. Races of hunters, at least in non-tropical countries, usually use skins

as money; that is the almost exclusive product of their labor, one which

can be preserved for a long period of time, which constitutes their

principal article of clothing and their principal export in the more

highly developed regions.(706)

B. Nomadic races and the lower agricultural races,(707) pass, by a natural

gradation, to the use of cattle as money; which supposes rich pasturages

at the disposal of all. If it were otherwise, there would be a great many

to whom payments of this kind had been made, who would not know what to do

with the cattle given them, on account of the charges for their

maintenance.(708)

Section CXIX.

The Metals As Money.

C. That metals were used for the purpose of money much later than the

commodities above mentioned, and the precious metals in turn later than

the non-precious metals, cannot by any means be shown to be universally

true. Rather is gold in some countries to be obtained by the exercise of

so little skill, and both gold and silver satisfy a want(709) so live and

general, and one so early felt, that they are to be met with as an

instrument of exchange in very early times.(710) In the case of isolated

races, much depends on the nature of the metals with which the geologic

constitution of the country has furnished them.(711) In general, however,

the above law is found to prevail here. The higher the development of a

people becomes, the more frequent is the occurrence of large payments; and

to effect these, the more costly a metal is, the better, of course, it is

adapted to effect such payments. Besides, only rich nations are able to

possess the costly metals in a quantity absolutely great.(712) Among the

Jews, gold as money, dates only from the time of David.(713) King Pheidon,

of Argos, it is said, introduced silver money into Greece, about the

middle of the eighth century before Christ. Gold came into use at a much

later period.(714) The Romans struck silver money, for the first time, in

209 before Christ, and, in 207, the first gold coins.(715) Among modern

nations, Venice (1285) and Florence seem to have been the first to have

coined gold in any quantity.(716) Henry III. of England (ob. 1272), was

the first to coin gold, but with so little success, that for a long time

after, Edward III. (ob. 1377) was regarded as the first English monarch

who had coined gold.(717) How little a barbarous people are in a condition

to make use of very costly material as money, is proved by the account

which Tacitus gives of the ancient Germans, who preferred silver to gold

in trade.(718) England presents us with an instance of the other extreme.

Since 1816, silver, in that country, has been used only as a species of

change, and the circulation of gold governs in almost all commercial

transactions.(719)

D. The local usage of some countries has raised many other commodities to

the dignity of instruments of exchange, especially where the population

are poor and the metals which might be used as money have not existed in

sufficient quantities or in the requisite proportion. But people have

always limited themselves in the material of their money to such

commodities as are universally acceptable, as uniform as may be, and

current as articles of export or import.(720)

Section CXX.

Money—The Precious Metals.

That the precious metals are uniformly preferred in highly cultivated

nations(721) as the instrument of exchange, depends on the greatness and

uniformity of their value in exchange, but especially on their durability

and pliancy as to form.

This value in exchange is great, because their beauty, which consists in

their luster and their sonorous ring,(722) gives them great value in use;

and because, at the same time, their rarity in nature makes the supply of

them relatively small,(723) and not susceptible of increase at

pleasure.(724) As they contain so large a value in so small a volume, they

are adapted to transportation from one place to another, with but little

difficulty—a matter of the greatest importance in an instrument of

exchange.(725) Hence, it is much easier to keep the demand for them and

the supply of them at a level all over the world, than it is the demand

and supply of most other commodities. And this all the more as there are

not different kinds of gold and silver, but only different qualities of

their fineness.(726) It also contributes to the uniformity of their value

in exchange, that they minister mainly only to wants of luxury. The most

indispensable commodities are subject to the greatest variations in price

(see § 103), whereas, in the case of the precious metals, the diversity of

uses to which they may be turned contributes greatly to render their

value, as instruments of exchange, more equable. If the supply of them be

small, gold and silver vessels are less in demand; a part of the old ones

are melted down, and _vice versa_.

In durability, the precious metals surpass almost all other commodities.

