બબી
હા

ARTES
1817
SCIENTIA
LIBRARY
VERITAS
OF THE
UNIVERSITY OF MICHIGAN
THEBOR
SI QUERIS PENINSULAM AMŒINAM
CIRCUMSPICE
THIS BOOK
FORMS PART OF THE
ORIGINAL LIBRARY
OF THE
UNIVERSITY OF MICHIGAN
BOUGHT IN EUROPE
1838 TO 1839
BY
ASA GRAY
HB
161
E36
10-117
A
TREATISE
ON THE
INDUSTRY OF NATIONS;
OR,
THE PRINCIPLES OF
NATIONAL ECONOMY, AND TAXATION.
BY J. S. EISDELL, ESQ.
IN TWO VOLUME S.
VOL. II.
ON DISTRIBUTION, CONSUMPTION, AND TAXATION.
LONDON:
G. B. WHITTAKER AND CO., AVE MARIA LANE.
MDCCCXXXIX.
D.R.
JOHN CHILDS AND SON, BUNGAY.
CONTENTS.
BOOK II.-DISTRIBUTION.
PAGE
CHAP. I. Of the Rent of Land
II. Of the Profits of Stock
4
83
SECT. I. Of the Profits of Capital
84
II. Of Stock let on Hire, and Money lent at Interest
112
III. On the Rewards of Labour
126
SECT. I. On the Rewards of Labour as a Whole
130
II. On the Inequality in the Rewards of different kinds
of Labour
148
III. On the Rewards of Learned and Scientific Exertion
IV. On the Rewards of the Labour of the Master, or
Adventurer
183
191
•
V. On the Rewards of Operative Labour, and the Means
of Ameliorating the Condition of the Working
Classes
BOOK III.—CONSUMPTION.
CHAP. I. On Consumption
II. On the Accumulation of Property
195
244
283
BOOK IV.-TAXATION.
CHAP. I. On the Effects of Taxation
302
II. On the Parties upon whom Taxation ultimately falls
III. On the Rule for the Apportionment of Taxation
IV. On the Application of the Rule of Apportionment, as re-
gards the Expense of Protection .
307
320
•
335
A 2
iv
CONTENTS.
CHAP. V. On an Apportionment of Taxation according to the
Benefits derived from Government
VI. On a Tax on the Value of Property
VII. On the Effects of Indirect Taxation
VIII. On Direct Taxation
IX. On the Distribution of the Expense of Constructing and
Maintaining Roads, Bridges, Canals, Harbours, Light-
Houses, and other Guides and Protections to Naviga-
tion
X. On the Distribution of the Expenses of Public Institu-
tions for Education, Religious Worship, and the Support
PAGE
358
366
. 370
386
393
of the Poor
XI. On Public Debts
•
399
404
THE
INDUSTRY OF NATIONS,
&c.
BOOK II.
ON DISTRIBUTION.
We have already seen that objects of wealth are acquired or pro-
duced by labour, that such labour is aided by capital, and bestowed
either on some raw material which nature furnishes, or on the
cultivation of the soil, pasturage, and the like. This labour is
applied to appropriate the spontaneous productions of nature,
to increase the quantity and improve the quality of those desir-
able animal and vegetable productions which nature guided by
art can yield, to prepare and adapt these productions for our
service, and distribute them for use or consumption.
In the early periods of society, before the establishment of
regular government, when no considerable amount of stock
could be accumulated, and no exclusive property in the soil be
acquired, there were no such classes as we now have of land-
lords and capitalists. The whole produce of industry, in con-
sequence, belonged to the labourer who procured it he being
the sole party at all contributing to its acquisition. But in the
more advanced stage of society in which we live, large quantities
of capital are accumulated, and employed in assisting labour,
VOL. II.
B
2
ON DISTRIBUTION.
while its ownership is seldom vested in the workman who em-
ploys it, but more commonly in another person. The soil, too,
and with it, all the vegetable productions which grow on its
surface, and all the minerals which are found beneath it, is ap-
propriated as the exclusive property of particular persons, who
demand a rent or payment of some kind from every individual
who would use or take anything from it. Land, capital, and
labour being essential to production, there are, accordingly,
three parties to whom the whole gross produce of industry pri-
marily belongs, and amongst whom its distribution takes place;
these are, the owners of land, the capitalists, and the labourers.
To one or other of these every member of society belongs, who
is not supported either on the bounty or the forced contributions
of others. Public functionaries of every kind, the members.
of learned professions, individuals practising the fine arts,
with other like persons, deriving their subsistence from their
professional exertions, are comprised in the class of labourers.
Each of the parties before named concurring, either by his
property or his labour, to the general result, has an equitable
right to, and must have his share of, the produce; or, which
comes to the same thing, of the worth of that produce. Hence
the inquiry as to the proportion that goes to each.
These three parties are not always nicely distinguishable. It
often happens that the same person possesses at one and the
same time, the capacities of landlord, capitalist, and labourer ;
or of capitalist and labourer. A man who cultivates his own
estate with his own capital and personal labour, comes under
the first description. A fisherman who employs his own boat
and tackle in fishing, comes under the second.
In such cases,
holding a double or triple capacity, a man takes the whole pro-
duce which would otherwise be shared between himself and
others; and this being mixed together, what is rent, profits, or
wages, is undistinguishable. Our inquiry is as to the portion
which is acquired in respect of these capacities, which hold
alike, whether the same person possess one or more of them.
On the present occasion, we do not inquire into the origin of
the right, or the justice of the claim, of either of these parties to
the portions which they take. Whether, originally, the land-
ON DISTRIBUTION.
3
lord may have derived his title to the soil by prior occupation,
by violent usurpation, or fraud; or, again, whether the labourer
be equitably entitled to possess the whole or any certain portion
of the produce which his labour creates; in neither of these
cases does the justice, or want of justice, of the title, apply to
an inquiry into the circumstances which actually regulate the
distribution of the shares amongst the parties.
We know that the objects which industry acquires are only
really valuable as they conduce to human enjoyment, and that
the ultimate end of the sacrifice by which they are acquired is
more or less completely attained, according as they contribute
more or less to the gratification of the parties to whose use they
are allotted. This must depend, not only on the absolute quan-
tity or quality of the things themselves, and their suitableness
to the need or wishes of these parties, but also on the degree of
equality or inequality in which they are shared by those who
contribute to their acquisition. If, then, it be possible to bring
about any change in the distribution which actually obtains,
the object of such change must be to make some other distri-
bution which may afford a more general or higher gratification.
In the former part of this work, in which the circumstances
have been considered that affect the acquisition of the objects of
industry, there was little occasion to mention the quality or acci-
dent of value in these objects; because this quality has no influ-
ence in rendering the work of industry either difficult or easy; its
produce abundant or scanty, good or bad; or in distributing this
produce in such manner as shall be well or ill adapted to the use of
the parties to whose wants it ministers. Hitherto we have com-
prised in our view the interests of the whole community, and
considered its members in their double capacity of consumers
and producers; whence it was not an object, either to raise or
lower the value of the objects created by industry; because as
much as such value might be heightened or depressed, and the
interests of the producers thus advanced or retarded, the in-
terests of the consumers who had to pay for them would be
thereby affected in an opposite direction, and be injured or ad-
vanced in an inverse but corresponding measure. The advan-
tages on one side equalling the disadvantages on the other, the
B 2
4
RENT,
interests of the whole could not consequently be thus advanced.
But in the part of our subject on which we are about to enter,
we consider the interests, not of the whole community, but of its
separate classes, and in their single capacity of producers.
Hence, the value of the objects produced, as it is to them matter
of the first importance, necessarily becomes the subject of our
consideration.
Accordingly, our subject partakes somewhat of that intricacy
and complexity or abstruseness of character which is usually
possessed by discussions on value.
The parties before spoken of being determined amongst whom
the whole produce of industry is divided, we proceed to con-
sider the circumstances which determine the portions that fall
to each of them in this division: in other words, to investigate
the laws which regulate rent, profits, and wages; beginning with
those circumstances which determine the share taken by the
landlord for rent.
CHAPTER I.
OF THE RENT OF LAND.
THE material objects that minister to the wants and wishes of
mankind are all comprised in one or other of the three grand
divisions of nature-the animal, vegetable, and mineral king-
doms. In the animal kingdom every individual is supported
either directly or indirectly by the produce of the land; in the
vegetable kingdom each variety derives its subsistence from the
soil; while all that constitutes the mineral world is either found
scattered upon the surface, or drawn from the bowels of the
earth. Thus all are procured, through the exertion of labour,
from land. Again, nature, co-operating with labour, is essen-
tial to the production of every useful object. In civilized society,
almost every portion of the soil, whether cultivated or uncul-
RENT.
5
من
tivated, as well as nearly all its produce, with almost every
natural production which exists in any degree of scarceness, has
become private property. Even the marine plants on our shores,
and the fishings on our lakes and rivers, are appropriated. Ex-
cepting wild animals, fish in some great rivers and in the sea,
and the herbage, roots, wild fruits, and other products of com-
mon and forest lands, there is scarcely anything that we use or
consume, or any material which is employed in the fabrication of
commodities, that has not been previously appropriated. Al-
though the earth was given originally to mankind at large, to use
and enjoy it as they pleased, yet since the land has been par-
celled out in exclusive property to individuals, whoever would
employ it, and avail himself of the co-operative agency of nature,
or procure any of the raw productions it yields, must first obtain
permission from the proper owner of the land. For this per-
mission, a payment is demanded, annual or otherwise, which is
denominated rent. Thus, with the few exceptions already men-
tioned, it may be said that, in the distribution of the several ob-
jects of desire among the classes concerned in their production
or acquisition, a part of every such object, or its worth, goes to
the owner of the soil on which it was grown or reared, or of the
land whence the raw materials from which it was fabricated
were originally procured. Hence the inquiry presents itself-
In what way does rent accrue, and by what principles is its
amount regulated?
The agency of the soil is not the only agency of nature of
which we avail ourselves in our works. The force of attraction,
cohesion, and gravity, the power of the wind and of the waters,
the light and heat of the sun, are powers or properties of nature
which men constantly employ; but which, however, have not
in general the faculty of yielding rent; and the reason is, not
that they are less essential to the work of production, but that
they have not been appropriated to the exclusive benefit of
person. These, and such like powers of nature, have not
become so appropriated, either because they are not in their
nature susceptible of appropriation, or because they exist in
such ample measure that, if appropriated, no benefit could ac-
crue to individuals therefrom. Streams of water have very
any
6
RENT.
commonly been made exclusive property, and their force applied
to mechanical purposes. If men had been able to appropriate
to their exclusive use the wind which drives our sails, and it
had not been so abundant as to perform this service for every
person who chose to make use of it, no doubt the selfish principle
would have constituted it private property; and a rent, in such
case, must have been paid for the privilege of using its power.
But, happily, no man has been able to deprive his neighbour
either of the wind or the sun's rays, or to say, They are mine,
and I will be paid for the use of them.
The great consumption on the part of mankind consists of
those animal and vegetable productions which are grown on the
surface of land, or fed upon its produce; the supply of which is
renewed from season to season, and used as food and materials
of clothing. For the more durable objects, as wood of different
kinds, and minerals, the demand is of less magnitude. Thus
it is for the productive agency of the soil, in the shape of an
annual rent, that the greater portion of the demand of the land-
lord consists; and this, accordingly, constitutes the larger por-
tion of our inquiry.
Amongst most nations that have attained to the agricultural
state, an exclusive right to the soil seems to have been at first
invested in the government, and in persons deriving their title
from it. In ancient Egypt one-fifth of the crops was taken.
Among the Jews a tenth; and in the Grecian and Roman
states a similar proportion. In Persia a fifth. In Hindostan
from an eighth to a seventeenth. In the institutes of Menu the
sovereign is permitted to double this tax during war, raising it
to one-fourth. Such was the tax paid to Porus when Alexander
invaded his dominions.
This exclusive possession by a prince or state of the soil from
which alone the people could obtain the means of subsistence,
was of itself sufficient to give the power of exacting a tribute or
rent for the privilege of occupying and acquiring subsistence from
it, wholly irrespective in its amount of those natural circum-
stances of the country and times which would have determined
the rent in a state of freedom. In the greater part of the world,
the soil to this day is cultivated by a poor and more or less
i
RENT.
7
This is the case
enslaved peasantry, who are unable to dispose of their labour,
and the little capital which they possess, at their pleasure; but
are compelled to cultivate the land, either by the laws and
usages of the countries in which they live, or by the force of
circumstances which they are unable to resist.
throughout the whole of Asia, Russia, Poland, Hungary, and
the greater part of Germany. Where the peasant cultivator is
chained to the soil, either by the law, or by the force of circum-
stances which he cannot overcome, his condition is consequently
dependent on the mercy of the owner of the soil, and the amount
of rent which is wrung from him is limited only by the moder-
ation of the landlord, or his actual power of making the tenant
extract from the land a larger produce than is enough for his
support. Two centuries ago, this was the state of the cultivators
in our own country. Happily, we have now passed this state
of things; the task of cultivating our lands, and of furnishing
our supply of its provisions and materials, is no longer committed
to a poor, ignorant, and feeble peasantry, but is under the guid-
ance of an opulent, free, and intelligent yeomanry, possessing
talent and capital to make the most of the resources of the soil.
As the conduct of our agriculture is no longer in the hands
of a serf or metayer peasantry, and as throughout the more
improved portion of the continent of Europe, such a system is
gradually giving way to one more like our own, the larger
portion of our attention will be directed to rent under the cir-
cumstances in which we are at present placed, in which both
the labour and the capital employed in agriculture, instead of
being chained to the soil of necessity, are free to engage in any
other occupation which may hold out the prospect of superior
advantages. It is obvious that rent under the last-mentioned
conditions, as well as wages and profits, must be regulated by
circumstances far different from those which before determined
its amount in a state in which no such freedom was allowed.
The rents which we have now to consider consist merely of
surplus profits; that is, the surplus profit which the cultivation
of the land affords to the labour and capital expended upon it
over what would be acquired by the same labour and capital
otherwise employed.
8
RENT.
In this view the rent of land resembles the rent of a shop or
house of business, and its amount is determined upon the same
principles. A farm of excellent land may be compared to a
shop standing in a commanding situation for business, as in some
great thoroughfare in a populous town. Although the house
may not be of larger dimensions, or better built, than another
house situated in a back street, less favourable for business,
yet the first will yield a rent, perhaps double that which the
landlord of the other would be glad to accept. If, with the
same trouble, and the employment of the same amount of capital,
a tenant of the first house receive double the amount of profits
that a tenant in the other can acquire, the landlord of the first
will, in all probability, monopolize to himself this extraordinary
profit, in the shape of a high rent. So it is with a farm of highly
fertile land. According as the profit of occupying it is greater
than that of another farm of inferior land, in which the same
capital must be employed, the demand upon the occupier for
rent will be greater by the amount of this excess. Or,
which comes to the same thing, the rent will be equal to the
surplus profit which its cultivation affords above the profit
that could be acquired by employing the same capital in other
ways. Which surplus determines, in every case, the rent of
land; whether as respects the whole agriculture of a country,
or any particular portion of land, as its relative fertility and
situation, and consequent profit of cultivation, may be greater
or less.
It has been supposed that in most European countries the
profits of husbandry are on the average below those acquired
in trade, commerce, and manufactures. There are reasons to be-
lieve that this is the case. But whether it be so or not, is not
essential to the object of the present inquiry to ascertain. Indi-
vidual interest has a continually operating tendency to establish
an equality of benefits in all occupations; and although, in the
fluctuations to which every branch of industry is exposed, the
profits of farming may not yet equal the average of other em-
ployments, they must be approaching that average, and cannot
be far from it; for if the inferiority were strikingly apparent,
capital would be withdrawn from husbandry to be embarked in
RENT.
9
more lucrative occupations. While, on the other hand, if hus-
bandry were strikingly superior, capital would be withdrawn
from other employments, to be embarked in its exercise. It
may be that there exists a greater facility or predilection in the
trader or manufacturer to turn farmer, than in the farmer to
become trader or manufacturer; and thus a somewhat more
active competition may be occasioned amongst farmers. For
facility of elucidation, however, we shall suppose on the present
occasion, that the average profits of agriculture are the same as
in other occupations. But if this should not be the case, and
they should be two, three, or more per cent. below other average
profits, there will then be found an error running through the
inference which may be drawn, on the supposition of an equality,
of two, three, or more per cent., as the case may happen.
Land is sometimes cultivated by its proper owner,
and some-
times by a tenant. In the former case there is no rent actually
paid; but the profit accruing from the occupation is in both
cases of the same nature. If the land be cultivated by the
proprietor, that portion of the produce which remains to him
after all the outgoings attending its cultivation, of whatever
kind, have been paid, including the profits of the capital em-
ployed, estimated according to the ordinary rate of the profits of
agricultural capital at the place and time, may be considered as
rent. If the land be cultivated, not by the proprietor, but by
a tenant, the rent is the equivalent for this portion of the pro-
duce, which is paid by the tenant for permission to occupy the
land.
It often happens, however, that the rent which is paid is very
different from the real value of this portion of the produce. The
liberality of a few proprietors and the ignorance of others cause
rents in some instances to be below this value; while the ignor-
ance and imprudence of some farmers cause rents in other
instances to be higher than this value. Again, accidental and
temporary circumstances occasion the farmer to be paying
sometimes more and at other times less rent than he ought to
pay. But these accidental and temporary circumstances are not
the rule, but the exceptions, which bear too small a proportion
to the whole to require notice, and which do not invalidate those
10
RENT.
general principles which in the end determine rents.
In adjust-
ing the terms of the contract between landlord and tenant, it is
the real and average value in different years of this portion of
the produce to which both parties refer, and to which, if in-
sisted on, they must both conform; and it is to this value, too,
that rents, although seldom precisely equivalent, have a constant
tendency to approximate.
It is plain, that a rent cannot be paid for land, when the pro-
duce which the cultivator's skill and means enable him to raise
from it is not more than sufficient to maintain those whose la-
bour and attention are necessary to raise it. It is indispensable
to the existence of rent, that the quality of the cultivated portions
of the soil, or the efficiency of the powers of labour in relation to
that quality, be such as to yield a larger quantity of the necessaries
of life than is required for the maintenance of the persons em-
ployed upon the land. As much as this produce is more than
sufficient for the maintenance of these persons, a power exists of
paying rent, if it be necessary. This power, too, is limited by
the same excess. After cultivation has passed into the hands of
farmers who are able to move their capital at pleasure as oppor-
tunity offers of employing it to superior advantage, rent is no
longer a tribute paid of necessity for permission to acquire the
means of existence; it is no longer a creation at the will of the
landlords, and the quality of yielding more than sufficient to
maintain the cultivator, although it is indispensable to the pay-
ment, and constitutes the limit to the possible increase of rent,
is neither the cause, nor the circumstance which determines the
amount of rent. No man will pay a rent for land, whatever
may be the surplus it yields above what is required for his own sub-
sistence, or whatever may be his power of paying it, if the land-
lord have not the power to make him; that is, if other land in
the neighbourhood equally good can be had for nothing, or if
there be no other farmers offering to give more; and therefore
other circumstances must be brought into operation before the
existence of a condition in which rent can be demanded. Thus
rent is not exactly proportioned to the fertility of the land, or
the surplus which it yields beyond what is necessary to support
the labourers and keep up the capital employed upon it.
RENT.
11
In some parts of the world to which cultivation has not yet
been fully extended, there are large tracts of land susceptible of
almost every kind of culture, but which in their present state
possess no value. In America and Australia, for example, there
is more fertile land than is sufficient for the wants of the in-
habitants, and more than their means enable them to cultivate.
The governments of those countries claim the ownership of the
unsettled tracts, and will not allow a settler to gain a title to or
hold possession of the land, without purchase. A part only
of the best and most favourably situated land, under such
circumstances, is cleared, and all that is uncultivated yields.
nothing, at least nothing of value. While land of the best.
quality remains wholly unoccupied, and any person who will pay
the small purchase money demanded for it may occupy at will,
no rent could be obtained for that which is uncultivated, beyond
the trifling interest of the purchase money.
Notwithstanding the indispensable necessity of land as a co-
operating agent in the work of production, the use of its powers
has no market value until the circumstances of society, or the mo-
nopoly acquired by this assumption of ownership in the govern-
ment, cause the supply of land of the most fertile qualities to cease
to be co-extensive with the desire for it. Indeed its appropriation
would not at first be immediately profitable to the individual in
whose favour it might be made, since the land has no value.
There is a difference between the land which has been cleared,
enclosed, and improved, and that which is yet uncleared, and on
which nothing has been expended. Rather than clear and en-
close fresh land, a man will pay an equivalent, annual or other-
wise, for the cost of clearing and enclosing: and he will pay no
more. Consequently, a part of the rent of land which has been
enclosed and cultivated is to be assigned to the expenditure of
labour and capital made by the proprietors or their predecessors
in clearing, enclosing, draining, building, and otherwise im-
proving it. This part, however, is not a payment for the
original powers of the soil, but for what has been expended upon
it. Though it is called rent, it is rather interest than rent.
The rent may be conceived to be composed of two portions ;-
that which is for the use of the original powers of the soil, and
12
RENT.
that which is for the capital which has been expended in im-
proving the land and bringing it into a fit state for cultivation.
In some instances, the rent is not more than a reasonable in-
terest upon the capital expended. But the expenditure upon
land is not the circumstance which causes a rent to be acquired,
or which fixes the ratio of rent. Capital may have been judi-
ciously or injudiciously laid out, and even in cases where no
rent would have been demanded, except an expenditure had been
made, the amount of that demand must be affected by the judg-
ment displayed in the outlay. No tenant will indemnify the
landlord for an unwise expenditure, by paying the common
rate of interest upon it. While, if it has been well laid out, a
tenant may be able to pay perhaps much more than common in-
terest upon such expenditure. In most countries, however, the
landlord usually demands a rent for land which has never been
improved, and the interest upon the expense of improvement is
generally an addition to the original rent. These improvements,
besides, are not always made by the landlord, but sometimes by
the tenant. When the lease is renewed, however, the landlord
commonly demands the same advance of rent as if they had been
made at his own expense.
"He sometimes demands a rent for what is altogether incapable
of human improvements. Kelp is a species of sea-weed, which,
when burnt, yields an alkaline salt, useful for making glass, soap,
and for several other purposes. It grows in several parts of
Great Britain, particularly in Scotland, upon such rocks only as
lie within the high-water mark, which are twice every day cover-
ed with the sea, and of which the produce, therefore, has never
been augmented by human industry. The landlord, however,
whose estate is bounded by a kelp shore of this kind, demands a
rent for it as much as for his corn-fields."*
.
Thus the rent of land is not proportioned to what the land-
lord may have laid out in the improvement of the land, or to
what he can afford to take. It is entirely determined, through
the competition of persons desirous to occupy the land, by what
an occupier can afford to give.
If all land had the same properties, if it were unlimited in
* Wealth of Nations.
RENT.
13
quantity and uniform in quality, no charge could be made for its
use, unless when it possessed peculiar advantages of situation.
It is because there is not a sufficient extent of land which is of
good quality and well situated, that rent is paid for the use of it;
to avoid the payment of which, land of inferior quality, or less
advantageously situated, is brought into cultivation, as popula-
tion increases.
In our country, there are now probably few or no farms which
are either rent-free, or could not be profitably occupied on pay-
ment of some rent; yet there are very many in which some of
the land comprised in them is so bad that, if taken by itself and
without any other of better quality, could not be cultivated with
the usual profit, if subject to a rent. However, in countries
which possess a dense population, land in pasture or wood always
affords some rent to the proprietor, and therefore the land can-
not be profitably broken up except the return acquired when in
tillage be sufficient to pay both the expense of cultivation with
its usual profit, and the value of the pasturage or wood yielded
before being broken up. In such countries, then, the worst
land in tillage, although not wholly rent-free, is subjected to
no higher rent than the value of the pasturage or spontaneous
productions it would afford if no expenditure were incurred, and
the land left in a wild state. The value of such pasturage is,
however, so small, that the error would be hardly appreciable if
we should affirm that the worst land in cultivation pays no rent.
But whatever may be its amount, its payment is indispensable to
the supply of the market with cultivated products from this land;
and thus rent enters into the price of all cultivated products.
Not only in every country are there soils of a variety of
character and productiveness, but in the same neighbourhood,
and on the same farms, the land is of unequal quality. There
may be some highly fertile and richly cultivated countries in
which there is no waste land, but the prevailing case is, that a
portion of the soil of every country is either wholly unim-
proved, or but partially so. On the most elevated tracts, as
well as in the marshy and sandy situations, there is commonly
land so barren as not to admit of cultivation, with the existing
skill and capital in husbandry; and some which, though in
14
RENT.
other respects fit for cultivation, cannot be profitably cultivated
under existing prices of produce and expense of raising it; since
the produce it would yield would be of less value than that of other
products which might be gained with the same expenditure in other
ways. Between such land, and that which is most productive,
there are soils of all the intermediate degrees of fertility. Thus,
the labour and expense bestowed on the cultivation of different
lands produce returns very unequal to each other, according to
the productiveness of the land on which they are bestowed.
Again, from the nature of husbandry, much or little labour
and capital may be expended in the cultivation of the soil; and
the produce is greater or less according as the expenditure is
greater or less. But the return, in ordinary cases, is not in pro-
portion to the expense. A small expenditure yields in propor-
tion a better return than a large one. A piece of land, for
example, may be capable of yielding ten, twenty, thirty, or more
quarters of corn annually, according as its tillage is wrought up.
Yet the expenditure which is sufficient to raise from it ten quar-
ters, must usually be more than doubled in order to raise twenty
quarters; while in order to raise from it thirty quarters, the first
expenditure must be not merely trebled, but increased probably
above one-half more than was necessary to produce the twenty
quarters; and so of every larger quantity required to be raised,
-the outlay must be always in a still higher ratio than that for
any previous quantity. It is true, in the progress of improve-
ment, the soil yields a larger produce without a proportionately
larger expenditure. In England, in the thirteenth century," the
produce of an acre of wheat was probably much under a quarter.” *
Within three centuries afterwards, we are told, the same mea-
sure of land, well tilled and dressed, yielded sixteen or twenty
bushels.† But now the best lands yield from 36 to 40 bushels
per acre; while the worst yield from 8 to 10. Although, with
a better husbandry, a larger capital may be expended upon the
land with an equal or even sometimes a greater proportional re-
turn, yet it will be evident, that usually the contrary must be
the case, when we consider, that, if it were otherwise, and
* Sir F. Eden, State of the Poor, vol. iii. Appendix, p. x.
+ Hollingshed, Description of Britain, vol. i. p. 110.
RENT.
15
capital might be expended in cultivation to an indefinite extent,
and still yield a produce proportionate to the expenditure, the
smallest quantity of land, in such case, would be sufficient to
raise by high cultivation the largest quantity of produce re-
quired. Thus, in improving the tillage of land, the increased
produce yielded to the labour and capital expended under the
direction of the same skill in husbandry, is in a decreasing ratio
to the amount expended.
The rent of land being dependent on the demand for land,
and rent consisting of the surplus profit which cultivation af
fords over the profit which could be acquired by the same capital
in other employments, the circumstances which cause rents to
rise or fall are to be sought for amongst such as affect the quan-
tity and efficiency of the labour and capital which can be ad-
vantageously employed in cultivation; and amongst such as
affect the profit accruing from that employment; not, however,
the absolute or gross profit, but the excess of profit over what
is usually acquired in other occupations.
Hence the demand for land, and consequently its rent, will
be found to rise or fall from the following causes.
First, rents will rise from an increase in the quantity of la-
bour and capital which, under existing prices of produce and
cost of production, can be advantageously expended, either in
heightening the cultivation of the land already under tillage, or,
which comes to the same thing, in extending cultivation over
waste lands of inferior native fertility. On the other hand,
rents will fall from a decrease in the quantity of labour and
capital advantageously applicable to these purposes.
Secondly, rents will rise or fall from the general efficiency or
inefficiency of industry in its several branches. The quantity
of labour and capital thus advantageously applicable will depend,
first, on the actual quantity possessed; that is, on the population,
and the wealth of that population; secondly, on the efficiency
of its agricultural industry in relation to the efficiency of its
industry of other kinds.
Although the profits of cultivation determine the degree in
which industry is applied to agriculture, yet the means of pur-
chasing, or power of paying, through which prices and profits
16
RENT.
are acquired, are dependent on production; and thus these
profits themselves are dependent on the disposable power of la-
bour which is applicable to the general purposes of industry; so
that we come back to this disposable power as a cause of profits,
and, consequently, as a cause anterior to them in the determina-
tion of rents.
It is plain that the cultivation of the soil in any country can
only be extended and heightened, in proportion to the amount
of disposable labour and capital which the people have the
means of applying in this way. The magnitude of these means
depends both on the number and wealth of the population, and
on the effectiveness of its industry. Every man added to the
population of a country is an addition to the labour applicable
to the general purposes of its industry, which may be employed
either in agriculture, manufactures, commerce, or other occu-
pation; while every man so added forms, likewise, an addition
to the wants of the community, and calls for a supply of food,
clothing, and other articles. Precisely the same is the result,
when a person by the use of a new and more powerful imple-
ment, or through greater skill, is enabled to do the work of two.
This is equivalent to adding to the population as many men as
employ such implements; both as regards the additional labour
applicable to general purposes, and the additional demand for
commodities in general, which the enlarged means of consump-
tion in these men will assuredly occasion. When the wants of
the people have created an effectual demand for a larger quantity
of agricultural produce, so as to occasion the necessity of resort-
ing to new land of inferior quality, in order to supply it, and
thus cause an advance of rents, this demand can only have arisen
from the people having acquired larger means of consumption,
with the ability to cultivate more land and of a worse quality;
either through an increase in the number of persons requiring
food, or from the same number requiring to be more amply or
better fed. When there are more persons to be fed, there are,
evidently, more hands applicable to husbandry. When there
arises an effectual demand to a larger extent from the same
number of persons, this must have proceeded from enlarged
means of labour and of payment.
RENT.
17
Enlarged means of labour and of purchase may be the con-
sequence either of closer application to business, a saving of
labour, or an augmentation in its productive power, through the
acquisition of more capital, greater freedom of industry, the
employment of more or better machinery, or the acquisition of
superior skill and knowledge in applying labour and capital.
In whatever way a greater effectual demand for agricultural
produce may be occasioned, it is in every case the result of
greater powers of labour. These powers may be increased by
the acquisition of higher efficiency in any one branch; but
still more when it extends to many. It is the same whether the
higher efficiency be in agriculture or in any other occupation.
The application of labour to the purposes of industry, and
consequently to the cultivation of the soil, as well as the
people's means of consumption, and the demand for raw pro-
duce, depends on the full employment of the working classes.
This application is augmented by everything which stimulates
the exertion of labour, or tends to avert a derangement and
stagnation of business. The degree of personal exertion of the
labouring classes is extremely different in different countries,
and at different times in the same country. "A day's labour of
a Hindoo, or a South American Indian, will not admit of a com-
parison with that of an Englishman; and it has been said, that
though the money price of day labour in Ireland is little more
than the half of what it is in England, yet that Irish labour is
not really cheaper than English, although it is well known that
Irish labourers when in this country, with good examples and
adequate wages to stimulate them, will work as hard as their
English companions." A prosperous commerce which, while it
augments the rewards of labour, at the same time gathers into
busy and flourishing towns the idlers who would otherwise be
only half employed upon the land, occasions an effective and in-
creasing demand for the products of agriculture. But the cir-
cumstances which promote the exertion of labour, which operate
to prevent a derangement of industry, and to cause full employ-
ment to be offered to the workman, have been spoken of in
another place, and need not be repeated here.
On the other hand, a feebleness in the powers of industry,
VOL. II.
C
18
RENT.
If
from whatever cause it proceed, must contract the extent of
cultivation, and lessen the demand for agricultural produce.
the use of horses and other labouring cattle in agricultural and
other occupations were materially diminished, it is probable,
that a great part of the land which now bears corn would be
thrown out of cultivation. Poor land would never yield suffi-
cient to pay the expense of cultivating it with the spade; of
bringing manure from a distance in barrows or baskets; and
of carrying the products of the soil to distant markets by the
same sort of conveyance.
With an increasing population, the land becomes improved,
but it is too little the subject of observation that an increase of
population is not the only, and scarcely the main, cause of an in-
creased power of production, and of a larger demand for com-
modities. Though the human stomach is not more capa-
cious in a state of affluence than in a state of poverty, yet the
amount of its consumption, and the quantity of land necessary.
to furnish that amount, is incomparably greater in the former
state than in the latter. When in great poverty, the people
support themselves either wholly, or almost wholly, on vegetables;
being the cheapest food in proportion to its quantity. If their
circumstances improve, they are enabled to procure bread-corn;
advancing still further, they obtain white bread instead of brown,
a portion of animal food, and the more expensive kinds. "It
has been said, that the same extent of good ground which main-
tains one man upon butcher's meat will maintain twelve men
upon wheat, and seventy men upon potatoes. This statement
seems overcharged; but certainly the difference is great."
With regard to drink, a man in a state of indigence must be con-
tent with water; when better off, he will be found to drink small
beer, ale, wine, or spirits, as his circumstances afford. The rich
consume more by rejecting the inferior parts, reducing their
nourishment into a highly palatable form; by selecting the
materials of their clothing and other things from such of the
productions of nature as are most agreeable and pleasing.
A rich man may keep a horse, or perhaps many; but the poor
man can do nothing of the kind. Thus, according to the wealth
of the people is their consumption, and the demand which they
RENT.
19
create for agricultural produce; and since the means of con-
sumption can only be acquired through production, the quantity
of land in cultivation, and the degree in which its tillage is
forced, depend, not simply on the population to be supported
thereby, but on its powers of industry, and the degree in which
they are brought into action. On the other hand, rent cannot
but decline with a decline either in the number or the circum-
stances of the people.
We may suppose, when a larger disposable power of labour is
acquired, it will be diffused generally throughout the different
branches of industry, in the proportions in which labour was pre-
viously applied to them; and this will most commonly be the
case; but not universally.
The labour and capital which the people of any country have
at their disposal, and which must be directed to the different
branches of its industry, to furnish all the articles by which
their wants and wishes are supplied, will be applied to the dif-
ferent occupations in a greater or less degree according to the
relative productiveness of the industry employed in them, and
the consequent relative cheapness or dearness of the different、
kinds of productions they furnish. Since there is a tendency to
equalize the profits of industry in all occupations, they must
eventually be nearly alike; and when, in one occupation, as for
example, in agriculture, the exertion of a given quantity of labour
and capital raises but a small quantity of produce in relation to
the quantity of wrought goods which a like exertion can work
up, the produce of the soil must be proportionably high in price,
to compensate for the smallness of quantity, so that agricultural
industry may obtain an equal money remuneration with other
kinds of industry. But if raw produce be dear, while wrought
goods in relation to it are cheap, consumers will be deterred in
some degree from expenditure on that dear produce, preferring
to purchase the cheaper wrought goods. On the other hand, if
the produce of agriculture be cheap, while manufactures are
comparatively dear, consumption in that produce will be more
indulged in, and manufactures will go off more sparingly.
This natural direction of expenditure is frequently deranged
by taxation. Duties on commodities change the natural relation
c 2
20
RENT.
of the prices of different commodities to each other; articles
which in themselves are cheap they render dear; and articles
which are dear they render still dearer. If these duties were
ad valorem duties on all commodities, no change from the
natural direction of expenditure would take place. But when one
article is taxed and others left free, the consumption of the taxed
article is in a measure diminished, while the consumption of all
the rest is increased: the diminution in the one being equal to
the collected sum of the increase in all the others. Hence, if
foreign goods be taxed, home goods must be more in demand.
If manufactured goods be taxed, raw produce will be consumed
in larger quantities; and the reverse will take place if the pro-
duce of the soil be taxed, while wrought goods are left free.
It may not be superfluous to bring to recollection here the
substance of what has been observed on supply and demand,
for the purpose of removing an objection which might be raised
to the position, that the extension of cultivation and the con-
sumption of produce, will be carried to the full extent of the
powers of industry of the people and their means of consump-
tion. It has been attempted to be shown, that an increased
power of production, if properly managed, cannot give rise to
over-production, or a glut of produce; that increased supply
causes an increased demand; and a larger production of commo-
dities of one sort, a larger production of commodities of other
sorts; that a glut of any commodity can only result from one or
more of these three things,-first, from an improper distribution
of industry, in excess of quantity in this branch in relation to the
quantity directed to other branches; which is the same thing as
an inadequate supply in those other branches; secondly, from the
commodities produced not being of sufficient variety and excel-
lence of quality; or, lastly, from a higher price being demanded for
them than measures the ability or inclination of those who would
be able and might be inclined to purchase them on lower terms.
If these positions be admitted, it cannot be doubted that the
demand for produce and the consumption of the people will fully
keep pace with any increase in their power of production; since
the desires of mankind are insatiable; and the extension and
heightening of cultivation will be commensurate with the efficiency
RENT.
21
of their industry, without occasioning any superabundance of
produce, but merely causing that produce to be of superior
quality, or consumed in a more concentrated form. It is true,
the inequality of seasons, and the fluctuations of human affairs,
occasion sometimes a derangement of industry, and over-pro-
duction of agricultural produce; whence a temporary decline of
But this glut of produce may be the consequence,
not perhaps of over-production in relation to the former means
of consumption of the people, or even of a diminution in their
numbers, but from a change in its relation to their present
means, and through the want of production on their parts of
equivalents wherewith to purchase the products of agriculture.
rents ensues.
According then to the people's power of production, or the
efficiency of their industry, will be their consumption of the
general products of industry; while the particular direction of
that consumption to the produce of the soil, independently of tax-
ation, will depend in some measure on the efficiency of agricul-
tural industry in relation to the efficiency of other branches,
and the consequent relative cheapness of agricultural produce.
An enlarged demand for provisions may be met in two ways.
Either by applying the greater powers of industry which create
the enlargement of the demand, in heightening the cultivation of
the land already under tillage; or by enclosing and cultivating
waste land. But when all the most fertile land in the neigh-
bourhood is already cultivated, new enclosures can only consist
of soils of inferior quality or less conveniently situated. Whether
the old farms shall be better cultivated, or fresh land taken up, will
depend upon the return which in each case can be procured. If by
cultivating new land, a greater return can be obtained than by
higher cultivation of the old, the new will be preferred; if other-
wise, the reverse will be the case. But whether these greater
powers of industry be applied to the heightening or the exten-
sion of cultivation, the additional quantity of food demanded
cannot in either case be raised except at a higher ratio of cost
than the previous quantity obtained. This higher cost, how-
ever, may not in every case call for a greater outlay of labour or
capital, because improvements in their application may have
22
RENT.
rendered them more effective; but what is meant is, a higher
ratio according to the previously existing effectiveness.
Now, if it require greater labour and expense to raise one part of
the agricultural produce which supplies a community than another
part of similar quality, the price of produce must have risen in
the market sufficient to afford the customary profits on that
which is raised at the most expense; and as there cannot be
at the same time two prices for one article in the same market,
the price procured will be the same for the produce grown on
the fertile land as on the sterile; and the same for that part
which is raised by the original quantity of labour and capital as
for that which is raised by the additional quantity. Con-
sequently, those persons who occupy the good lands, which
yield with great facility and in abundance, must gain more than
ordinary profits from their occupation.
The origin, the occasion, and progress of rent may be thus
stated. The insufficient supply of the productive agency of the
soil, and the consequent increasing difficulty, as population and
productive power advance, of raising an adequate quantity of
food, cause the prices of provisions and of every other kind of
the produce of land to be continually advancing. The
effect of every successive increase in these prices is to allow of
the cultivation of inferior land, and yet to derive from it the
customary remuneration of labour and capital. In which case,
the larger returns upon the old enclosures of superior quality
render their cultivation highly profitable; and as this proceeds,
not from superior skill in the farmer, but from the superior
advantages of the land, the landlords who grant permission to
occupy these lands are enabled to demand an advance of rents;
while the competition of persons who are desirous of occupying
land compel them to offer its full value. In each of these suc-
cessive advances, that last enclosed land which paid no rent
becomes charged with a rent equal to the advance, or the
excess of profit which the land affords over the fresh and more
inferior land; leaving only the new portion rent free; while the
other lands which had formerly paid rent become severally
charged with an addition to their previous rents, by the amount
RENT.
23
of the advance; or, which comes to the same thing, with a rent
equal to the surplus profit their cultivation affords above what
could be acquired by employing the same capital in other occu-
pations. In these advances, the gradation of rents remains
unchanged; for the rent of land of the best quality must always
be higher than that of the second best; the second higher than
the third; the third higher than the fourth; and so on.
As in applying successively additional quantities of labour
and capital in heightening the cultivation of land, every increase
yields a smaller proportional return than the previous quantity,
the farmer of course continues to apply successively additional
quantities till he finds the last yield no more than the ordinary
profits of capital, and that any further addition would produce
less than these profits; consequently, less than he could get by
employing the capital in some other way. So long as the ordi-
nary profits of capital are obtained, these are sufficient to induce
cultivation. The farmer expects no more; it is indeed all that
he works for. He will not get more than this on any land, nor
on all the former portions of capital expended; because the com-
petition of other farmers to occupy the land will prevent him.
Whatever is yielded beyond this, the landlord appropriates to
himself; and thus equalizes the farmer's profits of cultivation
upon all lands.
We see, in the progress of population and of the efficiency of
industry, that the domain of cultivation is continually spreading;
lands of inferior quality and less conveniently situated are
brought under the plough, and this is accompanied with a gene-
ral advance of rents on all lands previously cultivated: the rent
of different parcels being proportionate to their relative fertility.
It is not, however, the unequal fertility, as some have thought,
and the cultivation of the poor soils, that are the cause either of
the origin or progress of rent: the cultivation of poor soils is
the consequence and not the cause; since it is to escape the
payment of rent that inferior soils are resorted to. The infe-
riority of soil which will bear to be tilled with the ordinary
profit at the time forms the measure of rent on other soils, but
the cause is to be found in the cultivation of land affording
higher profits than can be acquired in other occupations. If
24
RENT.
there were no poor soils, these higher profits would still exist.
We can suppose a country in which there should be no gradation
whatever in the quality of different portions of its soil, but all
should be of uniform fertility, and yet, however fertile the land
should be, a rent might be acquired for its occupation. Again,
we can suppose a state of things in which there should be no
land which did not pay a rent. Still the principles on which
the amount of rent would be determined in both these cases
would be the same as in every other. Though all lands were
precisely alike in quality and advantages of situation, yet
if the land were of insufficient extent to afford the required
supply of produce, this inadequate supply in relation to the
demand would cause the price of produce to be so much higher
than the cost of raising it as to yield extraordinary profits to the
cultivator; and thus, without any increasing difficulty in the
production of food, the landlord would be enabled to acquire a
rent equal to the superiority of these profits. The only differ-
ence in such case would be that the rent of all lands would be
the same, instead of being higher or lower in proportion to their
fertility. But the existence of inferior soils, as it affords the
means of enlarging the supply of produce, and of escaping from
the payment of the extravagant rent demanded for the superior
soils, and lessens the competition for their occupation, so far
from raising rents, tends to moderate their amount and to
retard their advance. In conceiving, therefore, that the cultiva-
tion of the poor soils is the cause of rents, there is a misappre-
hension of the order of causation; and this inversion of fact ex-
poses to the danger of involving erroneous conclusions. Although,
however, the cultivation of inferior land is never the cause of
rent, yet inferior land could never be resorted to unless large
profits were gained upon land of superior quality; and as the
cultivation of such poor land is its invariable consequence, it
may serve in discussions on rent to assist in elucidating the
principles upon which its amount is determined.
For this purpose it may be useful to observe, that the amount
of rent on land in general must be higher or lower according to
the quality of the worst land which, under existing prices of
produce and expenses of production, can be cultivated with the
RENT.
25
ordinary rate of profit upon capital: higher in proportion to its
sterility, and lower in proportion to its fertility. In old coun-
tries, generally the worst land must bear a rent equivalent to
the value of the spontaneous productions it would afford in a
wild state, or as pasture or wood land, and, universally, in other
lands, the superiority of the profit of cultivating them must be
the amount of rent. Again, and which comes to the same
thing, the rent must be higher or lower according to the quan-
tity of labour and capital which can be profitably expended in
cultivation; and if we suppose this labour and capital to be ap-
plied in distinct portions in succession one after another, each
of these will afford a gross amount of profit out of which a rent
may be taken, except the last; the earlier portions to a higher
amount, and the later to a lower, until the last can admit of
none at all. The whole rent, then, will be higher in proportion
to the number of these portions which can be successively ap-
plied. It will consist of that portion of the profits on all the
former quantities which exceeds the profits on the last, and will
be in proportion, not to the absolute, but to the relative fertility
of the land.
Improvements in the application of labour and capital are of
many kinds; both in agriculture and in other occupations.
Such as have an effect on rent may be considered as of two
kinds; namely, those which give a larger disposable power to
cultivate, and those which, without doing this, simply augment
the return or produce of agricultural industry upon the exertion
of the same power. Amongst the first kind of improvements,
are those in the implements and machinery employed, which
have the effect of diminishing actual labour;-the power-loom,
for example. Amongst those of the second, are a more success-
ful rotation of crops, and better management of the land, the
introduction of more prolific kinds of vegetables, or a better
choice of manure. The particular method in which improve-
ments of these two kinds are effected is not material. What-
ever gives a larger disposable power will assuredly lead to an
extension and heightening of cultivation, and cause an advance
of rents; while improvements which simply augment the pro-
duce of agricultural industry, without giving greater power, will
26
RENT.
not advance rents, in the first instance, though they will ulti-
mately have that effect.
*
Although a full exertion, and a high state of efficiency, of
industry, by which the people are enabled to raise a large quan-
tity of produce from the land, have a decided tendency to cause
high rents, they have sometimes been considered to have no
such tendency. It has been said that an increase of rents does
not follow from improvements in agriculture, or from an in-
creased fertility of the soil; but that it results entirely from the
necessity of resorting, as population increases, to soils of a
decreasing degree of fertility. When soils of inferior fertility
are resorted to, and resorted to as they must be with the cus-
tomary profit, this is the consequence, and is evidence of an
advance of rents; for no fresh land of inferior quality can be
taken into cultivation till rents have risen, or would allow of a
rise, upon what is already cultivated. But it is altogether the
same whether the cultivation of these poor soils be forced by an
increase of population, or take place voluntarily from other
causes. When, through improvements in the application of
labour or an augmentation of capital, the people acquire greater
powers of labour, and a consequent improvement in their cir-
cumstances, they resort to inferior soils voluntarily, and not
through the necessity of providing subsistence for a larger popu-
lation; their augmented powers giving them the means of doing
so, and the insatiableness of their constantly increasing wants pre-
senting them with the inducement to apply these powers to the ac-
quisition of fresh objects of desire in place of letting them lie idle.
The effect in both cases is an advance of rents. In the case of the
acquisition of a higher efficiency in industry, whether through an
advance in the science and practice of agriculture, or through the
employment of a larger capital upon the land, the first result is an
augmentation in the quantity of produce, which is raised upon
the whole with less difficulty than before; that is, with a smaller
expenditure of labour. Such an increase in the productiveness
of agricultural industry, which throws a larger quantity of pro-
duce on the market, is equivalent to a higher degree of natural
fertility in the soil, an enlargement of the national territories,
* Mr. M'Culloch's Principles of Political Economy, p. 269.
RENT.
27
or a further acquisition to the country of reclaimed lands from
districts previously not under cultivation. It renders less land
necessary to furnish the quantity of produce previously supplied,
and might thus be expected to lower both the price of produce
and the rent of land. But in reality it has no such effect; for
notwithstanding there are, as it were, a greater number of acres
in the country, there is, also, what is equivalent to a larger
population to be supported on the produce they yield; for the
people have become richer, they have acquired larger means of
consumption, they must be more abundantly fed, and with food
of better kinds.
Besides, through the superior efficiency of industry, a portion
of labour which was previously required to conduct the old pro-
cess of husbandry to the former extent, is now set free, and must
find occupation. But in what branches of industry shall this
disengaged labour find employment? Perhaps it may be best.
directed by an equal distribution among them, so as not to dis-
turb their existing proportions to each other. In such case, it
will be partly occupied in manufactures and commerce, and
partly in agriculture, in the cultivation of new and unimproved
lands, or in improving still further such as had been before
improved.
Doubtless it is possible to conceive some great and sudden
improvements in husbandry, which should cause the land to
yield, with the employment of the present quantity of labour
and capital, twice or three times the quantity of produce. Such
sudden inprovements in one department of industry, unaccom-
panied by corresponding improvements in other departments,
would certainly cause some change in the direction of labour
and capital; and, in the case supposed, the least fertile land
would at first be thrown out of cultivation, industry would be
more employed in the arts and manufactures, and rents for a
time would be considerably lowered. Even, however, in such
sudden and wonderful improvements as here supposed, if they
were accompanied by improvements of corresponding magni-
tude in other employments generally, no diminution in the quan-
tity of labour and capital devoted to agriculture would ensue;
and, consequently, no reduction of rents. The demands of the
28
RENT.
consumers would quickly grow up to their enlarged means of
production; and whoever would deny the assertions now made.
must be prepared also to deny the insatiable character of human
desires.
But, in fact, no such sudden and wonderful improvements as
have been now alluded to have ever been known in practice.
Improvements, however considerable on the whole they finally
prove, are usually partial in their extent; tardily completed and
brought to perfection; slow and gradual in their adoption into
practice. They are for the most part accompanied with simul-
taneous improvements in other occupations, which prevent any
perceptible transfer of industry from one employment to another,
and give time for the number of the people to grow up to the
augmented power of providing for their support.
Mr. Malthus says,
"These results appear to me to be so com-
pletely confirmed by experience, that I doubt, if a single in-
stance in the history of Europe, or any other part of the world,
can be produced, where improvements in agriculture have been
practically found to lower rents. I should further say, that not
only have improvements in agriculture never lowered rents, but
that they have been hitherto, and may be expected to be in fu-
ture, the main source of the increase of rents, in almost all those
countries with which we are acquainted." *
Thus improvements in husbandry, which increase the effi-
ciency of labour, so far as they augment the quantity of capital
employed upon the land, or extend and heighten cultivation,
cause an advance of rents; and this notwithstanding that they
are equivalent to an increased supply of land, and send a larger
quantity of produce to market. But if industry be properly
directed, no derangement of it ensues; improvements, in such
case, cause both the supply of produce and of land, and the de-
mand for them, to be greater in a corresponding degree, and
without change in their relation to one another.
However, if any improvement in husbandry take place, which,
while it augments the produce and lowers the cost at which it is
raised per quarter, has no effect in extending and heightening
cultivation, but the labour and capital set free from agriculture
* Principles of Polit. Econ. p. 207.
RENT.
29
find occupation in other branches of industry, such improvement
would not cause an advance of money rents, or raise the profits
of cultivation. It would simply prove beneficial to the con-
sumers. But the landlord, as a member of this class, would par-
take of the benefit, and consequently the real value of rents
would be indirectly raised thereby. A larger produce, we sup-
pose, is raised at a less expense per quarter, and more commo-
dities are to be offered in exchange for it. If, however, the rent
be paid or estimated in produce, such rent will be increased by
the improvement. The landlord will acquire a larger supply of
provisions, but after consuming in his family a quantity as
much larger than before as other persons are enabled to consume
in consequence of the same improvement, the remainder which
he has to dispose of for the purpose of purchasing other things,
being of lower value, its larger quantity will sell for no more
money than the smaller quantity that he received as rent,
and which remained applicable to the like purpose, before the
improvement had been introduced.
When we contemplate the universal order and harmony which
prevail throughout all the works of creation, it is natural to
suppose that the original fertility of the soil is in a due relation
to everything else, especially to the powers of mankind, and such
as is most likely to conduce to human happiness. But specula-
tions have often been formed as to what would have been the
consequences, if this fertility had been different from what it is.
These may excuse a word or two on this subject. It is on the
productiveness of industry, but more especially on the facility of
acquiring food and those other necessaries of life which the soil
affords, that the power of supporting population, of acquiring
wealth, and of advancing the other interests of humanity, de-
pends. Again, high rents are the certain accompaniments of
populousness and affluence. If, then, the natural fertility of all
the lands in the world had been considerably less than it is, this
would have been equivalent to a deficiency of skill and capital
in husbandry, and a feebleness in the powers of agricultural in-
dustry; whence a universal poverty would have overspread the
earth; the greater part of its population, its wealth, its sciences
and arts, its morals and religion, would never have had an exist-
30
RENT.
ence; only a small portion of the soil of most countries would
have admitted of corn cultivation; the largest portion of it
would have remained waste, and rents would have been greatly
lower on all the rest. On the other hand, if the natural fertility
of the soil had been considerably more than it is, we might ap-
prehend that the stimulus of necessity, which has so much
contributed to sharpen man's powers, and raise him in the scale
of existence, would have been wanting; that the same unfor-
tunate results would have followed, and that he would everywhere
have been found, like those indolent and barbarous nations.
which inhabit the fertile regions within the tropics, in the lowest
state of degradation. If, however, this had not been the case,
but the people had been as industrious, skilful, and enterprising
as at present, the world would unquestionably have been greatly
richer, and rents would have been considerably higher than they
now are.
In a country where there is an abundance of land of consider-
able fertility, the labour of only a small portion of the inhabit-
ants is required for cultivating the soil and raising the necessary
food. It has been affirmed that, in the West Indies, the labour
of thirty or thirty-five days in the year on the provision-ground
allotted to the slave, is sufficient. If this be true, the labour of
one man could raise provisions for ten. This representation is
probably exaggerated, at any rate it is an extreme case.
"In
France and Italy, the agriculture of the peasant tenantry is good
when compared with that of similar classes elsewhere, and the
soil and climate are, on the whole, excellent; yet the number of
non-agriculturists is in France only as 1 to 2, in Italy as 4 to
13, while in England, with an inferior soil and climate, (agricul-
tural climate, that is,) the non-agriculturists are to the cultiva-
tors as 2 to 1. In England, too, a larger number of animals are
kept for pleasure, and a variety of purposes unconnected with
cultivation the power of feeding these must be reckoned, when
we calculate the efficiency of her agriculture.
Now if one-
:
third of a nation's labour be required for agriculture, the other two-
thirds will be employed in procuring the comforts and conveni-
ences of life, and will afford a more ample measure of superfluities,
* Distribution of Wealth, by Rev. R. Jones.
RENT.
31
than if two-thirds be required for agriculture, leaving only one-
third applicable to other purposes. Thus the inhabitants of a
country are affluent or otherwise chiefly as respects the efficiency
of their industry in relation to the fertility of their soil. The more
fertile the country, the larger will be the share of the comforts
and conveniences of life enjoyed by the people, their industry
and skill being the same. But if through a deficiency of fertile
land, or an increase of population, it become necessary to culti-
vate the inferior soils, the condition of the inhabitants must be-
come worse, unless this result be counterbalanced by an improve-
ment in the effectiveness of their labour. Yet though the whole
wealth of the community is proportioned to the average fertility
of the soil which is cultivated, the measure of it which falls to
those who have no property in land is only in proportion to the
quality of the worst land in tillage. If the land, on an average,
require the labour of one-third for raising food, but the worst
land in cultivation require two-thirds, the inferior ranks will have
only one-third to provide themselves with other articles. It is
the same to them as if no better land existed. The benefit
arising from the more fertile is intercepted, in the form of rent,
by the proprietor.*
Of corresponding effects with a greater productiveness of in-
dustry, is the general use by the people of a kind of food which
is raised upon the land in abundant quantities and with facility,
instead of food requiring a larger surface of land, and which with
the same labour can only be raised in smaller quantities.
Though a certain mixture of animal and vegetable food seems
most congenial to the human constitution, yet it is not always
that animal food is in habitual use by the poor, and in many
countries, vegetables are their only subsistence. In India, the
Hindoos of all classes take no animal food; while in Europe, the
habits of the poor in most places call for some portion of meat,
as well as milk, butter, and cheese, with their other food.
Again, while in most parts of Europe corn of some kind or other
forms the principal food of the people, in Ireland potatoes are
their chief sustenance; in India and China rice; and in New
Spain maize and the banana. Now potatoes, rice, maize, and the
* Progress of Society, by Dr. Hamilton, p. 143.
32
RENT.
banana especially, are all of them yielded in much larger quan-
tities than any kind of grain in use in this country. The best
lands in England yield from 36 to 40 bushels of wheat per acre,
while the worst under tillage only yield from 8 to 10 bushels.
But of rice from 30 to 60 bushels per acre is said to be the
ordinary produce, with two crops in the year. The banana
in the tropical countries is more prolific than any vegetable in
use in Europe. Maize, though not so productive as the banana,
greatly exceeds the productiveness of other kinds of grain. In
New Spain the general return is considered to be 150 to 1. We
have alluded already to the assertion, that twelve times as much
land would be required to support a man upon butcher's meat.
as would be sufficient to support him upon wheat, and seventy
times as much as would support him on potatoes. Though the
estimate may be overcharged, it is sufficient to give an idea of
the great difference between them. But a piece of ground
which, if sown with wheat, would not raise more than enough to
support one individual, would, if cultivated with the banana,
afford more than sufficient food to maintain twenty-five persons ;
and with less labour.
According, then, as a greater or less quantity of land is requir-
ed to afford the subsistence which the custom and habits of the
people establish as necessary to them, must labour and capital
be directed to cultivation, and consequently, the rent of land
be high or low relatively to the population which the land
supports. Should potatoes ever become in England, like
in Ireland, and like rice in India, the common and favourite
vegetable food of the people, so as to occupy the same proportion
of the lands in tillage which wheat and other sorts of grain for
human food do at present, the same quantity of cultivated land
would maintain a much larger population. If the change were
sudden, perhaps at first a large extent of the poorer land would
be thrown out of cultivation; for there could not be for a con-
siderable time such a multiplication of people as to consume the
quantity of potatoes that might be raised from the land before.
sown with wheat. At first, therefore, rents must fall; but ulti-
mately the population increasing, rents would rise again to their
former level, or even become higher than before. In those
RENT.
33
countries where rice is grown, the watered lands adapted to its
cultivation are known to afford very high rents,-sometimes two-
thirds of the crop. But whether the land be cultivated with
productive crops which support a dense population, or with
less productive, as wheat for instance, which can only support
a comparatively thin population, rents in both cases are govern-
ed by the same principles. In the former case, however, the
increase of population may go on with little check from want of
food, a very large capital may be employed upon the land, and
soils of very inferior quality may admit of cultivation with the
customary profit, yielding a high rent to the landlord.
The thrashing machine, upon which so much popular venge-
ance has been wreaked, is, notwithstanding the odium which
has been excited against it, an invention from the adoption of
which the most unmixed and purely beneficial consequences
result; and more especially to its greatest enemies, the poor;
by enlarging the means of their subsistence, and rendering food
plentiful and cheap. To debar us of the advantages which this
machine confers, would be like bringing a curse of barrenness
upon our soil, or a perpetual blight upon our crops. Though
the use of this machine does not cause a larger crop to be raised
from the land, yet it prevents the loss of grain which would
otherwise be thrown away in the straw, and is therefore equi-
valent to raising a larger produce, or to a greater productiveness
of the soil. It is said not to lessen the expense of thrashing,
but to do its work cleaner, and with greater certainty and ex-
pedition than the flail. The effects of drill husbandry are simi-
lar to those which result from the use of the thrashing machine.
The saving of seed-corn effected by the drill, while the land is
not merely equally well, but much better sown than by the
broad-cast method, renders the net quantity of corn which, after
deducting for seed, remains available for consumption, larger
than before. It has been said, that the thrashing machine and
the drill together, save one-tenth of the grain from being wasted;
and, the quantity of wheat raised in Great Britain being fif-
teen millions of quarters, their universal use would save to the
country in wheat alone one million and a half of quarters
annually; equal in value to £4,000,000. The effect of the
VOL. II.
D
34
RENT.
greater productiveness of agricultural industry, from these and
similar improvements, is to augment the produce without en-
hancing the cost at which it is raised, which is equivalent to
raising and bringing the corn to market at a less expense per
quarter. If instead of a tenth, these improvements had doubled
the former quantity of net produce, and been all at once uni-
versally adopted in practice, they must for a time have thrown
the poor soils out of cultivation; they would have ruined the
farmers who held their lands on lease; and as the supply of
food would have been acquired with less labour than before,
more labour would have been directed to manufactures. But
these improvements are never adopted suddenly and generally
throughout a country; they spread slowly and partially, and
the additional quantity of corn sent to market from time to
time, through the savings effected by them, is not of such
magnitude as to overload the market, and thus to dispense
with so large a portion of the industry of the country being em-
ployed in agriculture, and throw the poor soils out of cultiva-
tion; but the larger quantity of produce is raised upon the same
land, and at the same cost, as the previous smaller quantity.
The effect, then, of these improvements upon rent is in the first
instance nugatory; the whole larger quantity of produce sells in
the market for the same sum as the whole smaller quantity
sold before; the profits of the farmer remain the same; while
the price of produce falls, and the consumer is more abundantly
supplied.
But although the gradual introduction of these improvements
produces no other effects than have been now mentioned, it is
reasonable to infer, that if a larger supply had not been pro-
cured in this way, the wants of the people, when an increase in
the powers of industry should have allowed, would have with-
drawn some hands from manufactures to extend cultivation
further, in order to acquire a more ample supply of food. In
such case, while manufactures would have been less abundantly
supplied, rents would have risen, an effect which has been pre-
vented by the improvements in question. Such improvements,
then, as they render less land necessary to yield the required
supply, must have a tendency, if not to lower rents in the first
.
RENT.
35
instance, at least to prevent their advance. Their ultimate
effects, however, by giving the means of supporting an increase
of population, are the reverse. The chief effect which we must
ascribe to the introduction and spread of these improvements, is
the moderate prices of our agricultural produce, that they have
not rapidly advanced, as population has increased, but have
lagged at a great distance behind.
The productiveness of the agriculture of a country depends, in
a great degree, upon the amount of capital devoted to cultiva-
tion. When an augmentation of national capital takes place, so as
to become redundant in those departments in which it has been
usually employed, new sources of employment must be found for the
additional quantities. They accordingly become diffused through
every department of industry, and in part are directed to extend
and heighten cultivation. Savings and accumulations of capital
thus become expended in ameliorations of the soil, clearing,
draining, fencing, and bringing new waste land into tillage;
constructing additional and better farm-buildings, improving
roads, and enlarging the productive powers of the soil. Capital,
in this way, becomes fixed and transformed into landed property;
the amount of the productive agency of land in the market is
thus augmented, and the same effect is produced as though an
acquisition of land had been made from the sea, and the num-
ber of acres were increased. Again, we know that an extension
and heightening of cultivation, while it augments the quantity
of produce raised, can usually, except through improvements in
husbandry, be only effected with a diminished ratio of pro-
ductiveness; and the increase of capital is sure to be followed
by a general reduction of interest and profits through all the
departments of industry, from the difficulty, or impossibility, of
finding new and sufficiently ample sources of employment for
the additional quantities, at the same rate of profit as on the
previously employed capital. While, however, from the expen-
diture of capital in landed improvements, the supply of produce
must be increased, we cannot anticipate a fall in its price, from
this cause, or a less demand for land than before, from what is
equivalent to an increased supply of it. It is the want of occu-
pation for an enlarged quantity of unemployed capital that has
D 2
36
RENT.
:
been the cause of this extended cultivation and new supply of
land, while the possession of the enlarged quantity has increased
the powers of industry and employed it in the cultivation in ques-
tion; and since this capital, by supposition, has been diffused
uniformly through all the branches of industry, although a
larger supply of produce has been the result, it has been accom-
panied in a commensurate degree with a larger supply of other
articles indeed, a larger supply of produce is called for to
exchange against the larger quantity of other commodities: the
supply and demand are both greater, but without alteration in
their relation to each other. The greater quantities on the one
side will, therefore, freely exchange for the greater quantities
on the other; without any derangement of industry, or glut of
produce. If then it were possible, in such a state of things,
that the money price of produce should fall, the commodity price,
or the quantity of goods for which it would exchange, could not
fall simultaneously. This commodity price cannot fall, when
the produce must necessarily bear a relatively higher value,
from the greater cost at which its last increased quantity from
the poor soils is raised. If, however, the money price should
neither rise nor fall, yet an extended cultivation is still, in this
case, not only practicable, but profitable; although attended with
a diminished ratio of productiveness, and a smaller profit to
the cultivator. From the increase of capital, and consequent
fall of profits, the rate of profit which will satisfy him, is not
what he acquired before the increase of capital took place, but
that which the capital when now employed in the most advan-
tageous manner in other occupations can be made to yield; and
this rate of profit being less than heretofore, lands may, in such
case, be cultivated, which could not previously have been done.
without disadvantage. For example, when the average profits
of capital are twenty per cent., no man would extend cultivation
over land so poor as to return only fifteen per cent. on his ca-
pital. But when profits in every other business have fallen to
fifteen per cent., the barrier to the entrance of the cultivator
upon such land is removed, and it may then be cultivated with-
out disadvantage; since no better profit could be obtained
elsewhere.
RENT.
37
But although, in this case, a diminution takes place in the
rate of profit on the capital employed by the cultivator, this
cannot lower the rent of the land. The fall in the profits of
farming has been occasioned by a general augmentation of
capital, by which profits have been reduced universally through-
out all occupations, and the rent is not lowered; because,
notwithstanding the profits of cultivation are less, its surplus
profits over other occupations are not less. On the contrary,
when larger quantities of capital have become fixed on the
land in permanent agricultural improvements, as well as larger
quantities employed in its actual cultivation, and when tillage
has been pushed over outfields of new and inferior soils,
whether from the want of employment for an augmented quan-
tity of capital, or from a reduction of profits lowering the ex-
pense of raising produce upon the old lands, the gross profits
of cultivation of these lands out of which rent is taken, being
upon a larger capital, must be greater in amount, though per-
haps lower in their rate per cent.; and the rents upon them
cannot but advance. Cultivation cannot, in the nature of things,
be heightened and extended, unless larger returns are acquired
on the labour and capital previously employed, than are gained
on what is last applied in such heightened or extended cultiva-
tion, and above what the same amount ordinarily yields in other
occupations.
It may be remarked, that the whole agricultural produce of a
country is susceptible of increase or decrease from several circum-
stances, without any variation in the shares or proportions of it
which, in the distribution, fall to the different parties concerned
in its production. And, again, the relative magnitude of these
shares or proportions may vary, though without an alteration in
the whole quantity of produce raised. But, while the popula-
tion and productive power of a country continue stationary,
whatever increases its whole agricultural produce, without occa-
sioning a corresponding diminution in the produce of other
kinds of industry, must benefit some party.
It cannot fail,
indeed, to benefit all parties so far as they are consumers.
The advantages which result from an increased supply of the
produce of the soil, from the extension and heightening of cul-
38
RENT.
tivation consequent upon an augmentation of capital and fall
of profits, accrue more especially to the landlord and the
labourer; while the farmer gains nothing from this increase.
The landlord gains, not only as consumer, in the cheapness of
provisions and other produce of the soil, through the reduction
in the charge for profits on the capital employed in raising them,
but he gains also as producer, in the larger surplus of profit
which the employment of a larger mass of capital in the cultiva-
tion of his land affords ; or, which is the same thing, in the larger
surplus profit which his land affords over that poorer land which
under the new circumstances can be cultivated without disad-
vantage. But this advantage of the landlord is gained, not at
the expense of the labourer, but out of the profits of the farmer.
The labourer, as consumer, comes in for his full share of ad-
vantage in the larger quantity of produce which is brought with-
in his reach, and the smaller charge for profit on the capital
employed in raising it. A fall of profits, or a reduction in the
price of the hire of capital, cannot occur without effecting a real,
though unapparent, rise in the real wages of labour. The farmer
gains, in some degree, it is true, as consumer, in the reduced
price of many articles on which his income is expended; but he
suffers as producer; and in this respect he stands distinct from the
two other parties, for there is a diminution in the rate of profit
he acquires. But though individuals, whose capital has not in-
creased in the general increase that has taken place, may thus
suffer, the class of capitalists as a body are more than indemni-
fied for a small reduction in the rate of profit, by the larger
amount to which their capital has accumulated, and on which
their profits accrue. Thus, however some individuals may suf-
fer from a general augmentation of capital, the most predominant
interest must be promoted thereby, which cannot but gain by
everything which heightens the efficiency of industry and in-
creases the quantity of produce to be enjoyed.
It has been said that a man can afford to give more for land
when he knows how to make a better use of it, and we know
that the rent is not what the landlord can afford to let the land
for, but what the tenant can afford to give for it. Yet this
argument in support of the position that improvements in hus-
RENT.
39
bandry have the effect of raising rents, must be received in a
qualified sense, and not so as to induce an inference from them
that the advance of rents will be equal to the improvement.
When, from such improvements, more produce than before is
raised from the land, and its supply in the market increased, its
price must fall; for the expense of its growth is lessened. If
such improvements were known only to a few persons, their
effect on prices would be imperceptible, and the few who
practised them would then be able to pay more for land, from
knowing how to make a better use of it. But when such im-
provements come into general practice, the case is different;
less land will be required to furnish the same supply; and when
the number of acres in a country is thus, as it were, increased,
and a great quantity of produce thrown upon the market, which
has lowered its price, the supply of land becomes greater than
before. Such a state of things would prevent higher profits
being gained by cultivation, and disable the farmer, who has to
live by the profit of the land, from paying a higher rent, not-
withstanding that means have been found of raising from it a
larger produce. Such improvements can only advance rents,
from setting free a portion of labour, which must find occupation
in part in extended and higher cultivation. The farmer can
afford to pay more for land, not when he knows how to make a
better use of it, if by that expression be meant, to raise a larger
produce, but when he can acquire a larger gross profit by its
occupation: it is on the profit and not the produce, which two
are distinct things, that the amount of rent depends.
From observing on the magnitude of the powers of industry
applicable to cultivation, we proceed to speak on the circum-
stances by which the price of produce is determined.
In order to understand how the price of agricultural produce in
any country is determined, let it be observed, that such country
has a given power of labour applicable to the general purposes of
industry, from which power both its means of cultivation of the
soil and its means for the purchase of its produce are derived.
Now the means of cultivation and of purchase possessed by the
population call for a certain quantity of agricultural produce, in
order to its maintenance, in that measure of comfort which
40
RENT.
these means afford; and the people are both enabled and willing
to give in exchange for this quantity a certain quantity of other
things. No doubt, they will give as little as possible, but there is a
certain quantity which they will give, if their supply cannot be
procured for less. Thus the expenditure of revenue is directed
in a given measure to agricultural produce, and the demand for
that produce will accordingly be commensurate with it. Again,
competition tends constantly to an equalization in the advan-
tages of all occupations, so that the net profits of cultivation
cannot permanently be either much higher or much lower than
in other occupations: for the sake of argument, they may be
assumed to be equal.
.
But the qualities of land, its situation, and the expenses of
cultivating it, are very different in different instances: the
qualities varying through every gradation from the highest to
the lowest degree of productiveness. In order to furnish any
required quantity of produce, or to procure thereby a certain
quantity of other articles in exchange, it is necessary to employ
some land which is inferior in quality to any of the rest; because
the whole of this required quantity cannot be furnished without
having recourse to such land. Hence, whatever is the cost of
raising produce from this inferior land, including the payment of
the value of the wild productions it yielded before it was brought
under cultivation; or, which comes to the same thing, whatever
is the cost of that last increased quantity of produce raised by
the last portion of capital expended in heightened cultivation
on better land, it determines the price in the market, not only
of what is raised from this poor land, and by this high degree of
cultivation, but of the whole quantity in the market, whatever
may have been the facility with which it was raised, or however
superior in fertility the land that produced it.
Again, not only is the price of agricultural produce necessarily
equal to the expense of raising that portion which costs the
most, and never liable to fall below it, but it is so determined
and limited by this amount that it cannot much exceed it. If the
nature of agriculture were, that a larger quantity of produce
when required could not be raised by heightened cultivation,
and if, in addition to this, there were no more poor soils which
RENT.
41
could be brought under tillage, in such case, produce would be
furnished under a monopoly, and its price be determined after
the manner of other monopolies. So long as the means and in-
clinations of consumers caused expenditure to be directed in a
given measure to agricultural produce, this measure of demand
would cause it to maintain the same price, notwithstanding that
savings, in some way or other, should be made in the expense of
raising and bringing it to market. But since the nature of
agriculture is contrary to this, and since there is always the
means of augmenting the produce when required by heighten-
ing cultivation, even if no more poor land remain uncultivated,
if the cost of production at any time fall, while the price remains
as high as before, an unusual profit must accrue by heightening
cultivation, and thus the produce would be sure to be augment-
ed, and the price reduced by the larger supply, to the level of
the cost of production under the new state of diminished
expense.
As long as there is in any country poor land which, under
existing circumstances, admits of cultivation, but admits it only
on being rent-free; and, again, as long as additional capital can
be applied in a higher cultivation of other lands, but which can
only be so done with the customary rate of profit upon it, be-
cause no more rent is paid for the land when this capital is
expended upon it than would be paid if it were not expended, so
long will the growth of produce be free from any monopoly, and
its price will not be a monopoly price. Hitherto we have not
known circumstances to exist in which more labour and capital
might not have been expended in heightened and extended cul-
tivation, had an increased demand for produce and a higher
price arisen, to call for and remunerate such expenditure; and,
from the nature of husbandry, it is difficult to conceive the ex-
istence of such circumstances. Thus, when industry is free, the
price of produce is never a monopoly price, but determined solely,
on the ordinary circumstances of competition, by the cost of
production of the last portions furnished from the poorest land,
with the addition of the value of the wild productions it pre-
viously afforded, or through the most heightened cultivation of
other land, and consequently raised at the greatest expense.
42
RENT.
If the people were fewer, and required only a smaller quan-
tity of produce than we have supposed, or were able and will-
ing to give in exchange for it only a smaller quantity of
other things, the cultivation of the poor land that has been
mentioned would not be requisite, because the better lands
would be sufficient to yield the whole required quantity. But,
notwithstanding this, the price of produce, although it would be
lower, would still be determined on the same principles; for
this better land is itself of unequal degrees of fertility, and there
is in it some of inferior quality to the rest. The price of pro-
duce, then, will be determined, as before, by the expense of
raising it upon this worst land which it is now necessary to keep
in tillage to furnish the supply: the price will be lower, because
the land is not so bad as before.
Again, on the other hand, if population were to increase, or a
foreign demand for grain arise, and instead of a smaller quan-
tity of produce, a larger quantity were requisite, while the peo-
ple of our own or other countries might be able to give a larger
quantity of other things for it, land of still worse quality than
that which was first supposed must be brought into tillage, in
order to furnish the larger supply of produce required. In this
case, likewise, the same principles operate, and the price of the
whole produce sent to market must rise to that point which would
afford the customary rate of profits and wages to the cultivators
of this worst land.
Thus, according to the population to be supported, and the
means of its production and consumption, will be the prices of
produce in the market, and the quality of the worst land in
cultivation. If either the amount of population, or the means
of its consumption, should fluctuate, so would the extent and
degree of cultivation, the quality of the worst land employed,
and the prices of produce. In such case, the poorest land would
alternately be abandoned and resumed, as the required quantity
of produce should increase or decrease, and, consequently, as
the remunerating nature of the prices in the market should ren-
der their cultivation profitable or unprofitable.
Whence it appears, that the price of agricultural produce, like
the price of everything else, is determined, first, by the com-
RENT.
43
petition of the market; and, secondly, by the circumstances in
which the parties in the competition on the two sides are placed;
that is, the cost which they are respectively at in the production
of the articles they offer for exchange against each other.
But in agricultural produce there is this difference, that it is
not the cost to the whole body of cultivators, or to the average
of them, but to the cultivators of the least productive soils, that
determines the competition on their side, and the conditions
under which every one of them makes the exchange. In fact,
the circumstances of the farmers of the least and of the most
productive soils are alike, for the landlord demands, on the more
productive, a rent exactly equal to their superior productiveness,
and, consequently, neither of them can afford to undersell his
neighbour. The rent, however, is not the cause of prices, but
their consequence. The price is necessary to obtain the required
quantity of produce, notwithstanding that the largest part is
raised at so much less expense as might, if a smaller quantity
only had been required, have borne a considerably lower price.
Hence the difference between agriculture and manufactures.
If the price of any manufacture were essentially depressed, whe-
ther by foreign competition or otherwise, and could not be
raised to its proper level by contracting the supply, the whole
manufacture must be destroyed. But, if the price of corn were
essentially depressed, it would not be the whole of the land
which would be thrown out of cultivation; but only the inferior
soils. The extent of cultivation would be diminished, but there
would be some land from which the market might still be fur-
nished at a reduced price.
Having thus noticed the circumstances by which the price of
agricultural produce is determined, it remains to consider those
which affect the expense of its growth and sale, whereby the
gross profit of the cultivator, out of which rent is to be paid, is
determined.
When the cultivation of land yields no higher profits on the
capital employed upon it than the same capital would acquire if
employed in other occupations, no rent whatever can be paid to
the landlord. But as much as this profit exceeds the profit
44
RENT.
which that capital could acquire in other occupations, so much
must the tenant expect to be obliged to pay in rent.
The expenses of cultivation, therefore, are ultimately matter
of no moment to the tenant. If they are high, the rent will be
low; and, on the other hand, if they are low, the rent will be
proportionably high: they are a matter of concern to the landlord
alone. The tenant is concerned only that his expenses shall be
as low as those of any one else who should offer to take the
land. Neither, for the same reason, is the farmer concerned in
the price of produce in the long run; but only in the price which
may obtain while his existing lease or agreement shall last.
The expenses of cultivation may be comprised under the
following heads; first, interest and profits of capital; secondly,
wages and charges for labour of all the different kinds re-
quired in conducting the business; and thirdly, taxes. Under
one or more of these heads may be classed all the expenses to
which the cultivator is subjected in bringing his produce to mar-
ket. After payment of these expenses, including therein the
customary rate of profit on the capital employed, the surplus
which may be yielded by the price of the produce when sold,
goes for rent.
We proceed to notice the effect of these charges in raising or
lowering rents, according as the charges are low or high.
The profits of capital forming part of the expense of bring-
ing to market the produce of land, that expense, consequently,
varies as interest and profits rise or decline. The customary
interest and profits of capital usually fall or rise as capital be-
comes abundant or scarce in relation to the employment for it ;
and it is possible that they may sometimes fall or rise in a coun-
try, not because its capital has increased or decreased, but be-
cause the known sources of employment for it have become
greater or less, or more or less productive.
Let it be supposed that profits of capital have fallen in a given
country, not through an increase in the amount of national
capital, but through the loss of some branches of industry, or
the drying up of some source of its employment. A lessening
of the sources of employment for capital takes place either in
RENT.
45
agriculture or in some other occupation. If it be in other em-
ployments, this, as regards the extent of the cultivation of the
soil, is equivalent to an increase of national capital and popula-
tion; more labour and capital are available, and must be de-
voted to cultivation, from the want of other occupation. Now
in applying successively additional portions of labour and capital
to cultivation, they yield a continually decreasing rate of return,
and a rent may be charged upon every one of these portions,
except the last, which yields only the ordinary profits of capital
and labour: all the preceding portions yielding more than the
ordinary profits. The same thing happens if, instead of height-
ening the cultivation of the lands already under tillage, this
greater abundance of capital and labour available to agriculture
be applied to the extension of cultivation over inferior soils.
These comparatively barren soils must yield a lower rate of
return in produce to the labour and capital expended on them
than the better soils, and only admit of cultivation through
the absence of a better occupation, in consequence of the
loss of branches of trade formerly possessed. Now, although
the condition of the people must have deteriorated through the
comparative unproductiveness of their whole labour and capital,
and their real means of purchase be diminished, yet, under the
circumstances now supposed, rents must advance. When the
direction of industry to agriculture must be augmented, the
mass of capital employed upon the land increased, and poorer
soils be taken into cultivation, those lands previously under till-
age, and which are of better quality than the last taken in, must
yield higher profits, and bear an increase of rent equal to the
sterility of the worst soils which, under the new circumstances,
will bear to be cultivated without loss. Those poor lands, which
heretofore could not yield any rent, now that still poorer soils.
admit of cultivation, will afford to pay a rent. Again, when
additional portions of labour and capital are employed upon the
better land, the number on which the landlord is enabled to de-
mand a rent is increased; and when the last portion of labour
and capital employed must yield less than any previously invest-
ed or expended, the share on all the former portions is also
increased; so that his advantage may be spoken of as derived
46
RENT.
in two ways; first, from the number of portions on the profits
of which he takes a share; and, secondly, from the increase in
the shares themselves on all the former portions. In the natural
progress of improvement, profits fall, and thus rents, when not
curtailed by taxation, rise in a greater proportion than the price
of produce, though in a less proportion than the quantity of
produce.
The position that an advance of rents takes place from an exten-
sion of cultivation, and the employment of much capital upon the
land, is corroborated from the fact that, in the progress of society,
which has always been accompanied with an extension and height-
ening of cultivation, rents have uniformly risen. If we look back
to former times, when but little labour and capital were employed
upon the land, we observe that rents were low, and that they
have subsequently advanced gradually as more labour and ca-
pital have been applied to cultivation. They have not, however,
advanced in an equal proportion with the extension of cultivation,
or the increase in the quantity of produce. Every diminution
in the expense of cultivation may allow of the employment of
additional capital; and when either new land is brought under
tillage, or the old improved, the increase of produce may be con-
siderable, though the increase of rents be trifling. In the pro-
gress towards a high state of cultivation, the quantity of capital
employed upon the land, and the quantity of produce yielded by
it, bear a constantly increasing proportion to the amount of rents.
In ancient times, when the cultivators were poor and husbandry
was badly conducted, rent was usually half the produce, and
sometimes more; as it is now in many foreign countries similar
in circumstances to what our own were in those times. Yet, though
rents have more than quadrupled since those days, the proportion
of the produce is now thought to be rather under than over one-
fifth part, and this one-fifth is perhaps three or four times great-
er than the half was before. Arthur Young gave his opinion,
that the average proportion which rent bears to the value of the
whole produce did not exceed one-fifth; whereas formerly, when
less value was produced, the proportion amounted to one-fourth,
one-third, or even two-fifths.*
* Evidence before the House of Lords, given by Arthur Young, p. 66.
RENT.
47
It is seldom, however, that the profits of capital fall through
the contraction or drying up of its existing sources of employ-
ment. The more common cause is a general increase of capital,
for which new sources of investment must be found. This in-
crease has the same effect in extending and heightening cultiva-
tion as a greater abundance of capital available for cultivation.
through the loss of existing employments, and in the same way
is productive of a general advance of rents.
But if we could suppose a fall of profits to take place without
any addition to capital, and from some circumstance which
should not occasion either an extension or heightening of culti-
vation, the saving thus effected in the expense of bringing the
produce of land to market would cause no change in rents.
The fall of profits, as it would operate universally on all occupa-
tions, would not affect the surplus profit afforded by the culti-
vation of land over that procured in other employments, which
surplus constitutes the landlord's rent. Let a country be sup-
posed in which the average rate of profits is ten per cent., and
that the occupation of a particular farm yields a gross profit on
the capital of twenty per cent. The landlord's demand in this
case will be ten per cent. on the capital employed; being the
excess of profit which is procured by the occupation of the farm
over what the capital would return elsewhere. Now if profits
in that country fall universally from ten to eight per cent. on
the average, the farmer's net profit on holding this farm must
fall to the same rate. But in this case, the landlord will not be
able to advance his rent, because the farmer's profit will have
been lowered either from a decline in the prices of agricultural
produce, or an advance of wages or other expenses; for usually
when profits fall, the rewards of labour rise in an equal degree,
and as the gross profit will fall, surplus profit will not be greater
than before. Since, then, a fall of profits, independent of a
power of pushing cultivation over inferior lands, and of employ-
ing additional capital upon other lands, has no effect upon rent,
such a fall of profits would go all to the advantage of the con-
sumer, and while the capitalist would suffer as producer, and
only participate as consumer, the benefit to the labourer and
landlord would be without any deduction: the real rewards of
48
RENT.
labour would be raised, and the landlord would participate in
common with every other consumer in the advantage of a low
rate of profits;—in the exchange of his rent, or its equivalents,
for the various productions of industry, he would pay less for the
use of the capital employed in their production.
On the other hand, let it be supposed that the profits of
capital have risen in a given country. This rise must be the
result, either of a loss and diminution in the amount of national
capital, or of a larger or more profitable opening having been
found for its employment; and, again, this larger opening must
be either in agriculture or in some other occupation. According
as the rise of profits is the consequence of a loss of national capi-
tal, or of the enlargement in the sources of its employment, will
the general condition and affluence of the country be diminished
or increased, and the real ability of the people to purchase
commodities determined. But it is not wholly by such cir-
cumstances that rent is fixed. If the larger or more pro-
fitable opening for the employment of capital be, not in agri-
culture, but in some other occupation, capital and industry
will be drawn from agriculture to this other occupation. The
change of industry will cause the supply of agricultural produce
to be diminished, while the means of purchasing it are larger,
through the more profitable direction which industry has re-
ceived. A rise in the price of produce follows, and the profits
of farming are increased. But, although the profits of culti-
vation will thus be raised, the surplus profit which it will yield.
above other employments will not be greater than before, and
rents cannot rise from such an advance of profits. On the con-
trary, less land than formerly will be cultivated, since part of
the industry of the country has been drawn off to the new occu-
pation. When the poor land is abandoned, because there are
not hands to cultivate it, nor so great profit to be acquired there-
by as in the new employment, the rents on all the remaining
lands in cultivation must be reduced.
If the larger opening for the employment of capital be in
agriculture, through improvements in husbandry or discoveries
which render more capital applicable with advantage, though no
more exists than formerly, capital will be drawn from trade and
RENT.
49
manufactures to be employed upon the soil; a greater quantity
of agricultural produce will be brought to market, and its price
must fall. But though the extension and heightening of culti-
vation have usually a direct tendency to raise rents, yet when
the profits of capital must be larger, the surplus profits will be
diminished thereby, and in such case, rents cannot greatly
advance.
High profits, then, which prevent the cultivation of the
poorer lands, cause rents to be low; while, on the other hand,
low profits, and their usual accompaniment, a large capital de-
voted to agriculture, which spread cultivation over such lands,
usually cause rents to advance.
We proceed to the consideration of the effect which wages
have upon rent.
We cannot determine the effects of the wages of labour on
rent, unless they be considered in two distinct points of view,-
first, as high or low wages of labour in general; secondly, as
high or low agricultural wages.
The condition of the labourer does not solely depend on the
quantity of agricultural produce that is within his reach, or the
share which comes to him in the distribution of that produce.
Though scantily and badly fed, the efficiency of labour in other
branches may cause him to be comfortably clothed, lodged, and
well furnished with necessaries and conveniences of other kinds.
His scanty supply of food may thus be partly compensated in
other ways, and his condition on the whole rendered tolerable.
rent.
If the productiveness of industry, generally considered, cause
the rewards of labour to be ample, this will have an effect on
When the people are well clothed, lodged, and furnished
with comforts and luxuries, they are placed in circumstances
in which, by a sacrifice of part of these, they are able to obtain
an ample supply of provisions; and, in this case, we may expect
to find cultivation flourish, with the rent of land high in propor-
tion to the population which is supported on its produce. On
the other hand, if ignorance of the proper processes in the arts,
and a want of the tools and machinery which are suited to the
different branches of manufacturing and commercial industry,
cause the labourer to be badly clothed and lodged, and scantily
VOL. II.
E
50
RENT.
furnished with other necessaries, the imperious want of such
things must cause him to save as much as possible from his
expenses for meat and drink, and devote a large part of his
time and means to procure a supply of manufactures. Cultiva-
tion then will be restricted within narrower bounds than those
to which, under more favourable circumstances, it would be
carried; and rents will be low in comparison with the numerical
population the land supports. It cannot be otherwise than this,
when a large portion of the industry of the people must be di-
rected to manufactures; and when, consequently, there is neither
time to bestow in heightened cultivation, nor the means of pur-
chasing its produce.
Thus it is that high or low wages of labour of all sorts have
an effect on rent. Whence we evidently see, that the interest
of the landlord is indissolubly bound up with the general pros-
perity of the people. There are cases in which the landlord may
gain a limited advantage at the expense of the rest of the com-
munity; but the general case, and that which is of permanent
duration, is, that his interest is promoted by everything which
advances the public interest, and suffers with everything that
injures that of the people. So far from his interest being al-
ways opposed, as it has been affirmed, to that of the consumer
and manufacturer, he is deeply concerned in the progress of
society, the heightening and diffusing of knowledge and skill,
and the consequent advancement of the productive powers of
industry, the growth of opulence and population. In the pro-
gressive advancement of nations, the natural tendency of rent
is to be continually rising. With every increase of popula-
tion and of wealth, there are more persons to be fed, and to
be better fed; and while the quantity of land cannot be in-
creased, the demand for it goes on continually augmenting.
These are advantages accruing to the landlord in the very nature
of things. But, besides these, as population advances, he some-
times derives benefit from his neighbourhood becoming the
seat of manufacturing or commercial industry, the discovery
of mines, the formation of a canal or road, and other accidental.
circumstances.
What has been now said has had reference to the wages of
RENT.
51
labour in general, and the condition of the working classes at
large, and has proceeded on the supposition, that the wages of
agricultural labour were on an equality with other kinds of la-
bour. But the farm labourer may be either better or worse
paid than workmen in other departments of industry; and,
in fact, throughout Europe generally, this kind of labour is worse
paid than almost any other. Although industry as a whole,
when adequately skilled, and properly distributed in the dif-
ferent employments, cannot exist in excess of quantity, and has
no competition to fear; its rewards depending, after deduction
for rent and profits of capital, solely on its own productiveness;
yet, through the division of employments, the individuals in the
separate departments of labour enter into competition with one
another, and, in offering to undersell each other, the rewards of
every separate department are thus relatively high or low, ac-
cording as that competition is more or less active in it than in
others, and thus determines the preponderance for or against it.
A disparity subsisting between the wages of labour in agriculture.
and wages in other occupations has an effect on rent; and which
effect we purpose here to consider; first premising, that in the
term agricultural wages will be included, not only the wages of
the farm labourer himself, but those also of the artificers, such
as the smith, the wheelwright, and others who are employed by
the farmer, or whose wages form part of the expense of con-
ducting his business.
If the wages of agricultural labour were higher than other
kinds of labour, this would cause rents to be lower than they
otherwise would be.
This will be evident from the following considerations. The
supply of agricultural produce will not be increased because the
labourer's wages are high; for his industry is not more efficient
in such case than before; and though he may work somewhat
more when better paid, yet as others will be worse paid no great
effect will result from thence. Neither will its consumption be
increased from this cause, for although the agricultural labourer
himself may be thus enabled to consume a larger quantity, some
other parties must be compelled to retrench their expenditure
in a corresponding degree; since the produce of industry, and,
E 2
52
RENT.
consequently, the means of expenditure of consumers on the
whole, remain nearly the same. But while neither the supply
nor the consumption of raw produce can be increased by rela-
tively high wages in agriculture, the demand for it must be less
from its dearness in comparison with other articles. If then a
great cost must be incurred in bringing the produce to market,
through high wages, while its consumption is small, the price
cannot be raised in a degree adequate to its higher cost. The
cultivation of the poorest lands must be abandoned, the gross
profits of farming must decline, and the surplus above other oc-
cupations, which goes for rent, be diminished.
On the other hand, if farm labourers multiply faster than the
employment for them, and if, through the difficulty of transfer-
ring such labourers to those branches of industry whose products
are in higher request, or otherwise, the wages of agricultural la-
bour become depressed below those of similar kinds of work in
other employments, the amount of this depression will go into
the landlord's pocket.
When through such depression the cost of bringing to market
the produce of land is low, the working of the soil will be deep-
ened, and wrought up to a more elaborate tilth, at the same
time that the domain of cultivation will be enlarged to comprise
a more extensive out-field of poor land than, under other cir-
cumstances, could be done with advantage. The gross profits
of farming will be high, and that surplus profit over other occu-
pations which constitutes the landlord's rent be large,
In countries or neighbourhoods where manufactures are defi-
cient, and where, consequently, there is not sufficient employ-
ment for the working classes, an active competition amongst
them is often found to obtain small portions of land for cultivation,
there being no other resource, as their numbers multiply, but pro-
curing land on which to bestow their labour, and from which they
draw the subsistence of themselves and families. The con-
sequence is a high rent of land in small portions, or a high sale
price when disposed of in such portions. This first is the case in
Ireland, where rents are paid for small holdings, sufficient to
yield potatoes for a family and support a cow and pigs, of such
exorbitant amounts as to leave scarcely the bare necessaries of
may
RENT.
53
existence to the occupiers. The same competition exists in
many parts of France in the purchase of small parcels of land to be
cultivated by the proprietors, and which has raised the sale price.
of such parcels in that country from twenty years' purchase, the
rate at which they stood before the revolution, to forty years'
purchase, at which rate they are frequently sold at present;
yielding perhaps only two and a half per cent. on the money,
while the ordinary rate of interest there is certainly above five
per cent.
Such an elevation of the rent and sale price of land
can only arise from the want of adequate employment for an
increasing population in other branches of industry; it is rather
artificial than natural; the result of a peculiar and cramped
state of society, instead of the steady progress of a healthy and
prosperous community. The cultivation of the soil was the
earliest occupation of mankind, manufactures and the arts came
afterwards; the population has been brought up and instructed
in the practice of the former, and has not yet learned how to
perform the latter. It is, however, but one step that is wanted
to emerge from this confined state of industry, and launch into
one affording endless occupation and abundance of wealth. This
consists in the acquisition of a knowledge of the arts; a step
perhaps difficult at first to be taken, but which afterwards
would more than repay its cost.
The consideration of the effects of taxation, and of the parties
on whom certain taxes ultimately fall, will be more convenient-
ly entered upon in another place, and therefore will not be fully
stated at present; some few remarks, however, upon this subject
may not be inappropriate here.
Taxes on land, or which in any way increase the expense of
cultivation, whether in the shape of land-tax, local rates, tithes,
or indirect taxes, though paid in the first instance by the tenant,
ultimately fall upon the landlord, in the shape of a diminution
of his rent. To convince ourselves of this fact, we need but
make a comparison between the rents of those lands which are
either wholly exempt from either of these burthens, or are only
pressed by them in a slight degree, and such as are heavily
loaded with them. A tithe-free farm always has paid a rent as
much more than another farm of equal goodness as the value of
54
RENT.
the tithe upon that other. And so of farms on which the rates
are light. Of such farms, the rents are higher than the rents
on others, in the precise degree in which the rates are lighter.
