Principles of Political Economy

Book V, Chapter IV: Of taxes on commodities

CHAPTER IV: of taxes on commodities

§ 1. By taxes on commodities are commonly meant, those which are levied either on the producers or on the carriers or dealers who intervene between them and the final purchasers for consumption. Taxes imposed directly on the consumers of particular commodities, such as a house-tax, or the tax in this country on horses and carriages, might be called taxes on commodities, but are not; the phrase being, by custom, confined to indirect taxes those which are advanced by one person, to be, as is expected and intended, reimbursed by another. Taxes on commodities are either on production within the country, or on importation into it, or on conveyance or sale within it; and are classed respectively as excise, customs, or tolls and transit duties. To whichever class they belong, and at whatever stage in the progress of the community they may be imposed, they are equivalent to an increase of the cost of production; using that term in its most enlarged sense, which includes the cost of transport and distribution, or, in common phrase, of bringing the commodity to market.

When the cost of production is increased artificially by a tax, the effect is the same as when it is increased by natural causes. If only one or a few commodities are affected, their value and price rise, so as to compensate the producer or dealer for the peculiar burthen; but if there were a tax on all commodities, exactly proportioned to their value, no such compensation would be obtained: there would neither be a general rise of values, which is an absurdity, nor of prices, which depend on causes entirely different. There would, however, as Mr. M'Culloch has pointed out, be a disturbance of values, some falling, others rising, owing to a circumstance, the effect of which on values and prices we formerly discussed; the different durability of the capital employed in different occupations. The gross produce of industry consists of two parts; one portion serving to replace the capital consumed, while the other portion is profit. Now equal capitals in two branches of production must have equal expectations of profit; but if a greater portion of the one than of the other is fixed capital, or if that fixed capital is more durable, there will be a less consumption of capital in the year, and less will be required to replace it, so that the profit, if absolutely the same, will form a greater proportion of the annual returns. To derive from a capital of 1000l. a profit of 100l., the one producer may have to sell produce to the value of 1100l., the other only to the value of 500l. If on these two branches of industry a tax be imposed of five per cent ad valorem, the last will be charged only with 25l., the first with 55l.; leaving to the one 75l. profit, to the other only 45l. To equalize, therefore, their expectation of profit, the one commodity must rise in price, or the other must fall, or both: commodities made chiefly by immediate labour must rise in value, as compared with those which are chiefly made by machinery. It is unnecessary to prosecute this branch of the inquiry any further.

§ 2. A tax on any one commodity, whether laid on its production, its importation, its carriage from place to place, or its sale, and whether the tax be a fixed sum of money for a given quantity of the commodity, or an ad valorem duty, will, as a general rule, raise the value and price of the commodity by at least the amount of the tax. There are few cases in which it does not raise them by more than that amount. In the first place, there are few taxes on production on account of which it is not found or deemed necessary to impose restrictive regulations on the manufacturers or dealers, in order to check evasions of the tax. These regulations are always sources of trouble and annoyance, and generally of expense, for all of which, being peculiar disadvantages, the producers or dealers must have compensation in the price of their commodity. These restrictions also frequently interfere with the processes of manufacture, requiring the producer to carry on his operations in the way most convenient to the revenue, though not the cheapest, or most efficient for purposes of production. Any regulations whatever, enforced by law, make it difficult for the producer to adopt new and improved processes. Further, the necessity of advancing the tax obliges producers and dealers to carry on their business with larger capitals than would otherwise be necessary, on the whole of which they must receive the ordinary rate of profit, though a part only is employed in defraying the real expenses of production or importation. The price of the article must be such as to afford a profit on more than its natural value, instead of a profit on only its natural value. A part of the capital of the country, in short, is not employed in production, but in advances to the state, repaid in the price of goods; and the consumers must give an indemnity to the sellers, equal to the profit which they could have made on the same capital if really employed in production.∗ Neither ought it to be forgotten, that whatever renders a larger capital necessary in any trade or business, limits the competition in that business; and by giving something like a monopoly to a few dealers, may enable them either to keep up the price beyond what would afford the ordinary rate of profit, or to obtain the ordinary rate of profit with a less degree of exertion for improving and cheapening their commodity. In these several modes, taxes on commodities often cost to the consumer, through the increased price of the article, much more than they bring into the treasury of the state. There is still another consideration. The higher price necessitated by the tax, almost always checks the demand for the commodity; and since there are many improvements in production which, to make them practicable, require a certain extent of demand, such improvements are obstructed, and many of them prevented altogether. It is a well-known fact that the branches of production in which fewest improvements are made are those with which the revenue officer interferes; and that nothing, in general, gives a greater impulse to improvements in the production of a commodity, than taking off a tax which narrowed the market for it.

§ 3. Such are the effects of taxes on commodities, considered generally;. but as there are some commodities (those composing the necessaries of the labourer) of which the values have an influence on the distribution of wealth among different classes of the community, it is requisite to trace the effects of taxes on those particular articles somewhat farther. If a tax be laid, say on corn, and the price rises in proportion to the tax, the rise of price may operate in two ways. First: it may lower the condition of the labouring classes; temporarily indeed it can scarcely fail to do so. If it diminishes their consumption of the produce of the earth, or makes them resort to a food which the soil produces more abundantly, and therefore more cheaply, it to that extent contributes to throw back agriculture upon more fertile lands or less costly processes, and to lower the value and price of corn; which therefore ultimately settles at a price, increased not by the whole amount of the tax, but by only a part of its amount. Secondly, however, it may happen that the dearness of the taxed food does not lower the habitual standard of the labourer's requirements, but that wages, on the contrary, through an action on population, rise, in a shorter or longer period, so as to compensate the labourers for their portion of the tax; the compensation being of course at the expense of profits. Taxes on necessaries must thus have one of two effects. Either they lower the condition of the labouring classes; or they exact from the owners of capital, in addition to the amount due to the state on their own necessaries, the amount due on those consumed by the labourers. In the last case, the tax on necessaries, like a tax on wages, is equivalent to a peculiar tax on profits; which is, like all other partial taxation, unjust, and is specially prejudicial to the increase of the national wealth.

It remains to speak of the effect on rent. Assuming (what is usually the fact) that the consumption of food is not diminished, the same cultivation as before will be necessary to supply the wants of the community; the margin of cultivation, to use Dr. Chalmers expression, remains where it was; and the same land or capital which, as the least productive, already regulated the value and price of the whole produce, will continue to regulate them. The effect which a tax on agricultural produce will have on rent, depends on its affecting or not affecting the difference between the return to this least productive land or capital, and the returns to other lands and capitals. Now this depends on the manner in which the tax is imposed. If it is an ad valorem tax, or what is the same thing, a fixed proportion of the produce, such as tithe for example, it evidently lowers corn-rents. For it takes more corn from the better lands than from the worse; and exactly in the degree in which they are better; land of twice the productiveness paying twice as much to the tithe. Whatever takes more from the greater of two quantities than from the less, diminishes the difference between them. The imposition of a tithe on corn would take a tithe also from corn-rent: for if we reduce a series of numbers by a tenth each, the differences between them are reduced one-tenth.

For example, let there be five qualities of land, which severally yield, on the same extent of ground, and with the same expenditure, 100, 90, 80, 70, and 60 bushels of wheat; the last of these being the lowest quality which the demand for food renders it necessary to cultivate. The rent of these lands will be as follows:—

Now let a tithe be imposed, which takes from these five pieces of land 10, 9, 8, 7, and 6 bushels respectively, the fifth quality still being the one which regulates the price, but returning to the farmer, after payment of tithe, no more than 54 bushels:—

and that producing 60 bushels, reduced to 54, will yield, as before, no rent. So that the rent of the first quality of land has lost four bushels; of the second, three; of the third, two; and of the fourth, one: that is, each has lost exactly one-tenth. A tax, therefore, of a fixed proportion of the produce, lowers, in the same proportion, corn-rent.

But it is only corn-rent that is lowered, and not rent estimated in money, or in any other commodity. For, in the same proportion as corn-rent is reduced in quantity, the corn composing it is raised in value. Under the tithe, 54 bushels will be worth in the market what 60 were before; and nine-tenths will in all cases sell for as much as the whole ten-tenths previously sold for. The landlords will therefore be compensated in value and price for what they lose in quantity; and will suffer only so far as they consume their rent in kind, or after receiving it in money, expend it in agricultural produce: that is, they only suffer as consumers of agricultural produce, and in common with all the other consumers. Considered as landlords, they have the same income as before; the tithe, therefore, falls on the consumer, and not on the landlord.

The same effect would be produced on rent, if the tax, instead of being a fixed proportion of the produce, were a fixed sum per quarter or per bushel. A tax which takes a shilling for every bushel, takes more shillings from one field than from another, just in proportion as it produces more bushels; and operates exactly like tithe, except that tithe is not only the same proportion on all lands, but is also the same proportion at all times, while a fixed sum of money per bushel will amount to a greater or a less proportion, according as corn is cheap or dear.

There are other modes of taxing agriculture, which would affect rent differently. A tax proportioned to the rent would fall wholly on the rent and would not at all raise the price of corn, which is regulated by the portion of the produce that pays no rent. A fixed tax of so much per cultivated acre, without distinction of value, would have effects directly the reverse. Taking no more from the best qualities of land than from the worst, it would leave the differences the same as before, and consequently the same corn-rents, and the landlords would profit to the full extent of the rise of price. To put the thing in another manner; the price must rise sufficiently to enable the worst land to pay the tax; thus enabling all lands which produce more than the worst, to pay not only the tax, but also an increased rent to the landlords. These, however, are not so much taxes on the produce of land, as taxes on the land itself. Taxes on the produce, properly so called, whether fixed or ad valorem, do not affect rent, but fall on the consumer: profits, however, generally bearing either the whole or the greatest part of the portion which is levied on the consumption of the labouring classes.

§ 4. The preceding is, I apprehend, a correct statement of the manner in which taxes on agricultural produce operate when first laid on. When, however, they are of old standing, their effect may be different, as was first pointed out, I believe, by Mr. Senior. It is, as we have seen, an almost infallible consequence of any reduction of profits, to retard the rate of accumulation. Now the effect of accumulation, when attended by its usual accompaniment, an increase of population, is to increase the value and price of food, to raise rent, and to lower profits: that is, to do precisely what is done by a tax on agricultural produce, except that this does not raise rent. The tax, therefore, merely anticipates the rise of price, and fall of profits, which would have taken place ultimately through the mere progress of accumulation; while it at the same time prevents, or at least retards, that progress. If the rate of profit was such, previous to the imposition of a tithe, that the effect of the tithe reduces it to the practical minimum, the tithe will put a stop to all further accumulation, or cause it to take place out of the country; and the only effect which the tithe will then have had on the consumer is to make him pay earlier the price which he would have had to pay somewhat later—part of which, indeed, in the gradual progress of wealth and population, he would have almost immediately begun to pay. After a lapse of time which would have admitted of a rise of one-tenth through the natural progress of wealth, the consumer will be paying no more than he would have paid if the tithe had never existed; he will have ceased to pay any portion of it, and the person who will really pay it is the landlord, whom it deprives of the increase of rent which would by that time have accrued to him. At every successive point in this interval of time, less of the burthen will rest on the consumer, and more of it on the landlord: and in the ultimate result, the minimum of profits will be reached with a smaller capital and population, and a lower rental, than if the course of things had not been disturbed by the imposition of the tax. If, on the other hand, the tithe or other tax on agricultural produce does not reduce profits to the minimum, but to something above the minimum, accumulation will not be stopped, but only slackened: and if population also increases, the two-fold increase will continue to produce its effects—a rise of the price of corn, and an increase of rent. These consequences, however, will not take place with the same rapidity as if the higher rate of profit had continued. At the end of twenty years the country will have a smaller population and capital than, but for the tax, it would by that time have had; the landlords will have a smaller rent; and the price of corn, having increased less rapidly than it would otherwise have done, will not be so much as a tenth higher than what, if there had been no tax, it would by that time have become. A part of the tax, therefore, will already have ceased to fall on the consumer, and devolved upon the landlord; and the proportion will become greater and greater by lapse of time.

Mr. Senior illustrates this view of the subject by likening the effects of tithes, or other taxes on agricultural produce to those of natural sterility of soil. If the land of a country without access to foreign supplies were suddenly smitten with a permanent deterioration of quality, to an extent which would make a tenth more labour necessary to raise the existing produce, the price of corn would undoubtedly rise one-tenth. But it cannot hence be inferred that if the soil of the country had from the beginning been one-tenth worse than it is, corn would at present have been one-tenth dearer than we find it. It is far more probable, that the smaller return to labour and capital, ever since the first settlement of the country, would have caused in each successive generation a less rapid increase than has taken place: that the country would now have contained less capital, and maintained a smaller population, so that notwithstanding the inferiority of the soil, the price of corn would not have been higher, nor profits lower, than at present; rent alone would certainly have been lower. We may suppose two islands, which, being alike in extent, in natural fertility, and industrial advancement, have up to a certain time been equal in population and capital, and have had equal rentals, and the same price of corn. Let us imagine a tithe imposed in one of these islands, but not in the other. There will be immediately a difference in the price of corn, and therefore probably in profits. While profits are not tending downwards in either country, that is, while improvements in the production of necessaries fully keep pace with the increase of population, this difference of prices and profits between the islands may continue. But if, in the untithed island, capital increases, and population along with it, more than enough to counterbalance any improvements which take place, the price of corn will gradually rise, profits will fall, and rent will increase; while in the tithed island capital and population will either not increase (beyond what is balanced by the improvements), or if they do, will increase in a less degree; so that rent and the price of corn will either not rise at all, or rise more slowly. Rent, therefore, will soon be higher in the untithed than in the tithed island, and profits not so much higher, nor corn so much cheaper, as they were on the first imposition of the tithe. These effects will be progressive. At the end of every ten years there will be a greater difference between the rentals and between the aggregate wealth and population of the two islands, and a less difference in profits and in the price of corn.

At what point will these last differences entirely cease, and the temporary effect of taxes on agricultural produce, in raising the price, have entirely given place to the ultimate effect, that of limiting the total produce of the country? Though the untithed island is always verging towards the point at which the price of food would overtake that in the tithed island, its progress towards that point naturally slackens as it draws nearer to attaining it; since—the difference between the two islands in the rapidity of accumulation depending upon the difference in the rates of profit—in proportion as these approximate, the movement which draws them closer together abates of its force. The one may not actually overtake the other, until both islands reach the minimum of profits: up to that point, the tithed island may continue more or less ahead of the untithed island in the price of corn: considerably ahead if it is far from the minimum, and is therefore accumulating rapidly. very little ahead if it is near the minimum, and accumulating slowly.

But whatever is true of the tithed and untithed islands in our hypothetical case, is true of any country having a tithe, compared with the same country if it had never had a tithe.

In England the great emigration of capital, and the almost periodical occurrence of commercial crises through the speculations occasioned by the habitually low rate of profit, are indications that profit has attained the practical, though not the ultimate minimum, and that all the savings which take place (beyond what improvements, tending to the cheapening of necessaries, make room for) are either sent abroad for investment, or periodically swept away. There can therefore, I think, be little doubt that if England had never had a tithe, or any tax on agricultural produce, the price of corn would have been by this time as high, and the rate of profits as low, as at present. Independently of the more rapid accumulation which would have taken place if profits had not been prematurely lowered by these imposts; the mere saving of a part of the capital which has been wasted in unsuccessful speculations, and the keeping at home a part of that which has been sent abroad, would have been quite sufficient to produce the effect. I think, therefore, with Mr. Senior, that the tithe, even before its commutation, had ceased to be a cause of high prices or low profits, and had become a mere deduction from rent; its other effects being, that it caused the country to have no greater capital, no larger production, and no more numerous population than if it had been one-tenth less fertile than it is; or let us rather say one-twentieth (considering how great a portion of the land of Great Britain was tithe-free).

But though tithes and other taxes on agricultural produce, when of long standing, either do not raise the price of food and lower profits at all, or, if at all, not in proportion to the tax; yet the abrogation of such taxes, when they exist, does not the less diminish price, and, in general, raise the rate of profit. The abolition of a tithe takes one-tenth from the cost of production, and consequently from the price, of all agricultural produce; and unless it permanently raises the labourer's requirements, it lowers the cost of labour, and raises profits. Rent, estimated in money or in commodities, generally remains as before; estimated in agricultural produce, it is raised. The country adds as much by the repeal of a tithe, to the margin which intervenes between it and the stationary state, as is cut off from that margin by a tithe when first imposed. Accumulation is greatly accelerated; and if population also increases, the price of corn immediately begins to recover itself, and rent to rise; thus gradually transferring the benefit of the remission, from the consumer to the landlord.

The effects which thus result from abolishing tithe, result equally from what has been done by the arrangements under the Commutation Act for converting it into a rent-charge. When the tax, instead of being levied on the whole produce of the soil, is levied only from the portions which pay rent, and does not touch any fresh extension of cultivation, the tax no longer forms any part of the cost of production of the portion of the produce which regulates the price of all the rest. The land or capital which pays no rent, can now send its produce to market one-tenth cheaper. The commutation of tithe ought therefore to have produced a considerable fall in the average price of corn. If it had not come so gradually into operation, and if the price of corn had not during the same period been under the influence of several other causes of change, the effect would probably have been markedly conspicuous. As it is, there can be no doubt that this circumstance has had its share in the fall which has taken place in the cost of production and in the price of home-grown produce; though the effects of the great agricultural improvements which have been simultaneously advancing, and of the free admission of agricultural produce from foreign countries,1 have masked those of the other cause. This fall of price would not in itself have any tendency injurious to the landlord, since corn-rents are increased in the same ratio in which the price of corn is diminished. But neither does it in any way tend to increase his income. The rent-charge, therefore, which is substituted for tithe, is a dead loss to him at the expiration of existing leases: and the commutation of tithe was not a mere alteration in the mode in which the landlord bore an existing burthen, but the imposition of a new one; relief being afforded to the consumer at the expense of the landlord, who, however, begins immediately to receive progressive indemnification at the consumer's expense, by the impulse given to accumulation and population.

§ 5. We have hitherto inquired into the effects of taxes on commodities, on the assumption that they are levied impartially on every mode in which the commodity can be produced or brought to market. Another class of considerations is opened, if we suppose that this impartiality is not maintained, and that the tax is imposed, not on the commodity, but on some particular mode of obtaining it.

Suppose that a commodity is capable of being made by two different processes; as a manufactured commodity may be produced either by hand or by steam-power; sugar may be made either from the sugar-cane or from beet-root, cattle fattened either on hay and green crops, or on oil-cake and the refuse of breweries. It is the interest of the community that, of the two methods, producers should adopt that which produces the best article at the lowest price. This being also the interest of the producers, unless protected against competition, and shielded from the penalties of indolence; the process most advantageous to the community is that which, if not interfered with by government, they ultimately find it to their advantage to adopt. Suppose however that a tax is laid on one of the processes, and no tax at all, or one of smaller amount, on the other. If the taxed process is the one which the producers would not have adopted, the measure is simply nugatory. But if the tax falls, as it is of course intended to do, upon the one which they would have adopted, it creates an artificial motive for preferring the untaxed process, though the inferior of the two. If, therefore, it has any effect at all, it causes the commodity to be produced of worse quality, or at a greater expense of labour; it causes so much of the labour of the community to be wasted, and the capital employed in supporting and remunerating the labour to be expended as uselessly as if it were spent in hiring men to dig holes and fill them up again. This waste of labour and capital constitutes an addition to the cost of production of the commodity, which raises its value and price in a corresponding ratio, and thus the owners of the capital are indemnified. The loss falls on the consumers; though the capital of the country is also eventually diminished, by the diminution of their means of saving, and in some degree, of their inducements to save.

The kind of tax, therefore, which comes under the general denomination of a discriminating duty, transgresses the rule that taxes should take as little as possible from the tax-payer beyond what they bring into the treasury of the state. A discriminating duty makes the consumer pay two distinct taxes, only one of which is paid to the government, and that frequently the less onerous of the two. If a tax were laid on sugar produced from the cane, leaving the sugar from beet-root untaxed, then in so far as cane sugar continued to be used, the tax on it would be paid to the treasury, and might be as objectionable as most other taxes; but if cane sugar, having previously been cheaper than beet-root sugar, was now dearer, and beet-root sugar was to any considerable amount substituted for it, and fields laid out and manufactories established in consequence, the government would gain no revenue from the beet-root sugar, while the consumers of it would pay a real tax. They would pay for beet-root sugar more than they had previously paid for cane sugar, and the difference would go to indemnify producers for a portion of the labour of the country actually thrown away, in producing by the labour of (say) three hundred men, what could be obtained by the other process with the labour of two hundred.

One of the commonest cases of discriminating duties, is that of a tax on the importation of a commodity capable of being produced at home, unaccompanied by an equivalent tax on the home production. A commodity is never permanently imported, unless it can be obtained from abroad at a smaller cost of labour and capital on the whole, than is necessary for producing it. If, therefore, by a duty on the importation, it is rendered cheaper to produce the article than to import it, an extra quantity of labour and capital is expended, without any extra result. The labour is useless, and the capital is spent in paying people for laboriously doing nothing. All custom duties which operate as an encouragement to the home production of the taxed article, are thus an eminently wasteful mode of raising a revenue.

This character belongs in a peculiar degree to custom duties on the produce of land, unless countervailed by excise duties on the home production. Such taxes bring less into the public treasury, compared with what they take from the consumers, than any other imposts to which civilized nations are usually subject. If the wheat produced in a country is twenty millions of quarters, and the consumption twenty-one millions, a million being annually imported, and if on this million a duty is laid which raises the price ten shillings per quarter, the price which is raised is not that of the million only, but of the whole twenty-one millions. Taking the most favourable, but extremely improbable, supposition, that the importation is not at all checked, nor the home production enlarged, the state gains a revenue of only half a million, while the consumers are taxed ten millions and a half; the ten millions being a contribution to the home growers, who are forced by competition to resign it all to the landlords. The consumer thus pays to the owners of land an additional tax, equal to twenty times that which he pays to the state. Let us now suppose that the tax really checks importation. Suppose importation stopped altogether in ordinary years; it being found that the million of quarters can be obtained, by a more elaborate cultivation, or by breaking up inferior land, at a less advance than ten shillings upon the previous price—say, for instance, five shillings a quarter. The revenue now obtains nothing, except from the extraordinary imports which may happen to take place in a season of scarcity. But the consumers pay every year a tax of five shillings on the whole twenty-one millions of quarters, amounting to 5¼ millions sterling. Of this the odd 250,000l. goes to compensate the growers of the last million of quarters for the labour and capital wasted under the compulsion of the law. The remaining five millions go to enrich the landlords as before.

Such is the operation of what are technically termed Corn Laws, when first laid on; and such continues to be their operation, so long as they have any effect at all in raising the price of corn. But I am by no means of opinion that in the long run they keep up either prices or rents in the degree which these considerations might lead us to suppose. What we have said respecting the effect of tithes and other taxes on agricultural produce, applies in a great degree to corn laws: they anticipate artificially a rise of price and of rent, which would at all events have taken place through the increase of population and of production. The difference between a country without corn laws, and a country which has long had corn laws, is not so much that the last has a higher price or a larger rental, but that it has the same price and the same rental with a smaller aggregate capital and a smaller population. The imposition of corn laws raises rents, but retards that progress of accumulation which would in no long period have raised them fully as much. The repeal of corn laws tends to lower rents, but it unchains a force which, in a progressive state of capital and population, restores and even increases the former amount. There is every reason to expect that under the virtually free importation of agricultural produce, at last extorted from the ruling powers of this country, the price of food, if population goes on increasing, will gradually but steadily rise; though this effect may for a time be postponed by the strong current which in this country has set in (and the impulse is extending itself to other countries) towards the improvement of agricultural science, and its increased application to practice.

What we have said of duties on importation generally, is equally applicable to discriminating duties which favour importation from one place or in one particular manner, in contradistinction to others: such as the preference given to the produce of a colony, or of a country with which there is a commercial treaty: or the higher duties formerly imposed by our navigation laws on goods imported in other than British shipping. Whatever else may be alleged in favour of such distinctions, whenever they are not nugatory, they are economically wasteful. They induce a resort to a more costly mode of obtaining a commodity, in lieu of one less costly, and thus cause a portion of the labour which the country employs in providing itself with foreign commodities, to be sacrificed without return.

§ 6. There is one more point relating to the operation of taxes on commodities conveyed from one country to another, which requires notice: the influence which they exert on international exchanges. Every tax on a commodity tends to raise its price, and consequently to lessen the demand for it in the market in which it is sold. All taxes on international trade tend, therefore, to produce a disturbance and a readjustment of what we have termed the Equation of International Demand. This consideration leads to some rather curious consequences, which have been pointed out in the separate essay on International Commerce, already several times referred to in this treatise.

Taxes on foreign trade are of two kinds—taxes on imports, and on exports. On the first aspect of the matter it would seem that both these taxes are paid by the consumers of the commodity; that taxes on exports consequently fall entirely on foreigners, taxes on imports wholly on the home consumer. The true state of the case, however, is much more complicated.

“By taxing exports, we may, in certain circumstances, produce a division of the advantage of the trade more favourable to ourselves. In some cases we may draw into our coffers, at the expense of foreigners, not only the whole tax, but more than the tax: in other cases, we should gain exactly the tax; in others, less than the tax. In this last case, a part of the tax is borne by ourselves: possibly the whole, possibly even, as we shall show, more than the whole.”

Reverting to the supposititious case employed in the Essay, of a trade between Germany and England in broadcloth and linen, “suppose that England taxes her export of cloth, the tax not being supposed high enough to induce Germany to produce cloth for herself. The price at which cloth can be sold in Germany is augmented by the tax. This will probably diminish the quantity consumed. It may diminish it so much that, even at the increased price, there will not be required so great a money value as before. Or it may not diminish it at all, or so little, that in consequence of the higher price, so great a money value will be purchased than before. In this last case, England will gain, at the expense of Germany, not only the whole amount of the duty, but more; for, the money value of her exports to Germany being increased, while her imports remain the same, money will flow into England from Germany. The price of cloth will rise in England, and consequently in Germany; but the price of linen will fall in Germany, and consequently in England. We shall export less cloth, and import more linen, till the equilibrium is restored. It thus appears (what is at first sight somewhat remarkable) that by taxing her exports, England would, in some conceivable circumstances, not only gain from her foreign customers the whole amount of the tax, but would also get her imports cheaper. She would get them cheaper in two ways; for she would obtain them for less money, and would have more money to purchase them with. Germany, on the other hand, would suffer doubly: she would have to pay for her cloth a price increased not only by the duty, but by the influx of money into England, while the same change in the distribution of the circulating medium would leave her less money to purchase it with.

“This, however, is only one of three possible cases. If, after the imposition of the duty, Germany requires so diminished a quantity of cloth, that its total value is exactly the same as before, the balance of trade would be undisturbed; England will gain the duty, Germany will lose it, and nothing more. If, again, the imposition of the duty occasions such a falling off in the demand that Germany requires a less pecuniary value than before, our exports will no longer pay for our imports; money must pass from England into Germany; and Germany's share of the advantage of the trade will be increased. By the change in the distribution of money, cloth will fall in England; and therefore it will, of course, fall in Germany. Thus Germany will not pay the whole of the tax. From the same cause, linen will rise in Germany, and consequently in England. When this alteration of prices has so adjusted the demand, that the cloth and the linen again pay for one another, the result is that Germany has paid only a part of the tax, and the remainder of what has been received into our treasury has come indirectly out of the pockets of our own consumers of linen, who pay a higher price for that imported commodity in consequence of the tax on our exports, while at the same time they, in consequence of the efflux of money and the fall of prices, have smaller money incomes wherewith to pay for the linen at that advanced price.

“It is not an impossible supposition that by taxing our exports we might not only gain nothing from the foreigner, the tax being paid out of our own pockets, but might even compel our own people to pay a second tax to the foreigner. Suppose, as before, that the demand of Germany for cloth falls off so much on the imposition of the duty, that she requires a smaller money value than before, but that the case is so different with linen in England, that when the price rises the demand either does not fall off at all, or so little that the money value required is greater than before. The first effect of laying on the duty is, as before, that the cloth exported will no longer pay for the linen imported. Money will therefore flow out of England into Germany. One effect is to raise the price of linen in Germany, and consequently in England. But this, by the supposition, instead of stopping the efflux of money, only makes it greater, because the higher the price, the greater the money value of the linen consumed. The balance, therefore, can only be restored by the other effect, which is going on at the same time, namely, the fall of cloth in the English and consequently in the German market. Even when cloth has fallen so low that its price with the duty is only equal to what its price without the duty was at first, it is not a necessary consequence that the fall will stop; for the same amount of exportation as before will not now suffice to pay the increased money value of the imports; and although the German consumers have now not only cloth at the old price, but likewise increased money incomes, it is not certain that they will be inclined to employ the increase of their incomes in increasing their purchases of cloth. The price of cloth, therefore, must perhaps fall, to restore the equilibrium, more than the whole amount of the duty; Germany may be enabled to import cloth at a lower price when it is taxed, than when it was untaxed: and this gain she will acquire at the expense of the English consumers of linen, who, in addition, will be the real payers of the whole of what is received at their own custom-house under the name of duties on the export of cloth.”

It is almost unnecessary to remark that cloth and linen are here merely representatives of exports and imports in general; and that the effect which a tax on exports might have in increasing the cost of imports, would affect the imports from all countries, and not peculiarly the articles which might be imported from the particular country to which the taxed exports were sent.

“Such are the extremely various effects which may result to ourselves and to our customers from the imposition of taxes on our exports; and the determining circumstances are of a nature so imperfectly ascertainable, that it must be almost impossible to decide with any certainty, even after the tax has been imposed, whether we have been gainers by it or losers.” In general, however, there could be little doubt that a country which imposed such taxes would succeed in making foreign countries contribute something to its revenue; but unless the taxed article be one for which their demand is extremely urgent, they will seldom pay the whole of the amount which the tax brings in.∗ “In any case, whatever we gain is lost by somebody else, and there is the expense of the collection besides: if international morality, therefore, were rightly understood and acted upon, such taxes, as being contrary to the universal weal, would not exist.”

Thus far of duties on exports. We now proceed to the more ordinary case of duties on imports. “We have had an example of a tax on exports, that is, on foreigners, falling in part on ourselves. We shall therefore not be surprised if we find a tax on imports, that is, on ourselves, partly falling upon foreigners.

“Instead of taxing the cloth which we export, suppose that we tax the linen which we import. The duty which we are now supposing must not be what is termed a protecting duty, that is, a duty sufficiently high to induce us to produce the article at home. If it had this effect, it would destroy entirely the trade both in cloth and in linen, and both countries would lose the whole of the advantage which they previously gained by exchanging those commodities with one another. We suppose a duty which might diminish the consumption of the article, but which would not prevent us from continuing to import, as before, whatever linen we did consume.

“The equilibrium of trade would be disturbed if the imposition of the tax diminished, in the slightest degree, the quantity of linen consumed. For, as the tax is levied at our own custom-house, the German exporter only receives the same price as formerly, though the English consumer pays a higher one. If, therefore, there be any diminution of the quantity bought, although a larger sum of money may be actually laid out in the article, a smaller one will be due from England to Germany: this sum will no longer be an equivalent for the sum due from Germany to England for cloth, the balance therefore must be paid in money. Prices will fall in Germany and rise in England; linen will fall in the German market; cloth will rise in the English. The Germans will pay a higher price for cloth, and will have smaller money incomes to buy it with; while the English will obtain linen cheaper, that is, its price will exceed what it previously was by less than the amount of the duty, while their means of purchasing it will be increased by the increase of their money incomes.

“If the imposition of the tax does not diminish the demand, it will leave the trade exactly as it was before. We shall import as much, and export as much; the whole of the tax will be paid out of our own pockets.

“But the imposition of a tax on a commodity almost always diminishes the demand more or less; and it can never, or scarcely ever, increase the demand. It may, therefore, be laid down as a principle, that a tax on imported commodities, when it really operates as a tax, and not as a prohibition either total or partial, almost always falls in part upon the foreigners who consume our goods; and that this is a mode in which a nation may appropriate to itself, at the expense of foreigners, a larger share than would otherwise belong to it of the increase in the general productiveness of the labour and capital of the world, which results from the interchange of commodities among nations.”

Those are, therefore, in the right who maintain that taxes on imports are partly paid by foreigners; but they are mistaken when they say, that it is by the foreign producer. It is not on the person from whom we buy, but on all those who buy from us, that a portion of our custom-duties spontaneously falls. It is the foreign consumer of our exported commodities, who is obliged to pay a higher price for them because we maintain revenue duties on foreign goods.

There are but two cases in which duties on commodities can in any degree, or in any manner, fall on the producer. One is, when the article is a strict monopoly, and at a scarcity price. The price in this case being only limited by the desires of the buyer; the sum obtained from the restricted supply being the utmost which the buyers would consent to give rather than go without it; if the treasury intercepts a part of this, the price cannot be further raised to compensate for the tax, and it must be paid from the monopoly profits. A tax on rare and high-priced wines will fall wholly on the growers, or rather, on the owners of the vineyards. The second case in which the producer sometimes bears a portion of the tax, is more important: the case of duties on the produce of land or of mines. These might be so high as to diminish materially the demand for the produce, and compel the abandonment of some of the inferior qualities of land or mines. Supposing this to be the effect, the consumers, both in the country itself and in those which dealt with it, would obtain the produce at smaller cost; and a part only, instead of the whole, of the duty would fall on the purchaser, who would be indemnified chiefly at the expense of the landowners or mine-owners in the producing country.

Duties on importation may, then, be divided “into two classes: those which have the effect of encouraging some particular branch of domestic industry, and those which have not. The former are purely mischievous, both to the country imposing them, and to those with whom it trades. They prevent a saving of labour and capital, which, if permitted to be made, would be divided in some proportion or other between the importing country and the countries which buy what that country does or might export.

“The other class of duties are those which do not encourage one mode of procuring an article at the expense of another, but allow interchange to take place just as if the duty did not exist, and to produce the saving of labour which constitutes the motive to international, as to all other commerce. Of this kind are duties on the importation of any commodity which could not by any possibility be produced at home; and duties not sufficiently high to counterbalance the difference of expense between the production of the article at home and its importation. Of the money which is brought into the treasury of any country by taxes of this last description, a part only is paid by the people of that country; the remainder by the foreign consumers of their goods.

“Nevertheless, this latter kind of taxes are in principle as ineligible as the former, though not precisely on the same ground. A protecting duty can never be a cause of gain, but always and necessarily of loss, to the country imposing it, just so far as it is efficacious to its end. A non-protecting duty, on the contrary, would in most cases be a source of gain to the country imposing it, in so far as throwing part of the weight of its taxes upon other people is a gain; but it would be a means which it could seldom be advisable to adopt, being so easily counteracted by a precisely similar proceeding on the other side.

“If England, in the case already supposed, sought to obtain for herself more than her natural share of the advantage of the trade with Germany, by imposing a duty upon linen, Germany would only have to impose a duty upon cloth, sufficient to diminish the demand for that article about as much as the demand for linen had been diminished in England by the tax. Things would then be as before, and each country would pay its own tax. Unless, indeed, the sum of the two duties exceeded the entire advantage of the trade; for in that case the trade, and its advantage, would cease entirely.

“There would be no advantage, therefore, in imposing duties of this kind, with a view to gain by them in the manner which has been pointed out. But when any part of the revenue is derived from taxes on commodities, these may often be as little objectionable as the rest. It is evident, too, that considerations of reciprocity, which are quite unessential when the matter in debate is a protecting duty, are of material importance when the repeal of duties of this other description is discussed. A country cannot be expected to renounce the power of taxing foreigners, unless foreigners will in return practise towards itself the same forbearance. The only mode in which a country can save itself from being a loser by the revenue duties imposed by other countries on its commodities, is to impose corresponding revenue duties on theirs. Only it must take care that those duties be not so high as to exceed all that remains of the advantage of the trade, and put an end to importation altogether, causing the article to be either produced at home, or imported from another and a dearer market.”

Book V, Chapter V: Of some other taxes

CHAPTER V: of some other taxes

§ 1. Besides direct taxes on income, and taxes on consumption, the financial systems of most countries comprise a variety of miscellaneous imposts, not strictly included in either class. The modern European systems retain many such taxes, though in much less number and variety than those semi-barbarous governments which European influence has not yet reached. In some of these, scarcely any incident of life has escaped being made an excuse for some fiscal exaction; hardly any act, not belonging to daily routine, can be performed by any one, without obtaining leave from some agent of government, which is only granted in consideration of a payment: especially when the act requires the aid or the peculiar guarantee of a public authority. In the present treatise we may confine our attention to such taxes as lately existed, or still exist, in countries usually classed as civilized.

In almost all nations a considerable revenue is drawn from taxes on contracts. These are imposed in various forms. One expedient is that of taxing the legal instrument which serves as evidence of the contract, and which is commonly the only evidence legally admissible. In England, scarcely any contract is binding unless executed on stamped paper, which has paid a tax to government; and until very lately, when the contract related to property the tax was proportionally much heavier on the smaller than on the larger transactions; which is still true of some of those taxes.1 There are also stamp-duties on the legal instruments which are evidence of the fulfilment of contracts; such as acknowledgments of receipt, and deeds of release. Taxes on contracts are not always levied by means of stamps. The duty on sales by auction, abrogated by Sir Robert Peel, was an instance in point. The taxes on transfers of landed property, in France, are another: in England there are stamp-duties. In some countries, contracts of many kinds are not valid unless registered, and their registration is made an occasion for a tax.

Of taxes on contracts, the most important are those on the transfer of property; chiefly on purchases and sales. Taxes on the sale of consumable commodities are simply taxes on those commodities. If they affect only some particular commodities, they raise the prices of those commodities, and are paid by the consumer. If the attempt were made to tax all purchases and sales, which, however absurd, was for centuries the law of Spain, the tax, if it could be enforced, would be equivalent to a tax on all commodities, and would not affect prices: if levied from the sellers, it would be a tax on profits, if from the buyers, a tax on consumption; and neither class could throw the burthen upon the other. If confined to some one mode of sale, as for example by auction, it discourages recourse to that mode, and if of any material amount, prevents it from being adopted at all, unless in a case of emergency; in which case as the seller is under a necessity to sell, but the buyer under no necessity to buy, the tax falls on the seller; and this was the strongest of the objections to the auction duty: it almost always fell on a necessitous person, and in the crisis of his necessities.

Taxes on the purchase and sale of land are, in most countries, liable to the same objection. Landed property in old countries is seldom parted with, except from reduced circumstances, or some urgent need: the seller, therefore, must take what he can get, while the buyer, whose object is an investment, makes his calculations on the interest which he can obtain for his money in other ways, and will not buy if he is charged with a government tax on the transaction.∗ It has indeed been objected, that this argument would not apply if all modes of permanent investment, such as the purchase of government securities, shares in joint-stock companies, mortgages, and the like, were subject to the same tax. But even then, if paid by the buyer, it would be equivalent to a tax on interest: if sufficiently heavy to be of any importance, it would disturb the established relation between interest and profit; and the disturbance would redress itself by a rise in the rate of interest, and a fall of the price of land and of all securities. It appears to me, therefore, that the seller is the person by whom such taxes, unless under peculiar circumstances, will generally be borne.

All taxes must be condemned which throw obstacles in the way of the sale of land, or other instruments of production. Such sales tend naturally to render the property more productive. The seller, whether moved by necessity or choice, is probably some one who is either without the means, or without the capacity, to make the most advantageous use of the property for productive purposes; while the buyer, on the other hand, is at any rate not needy, and is frequently both inclined and able to improve the property, since, as it is worth more to such a person than to any other, he is likely to offer the highest price for it. All taxes, therefore, and all difficulties and expenses, annexed to such contracts, are decidedly detrimental; especially in the case of land, the source of subsistence, and the original foundation of all wealth, on the improvement of which, therefore, so much depends. Too great facilities cannot be given to enable land to pass into the hands, and assume the modes of aggregation or division, most conducive to its productiveness. If landed properties are too large, alienation should be free, in order that they may be subdivided; if too small, in order that they may be united. All taxes on the transfer of landed property should be abolished; but, as the landlords have no claim to be relieved from any reservation which the state has hitherto made in its own favour from the amount of their rent, an annual impost equivalent to the average produce of these taxes should be distributed over the land generally, in the form of a land-tax.1

Some of the taxes on contracts are very pernicious, imposing a virtual penalty upon transactions which it ought to be the policy of the legislator to encourage. Of this sort is the stamp-duty on leases, which in a country of large properties are an essential condition of good agriculture; and the taxes on insurances, a direct discouragement to prudence and forethought.2

§ 2. Nearly allied to the taxes on contracts are those on communication. The principal of these is the postage tax; to which may be added taxes on advertisements, and on newspapers, which are taxes on the communication of information.

The common mode of levying a tax on the conveyance of letters, is by making the government the sole authorized carrier of them, and demanding a monopoly price. When this price is so moderate as it is in this country under the uniform penny postage, scarcely if at all exceeding what would be charged under the freest competition by any private company, it can hardly be considered as taxation, but rather as the profits of a business; whatever excess there is above the ordinary profits of stock being a fair result of the saving of expense, caused by having only one establishment and one set of arrangements for the whole country, instead of many competing ones. The business, too, being one which both can and ought to be conducted on fixed rules, is one of the few businesses which it is not unsuitable to a government to conduct. The post office, therefore, is at present one of the best of the sources from which this country derives its revenue. But a postage much exceeding what would be paid for the same service in a system of freedom, is not a desirable tax. Its chief weight falls on letters of business, and increases the expense of mercantile relations between distant places. It is like an attempt to raise a large revenue by heavy tolls: it obstructs all operations by which goods are conveyed from place to place, and discourages the production of commodities in one place for consumption in another; which is not only in itself one of the greatest sources of economy of labour, but is a necessary condition of almost all improvements in production, and one of the strongest stimulants to industry, and promoters of civilization.

The tax on advertisements was not1 free from the same objection, since in whatever degree advertisements are useful to business, by facilitating the coming together of the dealer or producer and the consumer, in that same degree, if the tax be high enough to be a serious discouragement to advertising, it prolongs the period during which goods remain unsold, and capital locked up in idleness.2

A tax on newspapers is objectionable, not so much where it does fall as where is does not, that is, where it prevents newspapers from being used. To the generality of those who buy them, newspapers are a luxury which they can as well afford to pay for as any other indulgence, and which is as unexceptionable a source of revenue. But to that large part of the community who have been taught to read, but have received little other intellectual education, newspapers are the source of nearly all the general information which they possess, and of nearly all their acquaintance with the ideas and topics current among mankind; and an interest is more easily excited in newspapers, than in books or other more recondite sources of instruction. Newspapers contribute so little, in a direct way, to the origination of useful ideas, that many persons undervalue the importance of their office in disseminating them. They correct many prejudices and superstitions, and keep up a habit of discussion, and interest in public concerns, the absence of which is a great cause of stagnation of mind usually found in the lower and middle, if not in all, ranks, of those countries where newspapers of an important or interesting character do not exist. There ought to be no taxes (as in this country there now are not)1 which render this great diffuser of information, of mental excitement, and mental exercise, less accessible to that portion of the public which most needs to be carried into a region of ideas and interests beyond its own limited horizon.

§ 3. In the enumeration of bad taxes, a conspicuous place must be assigned to law taxes; which extract a revenue for the state from the various operations involved in an application to the tribunals. Like all needless expenses attached to law proceedings, they are a tax on redress, and therefore a premium on injury. Although such taxes have been abolished in this country as a general source of revenue, they still exist in the form of fees of court, for defraying the expense of the courts of justice; under the idea, apparently, that those may fairly be required to bear the expenses of the administration of justice, who reap the benefit of it. The fallacy of this doctrine was powerfully exposed by Bentham. As he remarked, those who are under the necessity of going to law, are those who benefit least, not most, by the law and its administration. To them the protection which the law affords has not been complete, since they have been obliged to resort to a court of justice to ascertain their rights, or maintain those rights against infringement: while the remainder of the public have enjoyed the immunity from injury conferred by the law and the tribunals, without the inconvenience of an appeal to them.