They are not at all affected by air or water, and they can be corroded

only by very few fluids. Fire may, indeed, change their form, but scarcely

in any degree the value of the material of gold, and that of silver very

little, and then only when it is subjected to a very powerful blast or

draught of air.(727)(728) Hence, while by laying them by, they suffer

virtually nothing at all (a most valuable article is an article to deposit

savings in), their wear and tear from use may be very much decreased by an

admixture with other metals in the proper proportion.(729) This durability

contributes largely to keep the price of the precious metals more uniform.

By the time that the wheat crop is rightly harvested, the great bulk of

the previously stored wheat is, as a rule, consumed; and, therefore, the

supply of wheat depends almost entirely on the yield of the last crop. On

the other hand, it is probable that there is many a piece of money, the

raw material of which was dug from Thracian gold mines in the time of King

Philip or from the silver mines of Spain during the reign of Hannibal, in

circulation to-day. Compared with the immeasurable stores of gold and

silver which have gone on accumulating for thousands of years, the new

yield of them, in any one year, is lost like a drop in a bucket. Hence,

only when the yield of the mines has continued for a very long time, or

when it is exceedingly great or remarkably small, can the price of their

products change to any great extent.(730) Even during the revolution in

prices, between 1492 and 1560, the yearly decline in their prices was only

one-half of one per cent. per annum.

Their great pliability of form has, too, very important advantages for our

purpose: first, that they can be divided very accurately into very small

parts, and that the volume of every part corresponds exactly to the value

of the part;(731) and secondly, that they take an impression at very

little cost, an impression which is an authoritative and trustworthy

expression of their weight and quality, thus saving the commercial public

the perilous trouble of weighing and testing them every time they are

used.(732)(733)(734) This duty the state, as a rule, assumes. (Coinage.)

When its authority, however, is not recognized, as is generally the case

in international trade, gold and silver bars are even now used, and have,

therefore, to be weighed and tested.(735)(736)

Section CXXI.

Value In Use And Value In Exchange Of Money.

The original value in use of the precious metals, to satisfy certain wants

of luxury in the most aesthetic and the most substantial manner, continues

still; but with the advance of civilization, the employment of gold and

silver for this purpose has fallen farther and farther behind the more

recent employment of these metals as the best material for money. And

since now the services rendered by money may be divided into two classes:

storing up or preservation, and the transmission (division, concentration)

of values,(737) the former always plays a greater part in the earlier

states of the development of trade by money; and the latter plays the

larger part in the later stages of the same development. We may best

compare money to the other machines or instruments of commerce.(738)

The person who, in times when there is a dearth of goods, and especially

of capital, complains of a want of money, commits the same error as if he

ascribed a scarcity or absence of grain, when it exists, to a too small

number of wagons to carry it, or to the narrowness of country highways.

The inference may, indeed, be sometimes well-founded, but certainly only

by way of exception; and yet it is generally the first which

politico-economical quacks think of in practice.(739) Like all tools or

instruments, money constitutes a part of an individual’s or a nation’s, or

of the world’s capital. Considered from the point of view of private

business or economy, money is circulating capital, but from the point of

view of the world’s economy, it is fixed capital.(740)

Section CXXII.

Value In Exchange Of Money.

The value in exchange of money is said to be high when all other

commodities estimated in money are cheap; and low in the opposite case. We

have here to do with the application of the most general of all laws of

price; therefore, with the demand and supply of money. The demand for it

depends on the wants and the means of payment of its purchasers.

Therefore, if a country has little trade, it will, on this account, need

only few instruments of trade, that is, of little money to effect

exchanges. If it be poor in other goods, it will get little money in

exchange. In the former respect, there is a beneficent principle of

equalization or compensation which decreases the price-variations of

money, no matter of what kind, in the necessity, when the number of

business transactions remains the same and money becomes cheaper, to use

more of it, and less when it becomes dearer.(741) The supply of money is,

in the long run, dependent chiefly on the cost of production. But since

the cost of production in different mines is very different, the value in

exchange of the precious metals is determined by the cost of producing

them from the poorest mines which must be worked in order to supply the

aggregate want of them. (See § 110.)(742) The more unfavorable the

conditions of their production are, the greater is the quantity of

commodities which must be given for a pound of gold, silver etc.; that

producers may not be deterred from the prosecution of their work. The

extremes of the value in exchange of money are dependent on the use for

which it is intended. That value cannot rise higher than to the point at

which single pieces of money become inconvenient on account of their

smallness, nor sink lower than the point at which a similar inconvenience

is produced by their too great size. In both instances, it would become

necessary to have recourse to other instruments of exchange.