Even a tax on the farmer's income, or the profits of his capital,
would be thrown upon the landlord, unless the profits of other
occupations were equally taxed; for if the farmer could not
throw off the burthen, he would withdraw his capital from the
land, and embark it in some one of those employments which
were exempted from the tax. But if a tax were imposed on the
profits of capital in all occupations, this must be borne by the
tenant; since no means of escape from its payment would be
left; and the surplus profit of farming over those profits which
other occupations, now universally taxed, would yield, would
not be affected thereby. On the other hand, if to favour agri-
culture, the farmer's capital were exempted from tax, while
every other species of capital were assessed, this would prove no
encouragement to agriculture, or benefit to the farmer; it would
augment the surplus profit, and the amount would go entirely to
the landlord. Again, if the agricultural labourer were taxed in
any way in which he could throw off the burthen from himself
by obtaining higher wages, this would have the same results as
an advance of wages proceeding from other causes, and which
have been already noticed. No taxes upon land or cultivation,
whether they be direct or indirect, can fall upon the consumer,
unless they enhance the expense of the cultivation of the poorest
lands, and so lessen the degree in which cultivation may be
heightened and extended.
The tithe, after an existence of more than ten centuries, is at
last, happily, commuted; and therefore does not now call for
any lengthened remarks. During its continuance it arrested
the progress of agriculture at an earlier stage than would have
been the case had the cultivator been free from its payment;
and thus lessened the extent both of the cultivation of the
poor land, and of the improvement of the good. Lands of the
worst quality, as well as of the best, paid tithes, and in propor-
tion to the quantity of produce obtained from them. It is ob-
vious that no land can be cultivated which does not yield a pro-
duce sufficient to support the labourers and remunerate the
RENT.
55
capitalists in as full a measure as that in which they might be
supported and remunerated by applying their labour and capital
to other occupations which are open to them. Agriculture will al-
ways be pushed up to that limit, and there it will stop. But land
which was subject to the payment of a tithe could not be culti-
vated, unless it did this, not with its whole produce, but with
nine-tenths of it only. Thus cultivation ceased to be profitable,
and was stopped at land which is one-tenth better than that to
which in a natural state of things it might have been extended.
The same took place, also, in the improvement of land. No
additional capital could be profitably expended on the soil beyond
that which, with nine-tenths of its return, only remunerated for
the outlay; and consequently, the degree in which cultivation
was heightened was one-tenth less than it might have been had
the cultivator been allowed to possess the whole return of the
heightened tillage.
From the fact that the progress of agriculture was arrested by
the payment of a tithe of the produce, it is easy to perceive the
effects which this payment has had on the different classes of
society. It has prevented the advance of the landlord's rent to
that point to which it would have risen, if land of one-tenth less
fertility could have been profitably taken into cultivation. Thus
the tithe-owner did not simply share with the landlord in the
produce of the soil, but laid an incubus upon its improvement,
and prevented his acquiring so high a rent as he would otherwise
have done. It did this injury to him in his quality of land-
lord. But there was another mischief which he suffered in com-
mon with the labourer and capitalist in his character of con-
sumer. When the domain of cultivation was contracted within
narrower limits than it would of itself have reached, labour and
capital were prevented from flowing in advantageous channels
which might have been opened to them. They were, con-
sequently, obliged to move in channels in which they were less
productive. In this way, while a larger supply of manufactures
or some other commodity, of which we had comparatively little
need, was afforded, a smaller supply of agricultural produce was
procured, of which we had greater need. This produce, accord-
ingly, being scantily supplied, was dear to the consumer. But,
56
RENT.
from the state of the agricultural labourer in this country, often
without full employment for his time, and unable to follow any
other occupation, we perhaps failed to acquire a larger supply of
manufactures from this hinderance of the full flow of industry in
its most advantageous channel; and the scanty supply of agri-
cultural produce was a loss to the country of the amount of pro-
duce so prevented from being raised. The tithe had this inju-
rious effect, which applied to every consumer, but more especially
to the agricultural labourer, since it applied to him in the
double capacity of consumer and producer; in this last capacity,
depriving him of occupation which would otherwise have been
afforded to him, while, in consequence of his being unskilled in
any other occupation, he was unable to procure employment
elsewhere; it had this injurious effect, I say, from its nature, or
the mode of its imposition; being a portion of the whole pro-
duce raised, and increasing in amount with the increase of that
produce. In calling for a tenth of the produce of the last ex-
penditure of labour and capital by which cultivation was
heightened and extended, it called for that which it was im-
possible to give; the whole produce yielded from this expendi-
ture being no more than a bare remuneration for the labour
and capital bestowed, according to their average rates of wages
and profits; and, consequently, being incapable of bearing any
imposition whatever, whether of rent or tax. Thus, from the
existence of a demand where none was due, cultivation could not
be carried to that high degree and extent to which it otherwise
might have been extended with profit; and, while it procured
nothing to the tithe-owner, it prevented the people from gaining
where an opportunity of gain presented itself.
In so far as the tithe did not contract the limits of extended
or heightened cultivation, the tithe-owner simply shared with
the landlord in the produce of the soil; without ulterior con-
sequences to other classes of the community. There are, how-
ever, few productions of the soil which it did not raise in price
to the consumers. The rent of land has no such effect; prices
being determined by circumstances extrinsic of the rent; which
last is the consequence and not the cause of prices. But the tithe,
as it arrested the progress of agriculture, raised the prices of
RENT.
57
agricultural produce. It raised these prices in the measure of
its amount on the poorest land in cultivation. The tithe form-
ed part of the expenses of cultivating such land, and which
must be paid, though the tenant was unable to pay a rent; and,
consequently, in the increased prices of its produce, it formed a
deduction to that amount from the wages of labour and the profits
of capital expended on that produce. There are some species
of cultivation which exhibited this effect in a striking manner.
Of this kind were hops, flax, and vegetables of garden culture.
The tithe of an acre of hops raised on land worth forty or fifty
shillings an acre, was generally worth from three to four pounds.
This was plainly not a deduction from the rent, because if the
land had been tithe-free, it could never have been worth from
five to six pounds per acre; for a man who should hire such
land for the growth of hops would not pay more rent for it than
another man who proposed to employ it in the common rotation
of crops. Thus hops, which could not be cultivated without the
payment, in addition to the rent, of from three to four pounds
per acre for tithe, must have been dearer in consequence to the
consumer, in that proportion. Corn is dear to the consumer,
not because a rent is paid for the land on which it is raised;
but because a sufficient quantity cannot be procured for the
market without resorting in part to land of poor quality, on
which a great expense is incurred in the cultivation. It is dear
because there is not sufficient fertile land. But hops were dear,
not because fertile land was scarce, or wholly because a great
expense was incurred; but because a heavy tithe was demanded,
and which could not be escaped from by resorting to poor soils.
The tithe, in this case, had the same effect on price as the
government duty.
The expense of raising and bringing to market the produce
of land depends, in great measure, on the skill of the cultivator,
as well as on his knowing how to husband his resources, and
direct his labour and capital with the best effect.
This skill and knowledge may be displayed in a variety of ways.
Amongst others, it may be shown in a saving in the amount of
capital necessary to conduct agricultural industry, by employing
it in a better method, or returning it quicker into the hands of
58
RENT.
its employer; so that a smaller capital shall be of equal effect with
a larger one employed in a less skilful method. In this way, a
saving in the interest of capital is effected. The use of the
thrashing machine seems to be productive, not only of a saving
of grain which would otherwise be left in the straw, but, in
some degree, of a saving of capital. By the use of this machine,
the grain is thrashed out so rapidly that the farmer is enabled
to send his corn to market, and convert it into money, whenever
he may require money for carrying on his business. Were it
not in his power to do so, and should he be obliged to employ
men for a long time to thrash out the corn by the tedious process
of the flail, and wait until it were completed, deferring perhaps
in the mean time important operations out of doors, he must
employ more capital. The expense of the purchase of the
machine itself may, however, be equal to the saving of capital;
but this will not be the case where the farmer does not own the
machine, but hires it for the time of some other person, whose
business it is to let out the same machine to many farmers.
Skill may be displayed in saving labour, whether of men or
horses, by the employment of more efficient implements and
machines. But in whatever manner savings of expense are
effected, they operate in two ways; first, by the actual saving, of
whatever kind it may be; and, secondly, by lessening the capital
required to pay those expenses; consequently, effecting a pro-
portionate reduction in the amount of profits which the common
rate of profits at the time on the capital employed cause the
farmer to demand.
If any improvement in husbandry could take place, the effect
of which should consist merely of a saving in the expense of
cultivation, without causing its further extension, or increasing
the amount of produce to be raised, the consequence of such
improvement would be to lower the price of produce in propor-
tion to the amount of expense thus saved. Because the price.
of produce, as has been before observed, is determined event-
ually by the expense of raising it on the poorest land, and, by
the supposition, no extension or heightening of cultivation fol-
lowing, the landlord would be unable to advance his rent or
derive any other advantage from this saving, beyond that of
RENT
59
paying a lower price for provisions in his character of consumer,
in common with everybody else.
But the fact is, a saving in the expense of cultivation, effected
through an advance in the science and practice of agriculture,
does uniformly, by extending and heightening cultivation, in-
crease the supply of produce, and occasion different results from
those here supposed. A saving of expense is ultimately a saving
of labour; for all charges are resolvable into rent, profits, or
wages. Even taxes, under a just administration of government,
are really wages, or the remuneration for public services ren-
dered. As then, on the present occasion, rent is left out of the
question, the remaining charges are only wages, and the profits
of that capital which is nothing but labour invested in a sub-
stantial form and accumulated, the profit of which is the hire
of labour in such a form. If then a saving of expense is in
reality only a saving of labour, there must, in the event of a
saving of expense, be a quantity of labour set free from its previous
occupation, and for which work must be found. It is available
to extend and heighten cultivation, and if this be practicable.
with as much advantage to the unemployed labourers as other
occupations would afford, some part of this unemployed labour
will be directed to increase cultivation. Again, there are in
almost every country some soils so barren as, under existing
prices of produce and expenses of raising it, not to admit of cul-
tivation, except with a lower return on the labour and capital
employed upon them than could be acquired in other ways; and
these soils consequently remain waste. But let the expense of
raising produce on such soils be reduced, and immediately some
of them admit of cultivation, which were unsusceptible of it
under more expensive circumstances, at the existing prices of
produce. The unemployed labour, then, is furnished with land
whereon it may find occupation; and the quantity of produce.
becomes increased. But through this increase, and through
the saving in the expense of raising it, its price cannot rise: it
will remain as before; and the landlord will be enabled to raise
his rent in some degree; not, however, to the full amount of
the saving in the expense of cultivation, but to that degree in
60
RENT.
which his land is superior to the new and poorer soils that
now admit of advantageous cultivation.
Improvements in the practice of agriculture, and, indeed, in
every other branch of industry, are so beneficial in their con-
sequences, that it may not be a waste of time to consider their
effects in another point of view, in order to the determination of
the parties on whom their effects really fall. To this end, sup-
pose a man to cultivate a piece of land with his own hands, and
with his own capital, and that this land affords him full occupa-
tion. And let it be imagined that some discovery or invention
has been made in husbandry, whereby a saving of expense, which
is in reality a saving of labour, has been effected, equal to one
week's labour in the year. If then this improvement enable
the man in 51 weeks to do the work of 52, and cause him to
have no work for the remaining week in the year, his labour
may well be directed to cultivate an additional quantity of
land. If he farmed 52 roods before, he may now farm 53.
Nor is it likely that a loss can ensue thereby, although the
additional land be of inferior quality, and even if he hire la-
bourers instead of working himself; for there is unemployed
time for which occupation must be found, and wages and profits
will naturally so adjust themselves that no loss can possibly fol-
low from employing idle men in cultivating a poor soil, instead
of their doing nothing at all. But the question is, who are the
parties that benefit from this improvement and saving of labour?
In the exchange between the agriculturist and the manufacturer,
of the corn of the one for the clothing of the other, no doubt
the manufacturer must acquire an equal share in the benefit
with the agriculturist; otherwise he would turn agriculturist
himself. The exchange must be in the proportion of 52 weeks'
labour in the production of corn to 52 weeks' labour in the
manufacture of clothing; that is, the whole value of the aug-
mented quantity of corn is precisely equal to the value of the
smaller quantity raised before the adoption of the improvement.
The benefit must be shared mutually between the husbandman
and the clothier. If the clothier give half the produce of his
labour in clothing for half the produce of the labour of the
RENT.
61
husbandman in provisions, the other half of each man's labour
being retained for his own use, while the quantity of clothing to
each remains as before, the quantity of provisions to each is
greater, nearly in the proportion of 51 to 52; or they are both
richer by the produce of not quite half a week's work in the
year. Some share of benefit must accrue to the landlord from
his being enabled to demand an increase of rent, in consequence
of its having become possible to cultivate poorer soils without
disadvantage; or, in other words, to procure larger profits than
before in cultivating other soils. What this advance of rent will
be must depend entirely on the degree of inferiority of the land
which thus admits of cultivation.
Thus improvements in agriculture, and a higher efficiency of
industry, from whatever source they arise, are in their effects
equivalent to a lowering in the cost of production, or to an in-
creased fertility in the soil; and although they thus render less
land necessary to furnish the same supply, they do not, as might
be expected, lower rents; they act rather in increasing both
the supply and the demand, and causing not merely as much
but even more land to be cultivated than before; from which
an advance of rents, instead of a fall, results. A reduction in
the cost of production in so large a department of industry as
that of agriculture, whose products are of universal consumption,
must promote in a high degree the general opulence of the peo-
ple at large; but it acts more especially to the advantage of the
working classes, because the expense of food forms a much
larger proportion of the whole expenditure of the latter,* than
of the higher and more opulent classes. When the poor thus be-
come more amply fed, and with food of better kinds, their bodily
and mental vigour is promoted, and they are enabled to acquire
that skill in industry which is so essential, not only to their
own welfare, but to that of the community at large.
We have seen that the price of agricultural produce is deter-
mined by the expense of raising that portion of the whole which
According to Sir Frederick Eden, the expense of food to the labour-
ing classes amounts to three-fourths of their whole expenditure. To
those of middle rank it may be about half; and to those of higher rank
much less.
62
RENT.
costs the most. Corn cannot be permanently at a high price,
unless a great expense is necessary to raise this portion. We
have seen, likewise, that rents uniformly advance as cultivation
is pushed over inferior soils, and the labour and expense of
raising produce on such soils has become greater. But it ought
not to be concluded that everything which adds to the expense of
raising produce, and consequently to its price, must inevitably
raise rents, or that there is no other method of raising rents but
by increasing the expense of cultivation.
The cost of pro-
duction may be increased in two ways, and by causes of an op-
posite character; the one of which will advance rents, and the
other lower them. Augmented opulence and population cause
an enlarged demand for produce and for the cultivation of inferior
soils, and thus in the natural course of prosperous nations occa-
sion rents to rise. But, on the other hand, there are causes of
increased cost of production which, instead of enlarging demand,
must contract it, and which instead of extending cultivation and
advancing rents, must even check cultivation and lower rents.
The cost of production may be increased by higher profits,
higher agricultural wages, bad husbandry, the disuse of useful
machines, taxation, and many other circumstances. In each of
these ways, although this cost is raised, the surplus profit of
agriculture over other occupations which goes for rent is not in-
creased. It is not possible, therefore, to agree with Mr. Ri-
cardo in saying, that it is the interest of the landlord that the
cost attending the production of corn should be increased, and
that his interest is always opposed to that of the consumer and
manufacturer ;* in other words, to every class but his own. So
far is this from being the case, that "it may be safely asserted,"
in the words of Mr. Malthus, "that the interest of no other class
in the state is so nearly and necessarily connected with its
wealth and power, as the interest of the landlord.'
>>
As the rent of land is that part of the profit of cultivating it
which exceeds the profit that could be acquired by employing
the same capital in other occupations, the amount of rent de-
pends, not only on the fertility of the land, but on its distance
from the market, or the expense that must be incurred in turn-
Principles of Polit. Econ. p. 399. 3rd edit.
*
RENT.
63
ing the produce into money. The profit of occupying a farm is
affected by every expense incidental to the occupation, both as
regards the growth and the sale of its produce. If the contract
between the landlord and tenant had been the payment, not of
a money rent, but of a corn or produce rent payable on the spot,
the fertility of the land would have been the criterion by which
the rent would have been determined. In such case, the dis-
tance from the market would have had little effect, and a farm
in the neighbourhood of a town, would pay the same corn-rent
aş a similar farm situated at a distance from it. But it is quite
otherwise, if the rent is to be paid in money. In such case,
the rent of the land which is distant from the market must be
as much lower than the other as the greater expense required
to turn its produce into money. Land in the neighbourhood of
a town always gives a higher money rent than land equally good
in a distant part of the country. Though it may require no
more labour to cultivate the one than the other, it must always
cost more to bring the produce of the distant land to market.
A greater number of labourers, therefore, must be maintained
out of the produce; and the surplus, from which are drawn both
the profit of the farmer and the rent of the landlord, must be
diminished. But in remote parts of the country, the rate of
profit is usually higher than in the neighbourhood of a large
A smaller proportion, therefore, of this diminished sur-
plus must belong to the landlord.
town.
Good roads, canals, and navigable rivers, by diminishing the
expense of carriage, bring the remote parts of the country
nearer to a level with those in the neighbourhood of the town.
They are upon that account the greatest of all improvements.
They encourage the cultivation of the remote, which must al-
ways be the most extensive circle of the country. They are
advantageous to the town by breaking down the monopoly of
the country in its neighbourhood. They are advantageous even
to that part of the country. Though they introduce some rival
commodities into the old market, they open a larger market to
its productions; and, by the greater concentration of popula-
tion, yield to the country in return many new productions which
61
RENT.
could not otherwise be had, and many old ones of a higher de-
gree of excellence, abundance, and cheapness.
The great advances which have been made within compara-
tively few years in almost every branch of knowledge have, in
many instances, thrown new lights upon the science of agricul-
ture; but these have not yet been all applied in their full ex-
tent to practice. These advances, so far from being ended,
appear rather to be going on with a still more rapid progression;
the discoveries already made seeming to serve as helps to others
still more important; and hence we anticipate that it will not
be many years before the practice of husbandry shall become.
improved to an extent which it is at present difficult to appre-
ciate. It is to the combined influence of progressive advances
in science, and fresh accumulations of capital, by which the
efficiency of labour may be heightened, and the land made to
yield in greater productiveness, that we must look to relieve us
from that poverty which would otherwise be the inevitable lot
of humanity from the constant necessity, as population advances,
of continually resorting to fresh lands of an inferior natural fer-
tility. The utmost limit which shall bound the knowledge we
may be able to acquire exceeds the power of human prescience
to determine. Capital, too, may be increased to an extent which
cannot be defined, and the advantage of its monopoly perhaps
hereafter be greatly reduced; and though we cannot add to
the number of acres in a country, we may yet increase their
fruitfulness. Thus, whilst we may be enabled to acquire a
larger produce, the advance of rents may be retarded; they
may possibly be prevented from rising to the degree that might
be expected, and the sacrifice necessary to procure the supply
be no greater than at present. The monopoly of land, however,
is of that nature that we must allow the landlord to participate
in the advantages we acquire, and our expectations of bettering
the condition of the people must be derived rather from increas-
ing the produce by greater skill and capital in husbandry than
from lessening the deduction for rent.
The observations which have hitherto been made have pro-
ceeded on the supposition that the direction of industry to agri-
RENT.
65
culture is that which, in a state of freedom, results from the
natural circumstances which cause a demand for its produce,
and without external interference inducing an artificial demand,
and a higher state of cultivation, than natural circumstances
would occasion. But, in our own country, and in some measure
in France also, a forced direction of industry to agriculture is
induced, through the imposition of duties on foreign grain im-
ported.
Hence the inquiry presents itself, whether it be consistent with
the public interest, or with that of the agricultural classes, to
restrict the supply of the people of Britain to the produce which
can be raised upon their own soil. The magnitude of the con-
sequences, as regards the opulence and happiness of our country,
which hang upon the decision in the affirmative or negative of
this question, and upon the consequent line of policy respecting it,
which may be acted upon by the legislature, invest the inquiry
with an importance greater than is usually conceived to belong
to it.
Whatever may be the case as regards the agricultural classes, it
is impossible that such a forced direction of industry to agriculture
can be consistent with the interest of the other classes. If such
were the case, this would then be an exception to the universal
maxims, that industry exerts itself with the best effect when
least under restraint; and that it is better to buy in a cheap
market, though a foreign, than in a dear one at home. But it is
unquestionable, that this forced direction of industry diminishes
its productiveness, or the quantity of products it acquires, by wast-
ing its efforts in the cultivation of barren soils, and forcing it to
an unnatural height on other soils. In agriculture we labour
under disadvantages, in comparison with some other countries,
from the want of a sufficient quantity of fertile land; but there
are other businesses in which we possess a superiority over them.
The poor soils whose cultivation is induced, yield a smaller
quantity of grain than might be procured from foreign countries,
in exchange for the produce which the labour and capital em-
ployed upon them would yield in other occupations. But while
our supply of grain is scanted, its price enhanced, and the pub-
lic impoverishment indisputable, it is not possible that the pro-
VOL. II.
F
66
RENT.
fits of cultivation can be eventually heightened thereby, or gain
in other ways be acquired by the agricultural classes.
Admitting, however, for a moment that these classes could
gain thereby, still it might be asked, whether it is consistent
with a proper feeling towards their fellow-countrymen, for them
to obtain laws to enrich themselves through the impoverishment
of their country. But which of the parties is it that gains by
thus heightening the profits of cultivation ?
That it is not the farmer is abundantly evident. The high
price of produce can never be beneficial to him in the end, for
the landlord, on the renewal of his lease, will be sure to demand
as rent, whatever surplus profit that high price may afford
above the profits of other occupations.
That it is not the agricultural labourer seems equally clear.
The corn laws have evidently not ameliorated his condition.
Since they were first enacted, his circumstances, instead of
having improved, have become worse, until it seems scarcely
possible that they can fall lower. If the people of our country
are to be supported only on the produce which can be raised
from its soil, their number must necessarily be limited to
what that soil can support. Population then must be forcibly
prevented from exceeding this point; because, in such case,
famine or emigration would be the only alternatives that would
remain. When it becomes difficult to acquire the means of
subsistence, the poor are the first to feel, and the most severely
to suffer from it. But the agricultural labourer cannot escape
that distress in which the poor of every class must be involved,
when the supply of food is scanted.
If, then, it is neither the farmer nor the agricultural labourer
who benefit by these laws, the whole advantage, such as it is,
must accrue to the landlord. This advantage, however, is more
than problematical. In the first instance, it is true, he may ac-
quire an advance of rent through the high price of produce and
the extraordinary profits of farming. But this is a first effect
only. The ultimate and permanent effect must be to keep down
population, through the curtailment of the funds for its support,
and by checking public prosperity and the growth of opulence,
to prevent that natural and progressive advance of rents which,
RENT.
67
under other circumstances, would be sure eventually to take
place. If the position be true, that the interest of the landlord
is intimately bound up with the interest of the people, it is only
a momentary advantage which he can gain from the depression
of his country; and these duties, although they may be beneficial
to him at present, will prove ultimately not less to his prejudice.
than to that of the public at large. But the production of food
is an object of such paramount importance, that it can be only the
most pressing circumstances which can ever justify an artificial
restraint, either on its growth at home, or its supply from abroad.
Independently of legislative enactments, agriculturists, in the
nature of things, are more protected from foreign competition
than almost any other class, in consequence of the more bulky
nature of raw produce than of wrought goods.
The vicinity of a great town is always eminently beneficial to
the interests of the landholders. While foreign grain is refused us,
our population cannot permanently exceed the means of support
the land affords. But if we were allowed to draw supplies
from all the world, our whole island might become, as it were,
one great city. In an extended and comprehensive point of
view, therefore, the corn laws are detrimental to the interests of
the landholders themselves. Instead of a fall of rents resulting
from a free trade in corn, a rise is eventually to be anticipated.
The case of the landowners and farmers of the country at large
is precisely analogous to that of the landowners and farmers in
the vicinity of the metropolis, who, in the middle of the last
century, petitioned parliament to stop the extension of turnpike
roads into the distant counties, on the ground that they were
unable, in consequence of their higher wages and charges of
production, to stand the competition with the low wages and
charges of those distant counties; and that, if such competition
were permitted, the inevitable result would be, that the cultiva-
tion of their land could not be carried on, that it must lie waste,
and their labourers be deprived of employment. We know,
however, that, notwithstanding such melancholy forebodings,
these turnpike roads, by increasing the means of support to the
people of the metropolis, have contributed to the present magni-
tude of its population, whence the most beneficial results have
F 2
68
RENT.
followed to the landed interest in its neighbourhood. The
landholders, so far from being ruined, have found their estates.
continually increasing in value, which, instead of lying waste,
have become improved and cultivated in a higher degree than
any other part of the country. We ought to recollect, too,
that those restraints which prevent the importation of the pro-
ducts in one kind of the land and labour of other countries,
prevent likewise the exportation to pay for them of the products
in another kind of the land and labour of our own country; and
that, in depriving foreigners of the liberty of selling their corn
in our market, we deprive ourselves of the power of selling our
manufactures in their market. Now the freedom to the country
at large of importing corn from foreign countries, would be but
an extension of the freedom of the supply of London with the
agricultural produce of our distant counties: the principle is the
same in both cases. If, then, the agricultural interest in the
neighbourhood of London has been enriched, rather than ruin-
ed, from this freedom in the one case, it seems reasonable to
expect that correspondingly beneficial consequences must ensue
to the landed interest of the country at large, from the still
more extensive freedom in the other case. If this interest
be unfairly pressed with public burthens, these ought to be
equalized, but the imposition of one impediment in the supply
of food for a hungry community, cannot be a reason for adding
another.
While the productiveness of national industry is thus dimin-
ished, by forcing prematurely the cultivation of ungrateful soils,
and no advantage accrues to either of the parties engaged in
their cultivation, there are, on the other hand, no countervailing
circumstances attending the restrictive system which may pro-
duce a commensurate benefit in any other way. It has been
thought that, by inducing an extended cultivation of our soil,
employment is afforded to the labouring poor. But an exam-
ination of the causes on which their employment depends, and
which have been already spoken of, will show that this sup-
position is altogether groundless, and that no additional em-
ployment is thereby occasioned more than would exist in a state
of perfect freedom. In the same proportion as work is found
RENT.
69
for one additional labourer in an unnatural extension of cultiva-
tion, by so much is another labourer deprived of the work which
would otherwise be offered him, in producing some commodity
for exportation to pay for the foreign corn which would be im-
ported; while each by this means is obliged to purchase his
supply of food with a greater sacrifice of his labour than would
otherwise be necessary.
An unlimited freedom of the trade in corn would remove at once
the cause of those jealousies which now exist between the agri-
cultural and the other classes of the community, especially those
engaged in the fabrication of articles of export, the market
for which is contracted upon a scale corresponding with the
effect of the restraints in keeping out foreign grain. In the
opinion of all classes of workmen, cheap food is a matter of the
deepest concern; but these last possess, besides, another and a
deeper interest in the abolition of the existing restraints,-an
interest which cannot long be set at nought.
It is thought by many, that until nations shall be more alive
to the community of their interests-until commercial jealousies
shall have disappeared, and the chances of war shall be mate-
rially lessened, it will be prudent to continue to afford some
encouragement to domestic agriculture, with a view to supply us
with the primary articles of subsistence from our own soil, by
imposing duties on the importation of those of foreign growth.
This is a question, not of political economy, but of state policy,
and therefore will not be entered upon here. Taking for grant-
ed, however, the urgency of such policy, it is still open to discuss
the mode in which the required protection should be afforded.
The present varying scale of duties has not prevented the im-
portation of foreign corn, but has permitted a quantity to be
brought in, equal to one-twelfth of the entire consumption of
England, at rates of duty on wheat varying from one shilling to
twenty-eight shillings per quarter; the average being six shil-
lings and eightpence. But the varying scale has caused a great
inequality in the quantities imported from time to time, being
in excessively large quantities at one time, and afterwards wholly
stopped during very long intervals: thus at one time causing a
ruinous depression of price, and at another allowing the price to
70
RENT.
rise greatly above the average of other years. Now a steady
supply, and a degree of uniformity in the price of this most
necessary article, are objects of the highest public importance.
And if protection to the present extent were required, it might
be given without these inconveniences, by a fixed, or nearly
equal, duty operating to prevent the importation of more than
the quantity now brought in. Such duty would afford a more.
uniform supply, it would contribute to a greater steadiness in the
price of grain; at the same time that it would afford a more
equal demand and employment in those branches of industry
whose products are exported in payment for foreign corn, while
it would also supply the means of avoiding the great fluctuations.
which now from time to time take place in the bullion market
by the sudden and large demand for gold to help to make such
payment.
On the other hand, if freedom be the point at which we aim,
this should be gradually approached. Capital has been invested
in the cultivation of inferior soils through the higher prices
caused by the protective system, and it would be unjust to in-
dividual interests, as well as injurious to the general interest,
suddenly to withdraw this protection; and thus cause these
soils to be at once wholly thrown out of tillage. Time should
be given for prudential preparations to those whose interests
would be affected.
Bounties on the exportation of corn, though long in use in
this country, have now for many years been discontinued.
Their effect, the same as duties on importation, was in a mea-
sure to force cultivation to an unnatural extent, and by thus
diverting national industry from its most advantageous occupa-
tions, to diminish its productiveness. But while greatly injuring
the community at large, and ultimately the landowner also,
their immediate effect was to benefit him by raising rent.
Bounties, however, had this evil, beyond duties on importation,
that, instead of contributing to the public revenue, they neces-
sarily burthened the country with heavier taxes than were re-
quired, in order to supply foreigners with corn at prices below
the cost of raising it.
What has been hitherto said on rent has had reference to that
RENT.
71
state of society which subsists in our own and in a few other
countries, where the husbandman, instead of being chained to the
soil, is free to change his occupation at pleasure, and to remove
his capital and labour to any other employment which holds out
the prospect of superior advantages. In this state, the land is
the property of a great number of private individuals, whose
competition with one another, in conjunction commonly with the
practicability of breaking up poor uncultivated land, and with the
freedom of industry, determine the rent which must be paid for
the occupation of land upon principles and from causes founded
on the nature of things. From the consideration of rent in this
state-the state with which we are immediately conversant,
we pass to offer some remarks on that less fortunate condition,
in which the cultivators of the soil have most usually been found
in the history of other times, and in which they still exist
throughout the largest portion of the globe; that is, without the
freedom of industry which we possess.
When the prince, as amongst eastern nations, is the sole
proprietor of the soil, this proprietorship involves a strict mono-
poly of almost every article of primary necessity, and enables
him to exact, in the shape of rent or tax upon the land, so large
a portion of the produce as to leave nothing more to the culti-
vator than a bare subsistence. This is the case also in those
countries where the prince is not the sole proprietor, but where
the land is parcelled out amongst a powerful nobility, and with
it the ownership of the peasantry by which it is cultivated, with
a more or less absolute sway over them. A slave is dependent
for everything on his master; and a peasantry partly en-
slaved must be dependent on the lord in the measure in which
their freedom of exertion is wanting, either through actual re-
straint from their owners, or through their own incompetency
to raise themselves from the poor and helpless condition in
which they are placed to one more free and fortunate.
In countries where the peasantry are not restrained from
abandoning husbandry, the capital and labour employed upon
the land are yet, generally speaking, unsusceptible of removal
from it, though more lucrative occupations for them might be
found elsewhere. The cultivators of the soil in the greater part
72
RENT.
of the world possess so little capital of their own, and this un-
suited to be employed in any other business, that they have not
the power to remove. In eastern countries, where the institu-
tion of caste exists, this may raise an impediment. But in these
countries, if the peasantry had both the freedom and the power
to quit the occupation of husbandry, they could not benefit
themselves thereby. When the cultivation of the land is car-
ried on under a strict monopoly, the price of produce must be a
monopoly price; and when the landowner exacts from the cul-
tivator all beyond the necessaries of existence, this exaction
must extend itself from the cultivator to every other class, by
means of the monopoly price of produce. There seem to be no
other limits than those of human endurance to the oppression.
which might be practised through the possession of a complete.
monopoly of the supply of articles indispensable to human exist-
ence. While such endurance should permit, the price of the
necessaries of subsistence furnished under such a monopoly
might be raised to so great a height as to deprive a whole nation
of everything it possessed; since no other alternative would be
left than their relinquishment or famine. That the oppression of
the husbandman must extend itself to every other class will be
apparent, if we consider the circumstances in which all would
be placed. Allow that there were no caste, and that the cultivator
had the power of transferring his capital and labour from the
land to any other employment, and we shall see that such an
exaction of rent as should reduce him to subsist on bare
necessaries would reduce all his neighbours to the same con-
dition. In the exchange between the cultivator and the manu-
facturer, for example, of food for clothing or other necessaries,
the cultivator, notwithstanding the smallness of what he has
to give, would be able to procure so large a quantity of
the produce of the manufacturer's work as would reduce him
likewise to the same level of poverty with himself; for, if the
manufacturer should refuse to exchange on such terms, the
cultivator would abandon agriculture and become manufacturer.
No man can dispense with food, and, in order to procure it, he
must either consent to the demands of the cultivator, or till the
ground himself, and thus at once be reduced to the same con-
RENT.
73
dition. That such is the actual state of things, and that the
oppression of the cultivators of the soil extends itself to the
people at large of those countries, seems to be substantiated by
the fact that, contrary to what subsists in Europe, agricultural
labour there is equally remunerated with manufacturing and
other kinds of labour. If it had been otherwise, the condition
of the manufacturing classes would have been found to be
superior to that of the agricultural.
While thus a whole nation might be impoverished and depopu-
lated by the exactions which a strict monopoly of land gives the
power of enforcing, and from which the people cannot escape, it
would, however, be far from fact to suppose that the sovereign
can acquire by such means all the riches which he prevents his
subjects obtaining. It might be thought that the transfer from
the cultivator to the prince of an unreasonably large portion of
the produce of the soil, would be merely giving to the latter a
larger power of affording encouragement to manufacturing and
other branches of industry equal to that of which the farmer is
deprived. But such a premature exaction of rent, which goes
before the means of payment, and swallows up the sources of
reproduction, must put a stop to that natural advance of rent
which, under more favourable circumstances, would inevitably
take place, through the growing means and demands of the
people, proceeding from augmented numbers and opulence.
"There is reason to believe that in parts of India, and many
other eastern countries, and probably even in China, the taxation
on the land, founded upon the sovereign's right to the soil,
together with other customary payments out of the raw produce,
have forcibly lowered the wages of labour on the land, and have
thrown great obstacles in the way of progressive cultivation and
population in latter times, while much good land has remained
waste. This will always be the case, when, owing to an unne-
cessary monopoly, a greater portion of the surplus produce is
taken in the shape of rent or taxes, than would be procured in
the natural course of things."*
It is evident, from the circumstances of those countries, that
an accumulation of capital from at least one great branch of
Malthus, Polit. Econ. p. 156.
74
RENT.
industry-agriculture, is precluded. There are no landlords
from whose incomes savings might be made, other than the great
landlord, the prince himself. But his income is usually spent
and dissipated in the maintenance of a splendid court and re-
tinue, with his military and civil establishments; or, when not
wholly dissipated and savings are made, they are not employed
productively, but are a mere treasure hoarded up, of which the
dissipation is only postponed. Instead of being laid out in the
nature of fixed capital in substantial and permanent improve-
ments upon the land, to augment and ameliorate its annual pro-
duce, this hoard lies inactive, altogether useless, and to be
employed only on the most pressing emergencies. Industry
derives no assistance from accumulations so disposed of. A
class of large and wealthy farmers, from whose profits savings
might be made, is unknown. The cultivator usually has but a
precarious tenure. Independently of the exactions of an arbi-
trary government always drawing from him the very largest sum
he is able to pay, and which, by keeping him poor, prevents his
rising above the dependent condition of a labourer, he has little
interest either in the investment of capital in permanent improve-
ments on the land, or in employing much in its cultivation.
His rent, instead of being an invariable sum or quantity of pro-
duce, is a proportion of the produce raised, increasing with every
outlay by which the productiveness of the land is heightened.
Hence, as a larger expenditure in order to augment that produce
would only increase the taxation to which he is subject, and
perhaps in as high a degree as the additional net produce raised,
the tenant employs the smallest possible amount of capital; and as
the landlord does nothing in the way of permanent improvement
of the land, the produce of agricultural industry is at its lowest
ebb in relation to the natural fertility of the soil; the advantages
of which are more than compensated by the want of that se-
curity of property which is indispensable to a full production,
and the want of the employment of that capital without which
labour can never be effective. From the cultivator, then, accu-
mulations of capital are out of question; much more, if they
should be made, is it unreasonable to suppose that they should
be employed upon the land. Thus, while the sources of the pro-
RENT.
75
ductiveness of agricultural industry are dried up, it is no wonder
that the people of these countries should be miserably deficient
in food, and subject to the most dreadful famines. But it has
been shown already, that the cause of the poverty of the cul-
tivator is such that it cannot fail to extend its effects through
him to all other classes; and, accordingly, in this cause is to be
found a main source of the general poverty and inefficiency of
the labour of the people of these countries, and the reason why,
in the general market of the world, the produce of one day's
labour of an Englishman purchases as much as the produce of
five or six days' labour of an East Indian.
The rent of mines, quarries, and fisheries is in some respect
distinguished from that of land. The rent, in the case of land,
is for its productive agency in creating new products, while in
the other instances it is merely for the privilege of carrying off,
not new products, but old ones already there. There is, however,
here no difference in the principles which determine rent.
Mines, like land, are of various degrees of productiveness, and
require various degrees of expense in working them, according
to their depth, the accumulation of water, the distance of the
market, the condition of the roads and means of conveyance in
the neighbourhood, and other contingencies. As the scanty
supply of the productive powers of the soil is the occasion of the
greater part of its products selling above their actual cost, and
thus yielding a larger gross profit on cultivation than is usually
acquired in other occupations, out of which a rent is demanded
by the landlord; so, likewise, as regards the mineral productions
which the earth affords, and which are not renewed from year
to year, it is their scarceness, and the extraordinary profits
accruing from extracting them from the mines, that is the
occasion of a rent being acquired by their proprietors for
granting the privilege of working them. The extra profit which
may go for rent is dependent on the existing market price of
the metal, and the expense of extracting, purifying, and con-
veying it to market. The owners of minerals are desirous
of getting as much as they can for them, and the purchasers are
anxious to procure them on as low terms as possible. If any one
owner is resolved to sell a larger quantity than usual, he can
76
RENT.
only do so by offering it at a lower price than other persons;
and if the rest of the owners are determined to continue selling,
they must submit to take the reduced price which this man
takes. If the supply were inexhaustible, the price must be either
no more than the expense of working, or next to nothing be-
yond it; for if it were more than this, any one of the owners
being able to supply all the purchasers, would supplant the others
by underselling them, and engross the whole advantage to
himself. In order to monopolize the sale of the article, he
must sell at the lowest rate which yields any advantage.
But if the supply be less than the demand, competition to
this extent is impossible; for when the stocks of those owners
who undersell shall be exhausted, the others will be able to
raise their terms, and, therefore, nothing more is necessary than
to wait, in order to procure their own prices; and these prices
will be in proportion to the scantiness of the supply compared
with the demand. Demand, however, is always dependent as
well on the inclination as the ability of the purchasers. The
price which the seller can obtain is what the buyer is willing to
give, and this depends, not only on the question whether the
article can be procured cheaper elsewhere, but whether he can,
and is willing to, dispense with it rather than pay the price
demanded. If a complete monopoly of an article be possessed,
the owners may raise its price, till the people discontinue its
use, or use it so sparingly that the owners lose more by the
contraction of sales than they gain by the enhancement of price.
However, the cases are rare in which a complete monopoly of
an article is possessed. This is said to be nearly the case in
black lead; but in no other mineral; and the rent of mines, con-
sequently, is determined on the common principles which apply
to other cases.
Take the case of coal, for example. There are some mines
in which the coal extracted does no more than repay the labour
with the customary rate of profit on the capital expended and
employed; consequently, no rent can be paid for such mines.
But whatever may be the profit acquired beyond this, naturally
goes to the owner for rent. And this rent applies to all instances,
whatever may be the productiveness of the mines, or the kind
RENT.
77
.
of mineral. As, however, there is no monopoly of coal, if the
mines which are worked be, at any time, insufficient to supply
the quantity wanted for the market, the price rises until the
owners of other beds of coal, which are less productive or more
expensive to work, find they can obtain the usual profit by
working them. In such case they are opened, an adequate
supply is procured for a time, and the price is prevented from
rising further. Again, if, in process of time, these beds become
exhausted, while a continued supply of coal is still required, and
there remain no other beds of equal fertility and facility of
working, the price will again advance, until it afford the means
of working other beds of less productiveness or which are more
expensive to work. It appears, then, that the less productive beds
prevent the price from rising above the expense of working
them, while the insufficient supply from more productive beds
prevents, likewise, the price from falling below it; and thus the
price, although it cannot be said to be regulated by the ex-
pense of working the least fertile beds, is always commensurate
with it.
I proceed to observe in what way rent enters into the price,
or forms a component part of the price of commodities.
Rent enters into the composition of the price of commodities
very differently from wages and profits. It is true, in the pro-
duction of almost every commodity a payment has been made to
the owner of the soil on which it was grown or reared, or of the
place whence the raw materials from which it was fabricated
were originally procured. But this payment has no effect on
price; for it is not the cause but the effect of the price for which
the article will sell. High or low wages and profit are the
causes of high or low price. It is because high or low wages
and profit must be paid, in order to bring a particular commodity
to market, that its price is high or low. The demand of price
is never less in the long run than what a man can afford to take;
for if this cannot be procured, but a lower price must be for ever
submitted to, he will turn his industry to something else, and
the article will cease to be offered in the market: it is indis-
pensable to the supply of the market that a certain price on the
average be procured. On the other hand, if more than this be
78
RENT.
obtained for any continuance, other adventurers will step in to
share in its advantage, until the price fall to the common level
of other things. But, as regards the monopoly of land, the case
is quite different. It is because the price for which the article
freely sells is high or low, much more, or little more, or no more,
than is sufficient to pay the customary wages and profit, that it
affords a high rent, or a low rent, or no rent at all.
There are exceptions, however, to this general rule, and cases
exist in which rent forms a component part of the price of com-
modities, enhancing their value in the market. Everything
that is furnished under a monopoly, must be higher in price
according as the greater or less degree of strictness of that
monopoly may enable the proprietors to enhance their demands.
The metals, stone of different kinds, and other mineral produc-
tions, are in some instances furnished under some degree of
monopoly, and, consequently, bear a higher price than the actual
labour and expense which it costs to procure them in the least
productive mines or quarries. This additional price depends
very much upon the number of proprietors, and the magnitude.
of the supply they are able to afford in relation to the demand
for the article. When the number of proprietors is considerable,
and the means of furnishing a supply ample, their power of
combining to keep up the price is very small.
From what has just been said it follows, that the rent of land,
when not determined by the strict monopoly of it which the
government in some countries possesses, as it is not the cause of
the high prices of its produce, but the consequence of the ex-
cess of prices over the cost of production, arising from the na-
ture of agriculture, which affords in most instances larger profits
than other occupations, and further, as it is wholly inoperative
on prices, having no tendency to raise them, cannot in any way
act injuriously on the interests of the people, or abridge their
comforts. It would doubtless be advantageous to them if fertile
land were more abundant, and its rent were thus become lower;
but rent is a necessary consequence of the degree of scarcity in
which it exists, and is a matter in which they have no interest.
The landowner who cultivates his own estate, though he has no
rent to pay, will not be satisfied with a lower price for his corn
RENT.
79
than his neighbour the farmer, who rents his farm at perhaps
an extravagant rent. Again, if the landed proprietors did not
cultivate their own estates, but let them to tenants at very low
rents, or even at no rents at all, the price of produce would still
be the same; the tenants would become rich, but the people
would be none the better. To convince ourselves that the price
of produce would be the same if land were cultivated by no other
persons than its proprietors, or were rent free, it is only neces-
sary to reflect, that the same demand, in such case, would exist
for produce; that, in order to meet this demand, the same quan-
tity must be raised; the same land, therefore, must be cul-
tivated. This produce would then be in part grown, as at pre-
sent, on land of inferior quality, and at a great cost. Now, the
occupiers of this inferior land must be paid the same price for
their produce as they previously received, in order to reimburse
them for the greater expense of cultivating such land: to these
men the exemption from rent is no advantage, for they pay none
at present. The high price demanded for produce by the occu-
piers of the poor land must enable the occupiers of the better
land to require the same price for their produce, though raised
at a much less expense: indeed, if they did not, no one would
buy of the occupiers of the bad land; and a sufficient supply of
produce would not be brought to market. Thus the existence
of a power of paying certain rents is indispensable to the supply
of a certain quantity of produce. The entire absence of the
payment of rent, as it would not lessen the expense of growing
produce on the poorest land, would neither increase the supply
nor lessen the demand, by which prices are determined; and,
therefore, would not lower the price. Its only effect would be
to enable the cultivators of the better land to acquire larger
profits, and put the whole amount of rent into their own
pockets. In consequence of the unequal fertility of the land
which must be cultivated to yield the required supply of pro-
duce, larger profits must accrue on some lands than on others;
and it is matter of perfect indifference to the people, whether a
certain class of farmers shall get extraordinary profits, or whether
a second set of men, namely, the landlords, shall step in to take
the extra profits, and so reduce the net profits of cultivating
80
RENT.
every kind of land to one common level. There is, therefore,
nothing in rent which is at all hard or unreasonable towards the
poor.
It is of importance to the public interests that it should be
well understood, that both rents and the prices of agricultural
produce are determined, not at the will and pleasure of landlords,
but by circumstances which are wholly beyond their influence or
control. The not perceiving these facts, and much more the mis-
apprehensions through which the opposite conclusions are reach-
ed, are of incalculable mischief to society, and especially to the
working classes. Such misapprehensions provoke a thousand
undeserved antipathies, and are the fruitful source of those many
heart-burnings and jealousies by which society is so grievously
tormented. "The truth is," says Dr. Chalmers, "that the
landlords are altogether innocent of the rent, which has flowed
in upon them ab extra, not at their own bidding, but at the bid-
ding of those who complain of its oppressiveness. The employer
of labour would have had his workmen at a higher wage; but
another stepped forward and implored to be taken in at a lower
wage, who, if refused, would have been in fact the more aggriev-
ed sufferer, or at least the more helpless outcast, of the two.
The owner of the land would have let his farm at a lower
rent; but, in the importunity of capitalists, higher rents were
offered; and he, by refusing these, would in fact have disap-
pointed the most eager amongst the competitors. The land-
lord is passive under this operation. He is the subject, and
not the agent in it. The primary and the moving forces lie
with the labourers on the one hand, and with the capitalists on
the other; the former, through the medium of an increased
population, having brought on a lower wage than otherwise, by
a necessity as irreversible as any law of nature; and the latter,
through the medium of an increased capital, having by the same
necessity brought on a lower profit than otherwise. The dif-
ference goes to rent. The complainers of it are themselves the
makers of it."*
It has been thought that the property of the soil of yielding a
surplus in the form of rent exhibits a wise and beneficent
* Polit. Econ. in Connexion, &c. p. 462.
RENT.
81
arrangement of Providence, favourable to mankind, affording
the means of procuring leisure and exemption from personal
labour, offering the great prize for laudable exertion, and thus
affording a boon most important to the welfare and happiness
of mankind. But without questioning the wisdom and benevolent
design of any arrangement of Providence, even that of imposing
the task of perpetual labour on our race, taking into account all
the consequences, present and remote, it may nevertheless be
remarked that the opinion in question is only holding, in other
words, that the necessity of toil to mankind at large is a blessing;
and that leisure and exemption from labour, though favourable
when confined to the few and particular parties who now possess the
soil, would yet be injurious if all men were placed in equally fortu-
nate circumstances. In the case alluded to, it may likewise be
observed, that the high price of produce which affords rent, and
exalts one man, is paid by others, and is as correspondingly dis-
advantageous to the latter, as it is advantageous to the former.
It would be an unwarrantable departure, therefore, from just
principles of government, to found measures of state policy for
raising rents on the ground of the supposed benefit they confer
on society.
Another remark may likewise be made as a consequence of
what has been previously advanced. It is, that agriculture
ought not to be accounted as presenting superior advantages
over other branches of useful industry, from the surplus profit
which it yields, in the form of rent. The circumstance of rent
being paid for land, or of a country possessing a large landed
rental, and a wealthy landed aristocracy, although it is the usual
accompaniment of great opulence and of a dense population, can-
not be a cause of wealth, or add to the wealth or opulence of
that country; much less to the comforts of the people. For
when land is most abundant and most fertile, consequently the
prices of provisions at the lowest, it yields little or no rent at
all. The opulence of a community must depend, more than
upon anything else, on the quantity of produce at the command
of each consumer; not on its price. It has sometimes happened
that water in a time of drought, or in a besieged place, has borne
a high price. Under such circumstances, the owner of a spring
VOL. II.
G
82
RENT.
of water might demand a rent for it, and soon become rich; but
no one imagines that this could be an indication of public opu-
lence, or of comfort in the people at large. The same observa-
tions apply, in a measure, to the rent of land: the rent which is
received by one individual or class of society, is paid by the
other individuals or classes, without either augmenting or
diminishing the whole amount of objects of wealth between
them. If it be an advantage on one side, it is a corresponding
disadvantage on the other. If it be wealth in the possession of
the landlord, it imposes a degree of privation on the people, and
is a sort of abstraction from their wealth. As rent arises not
from the abundance of land, but from the scarcity of what is of
good quality, and increases in amount in proportion to such
scarcity, high rents indicate an inadequate quantity of fertile
land in relation to the produce required to be raised from it to
support the population. A large demand for agricultural pro-
duce, and its consequence, high rents, may arise either from a
poor but dense population with feeble powers of industry, or
they may equally proceed from a moderate population with
ample resources of skill and capital. But as the effects pro-
duced on rent are precisely similar in both these cases, a large
landed rental is therefore no certain criterion of public pros-
perity, but may equally show a dense population accompanied
with poverty in the people at large, and a difficulty in providing
food for its support. Corn and rents, however, are generally
the highest in the richest countries, in spite of the superior
powers of industry which the latter possess, and hence these
high prices, though not a certain proof, are nevertheless a strong
presumption, of public opulence; and it has been justly remark-
cd, that to complain of them is to complain of one of the most
certain proofs of the prosperous condition of a country. So far
as increased rents are the result of improvements, and the invest-
ment of fixed capital on the land, brought about by the accumu-
lation of capital, and the application of greater skill to husbandry,
and without a diminution of wages and profits, they are not only
themselves a clear addition to the wealth and resources of a
country, giving the means of extending and heightening cultiva-
tion, but necessarily indicate a yet greater addition in the hands
OF THE PROFITS OF STOCK.
83
of the productive classes, out of which they are enabled to pay
this increase of rent.
It is sometimes said, that rents are not exorbitant, as they re-
turn to the owner but a low rate of interest on the purchase
money. But whether rents are high or low, this is no proof of
their being low. It shows a certain relationship subsisting be-
tween what is commonly given for the purchase of land and what
is commonly paid for renting it. It shows that land sells high
in proportion to what it lets for. The farmer would not be
enabled to pay a high rent for the land, because the landlord
has paid a high price for his estate; but the reasonableness of
the rent must be judged of from circumstances altogether
different.
CHAPTER II.
OF THE PROFITS OF STOCK.
STOCK usually affords a profit or advantage to the person who
uses or employs it, whether he employ it as capital or as revenue.
In its employment as capital, we have seen, that it supplants,
abridges, and facilitates labour, enhances the efficiency of its
powers, and renders mankind capable of executing works and ac-
quiring objects of desire in quantities, of qualities, and varieties
which would otherwise exceed their ability. In the use of stock
as revenue, accommodations and comforts are enjoyed, which in
some instances are indispensable to human existence, and in all
the sources of gratification.
Stock, whether employed in business as capital, or used
simply for the accommodation or enjoyment it affords, may be
either the property of the person having the possession of it, or
may belong to another. But this makes no difference in the
benefits it is susceptible of yielding. In the first case, the
profits or advantages accruing from its use go entirely to the
6 2
¡
84
OF THE PROFITS OF CAPITAL.
person employing or possessing it. Sometimes they form an
addition to the produce of his own personal industry, and with
which, in such case, they are often confounded. The profits of
stock, however, are distinct in their nature from the produce of
labour, and it will be our endeavour to exhibit them as such,
and separated from that produce. When the use of stock
is transferred by the owner to others, most commonly a stipu-
lated portion of the produce, or a fixed sum, as hire or interest
for it, is to be paid by the borrower to the lender, leaving to the
former any other advantage attending its employment or pos-
session. In such case, the revenue reserved to the owner as a
return for the profit or accommodation the possession of the stock
affords is clearly ascertained by the reserved rent, hire, or in-
terest. This, however, may be either more or less than the
actual increased produce or advantage which ought to be attri-
buted as the result of its use, or more or less than the value of
the accommodation it affords.
Thus, there being in some instances two parties, the pro-
prietor and the possessor of the stock, between whom the whole
advantage derived from its use is shared, this gives rise to two
branches of inquiry; namely, the whole advantage acquired, and
the hire or interest paid for it. As stock which is used in the
function of revenue does not yield any material product, or other
result beyond the gratification it affords to its possessor, this
kind of stock does not seem to call for any observations. Ac-
cordingly, the first branch of our inquiry will be restricted to
the profits accruing from the employment of stock in the func-
tion of capital.
SECTION I.
Of the Profits of Capital.
It would be possible to consider the profits of capital as a propor-
tion of the whole produce created by industry,-as, for example,
a fourth, a fifth, or any other definite proportion, which, in the dis-
tribution amongst the parties concerned in its creation, falls to the
PROFITS.
85
capitalist in recompence for the service which his capital renders
to the productive operation. But in the different instances of
the employment of capital, the amount expended bears a larger
or smaller proportion to the land and labour contributed; and,
again, in different instances, the capital is occupied in the business
during a longer or shorter time. Hence, the proportions of the
whole produce acquired by capital must vary with these varying
proportions of its contribution; and, in instances of dissimilar
employment, must seldom be the same. This method of esti-
mating and expressing profits would be inconvenient in practice;
since it would afford no information by which a comparison
might be made with its other employments, without expressing
also the time it was occupied, and the amount of land and
labour contributed in relation to it, in the different instances.
Another method of viewing the profits of capital may be, as
an excess of commodities acquired by the outlay of capital above
the commodities expended; measured in parts of the capital
itself, whether it consist of money or of goods, at a per centage,
and acquired during some uniform period, as a year, for in-
stance. This method is more consonant with common usage.
By equalizing the period of employment, we avoid the necessity
of bringing time as an element into the expression; and the
per centage affords a convenient expression whereby the relation
may be estimated and compared with profits in other instances
of employment. While the profits actually received by the
capitalists in different instances bear a very different proportion
to the whole produce, they nevertheless nearly correspond with
each other in the amount per cent. per annum. Again, there is
a constant tendency to an equalization in this per centage of
profits in the different employments of capital; but none in the
proportion of the produce which falls to the capitalist. Ac-
cordingly, in what is about to be offered, profits will be estimated
and spoken of in the ordinary way, of a per centage per annum
on the amount of capital employed.
Capital entitles its proprietor to a share of the produce of in-
dustry, to the creation of which its agency contributes on ac-
count of the service which it renders in the productive operation
in augmenting and improving that produce; and from the ac-
86
PROFITS.
commodation afforded to the workman in advancing his wages.
immediately on the performance of his work, before the goods
are ready for sale, he being too necessitous to wait until the sale,
and receipt of the money for the goods. It might perhaps be
supposed, that the degree in which the produce of labour is
augmented or improved by the capital would constitute its pro-
fit. For example, if by means of advances to the workman, of
food, materials, tools, cattle, and machinery, he can execute
three times as much work as he could without such assistance,
it might be supposed that the person furnishing these articles
would be entitled to something like two-thirds of the produce
of the work, or the excess over what the workman without such
assistance could have produced. But this is not the case in
all instances. As we proceed, it will be attempted to show
that, as a general rule, the service which the capital renders has
no influence in determining the profit which the capitalist is
enabled to acquire; and that the profit is so determined only in
those instances in which the capital renders the least service.
It is worthy of notice that in the different instances of the
employment of capital in industry, it renders a service of very
unequal value towards the productive operation; for different
portions of it assist labour and augment its produce in very un-
equal measures. A simple tool or implement, as, for example,
a saw, may heighten the efficiency of labour a hundredfold, or
even more; while the employment of some other kinds of capital
does no more than return the outlay with the lowest rate of pro-
fit. In the progress of society, the first portions of capital
which are expended in industry generally yield a larger return
than succeeding portions of equal amount. This is peculiarly
the case in agriculture. The first hoe or spade, and the first
seed-corn, which the early cultivators of the soil procured to
assist the feeble powers of the hands and fingers in turning up the
ground, and for sowing the germ of a highly useful plant, to pro-
cure a supply of food, must have increased the produce of labour
in a greater degree than perhaps has been done by any subse-
quent additional acquisitions of capital of equal amount. In all
old countries, where the whole of the fertile land is already un-
der cultivation, it is exceedingly difficult to find new modes of
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87
employment for capital to yield as high a rate of profit as is ac-
quired on the old; and, accordingly, when fresh accumulations
of additional portions of capital call for new and extended
sources of employment, lower rates of profit are usually submit-
ted to. It is impossible to employ in agriculture additional
capital, either on the same land in heightened cultivation, or on
new land of inferior quality, except at a lower rate of return
than is acquired on the old capital already in use. The agricul-
tural capital at present employed in England yields on the
average a certain profit; say ten per cent. But if it were at-
tempted to employ upon the land twice this quantity of capital,
it could not be expected, when applied with the same knowledge
and skill, and even if labourers had increased in the same pro-
portion, to yield the same rate of return on the additional quan-
tity. Instead of ten per cent., the profit would probably be
under seven.
It is admitted that if new and superior modes of
husbandry were discovered and brought into practice, or if those
improved methods which are already known, but not yet exten-
sively employed, were brought into more general use, it might
be possible still to procure ten per cent. on a double amount.
But when an existing capital is employed upon the soil in the
most approved methods known, more capital can only be em-
ployed in the same manner, both with an inferior return in the
quantity of produce, and at a less rate of profit. It is the same
in manufactures and commerce. In these, capital cannot be em-
ployed to an indefinite extent without a falling off in the return.
If an augmented capital at any time induce an extension of
business, the sale of a larger quantity of goods can only be
effected by offering to the public more advantageous terms and
dealing on lower profits: the abilities of the purchasers have
limits, which must always be met. This necessity of submit-
ting to lower profits when tradesmen are determined to extend
their business, is evidence, that in trade and commerce, as well
as in agriculture, the first portions, if we may so speak, of capital
employed yield a higher profit than the succeeding portions.
A progressive augmentation of capital can only find employment
at the previous rate of profit, by a commensurate augmentation.
of labourers, and by new acquisitions of land or raw materials
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PROFITS.
by whom and on which it may be employed; or by a commen-
surate augmentation of sources of employment by new discoveries.
in the arts.
Now the general rate of profit does not in any manner depend
on the degree in which the whole amount of capital employed in
industry increases its produce. Neither is it at all affected by
the degree in which the more productive portions increase that
produce; but is wholly dependent on the degree of assistance
rendered by the least productive portions.
The degree in which the products of industry are augmented
and improved by any employment of capital forms on one hand
the maximum, or the utmost possible extent, to which its profits
under any circumstances can be raised. This degree of augment-
ation and improvement forms the maximum, because, if a larger
profit than this were demanded, the use of the capital would be
dispensed with. But while profits cannot be higher than the
actual assistance rendered by the capital, yet in all its more
productive occupations the rate of profit is much inferior to the
service rendered, and is determined without reference to the
increased produce which its employment occasions. Different
sorts of tools or other kinds of capital may make labour, some
two, some four, and some ten times, more efficient than it would
have been without their assistance. But this inequality in the
assistance afforded, will make no difference in their rate of profit.
The man who uses a spade or plough to assist his labour, instru-
ments which heighten its efficiency in the greatest degree, will
not be able to acquire larger profits from the employment of
these articles of capital, than the man who employs a capital of
equal value of any other, though much less effective, kind; and
this takes place because competition prevents him. If one sort
of machine yield a greater profit to its owner than another sort
of equal value and durability, so many more of the more profit-
able, and so many fewer of the less profitable, would be made,
that the profits of each would soon be brought to a common
level: thus it is with other kinds of capital. The competition
of that which is employed in the less productive ways with that
employed in the more productive, and the bidding of some of its
owners against others to procure the more lucrative occupations.
PROFITS.
89
possessed by them, deprives them of the superior advantages of
those occupations, advantages which they would reap if it were
not for such competition, and tends to reduce the profits of all
others to their own level.
In the successive application of additional portions of capital
in agriculture, the profit to the farmer is the same on each of
them, notwithstanding the different return they yield; the land-
lord, through competition amongst farmers, procuring, as rent,
all the higher profits on the earlier and more productive por-
tions. The same result takes place on different farms. The
farmer's profit in cultivating the less productive land is equal to
that of the more productive; the different amounts of rent
equalizing them all. In manufactures and commerce, too,
where no monopolies exist, and competition is unrestrained, this
competition, which is of the nature to cause profits in all em-
ployments to approximate to a common level, reduces the rate
of profit on all the old and more productive portions of capital
to an equality with the last and least productive; leaving to the
consumers all the benefit accruing from the reduction.
The least productive portion of the capital of a country is
usually that which is the last created and accumulated; and,
accordingly, it is this portion that determines the general rate
of profit. Occupation cannot be found for it in channels equally
advantageous with the old capital; it assists industry in the
lowest degree, and the circumstance of its owners bidding lower
terms against the owners of the old capital in order to obtain
their more lucrative occupations, brings down their profits to the
level of its own. In itself, however, it is exempt from com-
petition; for no person covets to obtain so poor an occupation for
capital; and hence its productiveness alone, or the degree in
which it assists industry, determines its rate of profit.
There seems no ground to suppose that the general rate of
profits can ever be below the amount of the augmented produce
of industry created by the use of this least productive portion.
It must in fact be somewhat higher; because competition is
always attended with difficulty, which holds it in some degree of
restraint, and prevents the establishment of a perfect equality of
profits. The owners of capital are anxious to reap the whole
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PROFITS.
benefit accruing from the employment of their capital, and no
competition amongst them will ever exist to reduce profits
below that lowest rate which consists with the full employment
of all the existing capital.
To place this subject in another light, let us suppose the case
in some particular manufacture, of a newly-invented patent
machine, which should enable the workman to perform in the
same time double his previously executed quantity of work.
The owner of this machine, so long as his patent lasts, will be
able to let it out to hire for nearly the value of the whole labour
which it saves; notwithstanding that the expense of its con-
struction and repairs are far from being equal to such high
charges. But as soon as the patent shall expire, so many per-
sons will make machines of the same kind, in the expectation
of large profit from employing or selling them, that the hire
will then be quickly reduced to no more than the customary
rate of profit of other capital at the time on its cost; which is
of course determined by its greater or less durability, and the
expense of its repairs. On the first introduction of the machine,
the hire could not exceed the value of the saving of labour it
effected; for, if the demand had been higher than this, the
manufacturers would not have used it; but employed the old
process instead. It must, indeed, be something less, in order
to induce persons to adopt it; but not in a great degree; for
we suppose that as yet there are not machines enough for all
the manufacturers; and competition amongst them would com-
pel them to offer nearly its value. But when the patent shall
expire, the inventor will no longer be able to refer to the great
saving which it effects, since the manufacturer will only reply
that he can procure elsewhere machines equally good on lower
terms. Now, in the earliest accumulations of capital, its owners
possess almost a monopoly, resembling that exercised by the
proprietor of a patent invention, and are able to procure a rate
of profits correspondingly high. But as other accumulations
are made, competition immediately begins to act, reducing the
previous monopoly rate, and gradually sinking it as competition
becomes more active.
Such seem to be the causes which determine the general rate
PROFITS.
91
of profits, or the share which, in the distribution of the produce
of industry amongst the three classes contributing to its ac-
quisition, the capitalists are enabled to acquire. These causes
operate under all the changing circumstances of the amount of
capital, and the extent of employment for it; whatever may be
its ordinary productiveness, or the scantiness of its produce in
general.
Hence a change in the general rate of profits may be pro-
duced by circumstances of two different kinds; first, by an
increase or diminution in the amount of capital; and, secondly,
by an extension or contraction of the known sources of profit-
able employment for it.
At any given time, there is a certain quantity of capital which
its owners seek to employ productively, and there is a certain
extent of business which may be carried on to yield a given
profit. If the existing capital be sufficient, and no more than
sufficient, to carry on this extent of business, the given profit
will be realized. But if an alteration take place, either in the
amount of existing capital, or the means of employing it, the ca-
pitalists will realize either more or less than this profit, as the
case may be. In the event of such a diminution in the amount
of capital in relation to this extent of business, as renders it
inadequate to the purpose, whether produced, on one hand, by
great and extended losses in business, the ravages of war, of
insurrection, tempest, or similar causes; or, on the other, from
new openings to industry; in all such events, the least ad-
vantageous occupations will be abandoned, and those of a more
profitable character embraced, through openings in them pro-
duced by such diminution, until the demand for these more.
profitable means of occupation are supplied, and a lessening of
competition in those which are less so afford the opportunity of
raising their emoluments. When, thus, the last accumulated
and invested and least productive portions of capital assist in-
dustry in a higher degree, the profit cf capital generally may
be expected to be commensurate with that assistance, and, con-
sequently, the general rate of profit must rise, extending through
all the employments of capital.
The reverse, on the other hand, is the consequence, when
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PROFITS.
an increase of capital has been accumulated which is more
than sufficient to carry on business to this extent, and for
which employment is wanted; while all the old channels of in-
dustry are fully occupied and supplied. In such case, a diffi-
culty is found in investing the additional portions, to yield the
same rate of profit as the preceding portions, and unless new
means of employment can be found commensurate with its in-
crease, the rate of profits must fall. It is otherwise in newly-
settled countries; and hence one reason of their rapid progress
in opulence and population. But in old countries, the newly-
created and accumulated portions of capital can only find em-
ployment in ways which assist industry in a feeble degree, and
this feeble assistance must prevent a higher rate of profit being
obtained on it than the actual value of the service it renders,
or the measure in which it augments the produce of labour;
while the competition of the new capital with the old to obtain
the lucrative occupations in which the latter is invested, must
cause the rate of profit generally to fall nearly to the level of
that which is yielded from it in the new and less lucrative occu-
pations. The fall will take place first in those branches of in-
dustry to which competition can be extended the most easily,
and will gradually spread to those that are less open whenever
competition can operate. Thus the relation of the existing
amount of capital to the profitable uses to which men are able
to apply it, at all times determines the sort of profitable or
unprofitable occupations which the owners of the newly-created
capital must be content to embark in, as likewise the rate of
profits on capital generally, through a competition constantly
tending to reduce all profits to one level; that is, to the rate of
the increase added to the produce of labour by the employment
of their capital, which augments that produce in the lowest de-
gree. Accordingly, at any given time, the amount of existing
capital being given, the rate of profit is determined by the ex-
tent of the employment for it; and, again, the extent of the
employment being given, the rate of profit is determined by the
amount of capital: the capital, as its relation to the employ-
ment changes, expanding or contracting any occupations which
are of different degrees of profitableness.
PROFITS.
93
Once more, the extent of the employment for capital, and,
consequently, the degree of profitableness of its least productive.
portions, depends on the skill and science with which industry
is applied. Inventions and discoveries when reduced to prac-
tice, as they enlarge the sphere of human labours, and render
possible, or profitable, undertakings which previously would have
been either impossible or unprofitable, and as they supersede
labour by employing capital in its place, thus open to capital
new sources of occupation, or enlarge old sources to a wider ex-
tent. Hence, the extent of employment depending on the state
of science, when the amount of capital is a constant quantity,
its rate of profit will vary by the greater or lesser application of
science to industry. Its rate will be kept up by the advance of
science, and will be proportionably lessened as it declines.
The competition which has been spoken of, is, a competition
carried on amongst the proprietors of capital on one side, and
of land and labour on the other; and the profits are disputed
between them; the capitalists endeavouring to procure the
largest profits possible, and the landlords and labourers to allow
the least. Accordingly, what is lost on one side is gained on
the other; and, again, whatever is gained by one is lost by thẹ
other: or, more strictly speaking, what the capitalists lose, the
consumers gain; and what the capitalists gain, the consumers
must pay for. In this loss or gain, the capitalists, as consumers,
participate; while, as producers, it is all their own.
The production of the industry of a country must be at its
maximum, when every department is amply furnished with the
best and most suitable machinery, and the fullest supply of all
the other articles of capital which the nature of the employment
calls for. On the other hand, when instead of this ample assist-
ance, capital is scantily supplied, labour has to contend against.
difficulties, and its produce is proportionably scanty. It is
evident, that whatever increases the quantity of commodities to
be enjoyed by some one or other of the classes concerned in their
acquisition, and whatever reduces the proportion which one of
these classes, as, for example, that of the capitalists, is enabled to
take for its share, must leave a greater balance to the share of
one or both of the other two: these are the landlords and
PROFITS.
94
labourers. When a greater productiveness of industry can no
longer be effected, a rise of profits cannot take place without re-
ducing either rents or wages. And, on the other hand, every
reduction of profits, which is not the consequence of a diminish-
ed productiveness of industry, must necessarily cause an advance
either of rents or wages, or both. The share which the capi-
talist receives depending on the competition of the market, and
the relation of the supply of capital to the call for it, it is to an
augmentation of capital that we must look, not only in great
part for an increase in the produce of industry, but entirely for
a diminution in the proportion or per centage which he, the
capitalist, appropriates to himself. On the other hand, a dimi-
nution of capital, whilst it lessens the quantity of commodities
which industry is enabled to acquire, through the imperfect
assistance which it receives from capital, increases the rate of
profits, and with it, the share which the capitalist takes on that
portion of the capital that remains. The shares, therefore,
either of the landlords or labourers, or of both of them, must be
proportionably diminished; the cost of acquisition to them is in-
creased, while the supply itself is less in quantity. As ex-
penses are thus lowered, the owners of the capital which
remains bring their goods to market at less cost than before,
and the market being less amply supplied with goods, from the
want of capital to produce them, they can sell them dearer;
and thus profits are augmented, as it were, at both ends.
Dr. Adam Smith affirms that the rise and fall in the profits
of stock depend on the increasing or declining state of the wealth
of a society; an increase of stock lowering profits, and a de-
crease causing them to rise. But it is possible that the wealth
of a society may advance or decline, and its profits yet remair
unaffected. The rate of profits may rise or decline, not only
from an alteration in the quantity of capital, but from an increase
or diminution of employment for it. When larger openings are
presented, or more profitable modes of employing capital are
found, a rise of profits may follow. Amongst the circumstances
which cause an augmented demand or more profitable employ-
ment for capital may be enumerated,-increased prosperity in
the people, which enables them to consume more largely, and
PROFITS.
95
articles of superior quality or of more costly kinds; the acqui-
sition of new branches of trade; inventions which substitute
machinery for manual labour, or more complicated and expensive
machines or instruments for those of simple and cheap con-
struction; improvements in physical science of every kind which
enlarge the sphere of human industry, create a greater quantity
of products, and open new sources of employment, or old sources
to a wider extent; but above all, the acquisition of extensive
colonial possessions, wherein new fields are opened for the pro-
fitable investment of capital. In all or either of these ways, an
augmented demand for capital may be occasioned, and a rise in
the rate of profits follow. Such rise, however, does not univers-
ally denote that capital is diminished: it is the result, not of a
scarcity of capital, but of a multiplication of its uses. On the
other hand, the wealth of a society may decline, and, notwith-
standing this, the profit of its capital may not advance. It
may be that some trade or branch of industry has been lost,
which was previously possessed. As, then, there is no necessary
connexion between the rate of profits and the advancing or de-
clining state of a society, we cannot certainly infer from the ob-
servation of a change in the one, that a commensurate change in
the other will ensue. We cannot conclude, either from the de-
clining circumstances of a country, that profits will increase; nor,
on the other hand, from a fall in the rate of profits, that a society
is advancing in opulence. But if the relation of the employment
for capital to its amount be taken into computation, we may
affirm, without danger of error, that the rate of profit must be
dependent on the scarcity or abundance of capital.
The history of the rate of profits from the early ages to the
present, will be found, on examination, to exemplify the po-
sition now stated, and to afford corresponding results. To
determine, indeed, what is the rate of profits, or the most usual
rate in any trade at a particular time and place, must be a
problem of exceeding difficulty. Profit is so fluctuating, that
a person in trade cannot always tell himself what is the average
of his annual profit. It is affected, not only by the change of
seasons; by every variation of price in the commodities which
he deals in, and his expenses in wages and other outgoings; but
96
PROFITS.
by the good or bad fortune both of his rivals and of his cus-
tomers, as well as by a thousand other accidents to which every
trade, and all goods when conveyed by sea or land, or even
when stored in a warehouse, are liable. It varies, therefore,
not only from year to year, but from day to day. To ascertain
what is the average profit of all the different trades carried on
in a country, must be much more difficult; and to judge of what
it
may have been formerly, or in remote periods of time, with any
degree of precision, is altogether impossible.
But though it is impossible to determine, with any precision,
what are or were the average profits, either in the present or
in ancient times, some notion may be formed of them from the
interest of money. It may be laid down as a maxim, that
wherever a great profit can be made by the use of money, a high
interest will commonly be given for its hire; and that, wher-
ever little can be made by its use, less will commonly be given
for it. According, therefore, as the usual market rate of in-
terest varies in any country, we may be assured that the ordinary
profits of capital must vary with it; must sink as it sinks, and
rise as it rises. The progress of interest, therefore, gives us
some notion of the progress of profit.
By the 37th of Henry VIII. all interest above ten per cent.
was declared unlawful. More, it seems, had sometimes been
taken before that time. In the reign of Edward VI. religious
zeal prohibited all interest. This prohibition, however, like all
others of the same kind, is said to have produced no effect, and
probably rather increased than diminished the evil of usury.
The statute of Henry VIII. was revived by the 13th of Elizabeth,
and ten per cent. continued to be the legal rate of interest till
the 21st of James I. when it was restricted to eight per cent.
It was reduced to six per cent. soon after the Restoration, and
by the 12th of Anne, to five per cent. All these different
statutory regulations seem to have followed, and not to have
gone before, the market rate of interest, or the rate at which
people of good credit usually borrowed. Since the time of
Queen Anne, five per cent. seems to have been generally rather
above than below the market rate. In times of war it has been
five and sometimes six per cent. But on the return of peace it
PROFITS.
97
has gradually fallen again to three and a half and four per cent.
From the accession of George II. in 1727 to the commencement
of the war in 1739 it was little more than three per cent.
.
Since the time of Henry VIII. the wealth and revenue of the
country seem, not only to have been steadily advancing, but the
rate of their progression appears to have been continually acce-
lerated; while the profits of capital have been diminished. It is
impossible to doubt, that this continual accumulation of capital
has been the real cause of the gradual diminution of profits.
How indeed could any other effect be the result? When all
the sources of employment for capital are exhausted which yield
to industry the customary existing rate of profit, the competition
produced by the continual endeavour to employ additional por-
tions of capital, when no more can be employed at that rate,
cannot but have a great effect in reducing profits, especially of
late years, when capital, at least in this country, notwithstanding
the vicissitudes to which it has been exposed, has been in a state
of rapid increase. During the last war, the immense sums of
money which were borrowed annually by the government were
the accumulations of private individuals. As were, subsequently,
all those large sums which have gone out of the country in loans
to foreign powers and investments in foreign securities. When
we recollect these, and the numerous mining and other com-
mercial undertakings in our own and foreign countries supported
by British capital, as well as the great public works and ad-
ditions that have been made to the buildings, rail-roads, and
other kinds of property at home, we cannot doubt that the
annual savings of individuals n the United Kingdom must collec-
tively be very large. To make an accurate estimate of its amount
would be impossible, it perhaps can scarcely be less than from
twenty to fifty millions sterling. Now if we suppose that additional
employment is to be sought for capital to the amount of from
twenty to fifty millions annually, either by new occupations at
home, (where every occupation is already full,) or by investments
abroad, the competition amongst the different owners of this
capital must be so active as very much to reduce the rate of
profit which capital will yield. Hence the reason why, since
the peace, and since the government has ceased to absorb and
VOL. II.
II
98
PROFITS.
dissipate in a war expenditure all the people's savings, the interest
of money has fallen nearly from five to three per cent. And hence
the reason why, also, we may anticipate, if peace should continue,
that a still further reduction will take place. The construc-
tion of rail-roads has for a time opened a new mode of investment
for capital, and has thus for the present put off this reduction ;
but when this is exhausted, the overflowings of new accumu-
lations of capital must again be felt in reducing the rate of
profits;-unless indeed we imagine that, ere such time arrive,
some fresh opening for the employment of capital will be found.
The position which has been now advanced, that the rate of
profits of capital depends on the relation of the supply of
capital to the known profitable uses to which there are the
means of applying it, and the consequent degree of productive-
ness of the last-created and least advantageously occupied por-
tion, has not hitherto been distinctly recognised.* It is con-
tended that the profits of capital depend on the productiveness
of industry; that an increased productiveness brings about a
universal rise of profits; and that "the decreasing fertility of
the soil is, at bottom, the great and only necessary cause of a
fall of profits."† Again, it is said, that "the increased diffi-
culty of raising raw produce has a tendency to lower the rate of
profit, while the improvements in manufacturing and commer-
cial industry have just the opposite effect." Now it has been
shown already, that it is those portions of capital which afford
the least assistance to labour that determine the rate of profit,
and bring down the profit of the more advantageously employed
portions to the level of their own. A greater productiveness of
industry, generally, though it would benefit the people at large,
would not raise the rate of profit, except the improvement ap-
plied to the least profitable occupations of capital, or to those in
which it assists labour in the least degree; either by a greater
call for capital which should cause these least profitable occu-
pations to be abandoned, and more profitable ones resorted
* I would here repeat, that this work was written long previous to the ap-
pcarance of Dr. Longfield's Lectures, and that in justice to him, this remark
does not apply to his view of the subject.
† Mr. M'Culloch, p. 380.
Mr. Ramsay, p. 190.
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99
to, or from some improvements being made in the method of
conducting those particular occupations. A greater productive-
ness of industry at large does not necessarily call for more
capital, since it may proceed from improved methods of business;
and while there is not room for further capital in the more pro-
fitable occupations, the general rate of profit cannot advance.
The fact that, while industry in our country during the last
half century has become gradually more productive, the profits
of capital, so far from having advanced in a commensurate de-
gree, have, on the contrary, gradually fallen, and are still fall-
ing, corroborates the position that an increased productiveness
of industry does not raise the rate of profits. If this position
were not true, and the contrary admitted, profits ought to have
risen to a very high pitch. That industry has become greatly
more productive than formerly cannot be disputed, when we
reflect that machinery and improved processes have been intro-
duced into almost every department, as well agricultural and
manufacturing, as commercial. Yet improvements, some of
which enable one man to perform the labour that, fifty years
ago, required the labour of two hundred, have had no effect in
raising profits. It is true, a part of our industry has been de-
voted to the cultivation of unfruitful soils. But, notwithstanding
this disadvantage, the productiveness of industry, on the whole,
must have increased in a much greater proportion.
To render the position now stated more apparent, let us sup-
pose the case of a farmer employing a capital in cultivation
equivalent to 100 quarters of corn, and obtaining a return of
120 quarters; making thereby a profit of 20 quarters. Suppose
now that the productiveness of agricultural industry is univer-
sally doubled. The immediate effect will be, that the farmer,
instead of 20 quarters, will obtain a profit of 140 quarters, on a
capital of 100. But the question is, as to the permanent effect
on the profits of capital arising from this enhancement of gain
accruing from cultivation, and whether its effects be merely tem-
porary. That the competition amongst capitalists in different
branches of industry will soon reduce the profits of farming to
the common level of the profits of other businesses cannot be
disputed. And it may be granted, that the profits of capital, on
H 2
100
PROFITS.
the whole, after this competition has produced its effect, will be
somewhat greater than they were previous to such increase of
gains in one considerable branch of industry. This question
still remains, Is the rate of profit of capital, on the whole, per-
manently raised by such augmentation of the profits of agricul-
ture? The first effect of larger profits will be the accumulation
of more capital, and, subsequently, greater competition amongst
capitalists to find advantageous employment for the new capital.
In the case supposed, it is not stated that more capital than be-
fore is required in agriculture. And, therefore, as the produce of
the land is doubled, and no more capital wanted to raise this
double quantity, than was previously required to raise the single
quantity; as, moreover, capital has been augmented, and com-
petition, consequently, become more active than before; the
conclusion forces itself upon us, that the increased rate of pro-
fit cannot be permanent, and that profits must eventually fall
below the level at which they stood before the rise took place.
As the share of the produce which the capitalist is enabled to
demand declines, so must that of the labourer be increased.
the case supposed, the probability is that in succeeding years
the cultivator will be unable to realize more than his first profit
of 20 quarters, and that the additional 120 must go to the con-
sumers. It is thus that increased productiveness of industry, in
whatever branch it exists, tends to the advantage of the con-
sumer.
In
From what is here said of the effects of greater productiveness
of industry on the rate of profits of capital, it is easy to transfer the
same reasoning, and demonstrate the same results, as ensuing from
an augmentation of profit accruing through a saving in the ex-
pense of cultivation. This saving of expense is, in effect, rendering
less capital necessary than before; setting free portions of capital
now occupied in cultivation; depriving them of employment;
and rendering them available to production in other ways. This
saving of expense might happen from several causes; but in
whatever way it happens, the same result must follow. It may
be that new modes of husbandry lessen the quantity of seed
required, and reduce the expense of horse labour, or the wear
and tear of implements and machines. It may be that taxes are
PROFITS.
101
lowered; labour saved; or, possibly, even wages reduced. This
last saving to the farmer, which at first sight seems to involve a
paradox, in that it assumes the rewards of labour to be augment-
ed while its wages are lowered, might, however, occur in prac-
tice; and the seeming contradiction will disappear when we
consider that it is possible for the rewards of industry in general
to increase, while those of one particular class may be lessened;
and that from causes extraneous to those which affect industry
as a whole.
Again, on the other hand, it is mistaking cause for effect,
when the reverse of this position is maintained, and it is said
that the diminished productiveness of industry is the great and
only necessary cause of a fall of profits. If the efficiency of in-
dustry determined the rate of profit, how should we be able to
reconcile with this theory the fact of the high rate of interest in
China, with, what is universally admitted, the general ineffi-
ciency of its industry? The fact is, when profits have fallen
from extrinsic causes, industry may be directed to new or more
extensive employments which are less productive, and yet with-
out a falling off of produce as the labourer's share of the return.
Land of inferior fertility may be broken up, and the plough car-
ried over a poorer territory than before, not because the labourer,
but because the farmer, is satisfied with less. This diminished
productiveness of the joint exercise of capital and labour in
new or extended employments, is not the cause, but the con-
sequence, of a fall of profits. Poor land is cultivated because
profits are low, but profits are not low because this poor land has
been taken into cultivation. When it is necessary, in order to
a further supply of food, to resort to soils of inferior productive-
ness, and the produce yielded per acre is less in quantity than
on the lands previously in cultivation, doubtless, in the division
between the labourer and capitalist, the principal part of the
produce must go to the labourer, for he could not work without
being supplied with an adequate subsistence. But the necessity
of the labourer's subsistence is by no means the cause of this land
being cultivated. Though the labourer should starve, the capital-
ist would never advance him the means of cultivating inferior soils,
if by this means the same return on capital could not be procured
102
PROFITS.
as could be procured from other investments. In the business of
life, it is not motives of charity, but of interest, that are the springs
of action. If capital has not increased, how can it be expected of
the capitalist to withdraw his capital from employments which
already yield a good return, and invest it at a loss in the cultiva-
tion of inferior soils, for the purpose of enabling a starving
peasantry to subsist? Even if this were done, it would be a
misdirected philanthropy, and the effect on society would be
injurious rather than beneficial. It is only when an increase of
capital has taken place, and there are no means of investing the
new portions, to procure as good a return as is obtained from the
old portions, that the labourer can expect to receive a loan of
capital to cultivate inferior soils with a diminished rate of profit.
This diminished productiveness of the joint exertion of industry
and capital is not, then, as was before said, the cause of a fall of
profits, but its consequence. The cause of the fall of profits is,
that capital has increased, in relation to its means of employ-
ment, and the additional portions cannot be employed with the
same rate of profit as is yielded by the previous portions.
Mr. Ricardo's theory of profits is founded on the assumptions
that the rate of profits depends upon the wages of labour,
while wages depend upon the quality of the poorest land culti-
vated; that as wages rise profits decline; and, on the contrary,
that as wages fall profits rise. But so far are these positions.
from the truth, that the very contrary is the case. Enough has
been said already to show that profits are independent of wages.
There are some occupations in which wages are exceedingly
low-farming and the silk manufacture may be taken as ex-
amples. But yet we do not find that profits are higher in these
occupations than in others; on the contrary, they seem to be
lower. In general, too, we observe, when business becomes de-
pressed or revives, that profits and wages seem to fall or rise
together, rather than in opposite directions; and the interests of
the workmen and masters appear to prosper or decline in com-
pany with each other. The real rewards of labour, or the quan-
tity and quality of the objects which labour procures, are at their
highest when capital is furnished to the workman in the most
ample measure, and, consequently, when his labour is most pro-
PROFITS.
103
ductive. But when capital can be so furnished, its quantity
must be so great that difficulty must be experienced in finding
profitable occupation for its whole amount, and its last created
and employed portions, on which the general rate of profits de-
pends, must be but little productive, and, consequently, must
cause the general rate of profits to be low. Again, when the
general rate of profits is low, the deduction from labour on ac-
count of profits is small, and its net amount consequently large;
while, on the other hand, when profits are high, this deduction
being larger, the net produce left to labour must be smaller.
In the present day, we hear complaints amongst capitalists
that profits have fallen to an unprecedentedly low rate. They
say, though business is carried on, yet, for what is gained by it, it
might almost as well be given up. From such complaints we
are led to believe that a general falling off of profits is a national
loss, that it indicates a decay of trade, and that the resources of
our country are nearly exhausted. Persons, too, better able to
judge, have been of opinion that the prosperity of a country is
in proportion to the rate of profit. It has been said, " Wher-
ever profits are high, capital is rapidly augmented, and there is
a proportionally rapid increase of wealth and population; but,
on the other hand, wherever profits are low, the means of em-
ploying additional labour are proportionally limited, and the
progress of society rendered so much the slower. It is not,
therefore, by the absolute amount of its capital, but by its
power of employing that capital with advantage-a power which
will always be correctly measured by the common and average
rate of profit-that the capacity of any country to increase in
wealth and population is to be estimated."* In this quotation
two inaccuracies are observable; first, it is assumed that ca-
pital is the means of employing labour; and, secondly, that the
average rate of profit is the index of the power of employing
capital with advantage. With regard to the first of these
positions, it is unnecessary to do more than refer, for the grounds
on which its truth is denied, to what has been already advanced
in the chapter on employment. With regard to the second, if
authority were argument, our great master, Smith, might be
* Mr. M'Culloch, p. 106.
104
PROFITS.
adduced in opposition to it. He says, " As riches, improvement,
and population have increased, interest has declined. The wages
of labour do not sink with the profits of stock; and after these
are diminished, stock may not only continue to increase, but to
increase much faster."* But authority will not be insisted on.
The capacity of a country to increase in wealth and population
must undoubtedly depend on " its power of employing its ca-
pital with advantage;” that is, however, let it be noticed, its
labour and capital; for capital must be employed by labourers ; it
can produce nothing alone. Now the rate of profit acquired by the
capitalist cannot be looked to as the index of this latter power, or
of the profitable character of the return obtained from the em-
ployment of the whole capital and labour jointly. This character
must depend on the gross amount resulting from that joint em-
ployment, and not from the return acquired by the capitalist alone.
The circumstance of the rate of the profits of capital de-
pending, as they do, on the value of the service rendered to labour
by the least advantageous employment of capital, presents no
criterion from which to form a judgment on the productiveness of
the other and more serviceable portions, or of the whole mass
of capital taken collectively. Whatever be the character of
this least advantageously employed capital, it is but a portion,
perhaps a small portion, of the whole capital of a country which
is thus circumstanced; and, notwithstanding its unprofitable-
ness, the great mass of the capital employed may be of a highly
profitable character, not perhaps to the capitalists, but to in-
dustry at large. Again, when additional portions of capital
have been accumulated, it does not follow, because these por-
tions cannot commonly be invested so as to yield the same rate
of profit as heretofore, that the produce of the industry employ-
ing the preceding portions has in any degree fallen off. No
effect of this kind can result. The gross produce of industry
must be augmented by the addition of the new capital to the
old, and the increased assistance thereby afforded to it; since it
must be employed, though it be with less productiveness than
the old. The abundance of capital causes machinery to be used
of a costly and powerful kind, and the absolute production it
*Book I. ch. 9.
PROFITS.
105
use.
yields cannot but be great, notwithstanding that the rate of
profit to the capitalist may be low. Thus the rate of profits
being determined by only a small portion of the whole capital
of a country, it cannot be regarded as a subject either of alarm
when it is low, or of satisfaction when increasing. It is not
denied that it may be to the prejudice of the capitalists that
their profits are reduced. But as far as regards the working
classes, a reduction of profits is in effect a commensurate aug-
mentation of wages. High profits of capital, and high wages of
labour, are things almost incompatible with each other, and
perhaps are never found together except in the peculiar circum-
stances of newly-settled countries, where the abundance of land
and its great fertility compensate for high profits.
A high
rate of profit, ordinarily, indicates a scarcity of capital; that the
labourer must employ it sparingly, while he pays dearly for its
Thus it is in all poor countries, where the effective powers
of industry are on the lowest scale, and the rate of profits on
the highest. The reverse takes place in rich countries. Here,
on the contrary, we find a low rate of profit, and an active com-
petition amongst capitalists, indicating an abundance of capital;
that the labourers of every kind are amply furnished with
the suitable capital to render their industry effective; that
they are easily able to procure the loan of capital, while they
pay a moderate remuneration for the use of it; and, conse-
quently, have greater facility of accumulation. But it is not
the poor, the feeble, the ignorant, and starving countries, whose
profit is the highest, that are most on the advance. It is
here that progress is the slowest, and the first forward step the
most difficult to be made. It is with nations as with indivi-
duals, a large capital, though with small profits, generally in-
creases faster than a small capital with great profits. According
to the proverb, It is money that makes money. When you
have got a little, it is easy to get more. The great difficulty
is to get that little; and we find, both amongst individuals.
and nations, that where wealth exists in the most ample mea-
sure, there is the greatest power of accumulation and of further
advancement.
It is not, then, the rate of profit gained by the capitalist that
1
106
PROFITS.
is the "real barometer, the true and infallible criterion of
national prosperity." This criterion must be looked for only in
the gross production which the capital and labour of the country
together present; which production is entirely distinct from
that share of the produce which, in the distribution amongst
the parties concerned in production, goes to the capitalist as
profit, and constitutes the rate of that profit. If the rate of
profits were the index of public prosperity, and of the advance
or decline of wealth and population, then we should expect to
find the East Indies one of the countries most fortunate in this
respect, and advancing with the most rapid strides in wealth
and population. There, money is often lent to the cultivators
of the rice grounds on interest at the rate of thirty, forty, and
fifty per cent. per annum, and the succeeding crop mortgaged
for its payment. But notwithstanding this supposed sign of
prosperity, and the prolific effects on vegetation of a tropical
climate, we find the people in the most abject state of poverty,
subject to the frequent recurrence of famine in its most dreadful
forms. China, where the common interest of money is said
to be from twelve to eighteen per cent., and the legal rate three
per cent. per month, has been supposed to have been for many
centuries nearly stationary in wealth and population; while its
poor are so scantily supplied with food as to be eager to catch at
everything capable of being eaten, though of the most offensive
and disgusting kind. Admitting that the peculiar circumstances
of eastern countries render the rate of interest there but an un-
certain criterion from which to judge of the actual rate of profits,
yet with every possible allowance that can reasonably be made,
they must be beyond comparison higher than any known in
European countries. Indeed, from the small amount of capital
employed, its produce must, in the nature of things, be un-
usually large. Such extraordinary profits cannot but swallow
up the subsistence of labour, or, more correctly speaking, the
feeble powers of the labourer are incompetent to produce suffi-
cient for his support, when all the additional produce which
capital enables him to raise is taken away. Whatever increases.
the share of the capitalist, without augmenting the gross pro-
duce raised, must lessen, in an equal degree, the share of the
PROFITS.
107
very reverse.
labourer. A fall in the rate of profit and interest, then, in any
country, so far from showing that "the plague of poverty is
secretly creeping on the mass of her citizens; that the founda-
tions of her power and greatness have been shaken; and that
her decline may be confidently anticipated;" must indicate the
It is the natural effect, and almost an infallible
sign, of public prosperity, and shows that an augmentation of
national wealth has taken place, whence may as confidently be
It
predicted an increase of population and of national power.
is possible, indeed, that some sudden and great check to com-
merce may have a momentary effect in reducing the rate of pro-
fits, by throwing many stocks out of trade; but a check of this
kind must be attended with such misery and want of employ-
ment to the poor, that, besides its short duration, it will not be
possible to mistake the one case for the other.
Neither is heavy taxation the cause of low profits. On the
contrary, heavy taxation, which absorbs the fund from which
accumulation would otherwise take place, must occasion a
scarcity of capital, and, consequently, a high rate of remunera-
tion to be paid to the capitalist. Heavy taxation, if it be on
articles of expenditure, will lessen the quantity of these articles.
which the capitalist will be able to command, though without
lowering the rate of profit. Or, the same thing will happen, if
taxes be placed directly on the revenue derived from capital.
It will cause the net sum which will be at the disposal of the
capitalist to be only equivalent to a low rate of profit untaxed;
but in neither case can the rate of profit be low on account of
heavy taxation. Its natural and powerful effect is directly the
reverse. It has been said, that "it was the excessive weight of
taxation that was the real cause of the lowness of profits in
Holland, and, consequently, of the decline of her manufacturing
and commercial prosperity." But if what has been now ad-
vanced be correct, the excessive weight of taxation in that
country must have produced her decline, not through the
assumed natural and necessary effect of taxation lowering profits,
but more probably through the mode of imposition of her taxes,
combined with the restrictive commercial system acted on by
108
PROFITS.
her and other countries, narrowing the market, fettering and
cramping the exertion of industry, by contracting or drying up
the sources of employment for capital, and thus reducing the
rate of profits. In such case, however, her low profits were the
consequence and not the cause of her decline.
A low rate of profit lessens the power of the capitalist to ac-
cumulate, while the wages of labour being in consequence of
that low rate proportionally high, the power of the labourer to
accumulate is increased in the same proportion as that of the
capitalist is taken away. Here, then, are two concurrent causes
oppositely acting on the accumulation of capital. Whether
capital is more or less accumulated, and general opulence and
comfort better promoted by the means of accumulation being more
in the hands of capitalists than in those of labourers, in other
words, by a high or a low rate of profit, is a question which
merits notice. It seems probable that accumulation may go on
faster when the power of accumulation is more in the hands of
capitalists than of labourers. But if the happiness of the greater
number be the object of attainment, one cannot doubt that a
low rate of profit, which, whilst it is injurious to the few, is
beneficial to the many, must tend more to the public happiness.