§ 4. Besides the general taxes of the State, there are in all or most countries local taxes, to defray any expenses of a public nature which it is thought best to place under the control or management of a local authority. Some of these expenses are incurred for purposes in which the particular locality is solely or chiefly interested; as the paving, cleansing, and lighting of the streets; or the making and repairing of roads and bridges, which may be important to people from any part of the country, but only in so far as they, or goods in which they have an interest, pass along the roads or over the bridges. In other cases again, the expenses are of a kind as nationally important as any others, but are defrayed locally because supposed more likely to be well administered by local bodies; as, in England, the relief of the poor, and the support of gaols, and in some other countries, of schools. To decide for what public objects local superintendence is best suited, and what are those which should be kept immediately under the central government, or under a mixed system of local management and central superintendence, is a question not of political economy, but of administration. It is an important principle, however, that taxes imposed by a local authority, being less amenable to publicity and discussion than the acts of the government, should always be special—laid on for some definite service, and not exceeding the expense actually incurred in rendering the service. Thus limited, it is desirable, whenever practicable, that the burthen should fall on those to whom the service is rendered; that the expense, for instance, of roads and bridges, should be defrayed by a toll on passengers and goods conveyed by them, thus dividing the cost between those who use them for pleasure or convenience, and the consumers of the goods which they enable to be brought to and from the market at a diminished expense. When, however, the tolls have repaid with interest the whole of the expenditure, the road or bridge should be thrown open free of toll, that it may be used also by those to whom, unless open gratuitously, it would be valueless; provision being made for repairs either from the funds of the state, or by a rate levied on the localities which reap the principal benefit.

In England, almost all local taxes are direct, (the coal duty of the City of London, and a few similar imposts, being the chief exceptions), though the greatest part of the taxation for general purposes is indirect. On the contrary, in France, Austria, and other countries where direct taxation is much more largely employed by the state, the local expenses of towns are principally defrayed by taxes levied on commodities when entering them. These indirect taxes are much more objectionable in towns than on the frontier, because the things which the country supplies to the towns are chiefly the necessaries of life and the materials of manufacture, while, of what a country imports from foreign countries, the greater part usually [1848] consists of luxuries. An octroi cannot produce a large revenue, without pressing severely upon the labouring classes of the towns; unless their wages rise proportionally, in which case the tax falls in a great measure on the consumers of town produce, whether residing in town or country, since capital will not remain in the towns if its profits fall below their ordinary proportion as compared with the rural districts.1

Book V, Chapter VI: Comparison between direct and indirect taxation

CHAPTER VI: comparison between direct and indirect taxation

§ 1. Are direct or indirect taxes the most eligible? This question, at all times interesting, has of late excited a considerable amount of discussion. In England there is a popular feeling, of old standing, in favour of indirect, or it should rather be said in opposition to direct, taxation. The feeling is not grounded on the merits of the case, and is of a puerile kind. An Englishman dislikes, not so much the payment, as the act of paying. He dislikes seeing the face of the tax-collector, and being subjected to his peremptory demand. Perhaps, too, the money which he is required to pay directly out of his pocket is the only taxation which he is quite sure that he pays at all. That a tax of one shilling per pound on tea, or of two shillings per bottle on wine, raises the price of each pound of tea and bottle of wine which he consumes, by that and more than that amount, cannot indeed be denied; it is the fact, and is intended to be so, and he himself, at times, is perfectly aware of it; but it makes hardly any impression on his practical feelings and associations, serving to illustrate the distinction between what is merely known to be true and what is felt to be so. The unpopularity of direct taxation, contrasted with the easy manner in which the public consent to let themselves be fleeced in the prices of commodities, has generated in many friends of improvement a directly opposite mode of thinking to the foregoing. They contend that the very reason which makes direct taxation disagreeable, makes it preferable. Under it, every one knows how much he really pays; and if he votes for a war, or any other expensive national luxury, he does so with his eyes open to what it costs him. If all taxes were direct, taxation would be much more perceived than at present; and there would be a security which now there is not, for economy in the public expenditure.

Although this argument is not without force, its weight is likely to be constantly diminishing. The real incidence of indirect taxation is every day more generally understood and more familiarly recognized: and whatever else may be said of the changes which are taking place in the tendencies of the human mind, it can scarcely, I think, be denied, that things are more and more estimated according to their calculated value, and less according to their non-essential accompaniments. The mere distinction between paying money directly to the tax-collector, and contributing the same sum through the intervention of the tea-dealer or the wine-merchant, no longer makes the whole difference between dislike or opposition and passive acquiescence. But further, while any such infirmity of the popular mind subsists, the argument grounded on it tells partly on the other side of the question. If our present revenue of about seventy [1862] millions were all raised by direct taxes, an extreme dissatisfaction would certainly arise at having to pay so much; but while men's minds are so little guided by reason, as such a change of feeling from so irrelevant a cause would imply, so great an aversion to taxation might not be an unqualified good. Of the seventy millions in question, nearly thirty are pledged, under the most binding obligations, to those whose property has been borrowed and spent by the state: and while this debt remains unredeemed, a greatly increased impatience of taxation would involve no little danger of a breach of faith, similar to that which, in the defaulting states of America, has been produced, and in some of them still continues, from the same cause. That part, indeed, of the public expenditure, which is devoted to the maintenance of civil and military establishments, (that is, all except the interest of the national debt) affords, in many of its details, ample scope for retrenchment.1 But while much of the revenue is wasted under the mere pretence of public service, so much of the most important business of government is left undone, that whatever can be rescued from useless expenditure is urgently required for useful. Whether the object be education; a more efficient and accessible administration of justice; reforms of any kind which, like the Slave Emancipation, require compensation to individual interests; or what is as important as any of these, the entertainment of a sufficient staff of able and educated public servants, to conduct in a better than the present awkward manner the business of legislation and administration; every one of these things implies considerable expense, and many of them have again and again been prevented by the reluctance which existed to apply to Parliament for an increased grant of public money, though (besides that the existing means would probably be sufficient if applied to the proper purposes) the cost would be repaid, often a hundredfold, in mere pecuniary advantage to the community generally. If so great an addition were made to the public dislike of taxation as might be the consequence of confining it to the direct form, the classes who profit by the misapplication of public money might probably succeed in saving that by which they profit, at the expense of that which would only be useful to the public.

There is, however, a frequent plea in support of indirect taxation, which must be altogether rejected, as grounded on a fallacy. We are often told that taxes on commodities are less burthensome than other taxes, because the contributor can escape from them by ceasing to use the taxed commodity. He certainly can, if that be his object, deprive the government of the money: but he does so by a sacrifice of his own indulgences, which (if he chose to undergo it) would equally make up to him for the same amount taken from him by direct taxation. Suppose a tax laid on wine, sufficient to add five pounds to the price of the quantity of wine which he consumes in a year. He has only (we are told) to diminish his consumption of wine by 5l., and he escapes the burthen. True: but if the 5l., instead of being laid on wine, had been taken from him by an income tax, he could, by expending 5l. less in wine, equally save the amount of the tax, so that the difference between the two cases is really illusory. If the government takes from the contributor five pounds a year, whether in one way or another, exactly that amount must be retrenched from his consumption to leave him as well off as before; and in either way the same amount of sacrifice, neither more nor less, is imposed on him.

On the other hand, it is some advantage on the side of indirect taxes, that what they exact from the contributor is taken at a time and in a manner likely to be convenient to him. It is paid at a time when he has at any rate a payment to make; it causes, therefore, no additional trouble, nor (unless the tax be on necessaries) any inconvenience but what is inseparable from the payment of the amount. He can also, except in the case of very perishable articles, select his own time for laying in a stock of the commodity, and consequently for payment of the tax. The producer or dealer who advances these taxes, is, indeed, sometimes subjected to inconvenience; but, in the case of imported goods, this inconvenience is reduced to a minimum by what is called the Warehousing System, under which, instead of paying the duty at the time of importation, he is only required to do so when he takes out the goods for consumption, which is seldom done until he has either actually found, or has the prospect of immediately finding, a purchaser.

1 The strongest objection, however, to raising the whole or the greater part of a large revenue by direct taxes, is the impossibility of assessing them fairly without a conscientious co-operation on the part of the contributors, not to be hoped for in the present low state of public morality. In the case of an income tax, we have already seen that unless it be found practicable to exempt savings altogether from the tax, the burthen cannot be apportioned with any tolerable approach to fairness upon those whose incomes are derived from business or professions; and this is in fact admitted by most of the advocates of direct taxation, who, I am afraid, generally get over the difficulty by leaving those classes untaxed, and confining their projected income tax to “realized property,” in which form it certainly has the merit of being a very easy form of plunder. But enough has been said in condemnation of this expedient. We have seen, however, that a house-tax is a form of direct taxation not liable to the same objections as an income tax, and indeed liable to as few objections of any kind as perhaps any of our indirect taxes. But it would be impossible to raise by a house tax alone, the greatest part of the revenue of Great Britain, without producing a very objectionable overcrowding of the population, through the strong motive which all persons would have to avoid the tax by restricting their house accommodation. Besides, even a house tax has inequalities, and consequent injustices; no tax is exempt from them, and it is neither just nor politic to make all the inequalities fall in the same places, by calling upon one tax to defray the whole or the chief part of the public expenditure. So much of the local taxation, in this country, being already in the form of a house tax, it is probable that ten millions a year would be fully as much as could beneficially be levied, through this medium, for general purposes.

A certain amount of revenue may, as we have seen, be obtained without injustice by a peculiar tax on rent. Besides the present land-tax, and an equivalent for the revenue now derived from stamp duties on the conveyance of land, some further taxation might, I have contended, at some future period be imposed, to enable the state to participate in the progressive increase of the incomes of landlords from natural causes. Legacies and inheritances, we have also seen, ought to be subjected to taxation sufficient to yield a considerable revenue. With these taxes, and a house tax of suitable amount; we should, I think, have reached the prudent limits of direct taxation, save in a national emergency so urgent as to justify the government in disregarding the amount of inequality and unfairness which may ultimately be found inseparable from an income tax.1 The remainder of the revenue would have to be provided by taxes on consumption, and the question is, which of these are the least objectionable.

§ 2. There are some forms of indirect taxation which must be peremptorily excluded. Taxes on commodities, for revenue purposes, must not operate as protecting duties, but must be levied impartially on every mode in which the articles can be obtained, whether produced in the country itself or imported. An exclusion must also be put upon all taxes on the necessaries of life, or on the materials or instruments employed in producing those necessaries. Such taxes are always liable to encroach on what should be left untaxed, the incomes barely sufficient for healthful existence; and on the most favourable supposition, namely, that wages rise to compensate the labourers for the tax, it operates as a peculiar tax on profits, which is at once unjust, and detrimental to national wealth.∗ What remain are taxes on luxuries. And these have some properties which strongly recommend them. In the first place, they can never, by any possibility, touch those whose whole income is expended on necessaries; while they do reach those by whom what is required for necessaries, is expended on indulgences. In the next place, they operate in some cases as an useful, and the only useful, kind of sumptuary law. I disclaim all asceticism, and by no means wish to see discouraged, either by law or opinion, any indulgence (consistent with the means and obligations of the person using it) which is sought from a genuine inclination for, and enjoyment of, the thing itself; but a great portion of the expenses of the higher and middle classes in most countries, and the greatest in this, is not incurred for the sake of the pleasure afforded by the things on which the money is spent, but from regard to opinion, and an idea that certain expenses are expected from them, as an appendage of station; and I cannot but think that expenditure of this sort is a most desirable subject of taxation. If taxation discourages it, some good is done, and if not, no harm; for in so far as taxes are levied on things which are desired and possessed from motives of this description, nobody is the worse for them. When a thing is bought not for its use but for its costliness, cheapness is no recommendation. As Sismondi remarks, the consequence of cheapening articles of vanity, is not that less is expended on such things, but that the buyers substitute for the cheapened article some other which is more costly, or a more elaborate quality of the same thing; and as the inferior quality answered the purpose of vanity equally well when it was equally expensive, a tax on the article is really paid by nobody: it is a creation of public revenue by which nobody loses.∗

§ 3. In order to reduce as much as possible the inconveniences, and increase the advantages, incident to taxes on commodities, the following are the practical rules which suggest themselves. 1st. To raise as large a revenue as conveniently may be, from those classes of luxuries which have most connexion with vanity, and least with positive enjoyment; such as the more costly qualities of all kinds of personal equipment and ornament. 2ndly. Whenever possible, to demand the tax, not from the producer, but directly from the consumer, since when levied on the producer it raises the price always by more, and often by much more, than the mere amount of the tax. Most of the minor assessed taxes in this country are recommended by both these considerations. But with regard to horses and carriages, as there are many persons to whom, from health or constitution, these are not so much luxuries as necessaries, the tax paid by those who have but one riding horse, or but one carriage, especially of the cheaper descriptions, should be low; while taxation should rise very rapidly with the number of horses and carriages, and with their costliness. 3rdly. But as the only indirect taxes which yield a large revenue are those which fall on articles of universal or very general consumption, and as it is therefore necessary to have some taxes on real luxuries, that is, on things which afford pleasure in themselves, and are valued on that account rather than for their cost; these taxes should, if possible, be so adjusted as to fall with the same proportional weight on small, on moderate, and on large incomes. This is not an easy matter; since the things which are the subjects of the more productive taxes, are in proportion more largely consumed by the poorer members of the community than by the rich. Tea, coffee, sugar, tobacco, fermented drinks, can hardly be so taxed that the poor shall not bear more than their due share of the burthen. Something might be done by making the duty on the superior qualities, which are used by the richer consumers, much higher in proportion to the value (instead of much lower, as is almost universally the practice, under the present [1848] English system); but in some cases the difficulty of at all adjusting the duty to the value, so as to prevent evasion, is said, with what truth I know not, to be insuperable; so that it is thought necessary to levy the same fixed duty on all the qualities alike: a flagrant injustice to the poorer class of contributors, unless compensated by the existence of other taxes from which, as from the present income tax, they are altogether exempt. 4thly. As far as is consistent with the preceding rules, taxation should rather be concentrated on a few articles than diffused over many, in order that the expenses of collection may be smaller, and that as few employments as possible may be burthensomely and vexatiously interfered with. 5thly. Among luxuries of general consumption, taxation should by preference attach itself to stimulants, because these, though in themselves as legitimate indulgences as any others, are more liable than most others to be used in excess, so that the check to consumption, naturally arising from taxation, is on the whole better applied to them than to other things. 6thly. As far as other considerations permit, taxation should be confined to imported articles, since these can be taxed with a less degree of vexatious interference, and with fewer incidental bad effects, than when a tax is levied on the field or on the workshop. Custom-duties are, caeteris paribus, much less objectionable than excise: but they must be laid only on things which either cannot, or at least will not, be produced in the country itself; or else their production there must be prohibited (as in England is the case with tobacco), or subjected to an excise duty of equivalent amount. 7thly. No tax ought to be kept so high as to furnish a motive to its evasion, too strong to be counteracted by ordinary means of prevention: and especially no commodity should be taxed so highly as to raise up a class of lawless characters, smugglers, illicit distillers, and the like.

Of the excise and custom duties lately existing in this country, all which are intrinsically unfit to form part of a good system of taxation, have, since the last reforms by Mr. Gladstone, been got rid of.1 Among these are all duties on ordinary articles of food,1 whether for human beings or for cattle; those on timber, as falling on the materials of lodging, which is one of the necessaries of life; all duties on the metals, and on implements made of them; taxes on soap, which is a necessary of cleanliness, and on tallow, the material both of that and of some other necessaries; the tax on paper, an indispensable instrument of almost all business and of most kinds of instruction. The duties which now yield nearly the whole of the customs and excise revenue, those on sugar, coffee, tea, wine, beer, spirits, and tobacco, are in themselves where a large amount of revenue is necessary, extremely proper taxes; but at present grossly unjust, from the disproportionate weight with which they press on the poorer classes; and some of them (those on spirits and tobacco) are so high as to cause a considerable2 amount of smuggling. It is probable that most of these taxes might bear a great reduction without any material loss of revenue. In what manner the finer articles of manufacture, consumed by the rich, might most advantageously be taxed, I must leave to be decided by those who have the requisite practical knowledge. The difficulty would be, to effect it without an inadmissible degree of interference with production. In countries which, like the United States, import the principal part of the finer manufactures which they consume, there is little difficulty in the matter: and even where nothing is imported but the raw material, that may be taxed, especially the qualities of it which are exclusively employed for the fabrics used by the richer class of consumers. Thus, in England a high custom-duty on raw silk would be consistent with principle; and it might perhaps be practicable to tax the finer qualities of cotton or linen yarn, whether spun in the country itself or imported.

Book V, Chapter VII: Of a National debt

CHAPTER VII: of a National debt

§ 1. The question must now be considered, how far it is right or expedient to raise money for the purpose of government, not by laying on taxes to the amount required, but by taking a portion of the capital of the country in the form of a loan, and charging the public revenue with only the interest. Nothing needs be said about providing for temporary wants by taking up money; for instance, by an issue of exchequer bills, destined to be paid off, at furthest in a year or two, from the proceeds of the existing taxes. This is a convenient expedient, and when the government does not possess a treasure or hoard, is often a necessary one, on the occurrence of extraordinary expenses, or of a temporary failure in the ordinary sources of revenue. What we have to discuss is the propriety of contracting a national debt of a permanent character; defraying the expenses of a war, or of any season of difficulty, by loans, to be redeemed either very gradually and at a distant period, or not at all.

This question has already been touched upon in the First Book.∗ We remarked, that if the capital taken in loans is abstracted from funds either engaged in production, or destined to be employed in it, their diversion from that purpose is equivalent to taking the amount from the wages of the labouring classes. Borrowing, in this case, is not a substitute for raising the supplies within the year. A government which borrows does actually take the amount within the year, and that too by a tax exclusively on the labouring classes: than which it could have done nothing worse, if it had supplied its wants by avowed taxation; and in that case the transaction, and its evils, would have ended with the emergency; while by the circuitous mode adopted, the value extracted from the labourers is gained, not by the state, but by the employers of labour, the state remaining charged with the debt besides, and with its interest in perpetuity. The system of public loans, in such circumstances, may be pronounced the very worst which, in the present state of civilization, is still included in the catalogue of financial expedients.

We however remarked that there are other circumstances in which loans are not chargeable with these pernicious consequences: namely, first, when what is borrowed is foreign capital, the overflowings of the general accumulation of the world; or, secondly, when it is capital which either would not have been saved at all unless this mode of investment had been open to it, or, after being saved, would have been wasted in unproductive enterprises, or sent to seek employment in foreign countries. When the progress of accumulation has reduced profits either to the ultimate or to the practical minimum,—to the rate less than which would either put a stop to the increase of capital, or send the whole of the new accumulations abroad; government may annually intercept these new accumulations, without trenching on the employment or wages of the labouring classes in the country itself, or perhaps in any other country. To this extent, therefore, the loan system may be carried, without being liable to the utter and peremptory condemnation which is due to it when it overpasses this limit. What is wanted is an index to determine whether, in any given series of years, as during the last great war for example [i.e. 1793–1815], the limit has been exceeded or not.

Such an index exists, at once a certain and an obvious one. Did the government, by its loan operations, augment the rate of interest? If it only opened a channel for capital which would not otherwise have been accumulated, or which, if accumulated, would not have been employed within the country; this implies that the capital, which the government took and expended, could not have found employment at the existing rate of interest. So long as the loans do no more than absorb this surplus, they prevent any tendency to a fall of the rate of interest, but they cannot occasion any rise. When they do raise the rate of interest, as they did in a most extraordinary degree during the French war, this is positive proof that the government is a competitor for capital with the ordinary channels of productive investment, and is carrying off, not merely funds which would not, but funds which would, have found productive employment within the country. To the full extent, therefore, to which the loans of government, during the war, caused the rate of interest to exceed what it was before, and what it has been since, those loans are chargeable with all the evils which have been described. If it be objected that interest only rose because profits rose, I reply that this does not weaken, but strengthens, the argument. If the government loans produced the rise of profits by the great amount of capital which they absorbed, by what means can they have had this effect, unless by lowering the wages of labour? It will perhaps be said, that what kept profits high during the war was not the drafts made on the national capital by the loans, but the rapid progress of industrial improvements. This, in a great measure, was the fact; and it no doubt alleviated the hardship to the labouring classes, and made the financial system which was pursued less actively mischievous, but not less contrary to principle. These very improvements in industry, made room for a larger amount of capital; and the government, by draining away a great part of the annual accumulations, did not indeed prevent that capital from existing ultimately (for it started into existence with great rapidity after the peace), but prevented it from existing at the time, and subtracted just so much, while the war lasted, from distribution among productive labourers. If the government had abstained from taking this capital by loan, and had allowed it to reach the labourers, but had raised the supplies which it required by a direct tax on the labouring classes, it would have produced (in every respect but the expense and inconvenience of collecting the tax) the very same economical effects which it did produce, except that we should not now have had the debt. The course it actually took was therefore worse than the very worst mode which it could possibly have adopted of raising the supplies within the year; 1 and the only excuse, or justification, which it admits of, (so far as that excuse could be truly pleaded), was hard necessity; the impossibility of raising so enormous an annual sum by taxation, without resorting to taxes which from their odiousness, or from the facility of evasion, it would have been found impracticable to enforce.

When government loans are limited to the overflowings of the national capital, or to those accumulations which would not take place at all unless suffered to overflow, they are at least not liable to this grave condemnation: they occasion no privation to any one at the time, except by the payment of the interest, and may even be beneficial to the labouring class during the term of their expenditure, by employing in the direct purchase of labour, as that of soldiers, sailors, &c., funds which might otherwise have quitted the country altogether. In this case therefore the question really is, what it is commonly supposed to be in all cases, namely, a choice between a great sacrifice at once, and a small one indefinitely prolonged. On this matter it seems rational to think, that the prudence of a nation will dictate the same conduct as the prudence of an individual; to submit to as much of the privation immediately, as can easily be borne, and only when any further burthen would distress or cripple them too much, to provide for the remainder by mortgaging their future income. It is an excellent maxim to make present resources suffice for present wants; the future will have its own wants to provide for. On the other hand, it may reasonably be taken into consideration that in a country increasing in wealth, the necessary expenses of government do not increase in the same ratio as capital or population; any burthen, therefore, is always less and less felt: and since those extraordinary expenses of government which are fit to be incurred at all, are most beneficial beyond the existing generation, there is no injustice in making posterity pay a part of the price, if the inconvenience would be extreme of defraying the whole of it by the exertions and sacrifices of the generation which first incurred it.

§ 2. When a country, wisely or unwisely, has burthened itself with a debt, is it expedient to take steps for redeeming that debt? In principle it is impossible not to maintain the affirmative. It is true that the payment of the interest, when the creditors are members of the same community, is no national loss, but a mere transfer. The transfer, however, being compulsory, is a serious evil, and the raising a great extra revenue by any system of taxation necessitates so much expense, vexation, disturbance of the channels of industry, and other mischiefs over and above the mere payment of the money wanted by the government, that to get rid of the necessity of such taxation is at all times worth a considerable effort. The same amount of sacrifice which would have been worth incurring to avoid contracting the debt, it is worth while to incur, at any subsequent time, for the purpose of extinguishing it.

Two modes have been contemplated of paying off a national debt: either at once by a general contribution, or gradually by a surplus revenue. The first would be incomparably the best, if it were practicable; and it would be practicable if it could justly be done by assessment on property alone. If property bore the whole interest of the debt, property might, with great advantage to itself, pay it off; since this would be merely surrendering to a creditor the principal sum, the whole annual proceeds of which were already his by law; and would be equivalent to what a landowner does when he sells part of his estate to free the remainder from a mortgage. But property, it needs hardly be said, does not pay, and cannot just be required to pay, the whole interest of the debt. Some indeed affirm that it can, on the plea that the existing generation is only bound to pay the debts of its predecessors from the assets it has received from them, and not from the produce of its own industry. But has no one received anything from previous generations except those who have succeeded to property? Is the whole difference between the earth as it is, with its clearings and improvements, its roads and canals, its towns and manufactories, and the earth as it was when the first human being set foot on it, of no benefit to any but those who are called the owners of the soil? Is the capital accumulated by the labour and abstinence of all former generations, of no advantage to any but those who have succeeded to the legal ownership of part of it? And have we not inherited a mass of acquired knowledge, both scientific and empirical, due to the sagacity and industry of those who preceded us, the benefits of which are the common wealth of all? Those who are born to the ownership of property have, in addition to these common benefits, a separate inheritance, and to this difference it is right that advertence should be had in regulating taxation. It belongs to the general financial system of the country to take due account of this principle, and I have indicated, as in my opinion a proper mode of taking account of it, a considerable tax on legacies and inheritances. Let it be determined directly and openly what is due from property to the state, and from the state to property, and let the institutions of the state be regulated accordingly. Whatever is the fitting contribution from property to the general expenses of the state, in the same and in no greater proportion should it contribute towards either the interest or the repayment of the national debt.

This, however, if admitted, is fatal to any scheme for the extinction of the debt by a general assessment on the community. Persons of property could pay their share of the amount by a sacrifice of property, and have the same net income as before; but if those who have no accumulations, but only incomes, were required to make up by a single payment the equivalent of the annual charge laid on them by the taxes maintained to pay the interest of the debt, they could only do so by incurring a private debt equal to their share of the public debt; while, from the insufficiency, in most cases, of the security which they could give, the interest would amount to a much larger annual sum than their share of that now paid by the state. Besides, a collective debt defrayed by taxes, has over the same debt parcelled out among individuals, the immense advantage, that it is virtually a mutual insurance among the contributors. If the fortune of a contributor diminishes, his taxes diminish; if he is ruined, they cease altogether, and his portion of the debt is wholly transferred to the solvent members of the community. If it were laid on him as a private obligation, he would still be liable to it even when penniless.

When the state possesses property, in land or otherwise, which there are not strong reasons of public utility for its retaining at its disposal, this should be employed, as far as it will go, in extinguishing debt. Any casual gain, or godsend, is naturally devoted to the same purpose. Beyond this, the only mode which is both just and feasible, of extinguishing or reducing a national debt, is by means of a surplus revenue.

§ 3. The desirableness, per se, of maintaining a surplus for this purpose, does not, I think, admit of a doubt. We sometimes, indeed, hear it said that the amount should rather be left to “fructify in the pockets of the people.” This is a good argument, as far as it goes, against levying taxes unnecessarily for purposes of unproductive expenditure, but not against paying off a national debt. For, what is meant by the word fructify? If it means anything, it means productive employment; and as an argument against taxation, we must understand it to assert, that if the amount were left with the people they would save it, and convert it into capital. It is probable, indeed, that they would save a part, but extremely improbable that they would save the whole: while if taken by taxation, and employed in paying off debt, the whole is saved, and made productive. To the fundholder who receives the payment it is already capital, not revenue, and he will make it “fructify,” that it may continue to afford him an income. The objection, therefore, is not only groundless, but the real argument is on the other side: the amount is much more certain of fructifying if it is not “left in the pockets of the people.”

It is not, however, advisable in all cases to maintain a surplus revenue for the extinction of debt. The advantage of paying off the national debt of Great Britain, for instance, is that it would enable us to get rid of the worse half of our taxation. But of this worse half some portions must be worse than others, and to get rid of those would be a greater benefit proportionally than to get rid of the rest. If renouncing a surplus revenue would enable us to dispense with a tax, we ought to consider the very worst of all our taxes as precisely the one which we are keeping up for the sake of ultimately abolishing taxes not so bad as itself. In a country advancing in wealth, whose increasing revenue gives it the power of ridding itself from time to time of the most inconvenient portions of its taxation, I conceive that the increase of revenue should rather be disposed of by taking off taxes, than by liquidating debt, as long as any very objectionable imposts remain. In the present state of England [1848], therefore, I hold it to be good policy in the government, when it has a surplus of an apparently permanent character, to take off taxes, provided these are rightly selected. Even when no taxes remain but such as are not unfit to form part of a permanent system, it is wise to continue the same policy by experimental reductions of those taxes, until the point is discovered at which a given amount of revenue can be raised with the smallest pressure on the contributors. After this, such surplus revenue as might arise from any further increase of the produce of the taxes, should not, I conceive, be remitted, but applied to the redemption of debt. Eventually, it might be expedient to appropriate the entire produce of particular taxes to this purpose; since there would be more assurance that the liquidation would be persisted in, if the fund destined to it were kept apart, and not blended with the general revenues of state. The succession duties would be peculiarly suited to such a purpose, since taxes paid, as they are, out of capital would be better employed in reimbursing capital than in defraying current expenditure. If this separate appropriation were made, any surplus afterwards arising from the increasing produce of the other taxes, and from the saving of interest on the successive portions of debt paid off, might form a ground for a remission of taxation.

It has been contended that some amount of national debt is desirable, and almost indispensable, as an investment for the savings of the poorer or more inexperienced part of the community. Its convenience in that respect is undeniable; but (besides that the progress of industry is gradually affording other modes of investment almost as safe and untroublesome, such as the shares or obligations of great public companies) the only real superiority of an investment in the funds consists in the national guarantee, and this could be afforded by other means than that of a public debt involving compulsory taxation. One mode which would answer the purpose would be a national bank of deposit and discount, with ramifications throughout the country; which might receive any money confided to it, and either fund it at a fixed rate of interest, or allow interest on a floating balance, like the joint stock banks; the interest given being of course lower than the rate at which individuals can borrow, in proportion and to the greater security of a government investment; and the expenses of the establishment being defrayed by the difference between the interest which the bank would pay, and that which it would obtain, by lending its deposits on mercantile, landed, or other security. There are no insuperable objections in principle, nor, I should think, in practice, to an institution of this sort, as a means of supplying the same convenient mode of investment now afforded by the public funds. It would constitute the state a great insurance company, to insure that part of the community who live on the interest of their property, against the risk of losing it by the bankruptcy of those to whom they might otherwise be under the necessity of confiding it.

Book V, Chapter VIII: Of the ordinary functions of government, considered as to their economical effects

CHAPTER VIII: of the ordinary functions of government, considered as to their economical effects

§ 1. Before we discuss the line of demarcation between the things with which government should, and those with which they should not, directly interfere, it is necessary to consider the economical effects, whether of a bad or of a good complexion, arising from the manner in which they acquit themselves of the duties which devolve on them in all societies, and which no one denies to be incumbent on them.

The first of these is the protection of person and property. There is no need to expatiate on the influence exercised over the economical interests of society by the degree of completeness with which this duty of government is performed. Insecurity of person and property is as much as to say uncertainty of the connexion between all human exertion or sacrifice and the attainment of the ends for the sake of which they are undergone. It means, uncertainty whether they who sow shall reap, whether they who produce shall consume, and they who spare to-day shall enjoy tomorrow. It means, not only that labour and frugality are not the road to acquisition, but that violence is. When person and property are to a certain degree insecure, all the possessions of the weak are at the mercy of the strong. No one can keep what he has produced, unless he is more capable of defending it, than others who give no part of their time and exertions to useful industry are of taking it from him. The productive classes, therefore, when the insecurity surpasses a certain point, being unequal to their own protection against the predatory population, are obliged to place themselves individually in a state of dependence on some member of the predatory class, that it may be his interest to shield them from all depredation except his own. In this manner, in the Middle Ages, allodial property generally became feudal, and numbers of the poorer freemen voluntarily made themselves and their posterity serfs of some military lord.

Nevertheless, in attaching to this great requisite, security of person and property, the importance which is justly due to it, we must not forget that even for economical purposes there are other things quite as indispensable, the presence of which will often make up for a very considerable degree of imperfection in the protective arrangements of government. As was observed in a previous chapter,∗ the free cities of Italy, Flanders, and the Hanseatic league, were habitually in a state of such internal turbulence, varied by such destructive external wars, that person and property enjoyed very imperfect protection; yet during several centuries they increased rapidly in wealth and prosperity, brought many of the industrial arts to a high degree of advancement, carried on distant and dangerous voyages of exploration and commerce with extraordinary success, became an overmatch in power for the greatest feudal lords, and could defend themselves even against the sovereigns of Europe: because in the midst of turmoil and violence, the citizens of those towns enjoyed a certain rude freedom, under conditions of union and co-operation, which, taken together, made them a brave, energetic, and high-spirited people, and fostered a great amount of public spirit and patriotism. The prosperity of these and other free states in a lawless age shows that a certain degree of insecurity, in some combinations of circumstances, has good as well as bad effects, by making energy and practical ability the conditions of safety. Insecurity paralyzes only when it is such in nature and in degree that no energy of which mankind in general are capable affords any tolerable means of self-protection. And this is a main reason why oppression by the government, whose power is generally irresistible by any efforts that can be made by individuals, has so much more baneful an effect on the springs of national prosperity, than almost any degree of lawlessness and turbulence under free institutions. Nations have acquired some wealth, and made some progress in improvement, in states of social union so imperfect as to border on anarchy: but no countries in which the people were exposed without limit to arbitrary exactions from the officers of government ever yet continued to have industry or wealth. A few generations of such a government never fail to extinguish both. Some of the fairest, and once the most prosperous, regions of the earth, have, under the Roman and afterwards under the Turkish dominion, been reduced to a desert, solely by that cause. I say solely, because they would have recovered with the utmost rapidity, as countries always do, from the devastations of war, or any other temporary calamities. Difficulties and hardships are often but an incentive to exertion: what is fatal to it, is the belief that it will not be suffered to produce its fruits.

§ 2. Simple over-taxation by government, though a great evil, is not comparable in the economical part of its mischiefs to exactions much more moderate in amount, which either subject the contributor to the arbitrary mandate of government officers, or are so laid on as to place skill, industry, and frugality at a disadvantage. The burthen of taxation in our own country is very great, yet as every one knows its limit, and is seldom made to pay more than he expects and calculates on, and as the modes of taxation are not of such a kind as much to impair the motives to industry and economy, the sources of prosperity are little diminished by the pressure of taxation; they may even, as some think, be increased, by the extra exertions made to compensate for the pressure of the taxes. But in the barbarous despotisms of many countries of the East, where taxation consists in fastening upon those who have succeeded in acquiring something, in order to confiscate it, unless the possessor buys its release by submitting to give some large sum as a compromise, we cannot expect to find voluntary industry, or wealth derived from any source but plunder. And even in comparatively civilized countries, bad modes of raising a revenue have had effects similar in kind, though in an inferior degree. French writers before the Revolution represented the taille as a main cause of the backward state of agriculture, and of the wretched condition of the rural population; not from its amount, but because, being proportioned to the visible capital of the cultivator, it gave him a motive for appearing poor, which sufficed to turn the scale in favour of indolence. The arbitrary powers also of fiscal officers, of intendants and subdélégués, were more destructive of prosperity than a far larger amount of exactions, because they destroyed security: there was a marked superiority in the condition of the pays d'états, which were exempt from this scourge. The universal venality ascribed [1848] to Russian functionaries must be an immense drag on the capabilities of economical improvement possessed so abundantly by the Russian empire: since the emoluments of public officers must depend on the success with which they can multiply vexations, for the purpose of being bought off by bribes.

Yet mere excess of taxation, even when not aggravated by uncertainty, is, independently of its injustice, a serious economical evil. It may be carried so far as to discourage industry by insufficiency of reward. Very long before it reaches this point it prevents or greatly checks accumulation, or causes the capital accumulated to be sent for investment to foreign countries. Taxes which fall on profits, even though that kind of income may not pay more than its just share, necessarily diminish the motive to any saving, except for investment in foreign countries where profits are higher. Holland, for example, seems to have long ago reached the practical minimum of profits: already in the last century her wealthy capitalists had a great part of their fortunes invested in the loans and joint-stock speculations of other countries: and this low rate of profit is ascribed to the heavy taxation, which had been in some measure forced on her by the circumstances of her position and history. The taxes indeed, besides their great amount, were many of them on necessaries, a kind of tax peculiarly injurious to industry and accumulation. But when the aggregate amount of taxation is very great, it is inevitable that recourse must be had for part of it to taxes of an objectionable character. And any taxes on consumption, when heavy, even if not operating on profits, have something of the same effect, by driving persons of moderate means to live abroad, often taking their capital with them. Although I by no means join with those political economists who think no state of national existence desirable in which there is not a rapid increase of wealth, I cannot overlook the many disadvantages to an independent nation from being brought prematurely to a stationary state, while the neighbouring countries continue advancing.

§ 3. The subject of protection to person and property, considered as afforded by government, ramifies widely, into a number of indirect channels. It embraces, for example, the whole subject of the perfection or inefficiency of the means provided for the ascertainment of rights and the redress of injuries. Person and property cannot be considered secure where the administration of justice is imperfect, either from defect of integrity or capacity in the tribunals, or because the delays, vexation, and expense accompanying their operation impose a heavy tax on those who appeal to them, and make it preferable to submit to any endurable amount of the evils which they are designed to remedy. In England there is no fault to be found with the administration of justice, in point of pecuniary integrity; a result which the progress of social improvement may also be supposed to have brought about in several other nations of Europe. But legal and judicial imperfections of other kinds are abundant; and, in England especially, are a large abatement from the value of the services which the government renders back to the people in return for our enormous taxation. In the first place, the incognoscibility (as Bentham termed it) of the law, and its extreme uncertainty, even to those who best know it, render a resort to the tribunals often necessary for obtaining justice, when, there being no dispute as to facts, no litigation ought to be required. In the next place, the procedure of the tribunals is so replete with delay, vexation, and expense, that the price at which justice is at last obtained is an evil outweighing a very considerable amount of injustice; and the wrong side, even that which the law considers such, has many chances of gaining its point, through the abandonment of litigation by the other party for want of funds, or through a compromise in which a sacrifice is made of just rights to terminate the suit, or through some technical quirk, whereby a decision is obtained on some other ground than the merits. This last detestable incident often happens without blame to the judge, under a system of law of which a great part rests on no rational principles adapted to the present state of society, but was originally founded partly on a kind of whims and conceits, and partly on the principles and incidents of feudal tenure (which now survive only as legal fictions); and has only been very imperfectly adapted, as cases arose, to the changes which had taken place in society. Of all parts of the English legal system, the Court of Chancery, which has the best substantive law, has been incomparably the worst as to delay, vexation, and expense; and this is the only tribunal for most of the classes of cases which are in their nature the most complicated, such as cases of partnership, and the great range and variety of cases which come under the denomination of trust. 1 The recent reforms in this Court have abated the mischief, but are still far from having removed it.

Fortunately for the prosperity of England, the greater part of the mercantile law is comparatively modern, and was made by the tribunals, by the simple process of recognizing and giving force of law to the usages which, from motives of convenience, had grown up among merchants themselves: so that this part of the law, at least, was substantially made by those who were most interested in its goodness: while the defects of the tribunals have been the less practically pernicious in reference to commercial transactions, because the importance of credit, which depends on character, renders the restraints of opinion (though, as daily experience proves, an insufficient) yet a very powerful, protection against those forms of mercantile dishonesty which are generally recognized as such.

The imperfections of the law, both in its substance and in its procedure, fall heaviest upon the interests connected with what is technically called real property; in the general language of European jurisprudence, immoveable property. With respect to all this portion of the wealth of the community, the law fails egregiously in the protection which it undertakes to provide. It fails, first, by the uncertainty, and the maze of technicalities, which make it impossible for any one, at however great an expense, to possess a title to land which he can positively know to be unassailable. It fails, secondly, in omitting to provide due evidence of transactions, by a proper registration of legal documents. It fails, thirdly, by creating a necessity for operose and expensive instruments and formalities (independently of fiscal burthens) on occasion of the purchase and sale, or even the lease or mortgage, of immoveable property. And, fourthly, it fails by the intolerable expense and delay of law proceedings, in almost all cases in which real property is concerned. There is no doubt that the greatest sufferers by the defects of the higher courts of civil law are the landowners. Legal expenses, either those of actual litigation, or of the preparation of legal instruments, form, I apprehend, no inconsiderable item in the annual expenditure of most persons of large landed property, and the saleable value of their land is greatly impaired, by the difficulty of giving to the buyer complete confidence in the title; independently of the legal expenses which accompany the transfer. Yet the landowners, though they have been masters of the legislation of England, to say the least since 1688, have never made a single move in the direction of law reform, and have been strenuous opponents of some of the improvements of which they would more particularly reap the benefit; especially that great one of a registration of contracts affecting land, which when proposed by a Commission of eminent real property lawyers, and introduced into the House of Commons by Lord Campbell, was so offensive to the general body of landlords, and was rejected by so large a majority, as to have long discouraged any repetition of the attempt.∗ This irrational hostility to improvement, in a case in which their own interest would be the most benefited by it, must be ascribed to an intense timidity on the subject of their titles, generated by the defects of the very law which they refuse to alter; and to a conscious ignorance, and incapacity of judgment, on all legal subjects, which makes them helplessly defer to the opinion of their professional advisers, heedless of the fact that every imperfection of the law, in proportion as it is burthensome to them, brings gain to the lawyer.

In so far as the defects of legal arrangements are a mere burthen on the landowner, they do not much affect the sources of production; but the uncertainty of the title under which land is held, must often act as a great discouragement to the expenditure of capital in its improvement; and the expense of making transfers, operates to prevent land from coming into the hands of those who would use it to most advantage; often amounting, in the case of small purchases, to more than the price of the land, and tantamount, therefore, to a prohibition of the purchase and sale of land in small portions, unless in exceptional circumstances. Such purchases, however, are almost everywhere extremely desirable, there being hardly any country in which landed property is not either too much or too little subdivided, requiring either that great estates should be broken down, or that small ones should be bought up and consolidated. To make land as easily transferable as stock would be one of the greatest economical improvements which could be bestowed on a country; and has been shown, again and again, to have no insuperable difficulty attending it.

Besides the excellences or defects that belong to the law and judicature of a country as a system of arrangements for attaining direct practical ends, much also depends, even in an economical point of view, upon the moral influences of the law. Enough has been said in a former place† on the degree in which both the industrial and all other combined operations of mankind depend for efficiency on their being able to rely on one another for probity and fidelity to engagements; from which we see how greatly even the economical prosperity of a country is liable to be affected by anything in its institutions by which either integrity and trustworthiness, or the contrary qualities, are encouraged. The law everywhere ostensibly favours at least pecuniary honesty and the faith of contracts; but if it affords facilities for evading those obligations, by trick and chicanery, or by the unscrupulous use of riches in instituting unjust or resisting just litigation; if there are ways and means by which persons may attain the ends of roguery, under the apparent sanction of the law; to that extent the law is demoralizing, even in regard to pecuniary integrity. And such cases are, unfortunately, frequent under the English system. If, again, the law, by a misplaced indulgence, protects idleness or prodigality against their natural consequences, or dismisses crime with inadequate penalties, the effect, both on the prudential and on the social virtues, is unfavourable. When the law, by its own dispensations and injunctions, establishes injustice between individual and individual; as all laws do which recognize any form of slavery; as the laws of all countries do, though not all in the same degree, in respect to the family relations; and as the laws of many countries do, though in still more unequal degrees, as between rich and poor; the effect on the moral sentiments of the people is still more disastrous. But these subjects introduce considerations so much larger and deeper than those of political economy, that I only advert to them in order not to pass wholly unnoticed, things superior in importance to those of which I treat.

Book V, Chapter IX: The same subject continued

CHAPTER IX: the same subject continued

§ 1. Having spoken thus far of the effects produced by the excellences or defects of the general system of the law, I shall now touch upon those resulting from the special character of parts of it. As a selection must be made, I shall confine myself to a few leading topics. The portions of the civil law of a country which are of most importance economically (next to those which determine the status of the labourer, as slave, serf, or free) are those relating to the two subjects of Inheritance and Contract. Of the laws relating to contract, none are more important economically, than the laws of partnership, and those of insolvency. It happens that on all these three points, there is just ground for condemning some of the provisions of the English law.