Section CXXIII.

The Quantity Of Money A Nation Needs.

How great the amount of money needed in the entire economy of any state

is, cannot be always rightly determined, either by the amount of the

national resources, or by the number of the population.(743) It is a very

easy thing to refute the opinion, that the aggregate amount of cash money

in a country constitutes an equivalent of the aggregate amount of all

other commodities to be found there at any time, in such a way that the

two pans of this great scales (_Locke_) hang always in a state of

equilibrium, and that an increase of the amount of money, the amount of

all other commodities remaining the same, must be productive of an exactly

corresponding decrease in the value of each piece of money.(744) Think

only of the great many commodities which are obtained and consumed without

any exchange whatever! Rather does the amount of money necessary to keep

the value in exchange of the money employed in a people’s public economy

unaltered,(745) depend on the cooperation of the following conditions:

A. _The number and extent of such commercial transactions as are effected

by means of money_;(746) a relation which, evidently, increases (see § 56,

ff.) with every advance in the division of labor. Hence the transition

from serfdom and socage service to free labor, from domestic-servant labor

to day-labor and piece-work, from feudal military service to that of paid

and standing armies, from land-privileges and allowances in produce, such

as fire-bote etc., to the payment of officials in money, from dues in

produce to taxes in money, and regular lease-hold interests, from

requisitions to loans of money; in a word, from the barter-economy

(_Naturalwirthschaft_) of the middle ages to the trade by means of money

in the higher stages of civilization, that is, from the “feudal” to the

“commercial” system must, of itself, increase the money-need

(_Geldbedarf_) of a people.

B. _The rapidity of the circulation of money_; because, in most commercial

transactions, one dollar which circulates ten times a year really performs

the same service as ten dollars which go from hand to hand once in a year;

just as the economic use of a ship employed in the transportation of

commodities does not depend on its commodiousness alone but on its

rapidity also.(747) The economic use of money does not depend on its

amount simply. Says _Sismondi_: “The amount of the medium of circulation

in a state must be equal to the sum of the payments made in it in a given

time, divided by the sum of the times the former has, on an average,

changed owners within that time.”(748) Under given economic circumstances,

the rapidity of the medium of circulation is, taken all in all, not by any

means an arbitrary matter. It will happen very seldom that one man will

purchase or consume a commodity in order that another may not want

money.(749) Were the greater number of money-earners (and in nations with

a healthy economic life this number is always made up of men noted for the

good management of their own affairs) inclined to pay out the money which

they had taken in, rapidly, a very active production would prevail

everywhere; and this, in turn, supposes general commercial freedom and

great legal security. The less these conditions are developed, the more

difficult it becomes, not only to lay out the money received to-day

productively to-morrow, but the more imperatively does a proper foresight

demand, that a reserve-fund should be maintained for times of necessity.

(See § 43.)(750) Even in the same age and among the same people, money

moves most slowly under the influences of troublesome and critical epochs;

for the dangers of war and sedition, of impending burdensome taxation,

commercial gluts and numerous cases of bankruptcy uniformly operate to

make the possessors of money hold anxiously to their present supply.(751)