When capital is abundant and profits are low, many invest-
ments of capital take place which could not otherwise be made,
both from the want, in the latter case, of the necessary capital, and
because its high rate of profit would render such investment less
lucrative than others. When profits are low, money is expended
more largely than before in substantial and durable improve-
ments, both public and private, which cannot afterwards be
removed or transferred from the land. It is also laid out more
in education and instruction in the higher skilled occupations.
Whence the labour of more intelligent and skilful labourers will
offer to the general market of the world goods of more costly.
kinds and higher value, which will procure in exchange for them
larger quantities of such goods as are of a ruder kind, and pro-
duced in other countries without the employment of so great.
skill and capital.
The rate of profit having a tendency to an equalization in
PROFITS.
109
different places, when capital accumulates in a particular
country at a quicker rate than in other countries, the relatively
low rate of profit occasioned thereby affords an inducement to
transport capital to foreign countries. Within the same territory,
a constant flow of capital is kept up from one place to another,
which so nearly equalizes profits in all its different districts as that
the difference is hardly perceptible. In country places, indeed, pro-
fits usually are somewhat higher than in large and opulent towns.
In these last, the number of rich capitalists causes competition
to be more active, and generally reduces profits rather below the
standard reached in the rural districts. But between different
countries, though the same tendency to an equalization exists,
yet it is opposed by circumstances of a more formidable charac-
ter, and the dissimilarity in profits in different countries is con-
sequently much greater. To a certain extent, however, capital
is constantly transported from one country to another, when
higher profits can be gained thereby, with an adequate security.
It is a common opinion, that it is injurious to a country to
have its capital transported to foreign countries for employ-
ment or investment. Unless, however, it be through want of
security for the capital at home, and unless the sources of its
employment are lessened, its exportation is evidence of public
prosperity, and shows its redundancy at home, or else that it
has increased beyond the means of employment for it with a
suitable profit in the proper business of the country. Its ex-
portation by no means proves that trade at home has declined,
but leads rather to the contrary supposition. The foreign
must yield a better return than the home employment; for,
unless this were the case, the owners would not allow their
property to go so far from their own inspection and control.
Passing by the consequences which political considerations
might lead us to apprehend, in the event of war, from capital
being invested in an enemy's country, and viewing the question
purely in an economical light, the more profitable employment
abroad than could be found at home affords a presumption that
it must be advantageous. Unquestionably, the capitalists whose
incomes are thus increased are benefited. Nor is this all, the
exportation of capital rendering it scarcer than it otherwise
110
PROFITS.
would be at home, must in some measure raise or keep up the
rate of profit on the whole capital of the country; and thus
benefit the whole class of capitalists. As members of the com-
munity, their interest forms part of the public interest, and
looking no further than this, it must be admitted that the public
interest is promoted by such transmission. In order to prove
the contrary, it must be shown, that the loss sustained there-
from by other members of the community exceeds the benefit
resulting to the capitalists.
The capital exported, is, if not wholly, yet for the most part,
capital newly created and accumulated, and capital which has
not heretofore been in any way employed. Being the property
of those who export it, every advantage accruing from it goes
to its owners, and to no one else. Whence it seems of small
concern to others what may become of it. Its transmission,
however, though not a positive, is a negative loss to the major
part of the community. Whatever the capital may consist of,
whether of corn, or clothing, or their equivalents, the exportation
of the articles renders them dearer in the market, and the
capitalists concerned in producing them will get a higher price
for the capital employed in their production. Industry, on the
whole, has to pay this higher price, but takes no share of bene-
fit; for production at large is not increased by high prices,
it is only production in a particular branch of trade that is
increased by a high price in that branch, and this is attended
with a commensurate falling off of production in other branches.
Production, then, not having increased, and the share of the
capitalists being greater, the labourer's share is diminished, by
his having to pay a higher price for all articles into which the
profit of capital enters as a constituent part of price. Again,
the corn and clothing, or whatever else the capital may consist
in, being sent abroad to obtain a profit, instead of being paid as
wages to labourers at home to create some new capital, or
otherwise procure a profitable return, the want of offers of capital
to persons in business, and its attendant scarcity, will also in
this way cause a higher remuneration to be paid for it in every
shape.
Thus, the first effect of the exportation of the principal
PROFITS.
111
money, if we may so call it, of capital, is to confer benefit on
the capitalists, while the rest of the community suffer a negative
loss. Similar consequences follow from the permanent loss of
the capital to domestic industry through its continuance abroad.
The lasting effect of a higher revenue acquired by the owners of
the capital exported will be, that corn and clothing, or other
commodities, must be annually sent back by foreigners to pay
the interest on the capital they have borrowed. Distant coun-
tries thus become, as it were, tributaries to a part of our country-
men, who live at home in affluence on the labours of the natives
of those countries. The gross produce of the whole national
capital is greater by the larger return of the portion sent abroad,
which could not have yielded so good a return at home. Fur-
ther than this, the effect on domestic industry of the annual im-
portation of commodities can be of little, if of any, consequence.
The individuals on whose account they are sent derive all the
benefit. It is plain, if the commodities were of kinds exactly
suited to the wants of these parties, they would be all consumed
by them, and no effect would be produced beyond their own
circle. The same must really happen, if the commodities are
wholly, or in part, unsuited to the wants of these persons. In
such case, they will be merely exchanged by them, value for
value, for commodities or services adapted to their wishes.
Nothing will be given away, or given for less than its equiva-
lent; and no advantage can accrue to any other than the parties.
to whom they are at first transmitted. But the greater revenue
acquired by these parties from sending their capital abroad, is a
decided benefit to them, and acquired without positive injury to
any one. It renders them better able to support the public
burthens, which, consequently, may be lightened on the other
subjects of the state. If the revenue from abroad were not
greater than might be procured at home, it would be conferring
an advantage on foreigners in preference to their own country-
men, without benefiting themselves. But since the revenue is
greater, we may expect, that the benefits accruing therefrom
must, in all probability, equal the indirect disadvantage to those
who, without such exportation, would have been served. It is
the interest of a country that the whole of its capital should be
112
OF STOCK LET ON HIRE,
so employed as to yield the largest produce; that it should
move from one district to another whenever a greater production
can be effected thereby. If, then, its flow from one place to
another in the same country be beneficial, why should it be ac-
counted injurious when it merely passes beyond a certain limit
a river, or imaginary line, which marks the boundaries of dif-
ferent nations? We ought not to desire to injure the capitalists;
and thus we ought not to regret that money is sent abroad
when it can no longer procure a good return at home.
The exportation of capital must, doubtless, be of advantage
to those foreign countries which thereby obtain the use of a
capital that they would not otherwise possess, and thus reap the
surplus profit accruing from its employment, after payment of
the interest to its owners. This benefit, and the consequent
superior productiveness of foreign industry, placing them in
more advantageous circumstances in the competition of the
market, is rather to be desired than depreciated, as we have
already shown in another place.
SECTION II.
Of Stock let on Hire, and Money lent at Interest.
THE inquiry now is, not into the actual magnitude of the profit
or advantage which the possession and use of stock afford, but
into the consideration which is paid to the owners for relinquish-
ing its possession, or the revenue which they derive from the
stock, without using or employing it themselves.
Although stock when let to hire or at interest affords a
revenue to the owner, it is not on that account to be classed as
capital. The borrower may use it either as capital in business,
or merely as an object of consumption from the use or accom-
modation it affords. Dwelling-houses are let to be occupied or
used as stock devoted to consumption, and without view to re-
production. Money is commonly lent to be employed as capital
for further production; but not always so. Country gentlemen
sometimes borrow upon mortgage in order to spend, sometimes
AND MONEY LENT AT INTEREST.
113
in improving their estates, but more commonly, to pay for what
has been already spent; their expenses having exceeded their
incomes. But of this class of borrowers, the greatest of all are
governments, through the disbursements of the state going be-
yond the receipts of the treasury. If borrowed money be em-
ployed as capital, it commonly reproduces itself with a profit,
thereby enabling the borrower to pay the interest, and ultimately
to restore the principal, without drawing from any other source of
revenue. If he use it as stock devoted to consumption, both
the payment of the interest, and, so far as the principal is con-
sumed, its restoration, must be drawn from some other source
of revenue.
.
If we except money, which, amongst different kinds of stock,
is in some respects distinct from others, it may be said that the
hire of all the different articles which are comprised in the
general description of stock is determined by the same universal
principles. Like the rent of land, or the wages of the separate
classes of labourers, it increases or decreases with the changes
which continually take place in the relation between the quantity
of the particular kind desired to be let for hire on one hand, and
the quantity desired to be hired on the other. An increase in
the quantity to be let, unaccompanied by a corresponding in-
crease of employment for it, lowers the hire, and, on the contrary,
a greater opportunity of employment without a corresponding
increase of articles to be let, raises it.
Again, the hire of an article being the consideration for
relinquishing the advantages which might be procured by re-
taining possession of it, necessarily depends much upon the
profit which can be got by its possession and employment. For
according to what the owner could get by using it himself will
be his demand in lending it to another. Where, therefore, much
can be made by its use, much will be expected on one hand for
the loan, and given on the other. Thus the rate of hire, and
the profit gained by the article lent, increase and decrease toge-
ther. When profits in business are high, there are so many
persons desirous of participating in them, that the competition
of these persons with one another to obtain the articles which
may put them in a condition to share these profits, gives an
VOL. II.
I
114
OF STOCK LET ON HIRE,
opportunity to the lender to raise his demand. Indeed, if only
a small consideration were offered, the owner would employ the
articles himself. On the other hand, when but little is to be pro-
cured by their employment, a man cannot afford to give much
for the use of them, and their hire must consequently be low.
In the work of industry, there are many kinds of capital that
are continually changing their form; some kinds in their em-
ployment disappear altogether from their original form, and
reappear in the product which industry creates. Thus, capital
in subsistence and clothing for labourers is consumed by them,
and reappears in the product of their labour, be it of what kind
it may. Other kinds of capital there are which in their nature
are inconvertible from their existing form to any other, except
as through their aid labour creates new articles, while they
themselves fall to decay, in a longer or shorter space of time.
But of these kinds of capital which eventually assume a new
form in the product which they create, while they themselves
disappear in the process, the most part is capable of reap-
pearing in one or more definite shapes alone, and in no other.
Capital in farming stock, as seed, cattle, and implements of
husbandry, becomes transformed into agricultural produce; but
into nothing else: it cannot assume the shape of manufactures.
Neither can the capital in the buildings, machinery, and materials
of manufacture produce anything but manufactures. Even
money, considered the most convertible kind of capital, can
only purchase commodities and make payments. Although
every kind of capital may be procured with it, this is merely a
change of the same items of capital from one proprietor to an-
other; not an actual conversion of money into goods, or into
capital of another kind. So articles of all the different kinds of
stock are bought, sold, and exchanged amongst different indi-
viduals one against another; but we must not mistake this change
of owners for a conversion of the articles themselves into other
forms. Capital once invested with a particular form, is with-
drawn for ever from circulation in any other form than that
which is given to it, or that which it has a limited susceptibility
of assuming afterwards.
Hence it is evident that stock of every kind, whether money,
AND MONEY LENT AT INTEREST.
115
goods, cattle, buildings, or what not, is only capable of oper-
ating by competition in the market on things of a like kind;
since it can yield no other benefit than that which is peculiar to
itself. All descriptions of stock separately, are liable from time
to time to exist in a greater or less abundance or scarcity, in
relation to the uses to which they are applicable. Sometimes
one kind exists in great plenty; at other times, another. But
the abundance of the supply of one kind has no immediate.
effect on the supply of other kinds : time must be given for in-
dustry to change the direction of its labours before the equili-
brium can be restored. Consequently, the hire of every kind of
stock is liable from time to time to rise or fall in the same man-
ner as the prices of their purchase, and this without a change
taking place in the hire of other kinds. The abundance of
stock of one description has no effect on the terms which are
demanded for the loan of stock of other descriptions, unless they
are convertible into one another. The hire of a house, for ex-
ample, is higher or lower from time to time, according to the
demand for houses; while the terms demanded for the loan of
other kinds of stock remain without alteration. The same of
horses; their hire is greater or less at different seasons, as they
are more or less in request. At one and the same time the rent
of houses may be high, and the hire of horses low; and an
equality between them can only be brought about, in process
of time, by the future operations of industry being directed in
different measures to the building of houses and to the breeding
of horses. But since all kinds of stock are subject to decay, and
require to be renovated, if at any time one kind should be less
profitable than another, industry would not be applied to reno-
vate that particular kind, but would be employed to create some
other and more extensive means of profit, until the equilibrium
of gain should be restored; and thus the profits of every kind of
stock usually approach nearly to an equality.
Money, however, or a stock lent at interest, is in some re-
spects peculiar in its circumstances. Unlike other kinds of
stock, which when let to hire are to be themselves returned at
the expiration of the term for which they are hired, money when
lent is not to be repaid in the precise pieces of coin or paper
I 2
116
OF STOCK LET ON HIRE,
which pass between the parties; it is enough if the repayment
be made in other pieces of money of equal value. Although in
loans at interest it is usually money that passes from the lender
to the borrower, it is not, in the great majority of instances,
either money which is the real and original object parted with.
by the one, or the ultimate object acquired by the other. The
lender must have procured the money which he advances by
parting with either some kind of property or some labour.
Most commonly some property is converted at the moment into
money, for the purpose of lending. But the money not being
an article to be consumed or retained for use, is itself of no use
to the borrower. The pieces of coin or paper are not the
things he wants, and the advantage which he contemplates from
the loan is not the retaining of these in his hands, but the ac-
quisition of some other articles he needs, and which these pieces
give him the means of purchasing. Thus money is in general
not wanted to be hired for time: while retained in hand, it
neither produces profit nor serves any useful purpose. The
borrower, therefore, never allows the money to lie idle. Imme-
diately after procuring it, he parts with it in exchange for the
things he wants. Though, therefore, for greater convenience,
property is usually converted into money previous to lending, yet
being immediately reconverted by the borrower into other ob-
jects, it may be said, in a more extended sense, that what the
lender really supplies, and what the borrower really obtains, is
not the money, or pieces of coin or paper that actually pass, and
which are the mere instruments of conveyance, but the things
for which it is exchanged. It is a power of acquiring things.
equal to the money's worth: a power which, although extend-
ing to indeterminate objects, is, notwithstanding, sufficiently de-
finite in itself.
It is true, amongst mercantile and monied men, money is
often hired for a time, particularly for short periods, for the
purpose of holding in reserve to make purchases or answer pay-
ments coming due, or that are expected to be demanded. In
this case, its hire or interest is determined by its scarcity or
abundance at the time in relation to the demand for it. On
the stock-exchange the interest of money borrowed for very
AND MONEY LENT AT INTEREST.
117
short periods varies from the rate of two to fifteen or twenty per
cent. per annum. It has been said, that during "the panic " at
the close of the year 1825, there were instances in which money
was borrowed for a short time at the rate of seventy per cent.
per annum.
But in loans made for considerable periods, it is not a scarcity
or abundance of money, of only temporary continuance, that de-
termines the rate of interest. A man desirous of lending money
on mortgage for a long period would hardly think it worth while
to forego an advantageous opportunity of so investing it, in
order to avail himself of a higher offer for his money for a week
or a month, although during such short period it might produce
him three or four times the rate of interest; after which he
might perhaps scarcely be able for a long time to find any one to
give him a reasonable interest for it.
י
As the pieces of money by which the power of acquiring
articles is conveyed from one party to another are never retain-
ed long in hand, the same pieces, after having conveyed to one
individual the power of acquiring a quantity of things equal to
their value, serve the same office to a second, to whom they are
parted with, and confer on him a like power; and so, again, on a
third; and thus the identical pieces of money serve over and
over again to convey an equal power to many different persons,
and are performing a constant round of payments without end.
The whole power thus conveyed in succession extends to a mul-
titude of valuable objects, whose total value amounts to the
value of the money multiplied a great many times over, and this
within a short period. Consequently, when money has been
borrowed, no scarcity of it is occasioned thereby in the market;
because it is not kept in hand, but is immediately offered for sale
again. With the goods it purchases it is otherwise these when
procured are kept for use or consumed, and extensive purchases
may cause a scarcity of them in the market.
:
Hence it is evident, that it cannot be the quantity of money
in any country which regulates its rate of interest, since this
money serves merely as the instrument of transfer from one hand
to another of the different loans made by it, which are called
118
OF STOCK LET ON HIRE,
indeed loans of money, but which in reality are loans of stock.
So far as quantity is concerned, it must be the quantity of stock
existing in it, and which the owners do not care to be at the
trouble of employing themselves, which determines this rate.
This stock may be greater in amount, in almost any proportion,
than the money which conveys it from hand to hand. The pay-
ment for the use of stock must be affected by the circumstances
which affect the stock itself, and not the instrument of its con-
veyance. The general and continued scarcity or abundance of
money in the market affects its value; and more or less of it
than before must be offered for the purchase of the same quan-
tity of goods; but this will not affect either its rate of interest,
or the rate of interest of stock. As the value of money changes,
so likewise does the value of the interest which is paid in it,
though the number of pieces remain the same; but the rate of
interest is unaffected by such change. If it were the plenty
or scarcity of money which determined the rate of interest, we
might expect to find it lower in South America, the West
Indies, Spain, and Portugal, whence it passes to the other parts
of the world, than in England, Holland, France, and Germany,
countries to which it is imported: whereas the contrary is the
fact. Increasing the quantity of money, therefore, could not
have the effect of lowering the rate of interest in a greater de-
gree than the increasing any other kind of stock.
On this subject Hume well remarks-" Were all the gold
in England annihilated at once, and one and twenty shil-
lings substituted in the place of every guinea, would money be
more plentiful or interest lower? No, surely we should only
use silver instead of gold. Were gold rendered as common
as silver, and silver as common as copper, would money be more
plentiful or interest lower? We may assuredly give the same
answer. Our shillings would then be yellow, and our halfpence
white; and we should have no guineas. No other difference
would ever be observed; no alteration on commerce, manufac-
tures navigation, or interest; unless we imagine that the colour
of the metal is of any consequence. Now, what is so visible in
these greater variations of scarcity or abundance in the precious
AND MONEY LENT AT INTEREST.
119
metals, must hold in all inferior changes. If the multiplying of
gold and silver fifteen times makes no difference, much less can
the doubling or tripling them. All augmentation has no other
effect than to heighten the price of labour and commodities;
and even this variation is little more than that of a name. In
the progress towards these changes, the augmentation may have
some influence, by exciting industry; but after the prices are
settled, suitably to the new abundance of gold and silver, it has
no manner of influence. An effect always holds proportion with
its cause. Prices have arisen near four times since the dis-
covery of the Indies; and it is probable gold and silver have
multiplied much more; but interest has not fallen much above
half. The rate of interest, therefore, is not derived from the
quantity of the precious metals."*
As the hire of articles in general depends on the profit which
can be got by their possession and employment, so the rate of
interest of money, which is in effect ultimately the hire of stock,
is determined by the advantages accruing from its possession.
"No man will accept of low profits, where he can have high
interest; and no man will accept of low interest, where he can
have high profits." The whole of these advantages, however, are
not to be considered, because some must be left to indemnify
the borrower for his trouble and risk, and to hold out to him an
inducement to attempt the adventure. But being affected by
these advantages, the rate of interest rises or falls as they in-
crease or diminish. As the quantity of stock increases, and
it becomes gradually more and more difficult to find modes of
employment for new stock to yield the profit which has been
previously acquired on the old stock, the profit which can be
made by employing additional quantities decreases. As, there-
fore, the profit derived from the employment of new stock di-
minishes, the hire, or rate of interest, which can be paid for the
use of it must necessarily diminish with it. But the effect of
this diminution in the rate of interest on newly-created stock, is
not confined to this sort of stock alone. It extends equally to
the whole quantity of stock, old as well as new, employed in
Essay 4.
120
OF STOCK LET ON HIRE,
the country; although much greater advantages accrue to in-
dustry from the employment of some than of other portions
of that stock. The competition which arises between dif
ferent capitals, the owner of one endeavouring to get possession
of the more lucrative employment which is occupied by another,
and, in order to do this, dealing on less advantageous terms, while
it tends to equalize profits in all occupations, at the same time
enables persons desirous of procuring loans to get them on the
terms which are established by the least profitable portions of
stock.
But while the interest of money is thus chiefly dependent on
the profit which can be gained by employing it productively, it
is also materially influenced by the extent of the demand for
money for unproductive uses. When an improvident and ne-
cessitous government comes into the market with large de-
mands for money for public purposes, the market is greatly in-
fluenced thereby. During the late war, the enormous sums
borrowed by our government raised the current rate of interest
to nearly double what it was previous to the commencement of
hostilities. In thus raising the rate of interest, it raised also
the general rate of profit, which is affected by the competition
between borrowers and lenders; the relation of the demand to
the supply of money determining the rate of interest. Where
great riches abound, and numbers of persons are ready to supply
the demand of borrowers, while few stand in need of loans,
there the interest of money, as well as the profits of business,
will be low. But, on the other hand, where a great demand for
borrowing exists, especially on the part of government, while
the people have scanty means of supplying such demand, interest
and profits will be high. Such circumstances are proof of the
small advance of industry, not of the scarcity of gold and silver.
But whether low interest is the cause or the effect of low profits,
it is needless to inquire. They both proceed from great riches,
and mutually forward each other. Again, in order to have
many lenders, it is not enough that much money or stock should
exist, diffused in small portions in the hands of numerous per-
sons, few of whom are willing to lend. It must be collected in
considerable sums in the hands of persons who are willing to
AND MONEY LENT AT INTEREST.
121
lend at interest. It must exist in the form of capital;—not of
stock reserved for consumption.
The proportion which the market rate of interest ought to
bear to the ordinary rate of clear profit, necessarily varies, both
according to the magnitude of the sum employed, and as profit
rises or falls. Double interest is in Great Britain reckoned a
good and reasonable profit. In a country where the ordinary
rate of clear profit is eight or ten per cent., it may be reasonable
that one-half of it should go to interest, where business is carried
on with borrowed money. The business is at the risk of the
borrower, who, as it were, insures the interest to the lender
and four or five per cent. may, in the greater number of trades,
be both a sufficient profit upon the risk of this insurance, and a
sufficient recompence for the trouble of employing the stock.
But the proportion between interest and clear profit might not
be the same in countries where the ordinary rate of profit is
either a good deal lower, or a good deal higher.
r;
In loans of money, the security presented to the lender for its
repayment together with the interest for its use, forms a con-
sideration which always affects the terms of the contract for
interest. A risk of loss to the lender attends loans of money in
a greater degree than loans of other property, and greater than
attends most other contracts of business. When land or
buildings are let, there is no danger of their being carried away.
When a horse or a machine is let, the borrower cannot change
its form, and so elude the pursuit of the owner; and neither can he
carry off and sell property in such shapes, but at the hazard of
the forfeiture of his life or liberty. In the sale of property, the
purchase money is frequently paid on delivery, or within a short
period after, and the transaction is then ended. But in money
loans there is generally a continued risk during the whole
period of the loan. Accordingly, the nature of the security
offered to the lender must always affect the demand of interest
he will make, and ought, indeed, to be paid; being higher in
proportion as the security is imperfect, and the risk greater.
Money is lent on the mortgage of real property; on the pledge
of movable articles of value; on the faith of governments and
public bodies; or, on the personal security of individuals. In
122
OF STOCK LET ON HIRE,
the two former instances, the security is complete, and the de-
mand for interest is simply for the loss of profit which the
capital would have yielded to the lender during the time, had it
been retained and employed by himself. In the two latter in-
stances, the security is incomplete, and to this demand for in-
terest must be added an indemnification for the risk. The
comparative risk or safety in loans on personal security, con-
sists chiefly in three circumstances. 1. The hazard or safety of
the occupation in which the capital is to be embarked. 2. The
personal ability and character of the borrower. 3. The cha-
racter of the government of the country wherein he resides.
The degree of risk in particular cases is varied by a multitude
of circumstances, beginning from next to nothing and ad-
vancing to nearly a certainty of loss, and must be estimated in
every case by the judgment of the lender, with reference to its
peculiar circumstances. It is in the nature of a premium of
insurance, to be added to the compensation for the use of the
capital. In all questions about the interest of advances, a dis-
tinction should be made between these its two component parts;
since, without this distinction, there is danger of error.
It is to the circumstance of the risk peculiarly attending the
loan of money, especially when only personal security is offered,
that the interest is lower, or that money can be more easily pro-
cured for a short than for a lengthened period. Merchants'
bills which have only a short time to run are readily negociable;
whilst those of long dates will not be looked at. There is, in-
deed, an advantage when the lender can withdraw his funds at
pleasure, or within a short period, and thus be enabled to seize
the opportunities which continually present themselves for the
more profitable employment of the money. But the chief cause
of the facility of borrowing for short periods is, the less pro-
bability of failure in the borrower when everything around him
seems favourable to him; and while so great changes as might
cause such an event are not likely to occur during the short
period for which the loan is made. When this period has
elapsed, the loan is renewed as readily as it was at first granted,
if circumstances and prospects continue equally favourable; but
not otherwise. The difference in the interest on the funded
AND MONEY LENT AT INTEREST.
123
and unfunded debt of this country is a remarkable instance of
the value which people affix to a security from loss, as well as
of the very low rate of interest at which money may be borrow-
ed for short periods when there is little or no risk. The fluc-
tuations in the price of the public funds during short periods is
generally greater than the interest for those periods. There is,
however, an equal chance of their rising as of their falling in
value; the risk, therefore, under ordinary circumstances, is really
equal to nothing; yet we find people satisfied to take exchequer
bilis at less interest by one-half, in order to be free from this risk.
Being to be paid off in full within a short time which is fixed,
the fluctuations in their prices is but small, and their value is
generally more steady as the time of payment approaches.
The many beneficial uses to which capital is applicable render
it of importance that it should be placed in the hands of such
persons as are best able to employ it with success. To this end,
the risk attending the loan of capital should be lessened as much
as possible, both that its owners may have little hesitation in
trusting it in other hands, and that their demand of in-
terest may not exceed the employers' means of payment. In
order to this, the law regarding loans of money and interest
should afford to the lender every reasonable security which the
nature of things admits; for in proportion as the security is per-
fect, will be the number of loans, and the lowness of the rate of
interest. A defect in the law checks the loan of money, and
raises the rate of interest above what the condition of the coun-
try, as to wealth or poverty, requires. Among the barbarous
nations which overran the western provinces of the Roman em-
pire, the performance of contracts was for many ages left to
the faith of the contracting parties. The courts of justice of
their princes seldom intermeddled in it. In Mahomedan coun-
tries the taking of interest is even prohibited. The high rate of
interest which subsisted in those ancient times, and still subsists
in countries where the taking of interest is prohibited, may,
perhaps, be partly accounted for from these causes. When the
law affords to the lender an uncertain remedy, and much more
when it does not at all enforce the performance of contracts, or
even prohibits them, it puts all borrowers upon the same footing
124
OF STOCK LET ON HIRE,
:
with people of doubtful credit in better regulated countries.
The uncertainty of recovering his money makes the lender exact
the same usurious interest as is usually required from persons of
bad credit. When the law prohibits interest altogether, it does
not prevent it. Many persons must borrow, and nobody will
lend without such a consideration as shall indemnify, not only for
what might be made by the use of the money, but for the risk of
loss and danger of evading the law in accepting a compensation
for that use.
This prohibition, accordingly, instead of prevent-
ing, has been found to increase, the evils of usury. The debtor
being obliged to pay, not only for the use of the money, but for
the risk which his creditor runs, is obliged, if one may say so, to
insure his creditor from the penalties of usury.
Should a country be possessed of abundance of capital, or
rather, should there be invested in each branch of industry as
much capital as it could possibly employ, in this case, not only
would the produce of that capital afford to its employers a small
return in proportion to its quantity, but the rate of interest
afforded to its owners would be so low that it would be impossible
for any but the most wealthy people to live upon the interest of
their money. All persons of small or middling fortunes would
be obliged, either to add to this interest the earnings of their
own industry, or to superintend themselves the employment of
their capital. Almost every man would be engaged in some em-
ployment. In Holland, nearly every man is in business. Neces-
sity makes it usual for most men to be so, and custom establishes it
as the fashion. The effect of this custom must be to approximate
to each other the rate of profits and interest: without raising
interest, it must lower profits. Capital on the whole is neither
greater nor less in consequence, and its produce must remain
the same; but the number of employers of capital is increased,
and the produce of industry on the whole augmented. Yet,
while the quantity of commodities produced is increased by the
greater number of persons engaged in business, who would
under other circumstances have retired from it and remained un-
employed, the competition amongst the masters is much greater,
and the rewards of their particular departments of industry
must be diminished. Thus, when interest and profits decline,
AND MONEY LENT AT INTEREST.
125
commodities of all kinds become more plentiful; competition
amongst traders is increased, and everything is rendered
cheaper. It is true, when capital is very abundant, there are
more rich persons who are able to live unemployed on the in-
terest of their money, though at a low rate, than when capital
is scarce and a country poor. But then the production of the
capitals of these rich persons makes up for the loss of their per-
sonal industry, and even exceeds it; for their property in most
cases produces more than their industry would do without it.
On the other hand, when capital becomes scarce, commodities
of all kinds are more scantily furnished and more difficult to
obtain, both from a falling off in production, occasioned by an
inadequate supply of capital, and from the increased rate of pro-
fits and interest.
The circumstances which determine the portion of the pro-
duce which goes to the landlord have already been spoken of.
We have seen that his rent depends on the consumption of the
people; that is, on their number and their power of production.
It is increased with an increase of capital; but this increase of
rent is an advantage he gains by a diminution in the profits of
the capitalist, and not to the detriment of the labourer. His rent
cannot increase except through a larger consumption by the
people, either from an addition to their numbers, or from an
improvement in their condition, The circumstances which
affect the portion of the produce which goes to the capitalist
have also been spoken of. This portion we find is regulated by
the return obtained from the least productive occupations of
capital, the profitable or unprofitable nature of which depends
on the scarcity or abundance of capital in relation to the em-
ployment for it. Hence, the portions of two out of three of the
parties concerned in industry being determined, the remainder,
or the portion which goes to the labourer, is determined like-
wise; and it may seem unnecessary to extend our observations
further on the distribution of the produce of industry. But
although our subject might be thought complete if it were
terminated here, yet the circumstances which affect the rewards
126
ON THE REWARDS OF LABOUR.
of labour, and so determine the condition of the great body of
the population, bear so closely on all the dearest interests of
society, that they are, in consequence, worthy of the most de-
liberate examination. They will, therefore, be followed out at
length, as though they had not already been in effect determined
by the determination of rent and profits.
CHAPTER III.
ON THE REWARDS OF LABOUR.
We have seen that there are no means by which human subsist-
ence can be procured, and those objects acquired which minister
to our wants and wishes, except through the intervention of
labour. Almost every product of nature is presented to us in a
more or less rude and unfashioned state; and in every article la-
bour, in a greater or less degree, is required before it can con-
tribute to the satisfaction of our wants.
We have further remarked that, in performing labour, there
must almost always be either land, or some natural product that
is procured from the surface or the bowels of the earth, on
which to bestow it. Again, besides this, labour must in general
be assisted by appropriate tools, implements, machinery, build-
ings, workshops, and premises adapted in each separate branch
to the particular kind of work to be performed. There must
also be a store of subsistence got together to support the person
while engaged in labour. Both the land, and these objects of
capital, usually belong, not to the man who does the work, but
to some other person or persons.
In that primeval state of poverty and barbarism which pre-
ceded the appropriation of land, and the accumulation of stock,
when the labourer had neither landlord nor master to share the
produce of industry with him, the rewards of labour depended
on nothing but its productiveness; and every improvement in
the productive powers of labour went directly to augment its
ON THE REWARDS OF LABOUR.
127
rewards. In such a state of society, there being no other party
concerned in production, there was no need of an inquiry as to
the share of the labourer, when the whole produce was his own.
But this state could not last beyond the first introduction of the
appropriation of land, and the accumulation of capital in other
hands than those which did the work. It was at an end long
before the most considerable improvements in the productive
powers of labour were made.
As soon as the land, together with all the vegetable and
mineral substances which are on or below its surface, becomes
private property, the landlord demands a share of almost all
the produce which can either be raised or gathered from it.
His rent makes the first deduction from the gross produce of
the industry that is employed upon the land, or on the natural
products which the earth affords.
The workman is, in general, too poor to furnish all those
articles of capital which are required to give his labour its proper
effect, and too necessitous to wait for payment until the com-
modity on which he works is fully completed, sold, and payment
obtained he must be paid in advance as the work proceeds.
When these articles of capital, and money to make this payment,
have been accumulated, and are furnished by another person,
this person requires in return a share of the produce of that indus-
try which he so helps to render effective. And it is necessary to
give him this share or profit; for without it, he would have no
inducement to abstain from the enjoyment which the immediate
expenditure of his money for his own use would afford, and in place
of it, to take the trouble and risk of advancing his capital in pro-
ductive occupation. This profit makes a second deduction from
the gross produce of industry. Thus, although the labourer
seems to produce everything by his toil, yet as the co-operation
of land and capital are essential to production, he cannot claim
all that his labour creates; the landlord and capitalist have an
equal right with himself to participate in the joint produce, and
he must submit to receive only a share with them.
Sometimes both the land and capital belong to the person
who labours. In such case, he combines in his own person the
distinct characters of landlord, capitalist, and labourer, and is
subject to no deduction, but retains the whole gross produce
128
ON THE REWARDS OF LABOUR.
which his industry creates. In the generality of instances, however,
the land, the capital, and labour, which conjoin in the production.
of the article, are furnished by different persons. The inquiry
now is as to the share of the gross produce which is acquired in
the character of labourer, distinct from that which may fall to the
lot of a person in quality of landlord or capitalist, when one or
both of these characters are united to that of labourer in the
same individual.
The rewards which labour acquires must be considered in
two points of view. First, as the rewards acquired by labour in
the aggregate, comprising every kind and description of labour;
and secondly, as the rewards acquired by labour distinguished
into its separate kinds.
In the first place, we regard the gross produce acquired by
labour, as one of the three divisions concerned in industry, in
contradistinction to what falls to the shares of land and capital.
In this point of view, looking at labour as a whole, we have no
need to regard any exchange of products. Their value, con-
sequently, is matter of no moment; and considering this gross
produce, we contemplate only its magnitude, its excellence, and
its adaptation to the wants of the consumers; since it is on these
qualities alone that the condition of the labourer depends. What-
ever augments that magnitude, and heightens that excellence or
adaptation, increases the rewards of labour in the aggregate.
In the second place, viewing labour in detail, and considering
how the gross produce obtained by labour in the aggregate is dis-
tributed amongst the several trades or classes of workmen which
make up the aggregate of producing power, the products they
create must be considered as subjects of exchange; and their
value, consequently, forms an important characteristic, as bearing,
though not on public, yet on particular interests. Considering la-
bour in this point of view, and that the articles created are not, for
the most part, intended to be consumed by the particular pro-
ducers, but to be sold, and the money they fetch laid out in the
purchase of other things, it is not enough that the quantity of
the articles created by any particular class be greater, and their
quality better, to affirm that the rewards of this class are in-
creased. Whether or not these rewards be greater or less will
depend on the value of the articles produced, or the quantity of
ON THE REWARDS OF LABOUR.
129
other things which they will procure in exchange; and not on
the quantity or goodness of the things themselves. If the
quantity or quality of the goods produced by any workman be
by any means increased or improved, the rewards of labour in
the aggregate will, no doubt, be by so much augmented; but if
the exchangeable value of the larger quantity of goods be not
higher than that of the smaller previous quantity produced, the
condition of the workman himself will not be superior to what
it was before, except so far as he is himself a consumer of the
goods he produces. It sometimes happens, indeed, that the
greater quantity of articles brought to market causes a glut of
them, and renders the value of the whole larger quantity even
less than that of the smaller previous quantity. In such case,
the workman, notwithstanding the exertion of greater industry,
or the acquisition of greater skill or capital, and notwithstand-
ing that he has contributed to augment the store belonging to
labour as a whole, and to improve the circumstances of every
other consumer, finds that his own condition has become worse.
While, therefore, the same circumstances may occasion such
opposite effects to the whole labour of every kind by which our
supply is obtained, and to particular classes comprised in that
whole, we cannot overlook the distinction which subsists be-
tween them. Yet, in considering the wages of labour, this dis-
tinction of labour in the aggregate, and labour in detail, has
been hitherto passed over. It would be far from the truth
to infer that, because some particular classes of labourers
are ill paid, the rewards of labour on the whole are scanty.
The low pay of these classes may contribute in part to the
higher rewards of other classes of workmen ; and on the whole
the wages may be ample. In forming an estimate of the re-
muneration of labour it is necessary to take that of every class
of workmen into account. The labour of the master may at
one time be well remunerated, while his servants' wages are low.
The merchant may obtain large profits at a time when the gains
of the manufacturers are small. Of the industry which furnishes
our bread, the farm-labourer may be poorly paid, but the
servants of the miller and baker may be better recompensed.
Thus the rewards which labour in the aggregate acquires being
VOL. II.
K
130
ON THE REWARDS OF LABOUR AS A WHOLE.
essentially different from those of any particular class of labour,
we cannot determine on the former without reference to what is
procured by all the different classes whose joint labours compose
that whole, nor on the latter except by reference to its own pe-
culiar circumstances.
It is evident, that the condition of the labourer does not
wholly depend on his money wages, or the amount of silver or
gold coin, or paper, which he receives, but it consists in the
command which these give him over the necessaries and con-
veniences of life. Neither does his condition entirely depend
on the share or proportion which, in the distribution of the pro-
duce of industry amongst the respective producers-the land-
lord, capitalist, and himself, he is enabled to retain in recom-
pence for the exertion of his faculties of mind and body. His
circumstances are fixed by what he acquires, or the quantity and
quality of the things contained in that share. If the whole pro-
duce of industry be scanty, the labourer cannot expect to be
well off, although the share of the produce which he acquires
may be large in relation to the shares which fall to the other
two parties. But although it cannot be affirmed, as a universal
proposition, that the condition of the labourer depends on the
share or proportion of the produce of industry which he re-
ceives, yet, under general circumstances, his condition is almost
wholly determined by that proportion; and in discussing the
subject before us, it is perhaps more convenient to consider
wages as high or low according as the share or proportion ac-
quired by the labourer is large or small, without reference to
the actual contents of the share. It is in this light, then, that
high or low wages will be considered on the present occasion.
I shall treat first of the rewards of labour in the aggregate.
SECTION I.
On the Rewards of Labour as a Whole.
THE rewards of labour in the aggregate depend on three cir
cumstances. First, and chiefly, on the productiveness of in-
ON THE REWARDS OF LABOUR AS A WHOLE.
131
dustry,—that is, the largeness and excellence of the produce it
creates. Secondly, on the relative magnitude of the shares
which, in the distribution of the gross produce, fall to the other
two parties concerned in production-the landlords and ca-
pitalists, which form deductions from the gross produce of in-
dustry under the names of rent and profits. Thirdly, the
produce, although the same in quantity and excellence, will,
notwithstanding, contribute more to the satisfaction of the la-
bourers, and others, who consume it, according as industry is
applied in the several branches which demand it in those pro-
portions to each other which most exactly correspond with the
wants of the consumers, so as not to produce a glut of some
articles with a scanty supply of others, but those in greatest
abundance which are most in request, and all in that proportion.
to each other in which they are demanded.
The first and main source whence an augmentation in the
rewards of labour must be sought is, an increase in the pro-
ductiveness of industry. As labour is the only means by which
our supplies are acquired, it is evident, that if labour be unpro-
ductive some class must suffer. On the other hand, if labour
be highly productive, it is equally evident that some class must
gain therefrom, and the share of one or other of the parties con-
cerned in production be increased. The probability is, that the
more there is to divide, the larger will be the share of each,
The fact is, the condition of the labourer is improved by every-
thing which facilitates production and abridges labour, whether
in appropriative, productive, or distributive industry ;—by every
improvement in cultivation or machinery; by every shorter pro-
cess in the arts; by every extension in the application of the
mechanical powers of wind, water, or steam and it is to such
that we must look as the grand sources whence an amelioration
of his condition may proceed. As proprietor of labour, he is
more deeply interested than any one else in its effectiveness.
When, through discoveries and improvements, the labour of the
acquisition of any commodity, or of its conveyance to the con-
sumer, is lessened, it is the labourer who reaps the advantage in
the long run: it is but a small portion which goes to the land-
lord, and still less which falls to the share of the capitalist.
K 2
132
ON THE REWARDS OF LABOUR AS A WHOLE.
Yet the very opposite to this is the generally received opinion,
and it is contended, that an increased productiveness of industry
does not permanently benefit the labourer in any material de-
gree. Mr. Ricardo says, "If the shoes and clothing of the
labourer could, by improvements in machinery, be produced by
one-fourth of the labour now necessary to their production, they
would probably fall 75 per cent. ; but so far is it from being
true, that the labourer would thereby be enabled permanently
to consume four coats, or four pair of shoes, instead of one, that
it is probable his wages would in no long time be adjusted by
the effects of competition, and the stimulus to population, to
the new value of the necessaries on which they were expended.
If these improvements extended to all the objects of the la-
bourer's consumption, we should find him probably at the end of
a very few years, in possession of only a small, if any, addition
to his enjoyments, although the exchangeable value of those
commodities, compared with any other commodity, in the
manufacture of which no such improvement was made, had
sustained a very considerable reduction; and though they were
the produce of a very considerably diminished quantity of
labour."
It is affirmed, that wages depend on the relation of the
supply of labour to the demand. This assertion continues to
be repeated to the present hour. In the latest work which
we have on this subject, it is stated, that" The immediate
cause which determines the rate of wages, is the proportion
existing between the supply of labour and the demand. But
this proportion itself depends, on the one hand, on the pro-
ductiveness of those branches of industry by which are raised
the necessaries of life; on the other, upon the style of living
rendered necessary by the nature of the climate, or considered
by opinion as necessary to the existence of the labouring popu-
lation. Consequently, the productiveness of the above branches
of industry, the nature of the climate, and the state of opi-
nion, are the ultimate causes which regulate the rate of wages."
Again, it is asserted, that "The greater in any country
Principles of Polit. Econ. ch. 1. s. 1.
ON THE REWARDS OF LABOUR AS A WHOLE.
133
the amount of funds" (that is capital)" set apart for the em-
ployment of labour, the greater the demand.” *
.
Without disputing, but on the contrary fully admitting, that
wages are determined by the proportion between the supply of
labour and the demand, when applied to any and to every single
class or description of workmen, as far as their wages bear a
relation to other wages, it is still impossible to admit the truth
of this position when applied to labour in the aggregate. In
this view, supply and demand do not apply to labour. When
labour is sufficiently skilled, properly distributed in the different
branches of industry in the ratio in which the objects they
furnish are in request, and offered at such moderate prices as do
not exceed the means of purchasers taking off the whole quan-
tity offered, no want of employment can exist. Under such
circumstances, it is contrary to the nature of things that there
should be an excess in the supply or a deficiency in the demand
for labour, while humanity is subject to wants, and human
appetites are insatiable. What demands labour, but labour
itself? To create a greater demand for one kind of labour, it is
only necessary to furnish a greater supply of another kind; and
the means of supporting labour are augmented with every ad-
ditional workman. But if labour of one kind create a demand
for labour of another kind, and by an increase in the demand
raise the wages of the labour so demanded, they who create the
demand must pay these higher wages, and thus their situation
must be lowered in a corresponding measure as the other is
raised so that labour on the whole gains nothing by such in-
creased demand; neither, on the other hand, can it suffer
through the want of it.
action of supply and de-
When goods are demand-
There is a difference between the
mand on labour and on other things.
ed, though their price affects somewhat the extent of the sale,
yet if high prices are required, the extent is not essentially
lessened thereby. Again, when low prices are offered, the
quantity which sells is not greatly increased. But when pro-
ductive labour is demanded, such demand is essentially depend-
ent on price. The manufacturer cannot produce and bring to
* Distribution of Wealth, by George Ramsay, B. M., 1836, p. 86.
134
ON THE REWARDS OF LABOUR AS A WHOLE.
market his goods, unless wages be low enough to yield him a
profit on the business. If wages exceed this, his demand for
labour at such price is at an end; while, if wages are so low as
to yield a liberal profit on production, there is never any want of
demand for labour at that price, nor ever funds insufficient to
employ it. No sale of goods can extend beyond the means of
purchase which the revenues of the consumers afford; but with
productive labour it is different. If the master's capital be not
enough to put on all the hands which can be had, he borrows ad-
ditional capital of others; he obtains credit, and sells his goods.
for cash instead of on trust; making a quicker return of his
money: thus capital is made to go further, when a profit can be
got by it, and admits of an expansion; which the revenues of con-
sumers do not. On the other side, in the supply of labour, there
is a difference between labour and goods. When the quantity
of any article in the market is in excess, the master cannot
greatly lower its price; because the cost of production has been
nearly equal to that price, and he would sustain a loss by any
material reduction. Instead, then, of making a sacrifice of price.
sufficiently ample to take off the whole quantity, he holds back,
offering but a small reduction; a large quantity in consequence.
remains unsold, and a glut ensues. Thus the demand for labour
and materials for future production falls short, and after a time
their prices decline, so as to allow business again to proceed
without loss to the master. But when the supply of any parti-
cular kind of labour is in excess, no real impediment exists to
such an immediate reduction of its wages as is sufficient to
dispose of the whole quantity. Unlike the master, the work-
man can offer any necessary reduction of wages without actual
loss; since those he may acquire through full employment,
though at a low rate, would be better than standing still. Thus,
in these various ways, supply and demand do not operate on
labour in that determinate manner in which they act on commo-
dities; both the capital to employ it expanding, on one side, and
wages, on the other, accommodating themselves, so as to afford
employment for all the labour to be disposed of, without that ab-
solute dependence on price which takes place in other instances.
That the labourer is the real party benefited by an increased
ON THE REWARDS OF LABOUR AS A WHOLE.
135
productiveness of industry will, perhaps, appear if we consider
his case in detail.
Take, for example, an agricultural labourer renting and cultivat-
ing on his own account, and with his own hands, a plot of ground,
with borrowed capital, for which he pays interest. Now suppose
at the year's end, after deducting the rent and interest, he have
a net produce, as the earnings of his labour for the year, of ten
quarters of corn, and let this equal the average earnings of com-
mon labour for a year. Suppose, again, that in the succeeding
year, through an improvement in husbandry, or the invention of
more efficient implements, this man increase his net produce to
twenty quarters. In such case, these twenty quarters must be
wholly his own; and the wages of agricultural labour will rise
to twenty quarters, or their equivalent. Since high rents ac-
crue through a scarcity of land, it is plain, that rent cannot
rise when productiveness is doubled, and when one-half only of
the quantity of land in tillage would be sufficient to maintain
the population. Neither is it possible that interest or profits
can rise, for no greater quantity of capital is wanted than be-
fore: indeed, less might suffice; for tillage need not be carried
to the same extent. As, then, neither of the other two parties
concerned in production-the landlord and capitalist, can insist
on a share of this greater productiveness, the whole increase of
necessity belongs to the labourer; and he acquires twenty
quarters of corn for his year's work, instead of ten. But al-
though, in such case, the wages of agricultural labour would be-
come equivalent to double the quantity of corn, we must not
suppose that the labourer would be twice as well off as before. If
all his wants were supplied with corn, or if all other branches of
industry were to become simultaneously doubly productive, he
would then be twice as well off. But as this is not the case,
and the greater part of the corn must be sold to purchase other
things, he will only be benefited so far as he is a consumer of
corn. Through the competition amongst labourers to procure
the most beneficial employments, the husbandman must con-
sent to share his good fortune with others, and to put them on
a par with himself; for unless he did this, they would give up
their occupations, and turn to agriculture. In exchanging the
136
ON THE REWARDS OF LABOUR AS A WHOLE.
surplus quantity of corn beyond what is wanted for his own use,
for other commodities, he must give more corn than before.
To the clothier, for instance, in exchanging corn for clothing,
he must give as much as will place the clothier in as good cir
cumstances as himself; and so for every other article he has
occasion to purchase. Thus, although he have twenty quarters
of corn for his labour, instead of ten, it is but a small part of
the increase that will be left to himself; since he is obliged to
benefit the circumstances of every other labourer with whom he
deals. He must, however, still have a greater quantity left.
than formerly. We suppose his circumstances before the
greater productiveness took place were equal to other labourers.
His circumstances will still be equal to theirs in the improved
condition to which they are raised. He is not required to
impoverish himself so as to be worse than they, for, if such
were the case, he would abandon agriculture, and betake to
some one of their employments. Thus it appears, that the
greater productiveness of industry, though it were confined to
one class of labourers only, extends its beneficial consequences
to every other labourer who consumes its produce, or who
has it in his power to come into competition with that class.
But the benefit falls wholly to the share of labour; for it
is labour alone that can come into the competition. Land and
capital cannot participate in it; and as they are not competent
to come into competition with labour, they cannot share in its
rewards.
In this example to exhibit the effect of an increase in the
productiveness of industry on the condition of the labourer,
agriculture has been mentioned. It has been chosen, because.
it is an occupation of great magnitude, and its products of uni-
versal demand. But the same results follow from augmented
productiveness in every other branch of industry; as might be
plainly shown, if it were necessary, by the extension to these of
a similar process of reasoning.
An increased productiveness of industry, however, only bene-
fits the labourer whose industry becomes more effective in pro-
portion as he consumes the goods he produces. If he do not
consume this kind of goods, it is probable that no advantage
ON THE REWARDS OF LABOUR AS A WHOLE.
137
results to him. Improvements in husbandry benefit the agri-
cultural labourer, because he partakes of its produce; so like-
wise do improvements in the coarser branches of manufacture.
But improvements in the fabrication of silk goods seldom benefit
the poor weaver of them, since he does not wear silk. It may
happen even that an increased efficiency in his labour may be
to his prejudice. The greater productiveness of a particular
class, when unattended with increased productiveness in other
classes, causes a change in the relation of the supply of the
article to the demand for it, sometimes makes the supply super-
abundant, the price to fall in an excessive degree, and while an
advantage accrues thereby to the consumer, the producer, per-
haps, unless he be also a consumer, finds that, instead of parti-
cipating in the advantage he confers on others, his own circum-
stances are deteriorated. Were the production of all the other
classes of industry simultaneously and proportionately increased,
the supply and demand would both be larger, but their ratio to
each other would remain unchanged, prices would continue the
same, and every class be equally benefited. The labourer has
but small interest in the effectiveness of that labour by which
pictures, statues, trinkets, and other works of taste and rarity
are created. Unpopular as the assertion may be, it is never-
theless true, that the encouragement of the fine arts, for which
princes and nobles have been so much lauded, has conferred
smaller benefits on the lower classes than is generally imagined.
It is the productiveness of that labour by which the food, cloth-
ing, fuel, and lodging of these classes is obtained, that they are
most concerned in, and by the patronage of which they would
be most served. Thus increased productiveness tends to the
advantage of the consumer.
In the business of industry, labour must be considered as the
active agent, capital and land as the passive instruments which
it employs in production. Labour is the party through whose
direct agency the increase is effected. The landlord contributes
to production the agency of land. His share of the produce is
fixed, through competition, at all that exceeds the produce.
which is afforded by the worst land that, under existing circum-
stances, admits of cultivation. Through the same competition,
138
ON THE REWARDS OF LABOUR AS A WHOLE.
the share of the capitalist is determined by the productiveness.
of that portion of capital which assists industry the least, and
adds the least quantity of produce. The amount of deductions
for rent and profits depends, not on the productiveness of the
general amount of land and capital, but on the productiveness
of the last employed portions, which are determined by the
ratio of the supply to the demand for them. Increased effi-
ciency of labour, it is true, has some tendency to extend culti
vation, and thus to raise the demand for land, but this is only
in a small degree. It has no tendency to render capital more
scarce, and therefore it can hardly at all increase the deductions
from the gross produce of industry for rent and profits. Thus
the shares or proportions of two out of three of the parties being
determined, the remainder, or the share of the third, is deter-
mined likewise. The price of the hire of these two must depend,
not only on their serviceableness, but on the competition of the
market; that is, the relation which the supply bears to the
demand; which relation varies from time to time, the supply
being sometimes in excess, and sometimes deficient. But with
respect to labour, though in its several classes one class is hired
by another, and by the landlords and capitalists in the expendi-
ture of their revenues, yet when taken as a whole, it is not hired;
there is no competition to affect its rewards, and no excess in
the supply of labour over the demand for its productions, every
labourer creating a demand equal to the supply which he fur-
nishes, and consuming as much as he produces. Under such
circumstances, its rewards depend solely, after deduction for
hire of land and capital, on its own productiveness. Unless it
be by greater productiveness, labour cannot acquire a larger
amount of produce. It cannot take from the shares of either
of the other two parties, because their shares are regulated by
circumstances over which it has no control. The labourer
cannot, by any exertions of his own, alter the circumstances
under which this competition takes place, so as to turn it more
favourably for himself. He cannot, by any combination, stand
out against land and capital, and, by doing without them, compel
their owners to abate in their demands; for he cannot exert his
industry with effect without their assistance. The monopoly
ON THE REWARDS OF LABOUR AS A WHOLE.
139
in the command over the first necessaries of existence which
the landlord possesses, is much too strong to be overset or even
shaken by the labourer. The profits of the capitalist can only
be lowered by an increase of capital, or a decrease of labourers ;
whereby the competition may be turned more favourably for
himself. If the former cannot be done, the latter alternative
would in other ways turn to his prejudice, instead of to his
advantage.
Since, then, in heightening the efficiency of labour, but little
or no greater deductions from the gross produce can take place,
the whole, or nearly the whole, addition to the produce created
must fall to the share of labour: not, indeed, always to those
particular classes whose labour has become more effective, but
to labour in general, and comprising every class.
"The pro-
ductiveness of an English labourer is perhaps twice as great as
that of a Frenchman, four times that of a Russian, and six or
eight times that of a Hindoo." It is this superior productive-
ness alone of the labour of our working classes which has raised
their condition above those of other countries; and this in spite
of the inferiority of our soil and climate.
After the productiveness of labour, the next in importance
of the circumstances on which the rewards of labour depend, is
the relative magnitude of the shares which, in the distribution of
the gross produce of industry, fall to the other two parties con-
cerned in production-the landlords and capitalists, and which
form deductions from that gross produce, under the names of
rent and profits.
In this division between the parties, whatever reduces the
share of any one of them, unless at the same time the amount
of the produce is lessened, must increase the share of one or
both of the other two parties. Consequently, the remuneration
of labour depends in part on the rent which is paid to the land-
lord. This remuneration is high in proportion as the deduction
for rent is small, and low in proportion as such deduction is
large. In a country where there is a great deal of rich land,
with but a thin population to be supported on its produce, the
productiveness of that portion of its industry which is employed
in agriculture will be high, while the rent will be low, and, con-
140
ON THE REWARDS OF LABOUR AS A WHOLE.
sequently, cæteris paribus, the reward of labour greater than in
a country where there is but little good land, with a dense
population to be fed on its produce. An increase of fertile soil,
which should reduce the monopoly price that is paid for its use,
could not but be highly advantageous to the labourer. To en-
large the quantity of land in a country is only in a few cases
possible. But similar effects are produced by augmenting the
produce of the same land; whether through improvements in
tillage, or from an additional quantity of capital applicable to
cultivation; provided the cost of raising such produce be not
increased. There is no difference in the effects resulting from
an augmented quantity of agricultural produce, whether it be
raised from the same land, or from a larger quantity of land;
nor, again, from land lying within the boundaries of the national
territories, or from land lying beyond those boundaries. It is
the cost of procuring corn that constitutes the essential differ-
ence as regards the rewards of labour. Increased facilities in
the transport of corn, whether the produce of domestic or foreign
industry, contribute to break down in some measure the pressure
of the barrier of the monopoly of land which the landowner pos-
sesses. These increased facilities of conveyance may arise from
improvements in navigation, the construction of canals and rail-
roads, or from improved roads and carriages; as, likewise,
where they exist, from the removal of legislative restraints and
duties on the transport or importation of corn. Such increased
facilities have precisely the same effects as would follow from an
enlargement of the national domain, an addition to its cultivable
soil, or an improvement in its fertility. They may for a time
prove injurious to the proprietors of land, but are always highly
beneficial both to the labourer and to the capitalist; and
eventually to the landowner himself.
Again, the rewards of labour depend in part upon the rate of
the profits of capital: they are high in proportion as profits are
low; and low in proportion as profits are high. The rate of
profits depends on the quantity of capital in relation to the popu-
lation, or rather to the employment of capital. An increase of
population without a proportionate increase of capital and of
cultivable land, cannot but render capital and land comparative-
ON THE REWARDS OF LABOUR AS A WHOLE.
141
ly scarce, raise the shares of the produce which go for rents and
profits, and, consequently, diminish the share which remains for
labour. On the other hand, everything which alters the ratio
of the supply of capital to the demand, and which, without
cutting off its sources of employment, renders that supply
more ample, operates favourably on the condition of the la-
bourer.
In this light, we cannot but consider all those expedients
which have been adopted for economizing capital, as having a
direct tendency to raise the rewards of labour. Of this kind
are the substitution of paper for coined money, the use of bills of
exchange, the banking system; but above all, the division and
subdivision of employment, whereby, not only is the manual dex-
terity of the workman heightened, but capital is economized and
rendered constantly productive, at the same time that its profits
are lowered. Similarly beneficial to the labourer are all those
circumstances which tend to the establishment of peace, order,
and justice, and thus lead to the accumulation of capital, or
which invite it to come into a country, or induce its stay, from the
freedom and security which attend its employment. On the
other hand, every destruction or loss of property, whether from
war, accident, fraud, or violence, though the labourer may appear
to be exempt from suffering, still tends to raise the rate of pro-
fit, and thus to increase the deduction from his earnings.
That a high rate of interest presses severely on the labourer
may be presumed from the fact that, with the exception of
newly-settled countries, in which the productiveness of agri-
cultural industry, from being applied to the cultivation of none
but the most prolific soils, compensates for everything else, the
condition of the people in different countries and at different
times has uniformly been better as interest has been lower, and
worse as interest has increased. It is true, the productiveness
of industry has been found to be correspondingly great as interest
was low, and the reverse; and other causes may, likewise, have
simultaneously operated on the welfare or poverty of the labourer.
But, when we find on examination that as the rate of profit was
high, the condition of the labourer was depressed, and, on the
contrary, that as profits were low, the labourer was better off, it
142
ON THE REWARDS OF LABOUR AS A WHOLE.
affords presumptive evidence of the truth of our position, that a
high rate of interest is injurious to the workman.
The condition of the poor in England, in the times of Henry
VIII., Elizabeth, and James I., must be admitted to have been
very much below what it is at present, and has been during the
last century. Their food, clothing, and lodging, are now all of
much superior kinds to what they were at that time. Famines,
then so frequent, are now known to us only as matter of his-
tory. The rate of interest was then ten per cent. it is now
four, or even less. In Scotland, until lately, interest was
somewhat higher than in England; while wages were lower,
and the aspect of the poor, in passing from one country to the
other, showed that they were better fed and clothed in the latter
than in the former. In Ireland, interest is decidedly higher
than in England; while the wretched condition of the poor is
proverbial. In France, interest and profits are higher than in
any part of Great Britain, and the condition of her poor until
lately was much worse. With the fall in the rate of interest in
that country since the peace, the condition of its poor has be-
come ameliorated. In Holland, it is said the rate of interest
is lower, while the condition of her poor is better than in most
of the neighbouring countries. In India and China the differ-
ence is striking. Interest in these countries is said to be twelve
per cent.; while the wages of labour in Hindostan are about
one-ninth part, in silver, of what they are in England.
With regard to the means by which the rewards of labour
may be increased, when, without a falling off in production, a
diminution happens in the share of the produce which goes to
the landlord and capitalist, the observations already offered un-
der the several heads of rent and profits apply in great mea-
sure here, and therefore need not be repeated.
The third circumstance on which the rewards of labour de-
pend, is, the exactness with which industry is distributed in the
different departments according to the ratio of our wants and
wishes, so as to produce most abundantly those articles which
are most in request. It is true, neither the quantity nor the
quality of the productions of labour is at all affected by the cir-
cumstance now mentioned; but the articles acquired will con-
ON
143
THE REWARDS OF LABOUR AS A WHOLE.
duce in a higher degree to the satisfaction of our wants and
wishes in proportion as these articles are more in request; and
thus the rewards of labour will be better according as industry
is distributed more in this way. To produce those things which
are most wanted; or rather, to produce all things in those exact
proportions in which they are wanted, having regard to the cost
of their acquisition; is the object to be aimed at. Both the
supply of the products of the different branches of industry, and
the objects which our wants and wishes call for, are in a con-
stant state of fluctuation. With this double fluctuation, it is no
wonder that industry cannot always adjust its operations to meet
them. But according as the supply can be made more exactly
to suit, and more steadily and closely to follow the changes of
demand, it will contribute in a higher degree to the enjoyment
of life. On the other hand, when industry can but ill be made
to adapt itself, and but slowly to follow towards a proper adjust-
ment, labour will be misapplied. However great the quantity
of industry exerted, however large the supply of its productions,
and excellent their quality, if they be not such as happen to be
in request at the time by the parties to whose wants they minis-
ter, or if the supply of some articles exceed that request, they
will possess but a small value; they will contribute comparative-
ly little to comfort, and when these productions are distributed
as the rewards of labour, this is equivalent to a low reward.
Thus the custom of apprenticeship, with all other impediments
raised in the way of the transfer of labour from one occupation to
another, and more especially the institution of caste, have all a
direct tendency to depress the condition of the labourers.
When an article is in request, its acquisition always presents
an employment which affords a profitable return to the labour
and capital occupied in the acquisition. It is to the public
interest that the several individuals engaged in industry-the
husbandmen, artisans, manufacturers, and dealers, should all
respectively occupy themselves in those particular employments
which yield the highest remuneration both to the labour and
the capital embarked in them. It is the productions of these
particular employments which are in the highest intensity of
demand, in proportion to their cost. When industry is free,
144
ON :
THE REWARDS OF LABOUR AS A WHOLE.
the private interest of individuals tends constantly, though slowly,
as opportunities offer and their means allow, to lead them to
engage in the highest remunerated branches; and this without
any external interference. If just views of the general good
could sanction any municipal regulations or restraints on industry,
they would be such as should have for their object to seek out
these highest paid branches; and such as by affording facilities,
would induce a greater number of persons to embark in them.
These branches must evidently be different at different times,
and continually fluctuating, as competition alters the rate of their
remuneration. But so far from this having been the object of
municipal regulations, it has been the very reverse. Com-
munities, instead of looking to the measures which promote the
universal good, have lent their sanction to the advancement of
private interests, or the interests of distinct classes, in opposition
to the public interest; they have lent their power to restrain
competition, instead of to increase it; rather to raise wages and
profits than to reduce them; and municipal regulations have
been applied uninterruptedly for a long course of years to the
same branches, when, if applied at all, they ought from time to
time to have been changed, as circumstances became changed,
and as their intended effects had been brought about.
The condition and happiness of all classes of the people of a
country, is very much influenced by the state either of advance-
ment or decline in their wealth and intelligence. In a country
fully peopled in proportion to what its territory could maintain
with its existing powers of industry, it is not enough to consti-
tute a fortunate condition, that its riches should be very great,
and the productive powers of its industry possess a high degree
of efficiency. Besides these, to insure a lasting prosperity to
such a country, it is necessary, that its property and the pro-
ductiveness of its industry be in a constant state of advance-
ment. The wealth and revenue of its inhabitants may be of
great magnitude, yet if they have continued for many centuries
of the same, or very nearly the same, magnitude, the increase of
population which, under favourable circumstances, is always
going on, will have caused the whole of its fertile land to be
fully cultivated, while no other land remains for tillage but
:
ON THE REWARDS OF LABOUR AS A WHOLE.
145
that of an inferior quality; and unless this increase of popula-
tion be accompanied with a corresponding increase of capital and
skill in employing it, its capital will have become inadequate to
the wants of its larger population, and all the known sources of
employment become exhausted, which its stationary knowledge
is enabled to point out; though an advancing knowledge might
discover new sources, and so afford enlarged employment and
subsistence for the people. It is necessary as population be-
comes greater, that capital to assist the labours of the increase
of workmen, and intelligence to open new sources of production,
as the old become fully occupied, and labour yields a less re-
turn, should increase, at least commensurately with the aug-
mentation of population. With its capital at a stand, and its
population augmenting, the people of such a country must be-
come poorer, amongst whom this capital is to be divided, to
each of whom, consequently, a smaller and smaller portion must
be allotted; while its working classes multiplying and increasing
the competition to procure land and capital for employment,
would reduce the rewards of labour to the lowest scale consistent
with humanity.
China has long been one of the most fertile, best cultivated,
most industrious, and most populous of countries. It seems to
have long ago acquired that full complement of riches which is
consistent with its laws and institutions; and has, probably,
been long stationary. But this complement is very inferior to
what, with other laws and institutions, and a higher state of
knowledge, the nature of its soil, climate, and situation, when
compared with those of other countries, might produce. A
country which neglects and despises foreign intercourse, which
admits the vessels of foreign nations into one or two only of its
ports, and refuses to avail itself of the improvements by which
other nations have augmented the powers of their industry,
while it takes no steps of its own to improve these powers, can-
not raise the quantity of subsistence, and carry on the same ex-
tent of trade, which it might do under happier circumstances
and a more enlightened policy. In a country, too, where,
though the rich enjoy a good deal of security, the poor have
scarcely any, but are liable, under the pretence of justice, to be
VOL. II.
L
146
ON THE REWARDS OF LABOUR AS A WHOLE.
at any time plundered by the inferior mandarins, the quantity
of capital employed in its different branches of industry, can
never be equal to what the nature and extent of that industry
might admit. In every different branch, the oppression of the
poor must establish the monopoly of the rich, who, by engross-
ing the whole trade to themselves, will be able to make large
profits, and keep down the circumstances of the people. Twelve
per cent., accordingly, is said to be the common interest of
money in China, and the ordinary profits of capital must be
sufficient to afford this interest. While, as a necessary conse-
quence of such high interest, and of the other circumstances
now detailed, the wages of labour are miserably low; the
poverty of the lower ranks surpassing that of the most beggarly
nations of Europe. If by digging the ground a whole day, the
labourer can earn enough to purchase a small quantity of rice in
the evening, he is contented. The condition of artificers is, if
possible, still worse. Yet this country, though it may stand still,
does not seem to go backwards. Its towns are nowhere deserted
by their inhabitants. The lands which have once been culti-
vated, are not neglected. As much labour, therefore, must still
be performed, and the labourers, notwithstanding their scanty
subsistence, must continue to keep up the usual numbers of their
race.
pro-
It would be still worse than this in a country where the pro-
ductive powers of its industry were sensibly decaying; whether
from loss of capital, decay of trade, or decline of knowledge and
skill in the arts of industry. From the loss of capital, the
duce it had formerly assisted to create could no longer be pro-
cured; many persons who had been bred to the superior classes
would from time to time seek employment among the inferior
classes. The inferior classes, not only overstocked with their
own workmen, but with the overflowings of the other classes,
would find the competition between labour and capital, and
between labour and land, turn still more to the disadvantage of
labour, so as to reduce its rewards to the most scanty subsist-
ence of the labourer. Famine, mortality, and crime would
prevail in that class, and thence extend themselves to those
above it, till the number of inhabitants in the country should be
ON THE REWARDS OF LABOUR AS A WHOLE.
147
reduced to what could be maintained by the diminished re-
sources that had escaped either the tyranny or calamity which
had destroyed the rest.
Hence, it is essential to the happiness of a people that their
wealth and intelligence should be progressive. To stand still as
regards the amount of capital and extent of knowledge, while
the population is increasing, is to go backwards as regards the
condition and happiness of the people. For except the powers
of industry increase by the acquisition of a larger capital, and
greater skill in the industrious arts, the increase of population
would reduce the subsistence of the people to a bare sufficiency
for their support.
The liberal reward of labour in any country, as it is the
necessary effect, so it is the natural symptom of the productive-
ness of industry, and of an abundance of capital. The con-
tinued prosperity and augmentation of population for a series
of years, indicates decisively that capital and knowledge have
been progressively advancing. The generally scanty main-
tenance of the labouring poor, on the other hand, is a symptom
that the productiveness of those branches of industry on whose
produce they are supported is at a stand; and that the worst
soils in cultivation are, as regards the existing state of know-
ledge and capital, too poor to afford more than a scanty subsist
ence to the labourer; while the starving condition of the poor
usually indicates that things are going backwards.
Having thus considered the circumstances which affect the
gross amount of the produce acquired by labour in the aggregate,
the distribution of which amongst the several classes of labourers
we shall by and by have to consider, it may be worthy of re-
mark, that, if this gross amount acquired by labour in the
aggregate be small, there is little chance that any particular
class of labourers will obtain a high reward for their exertion :
the relative proportion which they acquire may be large, and yet
its actual amount be small. While, on the other hand, if this
gross amount be large, there is a better chance for every class.
The poorest as well as the richest workman is interested in the
extent of this gross amount, a portion of which in the struggle
of competition is to be procured by himself. Hence, the in-
२
L 2
148
ON THE INEQUALITY IN THE REWARDS
terests of every workman are involved in two sets of circum-
stances; first, in those which affect the gross produce of labour
in the aggregate; and, secondly, in those which determine the
share of this gross produce which is allotted to himself: the first
is an interest in which his fellow-workmen as well as himself
are involved, it is nearly a public interest; the second is private,
and peculiar to himself or to his class.
SECTION II.
On the Inequality in the Rewards of different kinds of
Labour.
ON looking at the different rates of payment for labour, or the
different gains acquired by it in the several classes of society,
we observe a great inequality subsisting between them. Pecu-
niary wages are everywhere extremely unequal, both in the
different departments of labour in the same place or country,
and in the same departments in different places and countries.
In some departments the labourer acquires an ample, and in
others a scanty, recompence for the agency exerted. The pro-
fessional man will sometimes earn more in a few minutes than
the utmost exertion of a common labourer could in a whole week.
Again, in different countries, we find in one country a liberal
reward of labour commonly obtaining, and the industrious popu-
lation in a state of comparative comfort, while in other countries,
we find a poor reward of labour procured, and the labourer in a
state of destitution and misery. The causes of these differences
it is now proposed to consider.
Part of the inequality subsisting in the rewards of labour in
different employments in the same place is only apparent. This
apparent inequality arises from certain circumstances connected
with the employments themselves, which, either really, or in
common estimation, make up for a small pecuniary gain in some,
and counterbalance a great one in others. Thus when taking
into account the circumstances which call, in different cases, for
different rates of pecuniary payment, the real remuneration of
OF DIFFERENT KINDS OF LABOUR.
149
different classes will be found on examination to be much nearer
to a level than might be expected.
Competition is the great instrument by which wages in every
particular branch of business are determined. I say in every
particular branch; because, as has been already observed, a
distinction must be made between the effect of competition upon
industry as a whole, and its effect upon every distinct branch.
While the competition existing among the workmen in every
separate employment determines, according as it is more or less
active, wages in that employment, at the same that it fixes them
at a higher or lower point, it acts in an exactly opposite and
commensurate degree, on the rewards of other employments. It
has no tendency to increase or lessen the exertion of labour, or
affect the amount of its produce; and as much as, in the ex-
change of the produce of any particular branch of industry for the
produce of other branches, its activity may lessen the rewards
of the producers on one side, by so much it increases the rewards
of the producers of those things against which such produce is ex-
changed. Competition, then, as respects industry on the whole,
and taking into account every class of labourers, in their double
capacity of consumers as well as producers, is nugatory: neither
increasing nor diminishing their rewards. But in every separate
department of industry, the rewards of labour, or the quantity
of the necessaries and conveniences of life which the produce of
labour will exchange for, is regulated by the relation of the
supply to the demand in the particular department. An increase
in the number of workmen in any trade, without a correspond-
ingly greater demand for the articles they produce, necessarily
lowers the rate of wages in that trade. On the other hand, a
decrease in the number of workmen in a trade unaccompanied by
a decreased demand for the articles they produce, must sooner or
later raise their wages. Competition has a tendency to establish
an equality in the rewards of labour in different employments;
but as it cannot bring about or maintain an exact equality, it
causes these rewards constantly to oscillate above and below the
point of perfect equality. Men always desire to follow those
Occupations which yield the best returns, or those which they
most esteem, while they as studiously avoid those which yield the
150
ON THE INEQUALITY IN THE REWARDS
worst; and thus, where they are able to act according to their
wishes, their competition lowers the advantages of such occupa-
tions as are the best paid, while the withdrawal of their compe-
tition from those which are paid the worst, tends to bring both
to an equality. If, in the same neighbourhood, there were any
employment evidently either more or less advantageous than
the rest, so many people would crowd into it in the one case,
and so many would desert it in the other, that its advantages
would soon return to the level of other employments. This,
at least, would be the case as far as the ability of persons to
choose and to change their occupations at pleasure would allow,
and in a society where things were left to follow their natural
course; where there was perfect liberty, and where every man
was perfectly free both to choose what occupation he pleased,
and to change it as often as he pleased. In such case, every
man's interest would prompt him to seek the advantageous, and
to shun the disadvantageous, employment. But there is a diffi-
culty in following many occupations, from the want of the re-
quisite skill and knowledge, the time and expense of acquiring
these, and the necessity there is in many of them of possessing
considerable capital. And there is especially a difficulty in their
frequent diversion from one to another, from the necessity of ac-
quiring, besides the requisite skill and knowledge, a peculiar
kind of capital suited to the new occupation, and of submitting
to the loss of that which is adapted to the occupation that is
abandoned. Consequently, though perfect liberty were allowed
to every man, it is not every one who has the means of advan-
tageously following the most profitable employment, and of
changing his business at pleasure.
Hence, competition in the different employments of labour is
operated upon in three distinct ways. First, by the circum-
stances before alluded to, which, in many cases, make no dif-
ference in the whole of the advantages and disadvantages of an
employment, but only determine that which consists in pecuniary
payment. Secondly, by the inability of persons to enter into
competition in some employments, and, consequently, determin-
ing their competition in one which they would otherwise avoid.
And, thirdly, by the municipal regulations which views of policy
OF DIFFERENT KINDS OF LABOUR.
151
have everywhere in Europe, and in many parts of Asia, estab-
lishel, which scarcely, in any instance, leave things at perfect
liberty, but direct or restrain industry and competition in dif-
ferent employments.
Thus an inequality is always found to exist in the rate of re-
muneration of different kinds of labour, after allowance for the
circumstances which actually call for different rates. This in-
equality has an important influence on society, both as regards
its wealth and its happiness; and therefore deserves examina-
tion, for the purpose of understanding the causes which produce
it, and the remedy which is applicable to remove the mischiefs
it occasions.
An equal, or equitable, rate of remuneration of labour and of
profits in the different branches of industry, proportionate to the
several circumstances which really call for a higher rate in some
kinds than in others, is of great importance to the public wel-
fare. There are many advantages that would result from such
an equality. It would produce a steadiness of employment;
the full exertion of the powers of industry; an ample supply of
commodities from all; a reciprocity of benefits; and in a high
degree contribute to the augmentation of national opulence. If
one class of labourers is considerably underpaid, there is a
scarcity of employment for it; there is more of the produce of
its industry than we have occasion for, and though we purchase
the whole because of its low price, the advantage thus gained to
some classes is, as regards the general happiness, more than
counterbalanced by the suffering which the poverty of the class
brings upon it. Besides, the poverty of a class renders it a
burthen on the public, and the overpowering temptations of
want cause it to be a nursery of crime. On the other hand, if
there are too few workmen in some branches of industry, the
scanty supply of the articles of their trade, and the exorbitant
prices which must in consequence be paid for them, falls hard
upon the people at large; depriving them of the means of pur-
chasing, and of the enjoyment that would otherwise be derived
from a more abundant supply of those articles. Thus the public
is made poor, by the enrichment of particular classes. The de-
mand of exorbitant wages, or an overreaching selfishness, is
152
ON THE INEQUALITY IN THE REWARDS
not more directly opposed to the liberal morality, the enlarged
and active beneficence of Christianity, than it is to enlightened
views of policy. Is it not a species of vice, and one which, like
every other, brings suffering along with it? We readily admit
that it would be better if the wages, which are in some instances
depressed, were raised; yet few men consider it desirable, that
the wages, which in other instances are unreasonably high,
should be lowered; though in fact, lowering the one would be
equivalent to raising the other. The public interest, then, de-
mands, and the duty of individuals to promote the good of man-
kind enjoins, not only that endeavours should be made to raise
the condition of those classes which are severely depressed;
but, which in effect operates in the same way, to lower the
wages of such as are exorbitantly high. The common level of
equal benefits to all, regarding only the natural causes which
occasion a difference, is the point at which exertions should
aim; whether the divergence from it be above or below it; and
as much so in one case as in the other.
While the actual remuneration obtained for their labour by
workmen of different classes, is dependent on the relation of the
demand for the particular kind of labour each performs, to its
supply, yet this supply itself is operated upon by several cir-
cumstances.
The principal of these, which occasion wages in some em-
ployments to be higher or lower than the average rate, have
been stated by Adam Smith to be,-
1st, The agreeableness or disagreeableness of the employ-
ments themselves;
2ndly, The easiness and cheapness, or the difficulty and ex-
pense, of learning them;
3rdly, The constancy or inconstancy of the employments;
4thly, The small or great trust that must be reposed in those
who exercise them; and,
5thly, The probability or improbability of success in them.
The agreeableness of an employment may arise from several
Such as, the lightness of the labour to be performed,
its healthiness or cleanliness, and the degree of estimation in
which it is held. Its disagreeableness will arise from the oppo-
causes.
OF DIFFERENT KINDS OF LABOUR.
153
site circumstances,-the severity of the labour, its unhealthi-
ness or dirtiness, the danger attached to it, the disrepute in
which it is held. It is obvious that no man would engage in
an occupation of the disagreeable kind, unless its wages were
higher than in those of the agreeable kind. And according to
the influence which these circumstances have in determining
persons to follow or not to follow any particular employment,
must be its rate of pecuniary payment. But though the rate of
money wages paid in different employments is thus found essen-
tially to vary, it cannot thence be concluded that one employ-
ment is more advantageous than another; for these circum-
stances of agreeableness or disagreeableness may make up, or
take from, the money wages paid, as much as the deficiency or
excess below or above the average rate. If it were not so, the
competition to seek the most beneficial employments, would
alter the supply of labour, so that one employment should not
possess superior advantages over another. The estimate which
men form of the value of this agreeableness or disagreeableness,
is the only estimate which can be applied, and from which there
is no appeal. This value must therefore be equal to the defi-
ciency or excess below or above the average rate of wages, for
the reason before stated.
But the principal circumstances which occasion an inequality
in the remuneration of labour in different employments are,
their comparative facility or difficulty, and the relative expense
which must be incurred to acquire the requisite skill and
knowledge.
There are several sorts of labour which a man may perform
without any, or with but very little, previous instruction, the
learning of which is in consequence attended with no expense;
and from which the labourer procures wages from the moment
he is employed. In such sorts of labour, there is nothing that
can check or shut out the competition of any individual possess-
ing the ability to work; the supply of labour is always abundant,
and its wages are at the lowest rate. But there is a great num-
ber of other occupations that can only be followed by persons
who have been previously instructed in them, and which instruc-
tion involves an expense in a greater or less degree. The policy of
Europe considers the labour of the greater number of mechanics,
154
ON THE INEQUALITY IN THE REWARDS
artificers, and manufacturers, as skilled labour, of a more nice
and delicate nature than common or agricultural labour, though
frequently it is quite otherwise. The laws and customs of
Europe, therefore, in order to qualify a person for exercising
this skilled labour, impose the necessity of an apprenticeship,
though with different degrees of rigour in different places.
They leave the other kind free and open to everybody. During
the long application or probation which in many trades and pro-
fessions is necessary, the individual earns nothing for himself,
whatever work he does belongs to his master. In the mean time,
he must, in many cases, be maintained by his friends, and, in
almost all, must be clothed by them. Some money, too, is
commonly given to the master for teaching him his trade; all
which sometimes absorbs a capital of considerable amount.
They who cannot give money, give time, or become bound for
more than the usual number of years; a consideration which,
though it is not always advantageous to the master, on account
of the usual idleness of the apprentice, is always disadvantageous
to the apprentice. The medical practitioner, for example, can-
not be qualified to follow his profession, but at the cost of many
years of laborious and expensive application and study; and
when the requisite studies are completed, it may be many years.
before he possess the public confidence sufficiently to procure
himself full practice. In estimating the reasonableness of a phy-
sician's fee, it would be absurd to reckon only the labour or time
he bestows in seeing and prescribing for a patient; since these
are but a small part of the time and labour of which the patient
really avails himself. We must take into account all the years of
labour that have been spent in fitting him for practice and
establishing him in it, and the money which these have cost.
He is entitled to compensation, not only for all the labour they
have cost him, but for interest on all the capital expended in his
studies and subsistence previous to his getting into practice; and
this interest must be higher even than annuity interest, because
the capital has been sunk, not merely on his life, but on the
continuance of his practice. If it were less interest than has
been now stated, capital would cease to be expended in this
way, and there would be no medical practitioners. Nor is
even this compensation sufficient to keep up the number of
OF DIFFERENT KINDS OF LABOUR.
155
medical practitioners, for some students die before their studies
are completed; there are others whose success in their pro-
fession never returns the outlay expended in their studies. To
keep up the medical class by the amount of capital existing in
it, it is necessary that those who succeed should gain as much.
as is lost by those who fail or die. The whole emoluments of
the class ought to be sufficient for the maintenance of the whole
class-successful and unsuccessful, and to bring up and educate
a sufficient number, (allowing for losses from death during their
education,) to replace the number actually existing. With less.
remuneration than this, the class could not be kept up by its
emoluments, but must depend for its continued existence on
the aid of capital drawn from other occupations.
It has been thought that the learned professions, as a whole,
are not paid higher for their services than other classes of the
community, and that their emoluments do not more than replace
the capital expended in the requisite studies, and in the main-
tenance of the individuals in these professions. The author of
the "Wealth of Nations" states his belief, that "how extra-
vagant soever the fees of counsellors at law of celebrity may
appear, the annual gains of all the counsellors of a large town
bear but a very small proportion to their annual expense; so
that this profession must, in great part, derive its subsistence
from some other independent source of revenue." It is certain
that these professions are a constant drain on the capital acquired
in other employments. A successful tradesman seldom brings up
his son to the business by which his own fortune has been gained ;
most commonly the son is brought up to some profession, con-
sidered more respectable than trade. These professions, it is
generally allowed, do not reproduce their own numbers, and
would decline in numbers if not kept up by the more prolific
classes below them. The question then is, Do these professions
furnish to the classes above them, capital equal to that which
they draw from the classes beneath them? To this we answer,
It is more than probable they do not. But shall it be concluded
hence, that the learned professions are worse paid for their
services than other classes? It would be contrary to fact to do
No doubt, the learned professions are not so well paid as
SO.
156
ON THE INEQUALITY IN THE REWARDS
other classes of equal wealth. The higher repute, in compari-
son with trade or commerce, in which these professions are held,
cause their emoluments to fall below those of occupations held
in less esteem. But although they are below those of equal, yet
they are unquestionably higher than those of much inferior
opulence. Contrast the gains of this profession with the wages
of common labour, whether in agriculture or manufactures, and
it will at once be apparent that, even taken as a body, and with
all the circumstances which fairly entitle this profession to a
high remuneration, these gains are at a much higher rate than
those of the common labourer. Amongst members of their own
profession, and also as between classes whose wealth gives them
the means of following the law if they choose, no doubt, the
gains of lawyers are determined by competition; and we may
conclude that taking the whole of the advantages and disad-
vantages of following this profession into account, there is no
greater advantage accruing from following one employment than
another. But the fact is, there is no competition existing
between these higher classes, and those whose poverty precludes
the possibility of their attempting to enter into such competition;
and the emoluments of the law are, in consequence, determined
by principles wholly irrespective of such competition. What-
ever then may be the wages of common labour, whether high
or low, can have no effect on the emoluments of the law; since
it is out of question that any competition tending to an equality
of benefit can exist between them. The circumstances of these
emoluments being inadequate to support the members of the
profession, without assistance from some other independent
source of revenue, cannot show that the rate of remuneration for
professional services is lower than that of other classes. All
that can thence be inferred is, that it is persons of fortune who
follow this profession, and that this rate is not sufficient to
support the style of expense which they maintain.
If any
custom or prejudice could prevail that should render follow-
ing the plough the occupation of none but the superior orders
of society, it would be found that the wages they would earn at
the plough would be wholly unequal to maintain them in the
rank of gentlemen, in which rank these orders would still con-
OF DIFFERENT KINDS OF LABOUR.
157
tinue to live, in consequence of their possessing property whereon
to support themselves, in addition to the earnings obtained by
industry. But it would be absurd from hence to affirm that
the wages of the ploughman were unequal to the kind of labour
he performed, and lower than those of other classes; when the fact
must be, that it would be the pride and extravagance of the plough-
man which rendered his wages insufficient for his maintenance.
In all those employments in which a great expense must be
incurred before a person can acquire the qualifications necessary
to follow them, this expense precludes the competition of all those
who are too poor to afford it, and therefore cannot but raise the
remuneration of these employments higher than is called for by
the mere amount of the outlay of capital. They partake of the
nature of monopolies, and their gains are determined upon the
same principles. In proportion as they approach to the strict-
ness of a monopoly; that is, in proportion to the magnitude of
this outlay, and the number of persons whose competition is, in
consequence, shut out, or the few who can come in; so must be
the greatness of the rate of remuneration for their services, and
this in addition to the annuity interest called for to return the
outlay of capital expended. This partial monopoly of the more
lucrative occupations will be stricter at any time or place,
and the earnings acquired in them relatively higher, in propor-
tion to the depression of labour at that time and place, and,
consequently, to the few amongst the working classes who have
the means of establishing themselves in occupations calling for
a large outlay of money. That somewhat of a monopoly rate
of remuneration is actually obtained in those employments in
which a great expense must be incurred before an individual
can acquire the prescribed qualifications for following them,
cannot be doubted, if we consider the conduct which men pur-
sue, governed, as they must be, by the consideration of superior
advantage. We never find a father in doubt, whether to expend
the capital which he may have at command in qualifying his
son for following some trade or profession, or to put that capital
out to interest and suffer the son to follow the occupation of
common labour. He always considers it more advantageous for
the lad to follow some trade or profession, though the capital
158
ON THE INEQUALITY IN THE REWARDS
expended is altogether lost thereby, in the event of his death
or ceasing to follow the occupation. Now a trade or profession
is everywhere considered more respectable than common labour;
and, looking only to these circumstances, the pecuniary re-
muneration of labour ought to be relatively higher. It should,
then, be more profitable to put the money out to interest, and
let the son be a common labourer, living on the interest in ad-
dition to his wages. But that common labour is by much the
worst paid, and that there cannot be doubt on the subject, is
evident from the fact, that persons never follow this course; but
always the opposite. If the matter were doubtful, some would
take one course, and some the other, but this is not the case.
It must be admitted, then, that it is a monopoly rate of remu-
neration that is paid in those employments in which much ex-
pense is required to qualify a person to follow them.
If we would lower this rate of remuneration, and bring it
down, in some measure, to the common level in other employ-
ments, the means by which this object is to be attained cannot
be mistaken. Arising, as it does, from the great expense of
acquiring the necessary qualifications, whatever can lower this
expense, must, in the same degree, relax the strictness of the
monopoly, throw open the employment to competition, and so
tend to lower its remuneration to the average rate of other em-
ployments. The objects to be aimed at, then, are, to facilitate
or cheapen instruction, to lessen the difficulty and expense of
acquiring the requisite knowledge and skill in the arts, trades,
and professions, to remove the unnecessary barriers which
society or custom and prejudice may have raised to prevent
men from following occupations to which they are competent, but
for which they have not been regularly educated, or do not pos-
sess the qualifications prescribed; substituting, where necessary,
others better suited to attain the object they have in view, and
allowing greater freedom to individual action.
The higher relative remuneration of those kinds of labour, for
the performance of which the procurement of the requisite skill
or other qualifications is attended with much difficulty and ex-
pense, and a long-protracted course of study or practice, may,
perhaps, be attributed in part to the circumstance that estab-
OF DIFFERENT KINDS OF LABOUR.
159
lishing in the world the children of such persons, with the same
advantages as the parents have possessed, (which is the object
of most parents,) is more difficult and expensive than establish-
ing the children of other classes. These persons are not, there-
fore, likely to marry so early in life, and the greater mortality
before marriage prevents the class having so large an offspring
as persons whose children are more easily set going in the world
for themselves, and are perhaps able to earn wages sufficient for
their support from the moment they begin to be employed. If
the class multiplies less quickly than other classes, its numbers
can only keep pace with those of others by a continual supply
from without. But it is more difficult and expensive for a
parent to bring up a child to another business than to bring him
up to his own. From this cause, the supply of workmen may
be kept relatively below the supply in other occupations, and so
the rate of the remuneration be in a degree heightened.
In addition to the expense incurred in the acquisition of skill
and of prescribed qualifications, there is a difference in the re-
muneration which is gained by different workmen in the same
employment, who may have bestowed the same time, and ex-
pended equal sums, in the acquisition of skill and prescribed
qualifications, and this is occasioned by the different degrees of
talent possessed by the men. Great talents are always rare;
and, because they are so, they are usually well rewarded; for
the smallness of competition of equal talent allows their pos-
sessors to fix, in a measure, their own price upon their services.
But in the case of superior talents, it is not always necessary to
consider the remuneration as at a higher rate than that which is
paid to the other workmen. The work must be, either superior
in quality, or greater in quantity. If higher talents can execute
more work, or work of superior quality, within a space of time
which could only be done by ordinary talents in a much longer
time, this may be viewed in the light of a great quantity of work
done in a short time, and thus be placed on a footing of com-
parison with the work done by ordinary talents; and the re-
muneration be accounted as due merely to greater industry,
instead of existing in a different ratio.
Thirdly, the wages of labour in different employments depend
160
ON THE INEQUALITY IN THE REWARDS
in part on the constancy or inconstancy of the employment.
Different occupations afford more or less constancy of employ-
ment to the workman. Such as can only be followed at par-
ticular seasons, or in favourable states of the weather, and in
which the workman cannot ordinarily engage in anything else
during the rest of his time, must be paid adequately to support
him both during the time he is employed, and while he remains
idle. The same remark applies to such occupations as those of
porters, hackney coachmen, watermen, and generally of all
workmen employed only for short periods, and on particular
occasions, as the calls of customers require. Such persons fre-
quently gain in an hour or two as much as a regularly employed
workman earns in a day. But this greater hire during the time.
they are employed, is seldom more than a compensation for the
labour they perform, and for the time they spend in attendance
waiting to be hired. If it were something more than this, it
would seem but reasonable that some allowance should be made
for those anxious and desponding moments which their preca-
rious situation, and the uncertainty of a return of employment,
must at times occasion. There is nothing in the nature of these
employments to occasion any particular expense or difficulty in
acquiring the necessary qualifications for following them, or in
any other way to check competition, and where industry is un-
fettered, the average emoluments accruing from them must be
the same as those in other employments.
Fourthly, the wages of labour vary according to the small
or great trust which must be reposed in the workman. Integrity
being a quality which exists in a degree of scarceness, and being
on many occasions indispensable, will command its price; and
when the possession of this quality has been proved by an indi-
vidual, it insures to him a higher rate of remuneration for his
services than would otherwise be given. It is said that the
wages of goldsmiths and jewellers are everywhere superior to
those of many other workmen, not only of equal, but of much
superior ingenuity, on account of the precious materials with
which they are intrusted. This is the case in many mercantile
situations, where large sums of money, or very valuable property,
is intrusted, and great confidence reposed in the servant.
In
OF DIFFERENT KINDS OF LABOUR.
161
such situations, competition scarcely, if at all, determines the
reward, and the employer often allows a liberal salary for a kind
of work which he might, if he chose, have done for less. But
he gives a high remuneration, perhaps in order to procure a
person to accept the post who holds that station in society which
an important trust demands; perhaps to put him above the
reach of temptation from want: or, again, perhaps in the hope of
insuring faithful and zealous service; of retaining one of whose
talents and integrity he is assured, rather than risk the hav-
ing to procure another whose character is unknown, and who
might betray his confidence. In the case of lawyers and
physicians, great trust must be reposed; but more than all
Affairs of
in the higher public functionaries of the state.
so great importance as are necessarily confided to these last,
could not safely be intrusted to men of low condition, who
have been brought up and who associate with men of a class
where the prevalent sentiments of honour are less strict than in
the higher ranks. Such matters must be confided to men who
belong to a station in which the most elevated standard of
honour is established. The reward for their services must be
sufficiently liberal to enable them to maintain that rank in
society which trusts of so much importance call for; to place
them as far as possible out of temptation to swerve from cor-
rectness of conduct; and, by the value of their offices, the loss of
which would follow from misconduct, to hold them by the tie of
interest to the performance of the most zealous service. In the
instances now mentioned, the pay is not determined by open
competition. It is greatly restricted, and there are but few per-
sons who can be allowed to compete, from their not possessing
the required qualities; or, what is more likely, and which
comes to the same thing, their not being certainly known to pos-
sess them. Hence such services bear a high rate of reward.
The wages of labour in different employments vary according
to the probability or improbability of success in them. The
probability that any particular person will ever be qualified for
the employment to which he is educated, is very different in
different occupations. In employments where there is nearly a
certainty of procuring a livelihood, though it be but scanty, this
VOL. II.
M
162
ON THE INEQUALITY IN THE REWARDS
is enough to induce a sufficient number of persons to engage in
them. But when, on the other hand, the chance of failure is
great, the expected gains, if success ensue, must be larger in
proportion as the danger of failure is greater. In the lottery
which has but few prizes, these must necessarily be large
while in the lottery which has but few blanks, the prizes
may be proportionately low. In a perfectly fair lottery, those
who draw the prizes ought to gain all that is lost by those
who draw the blanks. So in employments in which many fail
in proportion to those who succeed, the fortunate ought in
fairness to gain, not only a proper remuneration for their own
labour, but as much as it was proper the unsuccessful should
have gained; and this in consideration of the hazard they
have run. Most probably they gain this, and we may sup-
pose they gain even more. Competition here, as in every other
case, determines the rate of wages, with reference to all the cir-
cumstances of advantage and disadvantage, real or imaginary,
attending them. The hazard of these employments must deter
many persons from encountering it. If the number of those
whose competition is thus shut out, exceed that of the number
of those who are allured into these employments by the ex-
pectation of great gains, competition must be less active, and the
whole gains of the class, after allowing for its losses, may be ex-
pected to be higher than in other employments.
From what has been said on this part of the subject, it is
plain, that, although an inequality obtains in the rate of pe-
cuniary wages paid in different employments, yet if we take
into account all the various circumstances of a favourable and of
an unfavourable kind which belong to them, we find on the
whole that the advantage of following any one employment in
preference to another is much less than might be supposed. An
inequality, however, does exist. If industry were subject to not
restraint, and each individual had the ability, and were free to
follow any employment he pleased, then, indeed, the competition
to procure those which are the most advantageous, must, on the
average, and in the long run, establish an absolute equality in
their advantages and disadvantages, so far as the judgments of
men are able to appreciate them. But, while differences of
OF DIFFERENT KINDS OF LABOUR.