With regard to Inheritance, I have, in an early chapter, considered the general principles of the subject, and suggested what appear to me to be, putting all prejudices apart, the best dispositions which the law could adopt. Freedom of bequest as the general rule, but limited by two things: first, that if there are descendants, who, being unable to provide for themselves, would become burthensome to the state, the equivalent of whatever the state would accord to them should be reserved from the property for their benefit: and secondly, that no one person should be permitted to acquire, by inheritance, more than the amount of a moderate independence. In case of intestacy, the whole property to escheat to the state: which should be bound to make a just and reasonable provision for descendants, that is, such a provision as the parent or ancestor ought to have made, their circumstances, capacities, and mode of bringing up being considered.

The laws of inheritance, however, have probably several phases of improvement to go through, before ideas so far removed from present modes of thinking will be taken into serious consideration: and as, among the recognized modes of determining the succession to property, some must be better and others worse, it is necessary to consider which of them deserves the preference. As an intermediate course, therefore, I would recommend the extension to all property of the present English law of inheritance affecting personal property (freedom of bequest, and in case of intestacy, equal division): except that no rights should be acknowledged in collaterals, and that the property of those who have neither descendants nor ascendants, and make no will, should escheat to the state.

The laws of existing nations deviate from these maxims in two opposite ways. In England, and in most of the countries where the influence of feudality is still felt in the laws, one of the objects aimed at in respect to land and other immoveable property is to keep it together in large masses: accordingly, in cases of intestacy, it passes, generally speaking (for the local custom of a few places is different), exclusively to the eldest son. And though the rule of primogeniture is not binding on testators, who in England have nominally the power of bequeathing their property as they please, any proprietor may so exercise this power as to deprive his immediate successor of it, by entailing the property on one particular line of his descendants: which, besides preventing it from passing by inheritance in any other than the prescribed manner, is attended with the incidental consequence of precluding it from being sold; since each successive possessor, having only a life interest in the property, cannot alienate it for a longer period than his own life. In some other countries, such as France, the law, on the contrary, compels division of inheritances; not only, in case of intestacy, sharing the property, both real and personal, equally among all the children, or (if there are no children) among all relatives in the same degree of propinquity; but also not recognizing any power of bequest, or recognizing it over only a limited portion of the property, the remainder being subjected to compulsory equal division.

Neither of these systems, I apprehend, was introduced, or is perhaps maintained, in the countries where it exists, from any general considerations of justice, or any foresight of economical consequences, but chiefly from political motives; in the one case to keep up large hereditary fortunes, and a landed aristocracy; in the other, to break these down, and prevent their resurrection. The first object, as an aim of national policy, I conceive to be eminently undesirable: with regard to the second, I have pointed out what seems to me a better mode of attaining it. The merit, or demerit, however, of either purpose, belongs to the general science of politics, not to the limited department of that science which is here treated of. Each of the two systems is a real and efficient instrument for the purpose intended by it; but each, as it appears to me, achieves that purpose at the cost of much mischief.

§ 2. There are two arguments of an economical character, which are urged in favour of primogeniture. One is, the stimulus applied to the industry and ambition of younger children, by leaving them to be the architects of their own fortunes. This argument was put by Dr. Johnson in a manner more forcible than complimentary to an hereditary aristocracy, when he said, by way of recommendation of primogeniture, that it “makes but one fool in a family.” It is curious that a defender of aristocratic institutions should be the person to assert that to inherit such a fortune as takes away any necessity for exertion is generally fatal to activity and strength of mind: in the present state of education, however, the proposition, with some allowance for exaggeration, may be admitted to be true. But whatever force there is in the argument counts in favour of limiting the eldest, as well as all the other children, to a mere provision, and dispensing with even the “one fool” whom Dr. Johnson was willing to tolerate. If unearned riches are so pernicious to the character, one does not see why, in order to withhold the poison from the junior members of a family, there should be no way but to unite all their separate potions, and administer them in the largest possible dose to one selected victim. It cannot be necessary to inflict this great evil on the eldest son for want of knowing what else to do with a large fortune.

Some writers, however, look upon the effect of primogeniture in stimulating industry, as depending, not so much on the poverty of the younger children, as on the contrast between that poverty and the riches of the elder; thinking it indispensable to the activity and energy of the hive that there should be a huge drone here and there, to impress the working bees with a due sense of the advantages of honey. “Their inferiority in point of wealth,” says Mr. M'Culloch, speaking of the younger children, “and their desire to escape from this lower station, and to attain to the same level with their elder brothers, inspires them with an energy and vigour they could not otherwise feel. But the advantage of preserving large estates from being frittered down by a scheme of equal division, is not limited to its influence over the younger children of their owners. It raises universally the standard of competence, and gives new force to the springs which set industry in motion. The manner of living among the great landlords is that in which every one is ambitious of being able to indulge; and their habits of expense, though sometimes injurious to themselves, act as powerful incentives to the ingenuity and enterprise of the other classes, who never think their fortunes sufficiently ample, unless they will enable them to emulate the splendour of the richest landlords; so that the custom of primogeniture seems to render all classes more industrious, and to augment at the same time, the mass of wealth and the scale of enjoyment.”∗

The portion of truth, I can hardly say contained in these observations, but recalled by them, I apprehend to be, that a state of complete equality of fortunes would not be favourable to active exertion for the increase of wealth. Speaking of the mass, it is as true of wealth as of most other distinctions—of talent, knowledge, virtue—that those who already have, or think they have, as much of it as their neighbours, will seldom exert themselves to acquire more. But it is not therefore necessary that society should provide a set of persons with large fortunes, to fulfil the social duty of standing to be looked at, with envy and admiration, by the aspiring poor. The fortunes which people have acquired for themselves, answer the purpose quite as well, indeed much better; since a person is more powerfully stimulated by the example of somebody who has earned a fortune, than by the mere sight of somebody who possesses one; and the former is necessarily an example of prudence and frugality as well as industry, while the latter much oftener sets an example of profuse expense, which spreads, with pernicious effect, to the very class on whom the sight of riches is supposed to have so beneficial an influence, namely, those whose weakness of mind, and taste for ostentation, makes “the splendour of the richest landlords” attract them with the most potent spell. In America there are few or no hereditary fortunes; yet industrial energy, and the ardour of accumulation, are not supposed to be particularly backward in that part of the world. When a country has once fairly entered into the industrial career, which is the principal occupation of the modern, as war was that of the ancient and medieval world, the desire of acquisition by industry needs no factitious stimulus: the advantages naturally inherent in riches, and the character they assume of a test by which talent and success in life are habitually measured, are an ample security for their being pursued with sufficient intensity and zeal. As to the deeper consideration, that the diffusion of wealth, and not its concentration, is desirable, and that the more wholesome state of society is not that in which immense fortunes are possessed by a few and coveted by all, but that in which the greatest possible numbers possess and are contented with a moderate competency, which all may hope to acquire; I refer to it in this place only to show how widely separated, on social questions, is the entire mode of thought of the defenders of primogeniture, from that which is partially promulgated in the present treatise.

The other economical argument in favour of primogeniture has special reference to landed property. It is contended that the habit of dividing inheritances equally, or with an approach to equality, among children, promotes the subdivision of land into portions too small to admit of being cultivated in an advantageous manner. This argument, eternally reproduced, has again and again been refuted by English and Continental writers. It proceeds on a supposition entirely at variance with that on which all the theorems of political economy are grounded. It assumes that mankind in general will habitually act in a manner opposed to their immediate and obvious pecuniary interest. For the division of the inheritance does not necessarily imply division of the land; which may be held in common, as is not unfrequently the case in France and Belgium; or may become the property of one of the coheirs, being charged with the shares of the others by way of mortgage; or they may sell it outright, and divide the proceeds. When the division of the land would diminish its productive power, it is the direct interest of the heirs to adopt some one of these arrangements. Supposing, however, what the argument assumes, that either from legal difficulties or from their own stupidity and barbarism, they would not, if left to themselves, obey the dictates of this obvious interest, but would insist upon cutting up the land bodily into equal parcels, with the effect of impoverishing themselves; this would be an objection to a law such as exists in France, of compulsory division, but can be no reason why testators should be discouraged from exercising the right of bequest in general conformity to the rule of equality, since it would always be in their power to provide that the division of the inheritance should take place without dividing the land itself. That the attempts of the advocates of primogeniture to make out a case by facts against the custom of equal division, are equally abortive, has been shown in a former place. In all countries, or parts of countries, in which the division of inheritances is accompanied by small holdings, it is because small holdings are the general system of the country, even on the estates of the great proprietors.

Unless a strong case of social utility can be made out for primogeniture, it stands sufficiently condemned by the general principles of justice; being a broad distinction in the treatment of one person and of another, grounded solely on an accident. There is no need, therefore, to make out any case of economical evil against primogeniture. Such a case, however, and a very strong one, may be made. It is a natural effect of primogeniture to make the landlords a needy class. The object of the institution, or custom, is to keep the land together in large masses, and this it commonly accomplishes; but the legal proprietor of a large domain is not necessarily the bonâ fide owner of the whole income which it yields. It is usually charged, in each generation, with provisions for the other children. It is often charged still more heavily by the imprudent expenditure of the proprietor. Great landowners are generally improvident in their expenses; they live up to their incomes when at the highest, and if any change of circumstances diminishes their resources, some time elapses before they make up their minds to retrench. Spendthrifts in other classes are ruined, and disappear from society; but the spendthrift landlord usually holds fast to his land, even when he has become a mere receiver of its rents for the benefit of creditors. The same desire to keep up the “splendour” of the family, which gives rise to the custom of primogeniture, indisposes the owner to sell a part in order to set free the remainder; their apparent are therefore habitually greater than their real means, and they are under a perpetual temptation to proportion their expenditure to the former rather than to the latter. From such causes as these, in almost all countries of great landowners, the majority of landed estates are deeply mortgaged; and instead of having capital to spare for improvements, it requires all the increased value of land, caused by the rapid increase of the wealth and population of the country, to preserve the class from being impoverished.

§ 3. To avert this impoverishment, recourse was had to the contrivance of entails, whereby the order of succession was irrevocably fixed, and each holder, having only a life interest, was unable to burthen his successor. The land thus passing, free from debt, into the possession of the heir, the family could not be ruined by the improvidence of its existing representative. The economical evils arising from this disposition of property were partly of the same kind, partly different, but on the whole greater, than those arising from primogeniture alone. The possessor could not now ruin his successors, but he could still ruin himself: he was not at all more likely than in the former case to have the means necessary for improving the property: while, even if he had, he was still less likely to employ them for that purpose, when the benefit was to accrue to a person whom the entail made independent of him, while he had probably younger children to provide for, in whose favour he could not now charge the estate. While thus disabled from being himself an improver, neither could he sell the estate to somebody who would; since entail precludes alienation. In general he has even been unable to grant leases beyond the term of his own life; “for,” says Blackstone, “if such leases had been valid, then, under cover of long leases, the issue might have been virtually disinherited;” and it has been necessary in Great Britain to relax, by statute, the rigour of entails, in order to allow either of long leases, or of the execution of improvements at the expense of the estate. It may be added that the heir of entail, being assured of succeeding to the family property, however undeserving of it, and being aware of this from his earliest years, has much more than the ordinary chances of growing up idle, dissipated, and profligate.

In England, the power of entail is more limited by law, than in Scotland and in most other countries where it exists. A landowner can settle his property upon any number of persons successively who are living at the time, and upon one unborn person, on whose attaining the age of twenty-one, the entail expires, and the land becomes his absolute property. An estate may in this manner be transmitted through a son, or a son and grandson, living when the deed is executed, to an unborn child of that grandson. It has been maintained that this power of entail is not sufficiently extensive to do any mischief: in truth, however, it is much larger than it seems. Entails very rarely expire; the first heir of entail, when of age, joins with the existing possessor in resettling the estate, so as to prolong the entail for a further term. Large properties, therefore, are rarely free, for any considerable period, from the restraints of a strict settlement; 1 though the mischief is in one respect mitigated, since in the renewal of the settlement for one more generation, the estate is usually charged with a provision for younger children.

In an economical point of view, the best system of landed property is that in which land is most completely an object of commerce; passing readily from hand to hand when a buyer can be found to whom it is worth while to offer a greater sum for the land, than the value of the income drawn from it by its existing possessor. This of course is not meant of ornamental property, which is a source of expense, not profit; but only of land employed for industrial uses, and held for the sake of the income which it affords. Whatever facilitates the sale of land, tends to make it a more productive instrument of the community at large; whatever prevents or restricts its sale, subtracts from its usefulness. Now, not only has entail this effect, but primo. geniture also. The desire to keep land together in large masses, from other motives than that of promoting its productiveness, often prevents changes and alienations which would increase its efficiency as an instrument.

§ 4. On the other hand, a law which, like the French, restricts the power of bequest to a narrow compass, and compels the equal division of the whole or the greater part of the property among the children, seems to me, though on different grounds, also very seriously objectionable. The only reason for recognizing in the children any claim at all to more than a provision, sufficient to launch them in life, and enable them to find a livelihood, is grounded on the expressed or presumed wish of the parent; whose claim to dispose of what is actually his own, cannot be set aside by any pretensions of others to receive what is not theirs. To control the rightful owner's liberty of gift, by creating in the children a legal right superior to it, is to postpone a real claim to an imaginary one. To this great and paramount objection to the law, numerous secondary ones may be added. Desirable as it is that the parent should treat the children with impartiality, and not make an eldest son or a favourite, impartial division is not alway synonymous with equal division. Some of the children may, without fault of their own, be less capable than others of providing for themselves: some may, by other means than their own exertions, be already provided for: and impartiality may therefore require that the rule observed should not be one of equality, but of compensation. Even when equality is the object, there are sometimes better means of attaining it, than the inflexible rules by which law must necessarily proceed. If one of the coheirs, being of a quarrelsome or litigious disposition, stands upon his utmost rights, the law cannot make equitable adjustments; it cannot apportion the property as seems best for the collective interest of all concerned; if there are several parcels of land, and the heirs cannot agree about their value, the law cannot give a parcel to each, but every separate parcel must be either put up to sale or divided: if there is a residence, or a park or pleasure-ground, which would be destroyed, as such, by subdivision, it must be sold, perhaps at a great sacrifice both of money and of feeling. But what the law could not do, the parent could. By means of the liberty of be. quest, all these points might be determined according to reason and the general interest of the persons concerned; and the spirit of the principle of equal division might be the better observed, because the testator was emancipated from its letter. Finally, it would not then be necessary, as under the compulsory system it is, that the law should interfere authoritatively in the concerns of individuals, not only on the occurrence of a death, but throughout life, in order to guard against the attempts of parents to frustrate the legal claims of their heirs, under colour of gifts and other alienations inter vivos.

In conclusion; all owners of property should, I conceive, have power to dispose by will of every part of it, but not to determine the person who should succeed to it after the death of all who were living when the will was made. Under what restrictions it should be allowable to bequeath property to one person for life, with remainder to another person already in existence, is a question belonging to general legislation, not to political economy. Such settlements would be no greater hindrance to alienation than any case of joint ownership, since the consent of persons actually in existence is all that would be necessary for any new arrangement respecting the property.

§ 5. From the subject of Inheritance I now pass to that of Contracts, and among these, to the important subject of the Laws of Partnership. How much of good or evil depends upon these laws, and how important it is that they should be the best possible, is evident to all who recognize in the extension of the co-operative principle in the larger sense of the term, the great economical necessity of modern industry. The progress of the productive arts requiring that many sorts of industrial occupation should be carried on by larger and larger capitals, the productive power of industry must suffer by whatever impedes the formation of large capitals through the aggregation of smaller ones. Capitals of the requisite magnitude belonging to single owners, do not, in most countries, exist in the needful abundance, and would be still less numerous if the laws favoured the diffusion instead of the concentration of property: while it is most undesirable that all those improved processes, and those means of efficiency and economy in production, which depend on the possession of large funds, should be monopolies in the hands of a few rich individuals, through the difficulties experienced by persons of moderate or small means in associating their capital. Finally, I must repeat my conviction, that the industrial economy which divides society absolutely into two portions, the payers of wages and the receivers of them, the first counted by thousands and the last by millions, is neither fit for, nor capable of, indefinite duration: and the possibility of changing this system for one of combination without dependence, and unity of interest instead of organized hostility, depends altogether upon the future developments of the Partnership principle.

Yet there is scarcely any country whose laws do not throw great, and in most cases intentional obstacles in the way of the formation of any numerous partnership. In England it is already a serious discouragement, that differences among partners are, practically speaking, only capable of adjudication by the Court of Chancery: which is often worse than placing such questions out of the pale of all law; since any one of the disputant parties, who is either dishonest or litigious, can involve the others at his pleasure in the expense, trouble, and anxiety, which are the unavoidable accompaniments of a Chancery suit, without their having the power of freeing themselves from the infliction even by breaking up the association.∗ Besides this, it required, until lately, a separate Act of the legislature before any joint-stock association could legally constitute itself, and be empowered to act as one body. By a statute passed a few years ago, this necessity is done away; but the statute in question is described by competent authorities as a “mass of confusion,” of which they say that there “never was such an infliction” on persons entering into partnership.∗1 When a number of persons, whether few or many, freely desire to unite their funds for a common undertaking, not asking any peculiar privilege, nor the power to dispossess any one of property, the law can have no good reason for throwing difficulties in the way of the realization of the project. On compliance with a few simple conditions of publicity, any body of persons ought to have the power of constituting themselves into a joint-stock company, or société en nom collectif, without asking leave either of any public officer or of parliament.2 As an association of many partners must practically be under the management of a few, every facility ought to be afforded to the body for exercising the necessary control and check over those few, whether they be themselves members of the association, or merely its hired servants: and in this point the English system is still at a lamentable distance from the standard of perfection.3

§ 6. Whatever facilities, however, English law might give to associations formed on the principles of ordinary partnership, there is one sort of joint-stock association which until the year 1855 it absolutely disallowed, and which could only be called into existence by a special act either of the legislature or of the crown.4 I mean, associations with limited liability.

Associations with limited liability are of two kinds: in one, the liability of all the partners is limited, in the other that of some of them only. The first is the société anonyme of the French law, which in England had until lately no other name than that of “chartered company” meaning thereby a joint-stock company whose shareholders, by a charter from the crown or a special enactment of the legislature, stood exempted from any liability for the debts of the concern, beyond the amount of their subscriptions. The other species of limited partnership is that known to the French law under the name of commandite; of this, which in England is still unrecognized and illegal, I shall speak presently.

If a number of persons chose to associate for carrying on any operation of commerce or industry, agreeing among themselves and announcing to those with whom they deal that the members of the association do not undertake to be responsible beyond the amount of the subscribed capital; is there any reason that the law should raise objections to this proceeding, and should impose on them the unlimited responsibility which they disclaim? For whose sake? Not for that of the partners themselves; for it is they whom the limitation of responsibility benefits and protects. It must therefore be for the sake of third parties; namely, those who may have transactions with the association, and to whom it may run in debt beyond what the subscribed capital suffices to pay. But nobody is obliged to deal with the association: still less is any one obliged to give it unlimited credit. The class of persons with whom such associations have dealings are in general perfectly capable of taking care of themselves, and there seems no reason that the law should be more careful of their interests than they will themselves be; provided no false representation is held out, and they are aware from the first what they have to trust to. The law is warranted in requiring from all joint-stock associations with limited responsibility, not only that the amount of capital on which they profess to carry on business should either be actually paid up or security given for it (if, indeed, with complete publicity, such a requirement would be necessary), but also that such accounts should be kept, accessible to individuals, and if needful, published to the world, as shall render it possible to ascertain at any time the existing state of the company's affairs, and to learn whether the capital which is the sole security for the engagements into which they enter, still subsists unimpaired: the fidelity of such accounts being guarded by sufficient penalties. When the law has thus afforded to individuals all practicable means of knowing the circumstances which ought to enter into their prudential calculations in dealing with the company, there seems no more need for interfering with individual judgment in this sort of transactions, than in any other part of the private business of life.

The reason usually urged for such interference is, that the managers of an association with limited responsibility, not risking their whole fortunes in the event of loss, while in case of gain they might profit largely, are not sufficiently interested in exercising due circumspection, and are under the temptation of exposing the funds of the association to improper hazards. It is, however, well ascertained that associations with unlimited responsibility, if they have rich shareholders, can obtain, even when known to be reckless in their transactions, improper credit to an extent far exceeding what would be given to companies equally ill-conducted whose creditors had only the subscribed capital to rely on.∗1 To whichever side the balance of evil inclines, it is a consideration of more importance to the shareholders themselves than to third parties; since, with proper securities for publicity, the capital of an association with limited liability could not be engaged in hazards beyond those ordinarily incident to the business it carries on, without the facts being known, and becoming the subject of comments by which the credit of the body would be likely to be affected in quite as great a degree as the circumstances would justify. If, under securities for publicity, it were found in practice that companies, formed on the principle of unlimited responsibility, were more skilfully and more cautiously managed, companies with limited liability would be unable to maintain an equal competition with them; and would therefore rarely be formed, unless when such limitation was the only condition on which the necessary amount of capital could be raised: and in that case it would be very unreasonable to say that their formation ought to be prevented.

It may further be remarked, that although, with equality of capital, a company of limited liability offers a somewhat less security to those who deal with it, than one in which every shareholder is responsible with his whole fortune, yet even the weaker of these two securities is in some respects stronger than that which an individual capitalist can afford. In the case of an individual, there is such security as can be founded on his unlimited liability, but not that derived from publicity of transactions, or from a known and large amount of paid-up capital. This topic is well treated in an able paper by M. Coquelin, published in the Revue des Deux Mondes for July 1843.∗

“While third parties who trade with individuals,” says this writer, “scarcely ever know, except by approximation, and even that most vague and uncertain, what is the amount of capital responsible for the performance of contracts made with them, those who trade with a société anonyme can obtain full information if they seek it, and perform their operations with a feeling of confidence that cannot exist in the other case. Again, nothing is easier than for an individual trader to conceal the extent of his engagements, as no one can know it certainly but himself. Even his confidential clerk may be ignorant of it, as the loans he finds himself compelled to make may not all be of a character to require that they be entered in his day-book. It is a secret confined to himself; one which transpires rarely, and always slowly; one which is unveiled only when the catastrophe has occurred. On the contrary, the société anonyme neither can nor ought to borrow, without the fact becoming known to all the world—directors, clerks, shareholders, and the public. Its operations partake in some respects, of the nature of those of governments. The light of day penetrates in every direction, and there can be no secrets from those who seek for information. Thus all is fixed, recorded, known, of the capital and debts in the case of the société anonyme, while all is uncertain and unknown in the case of the individual trader. Which of the two, we would ask the reader, presents the most favourable aspect, or the surest guarantee, to the view of those who trade with them?

“Again, availing himself of the obscurity in which his affairs are shrouded, and which he desires to increase, the private trader is enabled, so long as his business appears prosperous, to produce impressions in regard to his means far exceeding the reality, and thus to establish a credit not justified by those means. When losses occur, and he sees himself threatened with bankruptcy, the world is still ignorant of his condition, and he finds himself enabled to contract debts far beyond the possibility of payment. The fatal day arrives, and the creditors find a debt much greater than had been anticipated, while the means of payment are as much less. Even this is not all. The same obscurity which has served him so well thus far, when desiring to magnify his capital and increase his credit, now affords him the opportunity of placing a part of that capital beyond the reach of his creditors. It becomes diminished, if not annihilated. It hides itself, and not even legal remedies, nor the activity of creditors, can bring it forth from the dark corners in which it is placed.... Our readers can readily determine for themselves if practices of this kind are equally easy in the case of the société anonyme. We do not doubt that such things are possible, but we think that they will agree with us that from its nature, its organization, and the necessary publicity that attends all its actions, the liability to such occurrences is very greatly diminished.”

The laws of most countries, England included, have erred in a twofold manner with regard to joint-stock companies. While they have been most unreasonably jealous of allowing such associations to exist, especially with limited responsibility, they have generally neglected the enforcement of publicity; the best security to the public against any danger which might arise from this description of partnerships; and a security quite as much required in the case of those associations of the kind in question, which, by an exception from their general practice, they suffered to exist. Even in the instance of the Bank of England, which holds a monopoly from the legislature, and has had partial control over a matter of so much public interest as the state of the circulating medium, it is only within these few years that any publicity has been enforced; and the publicity was at first of an extremely incomplete character, though now, for most practical purposes, probably at length sufficient.

§ 7. The other kind of limited partnership which demands our attention, is that in which the managing partner or partners are responsible with their whole fortunes for the engagements of the concern, but have others associated with them who contribute only definite sums, and are not liable for anything beyond, though they participate in the profits according to any rule which may be agreed on. This is called partnership en commandite: and the partners with limited liability (to whom, by the French law, all interference in the management of the concern is interdicted) are known by the name commanditaires. Such partnerships are not allowed by English law:1 in all private partnerships, whoever shares in the profits is liable for the debts, to as plenary an extent as the managing partner.

For such prohibition no satisfactory defence has ever, so far as I am aware, been made. Even the insufficient reason given against limiting the responsibility of shareholders in a joint-stock company does not apply here; there being no diminution of the motives to circumspect management, since all who take any part in the direction of the concern are liable with their whole fortunes. To third parties again; the security is improved by the existence of a commandite; since the amount subscribed by commanditaires is all of it available to creditors, the commanditaires losing their whole investment before any creditor can lose anything; while, if instead of becoming partners to that amount, they had lent the sum at an interest equal to the profit they derived from it, they would have shared with the other creditors in the residue of the estate, diminishing pro rata the dividend obtained by all. While the practice of commandite thus conduces to the interest of creditors, it is often highly desirable for the contracting parties themselves. The managers are enabled to obtain the aid of a much greater amount of capital than they could borrow on their own security; and persons are induced to aid useful undertakings, by embarking limited portions of capital in them, when they would not, and often could not prudently, have risked their whole fortunes on the chances of the enterprise.

It may perhaps be thought that where due facilities are afforded to joint-stock companies, commandite partnerships are not required. But there are classes of cases to which the commandite principle must always be better adapted than the joint-stock principle. “Suppose,” says M. Coquelin, “an inventor seeking for a capital to carry his invention into practice. To obtain the aid of capitalists, he must offer them a share of the anticipated benefit; they must associate themselves with him in the chances of its success. In such a case, which of the forms would he select? Not a common partnership, certainly;” for various reasons, and especially the extreme difficulty of finding a partner with capital, willing to risk his whole fortune on the success of the invention.∗ “Neither would he select the société anonyme,” or any other form of joint-stock company, “in which he might be superseded as manager. He would stand, in such an association, on no better footing than any other shareholder, and he might be lost in the crowd; whereas, the association existing, as it were, by and for him, the management would appear to belong to him as a matter of right. Cases occur in which a merchant or a manufacturer, without being precisely an inventor, has undeniable claims to the management of an undertaking, from the possession of qualities peculiarly calculated to promote its success. So great, indeed,” continues M. Coquelin, “is the necessity, in many cases, for the limited partnership, that it is difficult to conceive how we could dispense with or replace it:” and in reference to his own country he is probably in the right.

Where there is so great a readiness as in England, on the part of the public, to form joint-stock associations, even without the encouragement of a limitation of responsibility; commandite partnership, though its prohibition is in principle quite indefensible, cannot be deemed to be, in a merely economical point of view, of the imperative necessity which M. Coquelin ascribes to it. Yet the inconveniences are not small, which arise indirectly from provisions of law by which every one who shares in the profits of a concern is subject to the full liabilities of an unlimited partnership. It is impossible to say how many or what useful modes of combination are rendered impracticable by such a state of the law. It is sufficient for its condemnation that, unless in some way relaxed, it is inconsistent with the payment of wages in part by a percentage on profits; in other words, the association of the operatives as virtual partners with the capitalist.∗

It is, above all, with reference to the improvement and elevation of the working classes that complete freedom in the conditions of partnership is indispensable. Combinations such as the associations of workpeople, described in a former chapter, are the most powerful means of effecting the social emancipation of the labourers through their own moral qualities. Nor is the liberty of association important solely for its examples of success, but fully as much so for the sake of attempts which would not succeed; but by their failure would give instruction more impressive than can be afforded by anything short of actual experience. Every theory of social improvement, the worth of which is capable of being brought to an experimental test, should be permitted, and even encouraged, to submit itself to that test. From such experiments the active portion of the working classes would derive lessons, which they would be slow to learn from the teaching of persons supposed to have interests and prejudices adverse to their good; would obtain the means of correcting, at no cost to society, whatever is now erroneous in their notions of the means of establishing their independence; and of discovering the conditions, moral, intellectual, and industrial, which are indispensably necessary for effecting without injustice, or for effecting at all, the social regeneration they aspire to.†

The French law of partnership is superior to the English in permitting commandite; and superior, in having no such unmanageable instrument as the Court of Chancery, all cases arising from commercial transactions being adjudicated in a comparatively cheap and expeditious manner by a tribunal of merchants. In other respects the French system was, and I believe, still is, far worse than the English. A joint-stock company with limited responsibility cannot be formed without the express authorization of the department of government called the Conseil d'Etat, a body of administrators, generally entire strangers to industrial transactions, who have no interest in promoting enterprises, and are apt to think that the purpose of their institution is to restrain them; whose consent cannot in any case be obtained without an amount of time and labour which is a very serious hindrance to the commencement of an enterprise, while the extreme uncertainty of obtaining that consent at all is a great discouragement to capitalists who would be willing to subscribe. In regard to joint-stock companies without limitation of responsibility, which in England exist in such numbers and are formed with such facility, these associations cannot, in France, exist at all; for, in cases of unlimited partnership, the French law does not permit the division of the capital into transferable shares.

The best existing [1848] laws of partnership appear to be those of the New England States. According to Mr. Carey,∗ “nowhere is association so little trammelled by regulations as in New England; the consequence of which is, that it is carried to a greater extent there, and particularly in Massachusetts and Rhode Island, than in any other part of the world. In these states, the soil is covered with compagnies anonymes—chartered companies—for almost every conceivable purpose. Every town is a corporation for the management of its roads, bridges, and schools: which are, therefore, under the direct control of those who pay for them, and are consequently well managed. Academies and churches, lyceums and libraries, saving fund societies, and trust companies, exist in numbers proportioned to the wants of the people, and all are corporations. Every district has its local bank, of a size to suit its wants, the stock of which is owned by the small capitalists of the neighbourhood, and managed by themselves; the consequence of which is, that in no part of the world is the system of banking so perfect—so little liable to vibration in the amount of loans—the necessary effect of which is, that in none is the value of property so little affected by changes in the amount or value of the currency resulting from the movements of their own banking institutions. In the two states to which we have particularly referred, they are almost two hundred in number. Massachusetts, alone, offers to our view fifty-three insurance offices, of various forms, scattered through the state, and all incorporated. Factories are incorporated, and are owned in shares; and every one that has any part in the management of their concerns, from the purchase of the raw material to the sale of the manufactured article, is a part owner; while every one employed in them has a prospect of becoming one, by the use of prudence, exertion, and economy. Charitable associations exist in large numbers, and all are incorporated. Fishing vessels are owned in shares by those who navigate them; and the sailors of a whaling ship depend in a great degree, if not altogether, upon the success of the voyage for their compensation. Every master of a vessel trading in the Southern Ocean is a part owner, and the interest he possesses is a strong inducement to exertion and economy, by aid of which the people of New England are rapidly driving out the competition of other nations for the trade of that part of the world. Wherever settled, they exhibit the same tendency to combination of action. In New York they are the chief owners of the lines of packet ships, which are divided into shares, owned by the shipbuilders, the merchants, the master, and the mates; which last generally acquire the means of becoming themselves masters, and to this is due their great success. The system is the most perfectly democratic of any in the world. It affords to every labourer, every sailor, every operative, male or female, the prospect of advancement; and its results are precisely such as we should have reason to expect. In no part of the world are talent, industry, and prudence, so certain to be largely rewarded.”

The cases of insolvency and fraud on the part of chartered companies in America, which have caused so much loss and so much scandal in Europe, did not occur in the part of the Union to which this extract refers, but in other States, in which the right of association is much more fettered by legal restrictions, and in which, accordingly, joint-stock associations are not comparable in number or variety to those of New England. Mr. Carey adds, “A careful examination of the systems of the several states, can scarcely, we think, fail to convince the reader of the advantage resulting from permitting men to determine among themselves the terms upon which they will associate, and allowing the associations that may be formed to contract with the public as to the terms upon which they will trade together, whether of the limited or unlimited liability of the partners.” 1 This principle has been adopted as the foundation of all recent English legislation on the subject.

§ 8. I proceed to the subject of Insolvency Laws.

Good laws on this subject are important, first and principally, on the score of public morals; which are on no point more under the influence of the law, for good and evil, than in a matter belonging so pre-eminently to the province of law as the preservation of pecuniary integrity. But the subject is also, in a merely economical point of view, of great importance. First, because the economical well-being of a people, and of mankind, depends in an especial manner upon their being able to trust each other's engagements. Secondly, because one of the risks, or expenses, of industrial operations is the risk or expense of what are commonly called bad debts, and every saving which can be effected in this liability is a diminution of cost of production; by dispensing with an item of outlay which in no way conduces to the desired end, and which must be paid for either by the consumer of the commodity, or from the general profits of capital, according as the burthen is peculiar or general.

The laws and practice of nations on this subject have almost always been in extremes. The ancient laws of most countries were all severity to the debtor. They invested the creditor with a power of coercion, more or less tyrannical, which he might use against his insolvent debtor, either to extort the surrender of hidden property, or to obtain satisfaction of a vindictive character, which might console him for the non-payment of the debt. This arbitrary power has extended, in some countries, to making the insolvent debtor serve the creditor as his slave: in which plan there were at least some grains of common sense, since it might possibly be regarded as a scheme for making him work out the debt by his labour. In England the coercion assumed the milder form of ordinary imprisonment. The one and the other were the barbarous expedients of a rude age, repugnant to justice, as well as to humanity. Unfortunately the reform of them, like that of the criminal law generally, has been taken in hand as an affair of humanity only, not of justice: and the modish humanity of the present time, which is essentially a thing of one idea,1 has in this as in other cases, gone into a violent reaction against the ancient severity, and might almost be supposed to see in the fact of having lost or squandered other people's property, a peculiar title to indulgence. Everything in the law which attached disagreeable consequences to that fact, was gradually relaxed, or entirely got rid of: until the demoralizing effects of this laxity became so evident as to determine, by more recent legislation, a salutary though very insufficient movement in the reverse direction.1

The indulgence of the laws to those who have made themselves unable to pay their just debts is usually defended on the plea that the sole object of the law should be, in case of insolvency, not to coerce the person of the debtor, but to get at his property, and distribute it fairly among the creditors. Assuming that this is and ought to be the sole object, the mitigation of the law was in the first instance carried so far as to sacrifice that object. Imprisonment at the discretion of a creditor was really a powerful engine for extracting from the debtor any property which he had concealed or otherwise made away with; and it remains to be shown by experience whether, in depriving creditors of this instrument, the law, even as last amended, has furnished them with a sufficient equivalent.2 But the doctrine, that the law has done all that ought to be expected from it, when it has put the creditors in possession of the property of an insolvent, is in itself a totally inadmissible piece of spurious humanity. It is the business of law to prevent wrong-doing, and not simply to patch up the consequences of it when it has been committed. The law is bound to take care that insolvency shall not be a good pecuniary speculation; that men shall not have the privilege of hazarding other people's property without their knowledge or consent, taking the profits of the enterprise if it is successful, and if it fails throwing the loss upon the rightful owners; and that they shall not find it answer to make themselves unable to pay their just debts, by spending the money of their creditors in personal indulgence. It is admitted that what is technically called fraudulent bankruptcy, the false pretence of inability to pay, is, when detected, properly subject to punishment.1 But does it follow that insolvency is not the consequence of misconduct because the inability to pay may be real? If a man has been a spendthrift, or a gambler, with property on which his creditors had a prior claim, shall he pass scot-free because the mischief is consummated and the money gone? Is there any very material difference in point of morality between this conduct, and those other kinds of dishonesty which go by the names of fraud and embezzlement?

Such cases are not a minority, but a large majority among insolvencies. The statistics of bankruptcy prove the fact. “By far the greater part of all insolvencies arise from notorious misconduct; the proceedings of the Insolvent Debtors Court and of the Bankruptcy Court will prove it. Excessive and unjustifiable overtrading, or most absurd speculation in commodities, merely because the poor speculator ‘thought they would get up,’ but why he thought so he cannot tell; speculation in hops, in tea, in silk, in corn—things with which he is altogether unacquainted; wild and absurd investments in foreign funds, or in joint stocks; these are among the most innocent causes of bankruptcy.”∗ The experienced and intelligent writer from whom I quote, corroborates his assertion by the testimony of several of the official assignees of the Bankruptcy Court. One of them says, “As far as I can collect from the books and documents furnished by the bankrupts, it seems to me that,” in the whole number of cases which occurred during a given time in the court to which he was attached, “fourteen have been ruined by speculations in things with which they were unacquainted; three by neglecting bookkeeping; ten by trading beyond their capital and means, and the consequent loss and expense of accommodation bills; forty-nine by expending more than they could reasonably hope their profits would be, though their business yielded a fair return; none by any general distress, or the falling off of any particular branch of trade.” Another of these officers says that, during a period of eighteen months, “fifty-two cases of bankruptcy have come under my care. It is my opinion that thirty-two of these have arisen from an imprudent expenditure, and five partly from that cause, and partly from a pressure on the business in which the bankrupts were employed. Fifteen I attribute to improvident speculations, combined in many instances with an extravagant mode of life.”

To these citations the author adds the following statements from his personal means of knowledge. “Many insolvencies are produced by tradesmen's indolence: they keep no books, or at least imperfect ones, which they never balance; they never take stock; they employ servants, if their trade be extensive, whom they are too indolent even to supervise, and then become insolvent. It is not too much to say, that one-half of all the persons engaged in trade, even in London, never take stock at all: they go on year after year without knowing how their affairs stand, and at last, like the child at school, they find to their surprise, but one halfpenny left in their pocket. I will venture to say that not one-fourth of all the persons in the provinces, either manufacturers, tradesmen, or farmers, ever take stock; nor in fact does one-half of them ever keep account-books, deserving any other name than memorandum books. I know sufficient of the concerns of five hundred small tradesmen in the provinces, to be enabled to say, that not one-fifth of them ever take stock, or keep even the most ordinary accounts. I am prepared to say of such tradesmen, from carefully prepared tables, giving every advantage where there has been any doubt as to the causes of their insolvency, that where nine happen from extravagance or dishonesty, one” at most “may be referred to misfortune alone.”∗

Is it rational to expect among the trading classes any high sense of justice, honour, or integrity, if the law enables men who act in this manner to shuffle off the consequences of their misconduct upon those who have been so unfortunate as to trust them; and practically proclaims that it looks upon insolvency thus produced, as a “misfortune,” not an offence?

It is, of course, not denied, that insolvencies do arise from causes beyond the control of the debtor, and that, in many more cases, his culpability is not of a high order; and the law ought to make a distinction in favour of such cases, but not without a searching investigation; nor should the case ever be let go without having ascertained, in the most complete manner practicable, not the fact of insolvency, but the cause of it. To have been trusted with money or money's worth, and to have lost or spent it, is primâ facie evidence of something wrong: and it is not for the creditor to prove, which he cannot do in one case out of ten, that there has been criminality, but for the debtor to rebut the presumption, by laying open the whole state of affairs, and showing either that there has been no misconduct, or that the misconduct has been of an excusable kind. If he fail in this, he ought never to be dismissed without a punishment proportioned to the degree of blame which seems justly imputable to him; which punishment, however, might be shortened or mitigated in proportion as he appeared likely to exert himself in repairing the injury done.

It is a common argument with those who approve a relaxed system of insolvency laws, that credit, except in the great operations of commerce, is an evil; and that to deprive creditors of legal redress is a judicious means of preventing credit from being given. That which is given by retail dealers to unproductive consumers is, no doubt, to the excess to which it is carried, a considerable evil. This, however, is only true of large, and especially of long, credits; for there is credit whenever goods are not paid for before they quit the shop, or, at least, the custody of the seller; and there would be much inconvenience in putting an end to this sort of credit. But a large proportion of the debts on which insolvency laws take effect are those due by small tradesmen to the dealers who supply them: and on no class of debts does the demoralization occasioned by a bad state of the law, operate more perniciously. These are commercial credits, which no one wishes to see curtailed; their existence is of great importance to the general industry of the country, and to numbers of honest, well-conducted persons of small means, to whom it would be a great injury that they should be prevented from obtaining the accommodation they need, and would not abuse, through the omission of the law to provide just remedies against dishonest or reckless borrowers.

But though it were granted that retail transactions, on any footing but that of ready money payment, are an evil, and their entire suppression a fit subject for legislation to aim at; a worse mode of compassing that object could scarcely be invented, than to permit those who have been trusted by others to cheat and rob them with impunity. The law does not generally select the vices of mankind as the appropriate instrument for inflicting chastisement on the comparatively innocent. When it seeks to discourage any course of action, it does so by applying inducements of its own, not by outlawing those who act in the manner it deems objectionable, and letting loose the predatory instincts of the worthless part of mankind to feed upon them. If a man has committed murder the law condemns him to death; but it does not promise impunity to anybody who may kill him for the sake of taking his purse. The offence of believing another's word, even rashly, is not so heinous that for the sake of discouraging it the spectacle should be brought home to every door, of triumphant rascality, with the law on its side, mocking the victims it has made. This pestilent example has been very widely exhibited since the relaxation of the insolvency laws. It is idle to expect that, even by absolutely depriving creditors of all legal redress, the kind of credit which is considered objectionable would really be very much checked. Rogues and swindlers are still an exception among mankind, and people will go on trusting each other's promises. Large dealers, in abundant business, would refuse credit, as many of them already do: but in the eager competition of a great town, or the dependent position of a village shopkeeper, what can be expected from the tradesman to whom a single customer is of importance, the beginner, perhaps, who is striving to get into business? He will take the risk, even if it were still greater; he is ruined if he cannot sell his goods, and he can be ruined if he is defrauded. Nor does it avail to say, that he ought to make proper inquiries, and ascertain the character of those to whom he supplies good on trust. In some of the most flagrant cases of profligate debtors which have come before the Bankruptcy Court, the swindler had been able to give, and had given, excellent references.∗

Book V, Chapter X: Of interferences of government grounded on erroneous theories

CHAPTER X: of interferences of government grounded on erroneous theories

§ 1. From the necessary functions of government, and the effects produced on the economical interests of society by their good or ill discharge, we proceed to the functions which belong to what I have termed, for want of a better designation, the optional class; those which are sometimes assumed by governments and sometimes not, and which it is not unanimously admitted that they ought to exercise.

Before entering on the general principles of the question, it will be advisable to clear from our path all those cases, in which government interference works ill because grounded on false views of the subject interfered with. Such cases have no connexion with any theory respecting the proper limits of interference. There are some things with which governments ought not to meddle, and other things with which they ought; but whether right or wrong in itself, the interference must work for ill, if government, not understanding the subject which it meddles with, meddles to bring about a result which would be mischievous. We will therefore begin by passing in review various false theories, which have from time to time formed the ground of acts of government more or less economically injurious.

Former writers on political economy have found it needful to devote much trouble and space to this department of their subject. It has now happily become possible, at least in our own country, greatly to abridge this purely negative part of our discussions. The false theories of political economy which have done so much mischief in times past, are entirely discredited among all who have not lagged behind the general progress of opinion; and few of the enactments which were once grounded on those theories still help to deform the statute-book. As the principles on which their condemnation rests have been fully set forth in other parts of this treatise, we may here content ourselves with a few brief indications.