In less civilized countries, the same condition of things leads the people

even to bury their money-treasures. In large cities, the circulation of

money is generally more rapid than in the country districts; in a thickly

populated than in a thinly populated country; and in trade than in

agriculture.(752) Every improvement in the means of intercommunication

tends to facilitate it. The rich man possesses, as a rule, less money,

relatively speaking, than the poorer man. Hence, a more equable division

of a nation’s resources among the people would increase the amount of

money needed.(753) While the concentration, as to time, of circulation

into few great terms of payment is calculated of itself to cause a large

sum of money to remain idle in the interval,(754) its concentration in

space in large commercial cities must dispense with the necessity of a

great number of instruments of exchange. In England, it is customary for

every man in comfortable circumstances, as soon as he receives any money,

to deposit with a banker, and to make all his payments by means of checks

upon the latter. Cash money is now employed by Londoners only in payment

of wages, and in trade between retail dealers and consumers. The banker is

there the common cashier of a great number of private individuals, and is

in a condition to make their payments for them with a much smaller amount

of money, especially when they are to be made by one of his depositors to

another.(755) This “union of money-chests” (_Kassenvereinigung_) has been

effected also on a larger scale; inasmuch as bankers, in greater or

smaller numbers, are wont to have one bank as a center; and the country

banks, in turn, to be in constant relation with the great moneyed

institutions of London, subject to a species of general superintendence by

the Bank of England. These great monetary institutions have, so to speak,

a common rendezvous at the Clearing-House, where the greater part of their

payments are made by a mere off-setting of debits and credits;(756) and

this bank is, as it were, the cashier-in-chief of the nation, and in

possession of almost the entire cash stores of the English people.(757)

C. _The quantity and rapidity of circulation of the representatives of

money._ These, in so far as they are worthy of the name here given them,

depend on the credit of those who issue them; that is, on the certainty

that they shall, at the time fixed, be redeemed in money. To this category

belong the paper money of the state which bears no interest, and the

treasury-notes of the state which do bear interest, bank notes, bills of

exchange, promissory notes, book-credits of private persons, sometimes

even certificates of the storage of goods in public stores. It is

estimated, that, at the present time, nine-tenths of all the payments made

in Great Britain are effected without the aid of money, or even of

bank-notes.(758) The capacity of a person to make purchases does not

depend simply on the amount of money he possesses, but on his credit

likewise. The person who buys on credit, contributes as much to raise the

price of commodities as the person who buys for cash; with this exception,

however, that when the former eventually fails to redeem his promise to

pay, the price raised by him quickly falls again.(759) And, indeed, all

the various forms of credit, mentioned above, agree essentially in this,

however they may differ from one another in costliness and rapidity of

circulation.

Section CXXIV.

The Quantity Of Money A Nation Needs. (Continued.)

Of the three conditions above mentioned, it is evident that the first

operates on the amount of money needed, in a direction opposite to that of

the other two. The usual course of development is this: among an advancing

people, the number of money transactions increases at first; later, when

education has become general, and the people have grown habituated to the

giving and receiving of credit, the circulation of money is accelerated,

and an increase of the substitutes for money effected. Hence, it is

perfectly natural that the money-need of a people whose public economy is

only half developed, should, in proportion to the number of inhabitants,

be greater, not only than that of a people whose economy is wholly

undeveloped, but also, than that of a people whose public economy has been

carried to the highest point of perfection.(760)(761)

Section CXXV.

Uniformity Of The Value In Exchange Of The Precious Metals.

The peculiar properties of the precious metals described above (§ 120),

explains satisfactorily enough, why, at the same time, but in different

countries, they have more nearly the same value in exchange than any other

commodity whatever. Like a fluid in tubes which communicate with one

another, the precious metals seek the one same level of value the whole

world over.(762) Only, it must not be supposed that every absolute or

relative increase of the amount of money in a country must produce

immediately a corresponding diminution of the value of money; and in

addition to this cause an exportation of money.(763) If the number of

trade-transactions increases in the same proportion as the amount of

money, the value of money remains entirely unaffected.(764) The same thing

occurs when the increased influx of money, instead of overflowing the

channels of circulation, only swells the volume in the ready-money

reservoirs. By means of these stores of ready money, very large payments

may be made by one nation to another, without changing the circulation,

or, therefore, the value of money, in the slightest degree, on either

side.(765) If, indeed, such payments should continue for a long time to

flow in the same direction, they would certainly influence the

circulation, and then produce a current in the opposite direction.

However, it may happen, that the value of money in different countries may

be permanently different, when there are lasting difficulties in the way

of the leveling influence of the incoming or outgoing current of money.