163
talent, and of fortune, exist among men, competition in those
employments where talents and fortune are indispensable quali-
fications, must be more or less restricted, and a monopoly rate
of remuneration be procured in them. As far as the abilities of
men enable them to come into competition, an equality of
wages will be established; but no further; and those who
afirm that an equality obtains in all employments, affirm that
which is directly contrary to fact. An equality does not, nor
ever can, obtain between employments in which little or no
capital is required to fit a person for following them, and em-
ployments where a large capital is required for that purpose.
However much persons of small capital may wish to share in the
higher rate of wages procured by persons of large capital, such
wishes are altogether fruitless, where the means are wanted to
carry them into effect; and there is, in such case, no tendency in
competition to establish an equality of benefits in different em-
ployments; which can only operate where there is the ability to
act upon it. Where the same amount of capital is necessary,
an equality of benefits may subsist in all employments requiring
that amount; but not in employments requiring different
amounts.
Besides the inequality in the remuneration of labour in dif-
ferent employments, arising from competition being precluded
to all those who are destitute of the talents and capital necessary
to enable them to enter into competition, an inequality may
subsist from other causes.
In order that an equality may take place in the whole of the
advantages and disadvantages of different employments, three
things are requisite, even where there is perfect freedom. First,
the employments must be well known and long established in
the neighbourhood; secondly, they must be in their ordinary
or natural state; and, thirdly, they must be the sole or principal
occupations of those who follow them.
First, this equality can take place only in those employments.
which are well known, and have been long established in the
neighbourhood. When all other circumstances are equal,
wages are higher in new than in old trades.
When a pro-
jector attempts to establish a new manufacture, he must at first
M 2
104
ON THE INEQUALITY IN THE REWARDS
entice his workmen from other employments, by higher wages
than they can either earn in their own trades, or than the
nature of his work would otherwise require; and a considerable
time must pass away before he can reduce them to the common
level. Manufactures for which the demand arises altogether
from fashion and fancy, are continually changing, and seldom
last long enough to become old established manufactures.
Those, on the contrary, for which the demand arises chiefly
from use or necessity, are less fluctuating, and the same form
or fabric may continue in demand for centuries together. The
wages of labour, therefore, are likely to be higher in manu-
factures of the former, than in those of the latter kind. The
establishment of any new manufacture, of any new branch of
commerce, or of any new practice in agriculture, is always a
speculation from which the projector promises himself extraor-
dinary profits. These profits sometimes are very great, and
sometimes quite the reverse; but, in general, they bear no regu-
lar proportion to those of other old trades in the neighbourhood.
If the project succeeds, they are commonly at first very high.
When the trade or practice becomes thoroughly established and
well known, competition gradually reduces them to the level of
other trades, or perhaps below them.
Secondly, this equality in the whole of the advantages and
disadvantages of different employments, can take place only in
the ordinary, or what may be called the natural, state of those
employments. The demand for almost every different species
of labour is sometimes greater, and sometimes less than usual.
In the one case, the advantages of the employment rise above;
in the other, they fall below the common level. In a decaying
manufacture, on the contrary, many workmen, rather than quit
their own trade, are contented with smaller wages than would
otherwise be suitable to the nature of their employment.
Thirdly, this equality can take place only in such employments
as are the sole or principal occupations of those who follow them.
When a person derives his subsistence from one employment
which does not occupy the whole of his time, in the intervals of
leisure he is often willing to work at some other employment for
less wages than would otherwise suit the nature of the work;
OF DIFFERENT KINDS OF LABOUR.
165
and the produce of such labour frequently comes cheaper to
market than it would do under different circumstances. Knit-
ting and spinning were formerly the occasional employments of
country people who derived their chief support from other work,
and the produce of their labour bore so low a price in the
market, that it would have been only a very scanty subsistence
that could have been earned by a person who should have fol-
lowed exclusively either of these employments for a livelihood.
Such are the inequalities in the whole of the advantages and
disadvantages of the different employments of labour, arising
from the nature of the employments, even where there is perfect
freedom of choice. But the policy of Europe, by not leaving
things at liberty, has occasioned other inequalities of considerable
magnitude. This policy is gradually giving place to more en-
lightened views. In England, the repeal of the apprentice laws,
with the corporation reform, and the alteration in the law of
settlement through the Poor Law Amendment Act, have at
length given greater legal freedom to industry. The effects of
the past existence of the system, however, remain, with scarcely
abated force, and must long continue to do so. In France, the
revolution swept away the greater part of this system, and every-
where it is now gradually relaxing.
The inequalities now spoken of have been occasioned, in
some cases, by restraining competition in certain employments
to a smaller number of persons than would otherwise have en-
tered them; in others, by increasing it to a greater number
than would naturally follow them; and again, in some instances,
by obstructing the free circulation of labour and capital, both
from employment to employment, and from place to place.
In some employments, competition has been restrained by
the exclusive privileges granted to the corporations of towns,
and to incorporated trades. To exercise any trade in one of
these towns, it was necessary to be free of the town. To ob-
tain this freedom, it was commonly required to have served an
apprenticeship in the town, under a master properly qualified.
The by-laws of the corporation usually limited the number of
apprentices which each master was allowed to take, and almost
always regulated the number of years which an apprentice
166
ON THE INEQUALITY IN THE REWARDS
1
was obliged to serve. Both these regulations limited the com-
petition to fewer persons than would otherwise have entered the
trade. Limiting the number of apprentices restrained it direct-
ly. A long term of servitude restrained it indirectly, but as
effectually, by increasing the expense of instruction.
That the industry exercised in towns is, everywhere in
Europe, more lucrative than that exercised in the country, is ob-
vious, by comparing wages in the two situations, and from the
greater number of persons who have acquired large fortunes by
trade and manufactures-the industry of the towns, than by
that of the country-the cultivation of land. Wages and profits,
therefore, must be higher in the one situation than in the other.
In Great Britain, the superiority of the industry of the towns
over that of the country seems to have been greater formerly
than at present. The wages of country labour approach nearer
to those of manufacturing labour than they are said to have done
a century ago; and we may expect that the greater freedom which
industry has acquired will lead to a still nearer approximation.
An unnatural elevation of prices is of great public mischief,
and no facilities ought to be given to such an object. The in-
habitants of a town being collected into one place, can easily
combine together. The most insignificant trades carried on in
towns have, accordingly, in some place or other, been incor-
porated; and even where they have never been incorporated,
yet the corporation spirit, the jealousy of strangers, the aversion
to take apprentices, or to communicate the secrets of their
trade, generally prevail in them, and often lead those who ex-
ercise it, by voluntary association, to prevent that free com-
petition which they cannot prohibit by law. The trades which
employ but a few hands, run most easily into such combinations.
The inhabitants of the country, dispersed in distant places,
cannot readily combine together. They have not only never
been incorporated, but the incorporation spirit has never prevail-
ed among them. No apprenticeship has ever been thought
necessary to qualify for husbandry. Yet, after what are called
the fine arts, and the liberal professions, there is perhaps
no business in which a larger field and scope are afforded
for the display of extensive and profound scientific knowledge,
J
OF DIFFERENT KINDS OF LABOUR.
167
as well as of practical experience. The many volumes which
have been written upon it in all languages show that, among the
wisest nations, it has never been regarded as easily understood.
There is scarcely any common mechanical trade, on the con-
trary, of which all the operations may not be as completely laid
open in a few pages, as it is possible for words illustrated by
igures to explain. The direction of operations, besides, which
must be varied with every change of the weather, as well as with
many other accidents, requires much more judgment than those
which are always, or nearly always, the same. Many inferior
branches of country labour, too, require more skill and expe-
rience than the greater part of mechanic trades. The man
who works upon brass or iron, works with instruments, and
upon materials, of which the temper is nearly always the same.
But the man who ploughs the land with horses or oxen, works
with instruments of which the health, strength, and temper, are
very different on different occasions. The condition of the
ground he works upon, too, is as variable as that of the instru-
ments with which he works, and both require to be managed
with much judgment. The ploughman, though generally re-
garded as a pattern of stupidity and ignorance, is seldom defi-
cient in this judgment. He is less accustomed, indeed, to
society, than the mechanic who lives in a town. His voice and
language are more uncouth, and more difficult to be understood
by those who are not used to them. His understanding, how-
ever, being accustomed to consider a greater variety of objects,
is generally superior to that of the other, whose whole attention
is commonly occupied in performing one or two very simple
operations. In China and Hindostan, accordingly, both the
rank and wages of country labourers are said to be superior to
those of the greater part of artificers and manufacturers. They
would probably be so everywhere, if corporation laws and the
corporation spirit had not prevented it.
The superiority which the industry of the towns has every-
where in Europe over that of the country, is further supported
by other regulations. The high duties upon foreign manu-
factures, and upon goods imported by alien merchants, all tend
to the same purpose. Corporation laws enable the inhabitants.
168
ON THE INEQUALITY IN THE REWARDS
of towns to raise their prices, without being undersold by the free
competition of their own countrymen. Those other regulations
secure them against that of foreigners.
Persons of the same trade seldom meet together, but the
interests of the trade are discussed, and suggestions offered which,
though beneficial to the trade, would be injurious to the public,
if adopted. Such meetings, therefore, should not be encouraged.
When a particular trade supports its own poor, sick, widows, and
orphans, such assemblies are necessary. A regulation which
obliges all those of the same trade to enter their names and places
of abode in a public register, facilitates such assemblies, by giving
the direction where every member of it may be found. An incor-
poration not only renders meetings of the trade necessary, but
makes the act of the majority binding on the whole. The ma-
jority can then enact by-laws, with penalties, which will limit
the competition more effectually than any voluntary combination.
Corporations are unnecessary for the good government of a trade.
The effectual discipline which is exercised over a workman, is
not that of his corporation, but that of his customers. It is the
fear of losing their employment which restrains his frauds and
corrects his negligence. An exclusive corporation weakens the
force of this discipline, by rendering it necessary to employ a
particular set of workmen, whether they behave well or ill. On
this account, in many large towns, few good workmen are to be
found, while their charges are high. To have the work well
executed and at a moderate rate, it must be done in the suburbs,
where the workmen having no exclusive privilege, have only
their character to depend upon.
Again, European policy, by granting such exclusive privileges
to certain trades and places, has necessarily occasioned a more
active competition in other employments, and other neighbour-
hoods, than would have existed without them. The same measures
which raised the emoluments of some occupations, in the same
degree lowered the emoluments of others, not only relatively,
but absolutely.
The condition of the clergy in most Christian countries is
depressed, through many of them being educated for that pro-
fession, not wholly at their own expense, but from funds which
OF DIFFERENT KINDS OF LABOUR.
169
either the public, or the piety of private individuals, has estab-
lished for that purpose. These funds draw many persons into
this profession, whose inability to bear from their own resources
the expense of the long and tedious education required to qualify
them for it, would exclude them. The clergy being in consequence
more numerous than they otherwise would be, many, in order to
procure employment, accept a smaller recompence for their duties
than the cost of their education, if defrayed wholly at their own
charge, would entitle them to claim, and which other professions
obtain whose acquirements are not superior, but which are pro-
cured entirely at their own expense. In order to raise the con-
dition of the clergy, the law, on many occasions, has interfered
to oblige the rectors of parishes to allow their curates more than
the miserable salaries which they themselves might be willing
to accept. But in most cases the law has been ineffectual; be-
cause it could never hinder them from being willing, on account
of their indigent circumstances, to receive less than the legal
allowance.
Once more, the policy of Europe, by obstructing the free cir-
culation of industry, both from employment to employment, and
from place to place, has occasioned, in other cases, an inequality
in the advantages and disadvantages of different occupations.
The custom of apprenticeship, with the combinations amongst
workmen, has obstructed the free circulation of labour from one
employment to another, even in the same place. The exclusive
privileges of corporations hindered it from moving from one
place to another, in the same employment. It has happened,
that while high wages were given to the workmen in one manu-
facture, those in another have been obliged to work for a bare
subsistence. The one was in an improving state, continually
demanding additional hands; the other was declining, and the
excess of hands in it continually increasing. Though the two
manufactures have sometimes been in the same town, and the
operations nearly similar in each, the workmen have been pre-
vented from changing occupations, and thus of rendering assist-
ance to one another. Corporation laws have obstructed the free
circulation of labour in most parts of Europe. In England,
170
ON THE INEQUALITY IN THE REWARDS
another obstruction to such circulation has been given by the
law of settlement of the poor. The labour of artificers and
manufacturers alone was affected by corporation laws, the diffi-
culty of obtaining settlements obstructed the transfer even of
common labour. The apprehension of a poor man becoming.
burthensome to a parish, has occasioned his being refused em-
ployment out of that in which he was legally settled. Thus
the scarcity of hands in one neighbourhood could not be re-
lieved from their superabundance in another.* Happily for the
interests of the country, and still more for those of the labourer,
this evil no longer exists.
Besides the inequalities in the rewards of labour procured by
different classes of industry in the same country, there are not
less striking inequalities subsisting, both in the money wages,
and in the real rewards of labour, obtained in different countries.
The disparity in money wages in different countries presents a
subject deserving of attention.
“The average annual wages of labour in Hindostan are from
one pound to two pounds troy of silver a year. In England they
are from nine pounds to fifteen pounds troy. In Upper Canada
and the United States of America, they are from twelve pounds.
troy to twenty pounds. Within the same time the American
labourer obtains twelve times, and the English labourer nine
times, as much silver as the Hindoo."+
There is a distinction between money wages and the rewards
of labour which ought not to be lost sight of. Although the
money wages of different kinds of labour present in the same
country a standard of comparison with one another, and exhibit
the relative amounts of the rewards of labour in that country,
yet, between different countries, money wages do not afford the
same standard of comparison; they only indicate in an imperfect
degree the difference between the actual rewards of labour in
those countries. To infer, because the English labourer earns
nine times as much silver as the Hindoo, that his condition
must be nine times superior, and his command over the neces-
* Vid. Wealth of Nations.
† Mr. Senior's Lecture on the Cost of Obtaining Money.
OF DIFFERENT KINDS OF LABOUR.
171
saries and conveniences of life in the same degree greater, would
be very wide of the truth.
Silver
Money is of different value in different countries.
being a commodity the subject of commerce, the same as any
other commodity, must be dear or cheap in any country in pro-
portion to the difficulty or facility of its acquisition by that
country. There is a constant waste or consumption of silver in
every country in coin, plate, plated articles, trinkets, and the
like; there is, consequently, always a demand for its importation
to replace this destruction, and it is in a constant state of flow
from the mining countries to other parts of the world. Now,
as a commodity the subject of commerce, silver must be cheaper
in its own country than anywhere else; otherwise it would not
pay
for its removal; and it must be dearer in all other countries.
to which it flows in proportion as they are more distant from
its own; or, more exactly, in proportion to the expense of its
removal. It must be dearer in Europe, the country to which
it is brought, than in South America, the country whence it
cornes. It must be still dearer in India and China than in either
America or Europe; since the course of its passage is, first,
from America to Europe, and thence to India and China. Silver
must be dearer in Europe than in America by at least the ex-
pense of its freight and insurance, together with the customary
profit to the merchant for his labour and the use and risk of the
capital while invested in it. It is true, silver is of easy transport,
and the freight upon it cannot be heavy; but although easily
transported itself, it cannot be procured except by purchase with
goods, which are not, perhaps, so transportable; and its higher
value in Europe must be sufficient to pay, both for the freight
and insurance on the goods out, which are to purchase it, and on
the return of the silver when procured. While thus silver in
Europe must be so much higher in value as to bear two freights,
one of which may be of bulky articles, two insurances, and a mer-
cantile profit; in India, it must be sufficient to pay freight and
insurance four times over ;-two in the exchange from Europe
to America, and two in that from India to Europe, together with
two mercantile profits. The native of India who purchases silver
172
ON THE INEQUALITY IN THE REWARDS
with cotton wool, must sell his cotton so cheaply as to allow for
the freight of a bulky commodity, and for the risk and damage
it may sustain on the passage.
Hence, as there is a greater difficulty in the acquisition of the
precious metals by different countries, in proportion to their
distance from the mining countries, and the bulky and perish-
able nature of the commodities with which they must purchase
them, these metals must possess a different value in different
countries; the quantity of the produce of industry which must
be parted with to acquire them must be greater or less, and an
inequality be caused in the money wages of labour and the prices
of all other things in different countries. But it is possible, that
all this might consist with an equality in the real rewards of
labour; and, while the quantity of silver procured by the la-
bourer should be different, the command which the quantity
acquired might give him over the necessaries and conveniences
of life should be the same. Not, however, that there does exist
an equality in the rewards of labour in different countries. On
the contrary, the inequality is very considerable; though not so
great as in money wages.
Another, and still more powerful, cause for this inequality in
money wages, is to be found in the different degrees of efficiency
of labour in different countries. The goods of any country which
are exported to purchase silver must, in the bullion market, stand
the competition with the goods of all the world besides which
come to that market for a like purpose; and the quantity of
silver they will procure will, doubtless, depend upon their quality,
without regard to the cost of their production. The muslins of
India, when offered in the markets of Europe or America,
whence the people of that country obtain their supply of
silver, cannot be expected to fetch a higher price than those
of equal quality from Manchester and Glasgow, with which
they have to compete. But when we contrast the almost
incredible efficiency of the machinery employed in the cotton
manufactures in one country with the rude and simple loom
and implements in use in the other, it cannot be matter of
wonder that the goods produced in one country by a day's
OF DIFFERENT KINDS OF LABOUR.
173
labour, shall equal the goods produced by nine days' labour
in the other; and, consequently, procure by their sale nine times
as much silver to the workmen.
Now the wages that are procured in any country in those
branches of industry by the export of the produce of which the
precious metals are acquired, must regulate, in great measure,
the prices of commodities and the money wages of labour
throughout the different departments of industry in that coun-
try; at least as far as their power of competition with one an-
other allows. For if the producers in these branches procured
by the exportation of their goods more silver than could be.
procured by the sale at home of the goods produced at a like
expenditure of labour and capital in other branches, the compe-
tition of other labourers and capitalists would soon bring it down
to the common level.
The disparity of one-fourth between the money wages of la-
bour in England and in North America, seems to be account-
ed for by the different circumstances of the two countries.
First, North America is nearer to the mines; the export of its
produce to purchase silver, and the import of the silver when
bought, are attended with less difficulty and expense than from
England. Secondly, notwithstanding that North American
labour is, probably, applied with less diligence and skill than
that of England, it must be considerably more productive, from
its being employed upon only the most fertile soils. From
these advantages of position, the North American labourer is
enabled to produce commodities, and export them to the bullion
market, to the value in that market of above one-fourth more
than those produced and sent by the Englishman in the same
period, and to more than the value of ten times those produced
and sent by the Hindoo.
Again, in addition to the different degrees of difficulty in the
transport of commodities from different countries to the bullion
market, and the import of the precious metals, and besides the
unequal degrees of efficiency of labour, the disparity in the money
wages of labour, the same as in its real rewards, must be oc-
casioned partly by the different extent of the deductions which
are made from the gross produce created by industry, for rent
174
ON THE INEQUALITY IN THE REWARDS
i
and profits. In America, not only does the soil yield to the
husbandman more produce than in England, but the landlord
takes away less even from that larger produce. The capitalist,
it is true, has a somewhat larger share, but only in a slight de-
gree to compensate for the smaller deduction for rent. In
India, the share of the capitalist is very large, and constitutes a
formidable deduction from the gross produce of labour. With
regard to rents, those of rice grounds are said to be very high;
but what rents in general may be in that country I know not.
In the mining countries all prices ultimately depend on the
cost of producing the precious metals. Though the remuner-
ation paid to the miner is not identical with that received by
other producers, yet it affords the scale by which the remu-
neration of all other producers is calculated. When once expe-
rience has ascertained the comparative advantages and disad-
vantages of different occupations, competition will cause wages
in them to bear the same proportion to one another. "The mine
worked by England is the general market of the world: the
miners are those who produce those commodities by the ex-
portation of which the precious metals are obtained, and the
amount of the precious metals, which by a given exertion of la-
bour, and advance of capital, they can obtain, must afford the
scale by which the remuneration of all other producers is cal-
culated."
Whence it follows, that the income in money of each indi-
vidual depends on the difficulty or facility which the industry of
the country to which he belongs, experiences in the acquisition
of the precious metals. It is more or less according to the effi-
ciency of labour in the production and transport of goods ex-
ported, and the competition to be sustained in the bullion mar-
ket, whether it be with home or with foreign competitors.
In the case of a heightening in the efficiency of domestic in-
dustry, though it may be confined to one branch only, yet it
spreads its effects over all the rest, and extends its benefits to
each individual in proportion as he is a consumer of the article
in the production of which the efficiency of labour is heightened.
If manufacturing industry, for example, become doubly efficient,
while agricultural industry remain as before, the agricultural
OF DIFFERENT KINDS OF LABOUR.
175
labourer, notwithstanding that the produce he raises is no
greater, will be able to purchase with that same produce a
double quantity of manufactured goods. For if the manufacturer
did not make a proportionate reduction in their price, manu-
facturing profits would exceed those in other occupations, and,
when this should be ascertained, competition would compel the
manufacturer to reduce his demands to the common level of
profits acquired in other occupations.
Similar effects result in the case of a greater facility in the
acquisition of the precious metals, whether this arise from the
greater productiveness of mining industry, or greater advantage
in the exchange of exportable goods for them. Every indivi-
dual is a purchaser of the precious metals, though not imme-
diately from the mining countries, and, whatever be the branch
of industry in which he is concerned, he, as purchaser, partakes
in the consequences of an increased facility in their acquisition.
The acquisition of a greater quantity of them may not be an
advantage in every case. Unlike most other commodities, they
are not consumed by the purchaser, but are parted with again.
So far as they may be expended in home productions, they will
be parted with on the terms on which they are acquired; their
value will fall, in proportion to the increase of their quantity,
and no advantage will accrue to the purchaser in this way: a
greater quantity of money will be procured; and the monied in-
come of the labourer and landlord will be increased; but the
prices of home goods will rise in the same proportion.
But, if this increased facility should have arisen from a greater
efficiency of domestic industry, or the absence of an active com-
petition against home goods in the bullion market, this advan-
tage, which is peculiar to the country, and does not extend to
other countries, would give an advantage to the country in the
purchase of foreign commodities and foreign labour. In propor-
tion to this increased facility would the nation be able to pro-
cure a quantity of the labour of other nations greater than the
quantity of its own which it gives in exchange. The landlord,
with his advanced rents, would be able to travel and live abroad in
much greater splendour than the proprietor of the same extent of
equally fertile land in those countries which he visits could aspire
176
ON THE INEQUALITY IN THE REWARDS
66
to; little imagining that his superiority was owing to the steam
engines and spinning jennies of his neighbour the manufacturer.
Such, in fact, were the events which actually occurred in
this country during the latter part of the eighteenth and the be-
ginning of the nineteenth century. The inventions of Har-
greaves, Arkwright, and Watt, by making English labour ten
times, or more than ten times, as efficient in the production of
exportable commodities, doubled, or more than doubled, its
value in the foreign market, and reduced to one-half, or less, the
cost to England of obtaining the precious metals. It is true,
that, clinging to the restrictions and prohibitions of our commer-
cial code, we have, as yet, refused the greater part of the ad-
vantages which Providence seemed to press on our acceptance;
but cramped as they are, and always have been, by our perverse
legislation, the skill of our manufacturers has, during the last
sixty years, more than doubled the rent of land and the income
of every class of producers."*
But the start before all the world in industry which England
acquired by these inventions, and the superior facility they
afforded of purchasing in the bullion market with new commo-
dities unopposed by the rivalry of competitors either of its
own or other countries, were temporary only. Every newly-
discovered art acquires at first high gains. When it comes gene-
rally into use, they gradually fall to the common level. So it
is with the inventions now spoken of, their novelty is past, and
the high gains which they at first afforded have drawn so much
competition into them that these gains have greatly fallen.
They would have fallen not merely to the common level of other
occupations, but below it, if it had not been that new improve-
ments have been constantly introduced, which have kept them
up. While the war shut out the competition of all the rest of
Europe, and left the supply of the mining countries to England
chiefly, and while the inventions were but little in practice at
home and unknown abroad, competition was feeble, and the ad-
vantage in selling proportionably great. But now that com-
petition at home has arrived at the highest pitch of rivalry, and
foreign as well as home competitors are to be encountered,
* Mr. Senior's Lecture on the Cost of Obtaining Money, p. 19.
OF DIFFERENT KINDS OF LABOUR.
177
European goods have experienced so great a fall in the mining
countries, that a much larger quantity of them must be given
for the precious metals, and there no longer exists the same
degree of superiority in British industry over that of other
countries.
Independently of the difference in the facility or difficulty in
the acquisition of the precious metals by the people of different
countries, arising from the peculiar circumstances under which
they are placed, and their greater or less distance from the
mining countries, the real rewards they obtain by the exertion
of labour present likewise a striking inequality, which is worthy
of observation.
More than upon anything else, the inequality in the con-
dition of the labouring classes in different countries depends
upon the different degrees of productiveness of their industry,
or the different amounts of the produce which it creates; but
especially, upon the productiveness of those branches of in-
dustry, the produce of which they consume largely.
These facts will serve to account, in great measure, for the
unequal condition of the labouring classes in different countries.
The contrast exhibited by the different condition of the people,
especially of the working classes, in old and in newly-cultivated
countries, will, in great part, be explained from these causes.
The fortunate condition of the labouring classes in North
America, the settlements of New Holland, and other newly-
colonized countries, strikes us forcibly. In such countries, man
is exhibited in circumstances more favourable to his comfort,
his affluence, and ease, and, upon the whole, more conducive to
human happiness, than any in which he has been placed at any
period of his existence from the creation until the present time.
With the security of person and property which an advanced
state of morals and of social institutions affords, with the height-
ened efficiency in the powers of industry, from extensive know-
ledge and consummate skill, to the acquisition of which the
labours of thousands of years have been necessary, and by which
these powers have been made incomparably to surpass those of
every former age; with such advantages, and such an augment-
ed power over the works of nature, he finds himself in these
VOL. II.
N
178
ON THE INEQUALITY IN THE REWARDS
countries unaccompanied by that disadvantage which, in every
other country, has almost kept pace with the advance in the pro-
ductive powers of industry; I mean the disadvantage, through
the increase of population, and consequent difficulty of supporting
augmented numbers, of being subject to a continually increasing
scarcity of fertile land. That the fortunate condition of the labour-
ing classes in these countries is to be attributed, more than to
anything else, to the productiveness of their industry, or rather,
of those branches of it the produce of which they are the largest
consumers, must be evident on a slight degree of reflection.
In these countries there is more land than the inhabitants are
able to cultivate, or than there is capital for the purpose. In-
dustry is therefore applied to the cultivation of only what is
most fertile and most favourably situated,-the land near the
sea-shore, and along the banks of navigable rivers. The appli-
cation of industry to the cultivation of such fertile and favour-
ably situated lands, with all the knowledge and skill, and with
the powerful implements and beasts of labour, which an ad-
vanced progress of society commands, must yield a large in-
crease; capable of paying both a high rate of wages and a high
rate of profits. Consequently, capital accumulates rapidly;
labour is everywhere in request, and much better paid than in
old countries; while the price of provisions is much lower. In
North America, a dearth has never been known. In the worst.
seasons, they have always had a sufficiency for themselves,
though less for exportation. If the money price of labour,
therefore, be higher in that country than in any other, its real
price, the command over the necessaries of the labourers' sub-
sistence which it conveys, must be higher in a still greater pro-
portion. A decisive mark of the prosperity of any country
is an increase in the number of its inhabitants. While in
Great Britain the population is doubling itself in fifty years,
and was formerly, the same as in most other European coun-
tries, not supposed to double in much less than a century,
in North America it is known to double in twenty or five
and twenty years, and in some places in a much shorter time.
It is true, great part of this increase is owing to the continual
accession of new settlers in the prime and vigour of life, but a
OF DIFFERENT KINDS OF LABOUR.
179
great part is also due to propagation, by births, from the ori-
ginal inhabitants. Although England is a much richer country
than America, yet it is less thriving; and while much of its in-
dustrious population is depressed with poverty, that of America
is in the enjoyment of all the necessaries and many of the com-
ferts and luxuries of life.
The fact that the condition of the labouring classes depends
upon the productiveness of those branches of industry of which
they themselves are consumers, is so important that it ought to
receive a great share of attention. As food forms by far the
largest item in the expenditure of these classes, they are more
especially interested in the productiveness of agricultural in-
dustry. The condition of the poor, then, depends mainly on the
quality of the poorest land in cultivation; or, which is the same
thing, on the return acquired from the last portion of capital
bestowed in heightened cultivation. Adam Smith attributes an
advance of wages to an increase of national wealth, and considers.
the happy condition of the labourer to depend, not on the actual
greatness of that wealth, but on the rapidity of its increase.
This misapprehension of the true cause of a high rate of wages
proceeds from the error of concluding, that it is capital which
affords employment to the people. But it is in the different
degrees of productiveness of the industry by which food is ac-
quired, that the great inequality in the condition of the working
classes in different countries consists. And here is to be found
the great cause of the difference which we find to subsist be-
tween the condition of the labourer in all old countries, where
poor soils are necessarily cultivated, and agricultural labour is
consequently but little productive, in comparison with countries.
newly settled by civilized nations, where fertile land is so abund-
ant as to be the only kind which is tilled; and where food is,
in consequence, so easily procured.
But though the chief cause which operates in favour of the
labourer has, in this instance, been overlooked by Smith, there
are, notwithstanding, circumstances attending the progressive
accumulation of wealth which are to the advantage of the lowest
class of labourers, and which, through its welfare, operate fa-
vourably on other classes, and on the prosperity of the public at
N 2
180
ON THE INEQUALITY IN THE REWARDS
large. In the expenditure of wealth in the way of investment
or employment as capital for reproduction, rather than in its
expenditure by the rich, by whom it has been acquired, in their
present consumption in luxury and refined or splendid works of
taste or display, the class of workmen whose labour is called into
action is of the inferior sort: not of that sort whose skill and art
are of a high order, and of difficult and expensive acquisition.
Now the commoner sort of workmen being always superabundant,
when employment can be found for this sort, the whole powers
of industry of the community come into activity.
The unequal degrees of rapidity in the accumulation of wealth
in different countries, are not in themselves sufficient to account
for the different conditions of the labouring classes in those
countries. England has been for many years past advancing,
and still continues to advance, with rapid strides in the further
acquisition of riches. America has done and is still doing the
same. But there is, perhaps, no very striking difference in
the rapidity of this advance in the two countries. Certainly
none sufficient to account for the inequality in the circum-
stances of their respective poor. The advance of wealth in
England has been made chiefly by the rich; the great amount
of her already acquired capital is the means by which her
further riches are acquired. The advance of America has taken
place chiefly on the part of the working classes, through the
productiveness of their labour and capital. The capitalists of
England prosper on account of their great wealth, and the land-
lords on account of the scarcity of land in proportion to the
augmented population to be supported on it. The capitalists in
America prosper through the high rate of profits of capital;
while the labourers, notwithstanding the high rate of profit they
have to pay, are more than compensated for this disadvantage,
by the absence of the class of landlords, or, where they do exist,
by the smallness of the rent they are enabled to demand. In
America, too, the lighter burthen of taxes is also an important ele-
ment among the causes of the favourable condition of all classes.
British labour is, perhaps, more productive than that of Ame-
rica, especially since the false and disadvantageous direction to
manufactures which has been forcibly given to industry in that
OF DIFFERENT KINDS OF LABOUR.
181
country. But the productiveness of British labour is displayed
chiefly in the beauty, the fineness, and cheapness of the goods
which are consumed by the rich, while the sterility of some
branches of industry is evidenced in the dearness of provisions,
-the great item in the expenditure of the poor. On the other
hand, the most productive branch of American labour is agricul-
ture, while the least efficient is that by which the luxurious pro-
pensities of the rich are ministered to. It is thus that, in one coun-
try, the rich are relatively better off; and, in the other, the poor.
Again, the superiority of America consists in part in the cir-
cumstance that agriculture, which in that newly-settled country
is its most productive branch of industry, forms the great
business of the country. Now the peculiar nature of the cul-
tivation of the soil is, that it affords employment to unskilled
labourers. Not, as we have already remarked, that the conduct
of agriculture really requires less skill and experience than that
of other branches, but it requires none which law or custom has
rendered difficult or expensive to acquire. In the ordinary way in
which husbandry is conducted, the labourer insensibly acquires
his skill in the daily performance of his work, which he begins to
learn from childhood; there is no apprenticeship necessary; no
apprentice fee, and no outlay of capital, to obtain the requisite
qualifications for following his art. It is to the great demand for
common labour, and labour which costs nothing to the poor to
qualify them for practising, that the prosperity of America and the
superior condition of the working classes in that country are
greatly to be ascribed. As there is never a superabundance of
work people of the lowest class, they are no burthen on the other
classes. Able to support themselves through full employment,
and through the ample rewards of labour, they keep up a constant
and efficient demand for the produce of the labours of the other
classes. Thus the whole industrious population is maintained
at work, and business kept alive, by the activity of the demand
from the lowest and most numerous class. Contrast this state
of things with the condition of the old countries of Italy or
Spain. Here the superabundance, the want of employment,
and consequent idleness and poverty, of the lower orders, cause
them to be a burthen on the other classes. With the exertion
182
INEQUALITY IN THE REWARDS OF LABOUR.
of but a part of the national industry, and that with little
skill and knowledge, those countries are proportionably poor.
The lower orders, producing but little themselves, have but
little to give in exchange for the productions of the other classes;
and when they procure the supply of their wants, it is often
through the bounty of others, and not by the exchange of equi.
valents. Instead of encouraging the industry of the other classes,
and adding to the strength and resources of the state, they de-
tract from them, prey upon the resources of society, and weaken
and clog its operations.
Another favourable circumstance connected with agriculture
is, that there is seldom a stand-still of business through disagrec-
ments about wages between masters and workmen. In manu-
factures and trades of various kinds business is frequently sus-
pended, not from want of work, but through the masters being
unable to employ all their workmen at existing wages; because
the consumers cannot purchase the whole produce of their labour
at existing prices, which they would gladly do, if the goods were
sufficiently reduced in price to meet their means of purchase.
But in husbandry, if a suspension of industry, or a want of em-
ployment, takes place, it is seldom through any other cause than
there actually being no work to be done. In agriculture there
are no incorporations for its regulation, and seldom any com-
binations amongst workmen to keep up wages and prevent men
from working for low wages. There is, accordingly, a more
steady employment for the labourer in agriculture than in most
trades; and the community in which it forms the principal
occupation, as it does in newly-settled countries, or whose industry
is chiefly directed to employments free from such regulations and
combinations, is likely to be more exempt from suspensions of in-
dustry, and to derive a larger produce from labour, than other
communities.
The favourable circumstances now mentioned are all of them
of importance, and taken together are of sufficient magnitude to
account for the more easy and comfortable condition of the work-
ing classes in newly-settled countries than in others. Indeed,
they are of such consequence that it would be strange if their
condition in these countries were otherwise.
ON THE REWARDS OF LEARNING.
183
SECTION III.
On the Rewards of Learned and Scientific Exertion.
Ir might be expected, that the expense which a liberal education
involves would yield an equally profitable return with money ex-
pended in learning any art or profession. If, however, the educa-
tion be confined to literature and the sciences in general, without
a special direction to the practice of some particular profession,
the services of whose members are in general and constant re-
quest, such education, though better paid in the present than in
earlier times, still affords but a poor subsistence to its possessor.
Almost every person who is intended either for a profession, or
for living on his fortune, is well educated. There are many
such men who are unable to establish themselves in the pro-
fessions or employments for which they were intended, or who do
not succeed in them after being established, and who, in conse-
quence, are thrown back on the resources which their education
affords them. Thus, the class of such men, in addition to its
own proper members, is the common receptacle for the unfor-
tunate of other classes. Every profession which fails, and every
fortune which is ruined, throws men into it. In this respect, it
corresponds with the lowest class of labourers. Every trade
which fails, throws its workmen into the class of common
labourers; for all kinds of workmen are able to perform common
labour, though capable of nothing else. Whence the numbers
of both these classes become overcharged, and the rewards they
are able to procure are scanty.
Another cause of the poor remuneration of learning, especially
among the clergy, is to be found in the fact which has been
already spoken of, that in most Christian countries, many persons
are educated for the church gratuitously, either at the public
expense, or from funds arising from charitable bequests and
contributions to that object. Our pious forefathers, in whose
days learning was less diffused than at present, and the clergy
for the most part insufficiently instructed, thought that the
cause of religion was served by educating men gratuitously for
184
ON THE REWARDS OF LEARNED
the church, not considering that the evil might be only tem-
porary, and that the remedy, if permanently established, might
render the clergy too numerous, whence it must be poorly paid,
and its indigence lessen the respect in which it would be held, as
well as its influence in society. Men of talent who would volun-
tarily enter this class must, in consequence, be deterred from
doing so at their own expense, when an inadequate remuneration
would prevent their ever returning the money expended, and thus
providing suitably for themselves and families; and the church
must be filled, not alone by men whose talents and devotedness
to its cause must fit them for it, but by those who happen to
possess interest to procure presentations to the colleges. When
the public affords a gratuitous education, and there is little or
no money advanced by the individual or his friends, no higher
remuneration is due to his services than is paid in those me-
chanic trades in which no apprentice fee is required, nor any
longer servitude than that which is spent in his education; and
it would be surprising if he should be paid at a much higher
rate than this. Accordingly, we find that the salaries of those
clergymen who have had no benefice, but have been hired curates
or chaplains, has at no time much exceeded the wages given to
the generality of mechanic trades.
It is probable, however, that the low rate of remuneration in
these elevated paths of human exertion, is, on the whole,
rather advantageous than hurtful to the public. Intellectual
pursuits serve to enlarge our knowledge, augment our riches,
and purify our morals. But if we would derive the advantages
which the cheapness of literary education confers, we cannot
complain at having to pay its price, in the degradation of the
profession of a public teacher. If, however, we are dissatisfied
with paying this price, and wish that learning should be better
rewarded, the cause of the depressed condition of its professors
must be removed. Learning must be left to itself to find its
own level, and we must cease to derange that natural order of
things through which, in every other department of exertion,
an expenditure of capital for useful objects can be made with a
certainty of its affording a profitable return. Learning, in such
case, would gain a remuneration proportioned in some degree to
the money expended in acquiring it. Individual or public bounty
AND SCIENTIFIC EXERTION.
185
to necessitous individuals can only palliate for a time the effects
of the disease. In order permanently to eradicate the evil,
remedies must be applied to its cause; the superabundant num-
bers of the class in question must be lessened, which produces a
competition so unfavourable to its emoluments.
The funds appropriated to give a highly-finished education
gratis to a few, might be well bestowed in giving one less ex-
pensive to many. The system of favouritism which raises one
child above another, without any superior merit of its own,
lowers relatively the position of the rest; is calculated to excite
a feeling of envy in their breasts, and to make them depend
rather on the patronage of their superiors than on their own
exertions. Every measure, likewise, which might throw more
open to competition the different arts and professions, or might
facilitate the acquirement of the qualifications necessary for
following them, is calculated, in a degree, to lessen the glut of
merely learned men, and thus to raise the reward of their
labour.
The philosopher who does not work with his hands, but ob-
serves and reflects on everything, who occupies himself with
the investigation, the discovery, and development of the hidden
laws of nature, or the formation of combinations never before
attempted, with a view to direct industry in that course which
shall yield a larger return than has been before obtained, not
only by his labours and studies distinguishes himself above
others, but proves of the highest possible service to mankind.
In comparison with his, the labours of other men are almost as
nothing. They increase the stock of material wealth existing ;
but he enlarges the sources whence it is acquired. They work
to supply the present wants of themselves and families, and for
this alone; he to feed and clothe the species everywhere, and
in all times to come. The products to which their labour has
given birth are ended with their consumption; but the results
of his labours are imperishable, they last for ever, and their
beneficial consequences commencing from a little extend and
spread over a circle which in extent and duration has only the
world and time for its boundaries. All the arts owe their origin
and consummation to exertions of the same kind with those
about which he is occupied. Many manufacturing processes
186
ON THE REWARDS OF LEARNED
could never have been executed without the scientific acquire-
ments which he has brought to their aid, and which acquire-
ments were probably the result of long study, intense reflection,
and a series of experiments equally ingenious and delicate, far
above the reach of the vulgar,-the production of talents of the
first order, and of a combination of the highest degree of skill in
chemistry, mathematics, and mechanics.
But while industry has reaped incalculable benefits from the
knowledge of which the man of science is the discoverer, the
depositary, and the distributor, yet how scanty, except in fame,
has been the reward of the men from whose discoveries and inven-
tions in science and art mankind has derived such advantages!
This knowledge must have been slowly, and with no small diffi-
culty, acquired; at the expense of untold losses and privations to
the individuals by whose exertions it was obtained. Yet, far from
having received that pecuniary recompence which ought to have
been awarded for the talent and labour exerted, and the expense
incurred, in the cause of the species, these individuals have sel-
dom reaped during their lives even gratitude for the benefits
they have conferred. Many of them, though scarcely less
estimable for their virtues than distinguished for their talents,
have shared to its full extent in the common lot which in all
countries and ages has awaited the benefactors of mankind—
calumny, hatred, and persecution. While posterity alone, after
their death, and when it can no longer serve them, renders at
last a tardy homage to their merits. To take a few examples.
Amongst the most distinguished of modern discoverers in science
stands Galileo. But who can read without emotion the recital of
the cruel sufferings, especially in his declining years, which
awaited this amiable and venerable man-constantly calumniated
and persecuted, often compelled to flee from city to city to escape
the bitter enmity of his traducers; at length immured in a
dungeon of the Inquisition; and finally, obliged, as the price of
freedom for the few short years remaining of his life, to sign with
his own hand a recantation of his belief in some of the most
sublime discoveries of modern science. Let us look again at
the fate of the greater number of the talented men in our own
country, whose genius gave birth and vigour to our manufactures.
Lee, the inventor of the stocking frame, was neglected in his own.
AND SCIENTIFIC EXERTION.
187
country. He sought the patronage of Henry IV. of France,
with whose aid he established a manufacture of stockings at
Rouen. But on the death of that monarch, this distinguished
inventor fell into difficulties through want of encouragement
and died in poverty at Paris. Yet the English government
which could not appreciate his merit while he lived, could, after
his death, prohibit by law the exportation of the frames which
he had invented. The fly-shuttle was the earliest of the mo-
dern improvements in the art of weaving. It enabled the weaver
Kay, its inventor, was
to weave twice as much cloth as before.
so persecuted by the workmen that his life was in danger from
their fury, which drove him from his native country, and com-
pelled him to seek refuge in France. Among the inventors of
spinning machinery, Wyatt was the first, and, because the first,
perhaps the most meritorious. The difficulties which he had to
contend against were more than he was able to surmount ; and
eventually he sank under them. Who can read without the
tribute of pity for suffering merit in distress, his letter from the
Fleet prison, to which his misfortunes had consigned him, ad-
dressed to a member of parliament, praying him to support a bill
then before the House of Commons for the relief of insolvent
debtors? Hargreaves, once more, the inventor of the spinning-
jenny, did not extend his ambition to obtain a patent, but was
content to employ his jenny to spin weft for his own family's weav-
ing. Yet his house was broken into by a mob of infuriated work
people, his machine destroyed, and himself so persecuted as to
be obliged to fly his native country, Lancashire, and seek refuge
at Nottingham. There he obtained assistance, and afterwards
took out a patent; but was despoiled of the profits by a com-
bination of manufacturers; because to clothe his children when
in distress, of whom he had six or seven, he had been obliged
to dispose of some jennies before he left Lancashire. Such have
been the rewards of the greater number of the men to whose
genius and labours we owe the growth of our cotton manufacture,
and which have raised that manufacture from an occupation of
minor importance in a national point of view, to one of the very
highest. In the first half of the last century, the annual value
of our exports of cotton goods amounted on the average to about
£20,000. In the year 1833 it had increased to £18,486,000;
188
ON THE REWARDS OF LEARNED
1
and afforded subsistence to at least 1,500,000 of our fellow-sub-
jects. Nor is this unexampled improvement at a stand; on the
contrary, it is still advancing with a rapidity which defies all
computation as to its probable condition in future times.* But
let it not pass unobserved, that all this is owing to the improve-
ments which have been introduced into the manufacture; and
which in one department have increased our power of spinning
yarn, from one thread at a time to two and twenty hundred; and
all these of incomparably superior quality to the one. Nor let
us fail to observe to whom it is all due ;-to men who, though
they have given the means of feeding and clothing every person.
in the present as well as in all future times in a vastly better
manner than could possibly have been done before, have never-
theless not merely passed through life neglected and unrewarded,
but been persecuted,-many of them driven from their homes,
and compelled to seek refuge in obscurity.
Neither is this treatment of men to whom humanity is in-
debted to an amount which defies computation to estimate, but
of whom the world was unworthy, peculiar to our own country.
Other countries have participated in the guilt and infamy of
similar conduct to other equally meritorious individuals. Two
or three years since, the public prints announced the death in
Paris, at a very advanced age, of the ingenious Jaquard, the
inventor of the loom known by his name; an invention which
has become adopted throughout all France, and which gave new
life and vigour to her declining manufacture of silk. But
although the city of Lyons now owes all its prosperity, and
almost its means of subsistence, to his invention, yet so great was
the enmity excited against him for it, that three times he with
the greatest difficulty escaped from the city with his life. The
Conseil des Prud'hommes, who are appointed to watch over the
interests of the Lyonese trade, broke up his machine in the
public place; "the iron (to use his own expression) was sold for
iron, the wood for wood, and he, its inventor, was delivered over
to universal ignominy." Nor did the opposition to the intro-
duction of his loom cease until the effects of foreign competition
in the manufacture compelled the weavers to use it. Buonaparte
granted Jaquard a pension of a thousand crowns as a reward for
* Vid. Baines's History of the Cotton Manufacture, ch. 9.
.
AND SCIENTIFIC EXERTION.
189
his discoveries;* though other accounts say that he was suffered
to live and die unnoticed and in want.
Some happy exceptions there are of men whose splendid
talents have procured them honour and wealth,-the just reward
of their inestimable services to the world. We have a Watt, a
Strutt, an Arkwright, a Howard, whose strength of mind, aided
by favourable circumstances, overcame all obstacles, and acquired
for them splendid fortunes. But such instances of success are few
in comparison of the many whose resources were unequal to
contend against the difficulties opposed to their progress: they
are the exceptions to the general rule, and not the rule itself,
which assigns to genius employed in the service of mankind,
opposition, hatred, poverty, and neglect.
The disproportionate remuneration of this superior class of
knowledge and exertion proceeds partly from new discoveries.
being usually received in industry with distrust and apprehension
of failure; while interest and prejudice oppose their adoption,
and for a long time prevent their being brought into practice.
It proceeds partly, too, from discoveries in science not being
immediately perceived to be applicable to the arts. At first
many of them appear only as curious, but barren facts, without
any useful tendency. Afterwards their application to industry
comes to be perceived, and the profit accruing from such appli-
cation is reaped by men who had no share either in the labour or
the merit of their discovery. Perhaps there is no art more
indebted to the abstract sciences than navigation. Its superiority
in modern over ancient times is in great part due to the labours
of mathematicians, astronomers, and other scientific inquirers.
Modern navigators are much more indebted to such men than
to those of their own profession; whose improvements of the
art have been comparatively few, and these of minor importance.
But where has been the reward of the inquirer into the pro-
perties of numbers, of angles, and of curves? The application.
of his discoveries was not perhaps immediately perceived; or if
perceived, he was not the party who could apply them in prac-
tice; whence he failed to share in the rewards, though most of
all entitled to them. We owe our knowledge of the new world
to the discovery of Columbus in the fifteenth century. But it
* Penny Magazine, 12th Jan. 1833.
190
ON THE REWARDS OF LEARNED
was the previous labours of the Pythagoreans, of Copernicus,
and Galileo, which proved the rotundity of our earth, that pre-
sented to Columbus the persuasive reasons which induced him
to attempt the westward passage.
Again, this disproportionate remuneration proceeds partly
from other circumstances. The knowledge and discoveries
the acquisition of which may have cost intense study, unwearied
exertion, and perhaps considerable expense in investigation, and
experiments many of which may have failed, are communicable
in a moment. They are probably transmissible in a few pages;
and, through the channel of public lectures or of the press, are
circulated more extensively than actual use requires; or rather,
they spread of themselves. Once divulged, they cannot be
withdrawn; and being imperishable, there is no need for opera-
tive industry again to recur for a fresh disclosure to him from
whom they have emanated. The products of every other kind
of industry, whether they be for immediate and total consump-
tion, or of longer duration and for permanent use, are all of
them in a state of more or less rapid consumption or decay, and
the renewed exertion of labour is always called for to replace the
gradual waste which is constantly going on. But knowledge and
discovery are of a quite different character. In these, there is
neither waste, consumption, nor decay; and as there is no need
to ask the scientific labourer for a renewal of the supply, there
is little demand for his industry, and it is ill repaid. If he re-
new his application and attempt other discoveries, success is
more than uncertain, it is always rare; and it may be long be-
fore he have any new production of his genius to offer, in order
therewith to purchase a fresh supply for his wants. When he
have, such rare productions are not in demand, and he has to
create a demand for them, in addition to the task of furnish-
ing the supply.
Profit may be obtained from a discovery or invention whose
application to the arts is at once perceived, in three ways. By
employing it, and keeping the practice secret, where this can be
done; by obtaining an exclusive patent for exercising it; or by
a pecuniary reward from the public. But discoveries in science,
as their profitable uses are seldom at first perceived, rarely yield
any pecuniary advantage whatever to the discoverer.
AND SCIENTIFIC EXERTION.
191
We cannot doubt that this disproportionate remuneration of
a kind of exertion which is incomparably more useful to man-
kind than any other, is prejudicial to its interests, by disabling
some men and deterring others from following pursuits so un-
profitable, and even hurtful to themselves. A suitable reward
for those useful discoveries by which humanity is benefited is
due from it to those persons by whom they are made. Nations
sufficiently enlightened to judge of the immeasurable advantages
which result from scientific pursuits, have endeavoured by
honorary distinctions, and in some few instances by pecuniary
rewards, to indemnify the man of science for the trifling profits
accruing from his professional labours. But the views that
have now been offered of the magnitude of the services which
such labours render to the public, and the multiplied instances
of failure in procuring any reward for them, imperiously call
from every enlightened government for a more liberal extension
of patronage and protection, than has ever yet been awarded to
the men who by their discoveries or inventions contribute to the
advancement of science and art.
SECTION IV.
Of the Rewards of the Labour of the Master, or Adventurer.
Ir is seldom that the person who conducts a business is not
owner of some at least, if not the whole, of the capital embarked
in it. It is rare that a man begins business without any capital,
and by borrowing from others the whole of the capital he em-
ploys. If he but purchase some of the implements with his own
money, or do but maintain himself for a time from his own
funds, he so far advances capital, and, in consequence, is entitled
to share in the profits of the concern in a double capacity, as
capitalist, in the returns of capital, and as manager, in the
reward of the labour and risk of management. In this place
we inquire into the reward which peculiarly belongs to the
management; the return acquired in the quality of capitalist
having been already considered.
The master acts a most important part in the economy of
192
OF THE REWARDS OF THE LABOUR
industry. Every other class of society is dependent upon him.
He pays the incomes of the landlord, of the inactive capitalist,
and of the operative labourer. On his success or failure, on his
intelligence, talent, and enterprise, the activity of every branch
of industry, as well as its prosperity or adversity, wholly depends.
The reward of the labour of the master, like that of every other
person whose industry comes into the market to be subjected to
competition, is governed by the ratio of the supply to the de-
mand, or the quantity of that kind of labour which is in the
market, and the demand which exists for it. His condition ist
raised by lessening competition amongst his own class, which
operates against him, and by heightening competition in every
other class whose goods or services he purchases, which operates
for him.
The reward of the master is usually higher than that of most
other persons occupied in business, from the many and superior
qualifications required to fit an individual for so important a
post, qualifications which are possessed by comparatively few
persons.
The principal of these is, the ability to command the capital
requisite to conduct a concern with success. This capital is not
always the entire property of the master, but is often borrowed
in part of other persons. Yet he must possess capital of his
own sufficient to cover ordinary losses which may be expected;
for without such security, few persons would knowingly adven-
ture their money in his hands, subject to the inevitable loss
which a want of success must occasion. Besides this, to com-
mand capital, he must have the reputation of probity, intelli-
gence, industry, prudence, and economy,-qualities essential to
success in business.
The second principal qualification of the master is, an intimate
acquaintance with all the various processes of the particular
business in which he engages; the ability to judge of the quality
and value of the various articles in which he deals, with the
best markets in which to purchase or sell them, together with a
knowledge of the mercantile world, and of business in general.
The attention of the workman is directed solely to the production
of the article, or the performance of the single part assigned him
towards it, in general a simple operation. That of the master
OF THE MASTER, OR ADVENTURER.
193
must take a wider range; his thoughts are distracted with a
thousand considerations and perplexities unknown to the work-
man. In every department of industry, whether agricultural,
manufacturing, or commercial, the extent and variety of in-
formation necessary to conduct the business of the master with
success, is considerable. As society advances, and further
improvements are effected, this information must be greater.
With the advance of society, and the increase of capital, profits
fall, which renders it necessary that the calculation of the
cost of production or adventure, and the probable relation which
the supply of the article will bear to the demand when it shall
come into the market, on which the price will depend, should
be more precise and accurate. In all these, a high degree of
intelligence, foresight, activity, perseverance, and economy is
required, which can only be gained by a long previous appli-
cation to business in a subordinate capacity, which is seldom
attended with much remuneration, and is commonly the occasion
of expense.
Besides this, he must possess connexions, and the
qualities calculated to procure him friends and customers,-
agreeable manners or address, punctuality, and the reputation of
probity. Reviewing the superior qualifications required in a
master over those essential to the workman, especially to the
workman in employments where a great subdivision of labour
renders the operation of each extremely simple and easy, we
cannot wonder that the labour of the master should be much
more valuable, from the greater difficulty of performing it, and
be a great deal higher paid, than operative labour, in consequence
of its shutting out the competition of all those persons who are
destitute of the qualities it demands. Attended with these
qualifications, the occupation of the master is often accompanied
with great success, and realizes ample fortunes. On the other
hand, the want of them must sooner or later discover itself, and
lead to ultimate failure, involving the loss, not only of the ex-
pected profit, but of the principal also. The competition of
the one thus withdrawn gives an opportunity to the other mas-
ters to extend their concerns and raise their profits.
Different branches of business do not require an equal extent
and variety of knowledge, or an equal capacity, to conduct them.
VOL. II.
O
194
OF THE REWARDS OF THE LABOUR
The common routine of a retail trade is in general sufficiently
simple to be successfully managed by men of ordinary abilities.
The skilful direction of a foreign commerce, on the other
hand, must require the possession of more extensive informa-
tion. In this, besides the ordinary qualities required in other
traders, there should be an acquaintance with the languages of
the different countries with which the commerce is carried on,
a knowledge of their commercial code, their customs, duties,
and currency; the expense and risk of transport, the qualities.
and value of a great number of commodities of dissimilar nature.
There must also be foreign connexions and correspondents. The
want of these shuts out the competition of many persons from the
foreign trade, and thus allows those who are engaged in it to
obtain a higher rate for their agency than that of persons en-
gaged in some other occupations.
Again, the risk to the capital of the master causes his em-
ployment to be higher paid than that of most other persons.
There is a greater or less chance of failure in every branch of
business, however well it may be conducted. In some the
hazard is extreme; amounting to more than an even chance of
total failure. In all businesses where a man has to hazard his
fortune, and expose it to the errors and faults not of himself only,
but of others also; to the hazard of circumstances over which
he can have no control-to storms, to the seasons, to depre-
dation, to political occurrences and convulsions; he must have
an adequate profit in contemplation, to induce him to expose
his fortune, and in some measure his character also, to
chances and disasters which no human foresight can antici-
pate. The hazard being extreme, the profit when it comes
must be proportionately high, to counterbalance the heavy
losses which frequently occur. There must not only be a
greater return on the average for the capital employed, but
also for the superintendence, coupled as it must be with so
much responsibility, and beset with so many anxieties. These
risks and anxieties keep out the competition of the timid,
and thus render the reward of the more adventurous higher
than it otherwise would be. For this reason, too, the profit of
the foreign trade should be in general higher than that of the
OF THE MASTER, OR ADVENTURER.
195
home trade, on account of the greater uncertainty of the return;
and in the different branches of the foreign trade, those which
are connected with more distant countries, especially with bar-
barous and half-civilized nations, should bear higher profits than
trade carried on with neighbouring and civilized people. Of all
occupations, that of the smuggler is the most hazardous, and,
accordingly, its profit, when the adventure succeeds, is the
highest. It should seem, however, that these profits are not
sufficient to compensate for the risk incurred; since, of all oc-
cupations, his is the most likely to lead to ruin. And of other
trades, it would often be wrong to conclude that those which
yield the highest profits are on the whole the most advantageous,
since their greater risks may compensate, or even exceed, their
greater profits.
SECTION V.
On the Rewards of Operative Labour, and the Means of Ame-
liorating the Condition of the Working Classes.
IN civilized life, manual labour is for the most part performed
by persons of the poorer class, who have but little capital. Not
that they are wholly destitute of property, and advance no por-
tion of the capital employed in industry, for almost all of them
provide their own tools, which in some trades are of considerable
value. A complete set of joiner's tools, for example, is said to be
worth fifty pounds, and the workman is at considerable charges
from time to time in providing new tools for new descriptions
of work which he is required to execute, and in replacing such
of the old as become unserviceable. Even the bricklayer's la-
bourer comes to work with his own hod and shovel. Every
man is clothed, better or worse, and must find his subsistence in
advance until the week's end when his wages become due.
Thus in many trades, what appears to be nothing more than
the wages of actual labour, is in fact a profit upon capital, part
of which must be devoted to replace that capital as it is ex-
pended. Moreover, an expense has been incurred in the instruc-
o 2
196
ON THE REWARDS
tion of the workman, and the capital so expended must also
yield a profit. It seldom happens, however, that the workman
advances or could obtain what is necessary for his subsistence.
until the work he is employed upon is finished, and the article
ready for sale. The labourer who tills the ground, for instance,
has seldom wherewithal to maintain himself until the harvest is
reaped, and the produce sent to market and paid for. In manu-
factures, the case is the same. The workmen receive from the
master, or capitalist, the raw material, or the material after it
has undergone a certain degree of preparation, which they either
at once prepare for the use it is intended to answer,
or carry
through some one or more stages of the process necessary for
the purpose. For this labour, whether the article be completely
fitted for use or not, they are paid immediately in wages by the
master, who has to wait for the return of the money until the
article is sold and paid for.
Manual labour, however, is likewise performed by persons who
own the capital which is employed in conjunction with their
labour. In such case, since the individual is both master and
workman, the remuneration he obtains is greater: he enjoys
what are usually two distinct revenues, belonging to two dis-
tinct persons. The excess beyond the gains of other labourers
is to be ascribed not to mere operative labour, but to capital,
and to his industry in quality of master. The difference only,
after deducting what is due to these, is the reward of operative.
labour.
The inquiry now is as to the reward of operative labour, se-
parate from that which is acquired in the quality of master, and
through the employment of capital.
The circumstances which determine the amount of the earn-
ings which the working classes obtain, thereby operating di-
rectly on their condition, and the means by which that con-
dition may be improved, present subjects of the highest interest,
and of the greatest public importance. The class whose in-
terests are involved, probably exceeds in number all the
other classes together in England, while in other countries
it comprises a still larger proportion of their population.
Not only is the class greater than any other, and the effects
OF OPERATIVE LABOUR.
197
more extensive of any measures adopted respecting it, but the
causes to be operated upon and the evils to be remedied are of
a more formidable and difficult character than almost any other;
at the same time that the suffering is more intense which may
be mitigated or aggravated by the adoption of such measures.
But while the class is too large to be greatly benefited by any
exertions in its favour which can be made by the others, it is
ill able to assist itself, and its ignorance and prejudices often
stand in direct opposition to those measures which would most
of all conduce to its interests. The opinions that are held on
the circumstances which determine wages, whether right or
wrong, are never inoperative. The mighty interests involved
cause them to be always in action, either for good or evil.
These opinions exercise a powerful influence on the prosperity,
as well as on the peace and happiness, of society. If just, they
may lead to the introduction of such measures as may contribute
in a high degree to advance public wealth and the interest of
the poor; at the same time that they may tend to the satisfaction
of the masters and the content of the men, by showing that
wages are really determined by natural circumstances, of too
powerful a character to be much influenced either by legislative
enactments, or by any attempts or combinations of masters or
men. On the other hand, erroneous views on these points may
frustrate the best concerted measures for the public good.
Turbulent men may take advantage of such errors to inflame
the passions of a misguided populace, by representing the low-
ness of their wages, and the poverty of their condition, as owing
to corruptions of the state, or to wicked combinations of
employers, taking advantage of their ignorance or necessities
to impose unequal terms upon them, in order to enrich them-
selves. Such errors may disturb the public peace, may lead to
the destruction of property, and to drying up the sources of
national prosperity. Or, if not carried to this extent, they may
lead to the regulating of wages by law, or by combinations
amongst workmen. But the regulation of wages by law
or combination, though it may do incalculable mischief, can
seldom do good. It may secure to the labourer from his em-
ployer that just remuneration for his toil to which natural cir-
cumstances entitle him; but it is impossible for such regulation,
198
ON THE REWARDS
by any direct act, to increase the fund for the payment of wages.
It may effect a partition of that fund different from what would
take place if left entirely free; but as much as it may add to
the wages of one class, it must diminish from that which is
really due to another, and from what that other would receive,
if not so prevented.
Extreme poverty is a condition which men dread with a
sensitiveness of feeling almost instinctive. When we look at
poverty only in the bodily and mental suffering of the individuals
who are subject to it, and even when we add its consequent de-
terioration of their physical and moral energies, we see but half
the mischief it produces. Poverty draws down its curse, not
only on the wretched beings immediately subject to its influence,
but on the whole society which suffers its existence.
It exas-
perates the evil passions of our nature, and smothers the germs
of every generous and noble sentiment. The prevalence of vice.
is intimately connected with poverty, from the temptations to
the violation of right which want creates or heightens. A certain
degree of privation among the inhabitants of a country seems
incompatible with a due civil subordination, and with an intel-
lectual and moral education. The sourness of disposition which
it engenders, the envy and enmity it excites against those who
are favoured by fortune, the obtuseness of intellect which passion
and ignorance, occasioned by a want of moral culture, produce,
set mankind at variance with each other, raise up as it were a
state of civil warfare in society, and compel every man to maintain
a constant attitude of defence. These mischiefs are the result
of an inability to acquire better knowledge. They extend their
baneful influence to the whole circle of society, and detract from
the happiness of those who are exempt from the immediate
operation of their cause as well as of those who are subject to it.
In the same degree that vice is to be shunned, in that same degree.
is a state of privation to be dreaded which has a tendency to
excite it. The effects of poverty, again, are not limited to the
party directly suffering from it, nor do they terminate with the
society to which he belongs, they descend as an inheritance to
his posterity, and extend to society for generations to come.
The contraction in the physical, intellectual, and moral powers
which extreme destitution produces on the parent, causes a like
OF OPERATIVE LABOUR.
199
degeneracy in his offspring, and entails misery upon one gener-
ation after another. If man is interested, as has been said
already, in the welfare and advancement of his species, we ought
to strive by every means in our power to ward off extreme poverty,
not only from ourselves and our children, but from others also.
The fetters which it imposes are too heavy to be shaken off by
the unassisted efforts of the poor themselves. None but those
of strong natural talents can be expected to succeed in so diffi-
cult an enterprise; individuals of ordinary abilities can only
be emancipated by the philanthropic efforts of others, assisting
their own exertions.
In endeavouring to improve the condition of the working
classes, it is proper to look to the causes of their poverty.
These causes have not always been well understood; and it
cannot be denied that erroneous views respecting them have fre-
quently been acted upon. But when the real causes of their
suffering are ill understood or misconceived, and while those
who attempt to remove them are working as it were in the dark,
it might happen that, in endeavouring to advance the welfare of
the operative part of the community, they may aggravate the suf-
ferings which were meant to be relieved, and counteract the pro-
posed end by the very means adopted to promote it. If, however,
such lamentable results should not ensue, yet while these causes are
not distinctly perceived, and much more while they are misappre-
hended, we must expect to find the friends of humanity bewilder-
ed in their efforts, the measures undertaken indecisive, without a
common object, or concert of operation, and in a measure power-
less in their consequences. On the other hand, when these
causes are clearly understood, the proper means of remedy may
be devised, and such measures perceived as may safely and
successfully be adopted to insure desirable results, and unite
all endeavours in their attainment. From the extensive oper-
ation of general measures affecting the working classes, an
error as respects them, if put into practice, might prove abund-
antly fatal; and hence the greater necessity of cautious ex-
amination and a clear perception of the causes of the evil, in order
to discover and judge of the means of remedy.
The poverty of the lower classes has resulted, partly from
200
ON THE REWARDS
political causes, as from vicious civil institutions, or from false
and corrupt legislation and administration; and partly from the
vices and neglect of the higher classes of society. But more
directly than to either of these, is their poverty to be ascribed
to the natural and original state of ignorance and destitution
from which the human race has sprung, with its burthen of
perpetual labour upon it, and to the weakness, ignorance, pre-
judices, and vices of their parents as well as of themselves.
The great body of the poor have not become poor; they were
always so. Neither they nor their ancestors have ever been
otherwise. It is hardly more than two centuries since our
peasantry were serfs attached to the soil, and the property of
its owners.* To this hour the peasantry throughout the greater
part of Europe remain in this condition, and it is scarcely be-
yond the western margin of the continent that they have at-
tained to freedom. A few amongst our working classes may
have descended from persons in better circumstances; but the
great majority have been poor for a longer period than any
records or tradition can reach. It is, then, not a matter of
wonder that they remain so. A people born poor cannot easily
acquire riches. The first steps of advancement are proverbially
difficult. It is not in the nature of political institutions to
make the people rich, and it were monstrous to blame these in-
stitutions as the main cause of their poverty. The action of
government on wealth is of a negative and not of a positive kind.
Riches can be acquired only through individual exertion,-
through industry, intelligence, and frugality; aided, indeed,
negatively by the security which civil institutions confer, and the
personal freedom of action which they preserve. But riches
are not a product of government. When did it ever create a
single article of wealth? So far from creating and accumulating
riches, governments have done more in the way of squandering,
dissipating, and destroying wealth than all other spendthrifts
put together. “Government resembles the wall which sur-
rounds our lands; a needful protection, but rearing no harvests,
ripening no fruits. It is the individual who must choose whe-
* The last claim of villanage recorded in our courts was only in the
15th James I., 1618.
OF OPERATIVE LABOUR.
201
ther the enclosure shall be a paradise or a waste." * The low-
ness of the remuneration of common labour proceeds, chiefly, as
we shall see by and by, from natural circumstances. It must,
however, be allowed that political regulations have often aggra-
vated the difficulties of natural circumstances, and increased
the mischievous tendency of the weakness of human nature, and
so entailed on the poor a more abject state of poverty than that
to which they would otherwise have been subject. Such regu-
lations ought to be removed. But measures of state policy are
beyond the control of common workmen. It is fortunate for
them that they are so; since, being incompetent to their di-
rection, they would, by interfering, make their condition worse.
It is their wisdom to accommodate themselves to existing cir-
cumstances, and do the best with things as they find them.
From the natural condition of destitution in which man is
brought into existence, he is to be raised to that of comfort and
affluence, by his own exertions of industry and talent. Until
these exertions have been successfully made; until property has
been acquired, and those advantages and comforts obtained
which previous labour affords; he must necessarily continue in
a state of privation. As the natural condition of mankind, this
has always been the case in every age of the world, and, in the
nature of things, always must be. It is on their own exertions
that the lower classes must chiefly depend as the main source of
their welfare, and the means of their advancement ;-on the
wisdom with which they govern their own actions, and the energy
with which they pursue their objects. These are in their own
power, though political measures are beyond it. They are too
large a body to be much benefited as a whole by any efforts
that can reasonably be expected to be made for them by
others. Indeed, some kinds of assistance which have been
afforded, and which have weakened their dependence on their
own exertions, have made them more dependent on others, and
caused their poverty to be greater and more humiliating.
The unfortunate condition of the working classes proceeds.
from two circumstances; first, from the smallness of their earn-
* Dr. Channing's Discourses, &c. p. 156.
202
ON THE REWARDS
ings; and, secondly, from their usually not possessing property,
the earnings of labour are in consequence their only source of
subsistence.
Again, the smallness of these earnings, and especially of the
earnings of common labour, results from three causes; first, the
actual poverty of the produce which common workmen's rude and
unskilled labour creates; secondly, the largeness of the share
of this produce which goes to the other parties in the work of
production-the landlords and capitalists; and lastly, the dis-
advantageous circumstances under which the exchange is made
of this produce for other articles; in other words, the low price.
at which an extreme competition on their side compels them to
sell the produce of their own industry, and the relatively high
price at which the want of an equally active competition on the
other side compels them, with the money, to buy the goods or
services of other persons for which they have occasion.
From these causes of their poverty, therefore, we perceive the
means to be aimed at in effecting an improvement in their con-
dition. These are the opposites to the causes by which their
condition is depressed. They consist, first, in increasing the
productiveness of their industry, or the quantity and quality.
of the objects it creates; secondly, in lessening the shares of
these objects which go to the other two classes concurring in
their production, in other words, in lowering rents and profits;
thirdly, in altering the action of competition so as to turn it
more favourably to their interest; that is, equalizing in a mea-
sure the rewards of different kinds of labour; and lastly, in
endeavouring to acquire some property for them, or rather,
assisting and inducing them to acquire property for themselves.
The mode by which the productiveness of the industry of the
lower classes may be increased is, by greater exertion, superior
skill, better tools, or tools which require less art in using, and,
consequently, less waste of time and materials in acquiring the
skill requisite for their use. These circumstances have already
formed the subject of our consideration, and, consequently, do not
need to be stated afresh.
It is sometimes made a matter of complaint that the labourer
receives such a small portion of that produce which his labour so
OF OPERATIVE LABOUR.
203
eminently contributes to create; and this scanty remuneration of
labour, and the consequent poverty of the working classes, are
sometimes attributed to oppression or misrule.
Such com-
plaints, when alleged as ground of discontent with the existing
order of things, or with the conduct of employers towards their
work people, are seldom well-founded. The limit to which
wages can rise is determined by the productiveness of industry.
It can never exceed the whole produce which labour, assisted by
land and capital, creates. In fact, it must always be less than
this, for something must go to replace the capital expended in
production. It is plain, that if the labourer retain to himself
the whole produce which his industry procures, whether this be
great or small, there can be no ground of complaint against any
other class of persons, or against any established system of
society. Take the case of the fisherman who owns his boat and
tackle, and from the produce of whose labour no deduction is
made for the benefit of any other class. All the fish which he
catches is his own, and he may either consume it himself or dispose
of it as he pleases. If he be at liberty to sell it in a free and
open market, and where the best price can be obtained, it is
impossible to allege complaint against any one.
The few fish
which he may be able to catch, or the low price which they
fetch in the market, and the scanty livelihood he may be
able to procure with the money, may, no doubt, be a cause
of regret, but cannot be of complaint.
So in other depart-
ments of industry, where deductions are made from the gross
produce which the labourer creates, for rent and profits to
the landlord and master. If industry be free, the workman at
liberty to follow what occupation he pleases, and to buy and
sell where he finds it most advantageous; so that rent, pro-
fits, and wages, are determined by nothing but free and open
competition; the labourer gets the whole reward to which he
is entitled, and which any system of society can give him,
that respects with the same scrupulous equity the rights and
liberties of every class. In such case, in order to judge in any
individual instance, whether or not there be ground of com-
plaint, as to the proportion abstracted, we have only to compare
this proportion with that which competition, under the existing
204
ON THE REWARDS
condition of things, causes to be abstracted in the great majority
of other similar cases.
When the workman bestows his labour upon any materials,
he becomes entitled to a portion of the commodity created, or,
what is the same thing, to a portion of its value. But when
the master has paid him the stipulated wages, the master has
thereby purchased the labourer's interest in the commodity,
and henceforth it is wholly the master's property.
What-
ever is the share of the commodity, or commodity's worth,
which, in the division between the master and workman, comes
to the workman, is the reward of the operative labour by
which the commodity has been created. In considering the
reasonableness of the amount of the rewards of operative labour,
this reasonableness, or the contrary, may, perhaps, be more
easily estimated by looking to the proportion of the commo-
dity, or its worth, which the labourer receives, than by attend-
ing to any other circumstance.
In a state of freedom of industry, the rewards of operative
labour in every separate branch are regulated by the same cir-
cumstances that regulate the reward of the agency of the master;
and, in short, of every other person in whatever department he
may be engaged; namely, the ratio of the supply of the parti-
cular kind of labour performed to the demand there is for that
kind. In the struggle between master and workman, the same
as in the struggle between buyer and seller, it is not any prin-
ciple of reasonableness or equity that determines the condi-
tions of the bargain for wages. The workmen endeavour to
get as much, the masters to give as little, as possible; but it
is the relation of the supply to the demand subsisting at the time
that determines each party to accept or refuse the terms which
may be proposed by the other, and thus ultimately fixes the
prices both of labour and of goods; while the costs of producing
labour itself, or of raising up and bringing to market fresh
labourers, affect these prices only as they are the necessary con-
ditions of the permanent supply of labour.
As a constant competition is kept up amongst the operative
labourers in their different occupations, which, though it never
establishes an absolute equality, yet has a constant tendency to
OF OPERATIVE LABOUR.
205
bring to an equality the advantages and disadvantages of the
different branches, we may expect that, in a state of freedom,
the workmen in all of them will ultimately be nearly upon an
equality. In such case, as the rewards of labour would be equal
in every class, if the industry of any one class should be more
efficient than that of another in producing a large quantity of
excellent commodities, this will make no difference in the re-
wards of the labour of that class, since competition will cause
the articles to be sold at a proportionately cheap rate. On the
other hand, if the industry of any other class be comparatively
unproductive, neither will this make any difference in the re-
wards of its workmen; for the production of their industry will
be dear, and exchange at a high rate, corresponding with the
scantiness of its produce. A day's work in the occupation
in which labour is efficient will exchange for precisely a day's
labour in the inefficient occupation. The whole industry of a
community, and its whole produce, may be compared to those
of one man, and the circumstances of this man will be affluent,
or the reverse, in proportion to the general productiveness of
his industry; not to the productiveness of any one or more
kinds of the industry he exercises. So, in like manner, a
community is affluent, or the reverse, according to the pro-
ductiveness of its industry at large; it is interested in the pro-
ductiveness of every branch, and derives benefit or suffers as
a whole, and throughout all its classes of consumers, from
the increase or falling off in the produce of every one of its
branches; and this in proportion to the magnitude of that.
falling off or increase. The manufacturer and merchant are in-
terested in the productiveness of agriculture; not indeed that
husbandry should afford high profits to the cultivators, or high
rents to the landlords, but that it should yield a large and ex-
cellent produce. So, on the other hand, the agriculturist.
derives benefit from the efficiency of manufacturing and com-
mercial industry; by which the commodities supplied become
plentiful, good, and cheap. He has no interest in the manu-
facturer and merchant gaining high profits, part of which he
himself must pay; but the abundance, the excellence, and
206
ON THE REWARDS
cheapness of their goods, is a positive advantage to him, and
without alloy.
Agriculture, as we have before remarked, is that branch in
the productiveness of which the lower classes are most deeply
interested. They are more particularly interested in the pro-
ductiveness of this branch, both on account of its magnitude, and
because its produce forms the largest portion of the consumption.
of these classes. If agricultural industry be comparatively sterile,
whether from the poverty of the soil, or the incompetency of its
cultivators, the price of its produce must rise in proportion to
its scarcity, in order to establish the equality of rewards of la-
bour in the different departments; and the dearness of the pro-
duce will depend precisely upon the sterility of the industry.
If there were no relative superabundance of agricultural
labourers, the real rewards of labour in any state of society
would be indicated by the return of agricultural industry on the
poorest land in cultivation at the time, and which, consequently,
would not be subject to rent, after allowing for outgoings and
for the customary interest on the capital employed in its culti-
vation. After these allowances, the produce which would re-
main would be in part consumed by the cultivator and his family,
and the remaining part exchanged for other necessaries and
comforts. The real rewards of labour would thus be exhibited
in the quantity of produce consumed, and the quantity of other
things purchased with the surplus. To estimate these rewards
in money, in corn, or in any other single commodity, would
afford no criterion by which the condition of the labourers in
different countries and in different ages might be compared.
To form an exact comparison, we must take the quantity and
quality of all the different articles consumed by them,—of food,
of clothing, of fuel, and of every other item of expenditure.
With every change in the quantity or quality of any one of these
items, unaccompanied by a change of corresponding magnitude
and in an opposite direction in some other item, these rewards
would become greater or less, and the condition of the labourer
be improved or deteriorated.
We have seen that poor land is brought under tillage, because
OF OPERATIVE LABOUR.
207
the people possess the power of cultivating such land with success,
and because its cultivation is necessary to furnish the amount of
supply which they require, and are able to pay for towards their
support. If either population were less, or the efficiency of its
industry inferior, lands of better quality only would be cultivated.
If population were still greater than it is, or the efficiency of its
industry superior, lands of still less native fertility would be
brought into cultivation. Thus there being two circumstances
-the amount of population, and the efficiency of its industry, on
which the quality of the least productive land which shall be
cultivated depends, it is necessary that we take, as the criterion
of wages, the produce raised, and not the quality of the soil.
When the efficiency of industry remains the same, the condition
of the labourer, so far as relates to that portion of his expenditure
which is devoted to the purchase of food and other raw pro-
ductions of the soil, becomes deteriorated with every addition
to the population, and consequent necessity of resorting to soils
of a more ungrateful character. But, as regards the other por-
tions of his expenditure, his circumstances are not injured by
such additions: most commonly they are mended. Again, when
the population remains the same, his condition is improved by
every increase in the efficiency of labour, whether in agriculture, or
in any other department of industry whose products he consumes.
Once more, take any other land of better quality, the rent
of which is determined by open competition between tenants
and landlords, and the proper rewards of labour may, in like
manner, be exhibited by the produce of this land, the same as
in that of the poorest land, only making the further deduction
from its produce of the rent which is paid. After this deduction
is made, the remaining produce constitutes, in both cases, the
natural and full reward of labour, under existing circumstances.
If the labourer get the whole of this remaining produce, he gets
the utmost that his labour can procure under any system of
legislation or polity, which respects the rights of the other
parties. Again, if any labourer in manufactures or other em-
ployment, earn by his industry a sum which would purchase the
quantity of produce that the agricultural labourer on the poorest
lands procures, he, too, procures the full reward to which he is
208
ON THE REWARDS
A
entitled. If he get more than this, unless he possess greater
skill, or more time and expense have been bestowed in fitting
him to exercise his calling, he receives more than what an equal
degree of competition in all classes would award as his share;
he charges other men a higher price for his labour than he gives
for theirs; and does that to them which he would be unwilling
that they should do to him. If he get less than this, competition,
or circumstances of some other kind, deprive him of the equal
reward of his labour.
If, then, the whole produce of the poorest lands under cultiva-
tion, after deduction for profit of capital, determines at all times.
the natural and just reward of the labourer, and which it can-
not and ought not to exceed, because any such excess must be
an unequal advantage gained at the cost of some other person;
this fact will show the severe pressure on the poor, of those
laws which prohibit the free trade in corn, and the other pro-
duce of the soil, or fetter, by duties or restrictions, their im-
portation from foreign countries. These laws, by prematurely
forcing cultivation on poorer soils than would otherwise be em-
ployed, operate directly in diminishing the reward of labour, by
diminishing the productiveness of national industry, and so cause
a most important deterioration in the condition of the people,
but more especially of the lower classes.
Since the poverty of the lower classes results mainly from the
poorness of the produce of their own rude and unskilled labour,
no method promises so much to improve their condition, and at so
small a cost, as instructing them in the arts of industry. Education
holds out the prospect of more certainly and effectually than any
thing else raising the labourer to that level in society which be-
comes an intelligent being, and to that state of comparative inde-
pendence and comfort which consists with the full enjoyment of
life. It is not, indeed, that instruction which is limited to reading,
writing, and arithmetic; a merely literary education, which, if
pursued no further, although it may afford the means of amuse-
ment to the possessor, is in itself comparatively unprofitable,-
the key of knowledge, not knowledge itself; but the education
which is here meant is of a more extensive kind, and one whose
results are of substantial utility, which comprises the conduct
OF OPERATIVE LABOUR.
209
of life, forming habits of virtue and application, and giving the
means by which the individual may earn, by honest industry and
the exercise of his natural faculties, a comfortable and reputable
subsistence. This is the education most essential, and most impe-
ratively called for by a being brought into the world in a state of
total ignorance and helplessness, who has everything to learn, and
must be guided at every step. If to this sort of culture, the in-
dividual can add scientific or literary acquirements, they cannot
but be calculated to elevate and honour a humble station; to
make their possessor a more fit associate for his superiors in
rank; to strengthen and excite his powers of industry, by com-
bining theory with practice; to enlarge his usefulness; to en-
lighten and guide him in the conduct of life in every relation in
which he stands. Such are the views and objects which a
rational philosophy and an enlarged philanthropy would incul-
cate on the poor.
Poverty and wretchedness have their source in ignorance ;-
ignorance both of the industrial arts, and of the moral con-
nexion of things. From the same pernicious source are de-
rived both vicious propensities and criminal acts. No maxim
can be nearer the truth than that knowledge is power. As
respects industry, it is the source of wealth; as respects morals,
it is the source of virtue, which leads directly to that peace,
order, and security, which conduce to public opulence. Vice is
scarcely anything more than another name for ignorance; an
ignorance of consequences, and a miscalculation of their value.
It is a want of perception of the real connexion between itself
and suffering, and the absence of an impressive conviction that
the one is infallibly followed by the other, as cause is by effect.
Of all obstacles to the advancement of the poor, their ignorance
is the greatest and most formidable. It is impossible to as-
sist them with effect, unless they comprehend the plan pro-
posed for their advantage, so as to co-operate in carrying it
forward.
But though education stands thus pre-eminent amongst the
means of bettering the condition of the poor, there are, not-
withstanding, reasons which lead to the conclusion that it ought
not to be undertaken by government; that is, effected by com-
VOL. II.
r
210
ON THE REWARDS
pulsion, for its expense, in such case, must be defrayed by com-
pulsory contributions on the people. This, however, is a question
of jurisprudence, to discuss which would be out of place here,
and which will therefore be passed over. Let governments set
industry and the means of instruction free from the fetters in
which they have bound them, by monopolies, privileges, ex-
clusive rights, fiscal regulations, and the like; the rest may be
properly left to the exertions of voluntary beneficence.
Simple or rough labour, may be performed by any person
possessing health and strength of body. There is neither diffi-
culty nor expense in acquiring either the ability or the proper
qualifications for following the calling of a common labourer.
The man, while he is employed about the easier, gradually
learns the more difficult parts of his business, and the earnings
of his labour maintain him from his first beginning to work.
There is no apprenticeship required; there are no legislative or
trade regulations or restraints to prevent persons not regularly
qualified from following this occupation; and thus, as no one ist
precluded who desires to engage in it, competition amongst this
class of labourers is in the fullest degree of activity. The com-
petition here is not the voluntary competition of men desirous to
work at common labour, but the forced competition which results
from being unable to follow any other occupation, and unable to
subsist without labour. Not only is the class of labour in
question burthened with all those who, having been born poor,
have, in consequence, been disabled from acquiring the ability
to engage in any other employment; but it is the common re-
ceptacle to which the unfortunate of every trade descend, being
continually increased by labourers from every other department
of industry, through the fluctuations of events, which deprive
men of the means of continuing to gain a livelihood in those em-
ployments to which they have been accustomed, and which thus
drive them to common labour as the only other occupation they
are able to follow. From this superabundant supply of hands,
this sort of labour in almost every country is, and always has
been, poorly paid. The wages earned seldom much exceed what
is required for procuring those things which are necessary for
the support of animal existence.
OF OPERATIVE LABOUR.
211
But if the market for common labour is overdone, it does not
follow from the excessive supply of this class of labour, and its
consequent low rate of remuneration, that other classes of
labour should be badly paid. On the contrary, the inadequacy
of its recompence causes other workmen, who are thereby en-
abled to purchase it at too low a price, to be highly re-
munerated,
In the other kinds of operative labour, where greater skill is.
required in the workman, or more expense is necessary to ac-
quire that skill, his wages are universally higher or lower in pro-
portion as the competition of other workmen in the same class is
more or less under restraint, and the supply of labour of that
class kept beneath or above the demand for it.
Lastly, the circumstances of the lower classes may be im-
proved by equalizing, in a measure, the rewards of different
kinds of labour. To increase the productiveness of their indus-
try is most desirable; but when this can no longer be done, to
lessen the emoluments, without lessening the productiveness, of
those classes whose services they have occasion to purchase and
pay for, is an object of the next importance. If we would enrich
one class, we must always impoverish others, unless it can be done
by increased production. The industry of the lower classes is dis-
advantageously circumstanced in the exchange of its produce for
the produce of that of others. To place them in more favourable
circumstances in this exchange, the existing relation of the sup-
ply of the different kinds of labour to the demand for them must
be altered; the supply of what are now the peculiar products of
their industry must be lessened, while the products of the in-
dustry of the other classes must be increased: on one side, the
supply is relatively too abundant; on the other, it is relatively
too scanty; and the consequence is, that wages in the former
instance are too low, and in the latter too high. The assertion
that
wages are too high in some classes will, perhaps, be scarcely
admitted; but it should be observed that they are too high
only relatively, not absolutely. We cannot wish to lower the
condition of any class; but when their superiority proceeds, not
from greater productiveness, or a higher excellence in the pro-
ducts of their industry, but from a relative advantage in the
P 2
212
ON THE REWARDS
exchange of their products with those of others, a high remu-
neration on one side is equivalent to a low remuneration on the
other; the high remuneration must be brought down, in order
to raise that which is too low, and to place both on an equality.
Everything which should render more easy and less expensive
the acquisition of the necessary qualifications for following the
different trades, whether they consist in the ability of the work-
man, or his freedom, would tend in an eminent degree to relieve
the glut of common labourers, and to bring down the wages of
those trades which are too high. The inability of the common
labourer to perform any superior kind of work, and the multi-
plication of labourers of this kind beyond the numbers de-
manded by the work that is required to be done by them, is the
chief cause of their poverty. The use of machinery is highly
conducive to the welfare of every class of society, but is more
especially so to the lowest classes. In the employment of ma-
chinery in general, but little art or skill is requisite, and the
necessity of great dexterity of hand is commonly superseded.
In new machinery, and new processes in the arts, as the know-
ledge of their use and practice must be learned by some one,
they may as readily be acquired by a common labourer as by a
superior workman. It is thus that employment is afforded to a
greater number of unskilled labourers, and to children even of
tender years.
If it be doubted that the working classes can be benefited by
reducing their wages to a common level, let it be recollected.
that this is rather an equalization than a reduction. If the
wages of the superior classes of workmen were brought nearer
to those of the inferior classes, it would not be an equality
of poverty, like that to which the common labourer is at
present subject. As much as certain classes are lowered, so
much will other classes be raised in consequence. Every work-
man consumes as much as he produces; not indeed the precise
articles themselves, but the equivalents which he gets in ex-
change for them. If any workman should have his wages
reduced, he would find, if all were at the same time reduced to
a common level, that in the purchase of the labours of others
with his own, the price of some would be raised, while that of
OF OPERATIVE LABOUR.
213
others would be lowered. His money would go further, or
not so far, in the purchase of others' labours, in proportion ast
it was more expended on such as were lowered, or on such as
were raised. If the larger expenditure were on such as were
raised, he would sustain a still further disadvantage beyond the
reduction of his own wages. If, on the other hand, the ex-
penditure were more on such as were lowered, he would derive
some degree of compensation for that reduction. But an equality
of wages would tend so much to increase the produce of industry,
by preventing a want of employment, that even those whose wages
would be reduced would probably sustain no injury on the whole.
.
One principal mode by which an equality in wages may be
brought about, by which excessive wages may be lowered, and
the condition of those labourers who are the worst paid con-
sequently ameliorated, is by the most unrestricted freedom
of industry and commerce. If industry were freed from the
trammels with which a false legislation and rules of trade
founded on erroneous and interested views have shackled it,
the benefit would redound to all, but more especially to those
classes whose wages are the lowest. Industry cannot ad-
just itself with ease and rapidity to the constantly varying
demands of the market, and the transition must be quicker
and the difficulty experienced be greater as the market is
more limited. There are always particular employments which
in some places more than others are overburthened with work
people, whilst in other places they are not so much over-
stocked. Let the market be enlarged to comprehend places of
both descriptions, and the over-production in the one will com-
pensate for the possibly insufficient production in the other.
Let the foreign market be opened, and the varying fashions, or
the excessive production of particular articles, in one country,
will only cause an exportation of those articles to other countries,
where the fashion has remained unchanged, or where production.
in that particular article has not been excessive. Thus the work-
men will not be compelled to change their occupations; to aban-
don employments in which they have been brought up, and have
become more skilled and expert than others, or to begin the
world afresh. Fixed capital in buildings, machinery, and pre-
214
ON THE REWARDS
mises adapted to the business, will still be useful, and though
the profits may, in some degree, be lowered, they will not be
altogether lost. In a small extent of country, the changes of
demand act more violently in altering prices and deranging
industry, and gluts of particular commodities are of more fre-
quent recurrence, than in more extensive countries. Nothing
contributes so much to an exact apportionment of the supply to
the demand, as an extended market; and nothing acts more
favourably in preventing the derangement of industry, and
causing a steady and ample supply from every branch of it, as
well as an equality in the remuneration of its different branches,
as such a market. But while this freedom of industry causes
the produce of a country to be augmented to the utmost, and
benefits every class, it has a more direct and especially beneficial
effect on the lowest remunerated classes. The opening of a
larger market, which permits the transport of goods from one
place to another, causes such to be transported as exist in super-
abundance in the places where they are produced, and goes
directly to relieve the glut of commodities; to afford renewed em-
ployment to the workmen, and better wages to those that were
previously depressed. On the other hand, in what do the com-
modities obtained as equivalents in commerce, and brought back
in exchange for exports, consist, but in such articles as exist in
scarcity in the place to which they are brought, and afford un-
equally high wages to the workmen employed in their pro-
duction there? While thus the consumer is enabled to buy
cheap, things for which he would otherwise have to pay dearly
at home, the producer of such things as are the worst paid for at
home, is most essentially benefited by the opening of a larger
and better market for his produce. Such are the advantages.
which would flow from a universal freedom of industry and of
commerce in every country;-advantages which Providence
seems to press upon our acceptance, but which a perverse legis-
lation denies us. Take as an example the weavers of this country.
Their condition would be most essentially benefited by this free-
dom. If the duties on the importation of foreign corn, and of every
other article, were repealed, it is the produce of the industry of
the weavers that must be exported to pay for the corn and other
OF OPERATIVE LABOUR.
215
foreign productions that would be imported. The competition
with foreign productions would be injurious to many other home
branches of industry, and reduce the wages of their workmen
very materially. But while in this way a larger quantity of goods
would be obtained from abroad than could be produced at the
same cost at home, the weavers would have nothing to fear from
this competition; their wages are already lower here than else-
where; they have everything to gain from the export which
would take place to pay for the goods imported; which export
will always be of such articles as are produced in the country at
the cheapest rate; that is, the rate of the remuneration of their
own industry, the most sparingly recompensed of all. They
have everything to gain likewise, as consumers, from the foreign
competition which would reduce the prices of provisions, and of
those other domestic productions which their brethren at home
offer at a higher rate than that at which they themselves are
able to sell the produce of their looms to others in return.
But to pass to another subject. The working classes must
ever remain in a state of comparative poverty whilst they re-
main destitute of property. To the acquisition of property
they must look, as one of the chief means of raising their con-
dition. The possession of a certain quantity of property is
indispensably necessary to the support of human life, and the
successful prosecution of labour. We cannot exist without
clothing and lodging; without tools and implements to assist
our labour; without knowledge and skill in the arts of indus-
try to direct it; and without food by which the labourer may
be supported until the process of industry or the operation
of nature shall be completed which is to furnish our supply, or
until something can be earned. If the ground is to be tilled
and the seed put into it, the harvest must be waited for, and we
require a store of food and clothing to support us until the seed
shall spring up and be fit to gather. What, other than poverty,
can be expected by that man who has no knowledge of the arts
of life, or, even if he have this knowledge, when he must hire
his lodging, his furniture, his tools, and pay for them out of his
earnings, with, perhaps, interest of money advanced upon the
pledge of his clothing; or a repayment with a large profit for
216
ON THE REWARDS
the advance of subsistence until his labour is completed and his
earnings come in, as is the custom in some countries? With
such deductions from the earnings of labour, a man cannot ex-
pect to have a great deal left for himself; much less for his
comfortable support. One may affirm that a moderate enjoy-
ment of life cannot be anticipated unless a man have of his own,
a dwelling, furniture, clothing, tools, and a supply of food suffi-
cient to maintain him until the returns from his labour come in ;
or property yielding productively in some other shape an
equivalent to the payment which must be made for the hire of
these. We frequently see artisans and others, without any pro-
perty, gaining sufficient for a comfortable subsistence by their
labour. But in these instances we generally find, that they
have served a long and expensive apprenticeship, and are thus
enabled to procure a higher rate of wages than they otherwise
would have been able to earn. Some persons, indeed, have
wages given them from kind feeling or other motives on the
part of their employers, which are rather proportionate to their
wants, and for the purpose of enabling them to maintain them-
selves in comfort, than to what they might be had for, if their pay
were regulated only by the demand and supply of their labour.
These cases, however, do not invalidate the general principle
that the earnings of common or unskilful labour are insuf-
ficient, under natural circumstances, to yield a comfortable main-
tenance, and to lay by a part to accumulate into a fund in reserve
for that period when infirmity, or unexpected calamity, shall cut
off the resource of industry.
Seeing, then, that without some property the working classes
cannot rationally expect to be able to support their families in
comfort, it is of importance that the conviction of this fact
should be impressed on their minds as a matter of duty; and
that it is on their own industry and frugality their welfare must
mainly depend. With such views, we cannot too much applaud
the institution of savings banks, which afford to them a secure
deposit for the smallest savings, and with the advantage, which
could in no other way be procured, of their being made imme-
diately productive of interest. Another improvement, within
the power of the legislature to establish, which would likewise
OF OPERATIVE LABOUR.