Of these false theories, the most notable is the doctrine of Protection to Native Industry; a phrase meaning the prohibition, or the discouragement by heavy duties, of such foreign commodities as are capable of being produced at home. If the theory involved in this system had been correct, the practical conclusions grounded on it would not have been unreasonable. The theory was, that to buy things produced at home was a national benefit, and the introduction of foreign commodities generally a national loss. It being at the same time evident that the interest of the consumer is to buy foreign commodities in preference to domestic whenever they are either cheaper or better, the interest of the consumer appeared in this respect to be contrary to the public interest; he was certain, if left to his own inclinations, to do what according to the theory was injurious to the public.

It was shown, however, in our analysis of the effects of international trade, as it had been often shown by former writers, that the importation of foreign commodities, in the common course of traffic, never takes place, except when it is, economically speaking, a national good, by causing the same amount of commodities to be obtained at a smaller cost of labour and capital to the country. To prohibit, therefore, this importation, or impose duties which prevent it, is to render the labour and capital of the country less efficient in production than they would otherwise be; and compel a waste of the difference between the labour and capital necessary for the home production of the commodity and that which is required for producing the things with which it can be purchased from abroad. The amount of national loss thus occasioned is measured by the excess of the price at which the commodity is produced, over that at which it could be imported. In the case of manufactured goods, the whole difference between the two prices is absorbed in indemnifying the producers for waste of labour, or of the capital which supports that labour. Those who are supposed to be benefited, namely, the makers of the protected articles, (unless they form an exclusive company, and have a monopoly against their own countrymen as well as against foreigners,) do not obtain higher profits than other people. All is sheer loss, to the country as well as to the consumer. When the protected article is a product of agriculture—the waste of labour not being incurred on the whole produce, but only on what may be called the last instalment of it—the extra price is only in part an indemnity for waste, the remainder being a tax paid to the landlords.

The restrictive and prohibitory policy was originally grounded on what is called the Mercantile System, which representing the advantage of foreign trade to consist solely in bringing money into the country, gave artificial encouragement to exportation of goods, and discountenanced their importation. The only exceptions to the system were those required by the system itself. The materials and instruments of production were the subjects of a contrary policy, directed however to the same end; they were freely imported, and not permitted to be exported, in order that manufacturers, being more cheaply supplied with the requisites of manufacture, might be able to sell cheaper, and therefore to export more largely. For a similar reason, importation was allowed and even favoured, when confined to the productions of countries which were supposed to take from the country still more than it took from them, thus enriching it by a favourable balance of trade. As part of the same system, colonies were founded for the supposed advantage of compelling them to buy our commodities, or at all events not to buy those of any other country: in return for which restriction we were generally willing to come under an equivalent obligation with respect to the staple productions of the colonists. The consequences of the theory were pushed so far, that it was not unusual even to give bounties on exportation, and induce foreigners to buy from us rather than from other countries, by a cheapness which we artificially produced, by paying part of the price for them out of our own taxes. This is a stretch beyond the point yet reached by any private tradesman in his competition for business. No shopkeeper, I should think, ever made a practice of bribing customers by selling goods to them at a permanent loss, making it up to himself from other funds in his possession.

The principle of the Mercantile Theory is now given up even by writers and governments who still cling to the restrictive system. Whatever hold that system has over men's minds, independently of the private interests exposed to real or apprehended loss by its abandonment, is derived from fallacies other than the old notion of the benefits of heaping up money in the country. The most effective of these is the specious plea of employing our own countrymen and our national industry, instead of feeding and supporting the industry of foreigners. The answer to this, from the principles laid down in former chapters, is evident. Without reverting to the fundamental theorem discussed in an early part of the present treatise,∗ respecting the nature and sources of employment for labour, it is sufficient to say, what has usually been said by the advocates of free trade, that the alternative is not between employing our own people and foreigners, but between employing one class and another of our own people. The imported commodity is always paid for, directly or indirectly, with the produce of our own industry: that industry being at the same time rendered more productive, since, with the same labour and outlay, we are enabled to possess ourselves of a greater quantity of the article. Those who have not well considered the subject are apt to suppose that our exporting an equivalent in our own produce, for the foreign articles we consume, depends on contingencies—on the consent of foreign countries to make some corresponding relaxation of their own restrictions, or on the question whether those from whom we buy are induced by that circumstance to buy more from us; and that, if these things, or things equivalent to them, do not happen, the payment must be made in money. Now, in the first place, there is nothing more objectionable in a money payment than in payment by any other medium, if the state of the market makes it the most advantageous remittance; and the money itself was first acquired, and would again be replenished, by the export of an equivalent value of our own products. But, in the next place, a very short interval of paying in money would so lower prices as either to stop a part of the importation, or raise up a foreign demand for our produce, sufficient to pay for the imports. I grant that this disturbance of the equation of international demand would be in some degree to our disadvantage, in the purchase of other imported articles; and that a country which prohibits some foreign commodities, does, caeteris paribus, obtain those which it does not prohibit, at a less price than it would otherwise have to pay. To express the same thing in other words; a country which destroys or prevents altogether certain branches of foreign trade, thereby annihilating a general gain to the world, which would be shared in some proportion between itself and other countries—does, in some circumstances, draw to itself, at the expense of foreigners, a larger share than would else belong to it of the gain arising from that portion of its foreign trade which it suffers to subsist. But even this it can only be enabled to do, if foreigners do not maintain equivalent prohibitions or restrictions against its commodities. In any case, the justice or expediency of destroying one of two gains, in order to engross a rather larger share of the other, does not require much discussion: the gain, too, which is destroyed, being, in proportion to the magnitude of the transactions, the larger of the two, since it is the one which capital, left to itself, is supposed to seek by preference.

Defeated as a general theory, the Protectionist doctrine finds support in particular cases, from considerations which, when really in point, involve greater interests than mere saving of labour; the interests of national subsistence and of national defence. The discussions on the Corn Laws have familiarized everybody with the plea, that we ought to be independent of foreigners for the food of the people; and the Navigation Laws were grounded, in theory and profession, on the necessity of keeping up a “nursery of seamen” for the navy. On this last subject I at once admit, that the object is worth the sacrifice; and that a country exposed to invasion by sea, if it cannot otherwise have sufficient ships and sailors of its own to secure the means of manning on an emergency an adequate fleet, is quite right in obtaining those means, even at an economical sacrifice in point of cheapness of transport. When the English Navigation Laws were enacted, the Dutch, from their maritime skill and their low rate of profit at home, were able to carry for other nations, England included, at cheaper rates than those nations could carry for themselves: which placed all other countries at a great comparative disadvantage in obtaining experienced seamen for their ships of war. The Navigation Laws, by which this deficiency was remedied, and at the same time a blow struck against the maritime power of a nation with which England was then frequently engaged in hostilities, were probably, though economically disadvantageous, politically expedient. But English ships and sailors can now navigate as cheaply as those of any other country; maintaining at least an equal competition with the other maritime nations even in their own trade. The ends which may once have justified Navigation Laws, require them no longer, and afforded no reason for maintaining this invidious exception to the general rule of free trade.

With regard to subsistence, the plea of the Protectionists has been so often and so triumphantly met, that it requires little notice here. That country is the most steadily as well as the most abundantly supplied with food, which draws its supplies from the largest surface. It is ridiculous to found a general system of policy on so improbable a danger as that of being at war with all the nations of the world at once; or to suppose that, even if inferior at sea, a whole country could be blockaded like a town, or that the growers of food in other countries would not be as anxious not to lose an advantageous market, as we should be not to be deprived of their corn. On the subject, however, of subsistence, there is one point which deserves more especial consideration. In cases of actual or apprehended scarcity, many countries of Europe are accustomed to stop the exportation of food. Is this, or not, sound policy? There can be no doubt that in the present state of international morality, a people cannot, any more than an individual, be blamed for not starving itself to feed others. But if the greatest amount of good to mankind on the whole, were the end aimed at in the maxims of international conduct, such collective churlishness would certainly be condemned by them. Suppose that in ordinary circumstances the trade in food were perfectly free, so that the price in one country could not habitually exceed that in any other by more than the cost of carriage, together with a moderate profit to the importer. A general scarcity ensues, affecting all countries, but in unequal degrees. If the price rose in one country more than in others, it would be a proof that in that country the scarcity was severest, and that by permitting food to go freely thither from any other country, it would be spared from a less urgent necessity to relieve a greater. When the interests, therefore, of all countries are considered, free exportation is desirable. To the exporting country considered separately, it may, at least on the particular occasion, be an inconvenience: but taking into account that the country which is now the giver will in some future season be the receiver, and the one that is benefited by the freedom, I cannot but think that even to the apprehension of food rioters it might be made apparent, that in such cases they should do to others what they would wish done to themselves.

In countries in which the Protection theory is [1848] declining, but not yet given up, such as the United States, a doctrine has come into notice which is a sort of compromise between free trade and restriction, namely, that protection for protection's sake is improper, but that there is nothing objectionable in having as much protection as may incidentally result from a tariff framed solely for revenue. Even in England, regret is sometimes expressed that a “moderate fixed duty” was not preserved on corn, on account of the revenue it would yield. Independently, however, of the general impolicy of taxes on the necessaries of life, this doctrine overlooks the fact, that revenue is received only on the quantity imported, but that the tax is paid on the entire quantity consumed. To make the public pay much that the treasury may receive a little, is not an eligible mode of obtaining a revenue. In the case of manufactured articles the doctrine involves a palpable inconsistency. The object of the duty as a means of revenue, is inconsistent with its affording, even incidentally, any protection. It can only operate as protection in so far as it prevents importation; and to whatever degree it prevents importation, it affords no revenue.

The only case in which, on mere principles of political economy, protecting duties can be defensible, is when they are imposed temporarily (especially in a young and rising nation) in hopes of naturalizing a foreign industry, in itself perfectly suitable to the circumstances of the country. The superiority of one country over another in a branch of production, often arises only from having begun it sooner. There may be no inherent advantage on one part, or disadvantage on the other, but only a present superiority of acquired skill and experience. A country which has this skill and experience yet to acquire, may in other respects be better adapted to the production than those which were earlier in the field: and besides, it is a just remark of Mr. Rae, that nothing has a greater tendency to promote improvements in any branch of production, than its trial under a new set of conditions. But it cannot be expected that individuals should, at their own risk, or rather to their certain loss, introduce a new manufacture, and bear the burthen of carrying it on until the producers have been educated up to the level of those with whom the processes are traditional. A protecting duty, continued for a reasonable time, might1 sometimes be the least inconvenient mode in which the nation can tax itself for the support of such an experiment. But it is essential that the protection should be confined to cases in which there is good ground of assurance that the industry which it fosters will after a time be able to dispense with it; nor should the domestic producers ever be allowed to expect that it will be continued to them beyond the time necessary for a fair trial of what they are capable of accomplishing.

2 The only writer, of any reputation as a political economist, who now [1865] adheres to the Protectionist doctrine, Mr. H. C. Carey, rests its defence, in an economic point of view, principally on two reasons. One is the great saving in cost of carriage, consequent on producing commodities at or very near to the place where they are to be consumed. The whole of the cost of carriage, both on the commodities imported and on those exported in exchange for them, he regards as a direct burthen on the producers, and not, as is obviously the truth, on the consumers. On whomsoever it falls, it is, without doubt, a burthen on the industry of the world. But it is obvious (and that Mr. Carey does not see it, is one of the many surprising things in his book) that the burthen is only borne for a more than equivalent advantage. If the commodity is bought in a foreign country with domestic produce in spite of the double cost of carriage, the fact proves that, heavy as that cost may be, the saving in cost of production outweighs it, and the collective labour of the country is on the whole better remunerated than if the article were produced at home. Cost of carriage is a natural protecting duty, which free trade has no power to abrogate: and unless America gained more by obtaining her manufactures through the medium of her corn and cotton than she loses in cost of carriage, the capital employed in producing corn and cotton in annually increased quantities for the foreign market would turn to manufactures instead. The natural advantages attending a mode of industry in which there is less cost of carriage to pay, can at most be only a justification for a temporary and merely tentative protection. The expenses of production being always greatest at first, it may happen that the home production, though really the most advantageous, may not become so until after a certain duration of pecuniary loss, which it is not to be expected that private speculators should incur in order that their successors may be benefited by their ruin. I have therefore conceded that in a new country a temporary protecting duty may sometimes be economically defensible; on condition, however, that it be strictly limited in point of time, and provision be made that during the latter part of its existence it be on a gradually decreasing scale. Such temporary protection is of the same nature as a patent, and should be governed by similar conditions.

The remaining argument of Mr. Carey in support of the economic benefits of Protectionism, applies only to countries whose exports consist of agricultural produce. He argues, that by a trade of this description they actually send away their soil: the distant consumers not giving back to the land of the country, as home consumers would do, the fertilizing elements which they abstract from it. This argument deserves attention on account of the physical truth on which it is founded; a truth which has only lately come to be understood, but which is henceforth destined to be a permanent element in the thoughts of statesmen, as it must always have been in the destinies of nations. To the question of Protectionism, however, it is irrelevant. That the immense growth of raw produce in America to be consumed in Europe is progresssively exhausting the soil of the Eastern, and even of the older Western States, and that both are already far less productive than formerly, is credible in itself, even if no one bore witness to it. But what I have already said respecting cost of carriage, is true also of the cost of manuring. Free trade does not compel America to export corn: she would cease to do so if it ceased to be to her advantage. As, then, she would not persist in exporting raw produce and importing manufactures any longer than the labour she saved by doing so exceeded what the carriage cost her, so when it became necessary for her to replace in the soil the elements of fertility which she had sent away, if the saving in cost of production were more than equivalent to the cost of carriage and of manure together, manure would be imported; and if not, the export of corn would cease. It is evident that one of these two things would already have taken place, if there had not been near at hand a constant succession of new soils, not yet exhausted of their fertility, the cultivation of which enables her, whether judiciously or not, to postpone the question of manure. As soon as it no longer answers better to break up new soils than to manure the old, America will either become a regular importer of manure, or will, without protecting duties, grow corn for herself only, and manufacturing for herself, will make her manure, as Mr. Carey desires, at home.∗

For these obvious reasons, I hold Mr. Carey's economic arguments for Protectionism to be totally invalid. The economic, however, is far from being the strongest point of his case. American Protectionists often reason extremely ill; but it is an injustice to them to suppose that their Protectionist creed rests upon nothing superior to an economic blunder. Many of them have been led to it, much more by consideration for the higher interests of humanity, than by purely economic reasons. They, and Mr. Carey at their head, deem it a necessary condition of human improvement that towns should abound; that men should combine their labour, by means of interchange—with near neighbours, with people of pursuits, capacities, and mental cultivation different from their own, sufficiently close at hand for mutual sharpening of wits and enlarging of ideas—rather than with people on the opposite side of the globe. They believe that a nation all engaged in the same, or nearly the same, pursuit—a nation all agricultural—cannot attain a high state of civilization and culture. And for this there is a great foundation of reason. If the difficulty can be overcome, the United States, with their free institutions, the universal schooling and their omnipresent press, are the people to do it; but whether this is possible or not is still a problem. So far, however, as it is an object to check the excessive dispersion of the population, Mr. Wakefield has pointed out a better way; to modify the existing method of disposing of the unoccupied lands, by raising the price, instead of lowering it, or giving away the land gratuitously, as is largely done since the passing of the Homestead Act. To cut the knot in Mr. Carey's fashion, by Protectionism, it would be necessary that Ohio and Michigan should be protected against Massachusetts as well as against England: for the manufactories of New England, no more than those of the old country, accomplish his desideratum of bringing a manufacturing population to the doors of the Western farmer. Boston and New York do not supply the want of local towns to the Western prairies, any better than Manchester; and it is as difficult to get back the manure from the one place as from the other.

There is only one part of the Protectionist scheme which requires any further notice: its policy towards colonies, and foreign dependencies; that of compelling them to trade exclusively with the dominant country. A country which thus secures to itself an extra foreign demand for its commodities, undoubtedly gives itself some advantage in the distribution of the general gains of the commercial world, Since, however, it causes the industry and capital of the colony to be diverted from channels, which are proved to be the most productive, inasmuch as they are those into which industry and capital spontaneously tend to flow; there is a loss, on the whole, to the productive powers of the world, and the mother country does not gain so much as she makes the colony lose. If, therefore, the mother country refuses to acknowledge any reciprocity of obligation, she imposes a tribute on the colony in an indirect mode, greatly more oppressive and injurious that the direct. But if, with a more equitable spirit, she submits herself to corresponding restrictions for the benefit of the colony, the result of the whole transaction is the ridiculous one, that each party loses much, in order that the other may gain a little.1

§ 2. Next to the system of Protection, among mischievous interferences with the spontaneous course of industrial transactions, may be noticed certain interferences with contracts. One instance is that of the Usury Laws. These originated in a religious prejudice against receiving interest on money, derived from that fruitful source of mischief in modern Europe, the attempted adaptation to Christianity of doctrines and precepts drawn from the Jewish law. In Mahomedan nations the receiving of interest is formally interdicted, and rigidly abstained from: and Sismondi has noticed, as one among the causes of the industrial inferiority of the Catholic, compared with the Protestant parts of Europe, that the Catholic Church in the middle ages gave its sanction to the same prejudice; which subsists, impaired but not destroyed, wherever that religion is acknowledged. Where law or conscientious scruples prevent lending at interest, the capital which belongs to persons not in business is lost to productive purposes, or can be applied to them only in peculiar circumstances of personal connexion, or by a subterfuge. Industry is thus limited to the capital of the undertakers, and to what they can borrow from persons not bound by the same laws or religion as themselves. In Mussulman countries the bankers and money dealers are either Hindoos, Armenians, or Jews.

In more improved countries, legislation no longer discountenances the receipt of an equivalent for money lent; but it has everywhere interfered with the free agency of the lender and borrower, by fixing a legal limit to the rate of interest, and making the receipt of more than the appointed maximum a penal offence. This restriction, though approved by Adam Smith, has been condemned by all enlightened persons since the triumphant onslaught made upon it by Bentham in his Letters on Usury, which may still be referred to as the best extant writing on the subject.

Legislators may enact and maintain Usury Laws from one of two motives: ideas of public policy, or concern for the interest of the parties in the contract; in this case, of one party only, the borrower. As a matter of policy, the notion may possibly be, that it is for the general good that interest should be low. It is, however, a misapprehension of the causes which influence commercial transactions, to suppose that the rate of interest is really made lower by law, than it would be made by the spontaneous play of supply and demand. If the competition of borrowers, left unrestrained, would raise the rate of interest to six per cent, this proves that at five there would be a greater demand for loans than there is capital in the market to supply. If the law in these circumstances permits no interest beyond five per cent, there will be some lenders, who not choosing to disobey the law, and not being in a condition to employ their capital otherwise, will content themselves with the legal rate: but others, finding that in a season of pressing demand, more may be made of their capital by other means than they are permitted to make by lending it, will not lend it at all; and the loanable capital, already too small for the demand, will be still further diminished. Of the disappointed candidates there will be many at such periods who must have their necessities supplied at any price, and these will readily find a third section of lenders, who will not be averse to join in a violation of the law, either by circuitous transactions partaking of the nature of fraud, or by relying on the honour of the borrower. The extra expense of the roundabout mode of proceeding, and an equivalent for the risk of non-payment and of legal penalties, must be paid by the borrower, over and above the extra interest which would have been required of him by the general state of the market. The laws which were intended to lower the price paid by him for pecuniary accommodation, end thus in greatly increasing it. These laws have also a directly demoralizing tendency. Knowing the difficulty of detecting an illegal pecuniary transaction between two persons, in which no third person is involved, so long as it is the interest of both to keep the secret, legislators have adopted the expedient of tempting the borrower to become the informer, by making the annulment of the debt a part of the penalty for the offence; thus rewarding men for first obtaining the property of others by false promises, and then not only refusing payment, but invoking legal penalties on those who have helped them in their need. The moral sense of mankind very rightly infamizes those who resist an otherwise just claim on the ground of usury, and tolerates such a plea only when resorted to as the best legal defence available against an attempt really considered as partaking of fraud or extortion. But this very severity of public opinion renders the enforcement of the laws so difficult, and the infliction of the penalties so rare, that when it does occur it merely victimizes an individual, and has no effect on general practice.

In so far as the motive of the restriction may be supposed to be, not public policy, but regard for the interest of the borrower, it would be difficult to point out any case in which such tenderness on the legislator's part is more misplaced. A person of sane mind, and of the age at which persons are legally competent to conduct their own concerns, must be presumed to be a sufficient guardian of his pecuniary interests. If he may sell an estate, or grant a release, or assign away all his property, without control from the law, it seems very unnecessary that the only bargain which he cannot make without its intermeddling, should be a loan of money. The law seems to presume that the money-lender, dealing with necessitous persons, can take advantage of their necessities, and exact conditions limited only by his own pleasure. It might be so if there were only one money-lender within reach. But when there is the whole monied capital of a wealthy community to resort to, no borrower is placed under any disadvantage in the market merely by the urgency of his need. If he cannot borrow at the interest paid by other people, it must be because he cannot give such good security: and competition will limit the extra demand to a fair equivalent for the risk of his proving insolvent. Though the law intends favour to the borrower, it is to him above all that injustice is, in this case, done by it. What can be more unjust than that a person who cannot give perfectly good security, should be prevented from borrowing of persons who are willing to lend money to him, by their not being permitted to receive the rate of interest which would be a just equivalent for their risk? Through the mistaken kindness of the law, he must either go without the money which is perhaps necessary to save him from much greater losses, or be driven to expedients of a far more ruinous description, which the law either has not found it possible, or has not happened, to interdict.

Adam Smith rather hastily expressed the opinion, that only two kinds of persons, “prodigals and projectors,” could require to borrow money at more than the market rate of interest. He should have included all persons who are in any pecuniary difficulties, however temporary their necessities may be. It may happen to any person in business, to be disappointed of the resources on which he had calculated for meeting some engagement, the non-fulfilment of which on a fixed day would be bankruptcy. In periods of commercial difficulty, this is the condition of many prosperous mercantile firms, who become competitors for the small amount of disposable capital which, in a time of general distrust, the owners are willing to part with. Under the English usury laws, now happily abolished, the limitations imposed by those laws were felt as a most serious aggravation of every commercial crisis. Merchants who could have obtained the aid they required at an interest of seven or eight per cent for short periods, were obliged to give 20 or 30 per cent, or to resort to forced sales of goods at a still greater loss. Experience having obtruded these evils on the notice of Parliament, the sort of compromise took place, of which English legislation affords so many instances, and which helps to make our laws and policy the mass of inconsistency that they are. The law was reformed as a person reforms a tight shoe, who cuts a hole in it where it pinches hardest, and continues to wear it. Retaining the erroneous principle as a general rule, Parliament allowed an exception in the case in which the practical mischief was most flagrant. It left the usury laws unrepealed, but exempted bills of exchange, of not more than three months date, from their operation. Some years afterwards the laws were repealed in regard to all other contracts, but left in force as to all those which relate to land. Not a particle of reason could be given for making this extraordinary distinction: but the “agricultural mind” was of opinion that the interest on mortgages, though it hardly ever came up to the permitted point, would came up to a still higher point; and the usury laws were maintained that the landlords might, as they thought, be enabled to borrow below the market rate, as the corn-laws were kept up that the same class might be able to sell corn above the market rate. The modesty of the pretension was quite worthy of the intelligence which could think that the end aimed at was in any way forwarded by the means used.

With regard to the “prodigals and projectors” spoken of by Adam Smith; no law can prevent a prodigal from ruining himself, unless it lays him or his property under actual restraint, according to the unjustifiable practice of the Roman Law and some of the Continental systems founded on it. The only effect of usury laws upon a prodigal, is to make his ruin rather more expeditious, by driving him to a disreputable class of money-dealers, and rendering the conditions more onerous by the extra risk created by the law. As for projectors (a term, in its unfavourable sense, rather unfairly applied to every person who has a project), such laws may put a veto upon the prosecution of the most promising enterprise, when planned, as it generally is, by a person who does not possess capital adequate to its successful completion. Many of the greatest improvements were at first looked shyly on by capitalists, and had to wait long before they found one sufficiently adventurous to be the first in a new path: many years elapsed before Stephenson could convince even the enterprising mercantile public of Liverpool and Manchester of the advantage of substituting railways for turnpike roads; and plans on which great labour and large sums have been expended with little visible result (the epoch in their progress when predictions of failure are most rife) may be indefinitely suspended, or altogether dropped, and the outlay all lost, if, when the original funds are exhausted, the law will not allow more to be raised on the terms on which people are willing to expose it to the chances of an enterprise not yet secure of success.1

§ 3. Loans are not the only kind of contract, of which governments have thought themselves qualified to regulate the conditions better than the persons interested. There is scarcely any commodity which they have not, at some place or time, endeavoured to make either dearer or cheaper than it would be if left to itself. The most plausible case for artificially cheapening a commodity, is that of food. The desirableness of the object is in this case undeniable. But since the average price of food, like that of other things, conforms to the cost of production, with the addition of the usual profit; if this price is not expected by the farmer, he will, unless compelled by law, produce no more than he requires for his own consumption: and the law, therefore, if absolutely determined to have food cheaper, must substitute, for the ordinary motives to cultivation, a system of penalties. If it shrinks from doing this, it has no resource but that of taxing the whole nation, to give a bounty or premium to the grower or importer of corn, thus giving everybody cheap bread at the expense of all: in reality a largess to those who do not pay taxes, at the expense of those who do; one of the forms of a practice essentially bad, that of converting the working classes into unworking classes by making them a present of subsistence.

It is not, however, so much the general or average price of food, as its occasional high price in times of emergency, which governments have studied to reduce. In some cases, as for example the famous “maximum” of the revolutionary government of 1793, the compulsory regulation was an attempt by the ruling powers to counteract the necessary consequences of their own acts; to scatter an indefinite abundance of the circulating medium with one hand, and keep down prices with the other; a thing manifestly impossible under any régime except one of unmitigated terror. In case of actual scarcity, governments are often urged, as they were in the Irish emergency of 1847, to take measures of some sort for moderating the price of food. But the price of a thing cannot be raised by deficiency of supply, beyond what is sufficient to make a corresponding reduction of the consumption; and if a government prevents this reduction from being brought about by a rise of price, there remains no mode of effecting it unless by taking possession of all the food, and serving it out in rations, as in a besieged town. In a real scarcity, nothing can afford general relief, except a determination by the richer classes to diminish their own consumption. If they buy and consume their usual quantity of food, and content themselves with giving money, they do no good. The price is forced up until the poorest competitors have no longer the means of competing, and the privation of food is thrown exclusively upon the indigent, the other classes being only affected pecuniarily. When the supply is insufficient, somebody must consume less, and if every rich person is determined not to be that somebody, all they do by subsidizing their poor competitors is to force up the price so much the higher, with no effect but to enrich the corn-dealers, the very reverse of what is desired by those who recommend such measures. All that governments can do in these emergencies is to counsel a general moderation in consumption, and to interdict such kinds of it as are not of primary importance. Direct measures at the cost of the state, to procure food from a distance, are expedient when from peculiar reasons the thing is not likely to be done by private speculation. In any other case they are a great error. Private speculators, will not, in such cases, venture to compete with the government; and though a government can do more than any one merchant, it cannot do nearly so much as all merchants.

§ 4. Governments, however, are oftener chargeable with having attempted, too successfully, to make things dear, than with having aimed by wrong means at making them cheap. The usual instrument for producing artificial dearness is monopoly. To confer a monopoly upon a producer or leader, or upon a set of producers or dealers not too numerous to combine, is to give them the power of levying any amount of taxation on the public, for their individual benefit, which will not make the public forego the use of the commodity. When the sharers in the monopoly are so numerous and so widely scattered that they are prevented from combining, the evil is considerably less: but even then the competition is not so active among a limited as among an unlimited number. Those who feel assured of a fair average proportion in the general business are seldom eager to get a larger share by foregoing a portion of their profits. A limitation of competition, however partial, may have mischievous effects quite disproportioned to the apparent cause. The mere exclusion of foreigners, from a branch of industry open to the free competition of every native, has been known, even in England, to render that branch a conspicuous exception to the general industrial energy of the country. The silk manufacture of England remained far behind that of other countries of Europe, so long as the foreign fabrics were prohibited. In addition to the tax levied for the profit, real or imaginary, of the monopolists, the consumer thus pays an additional tax for their laziness and incapacity. When relieved from the immediate stimulus of competition, producers and dealers grow indifferent to the dictates of their ultimate pecuniary interest; preferring to the most hopeful prospects, the present ease of adhering to routine. A person who is already thriving, seldom puts himself out of his way to commence even a lucrative improvement, unless urged by the additional motive of fear lest some rival should supplant him by getting possession of it before him.

The condemnation of monopolies ought not to extend to patents, by which the originator of an improved process is allowed to enjoy, for a limited period, the exclusive privilege of using his own improvement. This is not making the commodity dear for his benefit, but merely postponing a part of the increased cheapness which the public owe to the inventor, in order to compensate and reward him for the service. That he ought to be both compensated and rewarded for it, will not be denied, and also that if all were at once allowed to avail themselves of his ingenuity, without having shared the labours or the expenses which he had to incur in bringing his idea into a practical shape, either such expenses and labours would be undergone by nobody except very opulent and very public-spirited persons, or the state must put a value on the service rendered by an inventor, and make him a pecuniary grant. This has been done in some instances, and may be done without inconvenience in cases of very conspicuous public benefit; but in general an exclusive privilege, of temporary duration, is preferable; because it leaves nothing to any one's discretion; because the reward conferred by it depends upon the invention's being found useful, and the greater the usefulness the greater the reward; and because it is paid by the very persons to whom the service is rendered, the consumers of the commodity. So decisive, indeed, are these considerations, that if the system of patents were abandoned for that of rewards by the state, the best shape which these could assume would be that of a small temporary tax, imposed for the inventor's benefit, on all persons making use of the invention. 1 To this, however, or to any other system which would vest in the state the power of deciding whether an inventor should derive any pecuniary advantage from the public benefit which he confers, the objections are evidently stronger and more fundamental that the strongest which can possibly be urged against patents. It is generally admitted that the present Patent Laws need much improvement; but in this case, as well as in the closely analogous one of Copyright, it would be a gross immorality in the law to set everybody free to use a person's work without his consent, and without giving him an equivalent. I have seen with real alarm several recent attempts, in quarters carrying some authority, to impugn the principle of patents altogether; attempts which, if practically successful, would enthrone free stealing under the prostituted name of free trade, and make the men of brains, still more than at present, the needy retainers and dependents of the men of money-bags.

§ 5. I pass to another kind of government interference, in which the end and the means are alike odious, but which existed in England until not more than a generation ago, and in France up to the year 1864.2 I mean the laws against combinations of workmen to raise wages; laws enacted and maintained for the declared purpose of keeping wages low, as the famous Statute of Labourers was passed by a legislature of employers, to prevent the labouring class, when its numbers had been thinned by a pestilence, from taking advantage of the diminished competition to obtain higher wages. Such laws exhibit the infernal spirit of the slave master, when to retain the working classes in avowed slavery has ceased to be practicable.

If it were possible for the working classes, by combining among themselves, to raise or keep up the general rate of wages, it needs hardly be said that this would be a thing not to be punished, but to be welcomed and rejoiced at. Unfortunately the effect is quite beyond attainment by such means. The multitudes who compose the working class are too numerous and too widely scattered to combine at all, much more to combine effectually. If they could do so, they might doubtless succeed in diminishing the hours of labour, and obtaining the same wages for less work. They would also have a limited power of obtaining, by combination, an increase of general wages at the expense of profits. But the limits of this power are narrow; and were they to attempt to strain it beyond those limits, this could only be accomplished by keeping a part of their number permanently out of employment.1 As support from public charity would of course be refused to those who could get work and would not accept it, they would be thrown for support upon the trades union of which they were members; and the workpeople collectively would be no better off than before, having to support the same numbers out of the same aggregate wages. In this way, however, the class would have its attention forcibly drawn to the fact of a superfluity of numbers, and to the necessity, if they would have high wages, of proportioning the supply of labour to the demand.

Combinations to keep up wages are sometimes successful, in trades where the workpeople are few in number, and collected in a small number of local centres. It is questionable if combinations ever had the smallest effect on the permanent remuneration of spinners or weavers; but the journeymen type-founders, by a close combination, are able, it is said, to keep up a rate of wages much beyond that which is usual in employments of equal hardness and skill; and even the tailors, a much more numerous class, are understood to have had, to some extent, a similar success. A rise of wages, thus confined to particular employments, is not (like a rise of general wages) defrayed from profits, but raises the value and price of the particular article, and falls on the consumer; the capitalist who produces the commodity being only injured in so far as the high price tends to narrow the market; and not even then, unless it does so in a greater ratio than that of the rise of price: for though, at higher wages, he employs, with a given capital, fewer workpeople, and obtains less of the commodity, yet if he can sell the whole of this diminished quantity at the higher price, his profits are as great as before.

This partial rise of wages, if not gained at the expense of the remainder of the working class, ought not to be regarded as an evil.1 The consumer, indeed, must pay for it; but cheapness of goods is desirable only when the cause of it is that their production costs little labour, and not when occasioned by that labour's being ill remunerated. It may appear, indeed, at first sight, that the high wages of the type.founders (for example) are obtained at the general cost of the labouring class. This high remuneration either causes fewer persons to find employment in the trade, or if not, must lead to the investment of more capital in it, at the expense of other trades: in the first case, it throws an additional number of labourers on the general market; in the second, it withdraws from that market a portion of the demand: effects, both of which are injurious to the working classes. Such, indeed, would really be the result of a successful combination in a particular trade or trades, for some time after its formation; but when it is a permanent thing, the principles so often insisted upon in this treatise, show that it can have no such effect. The habitual earnings of the working classes at large can be affected by nothing but the habitual requirements of the labouring people: these indeed may be altered, but while they remain the same, wages never fall permanently below the standard of these requirements, and do not long remain above that standard. If there had been no combinations in particular trades, and the wages of those trades had never been kept above the common level, there is no reason to suppose that the common level would have been at all higher than it now is. There would merely have been a greater number of people altogether, and a smaller number of exceptions to the ordinary low rate of wages.

1 If, therefore, no improvement were to be hoped for in the general circumstances of the working classes, the success of a portion of them, however small, in keeping their wages by combination above the market rate, would be wholly a matter of satisfaction. But when the elevation of the character and condition of the entire body has at last become a thing not beyond the reach of rational effort, it is time that the better paid classes of skilled artisans should seek their own advantage in common with, and not by the exclusion of, their fellow-labourers. While they continue to fix their hopes on hedging themselves in against competition, and protecting their own wages by shutting out others from access to their employment, nothing better can be expected from them than that total absence of any large and generous aims, that almost open disregard of all other objects than high wages and little work for their own small body, which were so deplorably evident in the proceedings and manifestoes of the Amalgamated Society of Engineers during their quarrel with their employers. Success, even if attainable, in raising up a protected class of working people, would now be a hindrance, instead of a help, to the emancipation of the working classes at large.

But though combinations to keep up wages are seldom effectual, and when effectual, are, for the reasons which I have assigned, seldom desirable, the right of making the attempt is one which cannot be refused to any portion of the working population without great injustice, or without the probability of fatally misleading them respecting the circumstances which determine their condition. So long as combinations to raise wages were prohibited by law, the law appeared to the operatives to be the real cause of the low wages which there was no denying that it had done its best to produce. Experience of strikes has been the best teacher of the labouring classes on the subject of the relation between wages and the demand and supply of labour: and it is most important that this course of instruction should not be disturbed.

2 It is a great error to condemn, per se and absolutely, either trade unions or the collective action of strikes. Even assuming that a strike must inevitably fail whenever it attempts to raise wages above that market rate which is fixed by the demand and supply; demand and supply are not physical agencies, which thrust a given amount of wages into a labourer's hand without the participation of his own will and actions. The market rate is not fixed for him by some self-acting instrument, but is the result of bargaining between human beings—of what Adam Smith calls “the higgling of the market;” and those who do not “higgle” will long continue to pay, even over a counter, more than the market price for their purchases. Still more might poor labourers who have to do with rich employers, remain long without the amount of wages which the demand for their labour would justify, unless, in vernacular phrase, they stood-out for it, and how can they stand out for terms without organized concert? What chance would any labourer have, who struck singly for an advance of wages? How could he even know whether the state of the market admitted of a rise, except by consultation with his fellows, naturally leading to concerted action? I do not hesitate to say that associations of labourers, of a nature similar to trades unions, far from being a hindrance to a free market for labour, are the necessary instrumentality of that free market; the indispensable means of enabling the sellers of labour to take due care of their own interests under a system of competition. There is an ulterior consideration of much importance, to which attention was for the first time drawn by Professor Fawcett, in an article in the Westminster Review. Experience has at length enabled the more intelligent trade to take a tolerably correct measure of the circumstances on which the success of a strike for an advance of wages depends. The workmen are now nearly as well informed as the master, of the state of the market for his commodities; they can calculate his gains and his expenses, they know when his trade is or is not prosperous, and only when it is, are they ever again likely to strike for higher wages; which wages their known readiness to strike makes their employers for the most part willing, in that case, to concede. The tendency, therefore, of this state of things is to make a rise of wages in any particular trade usually consequent upon a rise of profits, which, as Mr. Fawcett observes, is a commencement of that regular participation of the labourers in the profits derived from their labour, every tendency to which, for the reasons stated in a previous chapter,∗ it is so important to encourage, since to it we have chiefly to look for any radical improvement in the social and economical relations between labour and capital. Strikes, therefore, and the trade societies which render strikes possible, are for these various reasons not a mischievous, but on the contrary, a valuable part of the existing machinery of society.

It is, however, an indispensable condition of tolerating combinations, that they should be voluntary. No severity, necessary to the purpose, is too great to be employed against attempts to compel workmen to join a union, or take part in a strike by threats or violence. Mere moral compulsion, by the expression of opinion, the law ought not to interfere with; it belongs to more enlightened opinion to restrain it, by rectifying the moral sentiments of the people. Other questions arise when the combination, being voluntary, proposes to itself objects really contrary to the public good. High wages and short hours are generally good objects, or, at all events, may be so:1 but in many trades unions, it is among the rules that there shall be no task work, or no difference of pay between the most expert workmen and the most unskilful, or that no member of the union shall earn more than a certain sum per week, in order that there may be more employment for the rest; 2 and the abolition of piece work, under more or less of modification, held a conspicuous place among the demands of the Amalgamated Society. These are combinations to effect objects which are pernicious. Their success, even when only partial, is a public mischief; and were it complete, would be equal in magnitude to almost any of the evils arising from bad economical legislation. Hardly anything worse can be said of the worst laws on the subject of industry and its remuneration, consistent with the personal freedom of the labourer, than that they place the energetic and the idle, the skilful and the incompetent, on a level: and this, in so far as it is in itself possible, it is the direct tendency3 of the regulations of these unions to do. 4 It does not, however, follow as a consequence that the law would be warranted in making the formation of such associations illegal and punishable. Independently of all considerations of constitutional liberty, the best interests of the human race imperatively require that all economical experiments, voluntarily undertaken, should have the fullest licence, and that force and fraud should be the only means of attempting to benefit themselves, which are interdicted to the less fortunate classes of the community.∗

§ 6. Among the modes of undue exercise of the power of government on which I have commented in this chapter, I have included only such as rest on theories which have still more or less of footing in the most enlightened countries. I have not spoken of some which have done still greater mischief in times not long past, but which are now generally given up, at least in theory, though enough of them still remains in practice to make it impossible as yet to class them among exploded errors.

The notion, for example, that a government should choose opinions for the people, and should not suffer any doctrines in politics, morals, law, or religion, but such as it approves, to be printed or publicly professed, may be said to be altogether abandoned as a general thesis. It is now well understood that a régime of this sort is fatal to all prosperity, even of an economical kind: that the human mind when prevented either by fear of the law or by fear of opinion from exercising its faculties freely on the most important subjects, acquires a general torpidity and imbecility, by which, when they reach a certain point, it is disqualified from making any considerable advances even in the common affairs of life, and which, when greater still, make it gradually lose even its previous attainments. There cannot be a more decisive example than Spain and Portugal, for two centuries after the Reformation. The decline of those countries in national greatness, and even in material civilization, while almost all the other nations of Europe were uninterruptedly advancing, has been ascribed to various causes, but there is one which lies at the foundation of them all: the Holy Inquisition, and the system of mental slavery of which it is the symbol.

Yet although these truths are very widely recognized, and freedom both of opinion and of discussion is admitted as an axiom in all free countries, this apparent liberality and tolerance has acquired so little of the authority of a principle, that it is always ready to give way to the dread or horror inspired by some particular sort of opinions. Within the last fifteen or twenty years,1 several individuals have suffered imprisonment, for the public profession, sometimes in a very temperate manner, of disbelief in religion; and it is probable that both the public and the government, at the first panic which arises on the subject of Chartism or Communism, will fly to similar means for checking the propagation of democratic or anti-property doctrines. In this country, however, the effective restraints on mental freedom proceed much less from the law or the government, than from the intolerant temper of the national mind; arising no longer from even as respectable a source as bigotry or fanaticism, but rather from the general habit, both in opinion and conduct, of making adherence to custom the rule of life, and enforcing it, by social penalties, against all persons who, without a party to back them, assert their individual independence.

Book V, Chapter XI: Of the grounds and limits of the laisser-faire or non-interference principle

CHAPTER XI: of the grounds and limits of the laisser-faire or non-interference principle

§ 1. We have now reached the last part of our undertaking; the discussion, so far as suited to this treatise (that is, so far as it is a question of principle, not detail) of the limits of the province of government: the question, to what objects governmental intervention in the affairs of society may or should extend, over and above those which necessarily appertain to it. No subject has been more keenly contested in the present age: the contest, however, has chiefly taken place round certain select points, with only flying excursions into the rest of the field. Those indeed who have discussed any particular question of government interference, such as state education (spiritual or secular), regulation of hours of labour, a public provision for the poor, &c., have often dealt largely in general arguments, far outstretching the special application made of them, and have shown a sufficiently strong bias either in favour of letting things alone, or in favour of meddling; but have seldom declared, or apparently decided in their own minds, how far they would carry either principle. The supporters of interference have been content with asserting a general right and duty on the part of government to intervene, wherever its intervention would be useful: and when those who have been called the laisser-faire school have attempted any definite limitation of the province of government, they have usually restricted it to the protection of person and property against force and fraud; a definition to which neither they nor any one else can deliberately adhere, since it excludes, as has been shown in a preceding chapter,∗ some of the most indispensable and unanimously recognized of the duties of government.

Without professing entirely to supply this deficiency of a general theory, on a question which does not, as I conceive, admit of any universal solution, I shall attempt to afford some little aid towards the resolution of this class of questions as they arise, by examining, in the most general point of view in which the subject can be considered, what are the advantages, and what the evils or inconveniences, of government interference.

We must set out by distinguishing between two kinds of intervention by the government, which, though they may relate to the same subject, differ widely in their nature and effects, and require, for their justification, motives of a very different degree of urgency. The intervention may extend to controlling the free agency of individuals. Government may interdict all persons from doing certain things; or from doing them without its authorization; or may prescribe to them certain things to be done, or a certain manner of doing things which it is left optional with them to do or to abstain from. This is the authoritative interference of government. There is another kind of intervention which is not authoritative: when a government, instead of issuing a command and enforcing it by penalties, adopts the course so seldom resorted to by governments, and of which such important use might be made, that of giving advice and promulgating information; or when, leaving individuals free to use their own means of pursuing any object of general interest, the government, not meddling with them, but not trusting the object solely to their care, establishes, side by side with their arrangements, an agency of its own for a like purpose. Thus, it is one thing to maintain a Church Establishment, and another to refuse toleration to other religions, or to persons professing no religion. It is one thing to provide schools or colleges, and another to require that no person shall act as an instructor of youth without a government licence. There might be a national bank, or a government manufactory, without any monopoly against private banks and manufactories. There might be a post-office, without penalties against the conveyance of letters by any other means. There may be a corps of government engineers for civil purposes, while the profession of a civil engineer is free to be adopted by every one. There may be public hospitals, without any restriction upon private medical or surgical practice.