Thus, the precious metals maintain a high value in those countries

especially which can obtain them only by giving commodities difficult of

transportation for them. If, for instance, an Englishman, anxious to take

advantage of the high value of money in Poland, should cause Polish

articles, such as wheat, wood, wool etc., to be imported into England,

they would reach their destination very much increased in price, because

of the great cost of transportation. Whether Poland or England would have

to bear this cost depends on the relations of supply and demand. Certain

it is, however, that the migration of money is hereby rendered exceedingly

difficult, forbidden even within the limits of certain value-differences,

especially where the means of communication are universally bad. And so,

the smaller the number of countries which minister to the want of

commodities of precious-metal districts, the more must other nations

obtain the money they need only at second and third hand; by means of

which, naturally, money itself is made dearer each time. Now, it is, as a

rule, nations in a low stage of civilization, that engage in the

exportation of raw material, and they are the worst adapted to engaging

directly in the carrying on of trade. When, therefore, they do not possess

gold or silver mines themselves, money-value is, as a rule, highest with

them; especially as the absence of legal security and protection, which

generally obtains there, makes the value in use of the precious metals one

of great urgency to them.(766)(767)

Direct legislative or governmental provisions may operate in the same

direction; as, for instance, the Japanese embargo laws which, not long

since, limited all foreign trade to two foreign nations.(768) I intend to

treat of the influence of taxation on the value of money, in a future work

to be written by me, on the Political Economy of the State.

Section CXXVI.

Uniformity Of The Value In Exchange Of The Precious Metals. (Continued.)

Most nations can satisfy their want of the precious metals, only through

the medium of foreign trade. Hence they very naturally look upon the cost

of production of the articles of export by the exchange of which they

obtain the precious metals either directly or indirectly, as the cost of

production of these metals themselves. But, the rule that all commodities

of equal cost of production have equal value in exchange is applicable

only within the limits of the same economic territory (§ 107), for it is

frequently physically impossible, and still more frequently rendered

difficult, by laws, customs and states of mind to transfer factors of

production from one country to another simply on account of the more

advantageous market they would there find. Thus, for instance, when

England exchanges its cotton and woolen goods, and steel instruments for

Mexican silver, the cost of production of the two equivalents may be very

different, and the one party in this trade may permanently make a larger

profit than the other.(769) According to § 101, that party will be most

favored in whom the desire of holding to his own commodities is farthest

from being out-weighed by his desire to obtain the other. But, at bottom,

silver is no very indispensable article. Especially in highly civilized

commercial communities, it is easiest to obtain substitutes for it, while

the principal articles of English export are, for the most part, objects

with which to satisfy wants rather urgent in their nature, very general,

and of rapid growth; and which, besides, are not, to any extent, difficult

of transportation. It is not a matter of surprise, therefore, that English

commodities, in silver countries, are generally sold above the mean price

between the English cost of production and the Mexican, for instance, or

the cost of procuring them elsewhere; and that silver, on the other hand,

is sold in England, under the same. But this lowers the price of the

precious metals of the latter country in general. Hence a change in the

channels of international trade, which in most countries is the only

source of gold and silver, may make the price of the precious metals

dearer in one place and cheaper in another, even when the conditions of

the production of mines remain entirely unaltered.(770) In an isolated

country, any amount of gold and silver whatever would, finally, as soon as

the people had grown accustomed to it, suffice for all the wants of

circulation. But, in commerce with the rest of the world, the greater

quantity and greater cheapness of the precious metals, that is of those

commodities which are most current and are possessed of the greatest

amount of economic energy, must, without fail, be of the greatest

advantage to a country; and this irrespective of the fact that they are

under certain circumstances the symptom of an especially highly developed

public economy. If we suppose two nations, A and B, equal in every other

point, but that A has twice as much money as B, and that prices are twice

as high there as in B; yet, with the same effort or sacrifice, A could

levy twice as many taxes as B. In case of a war between them, A might pay

in ready money for the necessities of an army which had invaded B, with

one-fourth the sacrifice which B would have to make to support its army in

A, if we reverse the case, and suppose that B had invaded A.(771)

Chapter IV.

History Of Prices.