217
materially conduce to the advantage of the poor, might be effect-
ed by simplifying the legal forms and removing the duties attend-
ing the transfer of real property, with a view of affording greater
facility to the poor in acquiring the ownership of the cottages
they occupy. The rent of cottages is proportionately higher
than that of houses of a better kind, from the great difficulty
there is in collecting the rents, on account of the poverty of the
tenants, and the continual losses to which the proprietors are
subject from their inability or want of principle to pay. The
rent, therefore, which a labouring man saves, by being his own
landlord, is greater than what the purchase money of the cottage
would yield him if invested in any other shape. Besides, if
once possessed of his cottage, he would often have opportunities
and inducements to improve it, nor could he easily squander such
property away by little and little; and the evident advantages
of its possession would induce him to make great efforts of in-
dustry and economy to retain that possession. One might en-
large on other advantages which would arise to the poor from
their being the owners of the dwellings they inhabit, but they are
so evident that it is unnecessary to say more upon the subject.
The progress of society, and the benefits which result from a great
subdivision of employment, have a natural tendency to do away
with the smaller farmers and manufacturers, and to cause busi-
ness to be carried on upon a larger scale; thus establishing only
two industrious classes, the large capitalist and the workmen.
The only resource, therefore, that is left to the workman, to pre-
serve himself from the poverty and dependence which such a
state of things is calculated to bring about, is, to acquire pro-
perty to yield him something in addition to his earnings.
If the views which have now been presented of the circum-
stances that determine the rewards of labour, and of the means
by which the condition of the poor may be improved, be well-
founded, they are sufficient to enable us to correct many of the
erroneous opinions generally prevalent with regard to the cir-
cumstances by which wages are determined.
It has been said that the wages of labour depend on the
prices of the necessary articles of the labourer's subsistence.
This position must be admitted to a certain extent; but not
218
ON THE REWARDS
universally. It is not true under general circumstances; for
the prices of provisions have commonly no influence on the re-
wards of labour.
The opinion that wages are determined by the expense of the
labourer's subsistence is countenanced by the fact, that in most
countries wages are high where provisions are dear, and low where
they are cheap. And again, wages are commonly higher in great
towns, where living is expensive, than in country places, where
expenses are lighter. But these differences in wages in different
countries and places are caused by the circumstances which have
been already spoken of as determining wages; while in great towns
this additional cause operates-that the labourer would remove
to the country, if his wages were not so much higher in the town
as to compensate for his heavier expenses. Another cause why
the rate of wages appears to depend on the price of provisions
is, that the price of provisions is in reality affected by the rate
of wages and the wealth of the labourer. They are higher where
the labourer is able to consume a large quantity, and lower
where he is unable to purchase more than a bare subsistence.
No inference, therefore, can be drawn from these facts.
There is a cost attending the rearing of human beings, the
same as in producing commodities, and if the returns procured
by labour be inadequate to defray this cost, no doubt, the sup-
ply of labour can no longer be continued. "The race of la-
bourers would become extinct, were they not to obtain a suffi-
cient quantity of food and other articles required for their own
support, and that of their families. This is the lowest rate to
which wages can be permanently reduced. The market or
actual rate of wages may sink to this rate, but it is plainly im-
possible it can continue below it. If the labourers did not ob-
tain a supply equivalent to their support, they would be left
destitute; and disease and death would continue to thin the
population," until more favourable circumstances should arise
which would enable them to obtain the means of subsistence.
This lowest rate of wages, beyond which it cannot be perma-
nently reduced, has been called the natural or necessary rate of
wages.
The quantity of food and other articles of subsistence which
OF OPERATIVE LABOUR.
219
.
constitute the necessary rate of wages in any country, depends
on a variety of circumstances. It must comprise, in the words
of Adam Smith, "not only such things as are indispensably neces-
sary for the support of life, but whatever the custom of the
country renders it indecent for creditable people, even of the
lowest order, to be without." The quantity and kind of these
things depend, not only on the habits and customs of the people,
but on the climate in which they live, and the kind of food.
which forms the principal article of subsistence; and they must
vary in different countries and at different periods, as the
habits, customs, and circumstances of the people vary. The
habits of the poor of England are very unlike those of the poor
of Ireland, and still more opposite to those of the poor of the tro-
pical countries. The habits of our work-people are considerably
changed from those of their ancestors two centuries back; they
have formed much higher notions of the kind and quality of
commodities which are required for their support. Articles
which were unknown to their forefathers, or known only as lux-
uries and superfluities, are now considered as of primary neces-
sity; and the necessary rate of wages has consequently risen.
But the necessary rate of wages, as it depends upon circum-
stances, and upon custom and habit, is constantly fluctuating;
rising or falling as circumstances, habit, and custom vary.
Thus, although the actual rate of wages cannot permanently
fall below what circumstances at the time and place determine
to be necessary to the maintenance of the labourer and the con-
tinuance of his race, it may yet do so for a time, as, indeed, it is
frequently found to do. If the actual rate of wages, after sink-
ing below the necessary rate, should continue so depressed for
any considerable period of time, we might expect that the poor,
as they became habituated to inferior living, would gradually
lower their opinions as to what are necessaries for subsistence;
and those things which in their former and superior circum-
stances were considered as necessaries, would no longer be ac-
counted indispensable. In such case, the necessary rate itself
would be fixed at a lower standard, and those things only
might become indispensable which are actually required for
the preservation of the labourer's life and health, and the
220
ON THE REWARDS
bringing up of children sufficient to keep up the number of
labourers.
Although, however, there is an extreme point beyond which
wages cannot be permanently reduced, and although there is
likewise at all times a certain rate which custom and opinion
determine as necessary, (not perhaps justly,) and below which,
while that rate shall so continue, wages cannot be permanently
depressed, yet neither of these lowest or necessary rates of
wages constitutes the actual rate amongst civilized nations.
The actual rate seems to be much above, and beyond the influ-
ence of what is called the necessary rate. This is unquestion-
ably the case with wages in general in our own country; which
are determined wholly irrespective of the necessary rate, and
from principles of a quite different character.
The rewards of labour taken in all its several branches and
as a whole, are beyond comparison higher than the necessary
rate of wages, or the expense required in producing labour.
Neither at any particular point of time, nor in periods of average
duration, has the cost of subsistence anything to do with the
actual rewards of labour. All that has hitherto been said with
regard to the distribution of the produce of industry goes directly
to negative the assumption that the market rate of wages is
governed by the necessary rate, and to show that, so far from the
rewards of labour being regulated by the cost of producing labour,
they depend on circumstances of an entirely different nature.
To show how different these circumstances are from the cost of
producing labour, it may be permitted briefly to state them here.
The reward of labour, then, is thus derived. From the gross
produce which industry creates, there are two deductions to be
made; first, for rent; and secondly, for profits of capital: the
remainder, be it more or less, is the reward of labour. This
remainder is greater or less, not according to the cost of the
subsistence of the labourer, for it is itself his subsistence, but
according to the productiveness of industry; and this pro-
ductiveness, again, depends on the skill and industry of the
community, the freedom of commerce and of individual exer-
tion, and the proper direction of labour. The rewards of labour
are in a measure affected by the relation which subsists between
OF OPERATIVE LABOUR.
221
the quantity of capital and the population; and likewise by
the quantity of fertile land in relation to the population; for
the amount of the deductions for rent and profits depends on
these.
When the "Wealth of Nations' was written,* its author
gave his opinion that the wages of labour in Great Britain
were, at that time, more than was precisely necessary to enable
the labourer to bring up a family. As the reasons he adduced
are forcible, and in great measure also applicable to our times,
it may be useful to repeat them here. He says, " in order to
satisfy ourselves upon this point, it will not be necessary to enter
into any tedious or doubtful calculation of what may be the low-
est sum upon which it is possible to bring up a family. There
are many plain symptoms, that the wages of labour are nowhere
in this country regulated by this lowest rate, which is consistent
with common humanity.
<C
First, in almost every part of Great Britain there is a dis-
tinction, even in the lowest species of labour, between summer
and winter wages. Summer wages are always highest. But,
on account of the extraordinary expense of fuel, the maintenance
of a family is most expensive in the winter. Wages, therefore,
being highest when this expense is lowest, it seems evident
that they are not regulated by what is necessary for this ex-
pense, but by the quantity and supposed value of the work. A
labourer, it may be said, indeed, ought to save part of his sum-
mer wages, in order to defray his winter's expense; and that,
through the whole year, they do not exceed what is necessary
to maintain his family through the whole year. A slave, how-
ever, or one absolutely dependent on us for immediate subsist-
ence, would not be treated in this manner. His daily subsistence
would be proportioned to his daily necessities.
CC
Secondly, the wages of labour do not, in Great Britain,
fluctuate with the price of provisions. These vary everywhere
from year to year, frequently from month to month. But in
many places, the money price of labour remains uniformly the
same, sometimes for half a century together. If in these places,
* 1773.
222
ON THE REWARDS
therefore, the labouring poor can maintain their families in dear
years, they must be at their ease in times of moderate plenty,
and in affluence in those of extraordinary cheapness. The high
price of provisions during these ten years past, has not, in many
parts of the kingdom, been accompanied with any sensible rise
in the money price of labour. It has, indeed, in some; owing,
probably, more to the increase of the demand for labour, than
to that of the price of provisions.
"Thirdly, as the price of provisions varies more from year to
year than the wages of labour, so, on the other hand, the wages
of labour vary more from place to place than the price of pro-
visions. The prices of bread and butcher's meat are generally
the same, or very nearly the same, through the greater part of
the United Kingdom. These, and most other things which are
sold by retail, the way in which the labouring poor buy all things,
are generally fully as cheap, or cheaper, in great towns than in
the remoter parts of the country. But the wages of labour in a
great town and its neighbourhood, are frequently a fourth or a
fifth part, twenty or twenty-five per cent. higher than at a few
miles distance. Eighteen-pence a day may be reckoned the
common price of labour in London and its neighbourhood. At
a few miles distance, it falls to fourteen and fifteen-pence. Ten-
pence may be reckoned its price in Edinburgh and its neigh-
bourhood. At a few miles distance, it falls to eight-pence, the
usual price of common labour through the greater part of the
low country of Scotland, where it varies a good deal less than
in England. If the labouring poor, therefore, can maintain
their families in those parts of the kingdom where the price of
labour is lowest, they must be in affluence where it is highest.
"Fourthly, the variations in the price of labour not only do
not correspond, either in place or time, with those in the price of
provisions, but they are frequently quite opposite.'
"'*
From what has been here advanced it is unnecessary to say
more in denial of the position that "wages are regulated by
the prices of the commodities on which they are expended ;" a
position which we observe to be directly contrary to universal
* Book I. ch. 8.
OF OPERATIVE LABOUR.
223
experience, from which we find that the mode in which the work-
man lives is dependent on the amount of the wages he usually ob-
tains, and not the latter on the former.
While, however, it cannot be admitted with regard to industry
as a whole, and in a state of freedom, that the earnings of la-
bour cannot permanently much exceed the absolute cost of
supporting the labourer, and a family sufficiently numerous to
keep up the existing number of labourers; yet, under the bane-
ful influence of false legislation, there was until lately a class of
labour in England of the lowest order, which formed an ex-
ception to the general rule. The labourers of this unfortunate
class were supported in part upon wages and in part upon the
poor's rate; they were paid and fed, not according to the value
of their labour, but according to the scale of their necessities;
sustenance was doled out in quantities just sufficient for their
support and no more. They were a sort of serfs attached, not to
the soil, but to the parish, from which they could not remove; and
might be considered as more than half slaves in a land called free.
They had nothing to gain or to hope for from industry, talents, or
moral restraint, or to fear from the opposite qualities of indolence,
stupidity, and the indulgence of ungoverned appetites. This
class multiplied beyond the employment for labour of its kind;
and it was not to be wondered at that it should. Unable to
acquire skill in the arts of life, by which they might have dis-
tributed themselves amongst the classes whose labour was in
demand, and with no assistance afforded them towards such an
acquisition, they must have remained for ever depressed, while
the actual rate of wages which they gained did not much exceed
the necessary rate of wages, or that which is required to support
the labourer and his family. Happily, the amendment of the
poor laws has removed the grievances which bore down this class
of labourers, and it is to be hoped they will continue increasingly
to experience the benefits which have begun to result from such
removal.
A question has been raised as to the effects on the condition
of the poor of expensive habits and of elevated notions as to
what constitute the necessaries of life, and with the possession
of which they will be satisfied so as to enter into the marriage
224
ON THE REWARDS
1
state and propagate their race. On this point, erroneous views
have been entertained, which justify some observations. It is
considered, that the use of a cheap article of subsistence instead
of one that is more expensive, as potatoes instead of wheaten
bread, operates injuriously on the interests of the poor, by re-
ducing the cost of raising and supporting labourers, which cost
constitutes the necessary rate of wages; and to which, it is
thought, the market rate of wages must usually be proportioned.
Mr. Ricardo says, "The friends of humanity cannot but wish
that in all countries the labouring classes should have a taste for
comforts and enjoyments, and that they should be stimulated by
all legal means in their exertions to procure them. There can-
not be a better security against a superabundant population.
Mr. McCulloch observes," When wages are considerably re-
duced, the poor are obliged to submit to live on a smaller quan-
tity of necessaries and conveniences, and those, too, of an in-
ferior species, than they had previously been accustomed to use;
and the danger is, that the coarse and scanty fare which has
thus been, in the first instance, forced on them by necessity,
should in time become congenial from habit. Should this, un-
fortunately, be the case, the condition of the poor would be per-
manently depressed; and no principle would be left in operation,
that could raise wages to their former level; for the labourers
could no longer have a motive to lessen the increase of popula-
tion as compared with that of capital, and, unless they did this,
it is quite impossible they could ever emerge from their de-
pressed condition." These views, it is apparent, proceed on
the suppositions, that capital occasions employment, and is the
main source of the labourer's prosperity; that an increase of
population is usually disadvantageous to the workman; and that
the cost of supporting the labourer eventually determines his
rate of wages. If all these suppositions are unfounded, (and we
have already endeavoured to show that they are,) the conclu-
sions drawn from them will, in all probability, be unfounded
also.
It seems strange that economy in expenditure, which in
other cases tends so much to the opulence and welfare of the
† P. 347.
* Ch. 5.
OF OPERATIVE LABOUR.
225
people, should, in the case of the poor, be said to be injurious.
If potatoes are a food equally wholesome, nutritious, and palat-
able, with wheaten bread, why should the poor not avail them-
selves of its greater cheapness? To deny that advantage accrues
from the adoption of a cheap kind of food, is to assume that the
earnings of the poor depend upon their expenditure; to spend
largely in this case is the same as to earn largely; whereas these
are two different and totally opposite circumstances, which have
no necessary connexion with each other. No doubt the best
interests of society are promoted when the rate of wages is ele-
vated as high as possible. But to diffuse a taste for the com-
forts, luxuries, and enjoyments of life amongst the poor, and to
interweave this taste with the national habits and prejudices,
would be, without rendering them more happy from the pos-
session of such comforts and luxuries, to condemn them to in-
creased toil in order to maintain that possession,-in itself use-
less, and without causing any progressive advancement in their
condition. What is that state, as respects our temporal affairs,
which is most conducive to happiness? Not, surely, the con-
stant enjoyment of the luxuries of life, for then the rich man
would be happier than the poor; which he is not. When the
animal appetites have been satisfied; when warm and comfort-
able clothing has been procured; with dry and commodious
lodging, and supply of fuel; a man's happiness, as far as outward
circumstances are concerned, does not depend on the style and
luxury in which he lives, but on the relation which these bear to
what he has previously been accustomed to enjoy. If they be
equal, it may be said he should be satisfied; if they be better,
he may be accounted fortunate. Those habits and prejudices.
in the poor which are most of all likely to conduce to happiness,
are rather such as the substitution of potatoes, in part, for
bread, and plain and humble fare for expensive and luxurious
living. Extravagance and pride are already the bane of society
in the upper and middle classes; much more would they be so
if extended to the lower, where the sphere of their action would
be so much greater, and their consequences more pernicious.
It is not such habits that should be inculcated in the poor; but
the reverse. The object should be, to aim at gradual and steady
VOL. II.
Q
226
ON THE REWARDS
advancement; which can only be made through frugality,
by saving from expenditure to accumulate into capital. It
should be the possession of greater skill and knowledge in the
arts of life, the acquisition of scientific and literary attainments,
whereby new and additional avenues to employment and opulence
may be opened, as well as to enjoyment, beyond the gratification
arising from the indulgence of the mere animal desires. These
are to be obtained only by economy in expenditure. Beginning
with economy, the means will afterwards be acquired of gra-
dually enlarging expenditure, and by a steady and constant
progression in the comforts of life, of obtaining from them the
greatest enjoyment they are capable of yielding.
There is one point of view, however, in which it is desirable
that the poor should be subsisted on a kind of food which is
more expensive than what would actually support them; and
for this reason, that in the event of a scarcity of this kind of
food, recourse might be had to substitutes of cheaper and inferior
kinds which are raised for the use of cattle.
Thus, in the case of the poor of Ireland, who live on potatoes,
if a deficient crop of that root occurs, there are few substitutes
for it of which they can avail themselves. They cannot resort
to corn, which is too dear even in better times for their means
to procure. Hence, wheat has often been exported from that
country while at the same time the peasantry were dying of
hunger. No refuge from calamity is left, they cannot seek
safety in the food which has been raised for cattle, and being
without resource, famine, with its attendant disease, necessarily
ensues. But in England, where bread, meat, potatoes, and beer
are the chief articles of the labourers' subsistence, if a deficient
wheat harvest happen, recourse is had in larger quantities to
potatoes, or other food which has been grown for cattle; beer is
abstained from, and the miseries of actual want are averted.
For the same reason, it is desirable that more than one kind of
aliment should form the ordinary subsistence of the poor, espe-
cially such kinds as are most favoured by seasons of an opposite
character, that when a dearth in one occurs the other may be
resorted to, which may be expected in such years to yield the
more abundantly. In India, where the people live on rice,
OF OPERATIVE LABOUR.
227
which is cheaper than almost every other food, if the rains are
deficient the rice crop fails, famine inevitably follows, and
thousands perish from want. But if other kinds of food, which
should be less affected by a want of moisture, were also in part
adopted, some resource would be left if the crop of rice should fail.
Amongst the "expedients for the removal of want from the
human family, and the secure establishment of a general pros-
perity and abundance in its place—a legal and compulsory pro-
vision for the poor" stands pre-eminent, if not in beneficial
results yet in expense, above all others. Of this kind is the
system of poor laws in England. The extensiveness of the
operation of this expedient, and the costliness of its character,
warrant the expectation of results of the greatest magni-
tude, and of the most decidedly beneficial nature. It is true,
the consequences of this system have proved of the greatest
magnitude, but so far from having been of a beneficial character,
either in a direct or collateral manner, lamentable experience
has shown that it has stood in direct opposition to the dearest
interests of society at large, but more especially to those of the
poor themselves, for whose sole benefit it was intended.
Of such an expedient it may be remarked, that it creates no
new funds for the support of industry, it opens out no new source
of employment, neither does it invigorate with new activity, or en-
large and fertilize, the old sources; and that, while it thus adds
nothing to the common stock of a country's subsistence, its
operation is confined to effecting a different partition of the
produce of the old funds. It would, however, be stopping far
short of the truth, should we merely state, that it contributes
nothing to production; for amongst its important features the
two facts stand prominent, that it at one and the same time.
diminishes production, and causes a waste and dissipation of the
stock of national subsistence, through a profuse and extravagant
consumption; thus lessening that stock, as it were, at both ends.
That these two facts have been realized in practice will be
evident if we reflect, that the most idle, dissolute, and worthless,
shared in the funds of this compulsory provision as freely as the
most industrious, frugal, and deserving; that, consequently, the
Q 2
228
ON THE REWARDS
rewards of merit were taken away, on one hand, at the same
time that men were released from all care or apprehension of the
consequences of demerit, on the other. What could be expect-
ed by a common labourer, through the utmost exertions of in-
dustry, prudence, and economy, in youth and health, but to
scrape together at the most a few pounds, to be laid by to sup-
port him in sickness and old age? But without all this exertion
and self-denial, he would have been sure to procure as much or
more from the parish; not, indeed, because he had acquired the
fruits of exertion and self-denial; for in such case he would
have got nothing; but because he had abstained altogether from
exerting himself to procure them, and always given loose to in-
dulgence to the full extent of his means of gratification. What
advantage, then, could have been derived from toil, carefulness,
and voluntary abstinence, when the most idle and intemperate
were as well rewarded? When men have nothing more to hope
from diligence, economy, and prudential restraint on the in-
dulgence of appetite, than they will be sure to acquire without
such sacrifices, and by self-indulgence to the utmost limit of
their resources; when the rewards which ought to attach to
desert alone, are dispensed with equal liberality to profligacy,
while men are at the same time relieved from all apprehensions
of the consequences of such conduct; what is to be expected
from them but one uniform career of indolence and licentious-
ness? It would be contrary to all experience and to every prin-
ciple of our nature, that a man should strenuously exert him-
self and voluntarily practise self-denial without a motive, and
when the legitimate rewards of temperance and industry are
taken away, or are more easily procured without the exercise of
either. The course of nature which, in the moral world, awards
to vice its penalties, and to virtue its rewards, is here reversed;
and it cannot be matter of wonder that in thus turning things,
as it were, upside down, disorder and confusion should ensue.
Accordingly, the fruits which theory points out as the tendency
of this provision for the indigent, have been amply reaped by
bitter experience in practice. It has deranged social order, un-
dermined the morals of the poor, relaxed their industry, and led
OF OPERATIVE LABOUR.
229
to a wanton and reckless expenditure of their resources, when-
ever fortunate circumstances have given them the means of
spending.
Again, such an expedient diminished production by frequently
causing a stoppage of work. Its funds were applied to support
workmen while out of employment; and it thus enabled them to
keep up the rate of wages, by obviating the necessity in which
they would otherwise find themselves, of submitting to accept
such low wages as the masters could at the time afford to offer.
Thus business was brought to a stand, and the workmen had no
employment, because their wages were higher than circumstances
enabled the masters to pay. The general interest, however, requires
that workmen should never stand idle, but should either at
all times accept such wages as masters can afford to pay, or
turn to occupations in which still higher wages are given. It
may be thought severe that workmen should be obliged to ac-
cept inadequate wages. But however severe it may be, it is of
advantage to the public at large. The low wages of one class,
by cheapening the goods on which their labour is employed,
tend to raise the wages of other classes, by offering greater em-
ployment to them through an enlarged expenditure caused by
the savings of consumers from the low prices of the goods of the
one class.
Neither is this all; for it raises the real value of
the wages of other classes, when expended on these cheaper
goods. Thus an advantage which might accrue to other work-
men, and to the community at large, is prevented by the sus-
pension of the employment of these workmen.
We ought not to omit to notice the source whence the funds
employed in this way in presenting a premium to improvidence.
were drawn. Had they proceeded from some original and inde-
pendent supply, the mischief might have ended here; and we
should have simply regretted that they had not been better
applied. But this provision for the indigent is not a separate
and original source of revenue. Its whole amount is drawn from
classes whose expenditure would otherwise have gone in a na-
tural and wholesome channel to support industrious classes of
workmen. As much as the levy for this provision is increased,
so much must employment be withdrawn from these classes.
230
ON THE REWARDS
Yet these workmen, deprived in part of the means by which
their maintenance would otherwise have been secured to them,
are, notwithstanding, compelled to contribute to this provision
for indolence and profligacy. Many of these contributors are
themselves but just removed above the condition of those to whose
wants they must minister, and they have to struggle under the
burthen thus laid upon them, to preserve their own families from
sinking down amongst the throng of applicants for relief. The
distress is not removed from society. It is only shifted to
another and a more deserving class of sufferers, presenting, be-
yond the range of legal provision, a more extended field of real
though unseen distress, exceeding the power of individual bene-
volence to remove, curtailed as it is of its means by the im-
positions of a compulsory enactment, and chilled by the continual
spectacle of worthless and clamorous applicants, angrily de-
manding relief as a right, of which their own misconduct, in the
greater number of instances, has occasioned the need.
It is thus that, while on one side national production has been
enfeebled, and on the other the stock of national wealth dimin-
ished by a profuse and wasteful consumption, the circle of
destitution has been continually widening," pauperism, like a
moral leprosy," has been spreading over a greater number of
families, and poverty has been multiplied and rendered more
hopeless by expedients for its relief.
It has been already observed, that with the existing effective-
ness of labour, in relation to the difficulties it has to surmount,
the bare produce of unskilled labour, subject to the deductions
for rent and profits of capital, is inadequate to furnish those neces-
saries and accommodations which are essential to the enjoyment
of life; and hence the extreme desirableness that the labourer
should acquire some property-some land, or house, or capital.
But if the possession of some property be so essential to the
welfare of the working classes, that little enjoyment of life can
be expected without it, this provision for the indigent, intended
to better the condition of the poor, takes away from the working
classes at once the power and the motive to accumulate such
property, and for ever precludes even the hope of emerging from
their state of destitution. It has these effects, first, by burthen-
OF OPERATIVE LABOUR.
231
ing those individuals who are only just above want with the
contribution to it, and thus taking away their means of accumula-
tion; and, secondly, by taking away the inducement to accumulate
from those who are the objects of the provision, when they have
the opportunity of accumulating. In thus stopping accumulations
from a class of the community which is far more numerous than
any other, the accumulation of national capital is impeded, and
its rate of profits, in consequence, kept up; while the poor, at the
same time that they are prevented from acquiring and enjoying
these profits, are made to pay to the owners of capital in the
richer and more fortunate classes a higher rate of profit than
would otherwise be required.
Another evil of this provision consisted in its favouring prema-
ture marriage, and a too rapid increase of population, in a class
whose numbers are already greater than can be supported by
its own exertions. While an increase of numbers throughout
all the other classes would tend to the general good, the num-
bers of this class are at present more than are consistent both
with its own interest and with the interest of society at large.
This provision has been applied to maintain the children of the
poor, when their parents were unable to support them, or when
they exceeded a small number in family; as well as to provide
food and employment for the poor, when they themselves were
unable to procure them. It thus released them from all
care or concern about the consequences of impropriety or im-
prudence in their own conduct, and made it matter of indifference
to them whether they obtained full employment and adequate
wages or not; since, if they were insufficient to support a family
by themselves, the parish made up the deficiency. If this pro-
vision had been applied to spread the labourers generally
throughout all occupations, no other inconvenience would have
resulted from their rapid increase than the support of the off-
spring during childhood. But it has not been applied in this
way, and the lowest class have not the ability, without extrane-
ous aid, so to distribute their members. Hence they have been
unable to procure full employment and adequate wages, and no
means of bettering their condition has remained but lessening
the superabundance of their number to some proportion with
232
ON THE REWARDS
the work required to be done by them. Thus this misguided and
indiscriminate bounty removed the natural check to over-popu-
lation, and a disproportionate increase of one particular class,
and so aggravated the mischief it was intended to remedy.
The pecuniary circumstances of the poor, the same as those
of all other classes of society, are intimately connected with
moral causes. It cannot, therefore, be wholly out of place
in a discussion on national industry, briefly to allude to the
moral mischiefs which have flowed from our English system of
poor laws. In substituting compulsory for voluntary charity,
and supplanting benevolence in its own province, as though it
were a superfluous and useless part of the human constitution,
this system, as its natural consequence, extinguished gratitude
in the recipients of its bounty, and raised up in society an angry
dispute between two opposite parties, who regarded each other
as natural enemies; the one endeavouring to resist demands
which were interminable and ruinous, and trying to withhold
and contract relief, the other demanding it as their right, and
endeavouring to enlarge it as much as possible.
"It has
changed the timid supplications of want, into so many stout and
resolute demands for justice. The cry of the distressed few for
pity, has been strangely transformed by it, into the cry of a
whole population for the redress and rectification of their griev-
All the tenderness of charity on the one hand, and all
its delicacy on the other, have been put to flight, by this meta-
morphosis of a matter of love into a matter of angry litigation;
and we now behold the formidable array of a multitude fired
with a sense of oppression against the upper classes of society,
when, in fact, it is the oppression of their own numbers that has
sunk them into a state of abject prostration."* But besides a
wide-spread poverty, the miseries of which these laws have
greatly contributed to aggravate, they are also deeply responsible
for a mass of low debauchery, immorality, and crime, the certain
results of the exemption which its wholesale bounty and tempt-
ation to improvidence have extended to individuals from the
natural and inevitable consequences which follow from indolence,
folly, and profligacy. The burthen of these consequences they threw
* Polit. Econ. in Connexion, &c. by Dr. Chalmers.
ances.
OF OPERATIVE LABOUR.
233
on society, while the parties themselves were allowed to escape
with impunity, and the results amply fulfilled the expectations.
which might have been raised from such procedure.
The wages of labour are greater and the condition of the poor
better, when capital is on the increase, wealth generally diffused,
and society in a state of progressive advancement; but the reverse
when capital is on the decline, or concentrated in the hands of a
few individuals. We have before remarked, and the fact may
perhaps bear to be repeated, that where capital is accumulating,
its investment in some productive way to yield a future revenue
requires the labour more of the poorer than of the better class
of labourers. The productive investment of new capital may
consist in extending cultivation, or manufacture; in fresh and
larger adventures of industry; in new buildings or machinery;
in canals, rail-roads, bridges, and similar public works. These
give employment rather to the poorer than to the better sort of
workmen; and thus make them efficient purchasers in the
market. The poor, in this case, are able to support themselves,
and the public are relieved from the dead-weight, which their
superabundant number occasions. If, instead of investing their
superfluous revenues to yield a future revenue, the people gener-
ally spend the whole on their present enjoyment, in this case,
the workmen whose labour would be most called for would be
such as produce the finer and more expensive articles of luxury;
and the commoner sort of labourers would want employment.
If a man, instead of being contented with plain food, plain lodg-
ing, plain clothing, and laying by something every year to accu-
mulate, must spend everything on himself at once, he must do
so by consuming more costly things. He cannot eat more, or
drink more, or wear more; he must eat, and drink, and clothe
himself more expensively. In this way, the weaver of plain cloth
will lose a customer, and the weaver of superfine will get one;
and so of the producers of other articles, the producers of plain
articles will lose, while the producers of fine articles will gain.
When wealth is generally diffused, its expenditure has like-
wise a similarly good effect; being chiefly expended in plain
articles of necessity and comfort, which employ the common
sort of workmen. But if the same amount of wealth be concen-
234
ON THE REWARDS
trated in a few hands, and its revenue consequently expended in
articles of luxury, this must give employment to the superior classes
of workmen, and the lower classes must be deprived of employ-
ment. It is thus that luxury throws the poor labourer out of
employment, eats up the morsel he would gladly earn, and puts
an end to the reproduction his labour would furnish. A country
given to excessive luxury cannot long save itself from decline.
The smallness of the production of the lower classes of work-
men, through the scarcity of work, must lessen their power of
purchasing in the market; there must be a want of demand for
the articles they consume, and in the end employment for the
higher must diminish. Thus the whole machine of society be-
comes deranged in consequence of a stoppage of one of its parts.
The returns of property, which labour only can furnish, must
fall off; population, knowledge, activity, and capital must de-
crease, and even the rich soon feel the evils which their own ex-
travagance has brought on themselves and on their country.
When employment for the better sort of workmen falls off, they
can descend into a lower sphere, and perform some of the
labours of the inferior classes; and though the produce of their
labour in this case is not of the same value as before, it is still of
some value, and they are not altogether idle and unproductive.
But when work for the lower class of workmen becomes slack,
they can neither ascend nor descend; there is nothing else that
they can do; and they must of necessity remain unemployed,
and burthensome to the rest of the community. This advantage
to society from employing the inferior rather than the superior
sort of workmen, is, however, owing, not to anything in its own
nature better in one mode of living than another, but to the ex-
isting state of society, in which there is a superabundance of
inferior workmen, without sufficient work of the ruder kind to
employ them. Could they learn to manufacture articles of
luxury, the case would be altered, and no greater employment
would result from plain than from luxurious living.
One source of the poverty of the lower classes in England is
the general unprofitableness of the industry of females. We
have observed already that the rewards of labour depend in part
on industry being applied to such occupations as furnish articles or
OF OPERATIVE LABOUR.
235
services which are in request in a degree adequate to their cost.
Female industry presents a striking example, both of how much
valuable time may be lost through want of employment, and of
how much labour may be misapplied in the production of things
for which there is scarcely any demand. The occupations of
women are not sufficiently numerous, and hence these occu-
pations are overstocked with hands, and yield a very inadequate
remuneration to the labour engaged in them. Women seldom
earn more than a part of their expenses, the remainder of which
are, consequently, to be defrayed from the earnings of the men.
The want of employment for females, and the consequent un-
profitableness of their industry, render the sex more dependent,
and are an injury to it, as well as to the community at large.
It would be highly to the interest of females, and of advantage
to society, if custom and prejudice allowed them to follow more
of those occupations that are now followed by men, and which
are suited to their habits of life and capabilities. Serving in
retail shops is an employment which in most businesses is adapt-
ed to female habits, though there are comparatively few in which
females are thus employed. The occupation of a compositor
does not seem to surpass the abilities of women, or to be incon-
sistent with their habits, while their employment in this way
would contribute to render literary works cheap. Besides these,
there are many other occupations adapted to females, but which
it is unnecessary to enumerate.
With reference to the means by which the condition of the
labourer may be ameliorated, we ought not to overlook the in-
fluence which the conduct of political affairs has upon him. In
their proper management, the labourer is interested, not indeed
to an equal extent with the rich man, but to a certain extent,
and in that extent to which his interest does reach, he is, through
weakness, more susceptible of injury. The interest of the la-
bourer, therefore, calls both for wisdom in the direction of
public affairs, and for economy in the expenditure which they
occasion, towards which he, in common with others, is com-
pelled to contribute. Again, his interest calls for an equitable
apportionment of public burthens, and that no more than his
fair share should be required of him. Common justice, indeed,
236
ON THE REWARDS
would point this out with regard to every class, but the poverty
of the labourer seems, in his case, to demand it in stronger
terms. He who has much can bear to have something taken
from him without suffering serious inconvenience. But he who
has little cannot have that little curtailed without its occasion-
ing serious mischief to him. To the workman in the superior
branches of industry, the payment of a tax may only cause an
increase of exertion or a reduction of expenditure in super-
fluities, which may well be spared. But to the common la-
bourer, whose full earnings afford but a bare subsistence for his
family, such payment must curtail his expenditure in the neces-
saries of life, and deprive him of things indispensable to the
preservation of health. We cannot release the labourer alto-
gether from public contributions, because this could only be
done by throwing more than an equitable burthen on the other
classes of society; which justice would equally forbid. It is
difficult, in the complicated systems of modern finance, to deter-
mine with precision how nearly they effect an equitable distri-
bution of public burthens. But, in our own country, there re-
quires but little examination to perceive that the industrious
classes bear more than their just proportion. It has, indeed,
been affirmed that it is immaterial where the pressure of taxes
is placed; since, if any one class be overburthened, it will
ultimately throw off this burthen upon other classes. These
arguments, however, as will be shown in another place, are
without foundation. In a government which has justice for its
basis, an equitable distribution of public burthens must be a
point of the first moment; and hence, it will at all times care-
fully avoid placing on any class more than the fair proportion it
is entitled to bear.
Again, taxes are sometimes imposed on articles of consumption
in such a way as to fetter the exertions of industry, and lessen
its productiveness. As proprietor of labour, the workman is
more especially interested in its freedom, and consequent pro-
ductiveness, than the other contributors to production-the land-
lords and capitalists. Again, at other times, taxes are imposed
on articles which, without them, would be cheap, but with them
are rendered dear. Thus expenditure is diverted from commodities
OF OPERATIVE LABOUR.
237
which are naturally cheap, but so rendered artificially dear, to
others really not so cheap. In this way, while the government
fails to obtain the tax, an injury is inflicted on the consumer by
the attempt to obtain it. In the evil of a want of economy in
expenditure which is thus superadded to the burthen of the tax,
the labourer, in proportion to his expenditure, shares in common
with the other classes.
While, thus, governments are called upon, from motives of
humanity and justice, as well as from views of public interest,
to abstain from oppressing their poorer subjects with over-tax-
ation, and to afford the utmost freedom to the exertions of indus-
try, they are, from the same motives, not less imperatively call-
ed upon to extend to them that legal protection, and secure to
them the enjoyment of those civil rights, which their political
weakness and unrepresented condition, even in countries called
free, render more especially requisite in their case. Despotism
and oppression, with the attendant necessary to their main-
tenance, ignorance, are calculated to debase and brutalize the
character; while, on the other hand, the secure enjoyment of
civil and religious rights gives room for the improvement of the
moral and intellectual character, and the enlargement of all the
human faculties. The labouring classes have suffered op-
pression both from governments and from their own employers.
Our government has not, perhaps, been more free from blame
than others in this respect. Notwithstanding that it ought to
have been its object to secure to the poor all the benefits of
civil society, and the full enjoyment of the natural rights which
belong to them as men, they have been the subjects of never-
ceasing legislation, with restraints and penalties awaiting them at
every turn.
While the property and interests of the landlords
and capitalists have been respected, and encircled with ample
legislative provisions, little deference has been paid to that most
sacred of all property which consists in the personal faculties.
No scruple has been made to entrench on the workman's right
to freedom of exertion, and the right to supply his wants in
the cheapest way he can. The free exercise of industry has been
curtailed in a thousand ways, and its necessary consequence has
resulted to the labourer, in a curtailment of the rewards of la-
238
ON THE REWARDS
bour, and a diminution of the advantages and enjoyments which
would have been derivable from the free exercise of his personal
faculties. Happily the laws which fettered the exertions of in-
dustry have been greatly relaxed within a few years, and are
still further giving way before a more enlightened policy. Pre-
vious to 1825, a man who had acquired a practical knowledge of
any manufacturing process was even prevented from leaving his
country, and heavy penalties were imposed on all persons who
should abet him in so doing. This disgraceful law is now ex-
punged from our statute book. The exportation of tools and
machinery was also strictly forbidden. A discretionary power,
however, is now given to the Board of Trade to relax the law in
this respect, and permission may be obtained for exporting
all the commoner articles of machinery; the Board deciding
upon each application according to its merits. This permission
is highly valuable, since a great foreign demand exists for our
machinery, from its superior make, which affords an opportunity
of extending a branch of industry that yields higher wages and
profits than ordinary, on account of the great skill required
in it.
From their employers the labouring classes have often suffer-
ed. In the adjustment of wages between the conflicting interests
of master and workman, the one endeavouring to give as little,
and the other to get as much, as possible, there is, on all ordinary
occasions, a preponderance of advantage on the side of the
master. In this contest, there are on one side fewer masters,
so that they more readily combine and act in concert; their
wants are less immediate and less urgent than those of the work-
men; their capital enabling them to subsist a long time without
doing any business; while there are few workmen who can long
remain out of work without reducing themselves to extreme
distress. Thus the workmen are frequently oppressed by com-
binations amongst the masters. The masters can usually in-
crease the price of the article to the consumer when a general
combination amongst the men has increased the cost of produc-
tion; but the men can never indemnify themselves in a similar
way from the effects of a combination amongst the masters; and
whilst these effects extend themselves to embrace a greater
OF OPERATIVE LABOUR.
239
number of individuals, they are productive to each of a more
intense suffering. The oppression of the workman, however,
frequently recoils upon the master; and his selfishness destroys
its own object. When the limit of endurance is overstepped,
the labourer revenges his wrongs upon his employer with ten-
fold force in acts of destructive violence, endangering the public
peace and security of property; which furnishes another reason
for preventing combinations which produce such retaliations.
Equal justice demands the equal protection of law to each party
from the combinations of the other, but if any difference of
administration be allowed, the executive ought to keep a more
vigilant eye upon the masters than on the men, since the natural
advantages of position in the former cannot but have already
had an effect in adjusting the bargain for wages between them.
The oppression of the labouring classes may be, in some
measure, ascribed to their not having had a due share in the
enactment of laws and the administration of public affairs.
Without political power to cause themselves to be respected,
they have often failed to procure that respect for their interests
to which they were entitled. It may, perhaps, be thought that
the bias in the direction of public affairs which their influence
would occasion might be one which would add nothing to the
wisdom or propriety of the public will; but probably be produc-
tive of the reverse. Yet, while the poor can have no right to take
the lead and dictate in public measures, they are certainly
entitled to that share of influence which is necessary to the due
protection of their interests.
It is commonly supposed that high wages are injurious to the
commerce of a country, by placing its industry under disad-
vantageous circumstances in the competition which it has to
sustain with other nations in the foreign market. It is thought
that a low rate of wages would enable us to undersell all other
countries, and engross the supply of the foreign market to our-
selves. But an examination of the principles that determine
the exchange of commodities, of which we have already
spoken, will show that this supposition is without foundation;
that commerce, on the whole, is in no degree dependent on
the rate of wages; that it cannot be lessened by high wages,
nor increased by low wages. It is not the dearness of pro-
240
ON THE REWARDS
visions or the expense in general of producing goods in England,
that is the cause which checks our foreign trade. And, on the
other hand, neither would it be increased if provisions were cheap.
In Poland, corn and wages are low, but yet her foreign commerce
is inconsiderable. If labour were never so cheap, we could not
send more goods abroad than we take in return; for we never
give foreigners our goods for nothing. What is it that deter-
mines an individual to exchange one article for another, but that
he has more need of the one which he has not, than of the other
which he possesses? And what is it that determines him to
continue to produce articles which he does not, rather than
those which he does, want, but because he finds he ulti-
mately gets with the money which they sell for more of those
he wants than he himself could produce? It is some re-
lative advantage that he possesses, or superior profit that he
obtains, in producing one commodity, or some relative disad-
vantage that he would labour under, or some low rate of profit
that he must submit to take in producing others, that deter-
mines him rather to continue the course he follows than to
change it. So it is amongst nations. It is this relative facility
or difficulty of producing different commodities, and the in-
equality subsisting in wages and profits in an occupation in dif
ferent countries, and not the rate of wages generally, that give
rise to commerce amongst nations. But prices are dependent
on the distribution of the precious metals; and if commerce were
entirely free, high or low prices could never anywhere exist be-
yond the expense of transport of goods to supply the deficiency
or relieve the excess in the market; for the constant fluctuation
of these metals would prevent them. The fact of the rate of wages
in a country being high cannot cause a difficulty of production
generally, nor can it affect the existing facility or difficulty of
production of particular articles. On the contrary, this high
rate is usually the consequence and evidence of a great pro-
ductiveness of industry, and a large import of the precious
metals. No doubt the rate of wages in any country, in relation
to the rents of land and profits of stock, must determine to what
kind of articles its industry can be directed with the best effect,
and in what a successful competition with other countries can
be best maintained; but this is all. It can neither increase nor
OF OPERATIVE LABOUR.
241
diminish foreign commerce on the whole. When in a particular
country wages are high and profits low, the commodities in
which it most excels in facility of production will be such as
capital and machinery are most employed upon; and these will
be the chief articles of export; while the imports will be those
in which but little capital and much labour are required.
Thus our exports consist chiefly of cotton goods, hardware,
and other manufactured goods, in which machinery is much
employed and the division of labour carried to a great extent;
while those of France are chiefly wines and other productions
of the soil; with jewellery and fancy articles, in which much
manual labour, but not a great deal of capital, is employed. In
a country where land is fertile and abundant in relation to its
population, its natural exports are the productions of the soil, not
those in which labour and capital are principally employed, the
wages and profits of which in such countries are frequently high.
While capital shall continue so much more abundant, and the
rate of profits so much lower in England than in America, it is the
height of absurdity in the American legislature to endeavour by
their tariff to direct their capital to manufacture. If they possess-
ed all the facilities for manufacturing goods which we have; the
same skill and machinery, with the means of effecting an equal
division of employment; they would still remain inferior and un-
equal to compete with us, from the difference in the rate of profit.
in the two countries. Abandoning the advantages they possess in
an inexhaustible supply of fertile land, with ample wages to the
labourers employed upon the soil, and withdrawing their capital
from this most profitable occupation, they embark it in an em-
ployment in which our low wages and profits and our other dif
ferent circumstances must ever give us a decided ascendancy.
If the wages of a particular trade should rise, without a cor-
responding rise in all other occupations, the relative cost of
producing the articles of that trade would rise; and if they had
been usually exported, in all probability, competition with
other countries could no longer be maintained, and their ex-
portation must cease. But while foreigners continue to possess
in a higher degree than ourselves advantages in the production
of particular articles that we need, or while they are willing
VOL. II.
R
242
ON THE REWARDS
to work for a remuneration with which we should be dis-
satisfied, it cannot cease to be our interest to purchase them,
and to pay for them with some article in the production of which
we ourselves possess an advantage or acquire a superior profit
over them. It is not then a rise of wages that can ever be fatal
to the foreign commerce of a country. It may indeed turn it
into fresh channels. But when wages rise, it is frequently the
consequence of a fall of profits; and in such instances, that which
raises the price and destroys the foreign trade in some articles,
must lower the price and cause an opening for the exportation
of certain others. That alone which would naturally destroy
foreign trade would be the acquisition by all nations of equal
facilities in the production of all articles of necessity and con-
venience, and their becoming in all respects precisely similar.
But while differences continue to exist in the soil, climate, and
natural productions of different places, and while the circum-
stances of different nations are unlike each other, this can never
be anticipated. On the other hand, that which would enlarge
foreign commerce would be a more exclusive direction of industry
among nations to single and particular employments, whereby
each would increase its peculiar advantages in the production of
its few and peculiar commodities, and thus occasion a greater
dissimilarity in the advantages and disadvantages of producing
different commodities in different countries.
If our industry has to contend in a foreign market against the
competition of foreign producers, our power of competing must
depend on the efficiency of our domestic industry. The skill of
our workmen and the powers of our machinery are what we
must look to, in order to acquire a superiority. But the effi-
ciency of national industry in the bullion market is the cause of
high money wages.
"To complain," then, " of our high wages,
is to complain that our labour is productive; to complain that
our work people are diligent and skilful. To act on such com-
plaints, is as wise as to enact that all men should labour with
only one hand, or stand still four days in every week."
In countries which are fast advancing in wealth, the great
production of their immense mass of capital, and its low rate of
profit, may, in the price of many commodities, compensate for
OF OPERATIVE LABOUR.
243
their high wages of labour, and enable those countries to sell as
cheaply as their less opulent neighbours, among whom the wages
of labour may be lower.
In reality, high profits tend as much to raise the price of work
as high wages. If, in the linen manufacture, for example, the
wages of the different work-people, the flax-dressers, spinners,
and weavers, should all of them be advanced two-pence a-day, it
would be necessary to raise the price of a piece of linen only by a
number of two-pences equal to the number of people who had
been employed about it, multiplied by the number of days during
which they had been so employed. That part of the price of
the commodity which resolved itself into wages, would rise,
through all the different stages of the manufacture, only in arith-
metical proportion to this rise of wages. But if the profits of
all the different employers of those work-people should be
raised five per cent., that part of the price of the commodity which
resolved itself into profit would rise, through all the different
stages of the manufacture, in geometrical proportion to such rise
of profit. The employer of the flax-dressers, in selling his flax,
would require an additional five per cent. upon the whole value
of the materials and wages which he advanced to his workmen.
The employer of the spinners would require an additional five
per cent. both upon the advanced price of flax, and upon the
wages of the spinners. And the employer of the weavers would
require a like five per cent. both upon the advanced price of the
linen yarn, and upon the wages of the weavers. In raising the
price of commodities, a rise of wages operates in the same
manner as simple interest in the accumulation of debt. A
rise of profit operates like compound interest. Our merchants
and master manufacturers complain of the bad effects of high
wages in raising the price, and thereby lessening the sale of their
goods, both at home and abroad. They say nothing concerning
the bad effects of high profits; they are silent with regard to
the pernicious effects of their own gains, and complain only of
those of other people.*
*Wealth of Nations, Book I, ch. 9.
R 2
!
BOOK III.
CHAPTER I.
ON CONSUMPTION.
HAVING, in the previous divisions of our subject, stated the
principal circumstances connected with the acquisition of the
subjects of economical science; that is, of such things as minister
to the wants and desires of mankind, which exist in a degree of
scarceness, and require labour to procure, preserve, or modify
for use; and this with a view to facilitate labour, or increase
the quantity and quality of its products, and their adaptation to
our wants, as also to diminish the labour by which alone they
can be acquired; having also stated the circumstances which
determine the distribution of these things amongst the several
classes concerned in their acquisition; it remains only, in this
division, to make some remarks on their use or consumption.
It was formerly observed, that, in the productive operations
of industry, no new matter is created, and that new forms
alone are given to that which previously existed. In consump-
tion, in like manner, there is no absolute destruction of
substance. As it is beyond the power of man to create new
matter, so it is equally beyond his power to destroy or anni-
hilate the old. The original matter on which labour was be-
stowed always remains; the consumption extends only to those
properties which labour in conjunction with nature had conferred
upon it-the mode, the form, the utility, or value; these are de-
stroyed and lost. Accordingly, consumption is to be estimated,
not by the matter consumed-the number, weight, or magni-
tude of the objects, but by the qualities which labour aided by
ON CONSUMPTION.
245
rature had conferred. These qualities are most suitably mea-
sured by their exchangeable value.
Consumption, in the sense in which the word is used by poli-
tical economists, is synonymous with use. It is the last end
which men purpose to themselves in undertaking the labour or
sacrifice required both in the original acquisition of things, and in
their distribution and exchange. These last are the intermediary
operations for conveying things to those persons who are to use
or consume them. All the products of industry are produced
in order to be consumed or made use of. They are all liable to
be consumed, either by accident, or by intention; for that which
labour has added to them, may likewise be subtracted from
them; and, accordingly, all that are not absolutely sunk or
buried are sure in the end to be consumed, either by the pro-
ducers or by some other persons in their stead. But they are not
all consumed in an equal space of time; some are much more
rapidly consumed than others. The products of the labour of a
domestic servant are consumed at the time of their performance,
and leave no trace behind. The products of the labours of some
other persons last, and are of service, during long periods of
time, as houses, ships, mills, iron tools, furniture, and the like.
But such things, although more durable than some others, are
all equally consumed with the most perishable. Consumption,
again, may be either partial or total. Clothes or furniture worn
out and cast off by the persons for whom they were made, may
be given to the poor, to whom they may yet be serviceable. A
product wholly consumed cannot be again consumed; the value
or utility given to it by labour is thereby destroyed. The mate-
rial of which it is composed may perhaps still be of use for some
other purpose, or be remodified and again fitted for use, in the
same or another shape. The material of left-off linen clothes
used in the fabrication of paper. The iron of which a tool
is fabricated may be wrought into another similar tool or into
something else. But a fresh application of labour is necessary
in these cases, which is equivalent to a fresh creation: the
former creation is lost, so far as its continued utility in that
form is concerned.
The objects or ends of consumption, and, consequently, of all the
246
ON CONSUMPTION.
preliminary steps to it which labour has undertaken in the original
acquisition, or production, conveyance, distribution, and exchange
of things, are, the support of life, the supply of our daily wants,
and the gratification of our desires. But consumption takes
place in ministering either to present or to future wants and
desires. If the consumption of an object take place in directly
ministering to the immediate support or gratification of the
individual, the last end of industry as regards it is accomplished,
and the result is the immediate support and gratification desired.
If the consumption take place with a view to produce something,
not for present but for future use, the last end of industry is not
yet fulfilled, but its present end is answered by the progress in
the reproduction of something fresh to serve for a future supply.
When the farmer consumes in his own family a part of the pro-
duce of his harvest, the last end of his labour of production is
answered. But when he sows a part of his corn, and gives
another part to labourers to till the land, the last end, as regards
himself, is not yet attained, but remains unaccomplished until
the reproduction be completed; when it commonly replaces
the parts consumed, and affords an increase besides. As re-
gards the labourers, the corn is consumed with no view to fur-
ther production for themselves, but is the recompence of their
productive agency in the creation of a further product.
But in both the ends for which commodities are consumed, it
is not in every instance that the objects of consumption are
attained. Some things are not consumed in a useful way; such
as products consumed involuntarily, provisions spoiled by keep-
ing, things lost, burned, or destroyed accidentally. Even when
consumption is effected with a view to reproduction, an inju-
dicious expenditure may frustrate the intended object, and the
result turn out to be unprofitable both to the adventurer and to
the community. This result may be either inferior, equal, or
superior to the expenditure; or it may be less than the ex-
penditure might have procured in some other way. But these
instances of useless or unsuccessful expenditure are exceptions
to the general rule: in the majority of cases the objects of con-
sumption are attained; and although the products of labour are in
this way destroyed and lost, yet all that was required or expected
ON CONSUMPTION.
247
of them is fulfilled; by their means we are enabled to continue
the labour of constantly producing other things; and by thus
repeating the process, life is prolonged, and renewed enjoyment
acquired, while the ability to labour remains. In consuming
the products of labour, the sources of these products remain
untouched. Land, the agency of nature, and the faculty of
working, are inconsumable. It is true, the labourer is mortal,
the improvements on an estate may be destroyed, the seed
wherewith to sow the ground and the other capital requisite to
give effect to labour may be wholly consumed; their agency
during any given time, too, may be suspended and rendered
inefficient for the present, but that agency remains for the time
to come, and the providence of man seldom allows too large or
too wasteful a consumption; preserving the sources of production.
unimpaired.
When the consumption of the products of industry is deferred
after they have become fully matured, or fitted for use, the
agency of nature and man exerted in producing them has been
exerted in that direction too soon; its products, consequently,
lie inactive and unproductive; and as this agency may always
be employed in the creation of products which may be of use, or
yield a profit to the possessor, a loss is incurred either of the use
or the profit which might have been acquired had that agency
been exerted in another way, or of the satisfaction which might
have been derived from the consumption of some other article
whose acquisition was within our power.
Since all the products of industry are destined for consump-
tion, and that too in the quickest way, it may be asked, how can
there be any accumulation of capital? To this we answer, that
an accumulation of capital may continue to exist, without its
consisting of the same identical articles. Some articles, from
their durable nature, last during a long period of time; but
others which are continually consumed, though they disappear
in one shape, presently reappear in another, through the pro-
duction of their equivalents. The seed which was sown in the
autumn has disappeared, but it will spring up and yield an
increased quantity when the harvest shall return.
The food,
clothing, and materials consumed by the workmen in a manu-
A
248
ON CONSUMPTION.
factory are gone, but they have given rise to the articles of
manufacture whereon the labour of the workmen has been be-
stowed, which are of greater value than the things expended,
and applicable to a new course of consumption. The greater
number of articles of capital cannot be profitably employed to
yield an increase, unless they be consumed and converted into
other articles.
In an estimate of the total consumption of a nation every
kind of consumption must be included, whatever be its motive or
consequence, and whether productive of new objects or not. It
must include not only the sum of the objects consumed by the
different individuals composing the nation, in the supply of their
own personal wants, but likewise all the objects they consume
in the way of reproduction. In the different manufactures
and other kinds of industry, there is a consumption of materials,
fuel, tools, and other items of capital, in carrying through the
different processes to completion. The production of the article
of manufacture costs the destruction of these items, while the
article itself is also destined to be consumed. If the value of
the items consumed in the production were deducted from the
article, it would vastly reduce its value, and an estimate of na-
tional consumption so formed would represent only the sum of
the revenues of all the individuals of the nation. But as both
the finished goods, and the items of capital expended in their
production, are consumed, the gross national consumption is of
much larger amount.
Every person is a consumer, for no one can subsist without
the satisfaction of some necessary wants. On the other hand,
all who are not supported gratuitously contribute to production,
either by their labour or property. Wherefore we may say that
the consumers themselves are the producers; and vice versa.
The consumption of individuals is usually in proportion to
their production; that is, in proportion to their industry, skill,
and property. All that a man produces, and does not give away,
he consumes in the satisfaction of his own wants and those of his
family, or expends in the increase of his property. But the
great bulk of consumption takes place among the middling and
poorer classes, whose numbers more than counterbalance the
ON CONSUMPTION.
249
smallness of the share allotted to each. Opulent, intelligent,
and industrious nations, are greater consumers than poor ones,
because they are incomparably greater producers.
National consumption may be distinguished into two great
heads;—that which takes place with a view to the reproduction of
objects of a greater value, and that which has no view to re-
production, but whose last end consists in the satisfaction to be
derived from the use or consumption of the objects. Again,
this last kind may be divided into that which is present and
complete, and that which, though commencing now, is protracted,
and the final completion of which must take place at a remote
period.
Though all commodities are produced only to be consumed,
we must not conclude that every kind of consumption is equally
advantageous to the individual or the society. The well-being
and happiness both of individuals and of societies most essen-
tially depend on the mode in which revenue is expended. A
wise expenditure has for its object to produce the greatest en-
joyment; for which, as circumstances are continually changing,
no invariable rule can be laid down. In private expenditure,
reference must be had to the circumstances, the fortune, pros-
pects, wants, and inclinations of the individual. An expense
which may be suitable in a rich person, might be highly im-
proper and extravagant in a poor one. In sickness, a man
must allow himself indulgences which he would not think of
when in health. Again, in public expenditure, reference must
equally be had to the circumstances and prospects of the com-
munity. In neither case, is it always saving, or always spend-
ing, that is most advantageous. Individuals may be called on
to spend, not only on themselves, but for the benefit of others.
Even here, however, there are limits. A benevolent act
which curtails the personal comforts of the benefactor is
deserving of praise; but such an act would be culpable, if
performed at the expense of his children's subsistence. A
person, in regulating his expenditure so as to produce the
greatest gratification to himself and family, will save when
saving is calculated to be most beneficial to himself or them,
and will spend when spending is most so. There is, how-
250
ON CONSUMPTION.
ever, this difference in the effects of parsimony on individuals
and on society, that individuals sometimes save to their
injury; nations never. Individuals often debar themselves of
comforts in order to accumulate, and when they have thus ac-
cumulated, they are sometimes suddenly cut off by death; and
sometimes from age or the natural decay of faculties, they are
unable to enjoy their savings. But society lives on; it neither
dies, nor by growing old does it lose its capacity for enjoyment;
and an accumulation once effected, is, in general, permanent: it
seldom becomes dissipated or lost, though the persons who
enjoy it become changed. However, if wealth consumed un-
productively afford greater present satisfaction than its future
larger amount would do if expended productively, it were ab-
surd to defer its consumption. To a finite being a present en-
joyment is of higher value than a future of equal degree: the
present may be secured, but the future is dependent on contin-
gencies; which contingencies, as they may never happen, have
a value. To warrant the delay, the expected future pleasure
must be higher in degree. On the other hand, if the present
pleasure be less than the future would be, it were wise to defer
consumption. The determination of this point with precision,
and the steadily acting up to it, are, in the natural world, like
virtue in the moral world, that summit of wisdom in expenditure
which, next to wisdom in production, has the most powerful in-
fluence on the fortunes and well-being of individuals, of families,
and of nations.
Yet economists, assuming that that consumption must be al-
ways advantageous which is effected in the work of reproduction,
have not always attached that value to unproductive consumption
which it merits. The former they have termed productive, and
the latter unproductive. Setting aside the fact, however, that
neither saving nor spending can be always the most advantageous,
and can only be so under certain circumstances, there appears,
besides, an imperfection in this classification. When a man.
expends capital in employing productive labourers, they say, he
expends it productively. But when he expends the same on his
own subsistence while occupied in productive labour, they say,
he expends it unproductively. Yet the result in both cases is
ON CONSUMPTION.
251
the same. His future circumstances are influenced by the de-
gree of productive industry exerted, and not by the fact of its
being the industry of hired labourers, rather than of himself.
If the terms are admitted, still consumption ought to be ac-
counted productive when it procures a greater return, whether
it be a consumption by the owner on himself or on hired la-
bourers; while that only is really unproductive which is con-
sumed by idle persons, or persons whose occupation produces no
beneficial result. It is said that the wages which are paid to a
ploughman are expended for the sake of production; and that
the wages which are given to a footman are not given for the
sake of production. Now if the master be engaged in some
business or profession, the services which his footman performs
relieve him from performing them himself, and allow a greater
portion of his time to be devoted to business. Hence the effect
on production of the footman's labour may not be inferior to
that of the ploughman. The time of the master is of more
value than that of the servant, and should he dispense with his
footman's services, and perform them himself, the loss which his
business would sustain from the want of the attention which had
formerly been given to it, would more than counterbalance the
saving of the man's wages. The wages both of the plough-
man and footman are the reward of past labour, but there is this
difference between them, that the results of one are to be enjoyed,
and those of the other are enjoyed at the moment. However,
they may be both productive of the same degree of enjoyment,
and perhaps have an equal effect on a future production; though
one is extolled, and the other disparaged. The wages of both when
received by the parties are said to be expended unproductively;
that is, in the support of themselves and families. But, if things
which are consumed answer the end of consumption; that is,
afford the support or gratification which was expected; they are
productive of every purpose that can be desired. An eminent
author, not going so far as those now alluded to, has affirmed,
that" all consumption of the products of art and industry may
be held to be productive if it occasions, whether directly or in-
directly, the production of the same or of a greater quantity of
equally valuable products; and unproductive if it has not this
252
ON CONSUMPTION.
effect." But, if it were admitted that that consumption alone
is advantageous which has future production for its object, as
the term productive would lead ordinary persons to infer, it
would follow that men ought to debar themselves of every lux-
ury, and subsist exclusively on necessaries. The conduct of the
miser would thus be supported by argument, and an attempt be
made to persuade the world to follow his example.
Since tastes and inclinations, as well as pecuniary circum-
stances, differ in different persons, the mode, as well as the degree
of expenditure, most conducive to the enjoyment of any par-
ticular individual, can only be judged of by himself; for what
may be acceptable to one may not be so to another. Personal
expenditure, therefore, is a matter in which governments cannot
advantageously interfere: it should be left entirely free; and we
may be assured, though a few may spend unwisely, the great
majority will manage their expenditure in a much better manner
than any government could do for them.
But though governments have always been incomparably
more profuse in their expenditure than their subjects, they have,
notwithstanding, frequently interposed by sumptuary laws to re-
strain what they considered the improper expenditure of their
people. These laws, which occupied so prominent a place in
the system of legislation of early times, both in this and many
other countries, have now become obsolete in most of the Eu-
ropean states. They are in the present day almost universally
admitted to have been at best useless, if not mischievous; and ast
they were an uncalled-for interposition of authority, they must
be accounted arbitrary, and an infringement of the natural free-
dom of mankind. When the people are fettered in the disposal
of the fruits of their industry, a part of the inducement to labour
is taken away, and they must be expected in consequence to be
less zealous about their acquisition.
Although, however, it is now admitted that sumptuary laws
are calculated to paralyze the exertions of industry, and the
general principle is unquestioned, that it is improper to interfere
by municipal regulation in the expenditure of private persons,
yet an indirect interference is sanctioned, and exceptions are
made to the universal application of the principle. Revenue
ON CONSUMPTION,
253
laws are made the instruments of this interference; and the
lower classes are more especially its objects. Expenditure in
some articles is thought to conduce more to the welfare of
the individual or the public than in some others; and articles
are taxed or exempted from taxes accordingly, for the purpose
of encouraging or discouraging their use. Spirituous liquors,
for example, are heavily taxed, or, in other words, the persons
who drink them are heavily fined, and this, not only in order to
raise a revenue, but to check the consumption of these liquors,
and preserve temperate habits among the people.
The products of industry are more or less perishable in their
nature; some admitting of being kept but a short time, and
others much longer. Food cannot in general be very long pre-
served; clothing may be kept without injury for some years;
buildings, tools, machinery, plate, and some other things, last a
great number of years. The stock of food, clothing, and other
perishable articles is almost as regularly consumed as it is pro-
duced, and that within a short time. But, although the objects
are consumed, they may, in one case, be said to be saved, and
in another spent, according as they are consumed by persons en-
gaged in productive labour, or by those who are not so employed.
With regard to that expenditure of revenue which has not re-
production for its object, it may take place, either on things
that are immediately and totally consumed, which leave
nothing behind of a permanent nature, and in which one day's
expense contributes nothing to heighten or support that of an-
other, or it may take place on things of a more durable character,
for more remote and protracted use and consumption, which
may therefore be accumulated, and which, though ultimately to
be consumed, are destined to last for a long time, and afford use
and enjoyment to their possessors during all that time, in which,
moreover, every day's expense may either alleviate, or support
and heighten, the effect of that of the following day.
"A man of fortune, for example, may either spend his re-
venue in a profuse and sumptuous table, and in keeping a great
number of menial servants, dogs, and horses; or, contenting
himself with a frugal table, and few attendants, he may lay out
the greater part of his income in adorning his house or his
254
ON CONSUMPTION.
country villa, in useful and ornamental buildings, in useful or
ornamental furniture, in collecting books, statues, pictures; in
things more frivolous, as jewels, baubles, ingenious trinkets of
different kinds; or, in the most frivolous manner of all, by amass-
ing a great wardrobe of fine clothes, like the favourite and minis-
ter of a great prince who died a few years ago. Were two men of
equal fortune to spend their revenue, the one chiefly in the one
way, the other in the other, the magnificence of the person
whose expense had been chiefly in durable commodities, would
be continually increasing; every day's expense contributing
something to support and heighten the effect of that of the fol-
lowing day; that of the other, on the contrary, would be no
greater at the end of the period than at the beginning. The
former, too, would ultimately be the richer man of the two. He
would have a stock of goods of some kind or other, which,
though it might not be worth all it cost, would always be worth
something. No trace or vestige of the expense of the latter
would remain, and the effects of ten or twenty years' profusion
would be as completely annihilated as if they had never
existed.
"As the one mode of expense is more favourable than the
other to the opulence of an individual, so it is likewise to that
of a nation. The houses, the furniture, the clothing of the
rich, in a little time, become useful to the inferior and middling
ranks of people. They are able to purchase them when their
superiors grow weary of them; and the general accommodation
of the whole people is thus gradually improved, as this mode of
expense becomes general among men of fortune."
The consumption of different articles must be relatively ad-
vantageous or disadvantageous according as the satisfaction their
consumption affords is greater or less in proportion to the cost
of the articles. The consumption of a cheap article which
affords an equal gratification with another which is dear, must
be more advantageous than that of the dear one. While the
loss by the destruction of the article consumed is less in the
former case than in the latter, the saving is applicable to procure
further objects of consumption.
In this point of view, the consumption of objects of real utility
ON CONSUMPTION.
255
and serviceableness, and which minister to actual rather than to
capricious wants, is more advantageous than that of objects of
less urgent need, or which minister only to display on an already
satiated appetite. When national consumption is directed chief-
ly to wholesome and palatable food, warm and comfortable
clothing, commodious houses, in short, to articles of convenience
and cheapness, rather than of costly display, a higher degree of
public gratification will be the result than when it is directed to
objects of splendour, rarity, and ostentation, and such as minister
only to a pampered appetite or to vanity and pride. Again, in
expenditure, those things which are good in their quality, which
are the longest in wearing out, and the most frequently in use,
are usually objects of judicious preference. Of this kind are
good houses and furniture; for there are few things which take
a longer time to consume, and are more constantly in use.
A family, or a nation, may certainly consume the whole of its
revenue, without being impoverished thereby; but it does not
thence follow that it would act wisely in so doing. Under the
uncertainty of tenure and liability to reverses to which all human
affairs are exposed, common prudence would counsel to provide
against casualties; for, without this, whenever they happen,
the income must be diminished. But supposing it to remain
stationary, a fortune, however large, will seem small enough
when it comes to be divided amongst a number of children.
And, even if there be no occasion to divide it, as respects the
family of the owner, we should recollect that a full portion of
general happiness can alone consist in a state of advancement in
opulence and numbers; and an increase in the fortunes of others.
is necessary to this. If preceding generations had not been
actuated by the frugality which accumulates capital, and there-
by assists the progress of industry which leads to national opu-
lence and civilization, the present would now be in a state of
barbarism. Our wealth, our arts, our intelligence, nay, even
our religion itself, would have had no existence; and it is im-
possible for us to say how much further advancement in all these
may still be carried by increased opulence.
In consumption, prodigality and avarice are the two extremes
to be avoided. Prodigality, of the two, is regarded with the
256
ON CONSUMPTION.
most indulgence, because it is allied to many amiable and
social qualities, and because it imparts its pleasures to others:
yet it is in the highest degree mischievous to society. The
prodigal, while he ruins himself, and dissipates in idleness and
extravagance those funds which the frugality of his forefathers
had, as it were, consecrated to assist the efforts of the industry
of posterity, to increase its fruits, and contribute to the supply
of the future wants of society, is at the same time the worst
possible member of society. In squandering away capital, he
puts a stop to its further production, and lessens the future pro-
ductiveness of the industry of his country. It is true, the
effects of the prodigality of some individuals are usually coun-
teracted by the economy of others, and thus rendered apparent-
ly nugatory. But they are far from being so in reality. To
perceive the real consequences which prodigality is calculated to
produce, we must reflect on what would be the result if every
one were to follow the example, and annually encroach upon his
fortune. In a few years, a state of universal poverty must ensue,
and the population of the country be swept off, by the diminu-
tion of the capital which contributed to its subsistence. But
since the dissipation of the prodigal is generally counteracted
by the frugality of others, the effects are confined to preventing
the benefit which would have accrued from an increase of
capital, had the accumulations of these others not been counter-
balanced by his dissipation. Money is, indeed, made to be
spent, and products are created only to be consumed; but not
all at once, leaving nothing for the future. Money is to be
partly spent, and partly employed productively for future uses.
If the farmer consume in his family all the corn that he raises,
and leave none for seed, how can he look for a future harvest?
There is no skill or talent required in keeping an expensive
establishment, and spending all that is within reach, and no merit
in desisting only when nothing more remains to be consumed.
The miser who, in the dread of losing his money, refuses to em-
ploy it in any way, does, indeed, nothing to assist industry; but
he, at least, does not withdraw any assistance it previously pos-
sessed. His hoard is scraped together by the abridgement of
his own personal gratifications; it has not been withdrawn from
ON CONSUMPTION.
257
any productive occupation, and will at any rate be available at
his death for extending the operations of industry.
Economy is nothing more than the direction of expenditure
with judgment and discretion; -the employment of our means in
the most effective manner, with regard to the ends to be obtain-
ed--present and future, and the cost at which they must be ac-
quired. It is equally distant from avarice and from profusion.
The economical man balances his means against the present or fu-
ture wants of himself, his family, and friends. He never consumes
without an object equivalent to the sacrifice. Economy has been
ranked among the virtues; for like them it implies self-command
and control, and is productive of the happiest consequences. With-
out it, there can be no liberality of a permanent and wholesome
kind; but economy affords riches with a moderate fortune; while
the miser and the prodigal are alike poor, though in possession
of the largest resources. Frugality and simplicity of manners
tend to order, to virtue, and happiness; while, on the other hand,
luxury and extravagance are the hotbeds of vice; they are
inseparably connected with privation and suffering, and in their
consequences are of the greatest mischief to society.
A state of great destitution in the poor is the usual accom-
paniment of great riches and luxury. That it must be so will
be evident if we reflect, that there is in every community only a
certain number of labourers, and only a certain quantity of
capital, and that these are able to produce a certain quantity of
goods and no more. The kind and quality of the goods that are
produced are determined by the demand for them; that is, by
the tastes, inclinations, and means of the consumers. If plain and
useful articles are most in request, these, in consequence, are
produced in greatest quantity: if, on the contrary, articles of lux-
ury and splendour are more sought for, in such case, these are sup-
plied in the greatest abundance. But since the power of pro-
duction is limited, in proportion as more of one sort is produced
must less be produced of another. If the rich require a great
quantity of labour and capital to be concentrated, if it may be
so called, in a few commodities of small bulk and extraordinary
costliness, so that they may be able to consume it themselves,
there must be a smaller portion of labour and capital left to be
VOL. II.
S
258
ON CONSUMPTION.
!
expended in the production of plainer articles for the use of the
rest of the community. The more the rich consume, the less
must be left for other people. This conclusion of theory is
evidenced by experience in every country where great inequality
of private fortune exists, and the contrast is the more striking in
proportion to the magnitude of the fortunes of the rich.
"The
gold buckles of the rich man leave the poor one without shoes
to his feet; and the labourer will want a shirt to his back, while
his rich neighbour glitters in velvet and embroidery. It is vain
to resist the nature of things. Magnificence may do what it
will to keep poverty out of sight, yet it will cross it at every turn,
still haunting, as if to reproach it for its excesses.
This con-
trast was to be met with at Versailles, at Rome, at Madrid,
and in every seat of royal residence.” * On the other hand, in
countries where private fortunes are smaller, and luxury less
prevalent, the degree of misery is less also.
The passion for indulgences among the rich is, however, too
powerful to be much controlled by reasoning, and it would be
vain to expect much from decrying luxury or preaching up fru-
gality. But it cannot be denied, that in some instances luxury
and extravagance in the rich have been fostered and increased
to an extent beyond what they would otherwise have reached, in
consequence of the false notions which have prevailed as to the
effects of their expenditure on society. Traders, who have sel-
dom looked beyond themselves and their immediate connexions,
have been ever ready to advocate a large expenditure in their
superiors, never regarding distant consequences, or the means
by which a large expenditure is to be ultimately maintained.
Unfortunately, economists, from whom better views ought to
have been expected, have contributed their authority to the pro-
pagation of the popular error,-that prodigality is of more benefit
to the public than economy. Favouring human propensities,
these opinions have not been without their effect; though rea-
sonings more conclusive, opposed to these propensities, might
have been ineffectual. Some of these opinions, therefore, call for
observation in this place.
One of these is, that to induce a taste for luxuries, and to
* M. Say, Book III. ch. 5.
ON CONSUMPTION.
259
excite mankind to expend or consume, is to excite them to pro-
duce; and that those who produce superfluities conduce to the
production of necessaries. Dr. Paley says, " A watch may be
"A
a very unnecessary appendage to the dress of a peasant; yet if
the peasant will till the ground in order to obtain a watch, the
true design of commerce is answered; and the watchmaker,
while he polishes the case and files the wheels of his ingenious
machine, is contributing to the production of corn as effectually,
though not so directly, as if he handled the plough or the spade.
The use of tobacco is an acknowledged superfluity; but if the
fisherman will ply his nets, and the mariner fetch rice from fo-
reign countries, in order to procure to himself this indulgence,
the market is supplied with two important articles of provision
by the instrumentality of a merchandise which has no other
apparent use than the gratification of a vitiated palate." Now
it is true that the producers of superfluities conduce to the pro-
duction of necessaries, as much as though they were occupied
directly in their production; because they require necessaries for
their support, and having desirable articles to offer in exchange
for them, a demand for necessaries is thus created, and they are
produced in greater quantities than would be the case if no such
persons existed as these producers of superfluities, and the po-
pulation were by so much the less. But it would be wrong to
suppose that more necessaries are produced in consequence of
the production of superfluities; for, while the population re-
mains the same, the same quantity of necessaries must be pro-
duced for their support, though superfluities were unknown. In
such case, those who now produce superfluities would have
nothing to offer to the producers of necessaries to procure a
supply of necessaries, and must consequently produce them them-
selves; so that, in fact, there would in such case be more neces-
saries produced instead of less. Industry is indeed excited in a
higher degree by the production of superfluities; for, if men
will have these superfluities, they must pay their cost, and they
cannot do this without working harder than they need to do to
procure mere necessaries.
But is greater industry a benefit? Is it "the stimulus which
the desire to possess articles of luxury gives to industry that
s 2
260
ON CONSUMPTION.
renders their introduction advantageous?" If this were true
we must conclude, that there is nothing really good in the satis-
faction which articles of luxury confer, and that it is the labour
alone which they excite that is advantageous. But labour and
toil are what we naturally dislike, and as much as possible avoid.
It is only the pleasure which their fruits afford that compensates
for the sacrifice, and reconciles us to endure the toil. Let the
exhausted, the worn-out, the ill-paid, and dispirited labourer
answer, whether labour is good for its own sake; and whether
he likes, while half-stripped of its rewards, to be reduced to toil
for toiling sake? Unquestionably, the producers of superfluities
are highly useful members of society; they afford the means of
obtaining articles which afford a high degree of pleasure, and
which pleasure could not be procured at all except through their
instrumentality. But it would be reversing the order of things
to conclude that it is the greater industry thus excited which
constitutes the benefit. It is the pleasure alone which su-
perfluities yield that is beneficial. Pleasure is equally valuable
from whatever innocent source it may be derived. It is the
degree alone, and not the source, that is worthy of attention.
Let an occupation be as frivolous as blowing bubbles in the
sunbeams, yet, while it interests and amuses, it is quite as rational
as any other which produces superfluities, though they may be
highly valuable articles of wealth.
In support of the opinion that it is the stimulus to industry
which renders the introduction of articles of luxury advan-
tageous, it has been said, "The earth is capable of furnishing
food adequate for the support of a much greater portion of hu-
man beings than can be employed in its cultivation. But those.
who are in possession of the soil will not part with their produce
for nothing; or rather, they will not raise at all what they can
neither use themselves nor exchange for what they want. As
soon, however, as a taste for conveniences and luxuries has been
introduced, the occupiers of the ground raise from it the utmost.
that it can be made to produce, and exchange the surplus for
such conveniences and gratifications as they are desirous of ob-
taining; and, in consequence, the producers of these articles,
though they have neither property in the soil, nor any concern
ON CONSUMPTION.
261
in its cultivation, are regularly and liberally supplied with its
produce. In this way, the quantity of necessaries, as well as of
useful and agreeable products, is vastly increased by the intro-
duction of a taste for luxuries; and the population are, in con-
sequence, not only better provided for, but their numbers are
proportionally and greatly augmented."* In opposition to what
is here said, it may be replied, if the owners of the soil will not
raise what they can neither use themselves nor exchange for
what they want, it does not follow that, having more land than
is of any use to them, they should prevent the starving manu-
facturer of luxuries from raising on it a supply of food for him-
seif and family. They could have no interest in compelling him
to die of want, since the land would be of no value when nothing
existed which could be offered in exchange for it; and it would
be attributing to them a disgraceful selfishness to say they would
neither cultivate it themselves nor suffer others to do so. It
would be out of place here to go into the foundation of the right
to possess the soil and exclude others from using it. It is suffi-
cient merely to glance at it. The world is the gift of God to
the species, and men are bound in duty to use it for the pur-
poses for which it was given; that is, for the sustentation and
happiness of the species. Now as duty and right are correla-
tives, there can be no exclusive right to the soil in any indi-
vidual, except on condition of using it, or suffering it to be used,
for the sustentation and enjoyment of mankind. If such were
not the case, the Indians of America would have had a right to
maintain a whole continent a wilderness, for the sake of pre-
serving their hunting grounds. No civil laws, founded in jus-
tice, could maintain an ownership in the soil for the purpose
of keeping it a waste. If, then, there were no luxuries to
tempt the landowners to cultivation, the soil, as matter of right,
must be in part decreed to those who are now the producers of
luxuries, for them to cultivate. In such case, the quantity of
necessaries, and of useful and agreeable products, would be as
great as at present; the population would be equally well pro-
vided with necessaries, and its numbers as great as now. The
difference would be, that having no luxuries to toil for, men
* Mr. M'Culloch, p. 398.
.
262
ON CONSUMPTION.
would be but half employed; each, however, would be supplied
with that simple fare and those coarse necessaries which his la-
bour would produce.
While, however, it is true that to excite mankind to expend
or consume, in certain circumstances, is to excite them to in-
dustry, who that looks at the constitution of our nature can
doubt, that the desire to spend is always sufficient for its pur-
pose, without any unnatural excitement? Mankind are already
too prone to sacrifice the future to the present; although the
only chance of amelioration consists in foregoing the present
temptation for the sake of adding to the future means of enjoy-
ment. The difficulty lies not in exciting an inclination to spend,
but in acquiring the means to support expenditure. And the
fallacy of the position rests on the assumption that it is equally
within the power of mankind to produce as to consume. Even
the beggar would spend as much as the prince, if he had his
will.
And why is it that he does not, but because it is not in
his power? What then is " the first and grand object" which
political reasonings point out as the end to be attained? Not,
surely, "to excite a taste for superfluities," for this taste already
exists in every state and condition of mankind, from the most
barbarous to the most highly civilized, in a more ravenous de-
gree than any exertion of labour and any combination of skill
and capital which we are able to form can completely satisfy.
Exciting in a higher degree a taste for superfluities and splen-
dour, without giving the means of its gratification, would be
communicating a mental disease without affording its cure;
which could only lead to discontent, to endless labour and toil,
and prove a curse rather than a blessing to mankind. The in-
satiableness of our wants, with the absence of all contentment,
forms already the greatest of drawbacks on our happiness, and
the fruitful source of crimes. A more likely means of pro-
moting public happiness is to be found in that course which in
private life most conduces to the happiness of individuals; this
is, the proper regulation of our affections, the checking of arti-
ficial and capricious wants, and moderating our desires within
the limits which our fortune prescribes. Surely that which is
wise in an individual or family cannot be folly in a nation.
In
ON CONSUMPTION.
263
order to produce, something more is necessary than the desire
to spend there must be the ability to produce, to which capital
and skill are necessary; and the greater these are, the greater
will be the production. To their acquisition, however, the de-
sire of splendour is adverse; for by increasing expenditure it
lessens capital, and capital can only be increased by frugality.
Again, an excessive appetite for expense usually incapacitates
for steady and unremitting application to business, and thus
diminishes instead of increasing the produce of labour. Affluence
seldom takes away the motive to exertion, or the desire to be-
come still richer. No sooner are necessaries supplied, than
artificial wants spring up, equally clamorous and more numer-
ous than those which are strictly necessary, and they increase
exactly in proportion to the increase in the means of gratifying
them. If we seek to rise, not by the torturing goad which a
passion for extravagance and display induces, but by economy
in expenditure, and the application of capital accumulated from
savings to increase the efficiency of our industry, the ascent will
be easy. In the former method, the advance must be not only
uncertain and hazardous, but liable to lamentable reverses: at
the best it must be painful and toilsome. In the latter, it will
be certain of success; and a continually augmenting property
must afford that maximum of enjoyment which property is
capable of yielding. But if greater exertions of labour be effect-
ed by the love of display, it may be that happiness may be
diminished rather than increased thereby. Excessive sacrifices
of labour may not only be irksome, but wear out the bodily
frame, and bring on a premature decay of the faculties. The
progress of society, both in opulence and enjoyment, depends,
not on additional excitements for superfluities, but by facilitat-
ing their acquisition; which can only be effected by that frugal-
ity which leads to an increase of capital and skill.
Again, it is said, that without the stimulus of want, the lower
classes could never be impelled to labour; so that neither the
upper classes, nor society at large, could derive benefit from their
exertions. Happily this assertion is not better founded in fact,
than any course of action prompted by it would be in humanity
and justice. Were nakedness and want the greatest incentives
264
ON CONSUMPTION.
to labour, the savage would be the most diligent and laborious
of his species; for he is nearest of all to nakedness and destitu-
tion. Yet his indolence is equally notorious and incurable. But
to ascribe his indolence to a disinclination for the comforts of
life, or a want of taste for its luxuries, would be to ascribe it to
anything but its right cause. So far as our superfluities are
known to him, they are in general eagerly sought for. His
cupidity and propensity to thieving, his passion for finery and
display, and for excessive indulgence, when it is in his power,
are as remarkable as his idleness. Throughout Europe the lazi-
est nations are those the least removed from the savage state;
while, on the other hand, the best and most industrious me-
chanics and tradesmen are those who are most above wan:.
Wants multiply as fast as they are satisfied, and a man is never
without a motive to make a further acquisition, in consequence
of having made one already. It is the excessive toil of labour,
the smallness of its remuneration, and the hopelessness of ad-
vancing himself in life, that depresses the energies of the work-
man, and takes away the motive to exertion. But, since the
wealth of a country depends mainly on the skill and intelligence
of the industrious part of its population, if the working classes
are wretchedly poor, they must be unable to bear the expense of
the years of unprofitable labour necessary to qualify their chil-
dren for the skilful performance of the different arts. The
poverty of the lower classes overburthens and gluts the market
with the commonest sort of labour; and renders the labourers
who are incompetent to any superior kind of work idle through
necessity. Had they money sufficient, they would learn the
mechanical arts, and, instead of impoverishing, would contri-
bute to the prosperity of their country. Every class has an
interest in the welfare of every other, because, when others
are able to contribute largely to the expenses of the state,
the burthen on its own members will be less. But it has a
more especial interest in the welfare of the lowest class, since it
is the most numerous, and since, instead of being a help, it is
already a burthen to the others, which its advancement would
enable them to shake off.
Another popular error is, that the expenditure of the rich
ON CONSUMPTION.
265
affords employment to the poor, that they are in consequence
the support of industry, and the cause of production; while
frugality is thought to be adverse to the public welfare, by de-
priving workmen of employment. But the fact is, that the
money which is spent in luxuries and extravagance is not more
beneficial in circulation than the money which the miser lays
out in some way or other to acquire a future return of profit or
interest. Spending does not cause employment
nor does
hoarding diminish it. They neither increase nor lessen the de-
mand for commodities. The quantity of labour for which a
demand is created by the expenditure of revenue depends on the
amount of the expenditure, and not on the mode in which it is
expended. The mode merely directs the peculiar channels in
which industry shall flow. Revenue may be expended as
capital with a view to further production, or as revenue in the
personal or domestic expenditure of the owner; and the same
degree of employment be given in both instances. Adam Smith
has long ago exhibited this in a striking manner.
He says,
"What is saved, is as regularly consumed as what is spent, and
nearly in the same time; but it is consumed by a different set
of people. Whatever a person saves from his revenue and adds
to his capital, he either employs himself in maintaining an addi-
tional number of productive hands, or enables some other person
to do so, by lending it to him for an interest, that is, for a share
of the profits. That portion of his revenue which a rich man
spends is, in most cases, consumed by his guests and menial
servants, who leave nothing behind them in return for their con-
sumption. That portion which he saves; as, for the sake of the
profit, it is immediately employed as a capital; is consumed in
the same manner, and nearly in the same time too, but by a
different set of people: by labourers, manufacturers, and arti-
ficers, who reproduce, with a profit, the value of their consump-
tion. His revenue, we shall suppose, is paid him in money.
Had he spent the whole, the food, clothing, and lodging, which
the whole would have purchased, would have been distributed
among the former set of people. By saving a part of it, as that
part is, for the sake of the profit, immediately employed as a
capital, either by himself or by some other person, the food,
266
ON CONSUMPTION.
clothing, and lodging, which may be purchased with it, are
necessarily reserved for the latter. The consumption is the
same, but the consumers are different."*
.
The facts that saving from revenue, in order to add to pro-
perty, makes no change in the quantity of employment offered
to the workmen, and that the luxurious extravagance of the rich
is not more beneficial than the careful expenditure of the frugal,
ought not to be lost sight of, from the prevalence of the contrary
opinion, and the mischievous tendency of such opinion when
acted upon. A division of employments occasions industry of
one kind to give employment to industry of other kinds. A man
cannot consume all the articles he produces, but must exchange
the major part of them for articles of other kinds produced by
other persons. An increase of the articles he produces creates
an increased demand for the articles produced by others. But
whether a man expend his revenue in the supply of his own wants
and the gratification of his own desires; whether he expend it
in a productive way to increase his future income, or whether he
give it to others to expend in any way they please; no difference
can be effected in the extent of employment it affords: it is the
amount only which is expended that can do this. Whatever
encouragement ostentatious extravagance affords to one class of
producers, by the expenditure of money, or, which comes to the
same thing, of the things which that money represents, in the
purchase of articles to minister to pride and luxury, necessarily
diminishes in the same proportion the encouragement which,
without it, would be afforded to some other. Money cannot be
laid out to produce an interest or return without being expended,
and its expenditure must cause a demand for labour. Savings
in one quarter may, indeed, be only sufficient to compensate for
extravagance in some other quarter. But all other savings must
be expended either in the creation of new property, or em-
ployed in the extension of business. Savings are often expended
in the purchase of old property, but this is a mere transfer-
ence of the saving from one person to another: the man who
procures the saving in exchange for the old property he has
sold has still to employ it; there is no difference in the result,
* Wealth of Nations, Book II. ch. 3.
ON CONSUMPTION.
267
and the only difference is in the change of parties that ultimately
spend it. The saving may be spent in a variety of ways: in
erecting some new building, or in enlarging, repairing, or im-
proving some old one; constructing some new machine, or doing
something to facilitate and increase the productiveness of future
labours; breeding more horses, extending or heightening culti-
vation, or extending manufactures or trade. In whatever way.
it be expended to produce a profit, it must go in the purchase
of labour and natural products, on which to bestow the labour,
in order to render them of use.
While, however, saving from revenue in order to add to pro-
perty makes no difference, in the first instance, in the quantity
of employment afforded to workmen ; but merely effects a change
in the direction of industry, and causes a demand for one sort of
workmen instead of another sort, leaving employment on the
whole the same; it is worthy of notice, that the additional
revenue which subsequently accrues, as the result of the saving,
offers greater employment for labour in time to come, by the
supply of a greater quantity of things wherewith to purchase it,
and the means of maintaining an increased population; while a
larger capital opens new sources of industry, and enlarges old
ones to a greater extent, at the same time that it improves the
condition of the workmen, by lowering profits and rendering the
wages of labour equal to the purchase of a larger quantity of
goods. It is the want of property, and smallness of the produce
of the labour of partially civilized nations, which causes that
mortality which acts so powerfully in keeping down their num-
bers. It is the property, the intelligence, and, consequently, the
immense produce which the labour of civilized nations yields,
that enables them to maintain in health and affluence a dense
population, with perhaps small natural resources. And the
more this property and intelligence are increased, the better will
be the circumstances of the people. Now if every one spent
each year the whole of his income for that year, he could never
become richer, and these advantages could never be acquired.
Since, then, luxury cannot afford employment more than would
exist without it; since, again, in those instances in which it may
occasion an addition to the wealth of a country, it only does so
268
ON CONSUMPTION.
by inducing uncalled-for and excessive exertions, while its
general effect must be to keep down public wealth and im-
poverish a nation; how great would be the mischief which would
result from acting on the opinion, that frugality is adverse to
the public welfare, and that the most useful man is he who
spends the most! How false, too, is that reasoning which extols
excessive self-indulgence into a virtue, and extravagance and
ostentation into beneficence and patriotism! Though vanity
may pride itself in idle expense, its display of magnificence is
nothing more than a display of selfishness; and though it may
endeavour to shelter its deformity under the mask of virtue, it is
in reality no less contemptible from the motives which actuate it,
than it is mischievous in its consequences.
To affirm that the rich by their expenditure support the in-
dustrious population is an absurdity too glaring to need refutation.
It is an assertion, too, which is degrading and insulting to the
poor. There would be as much ground to affirm that the poor
support the rich. The fact, however, is, that each man supports
himself, either by his personal labour, or by the property which
either he or his ancestors have acquired-probably by industry
and frugality. The rich give nothing to the labourer without
exacting an equivalent in return for what they give. The poor,
again, give nothing to the rich of which they do not receive the
full value. The parties only exchange equivalents, as either the
poor or the rich may do amongst each other; and there is no
more advantage in exchanging with the rich than with the poor.
It is a voluntary exchange, implying on each side a preference of
what is received to what is given. Neither can we affirm that
an obligation is due from one to the other on either side. If
the rich desire to confer an obligation on the poor, something
more than the market price ought to be given.
Frequent changes of fashion are to be deprecated. A com-
pliance with fashion causes things to be thrown away which
have lost neither their utility nor beauty. This multiplication
of expense is only induced for the purpose of appearance, and of
acquiring or maintaining a certain rank in the estimation of the
world, as indicating that we are equal to some and superior to
others. But pride must be accounted a selfish passion. Its
ON CONSUMPTION.
269
indulgence makes an invidious distinction to the prejudice of those
beneath us, and of those who, though not beneath us, are yet too
wise to go to the same expense ;-a distinction which is calculated
to excite envy, hatred, and discontent in their minds. Pride is that
curse which blasts and renders nugatory the noblest exertions to
raise the condition of the species. What is the end of all the studies,
the inventions, the labours of men in advancing knowledge and
promoting improvements in the arts, but to lessen the labours of
mankind, and enable them to acquire a comfortable subsistence
with less exertion? No sooner, however, is an invention or im-
provement for abridging labour introduced in effecting any
object of human exertion, than the expense which is saved in
procuring this object inevitably leads to a greater expense in other
things, and there is no saving of labour or expense of living on the
whole; for the same expense as before is necessary to maintain
the same distinction of rank. The improvements which have
taken place in manufactures, although they have greatly re-
duced the prices of articles of clothing, have yet not at all less-
ened the expense of dress on the whole; for the plainer and
coarser clothing previously worn has been abandoned, and can no
longer be used, because it has become the dress of the commoner
sort of people, and respectable persons have had recourse to arti-
cles of finer texture and more costly materials. Thus all the im-
provements and inventions of machinery in our manufactures have
had but small effect in bettering our condition, and rendering
less exertion necessary to our comfortable support, because
fashion and pride have driven us from the use of the old,
plain, and cheap articles, and compelled us to adopt those of
finer workmanship and more costly fabric, though many of them
not at all better in themselves or more agreeable in use. If it
were not that our friends would be ready to shun our society
and cast us out from the circle of their acquaintance, there
would be only a small part necessary of the expense which we
incur to afford us quite as much real use and gratification. This
necessity of keeping up an outward appearance of affluence ex-
tends to every branch of expenditure ;-to our houses, furniture,
apparel, attendance, to the labour we perform, or the avoca-
tions we follow; all of which must be regulated by the standard
270
ON CONSUMPTION.
that the world affixes as indispensable to our station, and
which serve to keep up the appearance of wealth, where
actual poverty may exist. This is a weakness in human na-
ture, which is contrary to reason. It is, perhaps, a relict of
slavery, since we find in all countries where slavery exists, that
those laborious occupations performed by slaves are considered
derogatory to free-men. If we look forward to a time when the
conduct of mankind shall be freed from such influence, and reason
only shall be their guide, how much greater will be their ease,
independence, and happiness, and how much wider will the be-
nevolent principle extend its operations! Thus it is that pride
is the hardest and most inexorable of all taskmasters, enchain-
ing and perpetuating upon us the full burthen of the curse of
earning our bread by painful and incessant exertions, in spite of
the efforts of science to lighten its pressure. There is no vice
which deprives men of so many gratifications, which excites so
many cares and apprehensions, and is the occasion of so much
suffering in the world, as pride; for there is none so universal.
All the other vices are more or less kept in check by the laws of
society or public opinion; but this is suffered to run rampant
without control, not only through its exemption from civil re-
straints, but from the very approbation which popular feeling
awards to it. The compliance with expensive fashions on the
part of a few individuals induces others to imitate their exam-
ple, and spend more on themselves than they otherwise would
do, and this, not for the sake of any real utility or pleasure
which can be procured thereby, but merely for the purpose
of appearances. Thus such compliance impoverishes, in a
measure, not only those who set the example, but all those of
inferior fortune who imitate it. We may consequently rank
amongst the destroyers of social happiness those persons who
employ power, station, or talent in cherishing a spirit of pride,
and diffusing a passion for expense. The insatiable appetite
which luxury induces, while it swallows up the largest portion
of the produce of labour, acts as a preventive check on the mul-
tiplication of the human race.
It might be well if those persons in whose hands riches are
placed, almost in excess, would reflect sometimes on the amount
ON CONSUMPTION.