§ 2. It is evident, even at first sight, that the authoritative form of government intervention has a much more limited sphere of legitimate action than the other. It requires a much stronger necessity to justify it in any case; while there are large departments of human life from which it must be unreservedly and imperiously excluded. Whatever theory we adopt respecting the foundation of the social union, and under whatever political institutions we live, there is a circle around every individual human being which no government, be it that of one, of a few, or of the many, ought to be permitted to overstep: there is a part of the life of every person who has come to years of discretion, within which the individuality of that person ought to reign uncontrolled either by any other individual or by the public collectively. That there is, or ought to be, some space in human existence thus entrenched around, and sacred from authoritative intrusion, no one who professes the smallest regard to human freedom or dignity will call in question: the point to be determined is, where the limit should be placed; how large a province of human life this reserved territory should include. I apprehend that it ought to include all that part which concerns only the life, whether inward or outward, of the individual, and does not affect the interests of others, or affects them only through the moral influence of example. With respect to the domain of the inward consciousness, the thoughts and feelings, and as much of external conduct as is personal only, involving no consequences, none at least of a painful or injurious kind, to other people: I hold that it is allowable in all, and in the more thoughtful and cultivated often a duty, to assert and promulgate, with all the force they are capable of, their opinion of what is good or bad, admirable or contemptible, but not to compel others to conform to that opinion; whether the force used is that of extra-legal coercion, or exerts itself by means of the law.

Even in those portions of conduct which do affect the interest of others, the onus of making out a case always lies on the defenders of legal prohibitions. It is not a merely constructive or presumptive injury to others, which will justify the interference of law with individual freedom. To be prevented from doing what one is inclined to, from acting according to one's own judgment of what is desirable, is not only always irksome, but always tends, pro tanto, to starve the development of some portion of the bodily or mental faculties, either sensitive or active; and unless the conscience of the individual goes freely with the legal restraint, it partakes, either in a great or in a small degree, of the degradation of slavery. Scarcely any degree of utility, short of absolute necessity, will justify a prohibitory regulation, unless it can also be made to recommend itself to the general conscience; unless persons of ordinary good intentions either believe already, or can be induced to believe, that the thing prohibited is a thing which they ought not to wish to do.

It is otherwise with governmental interferences which do not restrain individual free agency. When a government provides means of fulfilling a certain end, leaving individuals free to avail themselves of different means if in their opinion preferable, there is no infringement of liberty, no irksome or degrading restraint. One of the principal objections to government interference is then absent. There is, however, in almost all forms of government agency, one thing which is compulsory. the provision of the pecuniary means. These are derived from taxation; or, if existing in the form of an endowment derived from public property, they are still the cause of as much compulsory taxation as the sale or the annual proceeds of the property would enable to be dispensed with.∗ And the objection necessarily attaching to compulsory contributions, is almost always greatly aggravated by the expensive precautions and onerous restrictions, which are indispensable to prevent evasion of a compulsory tax.

§ 3. A second general objection to government agency, is that every increase of the functions devolving on the government is an increase of its power, both in the form of authority, and still more, in the indirect form of influence. The importance of this consideration, in respect of political freedom, has in general been quite sufficiently recognized, at least in England, but many, in latter times, have been prone to think that limitation of the powers of the government is only essential when the government itself is badly constituted; when it does not represent the people, but is the organ of a class, or coalition of classes: and that a government of sufficiently popular constitution might be trusted with any amount of power over the nation, since its power would be only that of the nation over itself. This might be true, if the nation, in such cases, did not practically mean a mere majority of the nation, and if minorities were only capable of oppressing, but not of being oppressed. Experience, however, proves that the depositaries of power who are mere delegates of the people, that is of a majority, are quite as ready (when they think they can count on popular support) as any organs of oligarchy to assume arbitrary power, and encroach unduly on the liberty of private life. The public collectively is abundantly ready to impose, not only its generally narrow views of its interests, but its abstract opinions, and even its tastes, as laws binding upon individuals. And the present civilization tends so strongly to make the power of persons acting in masses the only substantial power in society, that there never was more necessity for surrounding individual independence of thought, speech, and conduct, with the most powerful defences, in order to maintain that originality of mind and individuality of character, which are the only source of any real progress, and of most of the qualities which make the human race much superior to any herd of animals. Hence it is no less important in a democratic than in any other government, that all tendency on the part of public authorities to stretch their interference, and assume a power of any sort which can easily be dispensed with, should be regarded with unremitting jealousy. Perhaps this is even more important in a democracy than in any other form of political society; because where public opinion is sovereign, an individual who is oppressed by the sovereign does not, as in most other states of things, find a rival power to which he can appeal for relief, or, at all events, for sympathy.

§ 4. A third general objection to government agency, rests on the principle of the division of labour. Every additional function undertaken by the government, is a fresh occupation imposed upon a body already overcharged with duties. A natural consequence is that most things are ill done; much not done at all, because the government is not able to do it without delays which are fatal to its purpose; that the more troublesome and less showy, of the functions undertaken, are postponed or neglected, and an excuse is always ready for the neglect; while the heads of the administration have their minds so fully taken up with official details, in however perfunctory a manner superintended, that they have no time or thought to spare for the great interests of the state, and the preparation of enlarged measures of social improvement.

But these inconveniences, though real and serious, result much more from the bad organization of governments, than from the extent and variety of the duties undertaken by them. Government is not a name for some one functionary, or definite number of functionaries: there may be almost any amount of division of labour within the administrative body itself. The evil in question is felt in great magnitude under some of the governments of the Continent, where six or eight men, living at the capital and known by the name of ministers, demand that the whole public business of the country shall pass, or be supposed to pass, under their individual eye. But the inconvenience would be reduced to a very manageable compass, in a country in which there was a proper distribution of functions between the central and local officers of government, and in which the central body was divided into a sufficient number of departments. When Parliament thought it expedient to confer on the government an inspecting and partially controlling authority over railways, it did not add railways to the department of the Home Minister, but created a Railway Board. When it determined to have a central superintending authority for pauper administration, it established the Poor Law Commission. There are few countries in which a greater number of functions are discharged by public officers, than in some states of the American Union, particularly the New England States; but the division of labour in public business is extreme; most of these officers being not even amenable to any common superior, but performing their duties freely, under the double check of election by their townsmen, and civil as well as criminal responsibility to the tribunals.

It is, no doubt, indispensable to good government that the chiefs of the administration, whether permanent or temporary, should extend a commanding, though general, view over the ensemble of all the interests confided, in any degree, to the responsibility of the central power. But with a skilful internal organization of the administrative machine, leaving to subordinates, and as far as possible, to local subordinates, not only the execution, but to a greater degree the control, of details; holding them accountable for the results of their acts rather than for the acts themselves, except where these come within the cognizance of the tribunals; taking the most effectual securities for honest and capable appointments; opening a broad path to promotion from the inferior degrees of the administrative scale to the superior; leaving, at each step, to the functionary, a wider range in the origination of measures, so that, in the highest grade of all, deliberation might be concentrated on the great collective interests of the country in each department; if all this were done, the government would not probably be overburthened by any business, in other respects fit to be undertaken by it; though the overburthening would remain as a serious addition to the inconveniences incurred by its undertaking any which was unfit.

§ 5. But though a better organization of governments would greatly diminish the force of the objection to the mere multiplication of their duties, it would still remain true that in all the more advanced communities, the great majority of things are worse done by the intervention of government, than the individuals most interested in the matter would do them, or cause them to be done, if left to themselves. The grounds of this truth are expressed with tolerable exactness in the popular dictum, that people understand their own business and their own interests better, and care for them more, than the government does, or can be expected to do. This maxim holds true throughout the greatest part of the business of life, and wherever it is true we ought to condemn every kind of government intervention that conflicts with it. The inferiority of government agency, for example, in any of the common operations of industry or commerce, is proved by the fact, that it is hardly ever able to maintain.. itself in equal competition with individual agency, where the individuals possess the requisite degree of industrial enterprise, and can command the necessary assemblage of means. All the facilities which a government enjoys of access to information; all the means which it possesses of remunerating, and therefore of commanding, the best available talent in the market—are not an equivalent for the one great disadvantage of an inferior interest in the result.

It must be remembered, besides, that even if a government were superior in intelligence and knowledge to any single individual in the nation, it must be inferior to all the individuals of the nation taken together. It can neither possess in itself, nor enlist in its service, more than a portion of the acquirements and capacities which the country contains, applicable to any given purpose. There must be many persons equally qualified for the work with those whom the government employs, even if it selects its instruments with no reference to any consideration but their fitness. Now these are the very persons into whose hands, in the cases of most common occurrence, a system of individual agency naturally tends to throw the work, because they are capable of doing it better or1 on cheaper terms than any other persons. So far as this is the case, it is evident that government, by excluding or even by superseding individual agency, either substitutes a less qualified instrumentality for one better qualified, or at any rate substitutes its own mode of accomplishing the work, for all the variety of modes which would be tried by a number of equally qualified persons aiming at the same end; a competition by many degrees more propitious to the progress of improvement than any uniformity of system.

§ 6. I have reserved for the last place one of the strongest of the reasons against the extension of government agency, Even if the government could comprehend within itself, in each department, all the most eminent intellectual capacity and active talent of the nation, it would not be the less desirable that the conduct of a large portion of the affairs of the society should be left in the hands of the persons immediately interested in them. The business of life is an essential part of the practical education of a people; without which, book and school instruction, though most necessary and salutary, does not suffice to qualify them for conduct, and for the adaptation of means to ends. Instruction is only one of the desiderata of mental improvement; another, almost as indispensable, is a vigorous exercise of the active energies; labour, contrivance, judgment, self-control: and the natural stimulus to these is the difficulties of life. This doctrine is not to be confounded with the complacent optimism, which represents the evils of life as desirable things, because they call forth qualities adapted to combat with evils. It is only because the difficulties exist, that the qualities which combat with them are of any value. As practical beings it is our business to free human life from as many as possible of its difficulties, and not to keep up a stock of them as hunters preserve game, for the exercise of pursuing it. But since the need of active talent and practical judgment in the affairs of life can only be diminished, and not, even on the most favourable supposition, done away with, it is important that those endowments should be cultivated not merely in a select few, but in all, and that the cultivation should be more varied and complete than most persons are able to find in the narrow sphere of their merely individual interests. A people among whom there is no habit of spontaneous action for a collective interest—who look habitually to their government to command or prompt them in all matters of joint concern—who expect to have everything done for them, except what can be made an affair of mere habit and routine—have their faculties only half developed; their education is defective in one of its most important branches.

Not only is the cultivation of the active faculties by exercise, diffused through the whole community, in itself one of the most valuable of national possessions: it is rendered, not less, but more necessary, when a high degree of that indispensable culture is systematically kept up in the chiefs and functionaries of the state. There cannot be a combination of circumstances more dangerous to human welfare, than that in which intelligence and talent are maintained at a high standard within a governing corporation, but starved and discouraged outside the pale. Such a system, more completely than any other, embodies the idea of despotism, by arming with intellectual superiority as an additional weapon those who have already the legal power. It approaches as nearly as the organic difference between human beings and other animals admits, to the government of sheep by their shepherd, without anything like so strong an interest as the shepherd has in the thriving condition of the flock. The only security against political slavery is the check maintained over governors by the diffusion of intelligence, activity, and public spirit among the governed. Experience proves the extreme difficulty of permanently keeping up a sufficiently high standard of those qualities; a difficulty which increases, as the advance of civilization and security removes one after another of the hardships, embarrassments, and dangers against which individuals had formerly no resource but in their own strength, skill, and courage. It is therefore of supreme importance that all classes of the community, down to the lowest, should have much to do for themselves; that as great a demand should be made upon their intelligence and virtue as it is in any respect equal to; that the government should not only leave as far as possible to their own faculties the conduct of whatever concerns themselves alone, but should suffer them, or rather encourage them, to manage as many as possible of their joint concerns by voluntary co-operation; since this discussion and management of collective interests is the great school of that public spirit, and the great source of that intelligence of public affairs, which are always regarded as the distinctive character of the public of free countries.

A democratic constitution, not supported by democratic institutions in detail, but confined to the central government, not only is not political freedom, but often creates a spirit precisely the reverse, carrying down to the lowest grade in society the desire and ambition of political domination. In some countries the desire of the people is for not being tyrannized over, but in others it is merely for an equal chance to everybody of tyrannizing. Unhappily this last state of the desires is fully as natural to mankind as the former, and in many of the conditions even of civilized humanity is far more largely exemplified. In proportion as the people are accustomed to manage their affairs by their own active intervention, instead of leaving them to the government, their desires will turn to repelling tyranny, rather than to tyrannizing: while in proportion as all real initiative and direction resides in the government, and individuals habitually feel and act as under its perpetual tutelage, popular institutions develop in them not the desire of freedom, but an unmeasured appetite for place and power: diverting the intelligence and activity of the country from its principal business to a wretched competition for the selfish prizes and the petty vanities of office.

§ 7. The preceding are the principal reasons, of a general character, in favour of restricting to the narrowest compass the intervention of a public authority in the business of the community: and few will dispute the more than sufficiency of these reasons, to throw, in every instance, the burthen of making out a strong case, not on those who resist, but on those who recommend, government interference. Laisser-faire, in short, should be the general practice: every departure from it, unless required by some great good, is a certain evil.

The degree in which the maxim, even in the cases to which it is most manifestly applicable, has heretofore been infringed by governments, future ages will probably have difficulty in crediting. Some idea may be formed of it from the description of M. Dunoyer∗ of the restraints imposed on the operations of manufacture under the old government of France, by the meddling and regulating spirit of legislation.

“The State exercised over manufacturing industry the most unlimited and arbitrary jurisdiction. It disposed without scruple of the resources of manufacturers: it decided who should be allowed to work, what things it should be permitted to make, what materials should be employed, what processes followed, what forms should be given to productions. It was not enough to do well, to do better; it was necessary to do according to the rules. Everybody knows the regulation of 1670 which prescribed to seize and nail to the pillory, with the names of the makers, goods not conformable to the rules, and which, on a second repetition of the offence, directed that the manufacturers themselves should be attached also. Not the taste of the consumers, but the commands of the law must be attended to. Legions of inspectors, commissioners, controllers, jurymen, guardians, were charged with its execution. Machines were broken, products were burned when not conformable to the rules: improvements were punished; inventors were fined. There were different sets of rules for goods destined for home consumption and for those intended for exportation. An artizan could neither choose the place in which to establish himself, nor work at all seasons, nor work for all customers. There exists a decree of March 30, 1700, which limits to eighteen towns the number of places where stockings might be woven. A decree of June 18, 1723, enjoins the manufacturers at Rouen to suspend their works from the 1st of July to the 15th of September, in order to facilitate the harvest. Louis XIV., when he intended to construct the colonnade of the Louvre, forbade all private persons to employ workmen without his permission, under a penalty of 10,000 livres, and forbade workmen to work for private persons, on pain for the first offence, of imprisonment, and for the second, of the galleys.”

That these and similar regulations were not a dead letter, and that the officious and vexatious meddling was prolonged down to the French Revolution, we have the testimony of Roland, the Girondist minister.∗ “I have seen,” says he, “eighty, ninety, a hundred pieces of cotton or woollen stuff cut up, and completely destroyed. I have witnessed similar scenes every week for a number of years. I have seen manufactured goods confiscated; heavy fines laid on the manufacturers; some pieces of fabric were burnt in public places, and at the hours of market: others were fixed to the pillory, with the name of the manufacturer inscribed upon them, and he himself was threatened with the pillory, in case of a second offence. All this was done under my eyes, at Rouen, in conformity with existing regulations, or ministerial orders. What crime deserved so cruel a punishment? Some defects in the materials employed, or in the texture of the fabric, or even in some of the threads of the warp.

“I have frequently seen manufacturers visited by a band of satellites who put all in confusion in their establishments, spread terror in their families, cut the stuffs from the frames, tore off the warp from the looms, and carried them away as proofs of infringement; the manufacturers were summoned, tried, and condemned: their goods confiscated; copies of their judgment of confiscation posted up in every public place; fortune, reputation, credit, all was lost and destroyed. And for what offence? Because they had made of worsted, a kind of cloth called shag, such as the English used to manufacture, and even sell in France, while the French regulations stated that that kind of cloth should be made with mohair. I have seen other manufacturers treated in the same way, because they had made camlets of a particular width, used in England and Germany, for which there was a great demand from Spain, Portugal, and other countries, and from several parts of France, while the French regulations prescribed other widths for camlets.”

The time is gone by, when such applications as these of the principle of “paternal government” would be attempted, in even the least enlightened country of the European commonwealth of nations. In such cases as those cited, all the general objections to government interference are valid, and several of them in nearly their highest degree. But we must now turn to the second part of our task, and direct our attention to cases, in which some of those general objections are altogether absent, while those which can never be got rid of entirely, are overruled by counter-considerations of still greater importance.

We have observed that, as a general rule, the business of life is better performed when those who have an immediate interest in it are left to take their own course, uncontrolled either by the mandate of the law or by the meddling of any public functionary. The persons, or some of the persons, who do the work, are likely to be better judges than the government, of the means of attaining the particular end at which they aim. Were we to suppose, what is not very probable, that the government has possessed itself of the best knowledge which had been acquired up to a given time by the persons most skilled in the occupation; even then, the individual agents have so much stronger and more direct an interest in the result, that the means are far more likely to be improved and perfected if left to their uncontrolled choice. But if the workman is generally the best selector of means, can it be affirmed with the same universality, that the consumer, or person served, is the most competent judge of the end? Is the buyer always qualified to judge of the commodity? If not, the presumption in favour of the competition of the market does not apply to the case; and if the commodity be one, in the quality of which society has much at stake, the balance of advantages may be in favour of some mode and degree of intervention, by the authorized representatives of the collective interest of the state.

§ 8. Now, the proposition that the consumer is a competent judge of the commodity, can be admitted only with numerous abatements and exceptions. He is generally the best judge (though even this is not true universally) of the material objects produced for his use. These are destined to supply some physical want, or gratify some taste or inclination, respecting which wants or inclinations there is no appeal from the person who feels them; or they are the means and appliances of some occupation, for the use of the persons engaged in it, who may be presumed to be judges of the things required in their own habitual employment. But there are other things, of the worth of which the demand of the market is by no means a test; things of which the utility does not consist in ministering to inclinations, nor in serving the daily uses of life, and the want of which is least felt where the need is greatest. This is peculiarly true of those things which are chiefly useful as tending to raise the character of human beings. The uncultivated cannot be competent judges of cultivation. Those who most need to be made wiser and better, usually desire it least, and if they desired it, would be incapable of finding the way to it by their own lights. It will continually happen, on the voluntary system, that, the end not being desired, the means will not be provided at all, or that, the persons requiring improvement having an imperfect or altogether erroneous conception of what they want, the supply called forth by the demand of the market will be anything but what is really required. Now any well-intentioned and tolerably civilized government may think, without presumption, that it does or ought to possess a degree of cultivation above the average of the community which it rules, and that it should therefore be capable of offering better education and better instruction to the people, than the greater number of them would spontaneously demand. Education, therefore, is one of those things which it is admissible in principle that a government should provide for the people. The case is one to which the reasons of the non-interference principle do not necessarily or universally extend.∗

With regard to elementary education, the exception to ordinary rules may, I conceive, justifiably be carried still further. There are certain primary elements and means of knowledge, which it is in the highest degree desirable that all human beings born into the community should acquire during childhood. If their parents, or those on whom they depend, have the power of obtaining for them this instruction, and fail to do it, they commit a double breach of duty, towards the children themselves, and towards the members of the community generally, who are all liable to suffer seriously from the consequences of ignorance and want of education in their fellow-citizens. It is therefore an allowable exercise of the powers of government to impose on parents the legal obligation of giving elementary instruction to children. This, however, cannot fairly be done, without taking measures to insure that such instruction shall be always accessible to them, either gratuitously or at a trifling expense.

It may indeed be objected that the education of children is one of those expenses which parents, even of the labouring class, ought to defray; that it is desirable that they should feel it incumbent on them to provide by their own means for the fulfilment of their duties, and that by giving education at the cost of others, just as much by giving subsistence, the standard of necessary wages is proportionally lowered, and the springs of exertion and self-restraint is so much relaxed. This argument could, at best, be only valid if the question were that of substituting a public provision for what individuals would otherwise do for themselves; if all parents in the labouring class recognized and practised the duty of giving instruction to their children at their own expense. But inasmuch as parents do not practise this duty, and do not include education among those necessary expenses which their wages must provide for, therefore the general rate of wages is not high enough to bear those expenses, and they must be borne from some other source. And this is not one of the cases in which the tender of help perpetuates the state of things which renders help necessary. Instruction, when it is really such, does not enervate, but strengthens as well as enlarges the active faculties: in whatever manner acquired, its effect on the mind is favourable to the spirit of independence: and when, unless had gratuitously, it would not be had at all, help in this form has the opposite tendency to that which in so many other cases makes it objectionable; it is help towards doing without help.

In England, and most European countries, elementary instruction cannot be paid for, at its full cost, from the common wages of unskilled labour, and would not if it could. The alternative, therefore, is not between government and private speculation, but between a government provision and voluntary charity: between interference by government, and interference by associations of individuals, subscribing their own money for the purpose, like the two great School Societies. It is, of course, not desirable that anything should be done by funds derived from compulsory taxation, which is already sufficiently well done by individual liberality. How far this is the case with school instruction, is, in each particular instance, a question of fact. The education provided in this country on the voluntary principle has of late been so much discussed, that it is needless in this place to criticize it minutely, and I shall merely express my conviction, that even in quantity it is [1848], and is likely to remain, altogether insufficient, while in quality, though with some slight tendency to improvement, it is never good except by some rare accident, and generally so bad as to be little more than nominal. I hold it therefore the duty of the government to supply the defect, by giving pecuniary support to elementary schools, such as to render them accessible to all the children of the poor, either freely, or for a payment too inconsiderable to be sensibly felt.1

One thing must be strenuously insisted on; that the government must claim no monopoly for its education, either in the lower or in the higher branches; must exert neither authority nor influence to induce the people to resort to its teachers in preference to others, and must confer no peculiar advantages on those who have been instructed by them. Though the government teachers will probably be superior to the average of private instructors, they will not embody all the knowledge and sagacity to be found in all instructors taken together, and it is desirable to leave open as many roads as possible to the desired end. It is not endurable that a government should, either de jure or de facto, have a complete control over the education of the people. To possess such a control, and actually exert it, is to be despotic. A government which can mould the opinions and sentiments of the people from their youth upwards, can do with them whatever it pleases. Though a government, therefore, may, and in many cases ought to, establish schools and colleges, it must neither compel nor bribe any person to come to them; nor ought the power of individuals to set up rival establishments, to depend in any degree upon its authorization. It would be justified in requiring from all the people that they shall possess instruction in certain things, but not in prescribing to them how or from whom they shall obtain it.

§ 9. In the matter of education, the intervention of government is justifiable, because the case is not one in which the interest and judgment of the consumer are a sufficient security for the goodness of the commodity. Let us now consider another class of cases, where there is no person in the situation of a consumer, and where the interest and judgment to be relied on are those of the agent himself; as in the conduct of any business in which he is exclusively interested, or in entering into any contract or engagement by which he himself is to be bound.

The ground of the practical principle of non-interference must here be, that most persons take a juster and more intelligent view of their own interest, and of the means of promoting it, than can either be prescribed to them by a general enactment of the legislature, or pointed out in the particular case by a public functionary. The maxim is unquestionably sound as a general rule; but there is no difficulty in perceiving some very large and conspicuous exceptions to it. These may be classed under several heads.

First:—The individual who is presumed to be the best judge of his own interests may be incapable of judging or acting for himself; may be a lunatic, an idiot, an infant: or though not wholly incapable, may be of immature years and judgment. In this case the foundation of the laisser-faire principle breaks down entirely. The person most interested is not the best judge of the matter, nor a competent judge at all. Insane persons are everywhere regarded as proper objects of the care of the state.∗ In the case of children and young persons, it is common to say, that though they cannot judge for themselves, they have their parents or other relatives to judge for them. But this removes the question into a different category; making it no longer a question whether the government should interfere with individuals in the direction of their own conduct and interests, but whether it should leave absolutely in their power the conduct and interests of somebody else. Parental power is as susceptible of abuse as any other power, and is, as a matter of fact, constantly abused. If laws do not succeed in preventing parents from brutally ill-treating, and even from murdering their children, far less ought it to be presumed that the interests of children will never be sacrificed, in more commonplace and less revolting ways, to the selfishness or the ignorance of their parents. Whatever it can be clearly seen that parents ought to do or forbear for the interest of children, the law is warranted, if it is able, in compelling to be done or forborne, and is generally bound to do so. To take an example from the peculiar province of political economy; it is right that children, and young persons not yet arrived at maturity, should be protected so far as the eye and hand of the state can reach, from being over-worked. Labouring for too many hours in the day, or on work beyond their strength, should not be permitted to them, for if permitted it may always be compelled. Freedom of contract, in the case of children, is but another word for freedom of coercion. Education also, the best which circumstances admit of their receiving, is not a thing which parents or relatives, from indifference, jealousy, or avarice, should have it in their power to withhold.

The reasons for legal intervention in favour of children, apply not less strongly to the case of those unfortunate slaves and victims of the most brutal part of mankind, the lower animals. It is by the grossest misunderstanding of the principles of liberty, that the infliction of exemplary punishment on ruffianism practised towards these defenceless creatures has been treated as a meddling by government with things beyond its province; an interference with domestic life. The domestic life of domestic tyrants is one of the things which it is the most imperative on the law to interfere with; and it is to be regretted that metaphysical scruples respecting the nature and source of the authority of government, should induce many warm supporters of laws against cruelty to animals, to seek for a justification of such laws in the incidental consequences of the indulgence of ferocious habits to the interests of human beings, rather than in the intrinsic merits of the case itself. What it would be the duty of a human being, possessed of the requisite physical strength, to prevent by force if attempted in his presence, it cannot be less incumbent on society generally to repress. The existing laws of England on the subject are chiefly defective in the trifling, often almost nominal, maximum, to which the penalty even in the worst cases is limited.

Among those members of the community whose freedom of contract ought to be controlled by the legislature for their own protection, on account (it is said) of their dependent position, it is frequently proposed to include women: and in the existing Factory Acts,1 their labour, in common with that of young persons, has been placed under peculiar restrictions. But the classing together, for this and other purposes, of women and children, appears to me both indefensible in principle and mischievous in practice. Children below a certain age cannot judge or act for themselves; up to a considerably greater age they are inevitably more or less disqualified for doing so; but women are as capable as men of appreciating and managing their own concerns, and the only hindrance to their doing so arises from the injustice of their present social position. When the law makes everything which the wife acquires, the property of the husband, while by compelling her to live with him it forces her to submit to almost any amount of moral and even physical tyranny which he may choose to inflict, there is some ground for regarding every act done by her as done under coercion: but it is the great error of reformers and philanthropists in our time, to nibble at the consequences of unjust power, instead of redressing the injustice itself. If women had as absolute a control as men have, over their own persons and their own patrimony or acquisitions, there would be no plea for limiting their hours of labouring for themselves, in order that they might have time to labour for the husband, in what is called, by the advocates of restriction, his home. Women employed in factories are the only women in the labouring rank of life whose position is not that of slaves and drudges; precisely because they cannot easily be compelled to work and earn wages in factories against their will. For improving the condition of women, it should, in the contrary, be an object to give them the readiest access to independent industrial employment, instead of closing, either entirely or partially, that which is already open to them.2

§ 10. A second exception to the doctrine that individuals are the best judges of their own interest, is when an individual attempts to decide irrevocably now, what will be best for his interest at some future and distant time. The presumption in favour of individual judgment is only legitimate, where the judgment is grounded on actual, and especially on present, personal experience; not where it is formed antecedently to experience, and not suffered to be reversed even after experience has condemned it. When persons have bound themselves by a contract, not simply to do some one thing, but to continue doing something for ever or for a prolonged period, without any power of revoking the engagement, the presumption which their perseverance in that course of conduct would otherwise raise in favour of its being advantageous to them, does not exist; and any such presumption which can be grounded on their having voluntarily entered into the contract, perhaps at an early age, and without any real knowledge of what they undertook, is commonly next to null. The practical maxim of leaving contracts free is not applicable without great limitations in case of engagement in perpetuity; and the law should be extremely jealous of such engagements; should refuse its sanction to them, when the obligations they impose are such as the contracting party cannot be a competent judge of; if it ever does sanction them, it should take every possible security for their being contracted with foresight and deliberation; and in compensation for not permitting the parties themselves to revoke their engagement, should grant them a release from it, on a sufficient case being made out before an impartial authority. These considerations are eminently applicable to marriage, the most important of all cases of engagement for life.1

§ 11. The third exception which I shall notice, to the doctrine that government cannot manage the affairs of individuals as well as the individuals themselves, has reference to the great class of cases in which the individuals can only manage the concern by delegated agency, and in which the so-called private management is, in point of fact, hardly better entitled to be called management by the persons interested, than administration by a public officer. Whatever, if left to spontaneous agency, can only be done by joint-stock associations, will often be as well, and sometimes better done, as far as the actual work is concerned, by the state. Government management is, indeed, proverbially jobbing, careless, and ineffective, but so likewise has generally been joint-stock management. The directors of a joint-stock company, it is true, are always shareholders; but also the members of a government are invariably taxpayers; and in the case of directors, no more than in that of governments, is their proportional share of the benefits of good management equal to the interest they may possibly have in mismanagement, even without reckoning the interest of their case. It may be objected, that the shareholders, in their collective character, exercise a certain control over the directors, and have almost always full power to remove them from office. Practically, however, the difficulty of exercising this power is found to be so great, that it is hardly ever exercised except in cases of such flagrantly unskilful, or, at least, unsuccessful management, as would generally produce the ejection from office of managers appointed by the government. Against the very ineffectual security afforded by meetings of shareholders, and by their individual inspection and inquiries, may be placed the greater publicity and more active discussion and comment, to be expected in free countries with regard to affairs in which the general government takes part. The defects, therefore, of government management, do not seem to be necessarily much greater, if necessarily greater at all, than those of management by joint-stock.

The true reasons in favour of leaving to voluntary associations all such things as they are competent to perform, would exist in equal strength if it were certain that the work itself would be as well or better done by public officers. These reasons have been already pointed out: the mischief of overloading the chief functionaries of government with demands on their attention, and diverting them from duties which they alone can discharge, to objects which can be sufficiently well attained without them; the danger of unnecessarily swelling the direct power and indirect influence of government, and multiplying occasions of collision between its agents and private citizens; and the inexpediency of concentrating in a dominant bureaucracy all the skill and experience in the management of large interests, and all the power of organized action, existing in the community; a practice which keeps the citizens in a relation to the government like that of children to their guardians, and is a main cause of the inferior capacity for political life which has hitherto characterized the over-governed countries of the Continent, whether with or without the forms of representative government.∗

But although, for these reasons, most things which are likely to be even tolerably done by voluntary associations, should, generally speaking, be left to them; it does not follow that the manner in which those associations perform their work should be entirely uncontrolled by the government. There are many cases in which the agency, of whatever nature, by which a service is performed, is certain, from the nature of the case, to be virtually single; in which a practical monopoly, with all the power it confers of taxing the community, cannot be prevented from existing. I have already more than once adverted to the case of the gas and water companies, among which, though perfect freedom is allowed to competition, none really takes place, and practically they are found to be even more irresponsible, and unapproachable by individual complaints, than the government. There are the expenses without the advantages of plurality of agency; and the charge made for services which cannot be dispensed with, is, in substance, quite as much compulsory taxation as if imposed by law; there are few householders who make any distinction between their “water-rate” and other local taxes. In the case of these particular services, the reasons preponderate in favour of their being performed, like the paving and cleansing of the streets, not certainly by the general government of the state, but by the municipal authorities of the town, and the expense defrayed, as even now it in fact is, by a local rate. But in the many analogous cases which it is best to resign to voluntary agency, the community needs some other security for the fit performance of the service than the interest of the managers; and it is the part of the government, either to subject the business to reasonable conditions for the general advantage, or to retain such power over it, that the profits of the monopoly may at least be obtained for the public. This applies to the case of a road, a canal, or a railway. These are always, in a great degree, practical monopolies; and a government which concedes such monopoly unreservedly to a private company, does much the same thing as if it allowed an individual or an association to levy any tax they chose, for their own benefit, on all the malt produced in the country, or on all the cotton imported into it. To make the concession for a limited time is generally justifiable, on the principle which justifies patents for invention: but the state should either reserve to itself a reversionary property in such public works, or should retain, and freely exercise, the right of fixing a maximum of fares and charges, and, from time to time, varying that maximum. It is perhaps necessary to remark, that the state may be the proprietor of canals or railways without itself working them; and that they will almost always be better worked by means of a company renting the railway or canal for a limited period from the state.

§ 12. To a fourth case of exception I must request particular attention, it being one to which as it appears to me, the attention of political economists has not yet been sufficiently drawn. There are matters in which the interference of law is required, not to overrule the judgment of individuals respecting their own interest, but to give effect to that judgment: they being unable to give effect to it except by concert, which concert again cannot be effectual unless it receives validity and sanction from the law. For illustration, and without prejudging the particular point, I may advert to the question of diminishing the hours of labour. Let us suppose, what is at least supposable, whether it be the fact or not—that a general reduction of the hours of factory labour, say from ten to nine,1 would be for the advantage of the workpeople: that they would receive as high wages, or nearly as high, for nine hours' labour as they receive for ten. If this would be the result, and if the operatives generally are convinced that it would, the limitation, some may say, will be adopted spontaneously. I answer, that it will not be adopted unless the body of operatives bind themselves to one another to abide by it. A workman who refused to work more than nine hours while there were others who worked ten, would either not be employed at all, or if employed, must submit to lose one-tenth of his wages. However convinced, therefore, he may be that it is the interest of the class to work short time, it is contrary to his own interest to set the example, unless he is well assured that all or most others will follow it. But suppose a general agreement of the whole class: might not this be effectual without the sanction of law? Not unless enforced by opinion with a rigour practically equal to that of law. For however beneficial the observance of the regulation might be to the class collectively, the immediate interest of every individual would lie in violating it: and the more numerous those were who adhered to the rule, the more would individuals gain by departing from it. If nearly all restricted themselves to nine hours, those who chose to work for ten would gain all the advantages of the restriction, together with the profit from infringing it; they would get ten hours' wages for nine hours' work, and an hour's wages besides. I grant that if a large majority adhered to the nine hours, there would be no harm done; the benefit would be, in the main, secured to the class, while those individuals who preferred to work harder and earn more, would have an opportunity of doing so. This certainly would be the state of things to be wished for; and assuming that a reduction of hours without any diminution of wages could take place without expelling the commodity from some of its markets—which is in every particular instance a question of fact, not of principle—the manner in which it would be most desirable that this effect should be brought about, would be by a quiet change in the general custom of the trade; short hours becoming, by spontaneous choice, the general practice, but those who chose to deviate from it having the fullest liberty to do so. Probably, however, so many would prefer the ten hours' work on the improved terms, that the limitation could not be maintained as a general practice: what some did from choice, others would soon be obliged to do from necessity, and those who had chosen long hours for the sake of increased wages, would be forced in the end to work long hours for no greater wages than before. Assuming then that it really would be the interest of each to work only nine hours if he could be assured that all others would do the same, there might be no means of attaining this object but by converting their supposed mutual agreement into an engagement under penalty, by consenting to have it enforced by law. I am not expressing any opinion in favour of such an enactment, which has never in this country been demanded, and which I certainly should not, in present circumstances, recommend:1 but it serves to exemplify the manner in which classes of persons may need the assistance of law, to give effect to their deliberate collective opinion of their own interest, by affording to every individual a guarantee that his competitors will pursue the same course, without which he cannot safely adopt it himself.

Another exemplification of the same principle is afforded by what is known as the Wakefield system of colonization. This system is grounded on the important principle, that the degree of productiveness of land and labour depends on their being in a due proportion to one another; that if a few persons in a newly-settled country attempt to occupy and appropriate a large district, or if each labourer becomes too soon an occupier and cultivator of land, there is a loss of productive power, and a great retardation of the progress of the colony in wealth and civilization: that nevertheless the instinct (as it may almost be called) of appropriation, and the feelings associated in old countries with landed proprietorship, induce almost every emigrant to take possession of as much land as he has the means of acquiring, and every labourer to become at once a proprietor, cultivating his own land with no other aid than that of his family. If this propensity to the immediate possession of land could be in some degree restrained, and each labourer induced to work a certain number of years on hire before he became a landed proprietor, a perpetual stock of hired labourers could be maintained, available for roads, canals, works of irrigation, &c., and for the establishment and carrying on of the different branches of town industry; whereby the labourer, when he did at last become a landed proprietor, would find his land much more valuable, through access to markets, and facility of obtaining hired labour. Mr. Wakefield therefore proposed to check the premature occupation of land, and dispersion of the people, by putting upon all unappropriated lands a rather high price, the proceeds of which were to be expended in conveying emigrant labourers from the mother country.

This salutary provision, however, has been objected to, in the name and on the authority of what was represented as the great principle of political economy, that individuals are the best judges of their own interest. It was said, that when things are left to themselves, land is appropriated and occupied by the spontaneous choice of individuals, in the quantities and at the times most advantageous to each person, and therefore to the community generally; and that to interpose artificial obstacles to their obtaining land is to prevent them from adopting the course which in their own judgment is most beneficial to them, from a self-conceited notion of the legislator, that he knows what is most for their interest, better than they do themselves. Now this is a complete misunderstanding, either of the system itself, or of the principle with which it is alleged to conflict. The oversight is similar to that which we have just seen exemplified on the subject of hours of labour. However beneficial it might be to the colony in the aggregate, and to each individual composing it, that no one should occupy more land than he can properly cultivate, nor become a proprietor until there are other labourers ready to take his place in working for hire; it can never be the interest of an individual to exercise this forbearance, unless he is assured that others will do so too. Surrounded by settlers who have each their thousand acres, how is he benefited by restricting himself to fifty? or what does a labourer gain by deferring the acquisition altogether for a few years, if all other labourers rush to convert their first earnings into estates in the wilderness, several miles apart from one another? If they, by seizing on land, prevent the formation of a class of labourers for wages, he will not, by postponing the time of his becoming a proprietor, be enabled to employ the land with any greater advantage when he does obtain it; to what end therefore should he place himself in what will appear to him and others a position of inferiority, by remaining a hired labourer, when all around him are proprietors? It is the interest of each to do what is good for all, but only if others will do likewise.

The principle that each is the best judge of his own interest, understood as these objectors understand it, would prove that governments ought not to fulfil any of their acknowledged duties—ought not, in fact, to exist at all. It is greatly the interest of the community, collectively and individually, not to rob or defraud one another. but there is not the less necessity for laws to punish robbery and fraud; because, though it is the interest of each that nobody should rob or cheat, it is not any one's interest to refrain from robbing and cheating others when all others are permitted to rob and cheat him. Penal laws exist at all, chiefly for this reason—because even an unanimous opinion that a certain line of conduct is for the general interest, does not always make it people's individual interest to adhere to that line of conduct.

§ 13. Fifthly; the argument against government interference grounded on the maxim that individuals are the best judges of their own interest, cannot apply to the very large class of cases, in which those acts of individuals with which the government claims to interfere, are not done by those individuals for their own interest, but for the interest of other people. This includes, among other things, the important and much agitated subject of public charity. Though individuals should, in general, be left to do for themselves whatever it can reasonably be expected that they should be capable of doing, yet when they are at any rate not to be left to themselves, but to be helped by other people, the question arises whether it is better that they should receive this help exclusively from individuals, and therefore uncertainly and casually, or by systematic arrangements, in which society acts through its organ, the state.

This brings us to the subject of Poor Laws; a subject which would be of very minor importance if the habits of all classes of the people were temperate and prudent, and the diffusion of property satisfactory; but of the greatest moment in a state of things so much the reverse of this, in both points, as that which the British islands present.

Apart from any metaphysical considerations respecting the foundation of morals or of the social union, it will be admitted to be right that human beings should help one another; and the more so, in proportion to the urgency of the need: and none needs help so urgently as one who is starving. The claim to help, therefore, created by destitution, is one of the strongest which can exist; and there is primâ facie the amplest reason for making the relief of so extreme an exigency as certain to those who require it, as by any arrangements of society it can be made.

On the other hand, in all cases of helping, there are two sets of consequences to be considered; the consequences of the assistance itself, and the consequences of relying on the assistance. The former are generally beneficial, but the latter, for the most part, injurious; so much so, in many cases, as greatly to outweigh the value of the benefit. And this is never more likely to happen than in the very cases where the need of help is the most intense. There are few things for which it is more mischievous that people should rely on the habitual aid of others, than for the means of subsistence, and unhappily there is no lesson which they more easily learn. The problem to be solved is therefore one of peculiar nicety as well as importance; how to give the greatest amount of needful help, with the smallest encouragement to undue reliance on it.

Energy and self-dependence are, however, liable to be impaired by the absence of help, as well as by its excess. It is even more fatal to exertion to have no hope of succeeding by it, than to be assured of succeeding without it. When the condition of any one is so disastrous that his energies are paralyzed by discouragement, assistance is a tonic, not a sedative: it braces instead of deadening the active faculties: always provided that the assistance is not such as to dispense with self-help, by substituting itself for the person's own labour, skill, and prudence, but is limited to affording him a better hope of attaining success by those legitimate means. This accordingly is a test to which all plans of philanthropy and benevolence should be brought, whether intended for the benefit of individuals or of classes, and whether conducted on the voluntary or on the government principle.

In so far as the subject admits of any general doctrine or maxim, it would appear to be this—that if assistance is given in such a manner that the condition of the person helped is as desirable as that of the person who succeeds in doing the same thing without help, the assistance, if capable of being previously calculated on, is mischievous: but if, while available to everybody, it leaves to every one a strong motive to do without it if he can, it is then for the most part beneficial. This principle, applied to a system of public charity, is that of the Poor Law of 1834. If the condition of a person receiving relief is made as eligible as that of the labourer who supports himself by his own exertions, the system strikes at the root of all individual industry and self-government; and, if fully acted up to, would require as its supplement an organized system of compulsion, for governing and setting to work like cattle, those who had been removed from the influence of the motives that act on human beings. But if, consistently with guaranteeing all persons against absolute want, the condition of those who are supported by legal charity can be kept considerably less desirable than the condition of those who find support for themselves, none but beneficial consequences can arise from a law which renders it impossible for any person, except by his own choice, to die from insufficiency of food. That in England at least this supposition can be realized, is proved by the experience of a long period preceding the close of the last century, as well as by that of many highly pauperized districts in more recent times, which have been dispauperized by adopting strict rules of poor-law administration, to the great and permanent benefit of the whole labouring class. There is probably no country in which, by varying the means suitably to the character of the people, a legal provision for the destitute might not be made compatible with the observance of the conditions necessary to its being innocuous.