271
of human labours which they consume and destroy in the grati-
fication of their own personal wants and desires, and those of
their families. Many of our nobility consume the produce
of the labours of thousands of persons; some of whom, from
the smallness of the remuneration allowed for their work,
have to struggle against poverty in supporting themselves and
families, and to labour beyond the usual hours of work with pain-
ful and unceasing toil, at the expense of their health and
strength, and all to produce what adds but, as it were, a drop in
the ocean to the enjoyment of the rich man who unthinkingly
consumes it, and who, notwithstanding the multitude employed
to minister to his pleasure, is, after all, not happier than the
generality of those who labour for him. Indeed, after the com--
mon wants of our nature are satisfied, happiness is to be found,
not in the frivolous enjoyments of luxurious vanity, but in the
proper government of our affections, and the rational exercise of
our bodily and mental faculties. But there is a moral offence in
extravagant profusion. Is there not an unworthy selfishness in
men who thus destroy and consume so much on themselves, and
allow so little for the support of those who labour for them?
And is it not, if one may so call it, a wanton sporting with the
miseries of mankind, alike inconsistent with reason and with.
that benevolent conduct which is incumbent on us? The boun-
ties of nature, though liberally bestowed, are bestowed in
measure only enough, but without excess. They are intended.
for the happiness of all, they can be obtained only through hu-
man toil. As much as a wasteful destruction of them takes place
in one quarter, must there be a deficiency of them in another.
Such a disposition of them is, in the moral world, in direct con-
trast with that economic conduct of Providence which every-
where in the physical world effects its object with the fewest ma-
terials and at the least expense, and is contrary to that careful
economy which is enjoined in the simple but expressive com-
mand,-" to gather up the fragments, that nothing be lost."
Liberally bestowed as are the bounties of nature, she neverthe-
less respects her gifts, and demands that we should respect them
too, and not waste them in lavish profusion. In what is here
said, it is not intended to cast blame in particular on the rich,
272
ON CONSUMPTION.
who act in no respect different from the manner in which others
would act if placed in their situations. All men, who are much
removed from want, are more or less chargeable with this selfish
appropriation of the bounties of Providence ; and, in general, the
more so in proportion to their affluence. Since, then, it is the
circumstances in which men are placed that determine their
conduct, we are irresistibly led to the conclusion, that great
riches in the hands of a few, when accompanied, as they usually
are, by privation in the great body of the people, are ill calcu-
lated to promote the general happiness; since it is only by the
diffusion of wealth that the labours of the people can be directed
to the production of those articles which most conduce to enjoy-
The gratification which labour bestowed on the manu-
facture of lace and embroidery affords to the rich who wear
these articles, is not to be compared to the satisfaction which
the same quantity of labour employed in the manufacture of
plain but comfortable clothing would afford to the much greater
number of poor who are now in want, and for which this labour
would suffice. While, therefore, poverty continues to meet us
at every turn, it must ever be not less an object to repress arti-
ficial and capricious wants, than to augment the produce of
labour. Pride, moreover, is insatiable, and the gratification of one
artificial desire leads only to the creation of another, of a still more
extravagant and costly nature, and still more difficult to supply.
ment.
While, however, we cannot doubt that the sum of happiness
of the community would be increased by a more general diffu-
sion of wealth, by less luxury on one hand, with less poverty
on the other, and by a greater share of its whole revenue being
dispensed amongst the poor, an important distinction still exists
between the division of property and its dissipation. The pub-
lic welfare could not be promoted by dissipating the fortunes of
the rich, or by distributing a part of them to those who would
spend or make an improper use of it. As far as the public
revenue is concerned, it is immaterial to the nation whether
property be enjoyed solely by rich owners, or shared in smaller
portions amongst a greater number of persons of lesser for-
tunes. But if more than the annual proceeds be spent, and,
consequently, the principal money or value entrenched on,
ON CONSUMPTION,
273
whether by the owner or by others, the future sources of tax-
ation must be diminished, and with them the future strength
and enjoyment of the community. Hence, in promoting the
general welfare, the possessor of large property must preserve it
unimpaired, or if he divide it on his death amongst many, it
must be among such only as will preserve what falls to them
undiminished. The public good is not likely to be permanently
promoted by dissipating property, though it were even in acts of
charity.
In arguing against luxurious consumption, the inquiry may
be made as to what would be the consequences to society, if the
considerations which have been now advanced had their full
effect on the public mind, and the dispositions and conduct of
men were so altered, that they should no longer have a de-
sire for articles which have no real utility, and are only desired
from motives of vanity and rivalry; and if, instead of such arti-
cles, people should consume nothing but what is plain, cheap, and
useful? To this I answer, the effect would be a change of
employments. The manufacture of lace, brocades, trinkets,
and such-like finery, must be abandoned, and, instead of these,
we should have only occupations by which useful products
are supplied. The manufacturers of lace and finery must be-
take themselves to the production of plainer articles. But we
cannot apprehend that a want of work, and poverty, would be
the consequence: the reverse of this would be the case. The
rich would no longer require all their income for their own
personal and domestic consumption, and, having no motive to
retain the whole, they would give away a part of it to others.
Thus, the inequality of fortune would be lessened, and the con-
dition of the great body of the people improved. The rich pro-
prietors, though ceasing to covet luxuries and splendour, would
still possess the same incomes. These are derived from the rent
of land, the interest or returns of money and other property, all
of which would continue to yield the same revenue, whether the
owner had a desire to spend it or not. Consumption does not
originate production; and it would be reversing the order of
cause and effect to suppose that it did. Undoubtedly, the la-
bours of the community would be lightened. Not having the
VOL. II.
T
274
ON CONSUMPTION.
same urgency of motive to goad them on to exertion, people would
not undergo the same intensity of toil. A few opulent manu-
facturers and merchants would retire from business. But this
slackening of personal exertions, when it takes place in order that
men may enjoy themselves the more, cannot be accounted a public
loss. At present, men in general consume on themselves and
their families all that their labour acquires: they would do the
same then, and, though the produce were less, they would be
equally well satisfied. The labourers must continue to work,
because under the necessity of doing so for their subsistence;
but perhaps it would be in many instances on their own accounts,
instead of for others. The capital which was used in business
would remain, and continue to be employed, though perhaps by
some other person.
A popular error exists, which has been handed down from the
earlier ages, that luxury is the chief cause of the decay of na-
tions. In those ages, there were instances in which luxury had
rendered men effeminate, had lessened their personal prowess,
and thus preceded, and in part caused, the overthrow of em-
pires. But however injurious luxury may be in other respects,
it would be incorrect to suppose that it alone could ruin a
people. The immense wealth amongst the ancients was in
general procured by rapine and violence; it gave to its pos-
sessors a power and influence which the feebleness of moral
restraints in those times rendered dangerous to the public wel-
fare, and the luxury which it induced ought to be considered
rather as the consequence of the general depravity of morals,
than as itself the cause of their decay. When a general de-
pravity of manners is introduced; when the rich, become power-
ful from their wealth, are at the same time unjust and over-
bearing, and the poor deprived of justice and protection; when
one class in society is thus set against another, and enemies are
raised up from within as well as from without; when treachery
and perfidy have become general, and mutual confidence is de-
stroyed: there is nothing left in such a state of things that can
be worth upholding; there can be no love of country, no union.
or strength, and the social fabric must fall to pieces by the mere
opposition of its parts, if some external force did not interpose
ON CONSUMPTION.
275
to overthrow it.
Again, there is an essential difference between
the mode of warfare amongst the ancients, and that in use in the
present day. Among them, the success of battles depended
chiefly on the hardihood and strength of body of the com-
batants: among the moderns, it depends rather on the mental
courage and military skill of the soldier and the science of the
commander. Science and skill are brought into the place which
muscular strength before could alone fill, and a diminution of
muscular strength induced by effeminate living has not now the
same effect as it had then. Great wealth does not lessen mental
courage and skill in arms. Many of the most able commanders
which Europe has furnished in modern times have been cour-
tiers, brought up in the enjoyment of every luxurious gratification
which art could furnish. The gentlemen of England, and the
courtiers of France, have yielded to none, either in ancient or
modern times, in cool intrepidity in action, and in military skill
and science. Besides, the great expense of modern warfare can
only be borne by rich nations, which have the means at their
command of living luxuriously.
In all countries, the government has a great influence in deter-
mining the character of the national consumption, not only by its
example, whether of splendour and ostentation, or of simplicity,
raising up a host of imitators, but because its consumption al-
ways forms a large portion of the total national consumption;
amounting sometimes to a fifth or even a fourth part of the
whole consumption of the community. Hence the powerful in-
fluence which economy or profusion exercised in the government
expenditure has on the circumstances of a nation.
There is no difference in the nature or effect of the expendi-
ture of the government and in that of private persons. The
one effects the same destruction of human labours as the other,
and causes the same demand for labour and commodities: it is
the magnitude, and not the nature, of the consumption that
constitutes the difference. The government expenditure, in-
deed, may be considered to form a portion of the private ex-
penditure of every individual; being for the attainment of
objects of which every one stands in need, in which every one
is interested, by which each is benefited, and to which all
T 2
276
ON CONSUMPTION.
contribute: the only difference is, that the duties are under-
taken and the expenditure made by government for all, instead
of by every man for himself. Economy, then, in public affairs,
is of the same nature, and is no less advantageous than in pri-
vate affairs; and no public measure can be beneficial, when the
cost exceeds the benefit it yields, or when this benefit is in-
ferior to what would have resulted from the same expenditure
in another way. It is by this plain maxim, that public as well
as private measures are to be judged. Every instance in which
the benefit is not equivalent to the expense of acquiring it, is an
instance of folly, or of criminality, in the government that
originates it. How then shall we repress our indignation when
we not only hear it boldly affirmed that the public wealth in-
creases with the public expenditure, but see this maxim reduced
to practice?
Mr. Malthus says, "With regard to statesmen, soldiers,
sailors, and those who live upon the interest of a national debt,
it cannot be denied that they contribute powerfully to distribu-
tion and demand; they frequently occasion a division of pro-
perty more favourable to the progress of wealth than would
otherwise have taken place; they insure that consumption which
is necessary to give the proper stimulus to production; and the
desire to pay a tax, and yet enjoy the same means of gratifica-
tion, must often operate to excite the exertions of industry
quite as effectually as the desire to pay a lawyer or physi-
cian."*
However, without denying, but on the contrary fully
admitting, that the useful functions performed by the officers
of government are fully equal in their real serviceableness
to the public to the expense of their performance, yet it can
never be admitted that the consumption of those who are sup-
ported by taxes adds, in the slightest degree, either to demand,
or to a division of property more favourable to the progress of
wealth than would otherwise obtain. The taxes by which these
classes are supported being drawn, not from any original and
actual production, but from the incomes of the people, and
chiefly of such among them as are of inferior rank; the people
become the poorer thereby, and their means of consumption are
* Principles of Political Economy, p. 479.
ON CONSUMPTION.
277
diminished in the exact measure in which the means of con-
sumption of these classes are enlarged. The public function-
aries create nothing to be consumed; they only share with the
people in the consumption of objects which the people them-
selves create and would consume, were they left in their hands.
Since, then, these functionaries add nothing to the common
stock, consumption can neither be increased nor diminished by
any alteration which may be made in the shares in which the
whole is consumed between them. With regard to a division of
property more favourable to the progress of wealth, such a di-
vision is to be effected, not by curtailing the means of accumu-
lation and lessening the capital of the productive classes, but,
on the contrary, by augmenting that capital; in other words, by
exempting them as much as possible from taxation, rather than
by unnecessarily adding to its burthen. So far, then, from those
who live on taxes "furnishing fresh motives to production, and
tending to push the wealth of a country further than it would
go without them," they lessen the motives to exertion, by less-
ening its rewards, and retard the progress of opulence by dimin-
ishing the power of production and accumulation.
The error of supposing that where there is no loss of
money
there is no loss of national wealth, and that a country cannot
be impoverished by its internal expenditure, has arisen partly
from the circumstance that money is not consumed in the using,
but passes from hand to hand in exchange for commodities of
different kinds, while its quantity and value remain undiminish-
ed. Though, however, the money itself is not consumed, the
different commodities which it circulates are so, and all the ob-
jects which have been successively bought with the same pieces
of coin sooner or later cease to exist, whilst the money remains
in full quantity. The same amount of money which existed in
a country in a year of plenty, may also be found in it in a year
of scarcity; but it will not, consequently, fill the hungry with
food, unless it be exported to buy provisions in foreign coun-
tries, where they may be purchased. The presence of money,
therefore, can be no criterion of wealth or abundance; and to
confine the national money at home for the purpose of preserving
wealth were absurd. Money by no means prevents consump-
278
ON CONSUMPTION.
tion. On the contrary, it facilitates the arrival of consumable
articles at their ultimate destination, and so helps to cause con-
sumption.
.
In the consumption of government, therefore, though the
money is not consumed, but returned again to the people, there
is, notwithstanding, the same destruction of the products of
labour as in the consumption of private persons. The govern-
ment demands the taxes of the people, not in goods, but in
money. The people, in order to meet this demand, give a part
of their productions or labour for money. This money, when
received by the government, is paid to its officers; and these do
not indeed consume it, but exchange it again for goods which
they consume. There is a double exchange; first, on the part
of the people, of goods or labour for money to pay the tax; and,
secondly, on the part of the servants of government, of this
money which has been raised by the taxes for goods for their
use. But, in the end, the effect is precisely the same as though
no such exchanges had been made, and the taxes had been paid
by the people, not in money, but in goods or labour in kind,
and these handed over in lieu of money to the public officers for
their use.
From the fact that the money paid in taxes comes back again
to the people in the expenditure of government and its officers,
has arisen the prevalent notion that the money raised in this
way is no loss to the people. This fallacy would have been
almost too gross to need refutation if it had not been held by
princes and statesmen, and had not been productive of infinite
mischief, by being made the pretext for shameless waste and
extravagance. This error proceeds from not observing that
the money when returned to the people is not returned in the
way of restitution, but only for its equivalent. Dr. Hamilton
illustrates the absurdity of this position by comparing it to the
"forcible entry of a robber into a merchant's house, who should
take away his money, and tell him he did him no injury, for the
money, or a part of it, would be employed in purchasing the
commodities he dealt in, upon which he would receive a profit."
Be it so.
The result, then, after the money is got back, is, not
the loss of the money, but of the goods which were given to get
ON CONSUMPTION.
279
it back. The effect of an unnecessary or extravagant expendi-
ture of public money is precisely analogous. The money raised
in taxes to defray this expenditure comes back. But it is only
in exchange for commodities or labour of equal value; and the
loss is, not of the money, but of the things of equal value.
The people first part with their money to the government with-
out equivalent, as far as this expenditure is concerned; they get
it returned by parting with things of equal value, just as though
it had never been in their hands before;-the public officers, in-
stead of the people, enjoying the satisfaction resulting from the
consumption of these things.
There is little danger of individual expenditure ever much
exceeding reasonable limits. "The principle which prompts to
expense is the passion for present enjoyment; which, though
sometimes very difficult to be restrained, is in general only
momentary and occasional. But the principle which prompts to
save, is the desire of bettering our condition; a desire which,
though generally calm and dispassionate, comes with us into the
world, and never leaves us till we sink into the grave. In the
whole interval which separates these two moments, there is
scarcely, perhaps, a single instance, in which any man is so com-
pletely satisfied with his situation, as to be without any wish
of improvement of any kind. An augmentation of fortune is the
means by which the greater part of men propose and wish to
better their condition. It is the means the most vulgar and the
most obvious; and the most likely way of augmenting their
fortune is, to save and accumulate some part of what they ac-
quire, either regularly, or upon some extraordinary occasion.
Though the principle of expense, therefore, prevails in almost
all men upon some occasions, and in some men upon almost all
occasions; yet in the greater part of men, taking the whole
course of their life at an average, the principle of frugality seems
not only to predominate, but to predominate very greatly."*
The circumstances of a great nation can seldom be much af-
fected either by the prodigality or misconduct of individuals;
the profusion or imprudence of some being always more than
compensated by the frugality and good conduct of others." In
* Wealth of Nations.
280
ON CONSUMPTION.
all tolerably well-governed countries, the principle of accumula-
tion has uniformly had a marked ascendancy over the principle
of expense. Individuals are fully sensible of the value of the
articles they expend; for, in the vast majority of instances, they
are the immediate result of their industry, perseverance, and
economy; and they will not consume them, unless to obtain an
equivalent advantage. But this, it must be allowed, is but
rarely the case with the consumption of governments and their
servants. Generally speaking, they consume the produce of the
labour of others, not of their own; and this circumstance pre-
vents them from being so much interested in its profitable out-
lay, or so much alive to the injurious consequences of extrava-
gant and wasteful expenditure as their subjects. But economy
on the part of government, though more difficult to be prac-
tised, is of infinitely greater importance than economy on the
part of any individual. Should a private gentleman think of
acting on the principle that profusion is a virtue, and that in-
dustry may be encouraged by increasing unprofitable consump-
tion, he will most certainly be ruined; his ruin, however, will
only be directly injurious to the individuals in his own employ-
ment, and will have but a very slight indirect effect on others.
But similar conduct on the part of government would most pro-
bably be productive either of revolution, or of national poverty
and degradation. If, then, it is most desirable that individuals
should have a correct knowledge of their real interest in the
consumption of commodities, how much more so must it be
that governments should possess that knowledge! Economy
and frugality are virtues in a private station; but in a public
station their influence upon national happiness is so vast, that
they are not only the first of virtues, but the most pressing of
duties."*
The prodigality of a government may consist in keeping up
unnecessarily large and expensive establishments, a numerous
and splendid court, great civil and ecclesiastical establishments,
great fleets and armies, which produce no adequate return for
the expense of their maintenance. Or it may consist in allow-
ing extravagant salaries and emoluments to its officers.
* Mr. M'Culloch, p. 415.
.ON CONSUMPTION.
281
The expense of the public administration of a country must
depend in part on the degree of pomp and splendour which it
assumes. Whatever be the appearance which a public officer
is expected to make, his salary or emoluments must be in pro-
portion. This observation applies to all the public officers
from the highest to the lowest. When, therefore, a people can
respect its prince only while surrounded with the externals of
greatness, they must pay dearly for their taste. If, on the other
hand, they can be content to respect simplicity rather than
pageantry, and obey the laws, though unaided by the attributes
of pomp and ceremony, they will save in proportion.
The services of the public officers are dear or cheap to the
public, not merely in proportion to what they actually cost, but
likewise in proportion as they are well or ill executed. A duty
badly performed is dearly bought, however little be paid for it;
it is dear, too, if it be superfluous, or unnecessary. On the other
hand, a public duty may be cheap, although very liberally paid.
A low salary is wholly thrown away upon an incapable and in-
efficient officer; his ignorance costs the public probably ten
times the amount of his salary; but the knowledge and activity
of a man of ability are fully equivalent to the pay he receives;
the losses he saves to the public, and the benefits derived from
his exertions, greatly outweigh his personal emolument, even if
settled on the most liberal scale.
The power which commonly accompanies the exercise of
public functions is a kind of pay, that often far exceeds the
pecuniary emolument attached to them. It is true that, in a
well-ordered state, there is little left to the caprice or arbitrary
control of the officer, yet the discretion which the law must in-
evitably vest in those who are to enforce it, together with the
honour commonly attendant on the higher offices of the state,
has a real value, which makes them sought after, even in coun-
tries where they are by no means lucrative.
There are some offices in the state which possess sufficient
attractions to the performance of the duty without any pecuniary
allowance. But it does not thence follow that there would always
be real economy in withholding all emolument.
In this case,
the office can be filled by none but the rich, and there is a
·
282
ON CONSUMPTION.
I
danger of losing more by the negligence or incapacity of the
officer than would be saved by withholding the salary. This,
as Plato observes in his Republic, would be like intrusting the
helm to the richest man on board. It is not likely that there
will be so much diligence and zeal in the performance of the
duty, where there is nothing, as where there is something, to be
gained by it, nor so much fear of dismissal, where there is
nothing to be lost by it. The government, therefore, cannot have
a proper control over its servant; besides, with what grace
can he be called to account, who may assume the merit of
generosity both with the people and with the government?
There are, however, some duties which may be well performed
without any salary; and in which the gratuitous services of the
rich may be employed with advantage. These are chiefly such
as confer some degree of honour on the officer, and which require
but little personal labour. Inspection and control over others
who perform the working part, are better suited to honorary
posts, than the actual performance of laborious duties. Com-
pulsory public services are in general the reverse of good eco-
nomy. The public lose more from the wilful negligence, in-
capacity, and abuse of power of the officer, than his salary would
amount to. Besides this, to render the burthen tolerably equal,
the officer must be frequently changed, and he no sooner acquires
the knowledge and experience necessary to the proper discharge
of his duty, than he is succeeded by one equally ignorant, who
has himself to learn, to be also dismissed when he has learnt,
and in his turn to be succeeded by another of equal incapacity
with his own, when he first entered upon the employment.
ON THE ACCUMULATION OF PROPERTY.
283
CHAPTER II.
ON THE ACCUMULATION OF PROPERTY.
THE possession of property affording inestimable advantages to
individuals and society, by assisting and heightening the work-
ing effect of labour when in the form of capital, and as stock of
different kinds, affording necessaries and comforts which con-
tribute to ameliorate the condition of the people, it is a question
of interest to ascertain by what means the property of a nation
may be increased, or what are the circumstances most favourable
to its accumulation.
Stock of every description is the result of the past exertions
of industry. An increase of it, then, cannot take place without
fresh efforts of production, nor without the exercise of frugality.
The circumstances favourable to accumulation, therefore, are of
two kinds; first, those which contribute to the success of indus-
try; and, secondly, those which are favourable to parsimony, or
adverse to wastefulness, prodigality, and misconduct. Wealth
cannot be increased except through the means by which it is
originally acquired. Industry must first provide the subjects
from which parsimony may afterwards accumulate. Industry
must be diverted from the production of the perishable objects
of immediate and total consumption, and be directed to the pro-
duction of such as are more durable, suited either to form
capital, or lasting objects of use and gratification. But however
industrious, however successful the exertion, and however great
the produce of labour, all is of no avail without a principle of
saving. If the produce of labour be all spent in idleness, and
all entirely consumed on present enjoyment, our property can
never become greater. We must abstract a part of what might
serve for our subsistence, from being expended in idleness on
present gratification, and employ it to assist our labours in mak-
ing provision for the future. Accumulation may be made either
in consequence of increased production, or of diminished con-
sumption.
284
ON THE ACCUMULATION OF PROPERTY.
Of the first set of circumstances favourable to the accumulation
of stock, or those which favour the productiveness and success
of industry, it cannot be necessary to say anything; since to do
so, would only be to repeat what has been said already on that
subject. It may suffice to observe, that without success in in-
dustry the means of saving cannot be acquired; and that every-
thing which promotes that success, in the same degree gives the
means of saving, if we choose to avail ourselves of them.
Among the second set of circumstances favourable to accumu-
lation, or those which promote frugality, and lessen prodigality,
misconduct, and loss, may be enumerated,-simplicity of man-
ners, a diffusion rather than a concentration of wealth, peace,
and the avoidance of violent and sudden changes in those politi-
cal measures through which industry is affected.
Whatever a man saves from present expenditure he turns
either into items of capital to be employed in business, or of
stock devoted to a protracted and remote consumption, which
may afford a continued use or enjoyment for a long time. If
the saving be turned into capital, he either employs it himself
in business, or enables some other person to do so, by lending it
to him for an interest or a share of the profits. If it be convert-
ed into objects of protracted consumption, as houses and the
like, he either occupies and uses them himself, or allows some
other person to have the use and accommodation they afford, on
payment of a rent or hire. In thus adding to his property, he
increases his future resources. As the property of an individual.
can be increased only by what he saves from his revenue, so the
property of a nation, which is the sum of that of all the indivi-
duals who compose it, can be increased only in the same manner.
Thus frugality, by augmenting the future produce of industry,
and multiplying the objects of property which afford lasting use
and enjoyment, gives the means of maintaining a greater popu-
lation, and creates a fund for the subsistence of additional num-
bers in all times to come. In private families, property affords
the means of establishing children in the world in an advan-
tageous manner at an early period of life, and thus causes early
marriages to take place amongst them. The same consequences.
result from the same causes amongst nations. In the latter case,
ON THE ACCUMULATION OF PROPERTY.
285
it may be less easy to trace the consequences, but there is no
difference in the result.
Since the accumulation of property confers so great a benefit
on the community at large, especially on the great mass of the
people, who have little or none, we ought on no account to dis-
courage hoarding. It is a great error, and one which has been too
long prevalent, to suppose that spending is doing good, and that
hoarding is withholding a good which ought to be conceded. To
spend in promoting the welfare of others may be meritorious,
but to spend on one's own gratification, though often the best.
way in which money can be disbursed, is, nevertheless, a propens-
ity to which mankind are already sufficiently prone, and which
needs no commendation of others to excite. So far is it from
being the case, that to spend largely on ourselves is to do good,
that the reverse is the fact; and that man ought to be account-
ed the best member of society, who is the most frugal and eco-
nomical in his own enjoyments. The miser, though he regards
neither family nor friends, hardly attending even to his own
personal wants, is, notwithstanding, one of the most useful mem-
bers of society. Scarcely any one does more for the benefit of
others, especially of the poor. He toils and schemes incessant-
ly, and subjects himself to all sorts of cares and privations,
not, as it turns out, for the benefit of himself, but of others.
Without motives of philanthropy or charity; an utter stranger
to sympathy with the wants of mankind at large; without even
intending or desiring to benefit any one but himself; yet he con-
tributes more to the comfort of others, and less to his own, than
almost any other man. Unlike the miser of early times, with his
treasures locked up in chests or buried in the earth, the modern
miser is the employer of labour, and the promoter of every use-
ful and valuable branch of industry. His accumulations afford
to industry the greatest facility, and increase the quantity and
quality of its products. His hoardings tend to render capital
abundant, to reduce its profits; make commodities cheap, and
bring them within the reach of the poorer classes. Could he
carry his wealth with him when he dies, his savings even then
would not be without their benefit: their effects would have
lasted during his life. But since he cannot do this, their effects
286
ON THE ACCUMULATION OF PROPERTY.
are permanent. The benefits his wealth dispenses are twofold,-
first, as respects society at large; and, secondly, as respects the
individuals who inherit his fortune. The accumulation of his
wealth, into the hands of whomever it may fall, benefits society
by multiplying and cheapening commodities: it benefits hist
heirs by the enjoyment its ownership confers, and that without
any sacrifice of labour or care on their part to procure it.
Since, then, accumulations are of so much advantage to society
at large, we may be well content to let alone those weak persons
who save when spending would be most beneficial to themselves
and families; since their hoardings must sooner or later be en-
joyed by others. We may admire, too, that admirable formation
of society by which even the selfish feelings of our nature are
made serviceable to the common good, and contribute to the
general happiness, without any design on our parts.
Property is often destroyed by storms, inundations, fires,
earthquakes, and other convulsive and destructive movements of
the elements, which sweep away or destroy in an instant the
labours and careful accumulations of years of toilsome industry.
These calamities are beyond the control of man, and such as his
foresight cannot guard against. Again, capital is frequently
lost by ur successful undertakings or speculations in business,
which fail to return the outlay embarked in them. An unpro-
fitable adventure is the same as regards wealth, as an excessively
prodigal consumption. The capital of the adventurer, and,
consequently, a part of the capital of the nation to which he
belongs, is lost, while the remainder is of course lessened, and
with it the future resources of the country. The injury ex-
tends not only to the particular person and his immediate con-
nexions, but to society at large; for the injury of a part has an
effect on the whole. Whether capital be destroyed or dissipated
by accidents, through want of judgment in its employment,
through misconduct or prodigality, its effects are the same.
However, the number of prudent and successful undertakings
is everywhere much greater than that of injudicious and unsuc-
cessful ones. Nations are never impoverished by private, though
they sometimes are by public, prodigality and misconduct. The
accumulation of property may be checked by excessive taxation;
ON THE ACCUMULATION OF PROPERTY.
287
by the government failing to afford security of person and pro-
perty to its subjects; by its fettering or obstructing industry
through its municipal or fiscal regulations; by sudden and vio-
lent changes of policy, which derange the course of industry, and
ruin the fortunes and dissipate the capital of individuals. The
operations of government being usually on a great scale, their
effects, whether favourable or adverse to the public interests, are
of corresponding magnitude. By a wise and economical admin-
istration of public affairs, it aids powerfully, though indirectly,
in the production and accumulation of wealth. By an unwise
or profligate administration, it contributes no less powerfully to
the dissipation of wealth and to national decline and ruin.
Hence the importance of the inquiry as to the modes in which
governments either aid or obstruct the accumulation of property.
The effects which the measures of government have on the
property of a country, in leading to the production of durable
articles which are suited for accumulation, are of an indirect
nature. They are more direct and decisive on the saving or ex-
penditure through which property is either accumulated or dis-
sipated.
Amongst other ways in which governments retard the pro-
duction and accumulation of stock, may be mentioned, excessive
and accumulating taxation; which lessens the means of industry,
and, in diminishing the funds from which accumulations may be
made, increases the difficulty, or deprives the people altogether
of the power of accumulating. Neither the government itself,
nor any of its officers, are engaged in industry; neither do they
produce any one object of stock: their labours are directed to
the preservation of the public and private rights of the com-
munity. But, although the government does not increase the
fund whence accumulations proceed, its taxes are drawn from
that fund, and diminish its amount in a sensible degree. The
public revenue is derived from the funds which have accrued
from those sources that yield revenue to private individuals
-land, labour, and capital; but more particularly from labour,
on account of its greater magnitude in comparison with the
other two. It would have been possible, that the whole of this
public revenue, which is drawn by taxation from the people,
288
ON THE ACCUMULATION OF PROPERTY.
1
might, if it had not been thus abstracted from them, have been
all accumulated; since the income which remained to the tax-
payers, after payment of the taxes, was found sufficient for their
subsistence. But, although it is not probable that the whole
would have been saved, a considerable portion would most
likely have been so. However, the amount having been drawn
from those who might have saved the whole, and having been
paid over to other persons from whom services are required, it
is not possible that these last can save any considerable portion
of it; because it is the subsistence out of which they must be
maintained, and the duties they have to perform occupy that
time which might be devoted to procure an independent sub-
sistence, without burthening the public. Besides this, persons
engaged in business have stronger motives to accumulate, and
greater facilities for that purpose, than officers employed by
government, from the necessity of their having capital, the ad-
vantages they find to accrue from possessing it, and the ready
means of employment they have for it. The officers of govern-
ment, on the contrary, have no occasion to employ capital of
their own, they could neither find employment for it, nor derive
benefit from its investment: the only way in which they can
dispose of stock is, by letting it out to hire. National industry
is guided by the demand for its productions. The call for taxes
which is made by the government, and the expenditure of those
taxes by the individuals to whom they come, directs the industry
of the country to the production of those articles which minister
to present wants and are quickly consumed, not of permanent
usefulness.
Nevertheless, when taxation is kept within reasonable bounds,
the government assists in the most decisive, though indirect
manner, in the accumulation of wealth, by the security which it
affords to the individuals who are engaged in industry, or who
possess revenues, and the confidence which they thence entertain
of enjoying the full advantage accruing from an accumulation of
property when this accumulation shall take place.
To the accumulation of wealth, security of property is abso-
lutely indispensable. It is even more indispensable to accu-
mulation than to production itself. No person can be expected to
ON THE ACCUMULATION OF PROPERTY.
289
deny himself a present enjoyment, which would arise from the
consumption of a commodity which is within his power, unless
he possess a well-founded expectation of acquiring from such
forbearance some greater pleasure, or avoiding some greater evil
than the present denial, at a future time. Urged by hunger or
distress, a man will labour to procure a supply for the immediate
necessities of nature, though not positively certain of enjoying
the fruits of his exertions. Under such circumstances, even the
chance only of reaping the fruits of labour is better than the endur-
ance of the urgent pains of present privation. But the treasur-
ing up and accumulating property, when a man is doubtful
whether he will be able to retain it, and much more when it is
nearly a certainty that he will not be allowed to enjoy it,
through the extortion of a rapacious government, or the plunder
of lawless depredators, is altogether different.
That a man
.
should undergo the toils of labour, and abstain from immediate-
ly consuming its produce, in such circumstances, would be con-
trary to all experience, and at variance with the common feel-
ings of our nature. Circumstances the most favourable to
opulence, from skill in industry, richness of soil, excellence of
climate, and the like, cannot preserve a people from sinking into
poverty, misery, and barbarism, when property is exposed to
rapine and plunder. Insecurity of property, therefore, is the
most dangerous evil to which the inhabitants of any country can
be exposed. It operates in a more effectual manner in prevent-
ing accumulation, and dissipating that wealth which may have
been already acquired, than any other circumstance. Hence
the protection of liberty and property is the first and most essen-
tial duty of civil government.
Insecurity of property may be the result of the weakness, in-
competency, or neglect of government, in its failing to protect
its subjects from the depredations of foreign enemies, or to re-
press and punish crimes at home. Again, such insecurity may
arise from an imperfect or inefficient system of laws, attended
with much expense, delay, and uncertainty, or much encum-
bered with forms, difficult to be known and complied with;
in consequence of which fraudulent men may either evade pay-
ment of their debts, or avoid making recompence for injuries
VOL. II.
U
290
ON THE ACCUMULATION OF PROPERTY.
1
occasioned or frauds committed on other men.
The law some-
times may be too oppressive and ruinous in its punishments; by
which moderate men may be deterred from prosecuting, or
petty offenders suffer unnecessary injury. Lastly, it may be
rendered nugatory by a corrupt administration of it.
Accumulations may be retarded by impediments in acquiring
property, from settlements, entails, duties, or excessive legal
formalities attending its sale and transfer. Where some men
are prevented from selling, others must be prevented from buy-
ing. Though the mere transfer of any property from one per-
son to another cannot increase the property, yet it certainly
increases both its usefulness and value; which are equivalent to
an augmentation of the property itself. If the property had
been of as much use or value to the original possessor as to the
purchaser, the one would not have sold nor the other have bought
it. Both of them contemplated an advantage, and in most cases
both acquire it, by exchanging what was comparatively unsuit-
able, for what is better suited to their wants. If all property
were under strict settlement or entail, it is evident there would
be little inducement to accumulate money; because there would
then be scarcely any property to be purchased to procure a rent
or return of revenue; and as, in this extreme case of strict en-
tail, the inducement to accumulate would be almost taken away,
so we may perceive that to place property in part under settle-
ment or entail, must in part diminish the inducement to accumu-
late, by diminishing the opportunities of purchasing, and there-
by enhancing the terms, and lessening the advantages to
purchasers. The expectation of possessing property is, doubt-
less, the cause of the accumulation of money. But, although
this be the motive of accumulation, yet the ability to sell pro-
perty is not always the cause of money being squandered away.
In some few instances it may be the case, but cannot frequently
be so; for there are many reasons, besides that of having
squandered away money, which may induce a man to sell his
property.
But the great mischief of settlements and entails is, that they
often consign an estate to nearly perpetual barrenness. The holder
who has but a life-interest in an estate has less inducement to im-
ON THE ACCUMULATION OF PROPERTY.
291
prove it than if it were absolutely his own, and he might dispose.
of it in any way he pleased. Frequently he has not the means of
making improvements, or if he have, is withheld from so doing
by the desire of making provision for some branch of his family
for which the entail has made none. But it is seldom that a
new purchaser of any property does not expend something in
improving it; sometimes he spends as much in improvements ast
the original purchase money. In real property that is not en-
tailed, the expense of the transfer is greater in proportion on
properties of small than on those of considerable value. But the
greatest difficulty in accumulating is in the beginning; and the
relatively greater expense of investing small savings in a pro-
ductive way, adds to this difficulty; by this means preventing
altogether some persons from advancing themselves, and re-
tarding the advancement of others, perhaps for years; when, if
the difficulty of the first efforts had been less, their after-pro-
gress would have been easy and rapid.
The accumulation of property may be checked by a rigid
distinction of ranks, or by fixing at some point the highest eleva-
tion to which an individual may aspire. The objects of ambition
are different in different men; some desiring honour, while
others are content with mere riches. Hence an interdiction to
rising from an inferior to a superior rank, must take away the
stimulus by which some men are urged on to exertion, and sink
them into lethargy; while, without this interdiction, their efforts
would be directed to the acquisition of wealth, as the means of
acquiring an elevation of rank.
In
But the great engine employed by governments, not merely
for preventing the accumulation of property, but for the actual
destruction of what has been already accumulated, is war.
the operations of war, property is destroyed to an incalculable
amount, and its owners reduced from affluence to poverty, while
industry is suspended, and the source of future supply, for the
time, cut off. Again, the immense sums which are raised in taxes
to support hostilities being drawn from the people, their means
are in that proportion diminished; they become impoverished
and are prevented from saving from their incomes to add to
U 2
292
ON THE ACCUMULATION OF PROPERTY.
their property, or perhaps from keeping up the amount of pro-
perty they possessed before. The men engaged in warfare are
taken from productive employments in which they contributed
to increase the quantity of property, and are employed in de-
stroying the possessions as well as the lives of mankind.
When the government omits to raise within the year taxes
sufficient to pay its expenses, the consequence is a diminution of
national property. But as the manner in which this diminution
is brought about will be spoken of when we come to treat on
public debts, the subject will not be enlarged upon here.
It has been thought by some persons, that capital is multiplied
by the operation of individual credit. Nothing, however, but a total
ignorance of the nature and functions of capital and credit could
have given rise to so great an error. Capital being that portion
of our property which is used either to aid the human arm in the
work of industry, or to form the materials on which labour is
bestowed, it necessarily consists of materials and substantial arti-
cles of positive utility and value, and these cannot be multiplied
by credit. A debt due to one party, but to be paid by another,
neither increases nor diminishes the amount of property between
the two. The works, machinery, utensils, and stock in trade,
which a manufacturer employs, may, possibly, be wholly bor-
rowed, and bills or other securities given for the repayment of
their value. But the capital is not increased thereby. If it
had not been borrowed, it would have remained in the hands of
the lender, and have been susceptible of being employed by
him; but, in such case, the manufacturer would not have had
any capital in his possession. Now that the lender has parted
with his capital, he is deprived of the means of employing it
himself; which can only be done by the borrower. With regard
to credit, it is unquestionably of great advantage, and contri-
butes to the advancement of wealth, by effecting a more favour-
able distribution of capital than would otherwise exist.
transfers the possession and employment of it from persons who
are unable or unwilling to use it, to those who are more able or
more desirous to do so, and, consequently, likely to turn it to a
greater profit. Bills and bank notes perform the functions of
It
ON THE ACCUMULATION OF PROPERTY.
293
metallic money, and by the substitution of a cheap for an ex-
pensive medium of exchange, set free the capital that must
otherwise be employed in the expensive medium. But beyond
the functions of money, notes and paper credit are utterly use-
less. They perform no part in the acquisition, production, ma-
nipulation, or distribution of the objects of industry. They are
merely the evidence of the existence of debt: of value, undoubt-
edly, as evidence ; but no further.
On the other hand, the government operates in a powerful
manner on the accumulation of property, and particularly in
lowering the interest and profits accruing from it, when the
public revenue exceeds the public expenses, the excess of which
it employs in paying off its funded debts, or in constructing
works of public utility, which yield a profit or advantage to the
nation equivalent to their cost. In this case a forced accumu-
lation of property is the result. Usually, taxes are drawn from
the contributors in small sums, which are in general paid out of
their revenue, and their unproductive expenditure is by so much
curtailed. It is seldom that the people trench on their capital
in order to pay their ordinary taxes. When, therefore, these
small sums which are drawn from revenue, and which curtail
unproductive expenditure, become collected together and paid
in large sums to the public creditors in the purchase of stock,
they are afterwards employed by these persons in the func-
tion of capital to augment future production; and the national
wealth is increased in proportion. It is but a small number of
the people who ever accumulate, if left to themselves. Usually,
some few are spending more than their incomes, while others.
are spending less; and among a vast number of persons there
must be a great uniformity from year to year in the whole
amount squandered, and the whole amount accumulated, so as
to approach towards an equilibrium. But when thus the state
takes upon itself the business of accumulation, forcing the people
to contract unproductive expenditure, and hand over revenue,
which is afterwards employed as capital, the case is different ;
and an increase of property nearly commensurate with the sums
so withdrawn from unproductive consumption is the result. The
effect is the same as if every individual in the country had laid
294
ON THE ACCUMULATION OF PROPERTY.
by a portion of his income, equal to the excess of taxes which
is thus drawn from him; and his future circumstances become
every year improved by as much as the interest this accumula-
tion would yield. For, through the reduction in the amount of
the public debt, a saving of interest on it is effected, which gives
the
power of reducing taxation for the time to come; or, which
is the same thing, of establishing a sinking fund to accumulate,
to take off taxes to a larger amount at some more distant
period.
From this forced drain of money from the people, the first
effect is to change in some degree the direction of industry from
the production of articles of expenditure to articles of capital; a
check is given in a slight degree to the production of articles of
luxury, at the same time that a stimulus is applied to the crea-
tion of articles of necessity. Were the government to retain its
surplus revenues in its coffers, this would contract the currency,
and a partial stagnation of business would ensue; but when the
government immediately pays over the surplus to its creditors,
an abundance of capital will be the result, and its owners will be
unable again to invest it in a way to produce the same interest
they obtained before. The interest of money will fall; a part
will go abroad to seek employment in securities or property in
foreign countries, and a part will be invested at home in new
employments of a less productive nature than the old. With
the fall in the rate of interest, there will be a reduction in the
rate of profits on capital in business. More capital will be in-
vested in machinery, in agricultural improvements, in commo-
dious buildings and methods for abridging labour. Whatever
be the rate of interest at any time, there is a certain limit to
which machinery and improvements for abridging labour may
be profitably extended; but beyond which they would be pro-
ductive of a loss. This limit is altered by a reduction of in-
terest, and such improvements then admit of being carried
farther than before. With the extension of machinery, cultiva-
tion, and improvements, the productive powers of industry are
augmented, commodities become more plentifully supplied,
particularly those in which capital forms a principal part of
price, and with this increase of productiveness and reduction of
ON THE ACCUMULATION OF PROPERTY.
295
profits of capital, their prices must fall; the necessaries and
comforts of life will be more easily procured, and an im-
proved and more healthy state of society be established. When
through the liquidation of part of a public debt capital is sent
abroad to seek employment in foreign countries, it must be the
products of domestic industry eventually that will be exported
for this purpose. Having no gold and silver mines, nor more
specie than is sufficient for circulation and other domestic uses,
we cannot send money abroad in any considerable quantities;
or if bullion be sent at first, its value at home will rise; and
thus home commodities will be sent abroad to purchase more
to replace it, until its former value, in relation to other things,
shall be restored. Such exportation of capital will therefore oc-
casion no diminution of employment or stagnation of trade, but
only divert it into other channels.
That which theory points out as the necessary result of an
excess of revenue applied to the liquidation of a public debt, has,
as far as practice gives an opportunity of judging, been uni-
formly confirmed by experience. "When Pope Innocent XI.,
in 1685, reduced the interest of his debt from 4 to 3 per cent.,
and employed the sum saved to accumulate, but a short time
elapsed till the new 3 per cent. fund sold at one hundred and
twelve. In like manner, when the interest of the national debt
of England was reduced, in 1717, from 6 to 5 per cent., and the
saving devoted to accumulation; the consequence was, that in
1727, from the rise of public securities, there was an opportunity
of again reducing the interest from 4 to 3 per cent., and of
applying an additional sum to accumulate. This, of course,
produced another rise, and to such a degree, that, in the year
1733, we learn the sinking fund, which had grown to a great
maturity, and produced annually about £1,200,000, was be-
come almost a terror to all the individual proprietors of the
public debt.”*
Yet the amount of debt paid off by this fund
in the preceding five years, and which had caused the price of
stock to be at 101, had been but little more than £5,000,000.
Again, on the revival of the system of a sinking fund in 1786,
* Earl of Lauderdale, p. 249.
296
ON THE ACCUMULATION OF PROPERTY.
the price of three per cent. stock, which at the close of the
American war had been at 60, and in 1787 was 74, rose gradually
till 1792, when it reached 96; yet the whole sum accumulated
during the five years amounted only to £5,424,592. A cor-
responding rise in the English funds has also occurred since the
termination of the last war. In 1815, three per cent. stock was
at 60, and in 1825 at 96. The pressure on the mercantile and
monied interests at the close of that year, caused first by the
extension of the paper currency, and the exportation of capital
and specie, and then by the contraction of the paper currency, oc-
casioned this stock to fall rapidly to 72; since which it has
again greatly risen.
A great accumulation of property, though highly beneficial to
a community at large, and more especially to those classes which
have little or none, by lessening the interest they have to pay for
the use of it, when they hire, and by lowering the prices of all
those articles in the production of which capital is employed, is,
however, in some degree disadvantageous to those persons who
already possess property and let it out to hire, by lowering the
return it procures them. They partake, indeed, in the common
advantage of the reduced prices of articles of expenditure, but
this is not equal to their loss through the reduction of their
interests or profits. As, however, the number of persons who
possess property is much fewer than that of those who have none,
an increase of property is greatly to the advantage of the people
on the whole.
But parsimony, like everything else, has limits beyond which
it cannot advantageously be carried. In every stage in the pro-
gress of society, there is a point beyond which no useful accu-
mulation of stock can be effected. As in the case of an indi-
vidual, there are times when to save would be worse for him,
even in the long run, than to spend, so it is with a community.
In every stage of society, there is a limit beyond which no
further employment could be found for an additional quantity
of capital, or beyond which the employment of a further quantity
would cease to be of use; and this limit, though never yet arrived
at, and though different in different stages, is gradually more.
nearly approached in the progressive accumulation of capital.
ON THE ACCUMULATION OF PROPERTY.
297
It is true, no example can be adduced in proof of this position.
No nation, of which history furnishes us with any knowledge,
has ever yet arrived at that limit beyond which the employment
of more capital would be useless; but, notwithstanding this, we
cannot doubt that most nations which have advanced far in the
career of opulence, have gradually approached nearer towards it.
In our own country, we shall be satisfied that this has been the
case; especially during periods of peace, accompanied with an
excess of public revenue over the public expenditure. The
interest of money is an index of the profits of capital which can-
not mislead. During every peace of any considerable duration
which has occurred for the last hundred years, the interest of
money has very materially declined; often to one half of what
it was during the previous war. Whence, we cannot doubt that
the accumulations of further capital which were made in those
periods, could not find employment with the same facility as
before; that the advantages accruing from the employment of
additional quantities of capital have not been in the same ratio
with that of the quantity previously employed; and that the
country in those periods was gradually approaching that point
beyond which no more capital could be employed with profit.
The advantages accruing from the employment of capital
consist, either in lessening the labour that must otherwise be
exerted to acquire the same commodities, or in enabling labour
to produce commodities in kind or quantity which, without
capital, would exceed its power of producing. But in the ap-
plication of labour there is only a certain quantity of capital that
is wanted, or that can be usefully employed in performing, sup-
planting, and assisting labour;-a certain quantity of raw mate-
rials, and tools, workshops and storehouses of a particular de-
scription; and a certain quantity of food to support the labourer
while employed. The quantity, the goodness, and the costli-
ness of these, cannot be advantageously carried beyond a certain
limit, and there is a distant point beyond which their increase
would be, not only useless, but injurious. For example, what
beneficial effect on production would be occasioned, when a
workman is furnished with a complete set of tools and machines
of the best description, to double their quantity or costliness?
298
ON THE ACCUMULATION OF PROPERTY.
They would only be an encumbrance on his hands. Or, when
he is supplied with an ample store of food of the best and
most nutritious qualities, of what advantage would it be, to sur-
feit him with double its quantity, or to feed him with dainties
instead of with plain and wholesome food? When he is amply
furnished with every species of capital which can give efficiency
to his labour, the possession of a greater quantity than can be
so employed, would produce no profit or revenue, and confer no
benefit, either on its possessor or on the community.
Such an
excessive accumulation of the objects composing capital would
occasion them to be no longer objects of desire, and they could
then only prove an annoyance and a burthen on our hands.
.
True it is, that in the progress of knowledge, man's invention
discovers larger openings for capital, either in new branches of
industry, or in old branches to a greater extent. Machinery of
a more costly and efficient kind may be invented, by which fresh
openings may be made for the employment of additional quan-
tities of capital by the same workmen, without a falling-off in
the rate of productiveness; though, in fact, new discoveries and
improvements have in general the effect, not of affording em-
ployment for more capital, but of increasing the efficiency of
the quantity already employed. But this supposition of future
circumstances does not invalidate the position, that at any given
period in the duration of society, it is only a certain quantity of
capital, determined by the existing state of knowledge in the
art of supplanting, performing, and assisting labour with capital,
that can be usefully and successfully employed in production,
and beyond which an additional quantity would not merely be
unprofitable, but disadvantageous.
As with capital, so it is also with the other objects of stock
of a durable kind. When every species of it exists in such
abundance as to afford all the use and accommodation of which
it is capable, in such circumstances, to add further accumula-
tions would only be to feed a depraved appetite. Suppose
there were houses already built sufficiently numerous and com-
modious for the comfortable abode, and to answer all the wishes
of the community, of what use would it be to debar oneself
the enjoyments which would proceed from the immediate con-
ON THE ACCUMULATION OF PROPERTY.
299
sumption of all the objects which must be dispensed with, and
expended in the purchase of materials and payment of labour to
erect more houses? The same is the case with household
utensils and furniture, books, pictures, statues, and works of
taste. If there be enough to satisfy every wish, to spend time
and labour in the acquisition of more, would be vain and use-
less. If there be enough in number, the only desire that could
exist would be to procure others of more exquisite taste, beauty,
or rarity. In the event of a further advancement of art, such
may hereafter be obtained; but until that further advancement
be made, to obtain more in number, but of no greater utility or
beauty, could only minister to the desire of variety or change.
The same remarks apply to every other article of stock. No
additional revenue could be acquired from an addition to such
things, since no further use or advantage could be acquired from
their possession.
However, both capital and other durable articles of stock
may be produced, and laid up in store, with a view to future as
well as to present use, and to supply our wants and exempt us
from labour when those now in use may be no longer service-
able; and this without other view of profit or advantage in the
interim. A man in youth and health might produce articles.
which are not of a perishable nature, and accumulate them to
supply his necessities and save his labour in old age, when his
health and strength may be no longer equal to the task.
This view of the subject gives an especial importance to the
study of nature, in order by new discoveries and inventions to ex-
tend the field for the employment of capital and to heighten its effi-
ciency, which is even more indispensable to the good of the commu-
nity than either the labours of the miser who accumulates capital,
or of the artificer who employs it. The latter contributes to the
present existence of mankind, the two former to its future exist-
ence in greater numbers and affluence. But, while there are
limits to the service which the miser can render, there seem
none to the services of science. When an abundance of stock
shall have been accumulated, the talents of the philosopher will
then be called more into requisition; and the energies of the
people take another direction. It were vain to accumulate
300
ON THE ACCUMULATION OF PROPERTY.
capital until a glut of it should be produced; and if this point
shall ever be nearly approached, human energies, in such case,
must be applied, not to a further accumulation of material, but
of intellectual riches.
When we compare the state of a nation at different periods
of its existence, and find that the produce of its land and labour
is evidently greater at one period than at another, that its lands
are better cultivated, its manufacturing establishments more nu-
merous and of greater magnitude, and its trade more extensive;
we may be assured, either that its capital must have increased
during the interval between those periods, or that the effectiveness.
of its industry has become greater. We shall find this to have been
the case with almost all nations, in tolerably quiet and peaceable
times, even of those that have not enjoyed the most prudent
and parsimonious governments. To form a right judgment on
this point, indeed, we must compare the state of the country at
periods somewhat distant from one another. The progress is
frequently so gradual, that, at near periods, the improvement
is not only not sensible, but, from the declension either of certain
branches of industry, or of certain districts, things which some-
times happen, though the country in general is in prosperity,
there frequently arises a suspicion, that the riches and industry
of the whole are decaying.
"The annual produce of the land and labour of England, for
example, is certainly much greater than it was at the restoration
of Charles II. Though at present no one doubts of this, yet
during this period five years have seldom passed away, in
which some book or pamphlet has not been published, written,
too, with such abilities as to gain some authority with the
public, and pretending to demonstrate that the wealth of the
nation was fast declining; that the country was ruined, agricul-
ture neglected, manufactures decaying, and trade undone. Nor
have these publications been all party pamphlets, the offspring
of falsehood and venality. Many of them have been written by
very candid and intelligent persons, who wrote what they be-
lieved, and for no other reason but because they believed it.
"The annual produce of the land and labour of England,
again, was certainly much greater at the restoration than we
ON THE ACCUMULATION OF PROPERTY.
301
can suppose it to have been about a hundred years before, at
the accession of Elizabeth. At this period, too, we have every
reason to believe, the country was much more advanced in im-
provement, than it had been about a century before, towards the
close of the dissensions between the houses of York and Lan-
caster. Even then it was, probably, in a better condition than
it had been at the Norman conquest; and at the Norman con-
quest, than during the confusion of the Saxon heptarchy. Even
at this early period, it was certainly a more improved country
than at the invasion of Julius Cæsar, when its inhabitants were
nearly in the same state with the savages of North America.
"In each of these periods, however, there was not only much
private and public profusion, many expensive and unnecessary
wars; but sometimes, in the confusion of civil discord, such ab-
solute waste and destruction of stock, as might be supposed, not
only to retard, as it certainly did, the natural accumulation of
riches, but to have left the country, at the end of the period,
poorer than at the beginning. Had not this waste and destruc-
tion taken place at different times, the produce of the land and
labour of the country would have increased every year, and every
year's increase would have augmented still more that of the
following year. More houses would have been built, more lands
would have been improved, and those which had been improved
before would have been better cultivated; more manufactures
would have been established, and those which had been estab-
lished before would have been more extended; and to what
height the real wealth and population of the country might by
this time have been raised, it is not perhaps very easy even to
imagine."
* Wealth of Nations, Book II. ch. 3.
[
BOOK IV.
ON TAXATION.
CHAPTER I.
1
ON THE EFFECTS OF TAXATION,
TAXATION transfers a portion of the returns yielded by the
agents of production-land, capital, and labour, from the
hands of their owners to the hands of government. Instead of
affording some direct personal gratification to the individual
owners, or being employed to augment their capital, these por-
tions are earned and enjoyed by the officers in the employ of
government, while the advantages derived from civil government.
constitute the return to the contributors for the sacrifice. Of
all popular topics of declamation, the burthen and oppressiveness
of taxes, and especially their injurious effects on industry and
the condition of the working classes, form the most frequent and
effectual means of exciting hatred against existing governments.
Yet when public measures are conducted with wisdom and eco-
nomy, so far from there being any loss to individuals from this
transfer of a portion of their income to the state, the security
and other social advantages it purchases, far exceed the enjoy-
ment which, without such security and other advantages, those
products could possibly afford, should they remain in the pos-
session of the individuals themselves, and be expended at
their pleasure. It is only when there is a want of wisdom or of
economy in the administration of public affairs, that taxation
becomes burthensome and injurious to the people. It is not
true, as is sometimes affirmed, that "taxation is but a choice of
ON THE EFFECTS OF TAXATION.
303
evils," and that " of all systems of finance that is the best which
spends the least;" for the advantages which civil government
procures, are incomparably greater than the sacrifice at which
they are usually purchased, even under the maladministrations
which have been witnessed, both in ancient and modern times.
If this were doubted, we need but look for its proof at the state
of the people in the civilized countries of Europe, as compared
with their state amongst those savage nations, where no taxation.
exists. When a man fences in his property, or houses it for
protection from depredation, we never say that the payment of
the expense is but a choice of evils, seeing that the value of the
security thus obtained far exceeds the cost at which it is ac-
quired. Why then shall we declaim against taxation, which is
but the payment for that moral fence by which our lives and
fortunes are encircled and secured; which only deserves to be
deprecated in its excess or abuse?
Unfortunately for the people, princes are usually surrounded
by persons who have an interest in a lavish expenditure of public
money. Holding emoluments derived from the public purse, or
seeking for them, their interest is, not merely to be liberally,
but extravagantly paid. The public service being conducted by
persons whose interests are opposed to those of the people, it is
not to be wondered at that it should seldom be conducted with
that economy which is practicable, and which is consistent with
the public interests. To such persons we owe the invention
and propagation of arguments to prove that magnificence and
profuse expenditure are conducive to public prosperity; and
that taxation, although unnecessary, so far from being an evil,
is beneficial to the state, and promotes the increase of national
industry and wealth. To reason seriously against such fallacies
might be thought trifling with the reader's patience, had it not
been that we have seen them, not only openly avowed, but
systematically and extensively reduced to practice; and hence
it is impossible to deny that they are deserving of refutation.
It has been already shown, that though the money which is
raised in taxes is refunded to the people by the expenditure of
the government, the people are still not the less deprived of the
comforts they would have enjoyed, had the money not been
304
ON THE EFFECTS OF TAXATION.
taken from them; for they never get back the things which
were parted with in order to procure the money wherewith the
taxes were paid: and the money, when it is returned, is never
restored gratuitously, or refunded by the public officers without
an equivalent for it; but is only repossessed, either by being
earned by personal services rendered, or by the sale of goods of
equal value; just as though it had been obtained in the way of
trade for goods or services of equal value, or just as though it
had never been in their hands before.
The fact is, the principles which apply to the ordinary articles
of the people's expenditure, apply equally to the government
services which are rendered them. It is their interest to pur-
chase food, clothes, and other things, in a cheap and good mar-
ket, and it is likewise their interest to procure the performance.
of the civil services of which they stand in need at a cheap rate,
and in an effectual manner; and as much so in the one case as
in the other.
The effect of taxation on the expenditure of the people is to
diminish that expenditure, by depriving them of a part of their
means of spending. This is equally the case whether taxes be
imposed on commodities, or directly on the individuals them-
selves. In raising the prices of commodities, taxation both
lessens the number of persons who are able to purchase them,
and curtails the extent of the power of purchasing in those who
are not wholly deprived of that power. But although the people's
means of purchasing are diminished by the payment of taxes,
the demand for commodities and labour on the whole is not
thereby diminished, (at least not in the first instance;) for these
taxes being paid over to persons in the government employ,
enable these last to purchase to as great an extent as that in
which the ability of the tax-payers themselves is curtailed.
Even the expense of collecting the taxes occasions no diminution
of demand; for whatever may be the cost of collection, it enables
the collector to expend precisely to the extent of its amount.
The only difference on demand caused by taxation is, therefore,
that the persons are different who have the spending, accom-
panied perhaps with some slight difference, not in the amount,
but in the kind of articles demanded; occasioned by the dif
ON THE EFFECTS OF TAXATION.
305
ferent nature of the wants and tastes of the consumers; the
persons who consume being in part persons who live on the
taxes as well as those who pay them. This effect on demand,
however, is only the first effect. When an unnecessarily large
amount of taxes is drawn from the people, and for the excessive
portion of which no equivalent is returned to them, their power
of accumulating capital, and of acquiring that knowledge and
skill through which their industry may be most successfully
applied, is contracted. With this contraction in their power of
production, their expenditure in future must be diminished in
a corresponding degree; and demand, which is always com-
mensurate with production when properly applied, must fall
short of that magnitude to which it would otherwise expand.
We have observed already, that it has been contended that
taxation operates as a stimulus to industry, and calls forth ex-
ertions which would never otherwise be made. As a first effect,
it may be admitted, that the imposition of a greater burthen of
taxes has this effect; though as a lasting effect it has not.
But, whatever may be its real effects, it is not likely that public
wealth can be at all augmented in this way. Objects of wealth
created by a forced industry, impelled by the feeling or appre-
hension of want, are seldom produced for the purpose of being
added to capital. When produced through unnecessary taxation,
they are to be consumed in the support of persons who either do
nothing at all, or are employed in doing what is of no real benefit
to the community; and who, if not so supported, would occupy
themselves in adding by their labour to the products of national
industry, and in supporting themselves independently of the ex-
ertions of others. Industry thus extorted from the people and
consumed in useless expenses, cannot add to capital or to future
production; nor can it be kept up except under the same appre-
hension of want. The additions made to capital must be expect-
ed to be in proportion to the facility and success of production;
not in proportion to the difficulties and privation under which
industry is exerted, and the smallness of the produce which tax-
ation leaves to those who labour. But the success of industry
must be in proportion to the aid it successively receives from
VOL. II.
X
F
!
306
ON THE EFFECTS OF TAXATION.
previous accumulations of capital, and to the knowledge and
skill of the labourer, which ease and affluence give him the
power of acquiring. Taxes, therefore, when raised and expend-
ed by the state in procuring no beneficial object, or in procuring
even a beneficial object at a profuse expense, and which, conse-
quently, operate in contracting the productive powers of industry,
act in the same way as excessive private expenditure, in impover-
ishing both the people and the state. Whatever stimulus they
may afford to industry in the first instance, they cannot but keep
down future production and future opulence, by withdrawing the
assistance which industry would otherwise derive from acquisi-
tions of additional capital and skill. As much as excessive tax-
ation keeps down future production, so must it keep down future
expenditure, which is always commensurate with its means.
Taxation, then, so far from being favourable to production and
expenditure, cannot but be adverse to them, and ultimately
diminish both.
Unquestionably, the richest nations are those which are the
most grievously taxed; as England and Holland, for example;
while, on the other hand, the poorest nations are those which
have no taxes whatever. But it would be a manifest inversion
of cause and effect thence to conclude, that the superior opu-
lence of some nations has arisen from the heavier amount of
their taxation. It is their opulence which enables them to pay
so largely, and not their paying largely which has made them
rich. No man could expect to enrich himself by rivalling the
expenditure of his richer neighbour. The rich man spends
largely because he is rich; but never can enrich himself by the
act of spending. The same rule applies to the condition of
nations.
There is one way in which taxation may be successfully em-
ployed as an instrument for the accumulation of property, and
the advancement of national opulence. This is, when its pro-
ceeds, instead of being expended in ostentatious, useless, or un-
profitable consumption, are applied to reduce or pay off a public
debt; to construct works of public utility which yield a profit
or advantage to the nation equivalent to their cost; or, in short,
ON THE EFFECTS OF TAXATION.
307
to any other productive employment. In this way, as we have
aiready observed, the effect of taxation in enriching a country is
direct and powerful.
Heavy taxes are the source of an inconceivable amount of
fraud, deception, and perjury. When taxation is excessive, it
is the same on the community at large as inequitably apportion-
ed taxation on individuals, which is excessive to those on whom
the burthen is too heavily imposed. Men of conscientious prin-
ciples are thus presented with the painful alternative of violating
candour and truth, or of submitting to an exaction which is an
aggression of fraud and force against them, and from which their
less scrupulous neighbours contrive to escape.
CHAPTER II.
ON THE PARTIES UPON WHOM TAXATION ULTIMATELY FALLS,
TAXES may be imposed in an endless variety of ways, yet as re-
gards their real incidence, they may be referred to three classes
only; namely, 1. Taxes which fall on the soil and other natural and
indestructible sources of production; 2. Taxes which fall on capital
and other property of a more or less perishable nature; and, 3.
Taxes which fall on labour. Land, capital, and labour, the three
agents in production, are the three original sources of revenue;
and, if we include in the term capital all property the creation
of labour, it is on the owners of one or other of these that every
tax must ultimately fall.
It may be laid down as a maxim, that any tax which is im-
posed directly on any one of these three classes cannot be shift-
ed off from itself to either of the other classes.
When a tax is imposed upon land, the effect to the proprietors
is the same as though the government had appropriated a share
of the land to itself, and left them only the ownership of the
other share. Now a tenant will not give more rent for the land,
x 2
308
ON THE PARTIES UPON WHOM
because the government and the proprietor are joint landlords,
than he would do if the proprietor were the sole landlord. He
would not be able to give more on this account; because neither
the quantity nor the quality of the produce is increased through
the tax being laid on; again, neither the ability nor the inclina-
tions of the consumers are augmented, so as to cause a greater
demand and value for it than before, nor is the cost of cultiva-
tion altered (provided the tax do not exceed the rent). On
these several accounts, therefore, the rent cannot be raised; for
the tenant has not the means of paying more. The landlord
cannot change the land into anything else which is untaxed,
in order to evade the payment of the tax. He cannot remove
it out of the country. Even if he sell it, he can gain no advan-
tage; for whoever should purchase it would give only such a
price as is proportionate to its net produce, after deducting the
tax and other outgoings. Thus, there are no means by which the
owners can escape from the payment of the tax, or throw off the
burthen from their own shoulders to those of
any other persons.
It is the same with any particular portion of land. The
owner of an estate which is charged with a heavy and unequal
assessment must bear the whole burthen of the impost; and
this for the same reasons as have been already stated with re-
gard to land in general.
The same observations which apply to land apply equally to
all other property of a fixed and durable character, which can-
not be changed in its form, or carried out of the country. Let
us take a house, for example. Now any tax, or unusually large
portion of a tax, laid on a particular house, must be borne by
the landlord in the end. During the currency of a lease, the
tenant, perhaps, may be compelled to pay it. But at the ex-
piration of the term, the tenant will not renew it except on con-
ditions in which this tax is taken into consideration. The
house is none the better for the tax; nor is it more in request
than before; and hence if the tenant is compelled to pay the
tax, an equivalent reduction must be made in the rent; or he
would quit the house and take another. Similar results
would ensue from the first operation of a tax on houses general-
ly; though ultimately these results would be modified; and
TAXATION ULTIMATELY FALLS.
309
herein constitutes the distinction between property of a perish-
able and property of an imperishable nature. For the reasons
above stated, a tax on houses generally would, in the first in-
stance, fall wholly on the owners; but eventually they would be
enabled to shift it in great part upon the tenants. When the
tax is first laid on, the landlord's capital is already invested in
houses, which he cannot change into property of any other kind,
and, consequently, cannot escape from the payment of the tax.
But as it happens, in the course of years, that houses go to decay
and require to be rebuilt, as well as that, in the progress of popu-
lation, more houses are in request, no man would invest newly-
created capital in rebuilding houses gone to decay, or building
fresh ones, unless capital invested in houses yield after the pay-
ment of the tax an equal return with capital invested in any
other shape. Thus the supply of houses would be lessened, or
the demand for them increased, until an advance of rents should
take place equivalent to the tax. Hence, in the shape of an ad-
vance of rents, the whole burthen of the tax would in the end
fall on the tenant. A tax on the occupation of houses is de-
manded of the tenant, and paid by him: the landlord bears no
part of this tax.
As it is with a tax imposed on houses, which does not extend
to other property the creation of labour, so it is with all other
property of a perishable nature. From the circumstance that
this kind of property wears out and becomes unserviceable, it
happens that a tax on any particular description of it, and not
extending to other descriptions, though in the first instance
borne by the owners, will not be so borne ultimately, but will
fall on the user or consumer of it. As the old capital goes to
decay, and new capital is invested in preference in the untaxed
instead of the taxed class of investments, the supply of the taxed
class becomes diminished, and the owner is ultimately enabled
to raise his charge for rent or hire, and throw the burthen of the
tax upon the tenant or employer of it.
In this circumstance of the perishableness of capital and of
all other property the creation of labour, lies an important dis-
tinction, as regards their real incidence, between taxes on such
property and taxes imposed upon land. The supply of the dif-
310
ON THE PARTIES UPON WHOM
ferent kinds of such property is under control, and may be in-
creased or diminished as a greater or less advantage is expected
in one kind than in another. But land remains for ever, and its
quantity cannot be increased or diminished. The supply of it
is not under control, and hence an impost on land is a perma-
nent impost on the proprietors, which they cannot shift from
themselves to any other persons whatever.
If a tax on property extend alike to every description of it,
in such case, the owner will be unable to shift the burthen of
the tax upon the tenant or user of it; because as the different
kinds are made to pay equally, there can be no advantage gain-
ed, as regards taxation, by investing newly-created capital in
one way in preference to another. The relation of the supply
and demand of the different descriptions will continue in time
to come wholly unaffected by taxation, except so far as the
government going shares with the owners in the profits may
tend to prevent so great an accumulation of property in general
as might otherwise be expected to take place. If we leave this
last-mentioned result out of the question, it must be admitted
that the government going shares with the owners of capital
and other property in its profits, cannot increase the utility of
the property or the produce it yields; neither will it occasion
any greater scarcity or larger demand for it; and, therefore, as
neither the quantity of produce nor its value can be affected, no
one will give a higher interest or hire for its use. If the
owners of this property would dispose of it to the landholders,
they must still submit to the disadvantage of the tax; for they
would only get so much land in exchange as would yield a
rent proportionate to the net profits of the capital, after deduct-
ing the tax.
There are limits, however, within which a tax on property of
a perishable character must be kept, in order to prevent its
being thrown on the shoulders of the user of it. In this respect,
it is different from a tax upon land. A tax on land may be
raised so high as in effect to appropriate the whole or nearly the
whole property to the state, and the landlord, so far from being
able to raise the rent in consequence, must submit to lower it in
the exact measure in which the tax is raised. The farmer,
TAXATION ULTIMATELY FALLS.
311
when he computes the returns he will get, after paying the
expense of cultivation, is willing to pay over the surplus profit
which his capital yields on the farm above what it would return
in other employments, in rent and taxes; but as much as the
taxes are increased must the rent be lowered. The rent, there-
fore, must be reduced as much as the taxes are raised; for
without this, the farmer would abandon cultivation and turn to.
some other occupation. But since other property, unlike land,
wears out in time and must be renewed, if taxation on it be not
kept within moderate bounds, capital that is newly created, in-
stead of being employed to keep up or renew the old, will be
exported to other countries, where a lighter burthen of taxation,
or other circumstances, may promise a better return to its owner.
Again, as the government spends all it gets, and lays by nothing
for repairs, or for renewal when the property shall become worn
out, an excessive impost upon perishable property will lessen
eventually the existing amount of such property. Hence, from
this diminution, combined with the diminution occasioned by
the exportation of new capital, its scarceness will ultimately raise
the interest or profit on that which is left, so as in some measure
to counterbalance to the owners their loss from the tax, and
throw the burthen of it on the user of the property, or the party
who consumes articles in the production of which capital is
employed.
A tax imposed on a particular individual is borne by that
individual, and by him alone. His labour is not more pro-
ductive than before. Nor is there any greater power or in-
clination in his employers to purchase his labour or its produce.
Neither production nor the relation of demand and supply is at
all affected by such a tax ; consequently, there will be no change
in the value of his labour; and, accordingly, no one will give
him more for it. It is the same with labour as a whole. Not-
withstanding the assertions of political reasoners to the contrary,
the labourers bear the whole burthen of the taxes imposed upon
them.
But if a tax be laid on any person, or any class of persons, in
respect of an occupation which they follow, and which occupation
they can relinquish for some other with a smaller disadvantage
312
ON THE PARTIES UPON WHOM
than the payment of the tax, such a tax will not be borne by
them, but will ultimately fall in the shape of an advance of
wages or prices on those who employ them in that occupation,
or purchase the articles which their labour furnishes. Because,
unless the workmen could get reimbursed the amount of the
tax by their employers, they would turn to other employments
open to them, in which they would not be taxed.
It may
be remarked, that this power of throwing off the burthen of a tax
upon their employers, in the shape of an advance of charges,
does not extend to those classes which should be peculiarly taxed,
whose labour already bears a higher price than that of other
classes in general. Neither does this power extend to such
classes as, from some cause or other, are prevented from en-
gaging in the untaxed and more lucrative occupations than their
own. In these cases, the workmen, either not having the power
of escaping from the tax, or if they have, and the tax does not
exceed the higher wages they earn, not being able to gain any
advantage by abandoning their taxed occupation and turning to
some other which may be exempted, the whole burthen of this
tax, though peculiar to their class, must be borne by it.
But if labour of every description be taxed equally one kind
with another, there are no means by which the labourer can
raise his wages, so as to reimburse himself and throw the bur-
then of the tax upon others: he must retrench his expenses, or
increase his labour. In years of scarcity, we see, that the poor
either consume less or work harder, or employ both these ex-
pedients of frugality and industry, in order to reach the end of
the year. If it were possible for the labourers to escape from
the tax, the only other parties upon whom they could throw the
burthen would be the owners of property; that is, of land,
capital, houses, and the like. But what more powerful means.
than they now possess, and call into exercise, would the la-
bourers acquire by the imposition of such a tax, so as to
enable them to raise their charges and make the owners of
property pay the tax? Every man, to be sure, is desirous of
pushing off from himself the burthen of any tax which is im-
posed, and of laying it upon others. But as every man has the
same inclination, and is upon the defensive, no set of men can
66
TAXATION ULTIMATELY FALLS.
313
And why the
be supposed to prevail altogether in this contest.
landed gentleman should be the victim of the whole, and should
not be able to defend himself as well as others, I cannot readily
imagine. All tradesmen, indeed, would gladly prey upon him,
and divide him amongst them, if they could; but this inclina-
tion they always have, though no taxes were levied; and the same
methods, by which he guards against the imposition of tradesmen
before taxes, will serve him afterwards."* Imagine that the
government should demand the moiety of the workmen's wages
by an income-tax. What fresh means, in such case, would they
acquire of compelling their employers to advance their pay?
Labour would produce no more on account of the tax. Society,
on the whole, would not be improved thereby, so as to augment
the demand for goods or labour. By what contrivance, then,
could a man raise the price of his labour? There would be no more
productions of labour to be exchanged with the productions of
land and capital, and no new circumstances to confer an advan-
tage in the exchange: the master who employs him will not.
give him more; neither can he, because he cannot raise the
price of the articles, being limited by the price which his cus-
tomers will pay; labour, then, would possess no higher value
than before, and no advance of wages could follow. It is true,
the government would come into the market with the proceeds
of the tax, and with the power of purchasing a larger quantity
of the productions of labour, land, and capital. But the addi-
tional demand for labour thus created, would be accompanied
with a falling off in the demand, of precisely equivalent magni-
tude, from labourers for their respective labours, and for the
productions of land and capital, through the curtailment of their
means of purchase by the payment of the tax. Neither the
landlords nor the capitalists would require more work than
before the labourers were taxed; the condition of the men
would be irremediable; they would in effect become slaves to
their rulers, to subsist or starve at their mercy or pleasure.
Undoubtedly there is a limit beyond which such oppression
could not be exercised. There is a limit to human endurance ;
but besides this, there are other limits, even supposing the ut-
* Hume, Essay 8.
314
ON THE PARTIES UPON WHOM
most submission on the part of the labourer. Workmen die,
and there is a considerable expense in keeping up a supply of
them. If this expense be not allowed, the supply of labour, as
the labourers die off, would be lessened. We might suppose
that this lessening of the supply of labour in relation to the sup-
ply of land and capital would enhance its relative value. But
we must recollect that this contraction in the supply of labour
will be accompanied with a deterioration in its quality and pro-
ductiveness, through the incapacity of the workmen to acquire
that skill and knowledge which is essential to the successful
exertion of their labour. Thus the condition of the labourers
would, in all probability, not be improved by lessening the sup-
ply of workmen. The probable result would be, an impoverish-
ment of the whole community; the interest of which is inti-
mately bound up with the interest of the working classes. If,
then, we put human endurance out of the question, the only limits
to such oppression would be found in the conditions which
nature has established as essential to the existence and propa-
gation of the human race.
Yet Dr. Chalmers holds the very opposite view of the case to
that here stated.
He says,
Should a hundred millions be
given annually in wages, and government lay an impost of ten
per cent. upon the labourers, the ability of the original hirers to
make offer of a hundred millions next year for service, is not at
all affected by such a tax. But then the effect of it is, that it
enables government to compete with them effectually in the la-
bour market, to the extent of an additional ten millions; or, in
other words, a hundred and ten millions may now be brought
annually forward for the purchase of labour, instead of a hun-
dred millions as before. But as there is no additional supply of
labour by this process, the money price of labour would just rise
to the full amount of the tax which has been laid upon it. The
labourers would obtain a full indemnity for the tax, by the pro-
duce of it coming almost immediately back upon themselves.
Insomuch, that were a poll-tax of five pounds a year laid upon
each labourer, we hold, that an almost instant compensation
would take place, by a rise to the same extent in the money
price of labour. He bears it ostensibly, but not actually. In
TAXATION ULTIMATELY FALLS.
315
point of semblance, it is a tax upon him; but, in point of real
incidence and effect, it is wholly upon his employers."* In re-
ply to this statement, however, it may be observed, that the
original hirers of the labourers are the masters and landlords,
who produce food, clothing, and lodging for the use of these
labourers and others, and in losing the labourers as customers
for such articles to the extent of ten millions a year, their means
of hiring them afresh must be diminished in the same propor-
tion. The government, indeed, comes into the market with
the ten millions, and makes up the deficiency in the power of
the original hirers; the result of which is, that by means of the
two parties, there is the same demand for labour as before, and
the labourers obtain the same sum in wages; but they are minus
the ten millions which is drawn out of their pockets by means of
the tax which is laid upon them.
It is important that the effect of taxation on the working
classes should be distinctly perceived and recognised. If this
effect be not well understood, or misapprehended, the con-
sequences in practice may be lamentable. Whether taxes be
imposed directly on the labourer in the shape of a poll-tax or in-
come-tax, or indirectly on the articles on which his earnings are
expended, the result is the same in both cases. Excessive tax-
ation trenches directly on the comfort and sufficiency of the
labourers. A want of those comforts and of that ample supply
of the necessaries which contribute to health, exposes them
more to sickness, and shortens the average duration of life in
their class, especially amongst children, who are more frequently
cut off in early life from an insufficiency of sustenance. Those
workmen who are above absolute want would be less ready to
marry, when they could not bring up children and establish
them advantageously in life. Thus population would be check-
ed, at the same time that the quality of labour would become de-
teriorated, from the want of skill in the workmen. These two
circumstances would have a direct effect in lessening the extent
of cultivation and the rent of land. But though rents should
fall, this fall would be inadequate to compensate to the labourer
for the falling off in the productiveness of his industry, through
* Polit. Econ. p. 270.
316
ON THE PARTIES UPON WHOM
the disadvantages under which his labour would be exerted.
The unproductiveness of industry would cause the amount of
capital to diminish, as the old became worn out and no longer
serviceable. A diminution in the number of workmen would
not therefore produce a fall of profits, so as to give them an ad-
vantage, because the amount of capital would decrease also.
The remarks which have been now offered on the wages of
labour apply also to the profits of trade. If the profits of one
trade are taxed, as, for example, by a licence for permission to
exercise it, while other trades may be followed without such
licence, the licence-duty will be thrown on the purchasers of the
articles, in the shape of an advance of price upon them. But if
all trades were licensed, or all profits taxed, the dealers alone.
must bear the burthen. Even if the duty were to absorb almost
all the profits, and leave only just sufficient to induce the owners
to continue to employ their capital in trade, in preference to be-
taking themselves to manual labour, this, though an act of utter
spoliation, would have little other effect on prices than as capital
would in future diminish in amount, through the want of ability,
and the absence of an inducement in the owners, to continue to
preserve and employ it; the limited extent of the traffic, would
cause its profits eventually to rise. Until that time, however,
the dealers alone must pay the duty.
Taxes on commodities, though advanced in the first instance
by the producers or dealers in them, fall wholly on the con-
sumers. The duty on tea, for instance, falls on those who drink
this beverage, whether of the class of landlords, capitalists, or
labourers; and it falls, too, in the exact measure in which they
consume it. These duties are not placed on all commodities,
and those on which they are placed are not taxed in an equal
degree; consequently, if the producers, importers, and dealers in
the taxed articles, could not reimburse themselves for the amount
of the tax by an increase of price on the articles, they would
turn to other and more lucrative employments which are not
taxed, or which are taxed only in a lighter degree. But if all
the productions of industry were taxed, and in an equal de-
gree; as, for instance, one per cent. on their value; this tax
would fall on the producers. For the productions would remain
TAXATION ULTIMATELY FALLS.
317
the same in quantity, and a part is taken away from the pro-
lucers by the state; their value, however, would not be raised,
because the demand and supply would not be altered (the re-
ceivers of the tax coming into the market in the same manner
as the original owners previously did); consequently, the loss
would fall on the producers.
In considering the incidence of taxes, and describing the
effects which taxation produces on the condition of the different
classes, it should be recollected that a variety of other circum-
stances operate from time to time to raise or lower the condition
of particular classes. The rent of the landlord, the profit of the
capitalist, and the wages of some or all of the descriptions of
labour, may be altered by a great many circumstances, inde-
pendent of taxation; and these operating, perhaps at the same
time, with taxation, may appear to counteract or vary those
which have been now considered. At one time they may act
in conjunction, and increase the effect which appears to flow
from taxation; at another, they may act in opposition, and anni-
hilate its action. But whether the one or the other of these
be the case, the effects of taxation, taken singly, are such as
have been now described. Like a poor soil and an unpropitious
climate, taxes add to the toil of the labourer, while at the same
time they diminish the produce which his labour acquires for
him.
A tax on the sale of goods and property of all descriptions, as
the alcavala of Spain, falls both on the purchaser and seller.
It lessens the division of employment, and, consequently, the
quantity and quality of the productions of industry, at the same
time that, in putting an impediment in the way of their exchange,
it lessens the adaptation to our condition and wants which ob-
tains in their actual distribution. These evils fall equally on
the producer and consumer. The producer will not apply him-
self exclusively to one occupation, unless he procure by the sale
of the particular kind of goods he produces, after payment of the
tax, as much as he would acquire by applying himself more
generally to the production of the various articles he requires.
The purchaser, therefore, must indemnify him for a portion of
318
ON THE PARTIES UPON WHOM
this tax. But, on the other side, the purchaser is similarly cir-
cumstanced, and must require the seller, who is in return the
purchaser of the goods he gives in exchange, to bear a part of
the tax which he himself has to pay on the sale of his own goods.
If any one of the purchasers were required to bear the whole of
the tax, he would apply himself to the production of a similar
article, in order to escape the payment; and hence, it must be
borne between the two.
Taxes on the sale of property by auction, when the sale
by private contract is free, fall usually upon the seller. For
the purchaser will not give more for an article at an auc-
tion than he can get it equally good by private contract else-
where; and the expense of the auction must be borne by the
seller.
Again, if a tax be imposed on the transfer of one particular
species of property, while other species are free; as, for example,
on land, while the public funds are exempted; this tax will fall
wholly on the owner of the property on which it is imposed. If
a man have a given sum which he wishes to invest in some pro-
perty from which he may procure an annual income, having to
pay a duty on the purchase of land, while he may buy into the
funds without the payment of any duty at all, he will reckon
what the cost of the land will be in price and duty together, and
will prefer the funds, unless the seller of the land will abate from
his price as much as the duty amounts to; and this abatement
the seller will be compelled to make, or he will never get a pur-
chaser to take the land off his hands; and the heavier the
amount of the duty the less he will get by his bargain.
Stamp duties, and duties on the registration of bonds and
contracts for borrowed money, fall altogether upon the borrower,
and in fact are always paid by him. Duties of the same kind.
upon law proceedings fall upon the suitors. They reduce to
both the value of the subject in dispute. The more it costs to
acquire any property, the less must be its clear value to the
party who must pay that cost before he can acquire it.
Taxes on the transference of property from the dead to the
living, of necessity, fall on the living, and as well finally
TAXATION ULTIMATELY FALLS.
319
as immediately on the persons to whom the property is trans-
ferred.
On whomever the real burthen of taxation ultimately falls,
the tax may be paid, like items of private expense, either out of
the principal or out of the revenue of the contributor. Taxes
laid on the principal are not, from their being thus imposed, the
more likely to be paid out of the principal; it must be the
amount and not the form of any tax which can occasion it to be
so paid. Taxes on income are not always paid out of income.
When the amount of taxes to be paid by any person falls
considerably short of his income, it is usually paid from it. But
if such taxation should at any time increase nearly to the extent
of the income itself, it must of necessity be in part paid out of
the principal. Prudent men generally contrive to pay their
taxes out of their income. Spendthrifts, on the other hand, fre-
quently pay them out of their principal.
There are some taxes, however, which, from their amount,
even prudent men cannot defray out of the revenue arising from
their property; but which must come out of the principal itself.
Of this kind are duties on bequests, and on the succession of
property, together with some others. Every instance of a tax
paid out of the principal, besides the hardship of its payment to
the particular contributor, is attended with the further mischief
to the community at large, of lessening the amount of the na-
tional capital, and, consequently, of diminishing its future pro-
ductiveness. The government spends the money in payment of
its ordinary expenses, and not reproductively as capital; so
that it is quickly dissipated from its state of accumulated capital,
and becomes wholly lost. For this reason, taxes on bequests
should be either kept within moderate bounds, or an ample time
allowed for their payment, so as to afford the opportunity of
paying them out of the revenue. It were better annually to de-
mand the full portion of taxes due from a man, and which he
will probably pay out of his revenue, through a curtailment
of his expenditure, than to wait till his death, and then de-
mand a large sum at once, which the heir will probably pay out
of the estate.
Taxes upon law proceedings, and law expenses in general, are
320
ON THE RULE FOR THE
very frequently paid out of the principal. For, as it has been
observed, litigation is not proportionate to the income of the
suitors, but to accident, to the complexity of family interests,
and to the ambiguity and imperfections of the law itself.
In countries like our own, where a heavy public debt exists,
taxes which are paid out of the principal, such as duties on the
probates of wills, on legacies, and on the sale and transfer of
property, ought to be scrupulously applied only in the liquida-
tion of that debt. If the produce of these taxes were expended
as it is received, in the buying up of stock, the fundholders, to
whom it would be paid in large sums, would not spend it as
revenue, but would employ or invest it in some productive way
as capital. Applied in this way, such taxes would have no
tendency to waste the capital of a country, and their peculiar
operation would become harmless.
CHAPTER III.
ON THE RULE FOR THE APPORTIONMENT OF TAXATION.
ONE of the most important questions which the subject of tax-
ation presents, is the principle or rule that should govern the
distribution of its amount amongst the different individuals of
the community. Without a knowledge of this rule, and con-
stant reference to it, it is impossible to determine on the pro-
priety or impropriety of any tax or system of taxes. It can
never be matter of indifference by what rule taxes are appor-
tioned, or whether that rule be founded in justice or not; see-
ing the vast extent of the effects to which it leads, in its prac-
tical results, and the oppression and injustice which it might
work throughout society. It may be truly affirmed, that, in a
system of taxation, its suitable apportionment is of the first im-
portance. Taxes must needs press the lightest on the commu-
nity when they bear equitably upon all. When they bear un-
APPORTIONMENT OF TAXATION,
321
fairly upon a few individuals, or classes, or branches of industry,
they are an indirect as well as a direct encumbrance; for they
prevent such as are thus unfairly burthened from competing on
even terms with others. Favour to one, in taxation, is neces-
sarily oppression to the rest. Its partial assessment is no less.
prejudicial to the public revenue, than unjust to individual in-
terests. Those who are too lightly taxed never call for an in-
crease; those who are too heavily burthened are seldom regular
in their payments, and are often ruined. The public revenue
suffers in both ways: in the one instance, from not obtaining
where it ought; in the other, from obtaining where it ought not,
and destroying the sources of future revenue. Besides, a partial
distribution of taxation soon makes it arrive at its utmost limit;
even though larger contributions are wanted, and might be
raised if properly apportioned. Thus, though in such a case
the public necessities may require an increase of revenue, yet no
more taxes can be laid on, without endangering the ruin of a
part of the people, and raising thereby a universal outcry
against an excess of taxation; in which all would join, even
though the greater part contributed only a very moderate sum.
In this way, taxes become vexatious and destructive to some
classes, while others are scarcely touched; and the burthen be-
comes galling, not so much on account of its weight, as from its
inequitable adjustment.
So simple a proposition as the rule which should govern the
distribution of the taxes to different individuals, may seem to
require but few observations; and this, indeed, would be the
case, were it not that false positions have been advanced in re-
spect to it, which call for a fuller discussion of the subject than
would otherwise have been necessary, in order to show their in-
correctness, and to make way for the reception of more accurate
conceptions on the subject.
In the ordinary business of life, the circumstance that governs
the charge is the quantity of work that is done, or the expense
which it has cost. When a gentleman builds a house, the
charge which is made upon him is the expense which the builder
has been at, with the addition of a profit for himself. No one
thinks of disputing the propriety of this mode of making out the
VOL. II.
Y
322
ON THE RULE FOR THE
account the only questions that can be raised are, as to the
actual amount of the outlay, and as to the reasonableness of the
per centage of the profit. But taxation is not thought to be
subject to the same rules as the common concerns of life, and it
is believed that different principles must regulate its distribu-
tion. There is, however, nothing essentially different in tax-
ation, which should exempt it from the universal principles
applicable to other cases. There is, indeed, no profit to be
charged on the people. But the expenses incurred are for
services performed, and are with the same propriety distributed
amongst the parties for whom they are performed, according to
the work done for each, as in every other joint undertaking.
In the "Wealth of Nations," several maxims are laid down
with regard to taxation; the first of which is as follows.
"The
subjects of every state ought to contribute towards the support
of the government, as nearly as possible, in proportion to their
respective abilities; that is, in proportion to the revenue which
they respectively enjoy under the protection of the state. The
expense of government to the individuals of a great nation, is
like the expense of management to the joint tenants of a great
estate, who are all obliged to contribute in proportion to their
respective interest in the estate. In the observation or neglect
of this maxim consists, what is called the equality or inequality
of taxation." In another place the author adds, "The evident
justice and utility of the foregoing maxims have recommended
them more or less to the attention of all nations."
Now to this maxim of Adam Smith, which has also since his
time been generally received, several objections may be stated.
In the first place, its several parts are inconsistent with each
other. Or, the explanation of the rule is wholly at variance
with the rule itself; for the ability and the revenue are not
equivalent terms. The ability of an individual to contribute
towards any adventitious purpose, does not depend on his re-
venue; since it must be varied by many circumstances wholly
independent of that revenue; nor can the one be measured by
the other.
The abilities of different persons must be varied by the dif-
ferent sources whence their revenues are derived; as from
APPORTIONMENT OF TAXATION.
323
labour, for instance, or from property. A man whose only source
of revenue is his labour, may be totally unable to increase it,
when additional taxes are required of him; whilst another man
of equal revenue, derived from property, has still his labour
applicable, in case of necessity, to the production of additional
income; and is therefore better able to bear an increased bur-
then of taxation. Again, a man whose income is derived from
the practice of some art or profession in the acquirement of
which money has been expended, is not in such good circum-
stances as a tradesman of the same income derived from the
employment of a capital in business; because the income of the
first must wholly cease with his ability to practise the art or
profession; while the capital of the latter will remain, when his
business is given up. The abilities of these two persons, it is
plain, are wholly different; and they must each be much inferior
to one possessing the same income wholly derived from pro-
perty; because this last, in addition to having his labour always
available to the production of income, has no need to provide
against sickness and old age, or for the necessities of a family
in case of his death. In one case, death ruins the family; in
the other, it enriches it.
Neither are the abilities of different individuals deriving their
revenues from property the same, though the revenues be equal
in amount; but must be varied by the different descriptions of
property whence they arise, and by the different tenures by
which this property is held. Speaking of revenue, with regard
to taxation, that sum must be meant which after paying ordinary
disbursements remains to the owner of the property. But in
computing the abilities of different persons whose revenues are
derived from different species of property, that revenue only
should be taken which remains after making all those deductions
necessary to place them on an equal footing as to permanence
and security. The net revenue, or that disposable sum which,
after all deductions, may be applied to the expenditure of the
holder, without incurring a risk of its future diminution, is the
only revenue which can be considered the measure of ability.
This net disposable revenue, in different descriptions of property,
is different from and disproportioned to the gross revenues de-
Y 2
324
ON THE RULE FOR THE
rived from them. The rent of a piece of land, for instance, has
few deductions to be made from it;-there are no repairs or
insurance; it is seldom untenanted, and subject to but little loss
from the insolvency of tenants. The rent of a house, on the
contrary, is subject, not only to the ordinary deductions which
arise from repairs, insurance, the want of occupants, and loss.
from bad tenants; but the property is less permanent; the
house must in time become old and of little value, and at last
require rebuilding; or the situation in which it stands may be-
come less eligible. Different houses, too, require different de-
grees of expense in repairs and other outgoings; depending on
the stability of their construction, the respectability of their
situations, and that of their tenants. The trouble and expense
of collecting the rents also vary. Again, the owners of money
lent at interest, without security, must be liable occasionally to
heavy losses from the failure of the borrowers. This loss ex-
tends not only to the interest, but to the principal and interest
together. The risk must be greater in some instances than in
others, and no criterion can be fixed of the deductions to be
made from the revenue on this score in different cases. But
this criterion must be fixed before we can determine on the net
revenue which may be spent by the owner without danger of
suffering a future diminution of income; and before we can
ascertain his ability in comparison with the owners of other
property to contribute to the support of government. Leasehold
property, and property held for life, must also require de-
ductions from their revenues, when compared with other pro-
perty, on account of these limitations to the terms for which they
are held.
Hence, the revenue and the ability, so far from being equiva-
lent, are totally different circumstances; one does not express
the extent of the other. If this rule, therefore, must be adopt-
ed, one of its parts must be taken singly, and the other aban-
doned.
Let us take the ability. But this rule is indefinite and insuf-
ficient in itself. The ability of a person to contribute towards
any object, depends, not so much on his revenue or his property,
as on the relation of his revenue to his expenditure; the source
APPORTIONMENT OF TAXATION.
325
from which his revenue is derived, and its permanent continu-
ance; on his family and connexions; on his progressive, station-
ary, or declining circumstances; his health or sickness; his
habits and manners of life; and the degree of foresight, pru-
dence, and economy which has habitually governed his con-
duct.
The spendthrift is less able to pay his taxes than most other
persons, though his income may be much greater. The miser,
on the other hand, is of all others the best able to pay. Those
whose only source of revenue is their labour, are, as was before
observed, less able to pay than those who live on their property;
and the pressure of taxation would be very unequal, if made the
same to both. Sickness, age, or infirmity, and the circumstance
of having families or relatives to provide for, must vary, in a
great degree, the abilities of persons whose monied incomes are
equal. Again, a person who has always found it necessary to
spend the whole of his income in maintaining that station of life
in which he has been brought up, would be obliged to make
more painful sacrifices when called upon to descend from it to
one of inferior grade, through a demand for extraordinary taxes,
than a person of the same income, who had risen from an in-
ferior station. These are circumstances of so nice a character,
that it would be impossible by any legislative enactments to
ascertain their value, and act upon them. Still more important,
however, is the indeterminateness of this rule in another point
of view.
In revenues of different amounts it must be matter of con-
troversy, whether the ability increase in the same or in a greater
proportion with the revenue; and what relation the one has to
the other; or, perhaps, whether, above a certain amount of in-
come, the whole excess beyond it may not be considered ability.
For instance, if a man having an income of a thousand pounds
a year were called upon to pay one hundred in taxes, the man
who has two thousand (if his ability to pay be considered the
rule for charging him) must pay eleven hundred; thus leaving
the same net income to both,—namely, nine hundred; for nine
hundred a year will support one man just as easily as another ;
and, therefore, all above it must be accounted ability.
326
ON THE RULE FOR THE
If, in the common transactions of business, the payment for
every service which is rendered to a man were to be regulated
by his ability to pay for it, what would this be but to strike at
the very foundation of the right of property, and to reduce the
condition of every rank among mankind to one common level?
In such case, the rich would have no superior advantages over
the poor; nor the poor be worse off than the rich. Yet there
is quite as much reason for making the ability to pay the rule
for governing the extent of payment in the common affairs of
life, as in taxation; and why shall that which is absurd in com-
mon life, be gravely advocated as wise in politics? There is not
in the whole circle of sophisms with which political science has
been obscured, one false position more completely levelling in its
nature than this.
Seeing, then, the indeterminateness of this principle, and the
dangerous abuses to which its application might lead, particu-
larly in a country where there is no equilibrium of political
power between the rich and the poor, it is impossible to allow
that the ability to pay taxes has anything to do with their dis-
tribution.
Neither can the revenue, when taken alone, afford a measure
for an equal apportionment of taxation. To charge the produce of
labour and that of property in the same ratio, must be an un-
equal mode of distributing the public burthens. The earnings
of labour cannot be left out; for some contribution is due from
the labourer towards the support of that government under
whose protection alone he can follow his occupation unmolested.
This rule is unequal as it respects every different source of re-
venue, every description of property, and different instances
of the same kind of property, as was before noticed. For
example, money lent on personal security, and money lent on
real security; property in houses, and property in land; lease-
hold property, and freehold property. To tax the revenue de-
rived from these with an equal poundage, would be unfair; be-
cause the circumstances of the owners are not proportionate to
the gross revenues derived from them. In some cases, the re-
venue is large, because the risk is great, or the property not
durable; but there is no superior advantage on the whole in
APPORTIONMENT OF TAXATION.
327
Fossessing these descriptions of property over others which
yield a lower rate of return; for the risk and the want of perma-
nence compensate for the larger revenue produced for a time.
If the welfare of the people be regarded, the system of taxa-
tion which a government imposes must be founded in justice,
equally with every other measure which it adopts. This is so
essential a requisite, that, without it, no system can be really
good, whatever apparent expediency or convenience may recom-
mend it. The ground on which a demand of a man's property is
made, ought to be entirely free from imputation of unfairness;
the reason which governs its amount ought to be plain, and its
equity easily comprehended. But neither ability nor revenue,
taken together or separately, as the rule of distribution, is an
equitable rule of taxation. The property possessed by indi-
viduals does not belong to the state; for though property can
seldom be accumulated to any extent unless through the pro-
tection afforded by government, yet it is not created by govern-
ment; and when the expense of its protection has always been
paid for, the government can have no further claim upon it, but
the remaining part must of right belong exclusively to the indi-
vidual owner. Now, it were an act of injustice to compel a
person to pay more than that share of taxes which belongs to
him on a partition according to the expense of the services ren-
dered him. Neither the ability nor the revenue, as the rule for
this purpose, has any relation to the expense of protecting dif-
ferent individuals, and would effect another distribution of the
burthen; in which case, some would be made to pay more, and
others would be let off with less, than that share which may with
justice be demanded of them.
If government were a charitable institution, and if the ends
it has to attain were of a benevolent character, or if the people's
property belonged to the government instead of to themselves,
their ability to bear taxation might be a suitable criterion by
which to apportion it among them. Government, however, has
nothing charitable either about its nature, or in the ends of its
institution; for its basis is interest,-not benevolence, and its
measures are characterized by force, instead of mercy. The
public good is not a sufficient ground for requiring the payment
328
ON THE RULE FOR THE
of a debt incurred in protecting one man, and actually due from
him, to be drawn from the pockets of another, without his
consent.
Since the ability or the revenue of individuals as the measure
for apportioning taxation would either of them effect an unjust
apportionment, they must therefore be inexpedient. Justice
being that course of action which is most calculated, according
to the present constitution of the universe, to avoid evil, and
conduce to the general good, nothing, therefore, can be useful but
what is just; and "the man who reasons that this is just, but
that is expedient,' erroneously dares to separate what nature has
cemented." The circumstance of this course most conducive to
universal happiness being deviated from by the government in-
stead of by individuals, cannot alter the natural tendency of the
action itself, or its results, except that the operations of govern-
ment being on a wider scale, of consequence the mischief must
be more extensive, and take a larger range.
The comparison of Adam Smith, before quoted, between the
individuals composing a nation and the joint tenants of an estate,
does not hold good, unless they all derive their revenues from
similar sources. But while some are supported by their in-
dustry, and others by their property, the comparison should
rather have been made between the individuals of a nation, and
the joint tenants, labourers, and other inhabitants of a great
estate, whose interests in it are not at all expressed by the re-
venue obtained. If these tenants were tenants in common, that
is, equally possessed of a proportionate interest in the whole estate,
and no exclusive interest in any part of it, doubtless the expense
of the whole management would be charged to the tenants ac-
cording to their respective interests. But if an exclusive and
complete property were possessed by them in particular parcels
of the estate, the expense of management to each would be ac-
cording to the expense of his particular parcel. Thus, if one
person possessed a number of cottages, and another a large
farm, the expense of collecting the rents and of managing the
letting and repairs of the cottages would be greater than that of
the farm, and would be so charged on the owner accordingly.
The individuals of a nation are tenants of particular parcels of
:
APPORTIONMENT OF TAXATION,
329
its property; possessing an exclusive and complete right to them;
not tenants of a proportion of a common right to the whole pro-
perty; and the expense of management, therefore, ought to be
divided according to the expenses of those parcels respectively.
The revenue of individuals has ever been difficult to ascer-
tain; and hence, governments have been led to the expedient of
taxing the expenditure of the people, as the nearest criterion:
which could be obtained by which to measure their revenues;
and as being, by indirect means, readily made the subject of
taxation. The expenditure is the governing principle in the
distribution of the British system of taxation. But whether as
a suitable principle itself, or as the means of bringing into action
some other principle, is not perhaps easy to determine. The
excise, the customs, the assessed taxes, the charge for postage,
and most of the stamp duties, are taxes on expenditure. The
land tax is the only tax on revenue, and this is of small amount
in comparison with the others. The auction duty, the legacy
duty, and part of the stamp duties, are taxes on the transfer of
property; and there are a few duties on licences, which fall on
the profits of particular occupations.
The expenditure is not the measure of the ability. It is as
distant from it as the revenue; and in some cases more so. A
taxation of expenditure to a person with a large family, de-
pendent relatives, or who is suffering through sickness, age,
or infirmity, or has been accustomed to move in a higher sta-
tion than that which he is now able to maintain, is, perhaps, of
all modes of taxation, to him the most oppressive. It is rather
taxing his misfortunes than his ability. And there are many
persons in one or other of these circumstances. On the other
hand, the miser, and those who are free from such encumbrances,
who in general are the best able to pay, escape in great measure
from contributing to these taxes. Where savings are made,
the nearest criterion by which a man's ability can be ascertained
is their amount. But taxes on expenditure, in cases of accu-
mulation, almost entirely fail. In cases where the revenue and
the expenditure are equal to each other, to tax the one is plainly
the same as to tax the other. But as the revenue can never be a
fair criterion for taxation, when it is applied to that drawn from
Uor M
330
ON THE RULE FOR THE
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industry and to that received from property, so neither can the
expenditure in such cases. There are some instances, however,
in which taxes on expenditure are superior, as regards distri-
bution, to a tax on revenue, when this last is applied with equal
pressure to the produce of industry and to that of property.
These are, those persons whose only resource is their labour,
and who being, consequently, under a greater necessity to accu-
mulate in order to provide against sickness, old age, or a family,
are more often found to save than those whose income is derived
from property, and who are therefore not under the same neces-
sity; so that the expenditure being less than the revenue, they
thereby escape from a part of the taxes which would fall upon
them if the revenue were taxed. In such cases, some com-
pensation is made for too high a ratio of taxation on the produce
of labour, and its pressure is rendered more equal. The same
thing happens with respect to such descriptions of property as
yield a large return, but the possession of which is insecure or of
short duration; the owners frequently spending but a part of
their income, laying by another part to compensate for the want
of security or of permanency.
What has been before said has relation chiefly to taxes on
general expenditure, and such as are imposed in an equal degree.
But such taxes may be levied on superfluities or on necessaries,
and thus be made to press on different classes of society in
different degrees, so as to make the rich pay more than the
poor; or the reverse. They cannot, however, make a distinction
between the man who earns his living by his labour, and the
individual who receives it from property; both these descriptions.
of persons being found in the opulent as well as in the neces-
sitous classes, and consuming commodities of the same kind.
Neither can these taxes make the distinction between such as
are able to pay and such as are not; since both ability and the
want of it are found in individuals of every class. What is a
luxury to one man, is but an article of necessity to another; and
what would be extravagance in health, may be indispensable in
sickness. These taxes are also avoided or paid merely from
personal inclination or disinclination for the article taxed, so
that the revenue cannot be fairly taxed in this way. Hence,
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APPORTIONMENT OF TAXATION
331
taxes on expenditure are in their nature incompetent to effect
an equal distribution of public burthens. Their operation on
industry, and the restraint they lay on the freedom of the people,
from the regulations necessary in collecting them for securing
the revenue, are productive of injurious consequences in a variety
of ways, which will be noticed heafter.
Expenditure, therefore, cannot be a suitable rule for the ap-
portionment of taxation. It is equally objectionable with ability
or revenue, and in many cases much more so. Taken with all
the mischiefs which result from it, it is in a high degree unequal,
oppressive, and inexpedient.
The expenses of government are incurred chiefly in affording
protection to the people; and if it could be ascertained what is
the precise expense incurred in rendering this and other services.
to different persons, doubtless, this exact sum, whatever it might
be, ought to be contributed by each respectively. But the ser-
vices of government are of a general nature afforded to the
whole nation; they are preventive or counteracting in their
effects, and though every one is benefited more or less by them,
yet the items of the expense they involve do not enable us to say
immediately how much of it, according to this principle, belongs
to any particular individual. Hence, though the expense in-
curred ought to be the invariable rule for the distribution of tax-
ation wherever this expense can be known and applied, yet as
this is most commonly unknown, it is necessary, in endeavour-
ing to carry out this principle into practice, to have recourse to
some guide in order to ascertain such expense, or to make an
estimate of it, or approximation towards it, where it may alto-
gether fail. For the purpose, then, of assisting in the distribu-
tion of taxation, the following maxims seem founded in reason
and equity--That taxation might properly be apportioned among
the people in proportion to the benefit they derive from govern-
ment, or the loss they would sustain by its subversion; or,
again, according to the interest they have in its maintenance;
that is, the magnitude of their stake in society. These lead to
the same result, and seem but different modes of expressing the
same idea. They may, however, assist in pointing out how an
equitable distribution of taxation may be effected.
332
ON THE RULE FOR THE
DOLW
It is affirmed, then, that taxation ought to be apportioned
according to the expense of the services rendered; or, according
to the benefit derived from the institution of government.
It may be premised, that success or failure, either partial or
complete, may attend the measures adopted to attain the benefit
derivable from government, and after the expenditure which
these measures have involved has been made, the benefit may,
in some cases, be little or none at all. But this is immaterial
in determining the relative contribution of the different persons
towards defraying such expenditure. The organization of social
life consists of a combination of the individuals in a state, whose
separate forces are united for the attainment of a common ob-
ject, in which all are interested, though in different degrees.
It is not, then, the fact of actual advantage having accrued from
the services of government that must regulate the contribution
of individuals, but the benefit contemplated by them. One
man may be robbed or defrauded, through the inefficiency of
the laws or the negligence of the police, while another may sus-
tain no such losses. But if the laws afford the same remedy to
both, and if the vigilance of the civil force be equally directed.
towards them, there can be no reason why they should not each
contribute proportionately, not to the actual exemption from in-
jury, but to that which was aimed at by the measures which in-
volved the expenditure. In fact, the contribution ought to be
made before the measures are carried into effect, and of course
before their failure or success can be known.
These principles for the apportionment of taxation are free.
from all the objections which have been before urged against
other rules for the like purpose. They are plain in themselves,
arising out of the nature of things and the principles of justice.
The reasons on which they are founded must be apparent, and
cannot need to be supported by argument, except to make way
for their reception by removing erroneous impressions before
imbibed. They must be expedient, because they are founded on
a principle of perfect equality, which it is the interest of all to
support, since it cannot be changed but to the injury of some one
or other.
It may not be useless to notice in this place a prevalent
APPORTIONMENT OF TAXATION.
333
opinion, that taxation should bear more heavily on revenue
which is expended on luxuries, than on that which is spent on
objects of necessity. M. Say asserts, that taxation merely pro-
portionate to individual income would be far from equitable, and
that it cannot be equitable unless its ratio is progressive. In
another place he says, "taxation is a sacrifice to the preserva-
tion of social organization, which ought not to be purchased by
the destruction of individuals. Yet the privation of absolute
necessaries implies the extinction of existence. It would be
somewhat bold to maintain, that a parent is bound in justice to
stint the food or clothing of his child, to furnish his contingent
to the ostentatious splendour of a court, or the needless magni-
ficence of public edifices. Where is the benefit of social insti-
tutions to a man whom they rob of an object of positive en-
joyment or necessity in actual possession, while they offer
nothing in return, but the participation in a remote and contingent
good, which any man in his senses would reject with disdain?”*
Doubtless, as far as the necessaries of existence go, revenue
ought not to be taxed. The immediate preservation of life is
the first demand of nature, and the more remote and contingent
good arising from the preservation of social organization can
only claim attention when the necessities of existence are sup-
plied. But this admission goes no further than necessaries, and
some further argument must be adduced to show that, beyond
this, a progressively increasing ratio of taxes should be imposed
on incomes as they increase in amount. I shall say nothing of
that part of the public charges which is incurred in maintaining
"the ostentatious splendour of a court, or the needless magni-
ficence of public edifices." Needless or extravagant expenses
may be difficult to apportion with justice; but the necessary
and suitable expenses of the state are free from all such
difficulty.
The protection of a thousand acres of land may easily be con-
ceived to cost ten times the trouble and expense which the pro-
tection of a hundred acres requires. But I know not that it
would cost any greater sum if one person owned the whole thou-
sand, than if they belonged to ten, or more, different persons.
* Book III. ch. 8. sect. 1.
1
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334
ON THE RULE FOR THE
If the owners lived on the land, and assisted in its protection, no
doubt the aid of ten persons would be more serviceable than
that of one; but if they all lived at a distance, I cannot con-
ceive what difference could be made by its belonging to one
person only, rather than to ten. To a very great proprietor,
the tax on all his property, assessed according to a progressively
increasing scale, might amount to so large a sum that his pro-
perty would be protected for less by his throwing off his alle-
giance to the state, declaring himself independent, and hiring
soldiers to defend his property. That could never be a just
system of taxation which should apportion it so as to be injurious
to individuals, and render the protection of their property more
expensive when undertaken by the state, than when managed by
themselves.
But if taxes in a progressively increasing ratio ought to be
imposed on large incomes, a difficulty meets us in fixing the
scale of progression. Immediately after leaving the solid ground
of principle, we are at sea without a compass or rudder to guide
our course; and in a matter where, perhaps, more than in any
other, we need plain and unanswerable reasons. How can it be
expected that a man should yield up a portion of his property to
anything short of force, when it is impossible to explain the
reason or justness of the demand we make? If luxuries are to
be more highly taxed, how are we to draw the line between
luxuries and necessaries, and say, that this, on one side, is an
article of luxury, and that, on the other, of necessity, where
nature has drawn no such line; where nothing can be more in-
determinate than the question at issue, about which no two per-
sons would agree? And how, again, are we to say how much
one article constitutes a luxury more than another? Since, as
before noticed, that which is a luxury to one man, may be only
an article of necessity to another; and that which may be an
indulgence at one time, may be indispensable at another; for in
sickness, or old age, we require indulgences which we should
not think of when in the enjoyment of youth and health.
From the rule that taxation should be apportioned according
to the services rendered, or the benefit derived, some inferences
or corollaries naturally follow. These are,―That the expense of
APPORTIONMENT OF TAXATION.
335
the protection of property must be borne by property; and that
the expense of the protection of persons must be borne by per-
sons. That various descriptions of property, and various de-
scriptions of persons, must severally bear the expenses of their
own protection. That services which are local must be borne
by local funds; and services which affect particular classes be
remunerated by those classes.
This rule and its corollaries appear so suitable for the pur-
pose, that it can scarcely be necessary to say anything in their
support; and it remains that we apply them to the several
branches of expense which the services of government occasion,
in order that it may be perceived how an equitable distribution
of the public burthens may be effected, and what imposts are
calculated to produce such a distribution.
CHAPTER IV.
ON THE APPLICATION OF THE RULE OF APPORTIONMENT, AS
REGARDS THE EXPENSE OF PROTECTION.
THE chief duties which devolve on government, as has been
already remarked, are to afford protection to our persons and
property; to secure the public tranquillity from foreign or do-
mestic aggression, and preserve inviolate the rights of individuals
and of the community at large. The performance of these
duties involves an expense. At first sight it may not be evident
that the protection of the person and property of any particular
individual is the occasion of expense to the state; but when we
consider that the protection of all the individuals comprised in a
state, and of the whole property of a community, does involve
an expense, and that the whole must be made up of its parts,
we cannot doubt that the protection of any single individual or
his property is the source of an expense to the public.
The frequency and vigour of the efforts to subvert a govern-
336
APPORTIONMENT OF THE
ment, to resist its power, or elude its vigilance, must be pro-
portionate to the magnitude of the objects which excite these.
efforts. These objects are the property and the individuals of
the community. Their magnitude may be measured by the sum
of all the property and all the individuals in the community,
each one swelling the amount; it is increased with their increase,
and lessened with their decrease. The circumstance, therefore,
which occasions the expense of the protection of persons and
property is, that they offer excitements to the evil passions of
human nature which prompt men to acts of violence or fraud;
or present subjects on which these passions may be exerted.
And the circumstance which must vary the expense of the pro-
tection of different individuals, and different parcels of property,
is, that they offer these excitements, or are exposed, in different
degrees. Now the force necessary to counteract these efforts of
violence or fraud must be proportionate to the force of the mo-
tives which call them into action; and the expense must, in
general, be supposed to follow the same proportion.
The services rendered by government in affording us pro-
tection, which involve an expense to be defrayed by contribu-
tions from the people, may, with regard to these contributions,
be divided into two classes, which being of a different nature, and
the one class affecting individuals in degrees different from the
other, it is proper to consider distinctly. These are,
First, Those services which provide for the public defence,
both against foreign enemies and insurrections at home; by
supporting the sovereign and his ministers, and whatever else
may be requisite to preserve the frame-work, or fabric, of society
efficient and entire, and by which the other class of services be-
comes attainable; which consists,
Secondly,―Of those services which appertain to the internal
or local administration and police ;-the distribution of justice;
the prevention of crime; the detection, apprehension, con-
viction, and punishment of individual offenders.
The characteristic of the first of these classes of services is,
that it is opposed to open warfare, to combined violence, and
to whatever would effect the overthrow of government. The
characteristic of the second class is, that it is opposed to secret
EXPENSE OF PROTECTION.
337
acts of fraud or violence on the part of single offenders, or small
combinations among them. The first is war with the commu-
nity; the second is war with individuals.
In each of these classes, the inquiry divides itself again into
two parts;-first, the expense of the services as they relate to the
protection of property; and, secondly, as they relate to the pro-
tection of the person.
With regard to the protection of property, the desire for it,
or the sacrifice which will be made by peaceable means to ac-
quire it, is measured by its marketable value; and the excite-
ment which it offers to its acquisition through acts of fraud or
violence is measured directly by this value, and inversely by the
difficulty, the danger, or the hazard, which must be run to pos-
sess it its value to the offender is therefore diminished at the
rate of the risk which its acquisition involves.
:
Now with regard to the expense incurred for the protection.
of property, to the department of government whose duty is to
render the first of the classes of services before alluded to, and
which might be called the general administration, we may say,
that this expense, in different parcels of property, is proportionate
to the direct ratio only of its value; leaving out of question the
inverse ratio of the difficulty or danger of acquisition; because
this last is equal in all. The measures of this department hav-
ing for their object protection from foreign enemies; from in-
surrections or the breaking up of society at home; in a word,
from open and combined violence; there is no greater difficulty
or danger of acquiring, in this way, one kind of property than
another. Modern European warfare is not carried on in the
way of plundering incursions; and rebellious insurrections at
home for the sake of plunder can only escape punishment by
the total subversion of government, the usurpation of its power,
or the introduction and continuance of anarchy. Under a usurp-
ed power, or in a state of anarchy, every description of property
could be equally well seized upon, and held by violence in
despite of the undisputed right of its proper owner. One de-
scription of property does not offer any greater inducement than
another, (leaving the difference of value out of the question,) to
bring about such a state of things. The sacrifice or hazard to
VOL. II.
Z
338
APPORTIONMENT OF THE
be run to possess different descriptions of property in this way is
equal, and therefore may be left out of the question; and the ex-
pense incurred by this department in the protection of different
parcels of property, of whatever description they be, may be
affirmed to follow the same ratio one with another, namely, that
of its market value.
But with regard to the second of these two departments, or
the internal administration and police, there is a great difference
in the expense incurred for the protection of different kinds of
property; and we must take into account, not only the direct
ratio of its value, but the inverse ratio of the difficulty and
danger of unlawful acquisition.
Movable property, in addition to the excitement to attack,
that is, to open warfare, which it offers, in common with real
property, to repel which forms the province of the general ad-
ministration, holds out likewise an inducement to attack it to
single offenders, or small combinations of them, by secret acts
of fraud or violence, to punish or guard against which forms.
the province of the internal administration and police. It is be-
cause the crimes, which it is the province of the internal admi-
nistration to regard, are chiefly those which are induced by the
hope of impunity from want of detection, that the distribution
of the expense of its support will not follow in amounts propor-
tioned to those for the support of the general administration,
though the same rule of apportionment direct them both. If
there were no movable property, there would be no thieves.
The owners of this property are, if one may so speak, the
cause of theft it is they who derive all the benefit of the
measures adapted to prevent and punish theft; and, when every
shoulder is to bear its own burthen, the expense of looking after
thieves, of apprehending, trying, and punishing them, whatever
it may be, must be borne by these owners of movable property;
as well as the expense incurred in watching over this property
in order to prevent theft.
:
The inducement to the violation of property operating, as was
before stated, in the direct ratio of its value, and the inverse
ratio of the difficulty or danger attending it, the expense of the
protection of property of different kinds must be increased as
EXPENSE OF PROTECTION.
339
the chance of impunity, or the exposure, is greater, and the
sacrifice or hazard to be run is, consequently, less. If, therefore,
a tax be assessed on the value of property, the poundage on that
value must be greater as the exposure and chance of impunity
are greater, and less as this chance is reduced.
But a more palpable and less abstract notion of the differ-
ence of the cost in protecting different kinds of property may
be gained, from a comparison of the number and expense of the
prosecutions instituted for the violation of property of different
kinds. Thus, by dividing property of different descriptions into
classes, as, for instance, household furniture and other property
in dwelling-houses into one class, and farming stock and other
property exposed in the fields or outhouses into another, it would
be seen what is the relative expense to the civil power for the
protection of these classes, and the whole value of each being
known, it would be seen how much per cent. must be laid on
each class to cover the expense of its protection; leaving the
division amongst the different parcels which make up its whole
class to proceed on the principle that the difficulty, danger, and
probability of detection is the same in the different parcels of the
same class, and that where these are alike, the inducement
to thieving operates with a force directly as the value of the
article liable to be stolen.
In the same way, that is, from the smaller number of pro-
secutions, it may be proved that the expense of the civil power
for the protection of real and fixed property is small; and that
this property must, consequently, bear but a small portion of
the burthen of the support of that power. There are some parts
of real and fixed property which are liable to be stolen ; as fences,
the lead on houses, and such things; and, therefore, this pro-
perty must contribute somewhat to the expense of the police;
but the value of the parts liable to be stolen is small in pro-
portion to the whole value of the property, so that if this whole
value be assessed, the poundage must be proportionately low.
Title deeds and writings are likewise liable to be fraudulently
withheld from their owners, or to be forged, so as to call for the
interference of the civil magistrate. In other respects, the pro-
tection of this property can give but little trouble to the civil
z 2
340
APPORTIONMENT OF THE
power, since little inducement is offered for its violation, from
the almost certain detection and punishment which must follow.
In taxing property, because its protection is an expense to the
state, this tax must extend to every kind of property; whether
it be what is termed productive, or unproductive: thus, house-
hold furniture and stock of every description, although affording
nothing in the shape of revenue, is equally chargeable as land
or other things yielding a rent. The tax is the necessary con-
dition of its protection; and the reason which imposes it on one
kind of property, extends with equal force to the other; for both
are equally protected.
We have thus stated all that it seems necessary to advance
relative to the distribution of the expense of the protection of
property to the two departments of government before alluded
to; supposing that the separate expense of each of these two
departments is known; and supposing, likewise, that it is known
what is the particular expense incurred by them in the pro-
tection of the whole mass of property of the community. These
expenses are, however, by each of them, incurred in the pro-
tection of property and persons conjointly, and it does not yet
appear how much is for the protection of property, and how
much for that of persons; or what is the relation between the
two. But of this, more will be said hereafter. We proceed to
the distribution of the expense of the protection of the person.
That individuals should contribute to the public expenses, as
well as property, might be proved, if necessary, both from the
benefits they enjoy through the freedom and security which
government procures them, and because the attainment of these
benefits involves an expense to the state. If it were not for the
protection thus afforded, our liberty and lives would be no longer
safe, and they might be made subservient to the purposes of
avarice, ambition, and other evil passions. What the depth of
degradation would be to which society would retrograde, and
the tyranny and misery to which we should be exposed without
the fostering protection of government, may be conceived from
regarding the state in which mankind have been found in those
ages and countries in which no regular governments existed, or
no governments of sufficient strength or virtue to secure the
EXPENSE OF PROTECTION.
341
rights of the subject. Or, looking nearer to our own times and
country, we may perceive, in some degree, the benefits of free-
dom, from viewing the state of that unfortunate race in our
colonies, to which the protection of the civil power has till lately
been denied. That our superiority of condition is to be attri-
buted to the civil liberty which the government secures, cannot
be doubted.
With regard to the expense incurred by the general adminis-
tration of government in the protection of individuals; this
expense must be considered to be occasioned in the same man-
ner as in the case of property, from their offering excitements
to the evil passions of our nature, which prompt men to acts of
violence and injustice; and the difference in the expense of pro-
tecting different individuals, must depend on the degree in which
they offer this excitement. The desire to deprive a person
of his freedom, and acquire possession of his labour, from ava-
ricious motives, must be in proportion to the advantage to be
gained thereby; that is, in proportion to the value of his labour,
or the sum he can earn above the expense of his maintenance.
The same may be observed respecting the desire of power.
Knowledge is a source of power and of wealth. To be sove-
reign of an intelligent, ingenious, and highly cultivated people,
must be more desirable than of a people less refined; and
the degree of its desirableness must follow that in which these
qualities exist. The intelligence and capacity of a people
are to be judged of by their results; and these may be mea-
sured and compared, as rendering services conducive to enjoy-
ment, or as producing things of value. A man who is incapa-
ble of earning more than sufficient to sustain animal life, would
offer no temptation to avarice; since no profit could accrue from
his labour; unless it were desired to employ him in an under-
taking in which his life would be endangered. But with regard
to ambition, he might still present an excitement; because his
liberty and life might subserve its ends. The desire to gratify
the other evil passions of our nature, as revenge, hatred, envy,
and wanton outrage and cruelty, as inducing invasion or re-
bellion, which it is the province of the general administration
to repel, must be provoked chiefly by the measures of govern-
342
APPORTIONMENT OF THE
ment, and not of individuals. These passions, on the part of
combinations of rebellious subjects, are not felt so much to the
disadvantage of the lowest classes of society, as to that of the
better classes; and the more as the latter ascend higher, and
may be thought to be connected with, countenancing, or parti-
cipating in, the acts of government. The purposes to be ac-
complished by rebellion would be, the degradation and de-
privation of wealth and power among these classes. It is the
rank or circumstances of the people, therefore, whether arising
from property, or from large income accruing from industry,
that particularly brings individuals within the sphere of these
revengeful and envious feelings, and forms the scale by which
their force may be supposed to be increased or diminished. So
far as the possession of property may be supposed to operate,
the expense of counteracting them is to be borne by the tax on
property. Here, we refer only to the produce of industry.
Many persons, however, do not receive any specific return for
service, or perform service at all; but when from their education
and talents they may be capable of earning more than sufficient
for their subsistence, they ought to be accounted as offering the
same excitement as though they obtained the wages which, on
an average, those classes obtain, whose services they are capable
of performing. Thus, the strength of the inducement to in-
vasion or rebellion which individuals present, independently of
their property, may be considered to be proportioned to the
earnings they obtain, or might obtain, beyond the necessary ex-
pense of their subsistence. And a tax on these earnings, or
means of earning, would be proportioned to the expense incurred
by the general administration of government in the preservation
of personal freedom.
We have before noticed, that the expense to the general ad-
ministration for the protection of property must depend on its
value; whilst the expense incurred by the protection of indi-
viduals depends on their earnings. In order to ascertain the
relation between the expense of the protection of property and
that of individuals; or how nearly an impost assessed on the
value of property is equivalent to one assessed on the earnings
of individuals; we may, for the moment, consider individuals as
EXPENSE OF PROTECTION.
343
property, and compute their value; so that having ascertained
the value of all the individuals, and adding the sum to the value
of all the property, it may be seen how much poundage must be
imposed on that value to defray the expense of the general ad-
ministration; or, which comes to the same thing, how much
per cent. must be imposed on the capital value of property, and
how much per cent. on the earnings of individuals, so as to be
equivalent to an equal per centage on the capital value of each.
That individuals, with regard to taxation, may be viewed in the
light of property, will appear reasonable from considering them
in another point of view; namely, because the superiority in the
remuneration which some classes obtain for their services over
others, is in consequence of the increased skill and ability, which
probably a more expensive education has afforded them.
Capital is thus invested in the improvement of their physical or
mental powers; and a return must be made from this capital,
equal to that from the like capital embarked in business, to-
gether with as much more as would, if laid by every year, equal,
at the average termination of the life or ability of the indivi-
duals, the amount originally expended in education. For if less
were returned, capital would be no longer invested in this way, but
would flow into more advantageous channels. The amount of this
capital, whether it has been usefully expended or wasted, can
only be ascertained from the return it yields; or from the earn-
ings which are thereby procured beyond those which would
otherwise be gained.
Now the earnings of individuals must be considered in the
light of a terminable annuity; while the produce of most kinds
of property is a perpetual annuity. Accordingly, the value
of individuals is to be computed from the average excess
of the earnings they obtain above the cost of their main-
tenance, and the number of years they will probably be enabled
to continue their labour. An estimated value of an individual
being thus obtained, he may be considered as offering an equal
incentive to the subversion of government, and the violation of
his personal freedom, as the same amount of property; and the
expense to the general administration for the preservation of
his freedom, may be reckoned as equal to such property. But a
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APPORTIONMENT OF THE
tax on earnings seems more reasonable than to compute the
value of an individual, and to tax that value. If the pressure of
the tax be made the same in both cases, the one would be equi-
valent to the other; the value being computed only to ascertain
the relation between the two. For which purpose, or, to perceive
how much tax assessed on earnings would be equivalent to a
given sum assessed on value, let us suppose the expense of main-
taining an individual to be thirty pounds a year. Then, this sum
deducted from his annual earnings will leave the annual profit
which would be derived from acquiring the command over his
labour. If we suppose the average term of the ability to labour
to be twenty years, his value at the commencement must be
accounted equal to a capital which would yield an income of this
net sum, and which capital will be worn out in twenty years.
Suppose such a capital to yield 8 per cent.; then is every £8 of
annual earnings above £30 liable to the same weight of tax as
£100 property. Or, if property be charged one-half per cent.
on its value, earnings above £30 must be charged 6 per cent. ;
and more or less in this proportion one to the other, as the
tax may be increased or diminished. At this rate, an individual
earning £130 a year by his industry, must pay an annual tax of
£6 5s. ; or the same sum as would be paid by a property of £1250
value. The data on which this computation proceeds are far
from truth; they are adopted merely for the purpose of illustra-
tion, not of definite conclusion.
With regard to persons in trade, whose income is derived from
the employment of capital, this capital should be taxed wherever
found, whether in their own hands or in the hands of their cus-
tomers. If these customers should thus become taxed for more
property than belongs to them, there is nothing unreasonable in
this; since its safe custody while in their hands is an implied.
condition of its being placed there. This safe custody equally
extends to paying the government the expense of its protection,
as to housing it from the weather, preserving it from fire, or
from other accidents. The expense of the protection of the
capital of traders being thus defrayed, it remains to consider the
earnings they gain as managers of capital. In this respect, it is
immaterial whether the capital they employ be their own, or
EXPENSE OF PROTECTION.
345
borrowed in part, or wholly, of other persons. If the capital be
borrowed, the trader will perhaps pay five per cent. interest for
it, while his gross profits may amount to ten per cent.; and after
deducting this interest from his gross profits, the remainder is
the reward of his industry and the risk he incurs. The profits
on borrowed capital are the same as on capital which belongs to
the person who employs it. The reward which appertains to
management and risk, therefore, though not equally apparent,
must be the same in both cases; and what is received more by
the owner of capital who employs it himself is the return of that
capital. In computing, then, the earnings of persons employing
capital, as this capital is taxed wherever found, five per cent. on
its amount should be deducted from the profits, as the value of
its interest, in order to leave the net earnings attributable solely
to the industry of the employer; to be charged on him, in the
same way as the earnings of other kinds of industry.
A question may be raised, whether debts should be charged
with a tax? To this it may be answered, that private debts
should not be charged; but that public debts should. A bond,
a bill, or other obligation to pay money, carries no real value in
itself, further than as the evidence of a transfer of some of the
property of the person who has to pay, to the person who holds
the bond; without at all increasing or lessening the amount of
property between the two. If a man have land worth £1000,
which he has mortgaged for £500, we cannot charge £1000 or
the land, and £500 on the mortgage also. It is sufficient to
charge £1000 on the land, which is the whole value of the pro-
perty divided between the parties; the land being really worth
only £500 clear to the owner. He should then have the power
of deducting the tax on £500 from the interest on the mortgage.
On the same principle, money lent on personal security cannot
be charged, for it must be already assessed in the shape of pro-
perty existing some where or other. If a wholesale dealer bor-
row £1000 to assist in carrying on his business, this £1000 is
charged with tax, either in the shape of stock in his warehouse,
or in the shops of his retail customers who are in his debt, and
whose stocks are greater than they would be if they had not pro-
cured goods on credit. Perhaps it will be said, that these shop-
346
APPORTIONMENT OF THE
keepers have no very large stocks on hand, proportionate to the
debts they owe; but, if they have not, they have debts due to
them from their customers, and these customers have property
in their possession to a greater amount than really belongs to
them, after payment of their debts. The debts, therefore,
being already charged in the shape of property, in the possession
of some one, who is not the real owner of the whole, in conse-
quence of having debts to pay out of it, and who is, therefore,
rated for more property than is really his; these debts, I say,
cannot be assessed in the shape of debts; for this would be.
charging them twice over. Though, however, debts ought not
to be charged; yet persons having interest to pay on them,
ought to be allowed to deduct the tax from the interest. But
this is not essential; because in the contract between the bor-
rower and lender, the circumstance of the tax being to be de-
ducted or not, would regulate the terms of the contract for in-
terest, and be compensated for by them.
The same reasoning applies to a public debt, though there is
a difference in appearance.
When an estate is taxed at its full
value, notwithstanding the existence of a mortgage upon it, the
owner of the estate who pays the whole tax, is entitled to call
on the mortgagee to bear a portion; since the mortgagee is
really in part owner of the estate. A public debt is a mortgage.
on the property and industry of a country, and the people ought
likewise to be entitled to deduct a part of the taxes they pay
from the interest of this mortgage, in the same manner as it would
be deducted in the case of money lent on the mortgage of a pri-
vate estate. The difference is as regards the assessment of the
tax. The deduction from the interest should be the same in
both cases, though the persons who make it should be dif
ferent. In a private estate, the owner being rated at its full
value, without regard to any mortgage that may be on it, deducts
himself a portion of the tax from the interest of the mortgage.
In a public debt, it would be inconvenient for the people (who
are the parties on whom the mortgage is made) to deduct the
fundholder's tax from the amount of the taxes they pay; and,
therefore, instead of the people being charged the whole expenses
of government, and allowed to deduct a portion of their taxes
EXPENSE OF PROTECTION.
347
from the sums they contribute towards the interest of the debt,
they are charged somewhat less, and not allowed to deduct any-
thing; the public creditor paying the tax directly to the state,
instead of indirectly through the hands of the people.
To the general administration of government devolves the
protection of navigation. Upon the principle that every one
should bear the expense of which he is the occasion to the pub-
lic, particular classes must bear the expense of the services ren-
dered them respectively. Accordingly, commercial men must
bear the expense of the services rendered in particular to them;
and their customers must bear the expense of procuring them
their supply of foreign productions. "The protection of trade
in general, from pirates and freebooters, is said to have given
rise to the first institution of the duties of customs;" and there
cannot be a more equal or suitable mode of providing for the
expense of the navy, and the support of consuls in foreign parts,
as far as their duties extend to protect commerce, than by the
imposition of custom-duties. But these duties ought not to ex-
ceed the expense of protecting navigation and foreign com-
merce; for if they be higher, the natural prices of things will
be altered, and people will be debarred the advantage they
would otherwise possess, of supplying themselves at the cheapest
market. Neither ought they to be lower; for in that case, fo-
reign commodities will be sold in the market for less than their
actual cost, and people will use foreign goods because they are
sold cheap, when home goods, though sold at a higher price,
really cost less. Duties of customs ought, in all cases, to be
either on the value of the goods, or on the quantity re-
gulated in amount with reference to the value; because
the advantage gained by the protection is the diminution of
risk, and this diminution is proportioned to the value. They
ought to be the same on all sorts of commodities transported;
for all are equally protected, and there is no greater expense in
protecting one sort than another. A vessel carrying bullion is
not more liable to capture than another vessel carrying a cargo
which will sell for an equal quantity of bullion to that carried by
the first. There is the same reason, likewise, for imposing duties
348
APPORTIONMENT OF THE
on goods exported as on those imported, namely, that they are
both equally protected. The maxims of the "commercial sys-
tem," doubtless are opposed to laying duties on goods exported.
It is not the place here to show the fallacy of those maxims; it
is sufficient to disallow them. But though the duties should be
the same on all the different sorts of commodities transported
to or from the same place or country, they yet ought to be dif-
ferent on the commodities transported to or from countries at
different distances, or where the expense of safe-conduct is
greater or less. Thus the East Indian trade ought to be charged
with a higher duty than that to the West Indies; because the
expense of protecting the former must be greater than the pro-
tection of the latter. The duties on the trade to France and
Holland ought to be much less than either, since the expense of
protecting them must be very small. Whence an argument
arises against the reduction of the duties on East and West
Indian sugars to a perfect equality with each other, for there ought
to exist that difference between them which the greater expense
of protecting the East Indian trade requires.
"If it was
thought reasonable to lay a general tax upon trade, in order to
defray the expense of protecting trade in general, it should seem
equally reasonable to lay a particular tax upon a particular
branch of trade, in order to defray the extraordinary expense of
protecting that branch.”
The rule, that the duties on export and import should be on
all merchandise alike, derived from, or exported to, the same
country, is however liable to the same exception or qualification
as that which may be made with regard to the tonnage duty on
commodities of small value passing along a canal; which will
be noticed hereafter. There are some commodities of small
value in which a trade could not be carried on if subject to a
duty; which nevertheless, if duty-free, would yield a profit; and
as the export or import of a particular commodity is not, strictly
speaking, (unless under convoy,) a source of expense to govern-
ment, though the export or import of commodities in general
certainly is, and as the expense to government would not be
lessened by preventing or lessening a trade in particular com-
EXPENSE OF PROTECTION.
349
modities, these, therefore, may, in some instances, be excepted
from the general rule, and subjected to lesser duties, or perhaps
exempted altogether.
Seeing that every different branch of trade must bear its own
expense, the charges of maintaining forts and settlements for
trade in countries inhabited by barbarous nations, must be borne
by the trade to those places. These duties should be raised in
the countries where the forts or settlements are established; and
should be laid on the import and export of commodities. The
advantage derived from these forts or settlements, as far as re-
gards the merchants, is in proportion to the profit gained by
the trade; and, as far as regards the people, in proportion to the
supply of articles which they could not, perhaps, get elsewhere,
or could not get so cheaply. This advantage is not always in
proportion to the value; because bulky articles of small value.
will yield a higher profit than others of greater value which are
of smaller weight and bulk; and the profit will be more in pro-
portion to the tonnage of the vessel, though not exactly so. But
if the duty be on the value both of the export and import of
goods, it would in many cases compensate for the greater profit
on goods of small value imported by the smaller profit on goods
of greater value exported, and would be sufficiently near to
answer its purpose.
The expense of consuls in foreign countries is a part of the
expense of protecting the trade to those countries; and
should be borne by the trade to those countries respectively.
The duties imposed on foreign commodities for the protection
of trade, and on home commodities exported, are paid by the
merchant, and by him recovered in the advanced price at which
he sells them, so that the duties ultimately fall on the consumers
of these commodities, and in proportion as they consume them.
The principle of apportionment is here carried into effect with
the utmost exactness, and nc hardship or oppression exists any-
where. Neither is there any variation occasioned from the
natural course of things by the imposition of these duties, so as
to induce persons to purchase some articles in preference to
others on account of their low price, when in reality the whole
expense of their supply was more; because paying the expense.
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APPORTIONMENT OF THE
of safe-conduct is a necessary condition of their supply, and
forms a part of the original cost as much as the insurance or
the expense of conveyance itself. Indeed, the natural course of
things would be varied were these duties not imposed.
We proceed to consider the expense occasioned to the internal
administration and police in the protection of the lives and
liberties of individuals.
The freedom of individuals can scarcely be in danger while
the general administration of government is maintained effective;
because its violation could hardly then escape detection and
punishment. Whatever expense the preservation of that freedom
may occasion, must be occasioned to the general administration.
The police or the law can have but little to do to maintain per-
sonal freedom; to these departments, therefore, there must in
this case be but a trifling expense.
The whole expense of the internal administration in the pro-
tection of persons and property conjointly being known, the
expense occasioned to it by the protection of the whole mass of
property, and the whole number of individuals, may be estimated
with sufficient accuracy by a comparison of the number of
offences committed against property, with the number committed
against the person; or, more nearly, by the relation of the whole
expense which the punishment of the offenders against property
occasions, to the whole expense of the punishment of the of
fenders against the person. In France, the proportion of the
crimes against property to those against the person, on an
average of six years ending 1818, was as 3% to 1. In England,
in the year 1825, 14,437 persons were charged with crimes; of
which number 12,530, or , were for theft. During seven years,
ending at the same period, the numbers were as follows; 211
murder, 50 arson, 241 forgery, 43,000 theft and other offences
against property: what was the relative expense of the prosecu-
tion and punishment of these, does not appear. Precautionary
measures to prevent crime must, for the most part, be placed to
the account of property; because there are no measures taken
to prevent injury to the person from revengeful and malicious
passions. These are, indeed, sometimes so impetuous as to
brave the certainty of punishment; but the criminal is in
EXPENSE OF PROTECTION.
351
general able to pay the expense of which he may be the
occasion.
The expense to the internal administration in protecting the
whole number of persons being thus ascertained, it remains to
inquire into the distribution of this expense amongst the differ
ent individuals. Acts of violence to the person are perpetrated
from motives of envy, hatred, revenge, lust, and wanton cruelty.
The force of the excitement to the perpetration of these acts of
violence must be varied by the personal and mental qualities of
the individuals against whom they are directed, and by the pro-
vocations they may offer. But these qualities and circumstances
can only be measured by their results. They may be consider-
ed equal in all. Wealth, or elevated station, may excite these
passions in a stronger degree than poverty or humble life. But
in proportion to the wealth of an individual, are the number of
points increased in which his property may be injured; and
hence, the liability of a wealthy man to personal outrages is,
perhaps, not greater than that of other persons. Indeed, mur-
ders and assaults are as much committed against persons in the
lower classes as against those in the higher; and we may con-
clude that the expense to the civil power in protecting different
individuals from personal outrages is the same in all. The rich,
however, pay more than the poor towards the punishment of
these malicious passions, in consequence of their property being
charged with the expense of the punishment of such offenders
as vent their malice by injuring property. A tax for the pro-
tection of the person, to be suitable, should be a tax on the per-
son, the payment of which should cease on the cessation of the
service rendered, either by the death or absence of the party.
A poll-tax, therefore, of equal or nearly equal amount on every
individual, might be a suitable provision for the expense to the
civil power in the protection of the person.
With regard to the administration of justice in civil matters,
in which the object is the adjustment of disputed rights; com-
pelling the payment of debts, and the fulfilment of contracts or
obligations; obtaining redress for injuries sustained, or deter-
mining the amount of compensation due; in these, and such-
like matters, the administration of justice ought to be no
352
APPORTIONMENT OF THE
burthen on the public funds. These are services which are
called for and rendered in a direct manner by government to
private individuals, and the expenses of which are ascertainable.
The application of the principle of apportionment is here com-
plete and evident; and, according to this principle, such ser-
vices must be paid for by the parties for whom they are perform-
ed. However, the party losing the cause, should not only be
compelled to do that justice, and make that recompence, to the
injured party, which he had previously refused, but to pay also
the costs which such refusal had rendered necessary to be in-
curred. Where no refusal had been made, the parties interested
should mutually bear the expense. But justice, it is said, should
be administered gratis. If it be administered gratis, all men
must contribute towards it, and that in equal proportions,
whether they give little or much trouble to the judges and
officers of court. But some men give a great deal more trouble
than others; and such ought to pay according to the trouble
they give. Is the litigious and unjust man, who is for ever
harassing his neighbours with frivolous and vexatious suits, or
compelling them to resort to law for redress of the wrongs he
commits against them, and who thus enhances to the public the
expense of the administration of justice; is such a one to pay
no more than the honest and inoffensive man who has, perhaps,
never been to law in his life? Nothing could be more unfair.
In civil matters, courts of justice cannot be better supported
than by fees of court, proportioned in every case to the value of
the time and trouble required of the judges and officers of court.
The expense of justice is often defrayed by stamp duties on the
paper or parchment used in the proceedings. But it would give
less trouble and be more convenient to the suitors if this expense
were defrayed by fees only without stamps.
In criminal prosecutions, where no particular compensation
is gained by the prosecutor for the injury sustained, proceedings
are carried on only for the sake of example, as a warning to the
criminal and to others. In this example, the public are equally
interested with the prosecutor, and the expense ought to be de-
frayed from the public purse.
The services of a local administration extend only to the in-
EXPENSE OF PROTECTION.
353
habitants of the district over which it presides. In apportion-
ing the expense of government according to the expense of the
services rendered, while individuals pay precisely the expense
of the services rendered them, collections of individuals must
also pay the collected sum of the portions of each member of the
collection. Hence the expenses of a local government can only
be properly defrayed by the inhabitants over whom it presides.
But if the objects of the local government partake in any measure
of those which belong to the general administration; such as
military defence, for instance; the rule must be qualified,
which can only extend to internal affairs, and protection from
individual aggression, or small combinations of offenders. The
duties of local governments in frontier or isolated provinces,
or colonies, may extend in part to the military as well as civil
defence; but the expenses of these ought to be charged on dif
ferent funds. The military defence appertains to the empire
generally; and must be borne equally by the inhabitants of
every part of it; for all are equally interested in this defence.
A colony, or frontier, or isolated province, may cost more for its
military defence than any other similar portion of the empire ;
because it is subject to attack, not only from the excitements pos-
sessed by itself, but as the point at which a blow may be aimed
at the empire to which it belongs. The European colonies in
the West Indies would have been less frequently attacked than
they have been, had they formed an independent nation amongst
themselves. But, belonging to one or other of the European
nations, in every war in which the mother country was engaged,
they became the vulnerable points through which the parent
state was sought to be brought to submission. Now, for the
greater expense which the protection of these colonies requires,
on account of such connexion, it were unreasonable to burthen
their inhabitants; since the excitement to attack is presented by
the empire generally, and not by these parts in particular.
Were it not for the existence of these distant points of attack,
the blow would be aimed at the heart of the empire itself;
whose inhabitants are better off, supposing they contribute no
more than those of the distant parts, inasmuch as the seat of war
is thereby removed from themselves.
VOL. II.
2 A
354
APPORTIONMENT OF THE
In many of the European colonies, and in some of the states
of North America, slavery is tolerated; while in other colonies
and states it is not. A state of slavery being an unnatural, un-
healthy, and feverish state of society, must increase the danger
and expense of the maintenance of government in those places
where it is tolerated; inasmuch as the basis of government
there is not the interest of all its subjects, but of a part only;
and is upheld by one part to the prejudice of another part. The
increased expense which a state of slavery occasions, though
it be in the military force, should be borne by those places only
where it exists, and should be raised by a tax on slaves accord-
ing to their number. The possession of colonies or provinces
where slavery is tolerated brings no accession of national
strength; but only weakness and danger.
Taxes on bequests and on the descent of property are fair, as
long as they are kept within moderate bounds; because by the
institution of government a person is secured in the peaceful
and quiet possession of property to which he in this way suc-
ceeds; when, without such institution, obstructions might be
raised against his succession. It is reasonable that he pay for
the benefit he thus derives. In particular, these taxes are pro-
per where there is a public debt; because the debt was occasioned
through not raising as much taxes at the time as the expenses
of the state required, and is due from those persons who did not
thus pay so much as they ought to have paid when the debt
was created or increased. To levy the tax, therefore, at the
death of a person, when he failed to pay as much as he ought to
have done during his life, is placing the burthen in the right
quarter. I pretend not to determine the proportion of the taxes
which should be laid on the property of persons deceased, nor
the variation in this proportion which should take place when
property descends to the near relatives, or such as lived with
the deceased, and to more distant relatives or friends.
Where a compulsory military service exists, without sufficient
pay to procure volunteers, this must be considered as part of the
aid afforded to the support of government; and ought to make a
difference in the monied contribution required of the individual
who serves. As the expense of the public services rendered to
EXPENSE OF PROTECTION.
355
different persons is unequal, as well as the interest they have in
the maintenance of social order, so the period of military ser-
vice required ought to differ in the same proportion. Or, if the
term of service be made the same, there ought to be a cor-
responding diminution in the taxes required of those whose term
is thus prolonged beyond its fair extent; for service, which is
money's worth, is equal to money itself. But there can be no
equitable distribution of public burthens, where services are
required without sufficient remuneration for them; because there
are many persons who must be exempted from serving, who
nevertheless derive advantage from the services being performed;
so that the burthen is unfairly placed on those who are required
to serve. For this reason, every public service ought to be
voluntary, and to be paid for in proportion to its value; for the
money to defray the expense can be equitably apportioned among
the people, while the service cannot.
Be-
Requisitions of labour is a common method of calling for
contribution to public objects. Neither can these be fairly dis-
tributed among the people, and they are, therefore, much more
burthensome than a contribution of equal value in money.
sides this, the labourers sometimes come from a distance to
their work; they come against their inclination, and having no
pay, the time is wasted, and the work is badly done. There is
also sometimes a loss from the interruption of the regular avoca-
tions of the labourer, which is often equal to the value of the
work performed.
In another place it has been noticed, that the protection
afforded by government is, protection to our persons and our
property. But the government likewise protects private cha-
racter or reputation; and, perhaps, the national character.
It may be that the national honour is best supported by
honourable actions, without a too petulant sensitiveness and
resentment of every injurious aspersion on it, which would only
serve to involve the country in endless, useless, and ruinous
dispute. But such a discussion would be out of place here.
If the reputation of a nation ever provoked hostilities from other
nations, in order to lower it in the estimation of the world; or,
if a vindication of public honour from unjust aspersions was
2A2
356
APPORTIONMENT OF THE
ever the cause of war; the character is but the conception in
the mind of the circumstances or qualities of a nation; and what-
ever effect may be produced by this conception may be referred
back to and follow the same rules as those circumstances or
qualities themselves. Though, therefore, the province of govern-
ment may be to protect public reputation as well as persons and
property, it is not necessary, with regard to taxation, to take
reputation into account, and our inquiries are sufficient if limited
to persons and property.
It is, however, the duty of the internal administration to pro-
tect private character, which is liable to be assailed from mo-
tives of interest, envy, revenge, or malice. It is impossible
to set a watch over reputation, to prevent the commission of
offences against it; there is, therefore, no expense incurred on
this score.
The offenders are, in general, competent to pay the
cost of their own punishment; which they ought at least to
do, if they are unable to repair to the sufferer the injury done
him. Consequently, the civil power cannot incur much expense
in the vindication of injured honour. What little expense it
may be at is induced from similar causes to that incurred in
the protection of the person, and should be defrayed from the
same funds.
A perfect exactness cannot be expected on all the points re-
lating to the distribution of taxation. But let it not, hence, be
thought, that the rule of distribution before advanced, or the
subsequent attempts to apply it, are, consequently, useless.
Though such inquiries may not determine the precise point we
wish to attain, they will, certainly, show us where it is not to
be found, and may direct us into the track in which it lies.
The rule which governments have hitherto adopted has been a
false rule, as well as indeterminate in practice; and it is, per-
haps, to the want of a definite rule, which should be plainly
founded in justice and the nature of things, that we may atribute
the total disregard to an equitable apportionment which has
shown itself in the different taxes which have been imposed,
and particularly in those of modern times.
To finish this part of our subject with a recapitulation of the
conclusions to which the application of our principle of appor-
EXPENSE OF PROTECTION.
357
tionment leads, it may be stated, that the expense of the pro-
tection afforded by government, which resolves itself, so far as
taxation is concerned, into protection to our property and our
persons, may suitably be defrayed by taxes on property and on
persons. That the different nature of the services of what may
be called the general administration, and the internal adminis-
tration, requires a different ratio of contribution towards their
That the contribution for the support of the general
expense.
administration may be raised by a tax of equal per centage on
the capital value of all property, and by a tax on the earnings
which are or might be obtained above the necessary subsistence
of the individual; and these two in such proportions that when
one-half per cent. is imposed on the value of property, earnings.
should be charged about 6 per cent. That the protection of
external commerce and navigation is best provided for by
duties of customs on the value of the goods both imported and
exported ;—of equal amount on all goods going to or coming
from the same country; but different on the commerce with
countries at different distances. That the contribution towards
the expenses of the internal administration might consist in
taxes on property and on persons, in addition to the charge on
these for the support of the general administration: the tax on
property to be, on the value of such property as is movable or
exposed to depredation from thieves;-of different amount on
different descriptions, according as their protection may be more
or less expensive to the civil power: the tax on persons to be
equal or nearly equal on all; its amount to be determined by
the expense which the protection of the person may occasion.
That the expense of the administration of justice in civil causes
should be borne by the suitors-plaintiff, or defendant, or both,
as the justice of each particular case may determine. That
taxes on the descent of property by inheritance or bequest seem
reasonable taxes, when kept within proper limits.
The collection and disbursement of a local revenue cannot be
better placed than in the hands of the local authorities. When
such funds are administered by persons who contribute to them,
who are to reap benefit from their proper management, and are
1
358
ON AN APPORTIONMENT OF TAXES
at hand to superintend and see that they are faithfully applied,
we may expect that nothing will be neglected which the public
safety or convenience requires, and that no public measures will
be undertaken the expenses of which exceed the expected
benefit.
Public military instruction, if any such be adopted, comes
within the province of the general administration; it forms part
of the measures adopted for the public defence, and its expense
should be defrayed out of the same funds.
Besides the protection which the government affords, there
are other services which it renders, that give facilities to the
people in their pursuits, and remove or lessen those obstructions
and dangers to which they would otherwise be exposed; such as
maintaining a circulating medium, the conveyance of letters by
post, constructing and maintaining roads, bridges, navigations,
harbours, light-houses, and other public works and public insti-
tutions for the security and benefit of commerce.
In some
countries the public establishments for education, for religious
worship and instruction, and for the support of the poor, come
under the administration of government. These will be separ-
ately noticed hereafter.
CHAPTER V.
ON AN APPORTIONMENT OF TAXATION ACCORDING TO THE
BENEFITS DERIVED FROM GOVERNMENT.
In what has been previously said on the apportionment of tax-
ation amongst the people, reference has been had to the relative
expense of the protection of different persons and different parcels
of property. This relative expense can only be ascertained by
an abstract inquiry, which may not, perhaps, in all cases, be
satisfactory. Hence, it may be worth while to inquire what are
ACCORDING TO THE BENEFITS DERIVED.
359
the relative benefits derived by different individuals from the ser-
vices of government; in order more clearly to perceive how an
equitable distribution of taxation can be effected.
The benefits which we derive from the protection of govern-
ment consist in the exemption from the necessity of defending
ourselves; the saving of labour and expense which is effected, in
consequence of the government affording protection at a cheaper
rate than could be done by every man for himself, and likewise,
in the protection being more effectual.
The value to different persons of the exemption from the
necessity of defending themselves is in proportion to what the
defence itself would cost them. The cost of the defence itself
we may suppose would be in proportion to the strength of the in-
ducements to attack; that is, in proportion to the degree of ex-
posure, the value of the property possessed, the extent of personal
acquirements, or the capacity to earn a greater sum than is
necessary for subsistence.
These are the same circumstances that have already been
stated as governing the expense of the protection when under-
taken by government, and they do not assist in determining
that expense. The difficulty lies in ascertaining the relative
force of the inducement to attack which is presented by indivi-
duals, and by property; and I do not know that this can be
done in any other way than that which has already been men-
tioned; namely, by considering individuals as of value, and
ascertaining that value. If, therefore, we have reference to the
benefits which mankind derive from the protection of govern-
ment in apportioning taxation amongst them, this rule would
afford precisely the same results as that which has reference to
the expense of their protection.
But another view might be taken of the benefits which men
enjoy under the protection of government. These are different
from the benefits derived from the protection of government.
The benefit which we derive from the protection of government,
is the actual protection of our persons and property such as they
are, and which we possess independently of the state. The
benefit we enjoy under the protection of government, is the en-
joyment we have of life under that protection, or the circum-
360
ON AN APPORTIONMENT OF TAXES
stances of fortune in which we are placed. These circumstances
are not, indeed, conferred on us by the government, but they
are enjoyed under its protection, and they could not be enjoyed
in anything like the same degree in any other way. This rule
is, with many exceptions and qualifications, the same as that
founded on our ability, or our means.
Let us, therefore, notice the effect of an apportionment of
taxation according to this rule.
The life, the liberty, and character of every person in a well-
ordered community being equally secure, the benefits which
each enjoys from liberty, life, and character, must be accounted
equal; because these must be supposed to be equally dear to all.
Hence, in a distribution of taxation according to the benefits we
enjoy under the protection of the state, an equal sum must be
demanded from every one for this benefit. So far our rule is
plain. But when we proceed to inquire what is the amount to
be thus demanded, or the relation it should bear to the other
taxes to be required, our rule fails; since it does not determine
the relation which the benefit derived from the possession of life
and liberty bears to the benefit derived from property. We
might estimate the value of life so highly, as to apportion a tax
on the poor man for the preservation of his life and liberty, so
as to exceed the tax for the preservation of the possessions of the
rich; which would be absurd. But to proceed.
The preservation of life, liberty, and character, being effected,
the benefits which men enjoy under the protection of the state,
are directly in proportion to their revenue, and inversely in pro-
portion to the labour or sacrifice they must make to procure it;
-the permanency of that revenue being, for the moment, con-
sidered the same.
In estimating the relative benefits arising to different persons
from their revenue, we may divide them into three classes.
First, those whose revenue is derived entirely from personal
labour. Secondly, those whose revenue is derived from labour
in the employment of capital. And, thirdly, those whose re-
venue is derived from the possession of property which is em-
ployed by other persons, and requires no personal exertion of
their own.
There is an essential distinction of character in
ACCORDING TO THE BENEFITS DERIVED.
361
each of these classes. In the first two, labour is necessary to
procure their revenue: not so in the last. Again, there is a
difference as to the permanence of the revenue. In the first
class, the revenue ceases entirely with the labour; in the second,
it does not altogether so terminate, but partly remains when the
labour is discontinued; in the last, it is permanent, and alto-
gether independent of personal exertion.
Among those who work, without employing capital to aid
their labour, the benefits they derive, considering them in their
relation one to another, are in proportion to their earnings.
This position, however, must be taken with some qualification ;
for to one man the toil and sacrifices necessary to earn a
given sum of money may be much greater than to another. In
some employments there is a risk of the loss of health, of life, of
property. Some employments are considered more honourable
and respectable than others. Some are painful or disagreeable.
All these circumstances must be taken into account in inquiring
minutely into the benefits derived from earnings. But this
would lead to an endless investigation. Our present purpose is
merely to elucidate the general effects of this rule for apportion-
ing taxation; and for this end, it is sufficient if we consider all
employments as requiring the same labour and sacrifices, and
as undertaken with the same risks and the same reluctance.
Among those who labour in employing capital, the benefits
they derive, considered one with another, are in proportion to
their profits. Neither can this position be taken without limita-
tion. There is greater risk in some businesses than in others;
some are unwholesome, unpleasant, or considered less reputable;
which occasion a considerable set-off against the benefits derived.
But these, as in the case of different descriptions of work, will
be passed over as unnecessary to the present purpose. Some
difference must exist, likewise, where the profits are not propor-
tioned to the capital employed. Because where the capital is
greater in proportion than the profits, the permanent revenue
which it may yield when labour shall be discontinued is also
greater.
Among the class of proprietors who live without any work,
on the rent or interest of their property, the property being em-
362
ON AN APPORTIONMENT OF TAXES
ployed by other persons, the benefits they enjoy, comparing
them amongst themselves, must, generally speaking, be accounted
to be in proportion to their revenues. In different descriptions
of property, however, some afford a permanent and secure in-
come, whilst others are hazardous, or last for a limited period
only. In estimating the benefits, the hazard or want of per-
manency must be brought into account, and the net revenue
only taken after allowance has been made for these. But the
advantages and disadvantages of every kind are expressed by
the value of the property, which is, therefore, an exact mode of
estimating amongst proprietors the benefits they respectively
enjoy under the protection of the state. On the present oc-
casion, however, the revenue will be taken, as more suitable for
comparison with revenue derived from labour.
Thus, generally speaking, we may say that the benefits enjoyed
by different individuals in the three classes which have been
mentioned, as compared with other individuals in the same class,
are in proportion to their respective incomes. But we cannot
in the same way compare the benefits derived from income in
one class with the benefits derived from income in another class,
and consider them equal when the incomes are equal, or pro-
portionate when the incomes are unequal; for the benefits are
altogether different.
The benefits which the man who labours without capital en-
joys under the protection of the state are the least of all. First,
his earnings can only be procured by the sacrifice of his plea-
sures and by painful labour; and, secondly, there is no perma-
nence in his income, which only lasts during the continuance of
actual labour. In case of sickness, old age, or infirmity, his
income ceases altogether; he must, therefore, provide against
these; and, perhaps, for the necessities of a family in case of his
death. The man who possesses a capital which he employs in
business is not under the same necessity; because his capital is
available for further income, when he himself shall be no longer
able to work. To place these two on the same footing, if we
would assess an equal rate of tax on the income of each, we must
consider the income of the man who labours without capital as
less than that of him who labours with capital, by as much as
ACCORDING TO THE BENEFITS DERIVED.
363
would insure his life for the sum which this other employs as
capital. The one may be considered as obliged to insure his
life, whilst the other is under no such necessity; and, conse-
quently, has an available income for expenditure greater than
the first, by the amount of the premium of insurance.
If we compare the condition of the labourer with the condi-
tion of the proprietor who does not work, but lives on the rent
or interest of his property, we have here a still further set-off
against the labourer, in addition to that which arises on com-
paring him with the man who employs capital, in that these two
are both doomed to labour, whilst the proprietor is not, and
pursues nothing but his pleasure. There is some risk in most
businesses; and the value of the exemption from labour and
risk of the inactive proprietor is expressed by the excess of the
profits on capital in trade over the returns on the value of other
property. If property in trade return on the average ten per
cent., and other property yield only five, then the value of the
exemption from labour and additional security of the inactive
proprietor must be accounted equal to five per cent. on his
capital; for if it were less than this, or supposed to be less,
there would be an advantage in being in business, and the gen-
tleman would turn trader. We cannot say, therefore, that the
tradesman who employs £1000 in business is better off than the
man who owns £1000 invested in good security, and lives idly
on the interest; though the income of the former may be double
that of the latter; for the value of the idleness and greater se-
curity of the latter must, in common estimation, make up the
difference. Neither can we say that the man who labours, and
thus earns a comfortable subsistence, is better off than the man
who has the ability to earn, but yet neglects to do so, and lives
in idleness and comparative penury; for the value of the
exemption from labour must, in his estimation at least, make up
for the privation which he endures. I speak not now of the
man who remains idle because he cannot procure employment;
with him it is otherwise. Hence we conclude that, amongst
the owners of property, a man is better or worse off in propor-
tion, not to the income he actually derives from it, but to the
income he might derive; and, amongst those who work or re-
364
ON AN APPORTIONMENT OF TAXES
main unemployed, that individuals are better or worse off in
proportion to what they might earn; or, universally, that a man
is better or worse off in proportion, not to the income he pos-
sesses, but to the income which he might have, if he would subject
himself to the same toils and hazards as other people.
If, therefore, taxes must be assessed on income, rather than
on the value of property, (which last is, however, the most exact
criterion,) we ought to charge all property as though it were
employed, and the rent or interest to the idle proprietor at a
rate, in general, double that of the profits of capital in business;
for the returns on capital employed are in general double those
arising from other property, in consequence of the labour and
risk of employing capital. The wages of labour must be charged
lower than the profits of capital in business, on account of the
utter cessation of return with the loss of the ability to work.
If the ordinary term of the ability to labour be accounted twenty
years, money be reckoned to produce five per cent. interest,
and capital when employed to yield a return of ten per cent.,
it will be necessary for the labourer, in order to put himself on
an equality with the capitalist as to permanency of income, to
lay by annually from the commencement £3 out of every £10 of
earnings, to accumulate at compound interest; which at the
end of twenty years (the average term of the ability to labour)
will amount to £100,-the sum for every £10 of income which
the capitalist has, when he retires from business. It might be
supposed here, that the sum which the labourer must lay by
annually, in order to put himself on an equality with the ca-
pitalist, should be such only as would, if employed as capital,
and yielding ten per cent., amount to £100 at the end of twenty
years. But it should be recollected that the labourer is fully
employed in his occupation of labourer, and cannot, whilst fol-
lowing this occupation, employ capital also: he can only lend
his savings to others, if they must be employed, and these
persons would then be entitled themselves to the excess of the
rate of profits over that of interest. It is not pretended that the
estimate here taken of the common duration of labour, and of
the profits of capital, is sufficiently correct to be acted upon.
Capital employed in small sums yields much more than ten per
ACCORDING TO THE BENEFITS DERIVED.
365
cent. per annum, and in large sums it does not yield so much.
But this estimate, for want of a better, is taken merely to eluci-
date the effects of a distribution of taxation, supposing the be-
nefits enjoyed under the protection of the state to be the rule of
distribution.
According to this rule, therefore, if a tax of ten per cent.
were imposed on the income derived from property which is not
employed by the owner, the tax on the profits of capital em-
ployed must be five per cent. only; for though capital employed
yield twice as much as property unemployed, the greater return
of the former is no more than the reward of the labour and risk
of employment, which the inactive proprietor himself might
gain, if he chose to turn his property into money and employ it
as industriously as the trader; and this difference of tax is only
necessary to put the two on an equality. According to this
rule also, the wages of labour must be charged less than the
profits of capital, on account of the cessation of return when the
labour shall be discontinued. It should be charged so that
every £10 of earnings should pay no more tax than if it were £7.
Or, when profits are charged five per cent., wages must be
charged of five per cent.; that is, 3 per cent. An equal
sum ought also to be paid by every one for the personal security
enjoyed, and the exemption from the labour and expense of de-
fending himself. But it does not appear how the amount of
this latter sum can be determined by the rule of distribution
now under consideration.
With regard to earnings, however, we ought to exempt from
taxation the wages of the very lowest class of labourers. When
a man has no property, and his earnings are barely sufficient to
support existence, we cannot affirm that he derives any benefit
or enjoyment under the protection of the state.
We ought
rather to say that he suffers under that protection. Excepting
the personal security afforded him, he derives no benefit from
government. If there had been no government, his condition
could scarcely have been worse. To tax him, would be to tax
privation and suffering, rather than enjoyment. Besides, the
rights of property themselves give way when the support of
existence is concerned.
366
ON A TAX ON THE VALUE OF PROPERTY.
From all that has been said on this branch of our subject, it
appears that the effect of a distribution of taxation according to
the benefits which men enjoy under the protection of the state,
is nearly the same as when the expense of the services rendered
forms the rule of distribution. When, however, the precise
expense of any service rendered to a particular person can
be determined, no distribution can be so proper as that which
apportions to him this precise sum, and neither more nor less.
This rule is so evidently just, and any deviation from it, which
must call on some individuals or other to pay more than their
reasonable share, in order to make up the deficiency, is so ob-
viously founded on injustice, that where its application is plain,
it is impossible to err in following it implicitly. But when
there may be anything of a doubtful or indeterminate character
in its application, the benefits enjoyed under the protection of
the state seem a reasonable and equitable rule for apportioning
taxation. Where one of these rules cannot be applied, the other
may be more easy of application; and besides, the consider-
ation of two methods of apportioning taxation, which seem
almost equally reasonable, and afford nearly the same results,
must serve to confirm the conclusions drawn from either. It is
for this last end, chiefly, that these remarks have been made.
CHAPTER VI.
ON A TAX ON THE VALUE OF PROPERTY.
A TAX on the capital value of property is not new. In Adam
Smith's enumeration of the principal taxes which have been
imposed in Europe, he states,-at Hamburgh, every inhabitant
pays one-fourth per cent. of all that he possesses; assessing him-
self on oath in presence of the magistrate. In the canton of
Underwold, in Switzerland, on extraordinary occasions, the
inhabitants assemble and declare what they are worth in order
ON A TAX ON THE VALUE OF PROPERTY.
367
to be taxed accordingly. In Holland, a tax was once raised of
two per cent. on the whole substance of every citizen. In the
province of Holland, every house is taxed at 23 per cent. of its
value, without regard to the rent which it actually pays, or to
its being tenanted or untenanted. Whence it should seem, as
a tax on the value of property has been in use in several in-
stances, that it has not been attended with any particular
inconveniences.
While the ability to pay was considered the guide of taxation,
it was natural to have reference to the revenue. But if the ex-
pense of the protection of property be the guide, it seems more
natural to have regard to its value. A tax on the value of pro-
perty is in every respect equal; while a tax on the revenue
derived from it cannot be so. The whole of the advantages and
disadvantages derived from the possession of property are neces-
sarily expressed by the value; because all these, whether they
consist of revenue, patronage, honour, security, or other benefit,
on the one hand, or risk, trouble, and insecurity, on the other,
are necessarily taken into account in computing the value; since
property is not valued for itself merely, but for the advantages it
confers. The advantages of patronage, honour, or whatever else
is derived from the possession of property, can be possessed only
through the protection of government, and these ought certainly
to contribute somewhat to the expense of the continuance of
that order of things whereby alone their possessors are enabled
to claim a superiority over other men. The possession of free-
hold property carries with it a degree of consideration and dig-
nity greater than property of other descriptions; it is in general
accompanied with a certain portion of political influence; its
possession is necessary to qualify for holding various offices in
the state, and it is sometimes accompanied with ecclesiastical
patronage. The possession of East India or Bank stock gives a
vote in the appointment of Directors; its possession is necessary
to qualify for a seat in the directory; and thus it either carries
with it a portion of the patronage of these companies, or a
chance of possessing it. It cannot be doubted that this cir-
cumstance must somewhat raise the demand for the stock of
those companies, and, consequently, have a tendency to raise its
368
ON A TAX ON THE VALUE OF PROPERTY.
value. No tax, therefore, can be equal which affects the pe-
cuniary revenue merely, and leaves untouched those other cir-
cumstances which raise or depress its value above or below the
natural level.
It has been already shown, leaving all these circumstances
out of account, that the apparent revenue itself is, in every
different species of property, and in different portions of the same
species, wholly different from and disproportioned to the net or
disposable revenue which may be safely applied to the expendi-
ture of the holder, without incurring a risk of its future diminu-
tion. But it is this net revenue alone that can place different
descriptions of property on an equality, and that should form the
basis of an equal system of taxation. The circumstances which
must be taken into account to compute it are so various, minute,
and intricate, that general rules would be difficult to meet them
with any degree of exactness. The value, however, of property
is continually ascertained by its sale, and the comparison only is
necessary between various portions of the same description; a
computation much less difficult than the other.
When property is let, there are sometimes many covenants
between landlord and tenant, besides the payment of rent; such
as repairs, or improvements, insurance, and the payment of
rates. When these expenses are borne by the tenant, the rent
is lower in proportion, which occasions the tax assessed on the
rent to be low also; while a property in which the landlord is
to bear these expenses will let for a higher sum, and the tax be
higher in consequence; though the two properties be exactly
similar.
A tax on the value of property may be more easily assessed
with equality. Sometimes the landlord drives a hard bargain
with the tenant, and sometimes he treats him liberally. In
those cases the tax assessed on the rent is hard or liberal also.
A tax on the value is also superior to one on the rent as respects
its collection. A tax on the rent must depend on the receipt of
the rent, and the charges made must be liable to many deduc-
tions. But a charge on the value of property, imposed as a
necessary consequence of providing for its security, would not
depend for its payment on the receipt of the rent, nor be varied
ON A TAX ON THE VALUE OF PROPERTY.
369
on an alteration in that rent, because its value would still remain
the same, and the expense of its protection would not be varied,
nor would this expense be lessened if the property should remain
wholly unproductive. The permanence of the assessment would
render it less objectionable to individuals; and as deficiencies on
the charges could only arise from the destruction or removal of
the property, they would be small, and afford few opportunities
of defrauding the revenue.
An objection, however, might be raised to taxing the value of
property, that when unproductive, it would be inconvenient
to the contributor to pay the tax. This inconvenience might
be obviated by allowing the payment to be postponed until the
property again became productive; it being always held liable
to the tax, and interest being demanded for the time during
which the payment should be deferred.
A tax on capital may by some be thought injurious, as likely
to lessen the amount of capital, and to turn it from the main-
tenance of productive to that of unproductive labour; or from
capital reserved for production to that intended for immediate
consumption; by such means tending to waste the national
capital, and bring on a state of general poverty. Undoubtedly,
such a tax would have this effect if it at any time exceeded the
rent or produce of the capital; as it would then be necessary to
pay the tax with a portion of the capital. But when kept within
this rent or produce, it can have no more tendency to lessen
capital than a tax of the same weight imposed on the revenue
derived from it. It is the amount of the tax, and not the mode
of its assessment, that can have this effect. A tax in either of
these forms will lessen the capital, if the owner have not resolu-
tion enough to diminish his expenditure, so as to keep within
the bounds of his remaining income; and in neither of them
will it do this, while the owner possesses such resolution. This
imputation of disadvantage, therefore, lies against a name only,
and not against a substantial ground of objection.
2 B
VOL. II.
370
ON THE EFFECTS OF INDIRECT TAXATION.
CHAPTER VII.
ON THE EFFECTS OF INDIRECT TAXATION.
THE system of taxation adopted in this country, places almost
the whole of the public contributions on articles of expenditure.
This system fails in a signal manner in effecting that most essen-
tial requisite in taxation-an equitable apportionment of the
burthen. Taxes so imposed are paid by those only who spend,
and in the measure in which they spend; while those who hoard,
or go abroad, escape from their payment; leaving the people at
large to make up the deficiency. Again, persons whose incomes
are derived solely from their labour pay in the same ratio as
those whose incomes are derived from property; though, in
addition to the protection which the government affords in
common to the persons of both, to these last it affords protection
to property also. To the owner of property there is more pro-
tection afforded than to the workman who is destitute of any;
and yet the contribution is the same from each.
Taxes on objects of expenditure not only bear unfairly on the
contributors, but they operate injuriously in many other respects;
some of which are worthy of notice.
They present an inducement to persons of property, or de-
riving incomes in other ways from the country, to go abroad to
spend them; because by this means they avoid the payment of
our taxes on expenditure, and, in other countries, such taxes
are light;—the greater portion of the burthen being placed on
the sources of revenue. Thus, notwithstanding that our govern-
ment keeps down the unprincipled among the populace, and se-
cures to these absentees the safe possession of their estates, and
the recovery of the rents accruing from them, yet they leave us to
bear all the expenses; contributing nothing or next to nothing
towards them themselves. Without pretending to blame such
persons, the error of the system is yet open to exposure and re-
prehension. If it were wished to bring back these absentees,
and induce them to spend their money at home, or at least to
ON THE EFFECTS OF INDIRECT TAXATION.
371
bear some portion of the public burthens, nothing more is re-
quired than to change taxation from objects of expenditure to
sources of revenue.
Taxes on objects of expenditure always alter more or less the
line of expenditure of the people's incomes; and therewith, as a
necessary consequence, the direction of national industry, which
always follows the line of expenditure. But, in making these
alterations, such taxes divert expenditure and production into
channels in which they would not run of their own accord, and
which are necessarily less advantageous than those in which
they would flow, if left to themselves. Thus, without benefiting
the government, or raising more taxes than might be procured
in another way, such taxes take away advantages which the
people would otherwise possess, and render them less able to
pay the taxes that are required of them. Most of the produc-
tions of industry may be used in a variety of ways, and for a
variety of purposes; and the number of ways, as well as the ex-
tent, in which any commodity may be advantageously used de-
pends upon its price. There is always a point at which its use
ceases to be profitable, and beyond which such use would in-
volve a loss; and the position of this point being governed by
the price, it is raised or depressed as the price rises or falls.
Individual industry and expenditure are always directed in that
way which, under existing circumstances, is most advantageous;
at least as far as the knowledge and means of the parties admit.
Any commodity which, by the imposition of a duty, is raised
above its natural price, ceases in consequence to be used in so
many ways, and to so great an extent, as before. Existing
circumstances become altered for the worse, and the people are
driven to substitute other commodities, not so well suited to the
purpose; or to abstain from using the taxed commodity at times
when, had the duty not been imposed, they would have used it.
Duties on foreign commodities, laid on for the ostensible pur-
pose of protecting and encouraging home production, not only
have no such effects, but directly frustrate the very ends they
were intended to bring about; namely, the increase of industry
and wealth. The advantages which foreign commerce confers,
and still more, the advantages which it is capable of conferring,
2 B 2
372
ON THE EFFECTS OF INDIRECT TAXATION.
1
$
if it were allowed to follow unrestrained its natural course, have
been already spoken of in another place, and need not be re-
peated here. These advantages are withheld from us chiefly
through the instrumentality of duties on foreign productions; and,
accordingly, it is to these duties that we owe the mischievous
consequences which result from the want of freedom of com-
merce, the burthen of which exceeds that of the payment of the
money, and this we have to bear without procuring any benefit
in return, beyond the disguise under which the taxes are drawn
from our pockets.
Taxes on some particular commodities, however, are more in-
jurious than on others; while some appear to be attended with
but little injury beyond their actual payment.
Amongst such as are unsound in principle, we may enumerate
those which burthen, and consequently retard, the progress of
discovery and invention, the diffusion of information, in all its
various branches, and the spread of sober and industrious habits.
Of this kind are, duties on paper, advertisements, and the in-
struments and materials of experiment. In chemical inquiries,
taxation is met at almost every step. The electric apparatus,
the galvanic battery, acids, alkalies, vessels, and retorts are all
sources of revenue to the state. Happily, coals are now ex-
empted. It was a wise policy which dictated the repeal of the
duty on this most important material of science and industry.
The cheapness of fuel, next to a fertility of soil and goodness of
climate, is the greatest natural source of opulence. An artificial
dearness, occasioned by the imposition of a duty, is of equal effect
with a natural scarcity. Since the invention of the steam en-
gine, a tax on coals became a tax on labour; and in limiting
the exertion of labour, it diminished the supply of the produc-
tions of industry. The effect of duties which repress invention
and enhance the expense and difficulty of the acquisition of
knowledge, is not only to deprive us of the intellectual gratifica-
tions of scientific and literary inquiries, but to check the produc-
tion of articles of material wealth, to render them dearer, and
of inferior quality, and to stint our supply of food, of clothing,
of fuel, and of lodging.
The duties on the raw materials of our manufactures raise
ON THE EFFECTS OF INDIRECT TAXATION.
373
the prices of the manufactured articles, and thus operate in-
juriously to trade in lessening the demand for goods. The duty
on paper injures the people in some degree, not only by check-
ing the diffusion of knowledge, physical and moral, or by dimin-
ishing the extent of the paper manufacture, but by lessening em-
ployment in the trades dependent on it, as printing, engraving,
type-founding, ink-making, book-binding, paper-staining, and
several others."Books carry the productions of the human mind
over the whole world, and may be truly called the materials of
every kind of science and art, and of all social improvement."
The same objections lie to the duties on many other raw materials
of our manufactures, as hemp, barilla, ashes, soap, drugs, dyes, and
some others, which raise the prices of the manufactured articles.
Again, duties on articles of capital, such as timber and woods
of all kinds, bricks, lime, or paint, are directly opposed to
theoretical views. These duties, by enhancing the expense of
building, lessen the number of instances and the extent in which
buildings may be employed with profit; and, consequently, with-
out raising any revenue for the state, they deprive the people of
the advantages that might accrue from a more extended use of
buildings in these instances. If the materials of building were
cheaper, they might be profitably employed in many purposes,
both of agriculture and trade, in which they cannot now be em-
ployed without loss. In that case, drains, fences, and more
extensive, commodious, durable, and useful buildings would
be constructed, which would afford additional accommodation,
or sources of revenue. The same remarks apply to taxes and
rates imposed on the rent of buildings, which operate in the
same manner as a natural dearness of buildings. To stint us
in the buildings and fences employed in industry, is equiva-
lent to stinting us in the tools and implements with which our
daily labour is performed. Taxing articles of capital, and thus
raising an artificial difficulty in the way of their acquisition,
cannot but lessen the quantity and quality of the productions of
labour, and spread a comparative poverty over the land. In
thus taxing articles of capital, a portion of the capital of a coun-
try is absorbed, which, operating in the same way as a natural
scarcity, diminishes the benefits which capital affords. On the
374
ON THE EFFECTS OF INDIRECT TAXATION.
building of a house, a large sum of money is paid to the govern-
ment in duties. The person who builds pays this sum out of his
capital, and is to be repaid by the tenant in the course of a long
series of years, in the shape of a higher rent. But if, instead
of thus taxing the capital of the builder, the same sum in taxes
were laid on the whole country, the people would pay it out of
their incomes, and not out of their capital; and there would
remain in the country a larger capital, available for productive
uses.
Another injurious consequence resulting from these duties
arises from their unequal imposition on different articles of a
similar nature, which induces the use of articles of inferior, in
lieu of those of better quality. Thus, while the duty on timber
from Canada is ten shillings per load, the duty on that from the
Baltic is fifty-five shillings. Consequently, the dear and in-
ferior pine timber of America is substituted for the sound yellow
deal of Norway. The same remark applies to bricks. While
the statute brick is subject to a duty of 5s. 10d. per thousand,
the 12in. paving tile, which contains but little more than
double the cubical contents, is charged a duty of 48s. 4d. per
thousand. The consequence is, that the latter highly useful
article is almost gone out of use, and common bricks, but little
suited to the purpose, or paving stones, are substituted in its
place.
Again, the necessity of advancing the duties to the govern-
ment before the articles are sold, renders it necessary for the
trader to employ a larger capital than he would otherwise want.
But when a larger amount of capital is required to carry on the
trade of the country, its effect is the same as would result from
a falling off in the amount of the national capital. The neces-
sity of employing a larger capital precludes persons of small
capital from engaging in business and competing with larger
capitalists to so much advantage as, under other circumstances,
they would be enabled to do. Thus competition is checked;
the larger capitalist acquires an advantage at the expense of the
smaller; the profits of trade are in a measure increased, and the
public made to pay more than they need to do.
Another circumstance occasions the people to pay much more
ON THE EFFECTS OF INDIRECT TAXATION.
375
in these taxes than is received by the state. In advancing the
duty to government previous to the sale of the article, the trader
of course charges his customer a profit on the capital thus ad-
vanced. If this customer should not be the consumer, but
another trader, this last when he sells the article lays a profit,
not only on the original duty, but on the first trader's profit
superadded to it. If the article pass through the hands of a
third trader, this man lays a profit on the duty and on the first
and second traders' profits also. Thus, in every transfer, a profit
is laid on all the former profits, and the duty accumulates in the
nature of compound interest. This accumulation, too, goes on
not simply at the common rate of interest of money, say four or
five per cent.; but at the rate of profits of capital in trade, which,
after remunerating the trader for occasional losses from bad
debts, must leave him a net profit of perhaps ten or more per
cent. Again, the tradesman must be paid for his trouble in
paying the duties, and in complying with the regulations im-
posed by the revenue laws. Thus, it is obvious, that the people
pay a great deal more in these duties than is received by the
state. They are, besides, exposed more frequently to the adul-
terations practised by the trade, which are induced in a greater
degree through the high prices of the articles in consequence of
the duties.
Taxes on commodities always require a great number of officers
to collect and manage them; and their collection is attended
with much more expense than that of other taxes. The regula-
tions and restraints which are framed to protect the revenue
arising from these taxes are exceedingly numerous and strict ;
they prevent the manufacturer from carrying on his business in
that way which is most convenient and least expensive to him-
self, and hinder his making those improvements in the processes
which his skill and experience may devise.
Mr. Babbage observes, "The effects of regulations of excise
upon our home manufactures are often productive of incon-
venience; and check, in some measure, the natural progress of
improvement. It is frequently necessary for the purpose of
revenue, to oblige manufacturers to take out a licence, and to
compel them to work according to certain rules, and to make
376
ON THE EFFECTS OF INDIRECT TAXATION.
stated quantities at each operation. When these quantities are
large, as they usually are, they deter manufacturers from making
experiments upon new materials; they likewise prevent them
from discovering by trial improved methods of conducting their
processes. Difficulties of this nature have occurred in experi-
menting upon glass for optical purposes; and in this case, per-
mission has been obtained by fit persons to make the experiments.
without the interference of the excise. It ought, however, to
be remembered, that such permission, if frequently granted,
might be abused."
It
"From the evidence given, in 1808, before the Committee of
the House of Commons, On Distillation from Sugar and Mo-
lasses, it appeared that, by a different mode of working from
that prescribed by the excise, the spirits from a given weight
of corn, which then produced eighteen gallons, might easily have
been increased to twenty gallons. Nothing more was required
than to make what is called the wash weaker; the consequence
of which is, that fermentation goes on to a greater extent.
was stated, however, that such a deviation would render the
collection of the duty liable to great difficulties; and that it
would not benefit the distiller much, since his price was enhanced
to the customer by an increase of expense in the fabrication.
Here, then, was an instance in which a quantity, amounting to
one-ninth of the total produce, was actually lost to the country.
A similar effect arises in the coal trade, from the effect of a duty;
for, according to the evidence before the House of Commons,
it appears that a considerable quantity of the very best coal is
actually wasted. The amount of waste is very various in dif-
ferent mines; but in some cases it amounts to one-third.” *
In the malting trade, too, "The severe and vexatious excise re-
gulations at one and the same time, have the effect of unnecessarily
fettering the operations of the maltster,—of deteriorating the
quality, and adding to the price of his malt,—and of putting him
wholly in the power of the pettiest officer of excise."†
We should therefore estimate the expense of collection of
indirect taxes at but a small part of their actual cost, if we
* Economy of Manufactures, p. 272. † Edin. Rev. vol. 44. p. 373.
ON THE EFFECTS OF INDIRECT TAXATION.
377
omitted to bring into account these injuries, with the trouble
and loss of time they occasion to the people; which never ap-
pear in the statement of expense to the government; but which,
in some of these taxes, are equal in value to the expense which
does so appear.
The frequent visits and examinations of the
officers are a source of vexation, and sometimes of oppression;
"and though vexation is not, strictly speaking, expense, it is
certainly equivalent to the expense at which a man would be
willing to redeem himself from it." Now the goodness of the
supply of the necessaries and conveniences of life of any com-
munity must depend, other things being equal, on the number
of persons employed in contributing to that supply, in relation
to the number of persons to be supported on it. But the great
number of revenue officers which these taxes require diminishes
the number of the people employed in productive labour; and
yet, without contributing at all to that supply, they must be
supported out of the diminished produce. Thus their salaries
and emoluments increase the labours and privations of the peo-
ple who have to pay them; whilst the occupation and waste of
the people's time lessens the productive effect of their labour,
and renders them less able to pay.
These taxes generally offer multiplied opportunities and strong
temptations to defraud the revenue; and when they are high,
fraudulent practices or smuggling are sure to be carried on, in
spite of the utmost vigilance to prevent them. In proportion
as the taxes are evaded, so is the fair trader's reasonable profit
curtailed; and he is almost driven, in self-defence, either to
adopt the general practice of defrauding as others do, or to give
up his concern. Almost all the businesses which government
has materially burthened with duties have been injured thereby,
and the fair trader's profit reduced below the level of other
businesses.
Taxes on commodities render a great many laws, penalties,
forfeitures, and punishments, necessary for their protection.
The distressing severity of these penalties and forfeitures, when
put in force, commonly ruins the unfortunate offender; while it
destroys the capital he possessed, and deprives the country of
the advantages which its productive employment might have
378
ON THE EFFECTS OF INDIRECT TAXATION.
afforded. For the capital henceforth, instead of continuing to
be productively employed, is expended as revenue by the go-
vernment agents, and disappears altogether. In estimating the
burthen of these taxes, we must always reckon the forfeitures,
penalties, the law expenses and punishments, which are sure to
accompany them; and which, without increasing the revenue
of the state, waste the national capital, and multiply the suffer-
ings of the people.
Again, such taxes oblige governments to brand with the in-
famy, and visit with the punishment of guilt, actions that are in
themselves innocent. But, to punish mankind for actions that
are guiltless, is to subvert the natural order of things, to con-
found vice and virtue, and to remodel them, as it were, upon
other principles different from the real nature of things. It is
to break down the barrier which separates virtue from vice,
and which prevents men from becoming vicious. To punish
such actions, is to allure men on insensibly into crime; for the
feeble barrier of things indifferent, except as human laws have
made them otherwise, is easily passed; but when once passed,
and men have become amenable to the laws of their country,
and covered with the disgrace of a breach of them, a further
transgression in matters not merely indifferent, but really cri-
minal in themselves, becomes easy, and they go on from bad to
worse; when, had the first false step not been so easy, they,
perhaps, had ever remained virtuous members of society. It
would be only a just retribution for thus overstepping the just
limits of its authority, and presuming to intermeddle in things
beyond its province, if government should in consequence be
brought into contempt, and its laws become hated by the peo-
ple; when they find themselves classed with malefactors, and
punished as such, without, perhaps, having had any evil inten-
tion. "The law, contrary to all the ordinary principles of jus-
tice, first creates the temptation, and then punishes those who
yield to it; and it commonly enhances the punishment, too, in
proportion to the very circumstance which ought certainly to
alleviate it, the temptation to commit the crime."
The assessed taxes are, immediately or ultimately, taxes on
expenditure. Yet such as are immediate in their operation do
ON THE EFFECTS OF INDIRECT TAXATION.
379
not take out of the pockets of the people more than they bring
into the treasury; since no capital is advanced by any one, and
therefore no profit laid upon it. Beyond the mere contribution
of the money, however, they deprive persons of many enjoyments
which would otherwise be within their reach, and obstruct them
also in their pursuits. The house duty, now repealed, does not call
for much remark. When in existence, this duty, as well as the
remaining duties on windows, caused persons to occupy smaller
houses, and put up with less light than was advantageous to
them. In some cases, they operated as a tax on articles of
capital, by increasing the expense of occupying houses employed
for purposes of business. Duties on horses and carriages lessen
the number of instances in which they might be profitably kept,
and must sometimes be the occasion of persons walking instead
of riding to places where their presence may be required, or to
refrain from going, when, without the duty, it would be better
to ride than to walk, and more advantageous to go than to stay
at home. In such cases, facilities which natural circumstances
present are withheld; the government gets nothing; but while it
attempts to make the people pay, it diminishes, or perhaps de-
stroys, some of the sources of profit which might enable them
more easily to do so.
Duties on the transfer and sale of property are at once inex-
pedient and unfair. They are inexpedient in two respects.
First, they are paid out of the capital, and not out of the reve-
nue; and hence the objections which have been already stated
as applying to taxes which diminish the national capital apply in
their fullest extent to these duties.
Secondly, they are mischievous in their effects, because they
form a clog on the circulation of property, and prevent that dis-
tribution of it obtaining which is most beneficial to the indivi-
duals immediately interested, and to the community at large.
"Every exchange which takes place in a country," says Mr.
Malthus, "effects a distribution of its commodities better adapt-
ed to the wants of the society, and calculated to give a greater
market value to the whole produce." M. Say, on the same
subject, remarks, "Has the public any interest in the free
circulation of property? So long as the object is in existence,
380
ON THE EFFECTS OF INDIRECT TAXATION.
is it not as well placed in one hand as in another? Certainly
not. The public has a decided interest in the utmost possible
freedom of its circulation; because by that means it is most like-
ly to get into the hands of those who can make the most of it.
Why does one man wish to sell his land? but because he thinks
he can lay out the value to more advantage in some channel of
productive industry. And why does another wish to buy it?
but because he is desirous of investing a capital that is lying
idle or less productively employed; or because he thinks it sus-
ceptible of improvement. The transfer tends to augment the
national income, because it tends to augment the income of the
two contracting parties. If they be deterred by the expenses
of the transfer, those expenses will have prevented this pro-
bable increase of the national income." However easily these
taxes may be collected, this is no adequate compensation for the
injury they inflict on the community. They, in a measure, com-
pel persons to keep things which are of little use to them,
rather than exchange them for things, which, though not better
in themselves, are nevertheless much more suited to their wants,
and much more calculated to promote their welfare. The value
of the things thus held by persons to whose wants they are un-
suited is, evidently, reduced by the amount of the expense of the
sale and transfer.
Duties on leases are equally inexpedient and unfair, with those
on the transfer or sale of property. Adam Smith, speaking of
the security which successive improvements in the law have
gradually afforded to the farmers in the possession of lands held
on lease, says, "These laws and customs, so favourable to the
yeomanry, have perhaps contributed more to the present
grandeur of England, than all their boasted regulations of com-
merce taken together." And again, "After small proprietors,
rich and great farmers are, in every country, the principal im-
provers." Duties, therefore, which operate as a discouragement
to granting leases of property, are calculated to lessen the advan-
tages derivable by the people from the possession of leases.
Both these duties are unfair, for there can be no justice in the
government demanding money on every sale, transfer, or lease
of property; since no additional services are then required of it;
ON THE EFFECTS OF INDIRECT TAXATION.