Subject to these conditions, I conceive it to be highly desirable, that the certainty of subsistence should be held out by law to the destitute able-bodied, rather than that their relief should depend on voluntary charity. In the first place, charity almost always does too much or too little: it lavishes its bounty in one place, and leaves people to starve in another. Secondly, since the state must necessarily provide subsistence for the criminal poor while undergoing punishment, not to do the same for the poor who have not offended is to give a premium on crime. And lastly, if the poor are left to individual charity, a vast amount of mendacity is inevitable.1 What the state may and should abandon to private charity, is the task of distinguishing between one case of real necessity and another. Private charity can give more to the more deserving. The state must act by general rules. It cannot undertake to discriminate between the deserving and the undeserving indigent. It owes no more than subsistence to the first, and can give no less to the last. What is said about the injustice of a law which has no better treatment for the merely unfortunate poor than for the ill-conducted, is founded on a misconception of the province of law and public authority. The dispensers of public relief have no business to be inquisitors. Guardians and overseers are not fit to be trusted to give or withhold other people's money according to their verdict on the morality of the person soliciting it; and it would show much ignorance of the ways of mankind to suppose that such persons, even in the almost impossible case of their being qualified, will take the trouble of ascertaining and sifting the past conduct of a person in distress, so as to form a rational judgment on it. Private charity can make these distinctions; and in bestowing its own money, is entitled to do so according to its own judgment. It should understand that this is its peculiar and appropriate province, and that it is commendable or the contrary, as it exercises the function with more or less discernment. But the administrators of a public fund ought not to be required to do more for anybody, than that minimum which is due even to the worst. If they are, the indulgence very speedily becomes the rule, and refusal the more or less capricious or tyrannical exception.2

§ 14. Another class of cases which fall within the same general principle as the case of public charity, are those in which the acts done by individuals, though intended solely for their own benefit, involve consequences extending indefinitely beyond them, to interests of the nation or of posterity, for which society in its collective capacity is alone able, and alone bound, to provide. One of these cases is that of Colonization. If it is desirable, as no one will deny it to be, that the planting of colonies should be conducted, not with an exclusive view to the private interests of the first founders, but with a deliberate regard to the permanent welfare of the nations afterwards to arise from these small beginnings; such regard can only be secured by placing the enterprise, from its commencement, under regulations constructed with the foresight and enlarged views of philosophical legislators; and the government alone has power either to frame such regulations, or to enforce their observance.

The question of government intervention in the work of Colonization involves the future and permanent interests of civilization itself, and far outstretches the comparatively narrow limits of purely economical considerations. But even with a view to those considerations alone, the removal of population from the overcrowded to the unoccupied parts of the earth's surface is one of those works of eminent social usefulness, which most require, and which at the same time best repay, the intervention of government.

To appreciate the benefits of colonization, it should be considered in its relation, not to a single country, but to the collective economical interests of the human race. The question is in general treated too exclusively as one of distribution; of relieving one labour market and supplying another. It is this, but it is also a question of production, and of the most efficient employment of the productive resources of the world. Much has been said of the good economy of importing commodities from the place where they can be bought cheapest; while the good economy of producing them where they can be produced cheapest is comparatively little thought of. If to carry consumable goods from the places where they are superabundant to those where they are scarce is a good pecuniary speculation, is it not an equally good speculation to do the same thing with regard to labour and instruments? The exportation of labourers and capital from old to new countries, from a place where their productive power is less to a place where it is greater, increases by so much the aggregate produce of the labour and capital of the world. It adds to the joint wealth of the old and the new country, what amounts in a short period to many times the mere cost of effecting the transport. There needs be no hesitation in affirming that Colonization, in the present state of the world, is the best affair of business, in which the capital of an old and wealthy country can engage.

It is equally obvious, however, that Colonization on a great scale can be undertaken, as an affair of business, only by the government, or by some combination of individuals in complete understanding with the government; except under such very peculiar circumstances as those which succeeded the Irish famine.1 Emigration on the voluntary principle rarely has any material influence in lightening the pressure of population in the old country, though as far as it goes it is doubtless a benefit to the colony. Those labouring persons who voluntarily emigrate are seldom the very poor; they are small farmers with some little capital, or labourers who have saved something, and who, in removing only their own labour from the crowded labour-market, withdraw from the capital of the country a fund which maintained and employed more labourers than themselves. Besides, this portion of the community is so limited in number, that it might be removed entirely, without making any sensible impression upon the numbers of the population, or even upon the annual increase. Any considerable emigration of labour is only practicable, when its cost is defrayed, or at least advanced, by others than the emigrants themselves. Who then is to advance it? Naturally, it may be said, the capitalists of the colony, who require the labour, and who intend to employ it. But to this there is the obstacle, that a capitalist, after going to the expense of carrying out labourers, has no security that he shall be the person to derive any benefit from them. If all the capitalists of the colony were to combine, and bear the expense by subscription, they would still have no security that the labourers, when there, would continue to work for them. After working for a short time and earning a few pounds, they always, unless prevented by the government, squat on unoccupied land, and work only for themselves. The experiment has been repeatedly tried whether it was possible to enforce contracts for labour, or the repayment of the passage money of emigrants to those who advanced it, and the trouble and expense have always exceeded the advantage. The only other resource is the voluntary contributions of parishes or individuals, to rid themselves of surplus labourers who are already, or who are likely to become, locally chargeable on the poor-rate. Were this speculation to become general, it might produce a sufficient amount of emigration to clear off the existing unemployed population, but not to raise the wages of the employed: and the same thing would require to be done over again in less than another generation.

One of the principal reasons why Colonization should be a national undertaking, is that in this manner alone, save in highly exceptional cases, can emigration be self-supporting. The exportation of capital and labour to a new country being, as before observed, one of the best of all affairs of business, it is absurd that it should not, like other affairs of business, repay its own expenses. Of the great addition which it makes to the produce of the world, there can be no reason why a sufficient portion should not be intercepted, and employed in reimbursing the outlay incurred in effecting it. For reasons already given, no individual, or body of individuals, can reimburse themselves for the expense; the government, however, can. It can take from the annual increase of wealth, caused by the emigration, the fraction which suffices to repay with interest what the emigration has cost. The expenses of emigration to a colony ought to be borne by the colony; and this, in general, is only possible when they are borne by the colonial government.

Of the modes in which a fund for the support of colonization can be raised in the colony, none is comparable in advantage to that which was first suggested, and so ably and perseveringly advocated, by Mr. Wakefield: the plan of putting a price on all unoccupied land, and devoting the proceeds to emigration. The unfounded and pedantic objections to this plan have been answered in a former part of this chapter: we have now to speak of its advantages. First, it avoids the difficulties and discontents incident to raising a large annual amount by taxation; a thing which is almost useless to attempt with a scattered population of settlers in the wilderness, who, as experience proves, can seldom be compelled to pay direct taxes, except at a cost exceeding their amount; while in an infant community indirect taxation soon reaches its limit. The sale of lands is thus by far the easiest mode of raising the requisite funds. But it has other and still greater recommendations. It is a beneficial check upon the tendency of a population of colonists to adopt the tastes and inclinations of savage life, and to disperse so widely as to lose all the advantages of commerce, of markets, of separation of employments, and combination of labour. By making it necessary for those who emigrate at the expense of the fund, to earn a considerable sum before they can become landed proprietors, it keeps up a perpetual succession of labourers for hire, who in every country are a most important auxiliary even to peasant proprietors: and by diminishing the eagerness of agricultural speculators to add to their domain, it keeps the settlers within reach of each other for purposes of co-operation, arranges a numerous body of them within easy distance of each centre of foreign commerce and non-agricultural industry, and insures the formation and rapid growth of towns and town products. This concentration, compared with the dispersion which uniformly occurs when unoccupied land can be had for nothing, greatly accelerates the attainment of prosperity, and enlarges the fund which may be drawn upon for further emigration. Before the adoption of the Wakefield system, the early years of all new colonies were full of hardship and difficulty: the last colony founded on the old principle, the Swan River settlement, being one of the most characteristic instances. In all subsequent colonization, the Wakefield principle has been acted upon, though imperfectly,1 a part only of the proceeds of the sale of land being devoted to emigration: yet wherever it has been introduced at all, as in South Australia, Victoria, and New Zealand, the restraint put upon the dispersion of the settlers, and the influx of capital caused by the assurance of being able to obtain hired labour, has, in spite of many difficulties and much mismanagement, produced a suddenness and rapidity of prosperity more like fable than reality.∗2

The self-supporting system of Colonization, once established, would increase in efficiency every year; its effect would tend to increase in geometrical progression: for since every able-bodied emigrant, until the country is fully peopled, adds in a very short time to its wealth, over and above his own consumption, as much as would defray the expense of bringing out another emigrant, it follows that the greater the number already sent, the greater number might continue to be sent, each emigrant laying the foundation of a succession of other emigrants at short intervals without fresh expense, until the colony is filled up. It would therefore be worth while, to the mother country, to accelerate the early stages of this progression, by loans to the colonies for the purpose of emigration, repayable from the fund formed by the sales of land. In thus advancing the means of accomplishing a large immediate emigration, it would be investing that amount of capital in the mode, of all others, most beneficial to the colony; and the labour and savings of these emigrants would hasten the period at which a large sum would be available from sales of land. It would be necessary, in order not to overstock the labour market, to act in concert with the persons disposed to remove their own capital to the colony. The knowledge that a large amount of hired labour would be available, in so productive a field of employment, would insure a large emigration of capital from a country, like England, of low profits and rapid accumulation: and it would only be necessary not to send out a greater number of labourers at one time, than this capital could absorb and employ at high wages.

Inasmuch as, on this system, any given amount of expenditure, once incurred, would provide not merely a single emigration, but a perpetually flowing stream of emigrants, which would increase in breadth and depth as it flowed on; this mode of relieving overpopulation has a recommendation, not possessed by any other plan ever proposed for making head against the consequences of increase without restraining the increase itself: there is an element of indefiniteness in it; no one can perfectly foresee how far its influence, as a vent for surplus population, might possibly reach. There is hence the strongest obligation on the government of a country like our own, with a crowded population, and unoccupied continents under its command, to build, as it were, and keep open, in concert with the colonial governments, a bridge from the mother country to those continents, by establishing the self-supporting system of colonization on such a scale, that as great an amount of emigration as the colonies can at the time accommodate, may at all times be able to take place without cost to the emigrants themselves.

1 The importance of these considerations, as regards the British islands, has been of late considerably diminished by the unparalleled amount of spontaneous emigration from Ireland; an emigration not solely of small farmers, but of the poorest class of agricultural labourers, and which is at once voluntary and self-supporting, the succession of emigrants being kept up by funds contributed from the earnings of their relatives and connexions who had gone before. To this has been added a large amount of voluntary emigration to the seats of the gold discoveries, which has partly supplied the wants of our most distant colonies, where, both for local and national interests, it was most of all required. But the stream of both these emigrations has already considerably slackened, and though that from Ireland has since partially revived, it is not certain that the aid of government in a systematic form, and on the self-supporting principle, will not again become necessary to keep the communication open between the hands needing work in England, and the work which needs hands elsewhere.

§ 15. The same principle which points out colonization, and the relief of the indigent, as cases to which the principal objection to government interference does not apply, extends also to a variety of cases, in which important public services are to be performed, while yet there is no individual specially interested in performing them, nor would any adequate remuneration naturally or spontaneously attend their performance. Take for instance a voyage of geographical or scientific exploration. The information sought may be of great public value, yet no individual would derive any benefit from it which would repay the expense of fitting out the expedition; and there is no mode of intercepting the benefit on its way to those who profit by it, in order to levy a toll for the remuneration of its authors. Such voyages are, or might be, undertaken by private subscription; but this is a rare and precarious resource. Instances are more frequent in which the expense has been borne by public companies or philanthropic associations; but in general such enterprises have been conducted at the expense of government, which is thus enabled to entrust them to the persons in its judgment best qualified for the task. Again, it is a proper office of government to build and maintain lighthouses, establish buoys, &c. for the security of navigation: for since it is impossible that the ships at sea which are benefited by a lighthouse, should be made to pay a toll on the occasion of its use, no one would build lighthouses from motives of personal interest, unless indemnified and rewarded from a compulsory levy made by the state. There are many scientific researches, of great value to a nation and to mankind, requiring assiduous devotion of time and labour, and not unfrequently great expense, by persons who can obtain a high price for their services in other ways. If the government had no power to grant indemnity for expense, and remuneration for time and labour thus employed, such researches could only be undertaken by the very few persons who, with an independent fortune, unite technical knowledge, laborious habits, and either great public spirit, or an ardent desire of scientific celebrity.

Connected with this subject is the question of providing by means of endowments or salaries, for the maintenance of what has been called a learned class. The cultivation of speculative knowledge, though one of the most useful of all employments, is a service rendered to a community collectively, not individually, and one consequently for which it is, primâ facie, reasonable that the community collectively should pay; since it gives no claim on any individual for a pecuniary remuneration; and unless a provision is made for such services from some public fund, there is not only no encouragement to them, but there is as much discouragement as is implied in the impossibility of gaining a living by such pursuits, and the necessity consequently imposed on most of those who would be capable of them, to employ the greatest part of their time in gaining a subsistence. The evil, however, is greater in appearance than in reality. The greatest things, it has been said, have generally been done by those who had the least time at their disposal; and the occupation of some hours every day in a routine employment, has often been found compatible with the most brilliant achievements in literature and philosophy. Yet there are investigations and experiments which require not only a long but a continuous devotion of time and attention: there are also occupations which so engross and fatigue the mental faculties, as to be inconsistent with any vigorous employment of them upon other subjects, even in any intervals of leisure. It is highly desirable, therefore, that there should be a mode of insuring to the public the services of scientific discoverers, and perhaps of some other classes of savants, by affording them the means of support consistently with devoting a sufficient portion of time to their peculiar pursuits. The fellowships of the Universities are an institution excellently adapted for such a purpose; but are hardly ever applied to it, being bestowed, at the best, as a reward for past proficiency, in committing to memory what has been done by others, and not as the salary of future labours in the advancement of knowledge. In some countries, Academies of science, antiquities, history, &c., have been formed with emoluments annexed. The most effectual plan, and at the same time least liable to abuse, seems to be that of conferring Professorships, with duties of instruction attached to them. The occupation of teaching a branch of knowledge, at least in its higher departments, is a help rather than an impediment to the systematic cultivation of the subject itself. The duties of a professorship almost always leave much time for original researches; and the greatest advances which have been made in the various sciences, both moral and physical, have originated with those who were public teachers of them; from Plato and Aristotle to the great names of the Scotch, French, and German Universities. I do not mention the English, because until very lately their professorships have been, as is well known, little more than nominal. In the case, too, of a lecturer in a great institution of education, the public at large has the means of judging, if not the quality of the teaching, at least the talents and industry of the teacher; and it is more difficult to misemploy the power of appointment to such an office, than to job in pensions and salaries to persons not so directly before the public eye.

It may be said generally, that anything which it is desirable should be done for the general interests of mankind or of future generations, or for the present interests of those members of the community who require external aid, but which is not of a nature to remunerate individuals or associations for undertaking it, is in itself a suitable thing to be undertaken by government: though, before making the work their own, governments ought always to consider if there be any rational probability of its being done on what is called the voluntary principle, and if so, whether it is likely to be done in a better or more effectual manner by government agency, than by the zeal and liberality of individuals.

§ 16. The preceding heads comprise, to the best of my judgment, the whole of the exceptions to the practical maxim, that the business of society can be best performed by private and voluntary agency. It is, however, necessary to add, that the intervention of government cannot always practically stop short at the limit which defines the cases intrinsically suitable for it. In the particular circumstances of a given age or nation, there is scarcely anything really important to the general interest, which it may not be desirable, or even necessary, that the government should take upon itself, not because private individuals cannot effectually perform it, but because they will not. At some times and places there will be no roads, docks, harbours, canals, works of irrigation, hospitals, schools, colleges, printing-presses, unless the government establishes them; the public being either too poor to command the necessary resources, or too little advanced in intelligence to appreciate the ends, or not sufficiently practised in joint action to be capable of the means. This is true, more or less, of all countries inured to despotism, and particularly of those in which there is a very wide distance in civilization between the people and the government: as in those which have been conquered and are retained in subjection by a more energetic and more cultivated people. In many parts of the world, the people can do nothing for themselves which requires large means and combined action: all such things are left undone, unless done by the state. In these cases, the mode in which the government can most surely demonstrate the sincerity with which it intends the greatest good of its subjects, is by doing the things which are made incumbent on it by the helplessness of the public, in such a manner as shall tend not to increase and perpetuate, but to correct that helplessness. A good government will give all its aid in such a shape as to encourage and nurture any rudiments it may find of a spirit of individual exertion. It will be assiduous in removing obstacles and discouragements to voluntary enterprise, and in giving whatever facilities and whatever direction and guidance may be necessary: its pecuniary means will be applied, when practicable, in aid of private efforts rather than in supersession of them, and it will call into play its machinery of rewards and honours to elicit such efforts. Government aid, when given merely in default of private enterprise, should be so given as to be as far as possible a course of education for the people in the art of accomplishing great objects by individual energy and voluntary co-operation.

I have not thought it necessary here to insist on that part of the functions of government which all admit to be indispensable, the function of prohibiting and punishing such conduct on the part of individuals in the exercise of their freedom as is clearly injurious to other persons, whether the case be one of force, fraud, or negligence. Even in the best state which society has yet reached, it is lamentable to think how great a proportion of all the efforts and talents in the world are employed in merely neutralizing one another. It is the proper end of government to reduce this wretched waste to the smallest possible amount, by taking such measures as shall cause the energies now spent by mankind in injuring one another, or in protecting themselves against injury, to be turned to the legitimate employment of the human faculties, that of compelling the powers of nature to be more and more subservient to physical and moral good.1

Bibliographical Appendix (Ashley)

BIBLIOGRAPHICAL APPENDIX

prepared by sir william ashley in 1909

For the history of economic investigation and discussion since the publication of Mill's Principles in 1848, the only general work to which reference can be made in English is Palgrave's Dictionary of Political Economy (1894–1908), which contains many useful articles under the headings of the various subjects and authors. Readers of French will obtain some assistance from Block, Les Progrès de la Science Économique depuis Adam Smith (1890), representing the strictest school of French orthodoxy, and from Gide and Rist, Histoire des Doctrines Économiques (1909), written from a more modern point of view. Readers of German will naturally refer to Conrad's Handwörterbuch der Staatswissenachaften, of which the third and enlarged edition is now being issued; and they will find a number of valuable reviews of the course of discussion of the several main topics in the series of monographs brought together under the title Die Entwicklung der deutschen Volkswirthschaftslehre im neunzehnten Jahrhundert (1908).

A.—: The Mercantile System (p. 6)

Mill's account is based on that of Adam Smith, Wealth of Nations, bk. iv. ch. i. Much investigation has subsequently taken place into mercantilist literature and policy, some results of which may be seen in Roscher, Geschichte der National-Ökonomik in Deutschland (1874), § 57, closely followed (with a Positivist colouring) by Ingram, History of Political Economy (1888); in Schmoller, The Mercantile System and its Historical Significance (1884; Eng. trans. 1896), and Grundriss der Allgemeinen Volkswirthschaftslehre (1900), i. § 39 (in French trans., Principes d'Économie Politique (1905–1908), i. § 39); in Cunningham, Growth of English Industry and Commerce, vol. ii. pt. i., The Mercantile System (1903); and in Unwin, Industrial Organisation in the Sixteenth and Seventeenth Centuries (1904). One of the most significant of English mercantilist writings, Mun's England's Treasure by Forraign Trade (1664), has been recently republished (1895).

B.—: The Definition of Wealth (p. 9)

Mill's definition has been criticised, from very different points of view, by Jevons, Principles of Economics (posthumously published, 1905), p. 14; Nicholson, Principles of Political Economy, i. (1893), Introduction; and Ruskin, Unto this Last (1862), Preface, and Munera Pulveris (1863), Preface. For a recent classification of “desirable things,” see Marshall, Principles of Economics (1890; 5th ed. 1907), bk. ii. ch. 2. Sidgwick, Principles of Political Economy (1883), bk. i. ch. ii., points out that, though in England “Wealth” has commonly been regarded as the most fundamental conception in Political Economy, it has also been commonly held that it should be defined by the characteristic of possessing “Value,” so that it would seem more logical “to begin by attempting to get a precise conception of this characteristic.” For difficulties attaching to “Richesse,” as the French equivalent of “Wealth,” see Gide, Cours d'Économie Politique (1909), p. 47. [By the earlier French economic writers, however, the term was used in the plural, as in Turgot's Réflexions sur Formation et la Distribution des Richesses (1770: trans. by Ashley, 1898).]

The German language possesses no one inclusive term like “Wealth”; and German economists have long been accustomed to begin with the definition of “goods” (Guter) and, in consequence, of “a good” (Gut)—enjoying, in the use of the latter term, an advantage not available in current English speech. For characteristic examples reference may be made to Wagner, Lehrbuch der Politischen Oekonomie, Grundlagen (3rd ed. 1892), I, bk. ii. ch. i.; or Conrad, Grundriss zum Studium der Politischen Oekonomie (6th ed. 1907), § 5. The phrases “goods,” “economic goods,” “an economic good,” and so on, have of late years made their way into English and still more into American economic writings; see, for instance, Marshall (as above), and Clark, Essentials of Economic Theory (1907), ch. 2; and cf. Pierson, Principles of Economics (Eng. trans. 1902), pt. i. ch. i.

C.—: The Types of Society (p. 20)

Mill's brief sketch of the general economic development of humanity is a masterly one. But since his time there has been a vast amount of work done, especially in Germany, in the field of economic history. The best introduction to the subject is now Schmoller's Grundriss, bk. ii. (occupying the second volume of the French trans., Principes). A very suggestive treatment of certain aspects of the subject is presented in a brief compass in Bücher, Entstehung der Volkswirthschaft (Eng. trans. under the title Industrial Evolution, N. Y. 1901); which receives some necessary correction and is supplemented in important respects by Meyer, Die wirthschaftliche Entwickelung des Alterthums, Vortrag, 1895, and Die Sklaverei im Alterthum, Vortrag, 1898; and by v. Below, Über Theorien der wirthschaftlichen Entwicklung der Völker, in Historische Zeitschrift, lxxxvi. (N. F. 1.). The best general work in English is Cunningham's Western Civilisation in its Economic Aspects; Ancient Times (1898), Mediaeval and Modern Times (1900). Seligman, Principles of Economics (1905), part ii. bks. ii. and iii., brings together a great many instructive apercus in a short compass.

D.—: Productive and Unproductive Labour (p. 53)

The distinction was taken from Adam Smith, Wealth of Nations, bk. ii. ch. 3, who derived the words themselves from the French Physiocrats, though he used them in a different sense. It has been criticised by Jevons, Principles, ch. xviii., and Cancan, History of the Theories of Production and Distribution (1893), ch. i. § 7; and it is now but little used. Cf. Marshall, bk. ii. ch. 3.

E.—: The Definition of Capital (p. 62)

A good introduction to the large contentious literature on this subject is Schmoller, Grundriss, ii. § 182 c (in the French trans. Principes, iii. pp. 409 seq.); which makes use of the material collected in Böhm-Bawerk, The Positive Theory of Capital (Eng. trans. 1891), bk. i. ch. 3. As Wagner, Grundlagen, § 129, has pointed out, the conception of capital is twofold—economical and historical (cf. Gide, Cours, bk. i. ch. 3); the latter aspect was emphasised by Lassalle in his proposition that “Capital is a historical category.” An account in English of the history of the conception will be found in Marshall, i. App. E, and in Taussig, Wages and Capital (N. Y. 1896), ch. 2. Clark, Distribution of Wealth (1902), ch. 9, distinguishes between “Capital” and “Capital Goods.” Fisher, The Nature of Capital and Income (1906), defines Capital as “a stock of wealth existing at a moment of time,”—which would seem to identify Capital with Wealth generally; while Gibson, Human Economics (1909), defines Capital from the business point of view as “everything in which an individual or group has a legal estate and for which there is a buyer's valuation.”

F.—: Fundamental Propositions on Capital (p. 90)

For destructive criticism of these propositions see Jevons, Principles, ch. xxiv.; Sidgwick Principles, bk. i. ch. 5, note; and Nicholson, Principles, i. pp. 98 seq. The first and fourth of them, as stated by Mill, are only other aspects of his Wages Fund doctrine, and, according to Marshall, Principles, i. App. J, “express his meaning badly.”

G.—: Division and Combination of Labour (p. 131)

This subject, when further examined, widens out into the two far larger topics of economic differentiation and co-operation, which are themselves to a large extent but different aspects of the same process. In this sense it is philosophically treated with a great command of the results of recent investigations, in Schmoller, Grundriss, i. §§ 113 seq. (in Fr. trans. Principes, ii. pp. 248 seq.).

H.—: Large and Small Farming (p. 154)

On this problem, so far as England is concerned, it has to be remembered: (1) that the substitution of large for small farming in the eighteenth and early nineteenth centuries was closely associated with the movement for the enclosure of the “open” or intermixed fields; see hereon, Slater, The English Peasantry and the Enclosure of Common Fields (1907), and Hasbach, A History of the English Agricultural Labourer (Eng. trans. 1908); and (2) that the position of affairs has been greatly affected since Mill wrote by the shock to “cereal farming” caused by the influx of cheap American grain in the eighties: hereon, see Levy, Entstehung and Rückgang des landwirthschaftlichen Grossbetriebes in England (1904). Materials for an opinion on the economic prospects of small farming in England are to be found in Lawes and Gilbert, Allotments and Small Holdings, in Journal of the Royal Agric. Soc., vol. iii. 3rd series (1892); in the Report of a Departmental Committee on Small Holdings (1906); and in Jebb, The Small Holdings of England (1907). They are evidently bound up to some extent with the prospects of agricultural co-operation (in the purchase of fertilisers, the sale of produce, &c.), of which an account is given in Pratt, The Organisation of Agriculture (1905), and in the publications of the Agricultural Organisation Society. A general comparison of Large and Small Farming following, criticising, and supplementing that of Mill is presented by Nicholson, Principles, i. (1893) bk. i. ch. 9.

I.—: Population (p. 162)

In the writings of no contemporary economist, in Great Britain or abroad, does the idea that population is constantly tending to press upon the means of subsistence occupy the same conspicuous and primary place as it does with Mill. The treatment of the subject by Marshall, Principles, bk. iv. chs. 4, 13, and bk. vi. ch. 13, is characteristic of the general present attitude. Attention is coming to be directed more and more to those defects in the present industrial organisation which create a body of permanently underemployed as well as temporarily unemployed, even where the growth of population is evidently not outstripping the means of employment: hereon see Beveridge, Unemployment (1909), p. 6 and passim. The understanding of the exact teaching of Malthus, and of the differences between the first edition of the Essay (1798) and the second (1803), has been facilitated by the publication of Parallel Chapters from the First and Second Editions of an Essay on the Principle of Population (1895).

J.—: The Law of Diminishing Return (p. 188)

Careful restatements in general accord with Mill's teaching are to be found in Marshall, Principles, i. bk. iv. ch. 3; and Nicholson, Principles, bk. i. ch. 10. For the results of the Rothamsted experiments, showing that “beyond a certain point the increase of crop is not in proportion to the increase in the amount of manure applied,” see Lawes, Is Higher Farming a Remedy for Lower Prices? Lecture (1879); and Hall, The Book of the Rothamsted Experiments (1905). The extent to which the formula of diminishing returns covers the facts of agricultural development is discussed by Schmoller, Grundriss, ii. § 233 (Principes, iv. pp. 427 seq.). But while Mill and the older theoretic writers distinguished between the law of diminishing return in agriculture and the fact (by some called the law) of increasing return in manufacture (cf. Marshall, Principles, bk. iv. ch. 13, § 2), and writers of the historical school tend to minimise the effect of the law of diminishing return even in agriculture, some more recent theoretic writers go in the other direction and declare that the law of diminishing return is universal and applies to production of all kinds. For the sense in which they use such language, see Clark, Distribution of Wealth, p. 208, and Seligman, Principles, § 88.

K.—: Mill's Earlier and Later Writings on Socialism (p. 204)

Mill's account in the Preface to the 3rd edition of the nature of the alterations there made, scarcely give an adequate impression of the change of tone on his part between 1848 and 1852. The total impression produced by the argument of 1848 is that “Socialism” was probably undesirable and impracticable. Thus the difficulty of apportioning labour among the members of the community, which was met in 1852 by an expression of the hope that “human intelligence would not be inadequate” to deal with it, had called forth in 1848 the following remarks:

“In the existing system of industry these things do adjust themselves with some, though but a distant, approach to fairness. If one kind of work is harder or more disagreeable than another, or requires a longer practice, it is better paid, simply because there are fewer competitors for it; and an individual generally finds that he can earn most by doing the thing which he is fittest for. I admit that this self-adjusting machinery does not touch some of the grossest of the existing inequalities of remuneration, and in particular the unjust advantage possessed by almost the commonest mental over almost the hardest and most disagreeable bodily labour. Employments which require any kind of technical education, however simple, have hitherto been the subject of a real monopoly as against the mass. But as popular instruction advances, this monopoly is already becoming less complete, and every increase of prudence and foresight among the people encroaches upon it more and more.”

And the argument concluded thus:

“I believe that the condition of the operatives in a well-regulated manufactory, with a great reduction of the hours of labour and a considerable variety of the kind of it, is very like what the condition of all would be in a Socialist community. I believe that the majority would not exert themselves for any thing beyond this, and that unless they did, nobody else would; and that on this basis human life would settle itself into one invariable round. But to maintain even this state, the limitation of the propagative powers of the community must be as much a matter of public regulation as everything else; since under the supposed arrangements prudential restraint would no longer exist. Now, if we suppose an equal degree of regulation to take place under the present system, either compulsorily, or, what would be so much preferable, voluntarily; a condition at least equal to what the Socialist system offers to all would fall to the lot of the least fortunate, by the mere action of the competitive principle. Whatever of pecuniary means or freedom of action any one obtained beyond this, would be so much to be counted in favour of the competitive system.”

It is true that, in the next section, he went on to say:

“These arguments, to my mind conclusive against Communism, are not applicable to St. Simonism... St. Simonism does not contemplate an equal, but an unequal, division of the produce.”

But he judged the assumption on which it rested “almost too chimerical to be reasoned against”; and began the next section thus:

“There has never been imagined any mode of distributing the produce of industry, so well adapted to the requirements of human nature on the whole, as that of letting the share of each individual (not in a state of bodily or mental incapacity) depend in the main on that individual's own energies and exertions, and on such furtherance as may be obtained from the voluntary good offices of others. It is not the subversion of the system of individual property that should be aimed at, but the improvement of it.”

In the 3rd edition, it should be noted, the treatment of the subject is affected not only by a modification of personal opinion, but also by the insertion, which had taken place in the 2nd edition, of the account of Fourierism.

In 1869 Mill formed the design of writing a book on Socialism; and after his death the first rough drafts of the work were published by his step-daughter, Miss Helen Taylor, in the Fortnightly Review for February, March, and April 1879. These articles indicate a reversion on Mill's part to an attitude resembling more closely perhaps his state of mind in 1848 than that in 1852. It must be remembered that his criticisms bore primarily upon the Socialist literature of his own time (1869). His treatment of the subject was so carefully balanced that there is a certain risk of giving an unfair impression of the general effect of the argument by the selection of a few passages. The following passages, taken in conjunction with the chapters in the Principles, will, however, indicate with sufficient clearness his general point of view.

After an Introduction on the importance of the subject, Mill begins by setting forth at length the Socialist objections to the present order of society, and by recognising the large element of truth in them.

“But the strongest case is susceptible of exaggeration; and it will have been evident to many readers, even from the passages I have quoted, that such exaggeration is not wanting in the representations of the ablest and most candid Socialists. Though much of their allegations is unanswerable, not a little is the result of errors in political economy; by which, let me say once for all, I do not mean the rejection of any practical rules of policy which have been laid down by political economists: I mean ignorance of economic facts, and of the causes by which the economic phenomena of society as it is, are actually determined.

“In the first place, it is unhappily true that the wages of ordinary labour in all the countries of Europe are wretchedly insufficient to supply the physical and moral necessities of the population in any tolerable measure. But when it is further alleged that even this insufficient remuneration has a tendency to diminish; that there is, in the words of M. Louis Blanc, une baisse continue des salaires; the assertion is in opposition to all accurate information, and to many notorious facts. It has yet to be proved that there is any country in the civilised world where the ordinary wages of labour, estimated either in money or in articles of consumption, are declining; while in many they are, on the whole, on the increase; and an increase which is becoming not slower, but more rapid.”

The following passage supplements the chapter in the Principles on the theory of Profit:

“Another point on which there is much misapprehension on the part of Socialists, as well as of Trades Unionists and other partisans of Labour against Capital, relates to the proportions in which the produce of the country is really shared, and the amount of what is actually diverted from those who produce it, to enrich other persons.... With respect to capital employed in business, there is in the popular notions a great deal of illusion. When, for instance, a capitalist invests £20,000 in his business and draws from it an income of suppose £2000 a year, the common impression is as if he was the beneficial owner both of the £20,000 and the £2000, while the labourers own nothing but their wages. The truth, however, is that he only obtains the two thousand pounds on condition of applying no part of the £20,000 to his own use. He has the legal control over it, and might squander it if he chose, but if he did he would not have the £2000 a year also. As long as he derives an income from his capital he has not the option of withholding it from the use of others. As much of his invested capital as consists of buildings, machinery and other instruments of production, is applied to production and is not applicable to the support or enjoyment of any one. What is so applicable (including what is laid out in keeping up or renewing the buildings and instruments) is paid away to labourers, forming their remuneration and their share in the division of the produce. For all personal purposes they have the capital and he has but the profits, which it only yields to him on condition that the capital itself is employed in satisfying, not his own wants, but those of labourers. The proportion which the profits of capital usually bear to the capital itself (or rather to the circulating portion of it) is the ratio which the capitalist's share of the produce bears to the aggregate share of the labourers. Even as his own share a small part only belongs to him as the owner of capital. The portion of the produce which falls to capital merely as capital is measured by the interest of money, since that is all that the owner of capital obtains when he contributes nothing to production except the capital itself. Now the interest of capital in the public funds, which are considered to be the best security, is at the present prices (which have not varied much for many years) about three and one-third per cent. Even in this investment there is some little risk—risk of repudiation, risk of being obliged to sell out at a low price in some commercial crisis.

“Estimating these risks at one-third per cent., the remaining three per cent. may be considered as the remuneration of capital, apart from insurance against loss. On the security of a mortgage four per cent. is generally obtained, but in this transaction there are considerably greater risks—the uncertainty of titles to land under our bad system of law; the chance of having to realise the security at a great cost in law charges; and liability to delay in the receipt of the interest, even when the principal is safe. When mere money independently of exertion yields a larger income, as it sometimes does, for example, by shares in railway or other companies, the surplus is hardly ever an equivalent for the risk of losing the whole, or part, of the capital by mismanagement, as in the case of the Brighton Railway, the dividend of which, after having been six per cent. per annum, sunk to from nothing to one and one-half per cent., and shares which had been bought at 120 could not be sold for more than 43.... Of the profits, therefore, which a manufacturer or other person in business obtains from his capital no more than about three per cent. can be set down to the capital itself. If he were able and willing to give up the whole of this to his labourers, who already share among them the whole of his capital as it is annually reproduced from year to year, the addition to their weekly wages would be inconsiderable. Of what he obtains beyond three per cent. a great part is insurance against the manifold losses he is exposed to, and cannot safely be applied to his own use, but requires to be kept in reserve to cover those losses when they occur. The remainder is properly the remuneration of his skill and industry—the wages of his labour of superintendence. No doubt if he is very successful in business these wages of his are extremely liberal, and quite out of proportion to what the same skill and industry would command if offered for hire. But on the other hand he runs a worse risk than that of being out of employment: that of doing the work without earning anything by it, of having the labour and anxiety, without the wages. I do not say that the drawbacks balance the privileges, or that he derives no advantage from the position that makes him a capitalist and employer of labour, instead of a skilled superintendent letting out his service to others; but the amount of his advantage must not be estimated by the great prizes alone. If we subtract from the gains of some the losses of others and deduct from the balance a fair compensation for the anxiety, skill and labour of both, grounded on the market price of skilled superintendence, what remains will be, no doubt, considerable, but yet, when compared to the entire capital of the country, annually reproduced and dispensed in wages, it is very much smaller than it appears to the popular imagination; and were the whole of it added to the share of the labourers it would make a less addition to their share than would be made by any important invention in machinery, or by the suppression of unnecessary distributers and other ‘parasites of industry.’...

“It seemed desirable to begin the discussion of the Socialist question by these remarks in abatement of Socialist exaggerations, in order that the true issues between Socialism and the existing state of society might be correctly conceived. The present system is not, as many Socialists believe, hurrying us into a state of general indigence and slavery from which only Socialism can save us. The evils and injustices suffered under the present system are great, but they are not increasing; on the contrary, the general tendency is toward their slow diminution.”

Mill then opens his statement of the objections to Socialism with the following classification, which illustrates the extent to which Socialist propaganda has changed its character since 1869:

“Among those who call themselves Socialists, two kinds of persons may be distinguished. There are, in the first place, those whose plans for a new order of society—in which private property and individual competition are to be superseded and other motives to action substituted—are on the scale of a village community or township, and would be applied to an entire country by the multiplication of such self-acting units; of this character are the systems of Owen and Fourier, and the more thoughtful and philosophic Socialists generally. The other class, who are more a product of the continent than of Great Britain and may be called the revolutionary Socialists, propose to themselves a much bolder stroke. Their scheme is the management of the whole productive resources of the country by one central authority, the general government.”

Remarking that:

“the peculiarities, however, of the revolutionary form of Socialism will be most conveniently examined after the considerations common to both the forms have been duly weighed,”

he begins by pointing out that:

“the distinctive feature of Socialism is not that all things are in common, but that production is only carried on upon the common account, and that the instruments of production are held as common property.”

Accordingly:

“The question to be considered is, whether this joint management is likely to be as efficient and successful as the managements of private industry by private capital. And this question has to be considered in a double aspect: the efficiency of the directing mind, or minds, and that of the simple workpeople.”

He discusses this, first in relation to the form of Socialism which he calls

“simple communism, i.e. equal division of the produce among all the sharers, or, according to M. Louis Blanc's still higher standard of justice, apportionment of it according to difference of need, but without making any difference of reward according to the nature of the duty nor according to the supposed merits or services of the individual,”

with the conclusion that its success would depend upon a moral education for which mankind could only be effectually trained by communistic association:

“It is for Communism, then, to prove, by practical experiment its power of giving this training. Experiments alone can show whether there is as yet in any portion of the population a sufficiently high level of moral cultivation to make Communism succeed, and to give the next generation among themselves the education necessary to keep up that high level permanently. If Communist associations show that they can be durable and prosperous, they will multiply, and will probably be adopted by successive portions of the population of the more advanced countries as they become morally fitted for that mode of life.”

And, going on then to “those other forms of Socialism which recognise the difficulties of Communism and contrive means to surmount them,” of which the principal was Fourierism, he gives reasons for the opinion that, for them, “practical trial” is no less necessary. He then goes on to the other main division:

“The various schemes for managing the productive resources of the country by public instead of private agency... are at present workabie only by the élite of mankind, and have yet to prove their power of training mankind at large to the state of improvement which they presuppose. Far more, of course, may this be said of the more ambitious plan which aims at taking possession of the whole land and capital of the country, and beginning at once to administer it on the public account. Apart from all consideration of injustice to the present possessors, the very idea of conducting the whole industry of a country by direction from a single centre is so obviously chimerical that nobody ventures to propose any mode in which it should be done.”

Mill's argument with regard to the second or “revolutionary” type of Socialism is accordingly based upon the difficulty of “the problem of management.” And his final conclusion is thus expressed:

“The preceding considerations appear sufficient to show that an entire renovation of the social fabric, such as is contemplated by Socialism, establishing the economic constitution of society upon an entirely new basis, other than that of private property and competition, however valuable as an ideal, and even as a prophecy of ultimate possibilities, is not available as a present resource, since it requires from those who are to carry on the new order of things qualities both moral and intellectual, which require to be tested in all, and to be created in most; and this cannot be done by an Act of Parliament, but must be, on the most favourable supposition, a work of considerable time. For a long period to come the principle of individual property will be in possession of the field; and even if in any country a popular movement were to place Socialists at the head of a revolutionary government, in however many ways they may violate private property the institution itself would survive, and would either be accepted by them or brought back by their expulsion, for the plain reason that people will not lose their hold of what is at present their sole reliance for subsistence and security until a substitute for it has been got into working order. Even those, if any, who have shared among themselves what was the property of others would desire to keep what they had acquired, and to give back to property in the new hands the sacredness which they had not recognised in the old.

“But though, for these reasons, individual property has presumably a long term before it, if only of provisional existence, we are not, therefore, to conclude that it must exist during that whole term unmodified, or that all the rights now regarded as appertaining to property belong to it inherently, and must endure while it endures. On the contrary, it is both the duty and the interest of those who derive the most direct benefit from the laws of property to give impartial consideration to all proposals for rendering those laws in any way less onerous to the majority....

“One of the mistakes oftenest committed, and which are the source of the greatest practical errors in human affairs, is that of supposing that the same name always stands for the same aggregation of ideas. No word has been the subject of more of this kind of misunderstanding than the word property. It denotes, in every state of society, the largest power of exclusive use or exclusive control over things (and sometimes, unfortunately, over persons) which the law accords, or which custom in that state of society recognises; but these powers of exclusive use and control are very various and differ greatly in different countries and in different states of society.”

And, after some historical illustrations of this proposition, he concludes:

“When, therefore, it is maintained, rightly or wrongly, that some change or modification in the powers exercised over things by the persons legally recognised as their proprietors would be beneficial to the public and conducive to the general improvement, it is no good answer to this merely to say that the supposed change conflicts with the idea of property. The idea of property is not some one thing identical throughout history and incapable of alteration, but is variable like all other creations of the human mind; at any given time it is a brief expression denoting the rights over things conferred by the law or custom of some given society at that time; but neither on this point nor on any other has the law and custom of a given time and place a claim to be stereotyped for ever. A proposed reform in laws or customs is not necessarily objectionable because its adoption would imply, not the adaptation of all human affairs to the existing idea of property, but the adaptation of the existing ideas of property to the growth and improvement of human affairs. This is said without prejudice to the equitable claim of proprietors to be compensated by the state for such legal rights of a proprietary nature as they may be dispossessed of for the public advantage.”

L.—: The Later History of Socialism (p. 217)

It will be observed that the socialistic writings commented on by Mill were all of French origin and were none of them subsequent to 1869, the date of Mill's articles on Socialism referred to under Appendix K. The Socialism which has been of most influence in later years has been of German origin, and must be studied in the writings of its chief exponents, Karl Marx, Ferdinand Lassalle, Rodbertus, and Friedrich Engels. The most notable in this connexion of those of Lassalle were Arbeiterprogramm (1862: Eng. trans. as The Working Man's Programme), and Herr Bastiat Schulze von Delitzsch der ökonomische Julian (1864: French trans. by Malon as Capital et Travail); of Rodbertus, Zur Beleuchtung der Sozialen Frage (1875; containing a new edition of Soziale Briefe an v. Kirchmann, 1850), and Die Handelskrisen (1858: Eng. trans. as Overproduction and Crises, 1898); and of Engels (in conjunction with Marx), Manifest der Kommunistischen Partei (1848: Eng. trans. revised by Engels 1888), and, alone, Die Entwickelung der Sozialismus von der Utopie zur Wissenschaft (1882: Eng. trans. as Socialism, Utopian and Scientific), and Introductions to Marx's Capital. But of most importance for the theoretic formulation of Socialism have been the writings of Marx (1818–1883): Zur Kritik der politischen Oekonomie (1859), and, above all, Das Kapital (i. 1867: Eng. trans. Capital, 1887; ii. 1893; iii. 1894. An English abstract of the 1st vol. by Aveling appeared in 1891 as The Student's Marx). Fundamental ideas in the writings of Marx were those of Surplus-Value, of Class War, of the Concentration of Wealth, and of the Materialist Interpretation of History. The extent to which these particular teachings have been abandoned by those younger German socialists known as “Revisionists” may be gathered from Bernstein, Die Voraussetzungen der Sozialismus (1899: Eng. trans. as Evolutionary Socialism, 1909).

Among useful books on the history of Socialism in general, and of German socialism in particular, may be mentioned: Laveleye, Le Socialisme Contemporain (1881: Eng. trans. 1885); Ely, French and German Socialism (1885); Gonner, The Social Philosophy of Rodbertus (1900); Rae, Contemporary Socialism (3rd ed. 1901); Brooks, The Social Unrest (1903); Kirkup, A History of Socialism (3rd ed. 1906); Ensor, Modern Socialism (2nd ed. 1907),—a most useful collection of typical documents and speeches from all the leading countries of Europe; and Herkner, Die Arbeiterfrage (5th ed. 1908).

English socialism has pursued in some respects a line of development of its own; and it may be studied in Fabian Essays in Socialism (1889: Reprint, with a significant preface, 1908); various Fabian Tracts, especially Shaw, The Fabian Society (1892); Macdonald, Socialism and Society (1905); Wells, New Worlds for Old (1908); and Villiers, The Socialist Movement in England (1908).

Two popular works which have had a very large circulation are, in America, Bellamy, Looking Backward (1890), and in England, Blatchford, Merrie England (1894).

For French socialism see Jaurès, Studies in Socialism (Eng. trans. 1906); Lavy, L'Oeuvre de Millerand (1902); and Millerand, Travail et Travailleurs (1908); for the recent developments of “Revolutionary Syndicalism,” Gide and Rist, Histoire des Doctrines Économiques (1909); and for Belgian socialism, Destrée and Vandervelde, Le Socialisme en Belgique (1903).

Among criticisms of socialism in various forms and aspects may be singled out Herbert Spencer, The Man v. The State (1884); Courtney The Difficulties of Socialism, in Econ. Journal, i. (1891); Schäffle, The Impossibility of Social Democracy (Eng. trans. 1892); Richter, Pictures of the Socialistic Future (Eng. trans. 1893); Devas, Political Economy (2nd ed. 1901), bk. ii. ch. 7; Strachey, Problems and Perils of Socialism (1908); and Mallock, A Critical Examination of Socialism (1909). An individualist position is ably maintained in the writings of Helen Bosanquet, especially The Strength of the People (1902).

M.—: Indian Tenures (p. 328)

The whole subject must now be studied in the works of the late B. H. Baden-Powell, and especially in the three massive volumes The Land Systems of British India (1892), and the brief text-book based upon that work, Land Revenue in British India (1894). See also his Indian Village Community (1896), and the more popular Village Communities in India (1899); and on the special subject of the Origin of Zamindari Estates in Bengal, his article under that title in the (Harvard) Quarterly Journal of Economics, xi. (Oct. 1896).

N.—: Irish Agrarian Development (p. 342)

The Irish Land Act of 1870 marked the beginning of an attempt to solve the agrarian problem in accordance with the principle popularly described as “dual ownership,” by giving the tenants a right to “compensation for disturbance.” The great Land Act of 1881 carried the process much further by accepting the proposals known as “the three F's” (fair rents, free sale of tenants' interests, and fixed tenure), and establishing a Land Court to fix “judicial rents” for a term of years. By the Land Act of 1903, however, a new departure was made; and machinery was provided for the voluntary transference to the tenants of the land still in the hands of the landlords, on terms attractive to both parties. This measure and the subsequent amending and supplementary Acts will probably, in no long time, bring about the establishment of a system of peasant proprietorship over a great part of Ireland. It should be added that there has of recent years been a rapid growth among Irish farmers of various forms of co-operation. For a brief account of the Act of 1881 and of its relation to contemporary Nationalism, see Low and Sanders, Political History of England during the reign of Victoria (1907). The least biassed accounts of Irish agrarian history during the last forty years are perhaps to be found in a brief work by a German economist, Dr. Bonn, Modern Ireland and her Agrarian Problem (Eng. trans. 1906), and in Bastable's articles in the (Harvard) Quarterly Journal of Economics, xviii. (Nov. 1903), and in the Economic Journal, xix. (March 1909). On the movement towards co-operation among farmers, see Plunkett, Ireland in the New Century (1903), part ii. The details of the history are best looked for in the reports of Royal Commissions and similar documents, such as the Report of the Royal Commission of 1880–1, and of the Royal Commission of 1886–7, the Report of the Select Committee of the House of Commons of 1894 (“Morley's Committee”), and the Report of the Royal Commission of 1897–8 (“Fry's Commission”), together with a Report by Mr. W. F. Bailey, Legal Assistant-Commissioner, of an Inquiry into the Present Condition of Tenant Purchasers (1903). the Reports of the Irish Agricultural Organisation Society (from 1895), and of the Irish Department of Agriculture and Technical Instruction (from 1901). See also Coyne, Ireland, Industrial and Commercial (pub. by Irish Dep. of Agriculture, 1902), and for the text of the Acts, Cherry and Barton, Irish Land Law.

O.—: The Wages Fund Doctrine (p. 344)

This doctrine was formally abandoned by Mill himself in the course of a review of Thornton's Labour in the Fortnightly Review for May 1869, reprinted in his Dissertations and Discussions, iv. The central passages of this article are as follows (Dissertations, iv. pp. 42 seq.):

“It will be said that... supply and demand do entirely govern the price obtained for labour. The demand for labour consists of the whole circulating capital of the country, including what is paid in wages for unproductive labour. The supply is the whole labouring population. If the supply is in excess of what the capital can at present employ, wages must fall. If the labourers are all employed, and there is a surplus of capital still unused, wages will rise. This series of deductions is generally received as incontrovertible. They are found, I presume, in every systematic treatise on political economy, my own certainly included. I must plead guilty to having, along with the world in general, accepted the theory without the qualifications and limitations necessary to make it admissible.

“The theory rests on what may be called the doctrine of the wages fund. There is supposed to be, at any given instant, a sum of wealth, which is unconditionally devoted to the payment of wages of labour. This sum is not regarded as unalterable, for it is augmented by saving, and increases with the progress of wealth; but it is reasoned upon as at any given moment a predetermined amount. More than that amount it is assumed that the wages-receiving class cannot possibly divide among them; that amount, and no less, they cannot but obtain. So that, the sum to be divided being fixed, the wages of each depend solely on the divisor, the number of participants....

“But is there such a thing as a wages-fund, in the sense here implied? Exists there any fixed amount which, and neither more nor less than which, is destined to be expended in wages?

“Of course there is an impassable limit to the amount which can be so expended; it cannot exceed the aggregate means of the employing classes. It cannot come up to those means; for the employers have also to maintain themselves and their families. But, short of this limit, it is not, in any sense of the word, a fixed amount.

“In the common theory, the order of ideas is this: The capitalist's pecuniary means consist of two parts—his capital, and his profits or income. His capital is what he starts with at the beginning of the year, or when he commences some round of business operations; his income he does not receive until the end of the year, or until the round of operations it completed. His capital, except such part as is fixed in buildings and machinery, or laid out in materials, is what he has got to pay wages with. He cannot pay them out of his income, for he has not yet received it. When he does receive it, he may lay by a portion to add to his capital, and as such it will become part of next year's wages-fund, but has nothing to do with this year's.

“This distinction, however, between the relation of the capitalist to his capital, and his relation to his income is wholly imaginary. He starts at the commencement with the whole of his accumulated means, all of which is potentially capital: and out of this he advances his personal and family expenses, exactly as he advances the wages of his labourers.... If we choose to call the whole of what he possesses applicable to the payment of wages, the wages-fund, that fund is co-extensive with the whole proceeds of his business, after keeping up his machinery, buildings and materials, and feeding his family; and it is expended jointly upon himself and his labourers. The less he expends on the one, the more may be expended on the other, and vice versâ. The price of labour, instead of being determined by the division of the proceeds between the employer and the labourers, determines it. If he gets his labour cheaper, he can afford to spend more upon himself. If he has to pay more for labour, the additional payment comes out of his own income; perhaps from the part which he would have saved and added to capital, thus anticipating his voluntary economy by a compulsory one; perhaps from what he would have expended on his private wants or pleasures. There is no law of nature making it inherently impossible for wages to rise to the point of absorbing not only the funds which he had intended to devote to carrying on his business, but the whole of what he allows for his private expenses, beyond the necessaries of life. The real limit to the rise is the practical consideration, how much would ruin him or drive him to abandon the business: not the inexorable limits of the wages-fund.

“In short, there is abstractedly available for the payment of wages, before an absolute limit is reached, not only the employer's capital, but the whole of what can possibly be retrenched from his personal expenditure: and the law of wages, on the side of demand, amounts only to the obvious proposition that the employers cannot pay away in wages what they have not got. On the side of supply, the law as laid down by economists remains intact. The more numerous the competitors for employment, the lower, caeteris paribus, will wages be....

“But though the population principle and its consequences are in no way touched by anything that Mr. Thornton has advanced, in another of its bearings the labour question, considered as one of mere economics, assumes a materially changed aspect. The doctrine hitherto taught by all or most economists (including myself), which denied it to be possible that trade combinations can raise wages, or which limited their operations in that respect to the somewhat earlier attainment of a rise which the competition of the market would have produced without them,—this doctrine is deprived of its scientific foundation, and must be thrown aside. The right and wrong of the proceedings of Trade Unions becomes a common question of prudence and social duty, not one which is peremptorily decided by unbending necessities of political economy.”

In spite of the remonstrances of Cairnes, and his attempt to restate the Wages Fund doctrine in a more satisfactory form, in his Leading Principles, part ii. ch. 1, it may be said to be abandoned now by all economists, at any rate in the form in which it was stated by Mill. For a criticism of Mill's retractation, and a statement of a sense in which it may still be allowable to speak of a Wages Fund, see Taussig, Wages and Capital, an Examination of the Wages Fund Doctrine (N. Y. 1896), especially part ii. ch. 11. And see Sidgwick Principles, bk. ii. ch. 8, § 2; Marshall, Principles, i. App. J: The Doctrine of the Wages Fund; and Nicholson, Principles, bk. ii. ch. 10, § 8.

P.—: The Movement of Population (p. 360)

The rate of growth of the population of the several parts of the United Kingdom is shown by the following table:

The factors in the increase of population are evidently (1) migration, (2) the “natural increase” of population, i.e. the excess of births over deaths. The annual natural increase has fallen in England and Wales from 14.5 per 1000 of the population for the period 1876–1880, to 12.1 in 1901–1905, in consequence of the fact that though the death-rate fell from 20.8 to 16 per thousand, the birth-rate fell from 35.3 to 28.1. The birth-rate in England and Wales, for the period since the Civil Registration Act of 1837, reached its maximum in the period 1870–1876, and has since shown a material decline.

The extent of this decline is shown in the next table:

BIRTH-RATES (ENGLAND AND WALES).

Period. Average Annual Crude

Birth-rate per 1000 of

Total Population. Average Annual Corrected

Birth-rate per 1000 of

Female Population

aged 15–45 years.

1876–1880.... 35.3 153.3

1881–1885.... 33.5 144.3

1886–1890.... 31.4 133.4

1891–1895.... 30.5 126.8

1896–1900.... 29.3 118.8

1901–1905.... 28.1 112.5

1906...... 27.1 108.3

1907...... 26.3 105.1

As regards the decline in the birth-rate generally, the Registrar-General observes:

“There are sufficient grounds for stating that during the past 30 years approximately 14 per cent. of the decline in the birth-rate (based on the proportion of births to the female population aged 15–45 years) is due to the decrease in the proportion of married women in the female population of conceptive ages, and that over 7 per cent. is due to the decrease of illegitimacy. With regard to the remaining 79 per cent. of the decrease, although some of the reduced fertility may be ascribed to changes in the age constitution of married women, there can be little doubt that much of it is due to deliberate restriction of child-bearing.”

The decline in the birth-rate, whatever may be its cause, is a feature common to the birth statistics of most European countries. The statistics may be studied in the General Report on the Census of 1901, and in the Annual Reports of the Registrar-General. The figures are conveniently collected in the Blue-book, Public Health and Social Conditions, prepared by the Local Government Board (1909). The most detailed statistical analysis of the facts is to be found in a paper by Newsholme and Stevenson, and another by Yule, in the Journal of the Royal Statistical Society (March 1906).

Q.—: Profits (p. 421)

The most powerful impulse to fresh discussion of the nature of profits was given by the late General Walker, in the emphasis laid by him on “the function of the entrepreneur,” and his view that “profits are a species of the same genus as rent,” and “do not form a part of the price of manufactured products”; see his Wages Question (1876), ch. 14, and Political Economy (1883). In this discussion it has become usual to distinguish more sharply than the earlier writers between Interest and “pure” or “net” Profits; and there is now a large literature on both these topics. As to Interest, much influence has been exerted by the doctrine of the Austrian writer, Böhm-Bawerk, which explains interest as “a premium on present as against future things”; see Böhm-Bawerk, Capital and Interest (Eng. trans. 1890), and Positive Theory of Capital (Eng. trans. 1891). Of the writings this has called forth it may be sufficient to refer to Pierson, Principles of Economics (Eng. trans. 1902), part i. ch. 4, § 5, and to Cassel, The Nature and Necessity of Interest (1903).

On Profit, recent writings are largely influenced by the conceptions of (1) a “quasi-rent,” (2) “the marginal entrepreneur,” and (3) “long and short periods.” The present state of the discussion may be seen in Marshall, Principles, bk. vi. chs. 6–8; Clark, Essentials of Economic Theory (1907), pp. 117 seq.; Seager, Introduction to Economics (3rd ed. 1906), ch. 10; and in Conrad's Grundriss, § 84, and Gide's Cours, pp. 674 seq. The treatment of the subject by Schmoller, Grundriss, §§ 231–2 (Principes, vol. iv.), will be found illuminating. The “tendency” of profits and wages to an equality has been commented upon frequently by Cliffe Leslie, as in his articles on The Political Economy of Adam Smith and On the Philosophical Method of Political Economy, reprinted in his Essays (1879).

R.—: Rent (p. 434)

Criticisms of the Ricardian doctrine of rent, or of its formulation, are to be found in Sidgwick, Principles, bk. ii. ch. 8, and in Nicholson, Principles, vol. i. bk. ii. ch. 14; and it is restated in Pierson, Principles, pt. i. ch. 2, and in Marshall, Principles, bk. vi. ch. 9.

S.—: The Theory of Value (p. 482)

It is on this subject—as to which Mill remarked, in 1848, that “happily there is nothing in the laws of value which remains for the present or any future writer to clear up; the theory of the subject is complete” (p. 436)—that theoretic discussion has mainly turned during the last four decades, owing chiefly to the writings of Jevons, of Menger and the other representatives of the Austrian school, and of Clark and his American followers. The characteristic of all these writers is to approach the problem from the side of demand, and to find the key to value in Final or Marginal Utility (Grenznutz). The best introduction to the discussion is through Jevons, Theory of Political Economy (1871; 2nd ed. revised, 1879), chs. 3 and 4; and through Bonar's article on The Austrian Economists in the (Harvard) Quarterly Journal of Economics, iii. (Oct. 1888); and Smart, An Introduction to the Theory of Value on the lines of Menger, Wieser and Böhm-Bawerk (1891). Wieser's Natural Value (Eng. trans. 1893) attempts to apply the doctrine to the whole problem of Distribution. For the present state of the discussion see Marshall, Principles, i. bk. v.; Clark, Essentials, chs. 6 and 7; and Schmoller, Grundriss, §§ 171–2 (in French, Principes, vol. iii.).

Mill's doctrine of Cost of Production was attacked by Cairnes in his Some Leading Principles of Political Economy newly expounded (1874), soon after Mill's death. See hereon Marshall in Fortnightly Review (April 1876), and Principles, book v. ch. 3, § 2. Cairnes contributed an important consideration to the discussion by the emphasis which he laid on “Non-competing Groups.”

T.—: The Value of Money (p. 506)

For other expositions of “the Quantity Theory of Prices,” see Walker, Money (1878), chs. 3–8; and Nicholson, Money and Monetary Problems (1888; 4th ed. 1897), chs. 5–7. For a criticism, see Scott, Money and Banking (N. Y. 1903), ch. 4. An attempt to test the doctrine statistically is made by Kemmerer, Money and Credit Instruments in their relation to General Prices (N. Y. 1907). For the sense of “money” in modern business, see Withers, The Meaning of Money (1909).

U.—: Bimetallism (p. 510)

For the main points of the controversy on this subject, which had hardly begun when Mill wrote in 1848, see Jevons, Money (1875), ch. 12 (with his acceptance of the view of the “compensatory action” of a double standard system); Gibbs and Grenfell, The Bimetallic Controversy (1886),—a collection of pamphlets, speeches, &c., on both sides; Nicholson, Money and Monetary Problems; Walker, International Bimetallism (1896); Darwin, Bimetallism (1898); and Carlile, The Evolution of Modern Money (1901). An extreme monometallist position is represented in Giffen, Case against Bimetallism (1892).

V.—: International Values (p. 606)

The Ricardian doctrine, followed and carried further by Mill, has hitherto remained the almost exclusive possession of English economists. It has been expounded by Cairnes, Leading Principles, part iii. ch. 3, and by Bastable, Theory of International Trade (2nd ed. 1897). It has been objected to from two diametrically opposite points of view. Transferability of capital and labour, it has been argued, is true of international trade as well as of domestic, so that no separate theory is necessary for the determination of international values; e.g. Hobson, International Trade (1904). On the other hand it has been asserted that such a transferability is true neither of domestic nor of international trade, and that therefore it is necessary to reject both the Ricardian doctrine of home values and the Ricardian doctrine of international values; e.g. Cliffe Leslie, Essays in Political and Moral Philosophy (1879), Preface. A different theory has been put forward by Sidgwick, Principles, bk. ii. ch. 3. A mathematical treatment of the whole subject, with a criticism of all the leading writers, will be found in a series of articles by Edgeworth on The Theory of International Values in the Economic Journal, vol. iv. (1894). Bastable and Edgeworth, while admiring and accepting Mill's first statement of the theory (ch. 18, §§ 1–5), agree in regarding “the superstructure of later date” (§§ 6–8) as “laborious and confusing.”

W.—: The Regulation of Currency (p. 677)

The question of the effect of the Bank Charter Act has lost much of its importance in consequence of the growing use of cheques. These cheques are now largely drawn not against actual deposits but against banking credits; so that banks, while abandoning more and more the issue of notes, “manufacture money” on a vast scale in another way. Hereon see Withers, Meaning of Money, chs. 3 and 5. On the effect of an increase in the supply of gold, see Walker, Money, pt. i. ch. 4, and Withers, ch. 1.

X.—: Prices in the Nineteenth Century (p. 704)

The actual movement of prices has been much investigated since the time of Mill; and attempts, in large measure successful, have been made by Jevons and others to reduce the statement of it to precision by the use of Index Numbers. On the theory and practice of Index Numbers, see article by Edgeworth, s. v., in Palgrave's Dictionary of Political Economy, vol. ii.; Fountain's Memorandum in Report on Wholesale and Retail Prices (Board of Trade, 1903); and the article of Flux in (Harvard) Quarterly Journal of Economics (Aug. 1907).

The following table, taken from the Blue-book of the Local Government Board on Public Health and Social Conditions (1909), presents the conclusions of Sauerbeck as to prices, and of Bowley as to wages, in a form convenient for comparison.

INDEX NUMBERS SHOWING COURSE OF AVERAGE WHOLESALE PRICES AND

GENERAL MONEY WAGES.

[The wages and prices in 1850 being taken as 100 ; wages and prices in other

years in percentages of 1850 figures.]

Year. Index Numbas of Year. Index Number of

Prices. Wages.

Prices. Wages.

1850 100 100

1895 80·5 159·2

1855 131·2 — 1896 79·2 160·7

1897 80·5 162·3

1860 128·6 119·2 1898 83·1 166·5

1899 88·3 170·4

1865 131·2 127·5

1900 97·4 178·7

1870 124·7 134·1 1901 90·9 177·0

1902 89·6 174·7

1875 124·7 161·4 1903 89·6 173·7

1904 90·9 172·8

1880 114·3 148·8

1905 93·5 173·3

1885 93·5 149·6 1906 100·0 175·7

1907 103·9 181·7

1890 93·5 161·7

NOTE.—The Index Numbers here given have been calculated as regards Wages for the years to 1873 on the averages ascertained by Mr. Bowley—see the Economic Journal (Dec. 1898) and the Journal of the Royal Statistical Society (Dec. 1899)—and for later years on the percentages in the 12th Abstract of Labour Statistics of the United Kingdom (1906–7), p. 54. As regards Prices, the Numbers are based on the Index Numbers calculated by Mr. Sauerbeck—see Report on Wholesale and Retail Prices (1903), p. 451, and particulars in the Journal of the Royal Statistical Society (March 1908).

With this may be compared the calculation of the Board of Trade, taking the level of 1900 as 100, as given in the Twelfth Abstract of Labour Statistics (1908), p. 80.

INDEX NUMBERS OF WHOLESALE PRICES, 1871–1907. 1900=100.

Year. Index

No. Year. Index

No. Year. Index

No. Year. Index

No.

1871 136.0 1881 127.3 1891 107.4 1901 96.9

1872 145.8 1882 128.4 1892 101.8 1902 96.5

1873 152.7 1883 126.8 1893 100.0 1903 96.9

1874 148.1 1884 114.7 1894 94.2 1904 98.3

1875 141.4 1885 107.7 1895 91.0 1905 97.6

1876 138.0 1886 101.6 1896 88.2 1906 100.5

1877 141.6 1887 99.6 1897 90.1 1907 105.7

1878 132.6 1888 102.7 1898 93.2

1879 126.6 1889 104.0 1899 92.3

1880 129.6 1890 104.0 1900 100.0

Before making use of these figures it must be remembered that they indicate the movement of wholesale prices; and attention would need also to be paid to the selection of commodities and the method of “weighting.”

To the Report on Wholesale and Retail Prices (1903) and to the “First Fiscal Blue-book” (British and Foreign Trade and Industry, Memoranda, &c., 1903) is prefixed as Frontispiece a chart combining the Index Numbers of Jevons for 1801–1846, of Sauerbeck for 1846–1871, and of the Board of Trade itself for 1871–1902; and so giving in one view the course of prices, so far as those materials indicate it, for the whole period 1801–1902.

As to Retail Prices, calculations will be found in the First “Fiscal Blue-book,” p. 215, and in the Second (British and Foreign Trade and Industry, Second Series, 1904), as to changes in the Average Retail Price of Workmen's Food in large towns in Great Britain during recent decades, as well as of the other principal items of the workman's budget, viz. rent, clothing, fuel, and light, during a quarter of a century. A considerable fall in food prices and a slight fall in the price of clothing since 1880 were in part counterbalanced by a rise in rents and, in the latter years, in fuel; with the result indicated below (Second Series, p. 32):

Statement showing Estimated Changes in Cost of Living of the Working Classes, based on Cost of Food, Rent, Clothing, Fuel, and Light, in a series of averages for quinquennial periods. (Cost in the year 1900=100.)

Y.—: Commercial Cycles (p. 709)

In England there has been no “commercial crisis” since 1866, though crises have continued to make their appearance in the United States, as e.g. in 1893 and 1907. But the alternations of commercial prosperity and depression continue; and the cyclical movement, as Jevons first showed, seems to occupy about ten years. The study of the subject must begin with Jevons' papers (1875–1882) on the Periodicity of Commercial Crises, printed in his Investigations in Currency and Finance (1884). A guide to the history and literature of the subject will be found in Herkner's article Krisen in Conrad's Handwörterbuch der Staatswissenschaften. The relation between Foreign Trade, Bank Rate, Employment, Marriage Rate, Pauperism, &c., for the period 1856–1907 can be conveniently observed in Table IX, and Chart II, “The Pulse of the Nation,” in Beveridge, Unemployment. On American conditions and their connexion with currency questions, see the papers of Seligman and others in The Currency Problem and the Present Financial Situation (N. Y. 1908).

Z.—: Rents in the Nineteenth Century (p. 724)

According to an estimate of Mr. R. J. Thompson printed in the Journal of the Royal Statistical Society (Dec. 1907) the rent of agricultural land in England and Wales advanced by probably 40 per cent. in the first twenty years of the nineteenth century. After 1820 a period of depression ensued, followed in 1840 by the beginning of an upward movement which continued with little intermission till 1878, when a serious depression again set in. The average rent of agricultural land in 1900 was 34 per cent. below the maximum of 1877, and 13 per cent. below the figure of 1846. The average rent of farm land in 1900 was estimated at about 20s. per acre; subject to charges for repairs, &c., amounting on the average to 35 per cent.; so that the net rent probably averaged 13s. per acre. Estimating expenditure on buildings, fences, drainage, &c., at 12l. per acre, 3½ per cent. on this would amount to 8s. 5d., leaving 4s. 7d. per acre as “economic rent,” in the Ricardian sense of payment for the use of the “original and indestructible powers of the soil.”

AA.—: Wages in the Nineteenth Century (p. 724)

There was undoubtedly a very large increase both in nominal or money wages and in real wages (i.e. their purchasing power) in the United Kingdom during the course of the century. The subject may be studied in Giffen's paper on The Progress of the Working Classes in the last half-century, reprinted in Essays in Finance (2nd series, 1886; and the first and more important of them more recently in Economic Inquiries and Studies, vol. i.); Webb, Labour in the Longest Reign (Fabian Tract, 1897); Bowley, Wages in the United Kingdom (1900), National Progress (1904), and his articles in the Journal of the R. Statistical Society, and Wood's article on Real Wages and the Standard of Comfort since 1850, in Jour. R. Stat. Soc. (March 1909).

The conclusions arrived at by the last two statisticians for the period since 1850 are thus summarised in the article last quoted, 1900–1904 being taken by Bowley, and 1900–1902 by Wood, as basis, and called 100:

REAL WAGES, 1850–1902.

1850–4 1855–9 1860–4 1865–9 1870–4 1875–9

Bowley .. .. 50 50 50 55 60 65

Wood .. .. 56 54 59 63 69 75

1880–4 1885–9 1890–4 1894–9 1900–2 or 4

Bowley.... 65 75 85 95 100

Wood.... 76 86 92 97 100

Compare also the table in Appendix X above.

The progress in real wages began before 1850; thus, e.g. Bowley's Index Numbers for 1830 and 1840 are 45 and 50 respectively (see National Progress, p. 33); and, for earlier periods, his conclusions are that while during 1790–1810 real wages were falling slowly, during 1810–1830 they were rising slowly (see Appendix (1908) to Palgrave's Dictionary of Political Economy). The general result would seem to be a large rise on the whole between 1810 and 1900, though between 1840 and 1860 and again between 1873 and 1879 wages were almost stationary.

During the century a progress in real wages of substantially the same character took place in other countries. For a comparison by Bowley of the United Kingdom, the United States and France for the period 1844–1891, see Econ. Jour. viii. 488; and for France, 1806–1900, see Gide, Économie Sociale, p. 64.

BB.—: The Importation of Food (p. 738)

The following figures are given in the Report of the Agricultural Committee (1906) of the Tariff Commission:

IMPORTS OF WHEAT AND FLOUR

Period. Imports

per head.

Cwts. Percentage

of Population

fed from

home-grown corn. Period. Imports

per head.

Cwts. Percentage

of Population

fed from home-grown

corn.

1831–1835 .119 96.0 1871–1875 1.56 48.0

1836–1840 .267 90.0 1876–1880 1.85 37.2

1841–1845 .308 89.55 1881–1885 2.17 26.4

1846–1850 .644 78.45 1886–1890 2.09 29.0

1851–1855 .755 74.4 1891–1895 2.51 15.2

1856–1860 .837 71.9 1896–1900 2.38 19.1

1861–1865 1.196 59.4 1901–1905 2.54 10.6

1866–1870 1.224 58.4

For other estimates, and for sources of import, see “First Fiscal Blue-book” (British and Foreign Trade and Industry, 1903), p. 108.

CC.—: The Tendency of Profits to a Minimum (p. 739)

Compare Cliffe Leslie's article on The History and Future of Interest and Profit in the Fortnightly Review (Nov. 1881: reprinted in Essays, 2nd ed.); and Leroy-Beaulieu, Repartition des Richesses (3rd ed. 1888), ch. 8; and for the history of the rate of interest, see Schmoller, Grundriss, § 191 (Principes, vol. iii).

DD.—: The Subsequent History of Co-Operation (p. 794)

Since Mill wrote, Industrial Co-operation in England has taken the direction mainly of the multiplication of retail stores, deriving their supplies in great measure from a great Wholesale Society: this “Wholesale” producing some of its goods in its own factories and purchasing the rest in the open market. It has not taken the form anticipated by him of self-governing productive associations, providing their own capital. The history of the various movements grouped under the name of Co-operation may be examined in Schloss, Methods of Industrial Remuneration (3rd ed. 1898), chs. 22–24; Potter, The Co-operative Movement (1891); Webb, Industrial Co-operation (1904); Aves, Co-operative Industry (1907); and Fay Co-operation at Home and Abroad (1908). For recent developments in “independent” productive co-operation, see Ashley, Surveys, Historic and Economic (1900), p. 399.

EE.—: The Subsequent History of Income Tax (pp. 806, 817)

For developments later than the time of Mill, reference should be had to Bastable, Public Finance (3rd ed. 1903), bk. iii. ch. 3 and bk. iv. ch. 4; Hill, The English Income Tax (Publications of the American Economic Association, 1889); Seligman, Progressive Taxation (Am. Econ. Assoc. Quarterly, 2nd ed. 1908); and two recent Reports, one of a Departmental Committee on the present working of the income tax (1905), and one of a Select Committee on Graduation (1906). In the Finance Bill now (1909) before Parliament it is proposed to introduce a super-tax on incomes above a certain point, and give an abatement on incomes below a certain point in respect of every child (up to a specified number) below a certain age.

FF.—: The Taxation of Land (p. 819)

In the Finance Bill now (1909) before Parliament it is proposed to impose a tax (1) of 20. per cent. on the future Unearned Increment in value of non-agricultural land; (2) of ½d. in the pound of the capital value of “undeveloped” land. The proposed exemption of agricultural land, when compared with Mill's assumption that there was likely to be a constant increase in the value of agricultural land owing to a rise in the price of food due to the growth of population, indicates the effect upon the public mind of the agricultural depression of the last two decades of the nineteenth century. On the general question of the assessment and special taxation of land values, see Report of the Royal Commission on Local Taxation (1901); Fox, The Rating of Land Values (1906); and the Blue-book on Taxation of Land in Foreign Countries (1909).

GG.—: The Incidence of Taxation (p. 863)

On the whole subject of The Shifting and Incidence of Taxation recourse can now be had to the treatise of Seligman bearing that title (2nd ed. 1899). For the incidence of Death Duties, Rates on Houses and Land, Inhabited House Duty, Taxes on Trade Profits and Taxes on Transfer of Property, see in particular the elaborate replies by “financial and economic experts” in the Blue-book, Memoranda relating to the Classification and Incidence of Imperial and Local Taxes (1899); and on the incidence of Import and Export Duties, see Edgeworth in Economic Journal, iv. pp. 43 seq.

HH.—: Company and Partnership Law (p. 904)

Partnership en commandite, as it is called abroad, is now allowed in the United Kingdom by the Limited Partnerships Act of 1907. This Act makes it possible to create a “limited partnership, wherein one or more persons, called general partners... shall be liable for all debts and obligations of the firm,” and “one or more persons, to be called limited partners, who shall at the time of entering into such partnership contribute thereto a sum as capital... shall not be liable for the obligations of the firm beyond the amount so contributed.” A limited partner must not take part in the management of the business.

The most important development since Mill wrote, however, has been the growth in commercial practice of what came to be known in business language as “private companies,” though organised under the general company law. This form has been increasingly adopted by businesses which wished to combine the advantages of Limited Liability with the advantage of unity and privacy of management belonging to the sole trader or old-fashioned firm. The legality of such arrangements, which were certainly not contemplated by the legislature when it introduced Limited Liability, was finally settled by the decision of the House of Lords in 1896 in the case of Broderip v. Salamon. See hereon Palmer, Private Companies and Syndicates. The conception of a “private company” was finally recognised and defined by the Companies Act of 1907. According to this Act a private company “means a company which by its articles (a) restricts the right to transfer its shares; and (b) limits the number of its members (exclusive of persons who are in the employment of the company) to fifty; and (c) prohibits any invitation to the public to subscribe for shares or debentures.” For the formation of such a company, instead of the seven members formerly required by the Companies Acts, two members will now suffice.

II.—: Protection (p. 926)

Mill's general line of argument has been further pursued and applied to contemporary conditions by Cairnes, Leading Principles; Fawcett, Free Trade and Protection (6th ed. 1885); and Farrar, Free Trade and Fair Trade (4th ed. 1887). Criticisms and considerations of other kinds will be found in Sidgwick, Principles of Political Economy, ch. v.; Patten, Economic Basis of Protection (Philadelphia, 1890); Johnson, Protection and Capital, in Political Science Quarterly, xxiii. (N. Y. 1908); Lexis, Handel, in Schönberg's Handbuch der Politischen Oekonomie (4th ed. 1898), vol. ii.; and Schmoller, Grundriss, §§ 253–271 (in Fr. trans.: Principes d'Économie Politique, vol. v.).

Mill's concession in favour of “infant industries” (bk. v. ch. 10, § 1) was much quoted subsequently in America, Australia and Canada. Writing to a correspondent in 1869 (see Letters, ed. Elliot), he expressed an intention to “withdraw” the opinion, and remarked: “Even on this point I continue to think my opinion was well grounded, but experience has shown that protectionism, once introduced, is in danger of perpetuating itself... and I therefore now prefer some other mode of public aid to new industries, though in itself less appropriate”; but in preparing the edition of 1871 he contented himself with the verbal changes indicated on p. 922 n. 1.

Mill makes no reference in his Principles to the writings of Friedrich List, the intellectual founder of the Zollverein, whose ideas have greatly influenced the subsequent commercial policy as well as the economic thought of Germany. Thereon see List's National System of Political Economy (1840, Eng. trans. by Lloyd: new ed. with Introduction by Nicholson, 1904), and Schmoller's article on List in Zur Litteraturgeschichte der Staats- und Sozialwissenschaften (1884).

A new stage in the discussion was opened by the grant of Preference to imports from England by the Dominion of Canada in 1897—an example since followed by the other great self-governing Dominions of the British Empire; and by the movement in favour of a policy of reciprocal Preference by the Mother Country, initiated by Mr. Joseph Chamberlain, then Colonial Secretary, in 1903. The most important collections of political speeches on this subject are, on one side, those of Chamberlain, Imperial Union and Tariff Reform (1903); Bonar Law, The Fiscal Question (1908); and Milner, Imperialism and Social Reform (1908); and, on the other Asquith, Trade and the Empire (1903); Haldane, Army Reform and Other Addresses (1907); and Russell Rea, Insular Free Trade (1908). See also Balfour, Economic Notes on Insular Free Trade (1903).

Among the writings called forth by the controversy may be mentioned, of those in favour of some modification of the present tariff policy: Caillard, Imperial Fiscal Reform (1903); Ashley, The Tariff Problem (2nd ed. 1904); Cunningham, The Rise and Decline of the Free Trade Movement (1904) and The Words of the Wise (1906); Graham, Free Trade and the Empire (1904); Palgrave, An Enquiry into the Economic Condition of the Country (1904); Price, Economic Theory and Fiscal Policy, in the Economic Journal, xiv. (Sept. 1904); Compatriots' Club Lectures (1905); Kirkup, Progress and the Fiscal Problem (1905); Welsford, The Strength of Nations (1907); Lethbridge, India and Imperial Preference (1907); and Milner's article on Colonial Policy and Vince's on The Tariff Reform Movement in Palgrave, Dictionary of Political Economy, Appendix (1908).

Among the writings in favour of the present policy may be mentioned: Money, Elements of the Fiscal Problem (1903); Avebury, Essays and Addresses (1903); British Industries under Free Trade, ed. Cox (1903); Labour and Protection, ed. Massingham (1903); Smart, The Return to Protection (1904); Hobson, International Trade (1904); Bowley, National Progress (1904); various papers by Giffen in Economic Enquiries (1904); Brassey, Sixty Years of Progress (new ed. 1906); Pigou, Protective and Preferential Import Duties (1906); The Colonial Conference (Cobden Club, 1907); and Marshall, Memorandum on the Fiscal Policy of International Trade (White Paper, 1908).

Materials, statistical and political, for a judgment will be found in the two “Fiscal Blue-books”—British and Foreign Trade and Industry, Memoranda, &c., 1st series, 1903; 2nd series, 1904; in the Proceedings of the Colonial Conferences of 1887, 1894, 1897, 1902, 1907; and in the Reports and Memoranda of the Tariff Commission, since 1904. Among foreign works bearing upon the problem may be particularly mentioned: Fuchs, The Trade Policy of Great Britain (1893: Eng. trans. 1905); Wagner, Agrar- und Industriestaat (2nd ed. 1902); Schwab, Chamberlain's Handelspolitik, with Preface by Wagner (1905); and Schulze-Gaevernitz, Britischer Imperialismus (1906). On the history of the English Corn Laws, Nicholson's book with that title (1904) should be consulted. Free Trade and the Manchester School, ed. Hirst (1903), is a convenient collection of speeches, &c. of the thirties and forties.

JJ.—: Usury Laws (p. 930.)

The pretty general repeal all over Europe of the old usury laws has been followed since 1878 by a reaction, and a great number of “usury laws” have been passed in Germany, Austria, Hungary, Switzerland, and other countries; as well as for the possessions of the Great Powers outside Europe, as e.g. for the Punjaub, the Soudan, Algiers, &c. For an account and estimate of this movement, see Schmoller, Grundriss, § 189 (Principes, vol. iii.). As to the English “Money-lenders Act” of 1900, see the observations from a point of view identical with that of Mill in Dicey, Law and Public Opinion in England (1905), pp. 33 and 45.

KK.—: The Factory Acts (p. 759)

See, on the whole subject, Hutchins and Harrison, A History of Factory Legislation (1907). The legislature, after restricting the freedom of contract of adult men in various other ways, began very tentatively in 1893 to regulate their hours of labour by the Act of that year giving power to the Board of Trade to order railway companies to submit revised schedules of hours of duty for their servants: hereon see Bulletin of the U.S. Department of Labour, No. 20 (1899). Since then, by the Miners' Eight Hours Act (1908), it has introduced a “normal day” for a large number of adult men.

LL.—: The Poor Law (p. 969)

The Report of the Royal Commission on the Poor Law (1909) contains copious and systematically arranged treatises, in the Majority and Minority Reports, and in the supplementary volumes of Reports of special inquiries, on all aspects of the history and practice of the Poor Law since 1834; and will doubtless lead to considerable legislative changes.

MM.—: The Province or Government (p. 979)

On this subject, in its general philosophical aspects, the most influential English writings since the time of Mill have perhaps been those of Sidgwick, Principles of Political Economy (1883), bk. iii. chs. 3 and 4; and Elements of Politics (1891); and Green, Lectures on the Principles of Political Obligation in Works (1886), vol. ii. See also Ritchie, Natural Rights (1895), and, with regard to certain arguments drawn from modern biology, his Darwinism and Politics (1889).

Notes

1.

[Autobiography, p. 27 (Pop. ed. p. 15).]

2.

[Ibid. p. 60 (Pop. ed. p. 34).]

3.

[Ibid. p. 62 (Pop. ed. p. 36).]

1.

[Ibid. p. 119 (Pop. ed. p. 68).]

1.

[Autobiography, p. 101 (Pop. ed. p. 58).]

2.

[Ibid. p. 242 (Pop. ed. p. 139).]

3.

[Ibid. p. 247 (Pop. ed. p. 142).]

1.

[Political Economy. Book iv. chap. vi. § 2.]

2.

[Autobiography, p. 246 (Pop. ed. p. 141).]

3.

[Ibid. p. 243 (Pop. ed. p. 139).]

4.

[Ibid. p. 128 (Pop. ed. p. 73).]

5.

[Reprinted in Dissertations and Discussions. Series I.]

1.

[Dissertations and Discussions, I. p. 452.]

2.

[Ibid. p. 425.]

3.

[Ibid. p. 426.]

4.

[Ibid. p. 453.]

5.

[Alexander Bain, John Stuart Mill, A Criticism: with personal recollections, p. 56.]

6.

[Ibid. p. 57 n.]

1.

[L. Lévy-Bruhl, Lettres Inédites de John Stuart Mill à Auguste Comte (Paris, 1899), p. 2. Writing to Comte, Mill naturally employs Comtean phraseology, and speaks of “ma sortie definitive de la section benthamiste de l'école revolutionnaire.”]

2.

[Bain, J. S. Mill, p. 63.]

1.

[Cf. Bain, p. 72.]

2.

[Cours de Philosophie Positive, vol. iv. (1839), pp. 412 seq.]

1.

[Ibid. pp. 318 seq.]

2.

[Ibid. pp. 264–79.]

1.

[Mill's Logic, book vi. chaps. 6, 10.]

1.

[Ibid. ii. p. 472 (ed. 3).

2.

[Ibid. ii. pp. 480–1.]

1.

[Mill's Logic, ii. p. 486.]

2.

[Reprinted in Essays on some Unsettled Questions of Political Economy (1844).]

3.

[Logic, ii. pp. 476–7.]

4.

[Ibid. ii. p. 441.]

5.

[Ibid. ii. p. 486.]

1.

[Ibid. ii. p. 487.]

2.

[Bain, pp. 78–9.]

3.

[Besides Bain's account, Mill's letters to Comte, printed by Lévy-Bruhl, pp. 260, 285, are of interest.]

4.

[Lévy-Bruhl, p. 308.]

5.

[P. 235 (Pop. ed. p. 135).]

1.

[Leslie Stephen, The English Utilitarians, ii. 161.]

2.

[Unsettled Questions, p. 149.]

3.

[Autobiography, p. 236 (Pop. ed. p. 135).]

4.

[Book ii. chap. 4.]

1.

[Book iv, chap. 1.]

1.

[See the concluding paragraphs in the Preliminary Remarks, and book ii, chap. i. § 1.]

2.

[P. 246 (Pop. ed. p. 141).]

1.

[Autobiography, p. 234 (Pop. ed. p. 134).]

1.

[April 3, 1844. Translated from the French text in Lévy-Bruhl, p. 309.]

2.

[May 1, 1844. Ibid. p. 314. The original French should be consulted. It is impossible in a free rendering to give all the nuances of the original.]

3.

[June 6, 1844. Ibid. p. 322.]

4.

[July 22, 1844. Ibid. p. 338.]

1.

[The original Preface remained unchanged throughout the subsequent editions. But each of the later editions during the author's lifetime contained an addition peculiar to itself, either a new paragraph subjoined to the original preface or a further preface. These are reprinted in the present edition.]

1.

[The English translations in the People's edition have similarly been substituted for the originals in this, Students', edition, but none of the quotations have been omitted.]

2.

[This example has been followed in the present, Students', edition.]

∗.

The last in the author's lifetime; [and to the subsequent eighth and ninth Library editions].

3.

[See, however, pp. 934, 936.]

†.

The present state of the discussion may be learnt from a review (by the author) of Mr. Thornton's work “On Labour,” in the Fortnightly Review of May and June, 1869, and from Mr. Thornton's reply to that review in the second edition of his very instructive book. [See Appendix O. The Wages Fund Doctrine.]

1.

[See Appendix A. The Mercantile System.]

1.

[1st ed. (1848) “about”; 5th ed. (1862) “almost.”]

2.

[Paragraph added in 6th ed. (1865).]

∗.

Infra, book i. chap. iii.

1.

[See Appendix B. The Definition of Wealth.]

1.

[Parenthesis added in 6th ed. (1865).]

1.