381
and since the expense of the protection of any property is not
increased, though it should change owners many times in the
course of a year. Such duties are of the same nature as the
alcavala of Spain and Naples. The injury which they occasion.
is of less magnitude, because they are less extended in their
operation, but it is of the same kind. They fetter and impede
the progress of wealth and enjoyment, and keep down the value
of property below the point to which it would otherwise rise.
Objects of luxury have been considered the most proper sub-
jects of taxation. But this is an erroneous idea, and arises
from the imperfect conception of the principle which should
govern the distribution of taxation ;-considering the ability of
the individual as the proper criterion by which to distribute it.
The industry of the people will be in proportion to the gratifi-
cations which exertion procures. The consumption of articles
of luxury will depend on the sacrifice which must be made to
obtain them, that is, on their price; and if this be raised by
the imposition of duties above its natural level, their consumption
will be diminished. If their consumption be lessened, the
enjoyments of the people will so far be lessened; they will be
driven to the use of expedients as substitutes, or to abstain from
them altogether. These substitutes must necessarily be of
inferior quality, either as respects their intrinsic worth, or, which
comes to the same thing, the desire of the people for them. As
the government does not in these instances obtain the tax, it
derives no benefit, while it deprives the people of their enjoy-
The idea of the expediency of these taxes can have
arisen solely from the limited view taken of them, as not pre-
judicial to the wealth of society. But this can never be a suffi-
cient reason for their adoption when they curtail its enjoyments.
The people must pay taxes, and ought to be required to pay
them, whether willing or not; but when this payment has been
made, there ought to be no impediment to their spending the
remainder of their incomes on commodities which they most
desire, at their natural prices; so as to procure the utmost
gratification possible. From these objections, however, must be
excepted such articles of luxury as are of no real utility in
themselves, or of none superior to plainer articles; and which,
ments.
382
ON THE EFFECTS OF INDIRECT TAXATION.
!
therefore, afford no gratification beyond what arises from their
serving as marks of distinction on account of their expense; as
jewels, trinkets, lace, the finer sorts of manufacture, feathers,
some sorts of fur, and such-like articles, that are valuable from
their rarity alone, but of little use. Duties on such articles
would be considered as adding to their beauty or desirableness,
by increasing their value, and thus would render them more
highly prized and more eagerly sought after. If ostrich feathers
were as cheap as hen feathers, there is no lady but would scorn
to wear them, however superior their beauty.
It has been urged in favour of taxes on objects of luxury,
that though they bear unequally on the revenue of different in-
dividuals, yet "any inequality in their contribution, which can
arise from such taxes, is more than compensated by the very
circumstance which occasions that inequality: the circumstance
that every man's contribution is altogether voluntary; it being
altogether in his power either to consume, or not to consume,
the commodity taxed. Where such taxes are therefore pro-
perly assessed, and upon proper commodities, they are paid with
less grumbling than any other." This observation is entitled
to attention. Doubtless, in adopting any measure, its advan-
tages as well as disadvantages must be taken into account, and
their relative importance estimated, in order to see on which
side the balance preponderates. Perhaps, when the amount to
be raised by such taxes is not large, it might not be worth while
changing them for others. But when the amount to be thus
raised is very great; when, consequently, the diminution of con-
sumption of articles which would otherwise afford a high de-
gree of gratification, and when the privation of the people, the
diversion of industry from its natural channels, and the increase
of smuggling, have, together, occasioned mischiefs almost in-
supportable; the inequality in the pressure of these taxes, added
to their other evils, becomes of much greater moment than the
advantage of their being paid voluntarily, or with less reluctance,
than taxes of other kinds. But a debt which is due from any
man ought to be paid by that man, whether willing or not;
especially when, if from such unwillingness he evade payment,
the debt must be paid by others. Taxes are a debt due from
ON THE EFFECTS OF INDIRECT TAXATION.
383
individuals to the community, which they are bound by every
obligation of justice to pay, and a liberty in any member to
evade the payment is a positive injury to the rest. Indeed, it
does not appear upon what principle a deficiency in the taxes.
thus occasioned can be required to be made good by others. If
my neighbour choose to live in a garret, and debar himself the
ordinary comforts of life, why should I on that account be call-
ed upon to pay a part of his taxes for him? Doubtless, the
payment of taxes is unpleasant, but it is a necessity arising out
of the nature of things, and is as reasonable as the payment of
any other debt for which value has been received. Though the
security which government confers is but a negative benefit,
consisting rather in the prevention of ill, than the diffusion of
good; yet this negative benefit is of indispensable necessity;
and though money paid in taxes may appear to produce no re-
turn, there are few articles of a man's expenditure which procure
him more solid advantages.
It must likewise be admitted, that all indirect taxes have
the recommendation of being levied with less apparent hardship
and vexation. They are usually paid unconsciously; the tax
is confounded with the natural price of the commodity on which
it is imposed, the buyer of which seldom reflects that in paying
the price demanded for it, he is paying a tax to the government.
The article itself is an object of sufficient attraction to induce
him to give as much money in order to acquire it as is equivalent,
not only to its original value, but to the tax superadded to it.
In paying taxes in this way, he pays them without reluctance.
He always gets something for his money. In the direct way,
he seems to get nothing; and there appears more of the cha-
racter of spoliation. The payment of indirect taxes is not,
however, altogether voluntary; for many articles are taxed
which are of indispensable necessity, and in which we cannot
evade the impost, however desirous of doing so, because we can-
not do without the articles on which it is placed. There is this
advantage, likewise, in indirect taxes, that they are levied in
small sums, and paid by the people according to their ability at
the time; and, if we except the dealers in the taxed articles,
they involve no inquisitorial inspection into private matters.
384
ON THE EFFECTS OF INDIRECT TAXATION.
The unpleasantness of appeals, and private animosities, as well
as of compulsory payment, is also avoided. From these cir-
cumstances, indirect taxation affords a means of raising a larger
revenue than could well be obtained through direct taxation.
In this way, the government of Great Britain has raised enor-
mous revenues, which the people would never have quietly con-
sented to pay in direct contributions from their purses.
sent.
Taxes on commodities are very often the occasion of much
mischief on their first imposition, as well as on any subsequent
increase or diminution in their amount; and again, on their being
taken off. Individual industry, in the long run, accommodates
itself as nearly as may be to existing circumstances, and to the
most advantageous employments which such circumstances pre-
But when the government lays on or takes off duties on
commodities, those circumstances become suddenly altered; the
demand for those commodities is increased or lessened, as the
taxes on them are lightened or increased, and industry must,
consequently, alter its channel of production.
But industry
cannot on a sudden accommodate itself to the rapid transition
or alteration in the demand for articles which a change of duties
occasions. The alteration in one branch affects other branches,
and thus such change in fiscal measures sometimes produces an
extensive derangement of business, causing workmen in some
branches to have more work than they can perform, with too
high wages, while in others they have little employment and
insufficient pay. In this change in the condition of the men the
master comes in for his share of the loss or gain. The landlord
of the premises where the concern is carried on, with the trades-
men in the neighbourhood, likewise participate indirectly in the
Thus such
prosperous or declining condition of the trade.
taxes, when first imposed or increased, do not fall on the parties
for whom they are intended; instead of being paid by the con-
sumer, they are paid in part out of the profits and wages of the
producers; and when reduced or taken off the public for a time
are seldom more than slightly benefited by the relief; the in-
creased demand for the articles enabling the producers to put
the larger part of the duty into their own pockets.
Indirect taxation is not only necessarily unequal when im-
ON THE EFFECTS OF INDIRECT TAXATION.
385
posed with the greatest judgment, but it is unfit for general and
permanent adoption, also, inasmuch as it cannot be increased or
diminished from time to time, as the public wants require, without
disturbing that equilibrium of pressure which it may be capable
of attaining, as well as occasioning a derangement of industry.
Let it be supposed that at any given period, a system of such
taxation should be so well contrived as to bear as equitably as
possible on the expenditure of different persons and classes. If
it be found necessary to increase or lessen the public revenue,
this equilibrium will in all probability be destroyed, unless the
duties are all proportionately raised or lowered; for if they are
laid on fresh commodities, or increased on, or taken off, a part
of the old ones, the pressure will not continue the same on dif-
ferent persons. If the duty, for instance, on malt liquors be
increased, it will be paid only by those who drink malt liquors ;
while the water-drinkers will go entirely free. But it is not
possible to increase the duties on articles of consumption be-
yond a certain limit, without diminishing, instead of increasing,
the revenue derived from them; as well as producing in other
respects the most injurious consequences. Every man has some
standard in his own mind by which he estimates the value of his
enjoyments. This standard is different in different men. But
every addition to such duties causes the prices of the articles on
which they are placed to exceed in a greater number of instances
than before the point which men fix as the limit at which the en-
joyn.ent is worth its cost, and thus lessens the consumption of the
article, and prevents an additional revenue being raised from it.
Neither is it possible to lower them all beyond a certain limit,
without occasioning the expense of collection in some of them
to be excessive in proportion to the produce of the duties.
Hence a great difficulty exists at all times under such a system,
in adjusting the revenue to the expenditure; but particularly
in increasing it; as well in consequence of the difficulty of select-
ing commodities which may bear on different classes in the
same proportion as the aggregate of the existing taxes, (for this
is necessary to preserve the equilibrium,) as in finding new
articles suitable for yielding a revenue, and coming under the
control and restrictive laws necessary to protect it, without
VOL. II.
20
386
ON DIRECT TAXATION.
being at the same time injurious to the public. May we
not attribute to this difficulty that, in our own country, the
national debt has been suffered to accumulate to so great an
amount? One can hardly conceive that our forefathers would
have burthened us with debts to such an extent, had the means
been apparent to them of suitably providing the increase of
revenue which the exigencies of the times required. If it be
allowed that this has been the effect in times past, the same
system continuing, the like effects must be expected in future;
the lamentable consequences of which may, perhaps, when too
late to remedy, prove greater than is generally imagined.
CHAPTER VIII.
ON DIRECT TAXATION.
THE observations which have been previously made on the
apportionment of taxes, proceeded on the supposition that they
be direct in their imposition; that is, laid immediately on the
persons or property for whose protection they are to pay, and
not on articles of expenditure.
The expense of the protection of property can only be ac-
curately provided for by a tax on property; and the protection
of the person, in the same way, can only be exactly provided for
by a personal tax. That some equitable principle ought to be
acknowledged and referred to, in distributing among the people
the burthen of the public contributions, is beyond a doubt; and
since in every other than the direct way, difficulty and uncer-
tainty exist, as to whether the tax ultimately falls on those for
whom it is intended, and since there is, consequently, always a
danger of requiring more from some persons than their fair pro-
portion, there seems hardly an alternative left, in following up
a rule of equitable apportionment, besides the adoption of the
direct method.
ON DIRECT TAXATION.
387
Taxes on property, and on the person, are liable to none of
the objections applicable to indirect taxes. The distribution of
their pressure may be effected by them with the greatest pre-
cision, whether the income be derived from industry or from
property, or whatever other circumstances may render a variation
in the amount of contribution necessary. They are capable of
being increased or diminished from time to time with the ut-
most accuracy, without additional trouble or expense, and with-
out varying the proportions contributed by different individuals,
by merely altering the per centage on the existing assessment, as
the public exigencies require. The amount to be paid by each
person may be certain, the time and manner of payment plain
and easily known; they may be levied in the way and at the
time most convenient for the contributors to pay. The expenses
of management and collection, and the number of officers em-
ployed in these taxes, are less than in any other; and they
therefore take out of the pockets of the people less than any
other over and above what they bring into the treasury; to say
nothing of the increased amount which they bring. The laws
and regulations necessary for their collection may be few, and
the penalties for infraction of them light. They do not in the
least obstruct or derange the industry of the people, nor deprive
them of sources of profit or of comforts which natural circum-
stances present. Under such taxes only can industry be entirely
free. Under them it would be placed in the most advantageous
circumstances in which it is possible to place it, the field of
its exertion would be extended, new sources of profit would open,
and the whole country becoming, as it were, a free port, would
present facilities to every branch of foreign and domestic com-
merce, and to the acquisition of all the objects of wealth which
minister to human pleasure.
These taxes have no effect on prices. By an increase of such
taxes the comforts of the people would be abridged; but there
the effects would end: none of the parties in business would be
enabled thereby to raise their charges; since there would be no
greater expense incurred in the production of the articles, and
no greater demand for them, than before. But commodities
cannot be taxed without raising their prices; since the cost of
}
2c2
388
ON DIRECT TAXATION.
production is thereby increased, and the producer would turn to
some other employment if he could not advance the price so as
to reimburse himself the amount of the duty imposed. Not
only is the price of a commodity raised when subjected to tax-
ation, but the price of every manufacture into which this taxed
commodity enters, or to which it is necessary, must likewise be
proportionately increased, in consequence of the additional cost
of manufacture. High prices of goods so occasioned destroy
foreign trade in them. Many manufactures might be carried
on for the supply of a foreign market without such taxes, which
cannot now be done, but which might be with advantage both
to individuals and to the country at large. Taxes on property
and on the person, as they would not enhance prices, would ren-
der a smaller capital in trade equally serviceable with a larger
capital under another system. We have already spoken of the
advantages which accrue to industry from the employment of
capital. These advantages would be augmented by substi-
tuting direct for indirect taxation; the capital of the country
would go further; a part of it would be set free from its present
employment of advancing duties to government, and would be
available for direct production. Capital being more abundant,
industry would be more effectually aided; commodities would
be more plentiful and of better quality, while profits and prices
would fall. Under a direct system of taxation, smuggling would
be at an end, and the industry both of the smuggler and of the
revenue officer would be turned from unproductive to productive
labour, from living on the exertions of others, to increasing
the quantity and improving the quality of the productions of
nature and art to be consumed by the society. Prosecutions,
penalties, and punishments for offences against the revenue laws
would nearly cease; for no one could make a business of de-
frauding the revenue; being concerned only in the taxes paid
by himself.
Having noticed the superiority of the direct over the indirect
mode of taxation, we must not omit to notice some of the cir-
cumstances in which it is inferior, and the inconveniences which
attend it.
A tax on earnings is in some degree arbitrary and inquisitorial.
ON DIRECT TAXATION.
389
Each person must from time to time render a statement of his
earnings or gains; and if this statement were unsatisfactory, an
investigation into his private concerns must be made, which
would be painful, and perhaps prejudicial to persons engaged in
business. There must also be some penalty in the form of fine
or of increased rate of charge on any intentional deficiency which
may be discovered in the statement. The only palliative which
can be offered, is an oath of secrecy in the persons concerned in
the collection and management of the tax; which, however, can-
not always be expected to secure the credit of a man in business
from the injurious consequences of a disclosure of his private
pecuniary circumstances.
Arbitrary taxes are unquestionably the most grievous to be
borne, because, by mismanagement, they may be converted into
punishments for political opinions or offences, real or imaginary,
or be made the vehicle of private malice on the part of the offi-
cers employed in assessing them; and because, from their arbi-
trary nature, they are unavoidably unequal in their pressure.
"Historians inform us, that one of the chief causes of the de-
struction of the Roman state, was the alteration which Con-
stantine introduced into the finances, by substituting a universal
poll-tax, in lieu of almost all the tithes, customs, and excises,
which formerly composed the revenue of the empire. The
people, in all the provinces, were so grinded and oppressed by
the publicans, that they were glad to take refuge under the
conquering arms of the barbarians; whose dominion, as they
had fewer necessities and less art, was found preferable to the
refined tyranny of the Romans.”* A tax on earnings, however,
is only in a small degree of an arbitrary character; and when
properly assessed, and kept within moderate limits, admits of
little exception on this ground.
A tax on property has but little of an inquisitorial character
belonging to it, since the real circumstances of individuals are
not thereby disclosed. When property is charged wherever it
is found, without regard to the owner, (he only being obliged by
law to refund the tax to the holder,) there is no disclosure of
private circumstances; because it is impossible to know whe-
ther the property really belongs to the person who has it in
Hume, Essay 8.
390
ON DIRECT TAXATION.
possession, whether it is mortgaged or not, or whether he owns
other property besides that in his own occupation. The know-
ledge of the particular owner of any property is immaterial to
the government; since the tax is sure to reach him; and since
the expense of its protection is not affected thereby. In the late
property tax, a full disclosure of the actual circumstances of a
person, whose whole income was under £150 a year, was neces-
sary, in order to enable him to claim the reduced rate of charge.
But this disclosure was only called for in consequence of the
pressure of the indirect taxes being too heavy on persons of small
income. Had their pressure been sufficiently great on larger
incomes, there would have been no need for a lower rate of
charge on persons of small incomes, and, therefore, no necessity
for a disclosure of their private circumstances.
Against direct taxation there is likewise this objection,-
that the poor, who ought to contribute their proportion to the
expenses of the state, are commonly so unwilling to do so that
there would be great difficulty in making them, and, conse-
quently, collecting from them would be expensive. If the
taxes to be raised were only those required to defray the cur-
rent expenses of the government, without a heavy charge for
the interest or liquidation of a national debt, the sum wanted
from a poor person would be so small that it would not perhaps
be difficult to collect it from him. But when the charge for a
debt amounts probably to twice as much as the yearly expenses,
to be added to them, the amount required of the poor may be
larger than their means can easily meet. In such case, the
trouble, expense, and painful consequences of enforcing payment
from the poor, may equal the inconveniences which accompany
taxes on commodities; and this last method of taxation, there-
fore, may be superior to the other as regards the poor. The
evils now spoken of are, however, limited to a certain point,
where the difficulty of collecting a direct tax comes within
moderate bounds. Let us suppose that this point were ascer-
tained to be established at incomes under £50 a year;
* and
that the difficulty of collecting a direct tax from persons whose
* The average income of a labouring family in England, is stated, on
the authority of many hundred returns sent from various quarters, to
amount to £41 17s. 8d. Vid. Progress of the Nation, p. 114.
ON DIRECT TAXATION,
391
earnings were below this sum, exceeded the evils of indirect
taxation. In these small incomes, therefore, indirect taxes would
be the more preferable mode of assessment, and it would be
necessary for the purpose of reaching them, to charge some arti-
cles of universal consumption with duties heavy enough to draw
from the poor the required contribution. In computing the larger
incomes of other persons, the first £50 being already taxed in-
directly, a direct tax could only commence at this sum. Thus
£100 income could only be charged for £50; £150 for £100;
and so for larger amounts. The articles most suitable for tax-
ation in this way would be rather articles of necessity, which
could not be dispensed with, than of comfort or luxury.
Once more, if it were thought objectionable or difficult to
ascertain the earnings of persons in trades or professions, a still
more extensive system of indirect taxation must be resorted to,
which should press on all persons with as much weight as though
their incomes were all obtained from their own industry; and,
for the additional charge beyond this which ought to be borne
by revenues derived from property, a tax on property, equal to
this additional charge, would equalize in a measure the burthen
on each. Notwithstanding, if political considerations do not in-
terpose, and the people can willingly submit to the inconve-
niences that attend direct taxation, and which are more ima-
ginary than real, it is so greatly superior to indirect taxation,
that they must be greatly gainers by such submission.
It will appear on a review of the taxes raised in this country
in the early periods of our history, that the public burthens were
more equitably distributed in those times than they are at pre-
sent; and that the taxes have become more unequally distribut-
ed, in proportion as the maxims of the commercial system have
been adopted, and the indirect taxes increased.
In those early periods, the ordinary revenue of the sovereign
consisted almost entirely of the rents and profits of his lands; no
regular taxes existing. "The people, when they served in the
field, were, by the condition of their feudal tenures, to be main-
tained either at their own expense or at that of their immediate
lords, without bringing any new charge on the sovereign." As
property was then almost entirely confined to land and the stock
392
ON DIRECT TAXATION.
belonging to it, manufactures and commerce being nearly un-
known, or carried on by pedlers and foreign merchants, the per-
sonal service of the people, and of the feudal lords attended by
their vassals, was a burthen as nearly equal in its pressure as
can well be imagined; for the number of vassals brought by the
lords expressed their wealth or the extent of their property. As
the burthen would thus be fairly distributed when all the people
were summoned to the field; so would it be also when a propor-
tionate part of them was summoned ; the lords sending the pro-
portionate part of their vassals, and the people furnishing by lot
their contingent. Afterwards, when the lords began to discon-
tinue the practice of maintaining a numerous retinue, it became
necessary that a contribution in money should be required,
sufficient to hire the number of men which was formerly brought
by the lords in person. Henry II., accordingly, and some of
his successors, had recourse, on extraordinary occasions, chiefly to
scutages, which were a composition by those who held knights'
fees, in lieu of the military service to which they were bound:
hydage, and talliage, were taxes of the same nature upon other
lands, and upon cities and boroughs. Now, as the military ser-
vice itself was a burthen of an equal pressure on the people; so
a composition for that service, if fairly made, must have been of
equal pressure also.
"Subsidies were introduced about the time of Richard II.
and Henry IV. They were a tax not immediately imposed
upon property, but upon persons in respect of their reputed
estates, after the nominal rate of four shillings in the pound for
lands, and two shillings and eight-pence for goods." Now, when the
interest of money is at five per cent., land will probably produce
about 33 per cent. ; and, in that case, a tax of two shillings and
eight-pence in the pound on the interest, and of four shillings in
the pound on the rent, amounts to the same as a tax of thirteen
shillings and four-pence per cent. on the value of the two. An
equal tax on the capital value of all property is, therefore, equiva-
lent to the subsidy; and if the observations before made on the
value of property as a criterion for taxation superior to the reve-
nue are correct, there has not existed in England any tax, which,
had it been fairly assessed, would have borne more equally on
ON DIRECT TAXATION.
393
the property of the country than these subsidies. Certainly no
tax could be less injurious in its effects. The present land-tax
was originally a tax on personal as well as on real property, and
is in most parishes at a greater poundage on lands than on
houses. It is to be regretted, however, that the charge on per-
sonal property is now in most places entirely omitted. The
earnings of industry form a most essential part of the revenue of
the people, which exceeds by far the revenue arising from pro-
perty, and are proper subjects of taxation; though no tax on
property can reach them.
It is to the commercial system that we owe much of the in-
crease of indirect taxation, and the consequent inequality and
other evils arising therefrom. It may be hoped, that with the
decline of that system, we shall eventually be freed from the
system of taxation which it introduced. In France, the direct
taxes bear a proportion of about one-half to the whole public
revenue; while, in England, the proportion is not three per cent.
The French system, in this respect, is, in consequence, superior
to the British.
CHAPTER IX.
ON THE DISTRIBUTION OF THE EXPENSE OF CONSTRUCTING
AND MAINTAINING ROADS, BRIDGES, CANALS, HARBOURS,
LIGHT-HOUSES, AND OTHER GUIDES AND PROTECTIONS TO
NAVIGATION.
THE Construction and maintenance of public roads, bridges,
canals, harbours, and light-houses, cannot be more suitably pro-
vided for than by a toll on the horses, carriages, or vessels that
pass along or use them; for the application of the principle of
apportionment is here complete and evident. Where there is
any injury done in wear and tear, the toll, or a part of it, should
be proportionate to that injury; and where there is no wear,
394
ON THE DISTRIBUTION OF THE EXPENSE
the toll should be proportionate to the relative benefit de-
rived from the use. On an old road, the wear and tear, could
it be ascertained, would be sufficient to fix the toll by; but on
bridges, canals, or in harbours, the wear and tear from the use
of them by carriages or vessels is altogether inconsiderable; and
a toll only equal to these would be insufficient to repay the cost
of construction and maintenance. The relative benefit de-
rived from their use is, therefore, the rule by which to compute
an appropriate toll. In carriages on a road, the number of
wheels, and the weight on them, in proportion to the breadth or
surface which rests fairly on the road, vary the injury done.
The increase of injury from an increase of weight will follow a
greater ratio than the weight, the ratio probably of the squares
of the weights. The more rapid motion of a carriage decreases
the injury; because the weight resting a shorter time on any
part of the road will penetrate to a less depth and do less injury
than it would in a longer time. The greater momentum created
by the increased velocity can have little effect on a road having
a smooth surface, because the momentum acts in the line of
motion only, and not perpendicularly.
6
On this subject, Mr. Babbage gives some interesting in-
formation, and which I may be pardoned for quoting.* "A
committee of the House of Commons was appointed to inquire
into the tolls proper to be placed on steam carriages; a question,
apparently, of difficult solution, and one on which widely different
opinions had been formed, if we may judge by the very different
rate of tolls imposed upon such carriages by different turnpike
trusts.' The principles on which the committee conducted the
inquiry were these. They first endeavoured to ascertain, from
competent persons, the effect of the atmosphere alone on dete-
riorating a well-constructed road. The next step was, to de-
termine the proportion in which the road was injured, by the
effect of the horses' feet compared with that of the wheels. Mr.
Macneil, the superintendent under Mr. Telford of the Holyhead
roads, was examined, and proposed to estimate the relative
injury, from the comparative quantity of iron worn off, from the
shoes of the horses, and from the tire of the wheels. From the
* Economy of Machinery, p. 201.
OF ROADS, CANALS, LIGHT-HOUSES, ETC.
395
data he possessed respecting the consumption of iron for the tire
of the wheels, and for the shoes of the horses, of one of the Bir-
mingham day-coaches, he estimated the wear and tear of roads,
arising from the feet of the horses, to be three times as great as
that arising from the wheels. Supposing repairs amounting to a
hundred pounds to be required on a road travelled over by a fast
coach at the rate of ten miles an hour, and the same amount of
injury to occur on another road, used only by waggons, moving
at the rate of three miles an hour, Mr. Macneil divides the in-
jury in the following proportions:
Injury arising from
Atmospheric changes.
Fast Coach.
Heavy Waggon.
20
20
Wheels
20
35.5
Horses' feet drawing
60
44.5
100
100
"One of the results of these experiments is, that every coach
which travels from London to Birmingham distributes about
eleven pounds of wrought iron along the line of road between
those two places. The committee agreed that The only ground
on which a fair claim to toll can be made on any public road, is
to raise a fund, which, with the strictest economy, shall be just
sufficient, first, to repay the expense of its original formation;
secondly, to maintain it in good and sufficient repair.' Sup-
posing it also to be ascertained that the wheels of steam carriages
do no more injury to roads than other carriages of equal weight
travelling with the same velocity, the committee now possessed
the means of approximating to a just rate of toll for steam-
carriages.
"As connected with this subject, and as affording valuable
information upon points in which, previous to experiment, widely
different opinions had been entertained, the following extract
is inserted from Mr. Telford's Report on the State of the Holy-
head and Liverpool Roads. The instrument employed for the
comparison was invented by Mr. Macneil; and the road between
London and Shrewsbury was selected for the place of expe-
riment.
396
ON THE DISTRIBUTION OF THE EXPENSE
"The general results, when a waggon weighing 21 cwt. was
used on different sorts of roads, are as follows:
1. On well-made pavement, the draught is.
2. On a broken stone surface, or old flint road
3. On a gravel road
4. On a broken stone road, on a rough pavement.
foundation
lbs.
33
65
147
46
5. On a broken stone surface, upon a bottoming of
concrete, formed of Parker's cement and gravel 46
•
"The following statement relates to the force required to
draw a coach weighing 18cwt., exclusive of seven passengers,
up roads of various inclinations.
Rate of inclination.
Force required at
six miles per hour.
Force at eight miles
per hour.
Force at ten
miles per hour.
lbs.
lbs.
lbs.
1 in 20.
268
296
318
1 in
26.
213
219
225
1 in 30.
165
196
200
1 in 40.
160
166
172
1 in 600 .
111
120
128"
917
997
1043
Average.
183/1/
1992/
208/3/
The draught of a carriage is occasioned partly by the resistance
of the atmosphere to its passage through it, and partly by the
friction on the axles, but chiefly by the continued effort to raise
the wheels out of the depression into which its weight drives
them on a surface comparatively soft, and to elevate them over
the obstacles which oppose their progress. The friction on the
axles is known to be a constant quantity, whatever may be the
velocity of the motion, depending on the pressure; while the
resistance of the atmosphere increases in a greater ratio than
that velocity. Hence if these allowances are made, the effort
required to beat down the surface of the road before the wheels
to that level which allows them to pass along, diminishes con-
OF ROADS, CANALS, LIGHT-HOUSES, ETC.
397
siderably as the velocity increases. Accordingly, the injury
done in this beating down is much greater in a slow motion than
in a quick one.
But it may reasonably be doubted, whether the injury done
to the road is correctly expressed by the wear of the iron either
on the horses' feet, or on the wheels, in cases where the velocity
is not alike. The same doubts may also be raised in the
case of the injury done by the horses' feet, in comparison with
that done by the wheels. The longer the weight is suffered to
rest on one spot, the deeper it will sink, and the greater will be
the injury done to the road. The crush of the materials is
heard under the wheels of a heavy waggon for some time after
it has stopped, and appears to extend to some depth in the road.
But the wear of the tire is occasioned by the motion of those
materials only which come immediately in contact with it. The
foot of the horse slides backward in his effort to draw the car-
riage, and the shoes may be very much worn by this sliding
motion, and yet without having much crushed the materials under
them. But no such sliding motion happens to the wheels.
They come down perpendicularly on the materials and break
them without much displacing them, or causing them to rub
much on the tire. Besides, we know there is very little wear
on a towing path, or in the horses' track in a tram-road, either of
which requires but little repairs.
If the advantage derived from the use of the road with a
carriage were considered the criterion for regulating a toll, it
would be expressed by the saving of expense from what would
be necessary to carry the same load on pack-horses. This
would be proportionate to the weight, and the same result would
be afforded as though the wear and tear were considered the
criterion. It does not appear fair to charge a carriage for
riding, more than one doing the same injury to the road, but
carrying a load of any kind; neither does it appear fair that
manure should go free of that amount of charge which may
compensate for the expense involved through the destruction
of the road. These variations from the natural course have
probably arisen from the idea of charging according to the ability
of the person to pay, and from a wish to favour agriculture.
398
ON THE DISTRIBUTION OF THE EXPENSE
Such roads as are not maintained by tolls, or not so entirely,
are in general kept up by a rate on the occupiers of land, or on
the occupiers of land and houses; sometimes in labour to be
performed, or a composition in lieu of it. Perhaps the burthen
of maintaining these roads would be more equally borne by a
duty on horses and carriages than by throwing it almost entirely
on the occupiers of land; since the wear and tear are very nearly
in proportion to the number of horses and carriages, and those
who use the roads most would in such case be made to pay most
towards their repairs. It may be thought that by throwing the
burthen on the occupiers of land, the public ultimately pay it in
the increased price of agricultural produce; but this is not very
evident; and if it were, the burthen will then fall on all who
consume agricultural produce, though some of these persons use
the roads a great deal, and others very little or not at all. The
expense of keeping up the footpaths would perhaps be equitably
distributed by a poll-tax.
A duty on the tonnage of vessels passing along a canal, or
navigable river, is a proper mode of providing for the expense of
keeping it in a condition for navigation; because in general the
advantage derived from it is proportioned to the weight, in con-
sequence of the saving in the expense of conveyance. But an
exception may be made with regard to heavy commodities of
small value; as manures, or earths for the amelioration of land.
In these, the advantage may not be equal or proportionate to the
reduction in the charge for what would have been the convey-
ance by land; because the expense of land carriage might per-
haps have exceeded the benefit from their use, and without such
navigation, they could not have been transported with profit.
If, therefore, a toll be imposed on such articles equal to any in-
jury that may be occasioned by their passage, with some trifling
contribution towards the original outlay in the formation, it is
sufficient for it were vain to endeavour to impose a greater
toll; which would only stop their transport altogether, and thus
prevent individuals from reaping the advantage derived from
their use, without benefiting the funds of the navigation.
:
Harbours, light-houses, beacons, and other guides and pro-
tections to navigation, are properly supported by duties on the
OF ROADS, CANALS, LIGHT-HOUSES, ETC.
399
tonnage or value of the ships and cargoes which use or pass by
them; for the advantage arises from the diminution of risk, and
is proportioned to the value of the property subjected to risk.
If it were not a tonnage duty, perhaps something should be de-
manded for the number of persons on board, in consequence of
the greater personal security afforded them. Packet boats and
other vessels conveying passengers ought certainly to contribute.
in common with vessels carrying goods.
CHAPTER X.
ON THE DISTRIBUTION OF THE EXPENSES OF PUBLIC INSTITU-
TIONS FOR EDUCATION, RELIGIOUS WORSHIP, AND THE SUP-
PORT OF THE Poor.
WITH regard to the distribution of the expenses which are here
mentioned, our rule of apportionment altogether fails: not, how-
ever, from its inapplicability in ordinary cases, but from the pecu-
liar character of the objects of such institutions. We cannot
distribute these expenses according to the services rendered,
for then such institutions would maintain themselves, and cease
to be a burthen on the public funds. Neither can we distribute
them according to the benefits derived; for, to a great majority
of the people, there are, strictly speaking, no services rendered
and no benefit derived from these institutions. As far as re-
gards education, it is the poor only who derive benefit: to the
rich, there are no services or benefits afforded. It is the same
with the relief and support of the poor: those only are relieved
who are in distress; and no benefit accrues to any one else.
With regard to religion, the services rendered are to those per-
sons only who attend the public worship or ministrations of the
religion supported by the state; and, amongst those who attend,
it is impossible to compute the advantage derived; since one
person may be reclaimed thereby from vicious courses, and
400
ON THE DISTRIBUTION OF THE EXPENSE
another, equally constant in attendance, may be wholly unim-
proved; and though in some instances there is an evident ad-
vantage, yet it is impossible to compute it in money. To the
dissenter, in particular, there are no services or benefits of any
kind afforded. Yet is he required to contribute equally with
others; though the duty of government is to protect the interests
of all its subjects alike, and not to suffer one part to be op-
pressed by the domination of another. He is compelled to
maintain a church the doctrines and discipline of which he dis-
allows; a church whose ministers publicly inveigh against hist
opinions and practices; while many of them impugn his motives,
and hold up his conduct as deserving of reprobation or contempt.
It is hard for a man to be made to pay for preaching against
doctrines which in his conscience he believes to be true, and
which he thinks it meritorious. to disseminate.
The expenses of these institutions are incurred for the attain-
ment of objects in their nature essentially different from those
which we have been before considering. These objects are of a
charitable and pious character, prompted by the benevolent
feelings of the heart, and by considerations of duty and obliga-
tion to the Supreme Being; and it might have been imagined
that the manner and extent of the contribution towards them
would naturally have been left to the influence of these benevo-
lent feelings and these considerations of duty and obligation;
since charity and duty disappear where compulsion is brought
into action. The institution of government has for its chief ob-
ject to combine the separate forces of individuals in one opera-
tion for the attainment of ends to which force is necessary; and
in which combined exertion is more effectual than the single
and isolated efforts of individuals would be: it has its origin in
views of temporal interest and advantage: these are easily and
naturally measured by things of the same nature,-by money, or
money's worth.
But how shall we measure by such things duty
and obligation, or benevolence and charity? Or, how shall we
use force to attain ends which the very use of force frustrates?
Doubtless, it is the duty of every person to contribute to pious
and benevolent objects: but it is a duty which he owes, not as a
citizen, but as a man ; and which is due, not to his country, but
OF EDUCATION, RELIGIOUS WORSHIP, AND THE POOR. 401
to God and to himself. Nor does it thence follow that we ought
to compel him to perform this duty. He ought, again, to con-
tribute in proportion to his duty; in proportion to the favours he
has received from God; and in proportion to the means he has
of returning them in substantive acts of gratitude. It seems
difficult, however, to measure these favours by money. But if
they must be so measured, perhaps, the ability to contribute
would be a suitable principle of distribution; since a man's
duty must be proportioned to his means, and cannot extend be-
yond them.
Before, however, we can look for an apportionment of the ex-
penses of pious and charitable institutions on principles of justice,
we must be assured that the objects they have in view come
within the legitimate bounds of civil authority, so that society
possesses a right to enforce the payment of their expenses; as,
likewise, that these objects are really promoted by the inter-
ference of legislative authority. Without assurance on both
these points, we cannot look for an apportionment of the burthen
according to the principles of justice; but merely for a distri-
bution of the burthen of usurped power with as much equality
as may be; so that it may be borne as easily, and do as little
mischief as possible.
We cannot overlook the fact that pious and charitable insti-
tutions become changed in their nature when made compulsory;
and that the better part of charity and benevolence is by this
means lost; viz. the improvement of the contributors by the ex-
ercise of these virtues. If hallowed institutions must be thus
profaned by the hand of power, we ought to regard them in the
light of secular institutions, founded on interested motives; and
the benefit which they confer, if any, must be taken to be the
criterion for the distribution of their expenses. This benefit
must then be considered, not so much the instruction or im-
provement of the individual himself who is called upon to con-
tribute, as the instruction and improvement of other members of
the society; with the view of promoting order, morality, obedi-
ence to the laws, of repressing crime, and improving society; so
that the public security may be made more perfect, and protec-
tion afforded at a less expense. We need, therefore, no longer
VOL. II.
2 D
402
ON THE PROVISION FOR A PUBLIC DEBT.
look for the measure of charity, duty, or obligation; nor need
we compute in money the benefit of the personal instruction or
conversion and improvement of the individual himself. If these
institutions be taken in this light, the benefits derived from
them must be somewhat proportionate to those derived from the
other services of government, and their expenses might, per-
haps, be defrayed from the same funds.
The injurious tendency of the poor laws, as they have been
administered, has been sufficiently shown by others. But while
we cannot go the length of an eminent writer on the subject,
"that no scheme for their amendment deserves the least atten-
tion which has not their abolition for its ultimate object," yet
it must be confessed that, as lately administered, to distribute
their burthen so as to render it more easy to be borne, could
only have had the effect of extending and perpetuating their mis-
chief. The right of property is, however, in every instance
limited by the right which extreme necessity confers. A man
who is in danger of drowning has a right to seize on the first
boat or plank he can lay his hand on. So we may have a right
to pull down a neighbour's house to stop the progress of a fire.
Upon the same principle, a man who is in danger of perishing
with cold or hunger has a right to the first food, or clothing, or
lodging that is within his reach. So far, then, as extreme neces-
sity may go, and which principles of justice authorize the poor
to demand, these same principles may, doubtless, be applied to
distribute the burthen on the people; but further than this, as
there is no justice in the demand, so there can be none in the
distribution of its burthen.
ON THE PROVISION FOR A PUBLIC DEBT.
THE observations which have been now made on the distribution
of taxation have had reference to the current disbursements of
an existing government, in effecting the proper objects of its
institution; not to the expenses which have been incurred by a
ON THE PROVISION FOR A PUBLIC DEBT.
403
government at some former period. But most of the European
states are burthened with a heavy national debt, and the pay-
ment of the interest and principal of such debt usually forms a
large portion of the charge on their public revenue. Now, when
a debt has been accumulated and allowed to remain for a long
series of years unliquidated, the persons for whom the services
which occasioned the debt were rendered do not remain to dis-
charge it, and, consequently, other parties must be called upon to
pay it. But the generations which succeed may not have de-
rived benefit from these services; or if they have, there are few
of the individuals that at any time compose it whose benefit
from them is proportioned to the taxes which they are made to
pay towards that debt. Since, then, the individuals no longer
continue for whose benefit the expenses were incurred, and since
they have failed to discharge them, as they ought to have done,
the question arises in what manner such expenses should be
apportioned among the existing members of the community.
Doubtless the debt must be paid, and the public faith kept
inviolate; but the difficulty lies in fixing on the proper parties
who should pay it, and on the proportions in which they ought
respectively to contribute, so as to meet the case in a just and
equitable manner. This difficulty is so great, in consequence
of the nonexistence of the individuals who ought to have paid the
debt, that it seems impossible to surmount it, and the endeavour
to make an equitable apportionment of the burthen must be
abandoned.
We may, therefore, consider that the mode of contributing to
a public debt should be the same as that for the support of the
general administration of government, and which has been al-
ready pointed out. The occasion of a debt is commonly war;
though incurring debts has not always been confined to periods
of warfare. The expense of the internal administration is com-
paratively small; and can vary but little from year to year;
and an adequate revenue being once provided for it, a permanent
debt of any magnitude can scarcely arise from an occasional
deficiency in this revenue. It is the general administration that
calls for extraordinary sums for defraying the expenses of war,
and the defence of its territories. The security, too, which is
2 D 2
404
ON PUBLIC DEBTS.
given for the repayment of a debt is a claim on the general re-
venue of the state, or parts of it; not on any local revenue, or on
that raised for specific purposes. We must, therefore, conclude
that the distribution of the burthen of a public debt should
follow the same rules as that of the expense of the general ad-
ministration of government.
CHAPTER XI.
ON PUBLIC DEBTS.
1
It was the practice of the ancient nations, as it still is amongst
the less civilized of the modern, to hoard up treasures during
peace as provision for the necessities of war, and as instruments
either of conquest or defence; without trusting to extraordinary
impositions, much less to borrowing, in times of disorder and
confusion. The modern expedient, on the contrary, in almost
all civilized states, has been to borrow in times of emergency on
the mortgage of the public revenues, leaving to posterity to pay
off the encumbrances. And posterity, following the same example,
trust to a future posterity to do the same; who, at last, from
necessity more than choice, are obliged to place the same con-
fidence in generations yet to come. The Italian republics first
adopted the practice of creating debts. Spain seems to have
learned it from them. That country was deeply in debt before
the end of the 16th century,-about a hundred years before
England ever owed a farthing.
The magnitude of the consequences resulting from public
debts warrants some remarks on the justice and policy of cre-
ating them. Unquestionably, events sometimes occur which
justify a nation in incurring a debt, to be paid off at a future
and more convenient opportunity. The wisdom of any public.
expense must be judged of by the occasion on which it is made,
and public profit or loss from any adventure must be measured
ON PUBLIC DEBTS.
405
by the return which it brings, whether adequate or inadequate
to its cost. An expense which is either uncalled for, or which
does not bring a proper return, cannot but be a public loss. On
the other hand, an expense which is necessary to public safety,
or which brings an overbalance of gain, must be sound policy.
But though it were wisdom to incur an extraordinary expense
for the attainment of an object which is proper and commensu-
rate with its cost, yet it is quite a different thing to affirm, that
it is wise or just to burthen posterity with the payment of it;
when, perhaps, the benefit may be only temporary, and one in
which posterity does not share. The continual practice exhi-
bited by many governments of funding, under prosperous as
well as adverse circumstances, and for objects which are merely
temporary, cannot be sufficiently reprobated.
Public debts are created by the government borrowing money
of individuals for the public service, on the mortgage of its fu-
ture revenue, in consequence of the inadequacy of its existing
revenue to meet the charges on it. The debt is incurred by the
government, acting in behalf of the persons composing the
public at the time, for payment of services rendered to them in
the general defence of the state and the support of government,
and is not in general for any particular purpose. Nor is the
deficiency of the revenue which called for borrowing, a defi-
ciency in any particular branch, but a general deficiency below
the expenditure. The services were for the benefit of the per-
sons composing the public at the time, and the deficiency in the
revenue arose from an inadequate contribution of these persons.
They ought to have contributed more; and not having done so,
they are in arrear of their taxes to the amount of the debt cre-
ated; for the services were for their benefit, and not having
been completely paid for, they still remain due from them. The
expense of the ordinary defence and support of the state cannot
properly be imposed upon posterity. Posterity must defend
themselves and support their own government, as we do ours
before them. Had we neglected to secure our civil liberty,
and had our children been born in a state of slavery, they would
nevertheless have had a right to freedom, though not in the
actual possession of it; freedom being an essential attribute of
406
ON PUBLIC DEBTS.
man as an accountable creature, which cannot justly be taken
from him, unless he violate the laws of nature, so as that his
freedom becomes incompatible with the freedom of other men.
But it is the duty of parents to place their children in circum-
stances in which they may be free to perform the duties incum-
bent on them, as well as have a right to freedom; and we can-
not expect them to pay us for doing what was our duty to do.
We might as well expect them to pay for our care and support
of them during their childhood. If the taxes which were in
being at the creation or increase of a debt, were imposed in such
a manner as to bear on the people in the proportion of their
respective interest in the measures which occasioned an increase
of debt, they ought to have been at that time all increased in the
same proportion; or if new taxes had been imposed, they ought
to have been such as should have borne on different persons in
the same proportion as the aggregate of the taxes then bore; for
the debt being due from the persons paying taxes at the time it
was created, is due in the proportions one to another as were
their respective contributions at the time. A public debt, then,
is to be regarded in the nature of an encumbrance, or mortgage,
on the property and industry of the country, which is held by
the fundholders for money advanced by them, in consequence of
the non-payment of a sufficient amount of taxes, and which is
still due as an arrear from the people who paid taxes at the time
it was created.
If the public revenue of Great Britain be stated at 50 mil-
lions, and her debt at 700 millions, then is every British subject
indebted to the public creditors in a sum equal to an arrear of
fourteen years of the taxes he ordinarily pays, and, therefore, he
is not in reality worth much more than one half of the property
he ostensibly possesses. This liberty, however, we give him,
in consequence of not enforcing payment of this arrear as it be-
came due, that if he die or emigrate to a foreign land, he may
escape its payment, and throw the burthen of his share on his
fellow-subjects. It would be equitable to suffer no one to emi-
grate without first paying the portion of the national debt which
belongs to him. Again, it would be fair, when a man is observ-
ed to be squandering away his property, to compel him first to
ON PUBLIC DEBTS.
407
pay this portion; for he can have no right to spend on his own
personal gratification what he owes to the public.
It is probable that the apathy with which the people have be-
held the gradual increase of the national debt, has arisen from
the false notions which have prevailed regarding its nature and
effects. It is of importance, therefore, that a clear apprehen-
sion of the real nature of a public debt should be obtained, be-
fore conclusions are drawn as to its effects on society.
By some persons, the paradoxical opinion has been entertain-
ed, that a public debt is by so much an addition to the capital
and wealth of a country. Whence it has been conceived that a
superabundance of capital would be occasioned should the debt
be ever paid off; as also that for the government to buy it up
would be to accumulate a treasure; as was stated by a late
British Chancellor of the Exchequer in his plan of finance in
1813. The following is the account of this wonderful discovery,
as given in the outlines of the plan of finance which were pub-
lished. "The principal advantage of the proposed plan in time
of peace, would be the facility of keeping in reserve a large sum,
(suppose £100,000,000,) as a resource in the case of a renewal
of hostilities. This fund, which would be formed in a few years
by the redeemed stock standing in the name of the Commis-
sioners, would be continually increasing, unless checked in the
manner above mentioned; and in no case should be reduced be-
low such a sum as may be thought amply sufficient to support
the confidence of the country at home, and maintain its dignity
abroad. It would, indeed, be such a treasure as no other coun-
try has ever possessed, and the first example of an immense
accumulation of public property, formed without the impoverish-
ment of any individual, or any embarrassment of the general
circulation." To argue gravely against the position that a pub-
lic debt forms an addition to the capital of a country, would
have been only next in absurdity to the position itself, were it
not that it has been patronized by great ministers and a great
party among us; the finances of our country have been managed
under this impression, and enormous losses sustained thereby.
Dr. Hamilton remarks," So soon as any stock is purchased by
the Commissioners, and stands invested in their name, a like
408
ON PUBLIC DEBTS.
amount of the public debt is in fact discharged. Whether a
parliamentary declaration to that effect be made or not, is only
a matter of form. If the stock remain vested in the name of
the Commissioners, no doubt it may be transferrred again to
purchasers in the stock-exchange when war breaks out anew,
and money may be raised for the public in this manner. But
this is in every respect a new loan. It is an application to the
public to invest their capital in the purchase of this dormant
stock. The capitalists must be possessed of the sum wanted;
and they will not part with it, except upon terms from which
they derive a profit. They would do this with equal readiness,
if a loan were proposed to them in the ordinary form." No one
imagines that the property of private individuals can be in-
creased by their spending more than their incomes; omitting to
pay their debts, and giving bills or a mortgage on their estates
for the amount; for the mortgage, and the estate subject to its
encumbrance, must together be of the same value as the estate
alone previous to the mortgage. If the bills or mortgages are a
capital to those who hold them, they are in the same degree a
deduction from the capital of those by whom they are to be
paid they are a mere paper capital; an acknowledgment of
debt, which though not a visible diminution of capital, is, never-
theless, not a less real reduction from it. Now the capital of a
country is the collected sum, plus and minus, of the capitals of
its inhabitants; and if its public debt be reckoned a capital to
the fundholder, it is an abstraction from the capital of the
people; to reckon it otherwise would be to count it twice over ;
and whatever be the amount of this debt, if it be wholly pos-
sessed by persons of the same country, the capital of the nation
is neither increased nor diminished by it. It would be no
greater were the debt at once doubled in amount, nor would it
be lessened were the debt completely paid off. If, then, a public
debt be not a capital, to pay it off at once could not create a
superabundance of capital, unless the means of payment be
drawn from an exterior source. If sufficient capital for such
purpose were drawn from some exterior source, there would
equally be a superabundance of it, whether the government ap-
plied it in discharge of the debt, or in some productive way
ON PUBLIC DEBTS.
409
If the funds to pay off the debt were drawn from the community
at large, this would be a mere settlement of account between
the general members of the society and the particular members
who held claims on it. The general members can only give to
the particular members the capital which they have already in
possession, and the transfer of property from one to another, and
cancelling of acknowledgments, cannot create a substantive
capital. A gradual payment, however, of a public debt would
force the people to save from revenue and accumulate into
capital, thereby increasing the property of the country, as has
been shown in another place. For the government to buy up
the debt and consider it a treasure, is like the merchant who,
instead of destroying the old bills he may have accepted and paid,
should hoard them up, and look upon them as an addition to
his wealth. The credit and circumstances both of the merchant.
and of the government would be equally affected by reissuing old
bills or reselling old debts, as by creating new ones.
For the
Though a public debt does not, when held exclusively by the
inhabitants of the country which has incurred the debt, either
add to or diminish the capital of that country, yet if a part
of this debt be held by foreigners, the whole national property
may be expected to be by that sum less in amount.
money borrowed has been expended by government in the cur-
rent expenses, without creating any property, or occasioning any
permanent benefit in return, and every future advantage from it
is therefore gone; while the property and industry of the coun-
try have been encumbered with the payment of a portion of its
annual produce to foreigners. Before the debt was created, the
whole produce of the national property and industry was enjoyed
by the people and spent within the country, but now a portion
of it must be sent abroad to pay the interest of the debt. The
property of the country has not been increased (except in a very
small degree) by withholding a demand of taxes for the whole
sum necessary to pay the expenses of government. After pay-
ment of the taxes demanded, the people usually spend the
whole of the income which is left to them. If these taxes
were more, they would spend less if the taxes were less, they
would spend more. It is only those who were accumulating at
:
410
ON PUBLIC DEBTS.
the time who have abstained from spending that which ought
to have been paid in taxes, and who have thus been enabled to
accumulate more than they otherwise would have done. If all
the money necessary for the service of the state had been raised
in taxes at the time wanted, instead of borrowing of foreigners,
the aversion which mankind in general have to becoming poorer,
(which is much more powerful than the desire of becoming
richer,) would have stimulated them to such exertions of in-
dustry or economy, as would in all probability have prevented
this encumbrance on their property and industry from being
created. Indeed, in most cases, an imperative necessity, from
the impossibility of borrowing or of selling a small portion of
their property, would have forced the people to make exertions
or sacrifices which have now been avoided; and which would
have preserved their fortunes unimpaired. But when all the
taxes necessary for the public service are not raised at the time
wanted, and the government creates or increases a public
debt, the people continue to spend, as before, the sum remain-
ing in their hands, after payment of the taxes actually de-
manded, not considering that these are not the whole which
ought to be paid; that thereby their real expenditure exceeds
their income, for the expenditure of government must be ac-
counted a part of every man's expenditure who has to contribute
to it; and that their circumstances are insidiously and imper-
ceptibly becoming undermined. In following years, the people.
have to pay, not only the expenses of those years, but the arrears
of former years, either all at once, or during a series of years, for
interest and principal of the money borrowed to pay those arrears.
The public at large are not aware of an actual excess in their
expenditure; they are given the ability to waste their fortunes;
while a difficulty often exists of investing in other property the
saving which ought to take place. From these and other causes,
the same exertions are not made to curtail expenses and re-
trieve the real, though unapparent excess of expenditure above.
the income, which in other circumstances would have taken place.
In consequence, they become burthened with a public debt;
which is a diminution from every man's property of as much as
his share would amount to if it were required to be all paid off
ON PUBLIC DEBTS.
411
at once; and foreigners who owe no allegiance, and contribute
nothing to the support of the state, are thus enabled imper-
ceptibly to acquire a title to a portion of the returns of our indus-
try and property. The man who would secure his circumstances
from deterioration, ought to possess himself of a part of every new
loan which is raised.
But the great evil of allowing the public expenses to exceed
the public revenue consists in the destruction of capital thereby
occasioned. The savings which at any time are made by indi-
viduals and borrowed of them by the government, are accumu-
lated previous to the government borrowing them, and would be
equally accumulated if the government did not want to borrow.
The government, then, has nothing to do with the accu-
mulation; but only with the spending. If the government had
not borrowed and spent the money, it would have been devoted
to increase the substantial property of the country, or, in the
shape of capital, would have remained in its accumulated state,
and been employed by some one or other to germinate and yield
in a productive way a future crop to add to the revenue of the
owners, and to that of the community. But now that the go-
vernment has borrowed and spent it in a way that has produced
no one article of property, or will bring in any future return, the
capital is irretrievably lost; it is gone for ever; and with it, the
means which then existed of increasing the future resources
of the country. The individuals, indeed, who lent the money
to the government have a nominal capital, but it is nominal
only interest is allowed them for it; which interest, however,
must be paid, not from the returns of the capital, for the capital
is destroyed, and there are no returns, but with a portion of the
revenue derived from other sources; and the people are as much
the poorer, as the amount of interest and principal they have
to pay.
Besides the idea of an increase of capital, and of wealth, to a
country, by creating or increasing a public debt, it has been
thought that many advantages accrue from such a debt. We
shall, therefore, enumerate some of the circumstances in which
the advocates of the funding system have asserted it to be
412
ON PUBLIC DEBTS.
beneficial, and show in what manner it is entitled to be so
considered.
Reasoning from analogy with the effect which an encumbrance
on the estate of a private family has on its circumstances and
happiness, the position of an advantage from a debt to a public
society appears absurd. We see what pain is occasioned to
private families from a course of extravagance long persisted in;
and the same injurious consequences must be expected to follow
from a long course of extravagance in a nation; which is but a
family of a larger growth.
Many persons have considered a public debt as beneficial to a
country, from the facility which it affords, with little trouble and
expense, for the investment of capital; in particular for short
periods, and in small portions; its immediate production of re-
venue, in consequence, with the power of obtaining the principal
again whenever it may be wanted, and the advantage that per-
sons, especially those in trade, have thus offered to them, en-
abling them to trade on smaller profits, and thus cheapening
commodities to the consumers. Doubtless this is an advantage
which a public debt confers, in common with Bank stock, India
bonds, canal, harbour, or rail-road shares, and other securities.
This facility, however, is not a quality so eminently belonging
to it from its peculiar nature, as may at first be considered,—
belonging also to the stocks above named, in common with it;
but in part consists in a relative superiority over some other de-
scriptions of property, in consequence of the difficulty and ex-
pense attending their transfer, through the formalities and
duties that the law has imposed, but from which the transfer
of stock is exempt. Where, for instance, would be the great
facility in investing small savings or floating capital in the
funds, if the same forms and expenses were imposed on their
transfer which the law requires for that of freehold property?
A small saving which the poor man may now invest in the funds
at an expense of one shilling, if expended in the purchase of a plot
of land for a garden, or to build a cottage on, would require an ex-
pense to make a title to it, equal to or more than the value of the
fee simple of the land itself. But the advantage to be derived
ON PUBLIC DEBTS.
413
by the poor man from being owner of the land, would be greatly
superior to that accruing to him from the half-yearly dividend
on its value in the funds. The land, however, would be almost
valueless to the generality of purchasers, when again offered for
sale, on account of the expense required to transfer a title to
it. Should, at any future time, the forms of conveyance now
required for real property be much simplified, and the duties
to government taken off, the pre-eminent advantages of a
national debt for the investment of small savings and floating
capital, would in great part disappear, and be confined merely
to those qualities which essentially belong to it, of always pos-
sessing a certainty in its market value, and of being divisible in
any required degree. Even these qualities, however, might
belong in an equal degree to mortgages on estates, if registered
and made transferable. At present, no one invests money in
real property unless there be a probability that the money will
not be wanted for a considerable time; because in case of being
obliged to sell at an early period, it must be expected that the
expense of conveyance at least will be lost. But if this expense
were reduced to the mere charge for writing and registering the
instrument, real property would be much more marketable;
would be more certain in its market value; and, on these ac-
counts, would immediately rise in price; while funded property,
losing a part of its comparative advantage, would in a slight de-
gree lose in its relative value.
It must, however, be admitted, that a public debt does in a
certain degree benefit some classes of society by the facility it
offers for the investment of money, and the ease with which
the money may be sold out at any moment at which it may be
wanted. But the office of government is to preserve the rights.
of individuals and of the community; not to make the interests
of one class subservient to the advancement of the interests of
another class. Now the plain and straightforward course which
the circumstances of the case point out, is to raise at once the
supplies necessary to meet the public expenditure by additional
taxes on the people. In deviating from this natural course, and
in lieu of it mortgaging a future revenue, it seems incumbent
that urgent grounds of necessity or expediency should exist to
414
ON PUBLIC DEBTS.
warrant such deviation. It is not sufficient, in justification, to
say that it will be beneficial by offering a facility to the invest-
ment of savings and floating capital; for this would benefit only
certain persons or classes at the expense of the rest. For, to
many it would be their interest to pay the expense at once,
rather than encumber their future resources, and especially, as
many persons who ought to bear a share of that expense will
not remain, or have always the ability to pay their portion of it.
Every entailed estate, every life interest, or other alienation for
a term of years, is granted on the condition, express or implied,
of preserving and maintaining the property during the period;
and of course of paying the whole expense thereby occasioned,
whether in taxes for its protection, or repairs for upholding it.
Nevertheless, if, during the period, the public debt be increased,
the property, when it reverts back to the original owner, or into
that channel which he has pointed out, returns, in effect, with
an arrear of taxes on it unpaid. Every lease, too, which is
granted with the condition of paying all taxes, is similarly cir-
cumstanced. In these cases the grantor, lessor, or reversioner,
is deprived by government of a part of his just rights, and the
holder of the lease or life interest is benefited at his expense.
Again, not only is the increase of a debt to be deprecated from
these acts of injustice which it occasions, but another evil at-
tends it,—that it cannot be paid off but with a repetition of the
like acts of injustice; though they then fall in a contrary di-
rection, on the opposite classes to those before mentioned. To
incur or increase a public debt, therefore, is not a procedure
that may or may not be adopted from views of political expe-
diency, being unjust and oppressive to a part of the people, and
opposed to the very ends of government, the protection of the
rights of all. How many are the fences and guards with which
the law has encircled the rights of private property; and how
often is it on that account admired and applauded! But to in-
cur or increase a public debt, is secretly and insidiously to un-
dermine private property, and alienate it to others; and can be
vindicated only by unavoidable circumstances of imperious
necessity.
The advocates for a public debt further adduce the advantages
ON PUBLIC DEBTS.
415
thereby derived to society by effecting a great distribution of
wealth. No one can doubt the advantage of such distribution.
But a distribution of property is not effected by a public debt
in consequence of any peculiarities in its nature different from
other descriptions of property, but because a facility attends its
transfer which is denied to real property, and a law of inherit-
ance applies to it different from, and more accordant with, na-
ture, than that which regulates the descent of real property ;-
dividing it equally among the descendants, instead of confining
it to one only. It is the law, therefore, which prevents real
property from diffusing wealth, and not the nature of things that
has made a public debt peculiarly suitable for that purpose
Alter these laws, and put both these descriptions of property
under the same regulations, and but little superiority in the
diffusion of wealth will be found in the one description over the
other.
The distribution of wealth which under present circumstances
takes place by means of a national debt, is, however, destitute
of the greatest of all the advantages derived from the distri-
bution of property; which is, its improvement.
The pur-
chaser of funded property cannot in any way improve it. But
when real property is bought, in the greater number of instances,
some improvement or other is began by the new proprietor.
"It seldom happens that a great proprietor is a great improver.
Compare the present condition of the great estates which have
continued without interruption in the hands of the same family
since the times of feudal anarchy, with the possessions of the
small proprietors in their neighbourhood, and you will require no
other argument to convince you how unfavourable such exten-
sive property is to improvement." "The ordinary revolutions
of war and government easily dry up the sources of that wealth
which arises from commerce only. That which arises from the
solid improvements of agriculture, is much more durable, and
cannot be destroyed but by those more violent convulsions occa-
sioned by the depredations of hostile and barbarous nations con-
tinued for a century or two together."
Though, however, a public debt is not in itself better calcu-
lated to distribute wealth than other descriptions of property,
416
ON PUBLIC DEBTS.
¦
yet its increase is eminently calculated for this purpose. When
the government continues a long course of improvidence in ex-
ceeding the income appropriated to the public service, the people,
in consequence, in general spend more than their real incomes.
From omitting to demand the increase of taxes really necessary,
the scale of expenditure to which the people have been ac-
customed is continued, instead of those temporary sacrifices
being made which ought, and which otherwise would be
made. The excess of expenditure of the government above its
income, during the increase of a debt, unchecked by the reduc-
tion which ought to take place for the time in the private expen-
diture of the people, makes the whole expenditure of the country
for the time exceed its income. There is a consumption of
capital going on; the interest of money rises, and the profits of
trade increase. This augmentation of interest and profits occa-
sions monied men and persons in business to grow rich, who are
thus enabled to lend to government the money which its measures
have been in part the means of creating. Profits continually
increase as the expenditure is increased, and afford as ample a
supply of money as the government requires. But this increase
of interest and profits is raising one class at the expense of
another; while, by the creation of a debt, a permanent encum-
brance is laid upon the future produce of the property and indus-
try of the people. A new race of proprietors appears in the
fundholders; but the greatness of ancient and established fami-
lies is silently and imperceptibly lowered, and their wealth in part
distributed to others. In this progress of change, we cannot but
anticipate that in a few generations, "the posterity of those
now in the coaches, and of those upon the boxes, will probably
change places.'
""
It cannot, however, be imagined that a distribution of wealth
effected in this way can be beneficial. Wealth can be only
valuable as it is subservient to enjoyment, and to set up a new
class in society, by in part pulling down the old ones, will cer-
tainly not increase the sum of happiness among the people; but
the reverse. To constitute happiness, as far as pecuniary cir-
cumstances are concerned, it is necessary that they be, if not
progressive, at least not declining our happiness being not so
ON PUBLIC DEBTS.
417
much dependent on our actual as our relative condition, with
regard to former circumstances, to present prospects, and to
the circumstances of those around us. By an increase of debt,
the circumstances of the people in general become, not only per-
manently worse in themselves from the increased burthen of the
debt, but also relatively worse as regards the circumstances of
certain classes among them who have risen in consequence of
the advance of interest and profits: And hence, greater ex-
ertions are necessary to retain the relative than even the actual
place in society they have been accustomed to occupy. To lower
the pride of ancient families might, possibly, in the fifteenth
century, have been an object deserving a statesman's attention,
when the means of reducing the powerful barons were sought
for. But now that the power of the aristocracy is so little.
to be dreaded, and when the maintenance of the British con-
stitution is said to require its support, such a course is rather to
be avoided than followed.
The effects produced by the increase of expenditure are tem-
porary, and continue only with the progress of the debt. When
it ceases, and the ordinary course of expenditure is returned to,
a revulsion is produced. The habits, the pursuits, and expect-
ations of the people, which had grown up and accommodated
themselves to an increased scale of government expenditure,
become deranged; a diminution of employment in many branches
of industry reduces wages, though, under the heavier pressure of
taxes, a rise, instead of a fall, is necessary to keep up the con-
dition before enjoyed. The interest of money, profits, and
prices fall below their natural level. Undertakings become
hazardous, a want of confidence is produced, and many fall vic-
tims to the alterations thus occasioned. But, after the effects
of these changes cease, and things return to their ordinary
channels, a heavy public debt occasions no increase of industry;
people find themselves under the same circumstances as they
have for years been accustomed to, and make no extraor-
dinary efforts to improve them. No distribution of wealth
takes place beyond what would be produced without the debt,
except as occasioned by its being subject to a different law of
VOL. II.
2 E
418
ON PUBLIC DEBTS.
succession, and being free from difficulty and expense in its
transfer and sale.
A national debt is said to be a support to government, by
binding the public creditors firmly on its side, and causing them
to be its zealous supporters, through a feeling of common in-
terest. Admitting this to be the case, it is, on the other hand,
equally obvious, that the sort of support which a government
may obtain in this way, proceeding as it does on nothing but
pecuniary interest, may attach equally to it, whether its mea-
sures be good or bad; and hence, there is the same chance that
the support so acquired may prove an injury instead of a
benefit to the community. But this same debt, while it gains
friends in one class, loses friends and raises up enemies in
another and more numerous class. The motive is the same on
both sides, private interest; the friends, however, which it loses
are more in number than those which it gains; and it may be
added, too, urged on by a stronger motive, inasmuch as hatred
is more powerful than friendship.
But if public debts were advantageous to a state, ought there
to be no bounds set to their progress? Suppose the public
revenue to be so deeply mortgaged as not to leave sufficient for
carrying on the necessary public services of the government;
and suppose the taxes to be raised to the utmost which the
nation can bear; and suppose again that the invention of man
can find no new imposition which may serve as the foundation
of a new loan; and the inevitable result must be, either that the
nation must destroy the debt, or the debt destroy the nation.
The property of the country being entirely absorbed, the landed
gentry will have disappeared, and the only persons possessing
property will be the fundholders. In this state of things, no
other resources for defending the public interests can be obtained,
than from a continual taxation of the annuitants, or, which is
the same thing, from mortgaging anew, on every exigency, a
part of their annuities, and thus making them contribute to their
own protection, and to that of the nation.
It is a question which is open to discussion, whether the state
has an unlimited right to burthen posterity with an intermin-
ON PUBLIC DEBTS.
419
able debt. If the practice of funding had been adopted at an
earlier period of our history, we should now have been loaded
with debts incurred by the Plantagenets, the Tudors, and the
Stuarts, as well as by William III. and the House of Hanover.
But without entering into such a question, it is sufficiently ob-
vious, that there are persons on whom it can scarcely be con-
ceived to be just to impose the burthen of the interest and
principal of a public debt. The laws of nature enjoin on every
parent, as far as his ability extends, the maintenance of his own
offspring, with such assistance as may enable them to procure
for themselves an honest and comfortable subsistence. But
where that maintenance has been barely equal to the support of
the child's existence, and no assistance given in enabling him to
procure a subsistence for himself, it cannot be said that a child,
in such circumstances, has derived an advantage from his pa-
rent, so as to entitle a creditor to expect from him the payment
of his parent's debts. No law that is founded in justice, could,
between man and man, require such payment. Yet to incur or
increase a public debt, is to burthen posterity with the payment
of expenses not incurred by themselves, but by their fore-
fathers; and for services from which many persons hereafter
will derive no benefit. These expenses are incurred in protect-
ing our persons and property; our persons die; our property is
in great part perishable, and such as is not, will never, from
many of us, descend to our children; and, therefore, will not
carry with it an obligation on them to pay our debts. If a man
who has inherited nothing is to be bound to pay the debts of
preceding generations, where, it may be asked, is the claim to
stop? Is it limited to any given fraction of the produce of la-
bour; or does it extend even to the whole; and thus a man
may be born, in effect, a slave? Where property descends, it is
otherwise; and no unfairness can exist in compelling payment
from the heir of arrears of taxes which ought to have been borne
by the ancestors from whom he inherits (as far as the property
will go); and which, had they been so borne, would probably
have lessened the property which has descended to him.
But private property is perpetually increasing or diminishing,
and shifting hands from one person to another. The circum-
2 E 2
420
ON PUBLIC DEBTS.
stances of individuals are continually varying; so that the
actual sum which ought to have been paid by the parent, will
scarcely ever be paid by the child; but will be either more or
less. Whence circumstances arise of such intricacy that it is
impossible, when a debt has been some time incurred, to point
out the persons who should contribute to its payment; much
more the proportions which should be required of them; and
thus, whatever might be the justice or expediency of such an
inquiry, it must be abandoned as hopeless. The creditor, how-
ever, who has lent his money to the state, on the faith of public
honour, ought not to suffer by this difficulty which the govern-
ment may find in ascertaining the persons from whom the debt
is properly due. The creditor has given, and the debtor has
received, expended, and profited from what both parties con-
sidered an equivalent to the claim. This difficulty, however,
may well be used as an argument against incurring future debts
of interminable obligation.
In this view, we cannot but regret that our debt had not
been borrowed, as in France, chiefly on terminable, instead of
on perpetual annuities. To an individual, or even to a family,
an annuity for a hundred years is of nearly the same value as
one which is perpetual; but to a nation it is different. The
supposed extent of its existence calls for a policy of a larger and
more extended kind, calculated for a longer duration. Had the
debt been borrowed on terminable annuities of fifty or a hun-
dred years, instead of on interminable annuities, a large portion
of the debt would by this time have expired, and the remainder
would have advanced considerably towards a termination.
Though the good supposed to be derived from a public debt is
in any case problematical, the evils attendant upon it are quite
the reverse; and as an opposite opinion has been held and acted
upon, it may be worth while to state some of the mischiefs which
flow from it.
Whatever may be the benefits of the funding system, it can-
not be doubted that the facility which it affords for raising
supplies has often betrayed governments into acts of rashness
and extravagance. If the full burthen of hostilities must be
borne during their continuance, they would be less wantonly
ON PUBLIC DEBTS.
421
undertaken, and more speedily concluded. The people would
less frequently call for war; and sooner grow weary of it, when
there was no real or solid interest to fight for. In mortgaging
the public revenues, the resources of the state are taken away,
and new, vexatious, and oppressive taxes must be resorted to,
In this way, the character of governments has been lowered;
they have been rendered unpopular at home, and enfeebled
abroad, in their transactions of war or negociation with other
states. The burthen and vexation of taxes are among the
greatest and most constantly operating sources of unpopularity
in a government. Its unpopularity is prejudicial to the state,
from its inducing the hazard of disturbing the public tranquillity
and security, as well as from its leading the people to neglect
supporting its authority, or even to raise up an opposition to
the performance of its duties. Whence, a larger military and
civil force must be employed, and additional expense incurred.
But taxes cannot be carried beyond a certain limit, without
becoming, not merely vexatious, but ruinous to the people. The
mischiefs of excessive taxation, and which are usually the con-
sequence of public debts, increase in a much faster ratio than
the taxes themselves, more especially when they are placed on
articles of expenditure. In such case, they distress agriculture,
manufactures, and commerce; they fetter all the other exertions
of industry, and consume the comforts of the people. It has
always been found, when a government has alienated its re-
venues, that it has become incompetent to its duties, and has
sunk into lethargy and impotence. The state as a body politic,
has to support its interests in the society of nations, and the
prejudice thus resulting to it has no favourable circumstances to
atone for it; but is an evil without alloy, and of the most
injurious kind. These are powerful motives to the adoption
of a policy founded on good economy and public approbation.
A national debt is productive of incalculable evil by alienating
the industry of the people. In the labouring classes, this is their
only source of income. If the portion of public debt in this
country which belongs to every man be the amount of taxes he
pays in fourteen years, then, whoever has not property to that
amount, is in effect insolvent; for he is indebted so much to the
422
ON PUBLIC DEBTS.
fundholders, and has not wherewith to pay. It may be immaterial
to the happiness of the community whether the rich in general
have mortgages on their estates, so that their real wealth be less
than it appears to be. But an encumbrance which so deeply
involves a working man, with no other resource than his labour,
is productive of the greatest imaginable injury to him. To
better the condition of the poor must ever be an object of the
first importance. But by creating a public debt they are in-
sidiously ruined. Had a greater portion of taxes been demanded
of them during war, they might then, by greater industry and
economy, which the increased demand for labour allowed, have
been enabled to pay their share, without incurring a debt; but
when that debt has accumulated to an enormous amount, and
when a return to the ordinary state of expenditure has rendered
employment difficult to obtain, the payment of the interest is
quite equal to their ability, and the liquidation of the principal
is deferred to a period which never arrives. In order to place
a man on the same footing as before the debt was contracted,
he ought to lay by a sum equal to his portion of it. But the poor
man has seldom resolution enough in his prosperity to lay by the
money which is at his disposal, and thus when the day of ad-
versity arrives, it comes with redoubled force. Means are in this
way placed at the disposal of the people of lowering their cir-
cumstances to a degree which would never otherwise have been
in their power. To lessen the debt, would do no less good to
the poor, than can be expected from the most successful insti-
tutions which benevolent men have ever established in their
favour.
Again, a national debt is an evil by its creating a property of
an immense amount, the title to which is insecure.
"When
national debts have once been accumulated to a certain degree,
there is scarcely a single instance of their having been fairly and
completely paid. The liberation of the public revenue, if it has
ever been brought about at all, has always been brought about
by a bankruptcy; sometimes by an avowed one, but always by
a real one, though frequently by a pretended payment." A na-
tional debt, as before observed, does not increase the ca-
pital of a country, but by creating an encumbrance on what
ON PUBLIC DEBTS.
423
already exists, transfers in effect a portion of all the pro-
perty and industry of a country to other hands than the os-
tensible owners.
Now the owners' title to the whole of the
property was originally good; but the title to the encumbrance
is not so secure; depending not only on the probity and good
faith of a government in keeping its engagements, in oppo-
sition to its apparent interest, and in a matter in which no com-
pulsion can be used against it; but also partly on the main-
tenance of that government itself, which must be the more
insecure as the debt is heavier. A great portion of the pro-
perty of a country is thus deteriorated in value; and without
raising the value of the remaining portion, which would, how-
ever, in the event of a national bankruptcy, be increased in
value thereby. Hence, a larger interest must be paid for the
money than would be necessary if the title were secure. If the
sum possessed by foreigners in the British funds be considered
as constituting a claim on all the land in the country, which, if
apportioned off, would equal a certain number of acres, it can-
not be doubted that if, instead of a claim on the land of the
country generally, the entire property in this certain number of
acres had been sold to them, the sum procured would have been
greater than that actually received; because the security would
have been better. Thus a larger revenue is drawn by fo-
reigners from this country, than was necessary for the money
received.
A public debt is a property highly fluctuating in value; being
liable to sudden and violent changes from causes which no hu-
man efforts can control, and no foresight can calculate; and
these changes happen in particular at those times when of all
others they are most injurious,—the period of adversity; bring-
ing with them distress and ruin on great numbers. A change
from a state of debt of a stationary amount, to one of an in-
creasing amount, or from an increasing to one of a stationary or
decreasing amount, must alter natural circumstances, and be
productive of injurious consequences. One of the great objects
of a well-ordered government must be to prevent, as much as
possible, all sudden and violent changes; particularly such as arise,
not from natural circumstances which may be foreseen, but from
424
ON PUBLIC DEBTS.
measures of state which cannot be foreseen. These sudden and
unexpected changes overthrow and disappoint the prudent cal-
culations and enterprises of individuals, and leave the possession
of wealth or poverty to fortuitous circumstances. Even a long
period of prosperity, if it must be followed by one of adversity,
though much shorter in duration, is not so conducive to hap-
piness as a steady and uniform prosperity, though much less in
degree, if the period of adversity be thereby averted. Now a
change from a state of debt of a stationary amount, to a state of
increasing debt, must raise prices, profits, and the interest of
money; because by the excess of expenditure above the income,
there is a greater demand for money; and though this may
benefit some, it must injure others, whose undertakings are
engaged in on the supposition of a continuance of existing prices.
A state of decreasing debt must be injurious to many, though
benefiting others. The government is not benefited by these
changes; though it thus deals out ruin on one hand, and riches
on the other. A state of war unaccompanied by an increase of
debt, cannot alter prices generally; for if the supplies be raised
within the year, as much as the government may spend more than
ordinarily, so much will the people be obliged to retrench. If
it be a maritime war, the prices of marine insurance and the
wages of seamen will be raised, and every foreign commodity
will be dearer; the prices of arms and ammunition will be raised;
but as the incomes of the people will be diminished by the
greater amount of taxes, the prices of articles of luxury must
fall. The woollen manufacturer will find that as the demand
for army clothing is increased, the demand for superfine broad
cloth is diminished; and his sale on the whole will be little more
than before. A change from a state of war, carried on in this
way, to a state of peace, will also but little alter prices; and the
evils from these changes would be but slightly felt.
This enumeration of some of the evils which arise from a pub-
lic debt, is sufficient to quiet the alarms of those far-sighted
men who are terrified lest, in the progress of redemption, we
should lose the inestimable advantages of our precious load, and
be overwhelmed with the miseries of having more wealth than
we shall know what to do with. They are sufficient, on the
ON PUBLIC DEBTS.
425
contrary, to show that the greatest benefit would accrue were
the debt paid off. But to do this at once would be impossible;
because though that part of the debt which may apply to fixed
property might be cancelled by transferring the debt in the way
of mortgage to the property to which it belongs, and sending
the fundholder for his dividend to the holders of this property;
yet that part of the debt which belongs to movable property and
to floating capital, could not always be discharged without cre-
ating embarrassment to the traders from the diminution of capital;
nor is movable property always divisible. To create a mort-
gage or encumbrance on such property could neither afford an
adequate security to the fundholder, nor one which could be
easily called in by him Still greater objections would apply to
that portion of the debt which may belong to the industry of
the people; since it could not possibly be discharged by many
from want of sufficient property, or property which is divisible
and disposable; and a stated annual claim on individuals is evi-
dently unsuitable.
Were it possible at once to cancel the debt by transferring a
portion of the property of the country to the public creditors, or
by giving them a mortgage on it and on individuals, no injury
would be occasioned to trade or circulation, and no check would
be given to production; all the evils attendant on taxation.
would be avoided, except those attendant on such taxation as is
necessary for the current expenses of government; a consider-
able saving would be effected by avoiding the collection of the
revenue and management of the debt; since, in many instances,
it would be as convenient to the public creditor to receive his
interest from the holders of property as from the bank. By
transferring property or creating a mortgage on it, the creditor's
title would become more secure than at present; and a property
yielding a smaller revenue than is now paid would be adequate
to liquidate the claim: thus easing the burthen on the public,
without injuring the public creditor. So many difficulties, how-
ever, must attend such immediate payment of the debt, that it
can be considered only as a matter of speculation.
If the debt were gradually liquidated, this would materially
affect the circumstances of the country, and prove in the highest
426
ON PUBLIC DEBTS.
degree beneficial; of which we have spoken already. By such
liquidation, the circumstances of the people would improve every
year. Having fewer taxes to pay in each succeeding year, they
would be as well off as though they had hoarded money enough
to yield an interest equivalent to the reduction of taxes.
From what has been said we perceive, that a public debt, the
accumulation of which has been regarded by the people with so
much supineness, and by some persons as highly beneficial to
the country, is an evil of the greatest magnitude. It is an evil
so pure and unmixed in its nature, that it can neither be in-
creased, nor continued, nor discharged, without producing injuri-
ous consequences; and particularly to the lower classes; which
are the first to suffer in any general distress. If it be increased or
diminished, it deranges the natural order of things; and while it
strews benefits on one hand, it deals out distress on the other. If it
be continued, it is continuing a burthen of an intolerable pressure,
without hope of relief; and which, if ever paid off, can never be
paid by those from whom it is due; and the longer it is con-
tinued the more unfair will be the distribution of its ultimate
payment. To mortgage our revenues at so deep a rate, was sure-
ly the most fatal delusion that a nation which had any preten-
sion to policy and prudence, has ever yet been guilty of. That
remedy of funding, if it be a remedy, ought, in all reason, to have
been reserved to the last extremity. There can hardly arise.
any circumstances which can warrant a nation incurring more
than a temporary debt; and none at all that can warrant so
dangerous an expedient as incurring a debt to remain for a long
series of years.
It may not be foreign to the present subject to offer one re-
mark on the laws of succession, as existing in this country with
regard to real and to funded property. Being different in these
two descriptions of property, should the debt at any future time
be materially reduced, though the laws themselves may remain
unaltered, a practical change will take place in their effects.
The proportions between the two descriptions of property will
vary as the debt is reduced; and they will be varied in a greater
proportion than the actual reduction of debt; because the value
of real property will be increased by every diminution of debt;
ON PUBLIC DEBTS.
427
as the real disposable revenue will be greater when the taxes
are less. Now if the laws of succession are perfect in themselves,
or in their operation, under the existing proportions between
real and funded property, they will not be perfect in their oper-
ation when the debt shall be greatly reduced. Or, if they were
perfect when the debt commenced, they cannot be perfect now;
for their effects are different. In either case, they are subjects
which, now or hereafter, deserve the consideration of the le- ·
gislature.
Perhaps it is in part the emancipation from those fetters that
retarded the transfer and division of property, which a national
debt has imperceptibly effected, by the facilities afforded to its
transfer; and the practical alteration produced by it in the effect
of the laws of succession, together with the necessity which the
deterioration in the circumstances of the ancient families has
imposed on them of resorting in a greater degree to their own
exertions, that has in this country, within the last half century,
produced such a diffusion of wealth, and such an unprecedented
spirit of industry and enterprise. To this spirit we owe those
immense strides in every department of science and art, that
have so much distinguished the present age above all that have
preceded it. Certain it is, that a great practical alteration has
been occasioned by the increase of the debt in the descent and
facility of alienation of property, which cannot but have had an
influence of a powerful nature. The conclusion to be drawn
from this, however, is, not that a debt is beneficial, but that the
trammels which the law has imposed on the transfer and division
of real property are so injurious as to have kept back the
country from the advancement it would otherwise have made,
and that the partial release from them, which the debt has oc-
casioned, has been so beneficial, as even in some measure to
counterbalance the evils which accompany the debt itself.
Besides the objections applicable to the debt itself, a serious
evil has resulted from the common practice of funding in a stock
below par, giving more stock than the money received, but
bearing a somewhat lower rate of interest than the market rate
at the time. This plan was first known to be adopted in this
country in 1759; but was not uniformly practised till 1781,
428
ON PUBLIC DEBTS.
when Lord North resorted to it; in which he has been very
generally followed by every succeeding British minister of
finance to the close of the last war. In France and Spain also,
the same practice prevails. From 1793 to 1812 inclusive, there
were in England eleven loans transacted entirely in the 3 per
cents. ; and £259,215,875 of stock were granted for £158,650,000
of money, which is at the rate of £60 2s. of money for £100 of
stock; or at an interest of £4 18s. per cent. The interest of
this sum borrowed during war, may be thus nominally low; but
the terms are in reality most exorbitant.
In time of war, the enormous sums of money borrowed and
expended by government, with the immense waste of productive
industry and destruction of property from the operations of war,
occasion a great scarcity of capital and a correspondingly high
rate of interest. If this rate of interest were permanent, and if
the government had no intention of ever paying the debt, it
would be its interest to borrow in a stock below par; because the
interest given for the money is lower in this stock than it would
be in one at par, in consequence of the certainty of receiving the
full interest, notwithstanding that a fall of interest generally
should happen, and in consequence of the expectation of a rise.
in the price of stock, from such general fall of interest, or from.
the government redeeming the debt. But the high rate of in-
terest during war is a temporary circumstance, continuing only
with the war, which the return of peace and more prosperous
times, is sure to reduce to the ordinary level. The government,
however, by borrowing in a stock below par, subjects itself to
the perpetual payment of a war-rate of interest, as long as the
debt shall remain unredeemed. Neither can the holders of the
stock be compelled to give it up on payment of the money they
advanced to the government, but the stock must either be
bought at the market price, or paid off at par. From the
establishment of the sinking fund to the 1st of February, 1791,
there were £6,772,350 of the 3 per cents. redeemed for
£5,424,592, being at the rate of £80 nearly. Thus when, in time
of peace, the government attempts to buy up the stock, it must
expect to give £80 of money for every £60 it received in time
of war. From the certainty that the holders will not be obliged
ON PUBLIC DEBTS.
429
to lower the interest, or to take back the money except on pay-
ment of the stock at par, there is a great probability that the
price of stock will rise on the return of peace, when capital be-
comes abundant, when, consequently, the general rate of interest
falls, and when the government is likely to pay off the debt.
Thus persons are willing to lend in this stock at a lower rate of
interest than in any other. "From 1794 to 1812, there were
six operations of funding bills, and three loans, entirely in the 5
per cents.
One of the loans, called the Loyalty Loan, in 1796,
was transacted upon terms so disadvantageous to the public,
that it ought to be excluded in estimating the average terms of
funding. Confining ourselves, therefore, to the six operations.
of funding bills, and the loans in 1811 and 1812, £40,157,150
were received by government in exchange for £42,175,338 of 5
per cent. stock, the interest of which was £2,108,767, being at
the rate of £5 5s. per cent. upon the money received, and 7s.
per cent. more than on the money funded in the 3 per cents.
Dr. Hamilton observes, that another consideration considerably
reduces this difference of interest. In the loans, the public pays
the whole interest for the year that the loan is transacted,
although the money be advanced by instalments, or discount
allowed if the whole be paid up at once.
If the lender did not
obtain this advantage, he would demand an additional capital,
at least equivalent to £2 10s. in the 5 per cents., and yielding
an interest of 2s. 6d. Nothing similar to this occurs in the
transactions of funding bills, from which the greater part of the
5 per cent. stock arises." Thus, for a difference not exceeding
five or six shillings per cent. on the interest, the government
threw away the future advantage which would otherwise have
accrued on the return of peace of reducing the interest to four or
three and a half per cent., with the prospect of a still further
reduction; while at the same time it pledged itself to pay as it
were a fine for discharging the debt, in the shape of a certainty
of paying £133 for every £100 borrowed, and a risk of paying
£166. A more ruinous plan of borrowing could scarcely be
Vid. Edinburgh Review, vol. xxiv. p. 317.
430
ON PUBLIC DEBTS.
}
devised.
This fatal blunder has rendered it as ruinous to con-
tinue burthened with the exorbitant interest, as to discharge the
debt.
A private individual when mortgaging his estate, does not
give a larger mortgage than the actual money received, in con-
sideration of the interest being nominally at a low rate, unless
it be to avoid the usury laws. But the absurdity of doing so in
a public transaction, though perhaps not quite so apparent to
common observation, is still greater than in a private transaction,
because whenever the government borrows, the rate of interest
is sure to be high, and whenever it pays off, the rate is sure to be
low: it is not so with individuals; some of whom are borrowing
at all times; and, consequently, when interest is low as well as
when it is high. Such is the result of the attempt of statesmen
to outwit the money-lenders.
The nation, like every other debtor, ought to pay a fair interest
for the money, and, in discharging the debt, ought to pay neither
more nor less than the sum borrowed. It would have been of the
highest advantage, had the government borrowed at the market
rate of interest of the day, that is, in a stock at par, though that
rate had been never so high. It is true, this would have
subjected the country during the war, to a higher rate of interest
than what has been paid, but on the return of peace, it was sure
to fall; and immediately after this took place, the government
might have borrowed at a lower rate, and with the money have.
tendered payment of the debt to such of its creditors as should
have refused to accept the lower rate of interest to which the
market rate had fallen. This operation continually repeated with.
every material lowering of the rate of interest in the market,
would have rendered our debt at the present moment equivalent
to more than £200,000,000 of capital, or £8,000,000 of an-
nual interest less than it is at present, with the prospect, too, of
continually effecting a further reduction of interest, and leaving
in the discharge of the debt no larger amount of money to be
paid than was actually received.
Public attention was drawn to the fact of the disadvantageous
method of funding in a stock below par, by the late Dr. Robert
ON PUBLIC DEBTS.
431
Hamilton in 1814,* yet in the reduction of the 5 per cent. stock
which was effected some years after, a similarly disadvantageous
plan was adopted. The current rate of interest in the market
being then about 41 per cent., and the minister being desirous
to reduce the stock to 4 per cent., he offered to the holders an
increase of 5 per cent. on the capital of their stock, with a re-
duction of the interest on the whole to 4 per cent., and a gua-
rantee that no further reduction of interest should be attempted ·
for seven years. This was almost universally accepted by the
stockholders. Thus above seven millions were added to the
capital of the debt. But had the minister been content, as he
was advised at the time, to reduce the interest first to 4 or 41
per cent., no such addition to the capital, and no guarantee,
could have been required of him; and he would have had the
opportunity in two or three years after of still further reducing
it to 4 and 3 per cent, as has since taken place. Independently
of the prospect of a reduction of the interest, it was unnecessary,
if the minister did not intend ever to pay off the debt himself, to
make it more difficult for his successors to do so. But such
policy might naturally be expected from a person who con-
sidered a public debt an addition to the wealth of a country,
which would be so much the less, as the capital of the debt
should be reduced. In reflecting on this signal mistake in our
finance ministers, and on the mischief which may result from a
single instance of mismanagement in public affairs, we can
scarcely help repeating the exclamation of an able politician,—
"With how little wisdom have the affairs of nations been
conducted!"
It may perhaps be thought, that had it not been for the ex-
pectation of a rise in the price of stock, monied men would not
have taken the loans, and government would not have been able
to borrow so large an amount. But such is not the fact. Though
the contractors might not perhaps have taken the loans in
exactly the same way as that in which they did take them, yet
the same sum of money might still have been borrowed. The
**
Inquiry concerning the National Debt of Great Britain.
432
ON PUBLIC DEBTS.
contractors did not save or create all the money which was lent,
nor are they the only persons who lend money: they are the
mere agents between the government and the lenders, and their
services, if needed, might as well have been procured by an
agency as by a prospect of profit on the stock. The money must
have existed in the country, or it could not have been borrowed;
and was to be had by offering a sufficient inducement, either of
a high interest, or a prospect of profit on the stock. But if the
government had been somewhat more at the mercy of the lenders
while it was borrowing, the tables would have been more than
sufficiently turned in its favour when it began to pay off.
Our sinking fund was first established in 1786,-a time of
profound peace, when the revenue exceeded the expenditure.
But it was kept up during the whole of the war, when the ex-
penditure exceeded the revenue to an enormous amount. It is
scarcely allowable now to say much on the absurdity of keeping
up this empty show of a sinking fund while the nation is borrow-
ing, and no real reduction of debt is being effected. But such
was not always the case.
It is well known that a sum of money
at compound interest of 5 per cent. doubles itself in fourteen
years; and the assertion of Dr. Price is believed to be true, that
a penny so improved from our Saviour's birth, would, at the
time he wrote, (1773,) have increased to more money than would
be contained in a hundred millions of globes, each equal to the
earth in magnitude, and all of solid gold. The statements of
this distinguished calculator influenced the measures of Mr.
Pitt, but it would be a waste of time now to show, that no in-
terest can accrue when there is no real reduction of debt. It
has been thought, however, that a sinking fund was a support to
public credit, and that the supply of ready money afforded by the
regular purchases of the commissioners kept up the price of
stock, and enabled the government to borrow on advantageous
The prices of the public funds, however, must depend
on the quantity of money, or rather capital, for which invest-
ment is wanted, in proportion to the quantity wanted to be bor-
rowed;-not on the quantities of stock bought and sold, but on
the relation of the one to the other. To borrow with one hand
terms.
ON PUBLIC DEBTS.
433
and pay off with the other, cannot alter the real supply and de-
mand, or raise the price; for it cannot create an abundance of
money. To borrow twenty millions, and at the same time to pay
off ten millions, must have the same effect on the market as bor-
rowing only ten millions, and not paying off at all. But this
double step of borrowing and paying off at the same time, must
occasion an increase in the expense of borrowing money, by in-
creasing the bonus which must be given by government to the
lender for the larger amount of the loan. Contractors would
not advance their money to the public, unless the stock assigned
them were of greater value than the money advanced could pur-
chase in the market at the time. They must be indemnified,
too, for the disadvantage to which they will be put of a fall in
the price of stock, during the paying up of the instalments on
the loan, on account of large sums being demanded at once,
while the purchasers for the sinking fund only furnish small
sums at regular intervals. Besides, there must be larger profits
to the contractors who hazard their property; for though they
may occasionally lose on their contracts, they must, on the
average, gain, or they would cease to take such contracts. Dr.
Hamilton computed that during a period of twenty years from
the establishment of the sinking fund, the loss which it occasion-
ed in this way could not be less than twenty millions. This
greater expense of management and of profit to the contractors
is so much lost to the nation, without any possible advantage in
return; and thus the keeping up a sinking fund in time of war,
instead of contributing to lessen the debt, has served only to
make a large addition to it. The only conceivable means of
reducing debt are a real excess of revenue over expenditure.
But a sinking fund might be usefully employed, even when a
nation is borrowing, if it were applied solely to pay off an old
debt bearing a higher rate of interest than the rate at which a
new debt could be created at the time. This, however, was not
the way in which the sinking fund was applied by the British
government; for it was applied to reduce that part of the debt
which bore the lowest rate of interest, without touching that
which bore the highest rate. For many years the country con-
VOL. II.
2 F
434
ON PUBLIC DEBTS.
tinued to pay 5 per cent. interest on 140 millions of stock, when,
had the sinking fund been applied to that stock, the holders would
have been obliged to accept a reduction of interest proportionate
to the market rate, or to have received money for their stock :
we cannot doubt that they would have accepted the former
alternative, had the reduction been fair and moderate. It is not
improbable, if peace and general prosperity should continue many
years, that our three per cent. stock may rise above par; more
especially if a sinking fund of any considerable magnitude should
be applied to its liquidation for a series of years. In June, 1739,
3 per cents. were sold at the rate of £107 of money, for £100 of
stock. If they should again advance above par, a sinking fund
might be applied with effect in tendering payment to the stock-
holders according to some regular order of succession, with the
option of a small reduction of interest, say one-eighth per cent.,
without any other guarantee of continuing that interest than that
no further reduction should be offered until all the other holders
had been similarly reduced. It is probable that the holders
generally would prefer to keep their security at a small reduction
of the interest rather than to change it, and thus the great body
might be expected to accede without opposition. Such reduction,
though trifling to individuals, would be of magnitude when ap-
plied to the whole debt; and might be repeated from time to time,
as the general rate of interest declined. It would diminish
speculation in the funds when the stock arrived at par, by
checking its rise above it, and no severe loss would be occasioned
to individuals, from the government suddenly offering payment
at par, after it had allowed the stock to advance considerably
above it.
A very powerful influence would be exerted in reducing the
general rate of interest, and advancing the price of stock, if a
sinking fund of magnitude were kept up for a series of years.
The relief to the nation from a reduction in the interest of its
debt, or from changing it into terminable annuities, which might.
be effected if advanced above par, would amply repay the
temporary sacrifice of keeping up such fund. The large amount
of capital thus accumulated by the government, and dispersed
ON PUBLIC DEBTS.
435
by the people throughout its several branches of industry, would
also contribute in the highest degree to the advancement of the
public opulence. In common honesty, a sinking fund ought to
be kept up during peace of sufficient amount to liquidate within
its probable continuance the debt incurred by the previous war ;
as well as to afford a ready resource of surplus revenue on any
sudden emergency of war or other public calamity.
THE END.
JOHN CHILDS AND SON, BUNGAY.

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UNIV. OF MICH.
LIBRARY
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The Industry of Nations