[So since 2nd ed. (1849). In the 1st ed. (1848) the text ran: “Russia and Hungary are,” &c.]

2.

[See Appendix C. The Types of Society.]

∗.

This essential and primary law of man's power over nature was, I believe, first illustrated and made prominent as a fundamental principle of Political Economy, in the first chapter of Mr. [James] Mill's Elements.

∗.

The able and friendly reviewer of this treatise in the Edinburgh Review (October 1848) conceives the distinction between materials and implements rather differently: proposing to consider as materials “all the things which, after having undergone the change implied in production, are themselves matter of exchange,” and as implements (or instruments) “the things which are employed in producing that change, but do not themselves become part of the exchangeable result.” According to these definitions, the fuel consumed in a manufactory would be considered, not as a material, but as an instrument. This use of the terms accords better than that proposed in the text with the primitive physical meaning of the word “material”; but the distinction on which it is grounded is one almost irrelevant to political economy.

∗.

Some authorities look upon it as an essential element in the idea of wealth, that it should be capable not solely of being accumulated but of being transferred; and inasmuch as the valuable qualities, and even the productive capacities, of a human being, cannot be detached from him and passed to some one else, they deny to these the appellation of wealth, and to the labour expended in acquiring them the name of productive labour. It seems to me, however, that the skill of an artisan (for instance) being both a desirable possession, and one of a certain durability (not to say productive even of national wealth), there is no better reason for refusing to it the title of wealth because it is attached to a man, than to a coalpit or manufactory because they are attached to a place. Besides, if the skill itself cannot be parted with to a purchaser, the use of it may; if it cannot be sold, it can be hired; and it may be, and is, sold outright in all countries whose laws permit that the man himself should be sold along with it. Its defect of transferability does not result from a natural but from a legal and moral obstacle.

The human being himself (as formerly observed) I do not class as wealth. He is the purpose for which wealth exists. But his acquired capacities, which exist only as means, and have been called into existence by labour, fall rightly, as it seems to me, within that designation.

∗.

Essays on some Unsettled Questions of Political Economy. Essay III. On the words Productive and Unproductive.

1.

[“The bankrupt states of North America” in all editions until the 7th (1871). “It remains to be shown whether England,” &e., remained two lines below until the 5th ed. (1862).]

1.

[See Appendix D. Productive and Unproductive.]

1.

[See Appendix E. The Definition of Capital.]

∗.

An exception must be admitted when the industry created or upheld by the restrictive law belongs to the class of what are called domestic manufactures. These being carried on by persons already fed—by labouring families, in the intervals of other employment—no transfer of capital to the occupation is necessary to its being undertaken, beyond the value of the materials and tools, which is often inconsiderable. If, therefore, a protecting duty causes this occupation to be carried on, when it otherwise would not, there is in this case a real increase of the production of the country.

In order to render our theoretical proposition invulnerable, this peculiar case must be allowed for; but it does not touch the practical doctrine of free trade. Domestic manufactures cannot, from the very nature of things, require protection, since the subsistence of the labourers being provided from other sources, the price of the product, however much it may be reduced, is nearly all clear gain. If, therefore, the domestic producers retire from the competition, it is never from necessity, but because the product is not worth the labour it costs, in the opinion of the best judges, those who enjoy the one and undergo the other. They prefer the sacrifice of buying their clothing to the labour of making it. They will not continue their labour unless society will give them more for it, than in their own opinion its product is worth.

∗.

For example, Mr. Malthus, Dr. Chalmers, M. de Sismondi.

∗.

It is worth while to direct attention to several circumstances which to a certain extent diminish the detriment caused to the general wealth by the prodigality of individuals, or raise up a compensation, more or less ample, as a consequence of the detriment itself. One of these is, that spendthrifts do not usually succeed in consuming all they spend. Their habitual carelessness as to expenditure causes them to be cheated and robbed on all quarters, often by persons of frugal habits. Large accumulations are continually made by the agents, stewards, and even domestic servants, of improvident persons of fortune; and they pay much higher prices for all purchases than people of careful habits, which accounts for their being popular as customers. They are, therefore, actually not able to get into their possession and destroy a quantity of wealth by any means equivalent to the fortune which they dissipate. Much of it is merely transferred to others, by whom a part may be saved. Another thing to be observed is, that the prodigality of some may reduce others to a forced economy. Suppose a sudden demand for some article of luxury, caused by the caprice of a prodigal, which not having been calculated on beforehand, there has been no increase of the usual supply. The price will rise; and may rise beyond the means or the inclinations of some of the habitual consumers, who may in consequence forego their accustomed indulgence, and save the amount. If they do not, but continue to expend as great a value as before on the commodity, the dealers in it obtain, for only the same quantity of the article, a return increased by the whole of what the spendthrift has paid; and thus the amount which he loses is transferred bodily to them, and may be added to their capital: his increased personal consumption being made up by the privations of the other purchasers, who have obtained less than usual of their accustomed gratification for the same equivalent. On the other hand, a counter-process must be going on somewhere, since the prodigal must have diminished his purchases in some other quarter to balance the augmentation in this; he has perhaps called in funds employed in sustaining productive labour, and the dealers in subsistence and in the instruments of production have had commodities left on their hands, or have received, for the usual amount of commodities, a less than usual return. But such losses of income or capital, by industrious persons except when of extraordinary amount, are generally made up by increased pinching and privation; so that the capital of the community may not be, on the whole, impaired, and the prodigal may have had his self-indulgence at the expense not of the permanent resources, but of the temporary pleasures and comforts of others. For in every case the community are poorer by what any one spends, unless others are in consequence led to curtail their spending. There are yet other and more recondite ways in which the profusion of some may bring about its compensation in the extra savings of others; but these can only be considered in that part of the Fourth Book, which treats of the limiting principle to the accumulation of capital.

∗.

On the other hand, it must be remembered that war abstracts from productive employment not only capital, but likewise labourers; that the funds withdrawn from the remuneration of productive labourers are partly employed in paying the same or other individuals for unproductive labour; and that by this portion of its effects war expenditure acts in precisely the opposite manner to that which Dr. Chalmers points out, and, so far as it goes, directly counteracts the effects described in the text. So far as labourers are taken from production, to man the army and navy, the labouring classes are not damaged, the capitalists are not benefited; and the general produce of the country is diminished, by war expenditure. Accordingly, Dr. Chalmers's doctrine, though true of this country, is wholly inapplicable to countries differently circumstanced; to France, for example, during the Napoleon wars. At that period the draught on the labouring population of France, for a long series of years, was enormous, while the funds which supported the war were mostly supplied by contributions levied on the countries overrun by the French arms, a very small proportion alone consisting of French capital. In France, accordingly, the wages of labour did not fall, but rose; the employers of labour were not benefited, but injured; while the wealth of the country was impaired by the suspension or total loss of so vast an amount of its productive labour. In England all this was reversed. England employed comparatively few additional soldiers and sailors of her own, while she diverted hundreds of millions of capital from productive employment, to supply munitions of war and support armies for her Continental allies. Consequently, as shown in the text, her labourers suffered, her capitalists prospered, and her permanent productive resources did not fall off.

∗.

Infra, book iv, chaps. iv, v.

1.

[This sentence replaced in the 3rd ed. (1852) the original text: “So that the capital cannot be dispensed with—the purchasers can.”]

1.

[The rest of this paragraph replaced in the 3rd ed. (1852) the original text: “I am desirous of impressing on the reader that a demand for commodities does not in any manner constitute a demand for labour, but only determines into a particular channel a portion, more or less considerable, of the demand already existing. It determines that a part of the labour and capital of the community shall be employed in producing certain things instead of other things. The demand for labour is constituted solely by the funds directly set apart for the use of labourers.”]

1.

[In the 2nd ed. (1849) there was here inserted “a different mode of stating the argument.” In the 3rd ed. (1852) this became the long footnote of this section; and five new paragraphs were inserted at this point.]

1.

[This paragraph was inserted in the 6th ed. (1865).]

∗.

[1849] The following case, which presents the argument in a somewhat different shape, may serve for still further illustration.

Suppose that a rich individual, A, expends a certain amount daily in wages or alms, which, as soon as received, is expended and consumed, in the form of coarse food, by the receivers. A dies, leaving his property to B, who discontinues this item of expenditure, and expends in lieu of it the same sum each day in delicacies for his own table. I have chosen this supposition, in order that the two cases may be similar in all their circumstances, except that which is the subject of comparison. In order not to obscure the essential facts of the case by exhibiting them through the hazy medium of a money transaction, let us further suppose that A, and B after him, are landlords of the estate on which both the food consumed by the recipients of A's disbursements, and the articles of luxury supplied for B's table, are produced; and that their rent is paid to them in kind, they giving previous notice what description of produce they shall require. The question is, whether B's expenditure gives as much employment or as much food to his poorer neighbours as A's gave.

From the case as stated, it seems to follow that while A lived, that portion of his income which he expended in wages or alms, would be drawn by him from the farm in the shape of food for labourers, and would be used as such; while B, who came after him, would require, instead of this, an equivalent value in expensive articles of food, to be consumed in his own household: that the farmer, therefore, would, under B's regime, produce that much less, of ordinary food, and more of expensive delicacies, for each day of the year than was produced in A's time, and that there would be that amount less of food shared, throughout the year, among the labouring and poorer classes. This is what would be conformable to the principles laid down in the text. Those who think differently, must, on the other hand, suppose that the luxuries required by B would be produced, not instead of, but in addition to, the food previously supplied to A's labourers, and that the aggregate produce of the country would be increased in amount. But when it is asked, how this double production would be effected—how the farmer, whose capital and labour were already fully employed, would be enabled to supply the new wants of B, without producing less of other things; the only mode which presents itself is, that he should first produce the food, and then, giving that food to the labourers whom A formerly fed, should by means of their labour, produce the luxuries wanted by B. This, accordingly, when the objectors are hard pressed, appears to be really their meaning. But it is an obvious answer, that, on this supposition, B must wait for his luxuries till the second year, and they are wanted this year. By the original hypothesis, he consumes his luxurious dinner day by day, pari passu with the rations of bread and potatoes formerly served out by A to his labourers. There is not time to feed the labourers first, and supply B afterwards: he and they cannot both have their wants ministered to: he can only satisfy his own demand for commodities, by leaving as much of theirs, as was formerly supplied from that fund, unsatisfied.

It may, indeed, be rejoined by an objector, that since, on the present showing, time is the only thing wanting to render the expenditure of B consistent with as large an employment to labour as was given by A, why may we not suppose that B postpones his increased consumption of personal luxuries until they can be furnished to him by the labour of the persons whom A employed? In that case, it may be said, he would employ and feed as much labour as his predecessors. Undoubtedly he would; but why? Because his income would be expended in exactly the same manner as his predecessor's; it would be expended in wages. A reserved from his personal consumption a fund which he paid away directly to labourers; B does the same, only instead of paying it to them himself, he leaves it in the hands of the farmer who pays it to them for him. On this supposition, B, in the first year, neither expending the amount, as far as he is personally concerned, in A's manner nor in his own, really saves that portion of his income, and lends it to the farmer. And if, in subsequent years, confining himself within the year's income, he leaves the farmer in arrears to that amount, it becomes an additional capital, with which the farmer may permanently employ and feed A's labourers. Nobody pretends that such a change as this, a change from spending an income in wages of labour to saving it for investment, deprives any labourers of employment. What is affirmed to have that effect is, the change from hiring labourers to buying commodities for personal use; as represented by our original hypothesis.

In our illustration we have supposed no buying and selling, or use of money. But the case as we have put it, corresponds with actual fact in everything except the details of the mechanism. The whole of any country is virtually a single farm and manufactory, from which every member of the community draws his appointed share of the produce, having a certain number of counters, called pounds sterling, put into his hands, which, at his convenience, he brings back and exchanges for such goods as he prefers, up to the limit of the amount. He does not, as in our imaginary case, give notice beforehand what things he shall require; but the dealers and producers are quite capable of finding it out by observation, and any change in the demand is promptly followed by an adaptation of the supply to it. If a consumer changes from paying away a part of his income in wages, to spending it that same day (not some subsequent and distant day) in things for his own consumption, and perseveres in this altered practice until production has had time to adapt itself to the alteration of demand, there will from that time be less food and other articles for the use of labourers, produced in the country, by exactly the value of the extra luxuries now demanded; and the labourers, as a class, will be worse off by the precise amount.

1.

[This paragraph was inserted in the 6th ed. (1865).]

1.

[“Not a labourer” was inserted in the 3rd ed. (1852).]

2.

[See Appendix F. Fundamental Propositions on Capital.]

∗.

Infra, book ii. chap. xvi. On Rent.

1.

[So altered in 2nd ed. (1849) from the original: “this may not, and often will not, be the case.”]

2.

[The first two sentences of this paragraph were inserted in the 2nd ed. (1849), and the subsequent sentences slightly changed in form.]

∗.

[1865] The clearing away of the small farmers in the North of Scotland, within the present century, was, however, a case of it; and Ireland, since the potato famine and the repeal of the corn laws, is another. The remarkable decrease which has lately attracted notice in the gross produce of Irish agriculture, is, to all appearance, partly attributable to the diversion of land from maintaining human labourers to feeding cattle; and it could not have taken place without the removal of a large part of the Irish population by emigration or death. We have thus two recent instances, in which what was regarded as an agricultural improvement, has diminished the power of the country to support its population. The effect, however, of all the improvements due to modern science is to increase, or at all events, not to diminish, the gross produce.

∗.

Infra, book iv. chap. v.

1.

[From the 4th ed. (1857) a long passage was omitted at this point. This originally ran as follows:

“In this last quality the English, and perhaps the Anglo-Americans, appear at present to surpass every other people. This efficiency of labour is connected with their whole character; with their defects, as much as with their good qualities. The majority of Englishmen and Americans have no life but in their work; that alone stands between them and ennui. Either from original temperament, climate, or want of development, they are too deficient in senses to enjoy mere existence in repose; and scarcely any pleasure or amusement is pleasure or amusement to them. Except, therefore, those who are alive to some of the nobler interests of humanity (a small minority in all countries), they have little to distract their attention from work, or to divide the dominion over them with the one propensity which is the passion of those who have no other, and the satisfaction of which comprises all that they imagine of success in life—the desire of growing richer, and getting on in the world. This last characteristic belongs chiefly to those who are in a condition superior to day labourers; but the absence of any taste for amusement, or enjoyment of repose, is common to all classes. Whether from this or any other cause, the national steadiness and persistency of labour extends to the most improvident of the English working classes—those who never think of saving, or improving their condition. It has become the habit of the country; and life in England is more governed by habit, and less by personal inclination and will, than in any other country, except perhaps China or Japan. The effect is, that where hard labour is the thing required, there are no labourers like the English; though in natural intelligence, and even in manual dexterity, they have many superiors.

“Energy of labour, though not an unqualified good, nor one which it is desirable to nourish at the expense of other valuable attributes of human nature, is yet, in a certain measure, a necessary condition,” &c.

In the 3rd ed. (1852) the characterisation had been made to apply to the English alone, and the passage began thus: “This last quality is the principal industrial excellence of the English people.” After “a small minority in all countries,” had been inserted “and particularly so in this;” and for “no labourers like the English” had been substituted “no better labourers than the English.”]

1.

[The three preceding sentences originally ran as follows: “As much as the industrial spirit required to be stimulated in their case, so much does it require to be moderated in such countries as England and the United States. There, it is not the desire of wealth...; required. Every real improvement in the character of the English or Americans, whether it consist in giving them higher aspirations, or only more numerous and better pleasures, must necessarily moderate the all-engrossing torment of their industrialism; must diminish, therefore, so far as it depends on that cause alone, the aggregate productiveness of their labour. There is no need, however, that it should diminish that strenuous and business-like application to the matter in hand, which is one of their most precious characteristics.”

In the 3rd ed. (1852) they were modified to make the description apply to England only, and “the best English workmen;” and in the 4th (1857) “the ardour of their devotion to the pursuit of wealth” was substituted for “the all-engrossing torment of their industrialism.”

Then followed in the original the following quotation and comments, omitted in the 3rd ed.:

“‘Whoever’ (says Mr. Laing, Notes of a Traveller, p. 290) ‘looks into the social economy of an English or Scotch manufacturing district, in which the population has become thoroughly imbued with the spirit of productiveness, will observe that it is not merely the expertness, despatch, and skill of the operative himself, that are concerned in the prodigious amount of his production in a given time, but the labourer who wheels coal to his fire, the girl who makes ready his breakfast, the whole population, in short, from the potboy who brings his beer, to the banker who keeps his employer's cash, are inspired with the same alert spirit, are in fact working to his hand with the same quickness and punctuality as he works himself. English workmen taken to the Continent always complain that they cannot get on with their work as at home, because of the slow, unpunctual, pipe-in-mouth working habits of those who have to work to their hands, and on whom their own activity and productiveness mainly depend.’

“Foreigners are generally quite unaware that to these qualities in English industry the wealth and power which they seek to emulate are in reality owing, and not to the ‘ships, colonies, and commerce’ which these qualities have called into being, and which, even if annihilated, would leave England the richest country in the world. An Englishman, of almost every class, is the most efficient of all labourers, because, to use a common phrase, his heart is in his work. But it is surely quite possible to put heart into his work without being incapable of putting it into anything else.”]

∗.

The whole evidence of this intelligent and experienced employer of labour is deserving of attention; as well as much testimony on similar points by other witnesses, contained in the same volume.

1.

[This comment was added in the 3rd ed. (1852).]

1.

[This statement took the place in the 3rd ed. (1852) of the sentence: “Nor are the greatest outward precautions; comparable in efficacy to the monitor within.”]

∗.

Some minor instances noticed by Mr. Babbage may be cited in further illustration of the waste occasioned to society through the inability of its members to trust one another.

“The cost to the purchaser is the price he pays for any article, added to the cost of verifying the fact of its having that degree of goodness for which he contracts. In some cases the goodness of the article is evident on mere inspection; and in those cases there is not much difference of price at different shops. The goodness of loaf sugar, for instance, can be discerned almost at a glance; and the consequence is that the price is so uniform, and the profit upon it so small, that no grocer is at all anxious to sell it; whilst on the other hand, tea, of which it is exceedingly difficult to judge, and which can be adulterated by mixture so as to deceive the skill even of a practised eye, has a great variety of different prices, and is that article which every grocer is most anxious to sell to his customers. The difficulty and expense of verification are in some instances so great, as to justify the deviation from well-established principles. Thus, it is a general maxim that Government can purchase any article at a cheaper rate than that at which they can manufacture it themselves. But it has, nevertheless, been considered more economical to build extensive flour-mills (such as those at Deptford), and to grind their own corn, than to verify each sack of purchased flour, and to employ persons in devising methods of detecting the new modes of adulteration which might be continually resorted to.” A similar want of confidence might deprive a nation, such as the United States, of a large export trade in flour.

Again: “Some years since, a mode of preparing old clover and trefoil seeds by a process called doctoring became so prevalent as to excite the attention of the House of Commons. It appeared in evidence before a Committee, that the old seed of the white clover was doctored by first wetting it slightly, and then drying it by the fumes of burning sulphur; and that the red clover seed had its colour improved by shaking it in a sack with a small quantity of indigo; but this being detected after a time, the doctors then used a preparation of logwood, fined by a little copperas, and sometimes by verdigris; thus at once improving the appearance of the old seed, and diminishing, if not destroying, its vegetative power, already enfeebled by age. Supposing no injury had resulted to good seed so prepared, it was proved that, from the improved appearance, the market price would be enhanced by this process from five to twenty-five shillings a hundred-weight. But the greatest evil arose from the circumstances of these processes rendering old and worthless seed equal in appearance to the best. One witness had tried some doctored seed, and found that not above one grain in a hundred grew, and that those which did vegetate died away afterwards; whilst about eighty or ninety per cent of good seed usually grows. The seed so treated was sold to retail dealers in the country, who of course endeavoured to purchase at the cheapest rate, and from them it got into the hands of the farmers, neither of these classes being capable of distinguishing the fraudulent from the genuine seed. Many cultivators in consequence diminished their consumption of the articles, and others were obliged to pay a higher price to those who had skill to distinguish the mixed seed, and who had integrity and character to prevent them from dealing in it.”

The same writer states that Irish flax, though in natural quality inferior to none, sells, or did lately sell, in the market at a penny to twopence per pound less than foreign or British flax; part of the difference arising from negligence in its preparation, but part from the cause mentioned in the evidence of Mr. Corry, many years Secretary to the Irish Linen Board: “The owners of the flax, who are almost always people in the lower classes of life, believe that they can best advance their own interests by imposing on the buyers. Flax being sold by weight, various expedients are used to increase it; and every expedient is injurious, particularly the damping of it; a very common practice, which makes the flax afterwards heat. The inside of every bundle (and the bundles all vary in bulk) is often full of pebbles, or dirt of various kinds, to increase the weight. In this state it is purchased and exported to Great Britain.”

It was given in evidence before a Committee of the House of Commons that the lace trade at Nottingham had greatly fallen off, from the making of fraudulent and bad articles: that “a kind of lace called single-press was manufactured,” (I still quote Mr. Babbage,) “which although good to the eye, became nearly spoiled in washing by the slipping of the threads; that not one person in a thousand could distinguish the difference between single-press and double-press lace; that even workmen and manufacturers were obliged to employ a magnifying-glass for that purpose; and that in another similar article, called warp-lace, such aid was essential.”

∗.

Note to Wakefield's edition of Adam Smith, vol. i. p. 26.

∗.

Supra, pp. 79–90.

1.

[“Now” was omitted before “rapid” in the 3rd ed. (1852).]

∗.

Say, Cours d'Economie Politique Pratique, vol. i. p. 340.

It is a remarkable proof of the economy of labour occasioned by this minute division of occupations, that an article, the production of which is the result of such a multitude of manual operations, can be sold for a trifling sum.

∗.

Economy of Machinery and Manufactures, 3rd edition, p. 201.

∗.

“In astronomical observations, the senses of the operator are rendered so acute by habit, that he can estimate differences of time to the tenth of a second; and adjust his measuring instrument to graduations of which five thousand occupy only an inch. It is the same throughout the commonest processes of manufacture. A child who fastens on the heads of pins will repeat an operation requiring several distinct motions of the muscles one hundred times a minute for several successive hours. In a recent Manchester paper it was stated that a peculiar sort of twist or ‘gimp,’ which cost three shillings making when first introduced, was now manufactured for one penny; and this not, as usually, by the invention of a new machine, but solely through the increased dexterity of the workman.”—Edinburgh Review for January 1849, p. 81.

†.

Page 171.

∗.

Statement of some New Principles on the subject of Political Economy, by John Rae (Boston, U.S.), p. 164. [Sociological Theory of Capital (1905), p. 102. See infra, p. 165 n.]

1.

[See Appendix G. Division and Combination of Labour.]

∗.

Page 214 et seqq.

∗.

Supra, chap. vi.

1.

[This paragraph was added in the 6th ed. (1865).]

∗.

[1852] The observations in the text may hereafter require some degree of modification from inventions such as the steam plough and the reaping machine. The effect, however, of these improvements on the relative advantages of large and small farms, will not depend on the efficiency of the instruments, but on their costliness. I see no reason to expect that this will be such as to make them inaccessible to small farmers, or combinations of small farmers.

1.

[This reference to steam threshing machines was inserted in the 5th ed. (1862); and “until lately” in the reference to Ireland, infra, p. 149.]

∗.

Prize Essay on The Management of Landed Property in Ireland, by William Blacker (1837), p. 23.

∗.

“The number of beasts fed on a farm of which the whole is arable land,” (says the elaborate and intelligent treatise on Flemish Husbandry, from personal observation and the best sources, published in the Library of the Society for the Diffusion of Useful Knowledge,) “is surprising to those who are not acquainted with the mode in which the food is prepared for the cattle. A beast for every three acres of land is a common proportion, and in very small occupations, where much spade husbandry is used, the proportion is still greater. After comparing the accounts given in a variety of places and situations of the average quantity of milk which a cow gives when fed in the stall, the result is, that it greatly exceeds that of our best dairy farms, and the quantity of butter made from a given quantity of milk is also greater. It appears astonishing that the occupier of only ten or twelve acres of light arable land should be able to maintain four or five cows, but the fact is notorious in the Wacs country.” (pp. 59, 60.)

This subject is treated very intelligently in the work of M. Passy, Des Systèmes de Culture et de leur Influence sur l'Economie Sociale, one of the most impartial discussions, as between the two systems, which has yet appeared in France.

“Without doubt it is England that, on an equal surface, feeds the greatest number of animals; Holland and some parts of Lombardy can alone vie with her in this respect: but is this a consequence of the mode of cultivation, and have not climate and local situation a share in producing it? Of this I think there can be no doubt. In fact, whatever may have been said, wherever large and small cultivation meet in the same place, the latter, though it cannot support as many sheep, possesses, all things considered, the greatest quantity of manure-producing animals.

“In Belgium, for example, the two provinces of smallest farms are Antwerp and East Flanders, and they possess on an average for every 100 hectares (250 acres) of cultivated land, 74 horned cattle and 14 sheep. The two provinces where we find the large farms are Namur and Hainaut, and they average, for every 100 hectares of cultivated ground, only 30 horned cattle and 45 sheep. Reckoning, as is the custom, ten sheep as equal to one head of horned cattle, we find in the first case, the equivalent of 76 beasts to maintain the fecundity of the soil; in the latter case less than 35, a difference which must be called enormous. (See the statistical documents published by the Minister of the Interior.) The abundance of animals, in the parts of Belgium which are most subdivided, is nearly as great as in England. Calculating the number in England in proportion only to the cultivated ground, there are for each 100 hectares, 65 horned cattle and nearly 260 sheep, together equal to 91 of the former, being only an excess of 15. It should besides be remembered, that in Belgium stall feeding being continued nearly the whole year, hardly any of the manure is lost, while in England grazing in the open fields diminishes considerably the quantity which can be completely utilized.

“Again, in the Department of the Nord, the arrondissements which have the smallest farms support the greatest quantity of animals. While the arrondissements of Lille and Hazebrouek, besides a greater number of horses, maintain the equivalent of 52 and 46 head of horned cattle, those of Dunkirk and Avesnes, where the farms are larger, produce the equivalent of only 44 and 40 head. (See the statistics of France published by the Minister of Commerce.)

“A similar examination extended to other portions of France would yield similar results. In the immediate neighbourhood of towns, no doubt, the small farmers, having no difficulty in purchasing manure, do not maintain animals: but, as a general rule, the kind of cultivation which takes most out of the ground must be that which is obliged to be most active in renewing its fertility. Assuredly the small farms cannot have numerous flocks of sheep, and this is an inconvenience; but they support more horned cattle than the large farms. To do so is a necessity they cannot escape from, in any country where the demands of consumers require their existence: if they could not fulfil this condition, they must perish.

“The following are particulars, the exactness of which is fully attested by the excellence of the work from which I extract them, the statistics of the commune of Vensat (department of Puy de Dôme), lately published by Dr. Jusseraud, mayor of the commune. They are the more valuable, as they throw full light on the nature of the changes which the extension of small farming has, in that district, produced in the number and kind of animals by whose manure the productiveness of the soil is kept up and increased. The commune consists of 1612 hectares, divided into 4600 parcelles, owned by 591 proprietors, and of this extent 1466 hectares are under cultivation. In 1790, seventeen farms occupied two-thirds of the whole, and twenty others the remainder. Since then the land has been much divided, and the subdivision is now extreme. What has been the effect on the quantity of cattle? A considerable increase. In 1790 there were only about 300 horned cattle, and from 1800 to 2000 sheep; there are now 676 of the former and only 533 of the latter. Thus 1300 sheep have been replaced by 376 oxen and cows, and (all things taken into account) the quantity of manure has increased in the ratio of 490 to 729, or more than 48 per cent, not to mention that the animals being now stronger and better fed, yield a much greater contribution than formerly to the fertilization of the ground.

“Such is the testimony of facts on the point. It is not true, then, that small farming feeds fewer animals than large; on the contrary, local circumstances being the same, it feeds a greater number: and this is only what might have been presumed; for, requiring more from the soil, it is obliged to take greater pains for keeping up its productiveness. All the other reproaches cast upon small farming, when collated one by one with facts justly appreciated, will be seen to be no better founded, and to have been made only because the countries compared with one another were differently situated in respect to the general causes of agricultural prosperity.” (pp. 116–120.)

∗.

See pp. 352 and 353 of a French translation published at Brussels in 1839, by M. Fred. de Kemmeter, of Ghent.

∗.

“In the department of the Nord,” says M. Passy, “a farm of 20 hectares (50 acres) produces in calves, dairy produce, poultry, and eggs, a value of sometimes 1000 francs (£40) a year: which, deducting expenses, is an addition to the net produce of 15 to 20 francs per hectare.” Des Systèmes de Culture, p. 114.

†.

[1857] During the interval between the census of 1851 and that of 1856, the increase of the population of Paris alone exceeded the aggregate increase of all France: while nearly all the other large towns likewise showed an increase.

1.

[This and the following paragraph were added in the 5th ed. (1862).]

∗.

Economie Rurale de la France depuis 1789. Par M. Léonce de Lavergne, Membre de l'Institut et de la Société Centrale d'Agriculture de France. 2mo éd. p. 59.

1.

[See Appendix H. Large and Small Farming.]

∗.

[1865] This has been disputed; but the highest estimate I have seen of the term which population requires for doubling itself in the United States, independently of immigrants and of their progeny—that of Mr. Carey—does not exceed thirty years.

†.

[1852] One of these theories, that of Mr. Doubleday, may be thought to require a passing notice, because it has of late obtained some followers, and because it derives a semblance of support from the general analogies of organic life. This theory maintains that the fecundity of the human animal, and of all other living beings, is in inverse proportion to the quantity of nutriment: that an underfed population multiplies rapidly, but that all classes in comfortable circumstances are, by a physiological law, so unprolific, as seldom to keep up their numbers without being recruited from a poorer class. There is no doubt that a positive excess of nutriment, in animals as well as in fruit trees, is unfavourable to reproduction; and it is quite possible, though by no means proved, that the physiological conditions of fecundity may exist in the greatest degree when the supply of food is somewhat stinted. But any one who might be inclined to draw from this, even if admitted, conclusions at variance with the principles of Mr. Malthus, needs only be invited to look through a volume of the Peerage, and observe the enormous families, almost universal in that class; or call to mind the large families of the English clergy, and generally of the middle classes of England.

[1865] It is, besides, well remarked by Mr. Carey, that, to be consistent with Mr. Doubleday's theory, the increase of the population of the United States, apart from immigration, ought to be one of the slowest on record.

[1865] Mr. Carey has a theory of his own, also grounded on a physiological truth, that the total sum of nutriment received by an organized body directs itself in largest proportion to the parts of the system which are most used; from which he anticipates a diminution in the fecundity of human beings, not through more abundant feeding, but through the greater use of their brains incident to an advanced civilization. There is considerable plausibility in this speculation, and experience may hereafter confirm it. But the change in the human constitution which it supposes, if ever realized, will conduce to the expected effect rather by rendering physical self-restraint easier, than by dispensing with its necessity; since the most rapid known rate of multiplication is quite compatible with a very sparing employment of the multiplying power.

∗.

[1865] Mr. Carey expatiates on the absurdity of supposing that matter tends to assume the highest form of organization, the human, at a more rapid rate than it assumes the lower forms, which compose human food; that human beings multiply faster than turnips and cabbages. But the limit to the increase of mankind, according to the doctrine of Mr. Malthus, does not depend on the power of increase of turnips and cabbages, but on the limited quantity of the land on which they can be grown. So long as the quantity of land is practically unlimited, which it is in the United States, and food, consequently, can be increased at the highest rate which is natural to it, mankind also may, without augmented difficulty in obtaining subsistence, increase at their highest rate. When Mr. Carey can show, not that turnips and cabbages, but that the soil itself, or the nutritive elements contained in it, tend naturally to multiply, and that too at a rate exceeding the most rapid possible increase of mankind, he will have said something to the purpose. Till then, this part at least of his argument may be considered as non-existent.

1.

[So from the 3rd ed. (1852). The original second clause of the sentence ran: “There is always an immense residuary power behind, ready to start into activity as soon as the pressure which restrained it is taken off.”]

1.

[See Appendix I. Population.]

∗.

This treatise is an example, such as not unfrequently presents itself, how much more depends on accident, than on the qualities of a book, in determining its reception. Had it appeared at a suitable time, and been favoured by circumstances, it would have had every requisite for great success. The author, a Scotchman settled in the United States, unites much knowledge, an original vein of thought, a considerable turn for philosophic generalities, and a manner of exposition and illustration calculated to make ideas tell not only for what they are worth, but for more than they are worth, and which sometimes, I think, has that effect in the writer's own mind. The principal fault of the book is the position of antagonism in which, with the controversial spirit apt to be found in those who have new thoughts on old subjects, he has placed himself towards Adam Smith. I call this a fault, (though I think many of the criticisms just, and some of them far-seeing,) because there is much less real difference of opinion than might be supposed from Dr. Rae's animadversions; and because what he has found vulnerable in his great predecessor is chiefly the “human too much” in his premises; the portion of them that is over and above what was either required or is actually used for the establishment of his conclusions. [A re-arranged reprint of John Rae's New Principles of Political Economy (1834) has been edited by Professor Mixter, and published (1905) under the title The Sociological Theory of Capital.]

∗.

Rae, p. 123 [ed. Mixter, p. 57].

∗.

Rae, p. 136 [ed. Mixter, p. 71].

∗.

Rae, p. 140 [ed. Mixter, p. 76].

∗.

Rae, pp. 151–5 [ed. Mixter, pp. 88–92].

1.

[From the 6th ed. (1865) was first omitted the following explanatory clause of the original: “as soon, in fact, as men have applied themselves to cultivation with any energy, and have brought to it any tolerable tools.”]

∗.

Letters from America, by John Robert Godley, vol. i. p. 42, See also Lyell's Travels in America, vol. ii. p. 83,

1.

[The account of Carey's argument, occupying this and the next two paragraphs, took the place in the 6th ed. (1865) of the brief paragraph referring, without mentioning any name, to the assertion that “the returns from land are greater in an advanced, than in an early, stage of cultivation—when much capital, than when little, is applied to agriculture.]

∗.

Ireland may be alleged as an exception; a large fraction of the entire soil of that country being still [1865] incapable of cultivation for want of drainage. But though Ireland is an old country, unfortunate social and political circumstances have kept it a poor and backward one. Neither is it at all certain that the bogs of Ireland, if drained and brought under tillage, would take their place along with Mr. Carey's fertile river bottoms, or among any but the poorer soils.

1.

[See Appendix J. The Law of Diminishing Return.]

1.

[In the 6th ed. (1865) “rather” replaced the original “very.”]

2.

[The qualifying clause “notwithstanding . . population” was inserted in the 6th ed. (1865).]

1.

[So from the 3rd ed. (1852). The original ran: “so unexampled a degree as to double the productive power of labour.”]

1.

[This one sentence replaced in the 3rd ed. (1852) the following passage of the original text: “If, indeed, the release of the corn trade from restriction had produced, or should still produce, a sudden cheapening of food, this, like any other sudden improvement in the arts of life, would throw the natural tendency of affairs a stage or two further back, but without at all altering its course. There would be more for everybody in the first instance; but this more would begin immediately and continue always to grow less, so long as population went on increasing, unaccompanied by other events of a countervailing tendency.

“Whether the repeal of the corn laws is likely, even temporarily, to give any considerable increase of margin for population to fill up, it would be premature as yet to attempt to decide. All the elements of the question have been thrown into temporary disorder by the consequences of bad harvests and of the potatoe failure. But as far as can be foreseen, there seems little reason to expect an importation of the customary articles of food either so great in itself, or capable of such rapid increase, as to interfere much with the operation of the general law.”]

1.

[The reference to Ireland (“and though... scheme”) was inserted in the 3rd ed. (1852).]

2.

[So from the 6th ed. (1865). The original ran: “There is no probability that even under the most enlightened arrangements a permanent stream, &c.”]

1

[So since the 3rd ed. (1852). The original ran: “But howsoever... things, those limits exist; there are ultimate laws, which we did not make, which we cannot alter, and to which we can only conform.”]

2

[The concluding words of this sentence were added in the 3rd ed., and “general” was deleted before “consent.” In the next sentence the keeping of property was made to depend on “the permission” and not on “the will” of society.]

1

[So since the 3rd ed. (1852). In the original, “the plausible remedy.” ]

2

[Here followed in the original text the following passage: “Owenism, or Socialism, in this country, and Communism on the continent, are the most prevailing forms of the doctrine. These suppose a democratic government of the industry and funds of society, and an equal division of the fruits. In the more elaborate and refined form of the same scheme, which obtained a temporary celebrity under the name of St. Simonism, the administering authority was supposed to be a monarchy or aristocracy, not of birth but of capacity; the remuneration of each member of the community being by salary, proportioned to the importance of the services supposed to be rendered by each to the general body.”

This was replaced in the 2nd ed. (1849) by the present reference to “the late revolutions in Europe,” and by the following paragraph, dividing “the assailants of the principle of individual property” into two classes. The present form, however, of the clause beginning “Nor is this attention” dates from the 3rd ed. (1852). In the 2nd it ran: “This attention is not likely to diminish; attacks on the institution of property being, in the existing state of human intellect, a natural expression of the discontent of all those classes on whom, in whatever manner, the present constitution of society bears hardly: and it is a safe prediction that, unless the progress of the human mind can be checked, such speculations will never cease, until the laws of property are freed from whatever portion of injustice they contain, and until whatever is well grounded in the opinions and legitimate in the aims of its assailants is adopted into the framework of society.” ]

1

[The whole of this section was rewritten in the 3rd ed. (1852), with the aid of some passages from the 2nd ed. (1849), for the reason stated in the Preface to the 3rd edition. The present first paragraph of § 4 was added, and the next paragraph modified by the omission of the assertion that the arguments of § 3 while “not applicable to St. Simonism” were, to his mind, “conclusive against Communism.” For the original text of § 3 see Appendix K. Mill§s earlier and later writings on Socialism.]

1

[The last sentence of this paragraph (“The impossibility of foreseeing and prescribing the exact mode in which its difficulties should be dealt with, does not prove that it may not be the best and the ultimate form of human society”) was omitted in the 4th ed. (1857).]

1

[The words “which are now,” i.e. 1852, “very numerous, and in some cases very successful” were omitted in the 4th ed. (1857).]

1

[The next sentence of the original was omitted in the 3rd ed. (1852). “Society, thus constituted, would wear as diversified a face as it does now; would be still fuller of interest and excitement, would hold out even more abundant stimulus to individual exertion, and would nourish, it is to be feared, even more of rivalries and of animosities than at present.” ]

1

[The account of Fourierism, in this and the next three paragraphs, was added in the 2nd ed. (1849).]

1

[The remainder of the paragraph as it now stands dates from the 3rd ed. 1852). In the 2nd ed. (1849) the paragraph went on from “influenced” as follows: “All persons would have a prospect of deriving individual advantage from every degree of labour, of abstinence, and of talent, which they individually exercised. The impediments to success would not be in the principles of the system, but in the unmanageable nature of its machinery. Before large bodies of human beings could be fit to live together in such close union, and still more, before they would be capable of adjusting, by peaceful arrangement among themselves, the relative claims of every class or kind of labour and talent, and of every individual in every class, a vast improvement in human character must be presupposed. When it is considered that each person who would have a voice in this adjustment would be a party interested in it, in every sense of the term—that each would be called on to take part by vote in fixing both the relative remuneration, and the relative estimation, of himself as compared with all other labourers, and of his own class of labour or talent as compared with all others; the degree of disinterestedness and of freedom from vanity and irritability which would be required in such a community from every individual in it, would be such as is now only found in the élite of humanity: while if those qualities fell much short of the required standard, either the adjustment could not be made at all, or, if made by a majority, would engender jealousies and disappointments destructive of the internal harmony on which the whole working of the system avowedly depends. These, it is true, are difficulties, not impossibilities; and the Fourierists, who alone among Socialists are in a great degree alive to the true conditions of the problem which they undertake to solve, are not without ways and means of contending against these. With every advance in education and improvement, their system tends to become less impracticable, and the very attempt to make it succeed would cultivate, in those making the attempt, many of the virtues which it requires. But we have only yet considered the case of a single Fourierist community. When we remember that the communities themselves are to be the constituent units of an organised whole, (otherwise competition would rage as actively between rival communities as it now does between individual merchants or manufacturers,) and that nothing less would be requisite for the complete success of the scheme than the organisation from a single centre of the whole industry of a nation, and even of the world; we may, without attempting to limit the ultimate capabilities of human nature, affirm, that the political economist, for a considerable time to come, will be chiefly concerned with the conditions of existence and progress belonging to a society founded on private property and individual competition; and that, rude as is the manner in which those two principles apportion reward to exertion and to merit, they must form the basis of the principal improvements which can for the present be looked for in the economical condition of humanity.”

Then began a new section: “And those improvements will be found to be far more considerable than the adherents of the various Socialist systems are willing to allow. Whatever may be the merit or demerit of their own schemes of society, they have hitherto shown themselves extremely ill acquainted with the economical laws of the existing social system; and have, in consequence, habitually assumed as necessary effects of competition, evils which are by no means inevitably attendant on it. It is from the influence of this erroneous interpretation of existing facts, that many Socialists of high principles and attainments are led to regard the competitive system as radically incompatible with the economical well-being of the mass.

“The principle of private property has never yet had a fair trial,” &c., as now, supra, p. 208, and the remainder of that paragraph.

The chapter ended with the following paragraph, of which the first sentence was retained later (supra, p. 209): “We are as yet too ignorant either of what individual agency in its best form, or Socialism in its best form, can accomplish, to be qualified to decide which of the two will be the ultimate form of human society. In the present stage of human improvement at least, it is not (I conceive) the subversion of the system of individual property that should be aimed at, but the improvement of it, and the participation of every member of the community in its benefits. Far, however, from looking upon the various classes of Socialists with any approach to disrespect, I honour the intentions of almost all who are publicly known in that character, the acquirements and talents of several, and I regard them, taken collectively, as one of the most valuable elements of human improvement now existing; both from the impulse they give to the reconsideration and discussion of all the most important questions, and from the ideas they have contributed to many; ideas from which the most advanced supporters of the existing order of society have still much to learn.” ]

1

[See Appendix K, Mill' earlier and later writings on Socialism, and Appendix L, The later history of Socialism.]

1

[This was added in the 3rd ed. (1852). The original ran: “The labour and abstinence of some former person, who, by gift or contract, transferred his claims to the present capitalist.” ]

2

[This and the next two sentences were added in the 3rd ed.]

3

[Here was omitted in the 3rd ed. the following passage of the original: “It may be said, they do not meet on an equal footing: the capitalist, as the richer, can take advantage of the labourer' necessities, and make his conditions as he pleases. He could do so, undoubtedly, if he were but one. The capitalists collectively could do so, if they were not too numerous to combine, and act as a body. But, as things are, they have no such advantage. Where combination is impossible, the terms of the contract depend on competition, that is, on the amount of capital which the collective abstinence of society has provided, compared with the number of the labourers.” ]

3

[The next two sentences, down to the word “Ireland” replaced in the 2nd ed. (1849) the following passage of the original:

“A joint administration on account of the state would not make the fund go further, or afford better terms to the labourers, unless either by enforcing, on the society collectively, greater abstinence, or by limiting more strictly the number of the labouring population. It is impossible to increase the quotient that falls to the share of each labourer, without either augmenting the dividend, or diminishing the divisor.”

To the substituted passage, the words “and much... England” were added in the 3rd ed.]

∗

[1862] See, for admirable illustrations of this and many kindred points, Mr. Maine' profound work on Ancient Law and its Relation to Modern Ideas.

1

[The rest of this paragraph replaced in the 3rd ed. (1852) the following original text: “but from accident or negligence or worse causes he failed to do. Whether it would be possible, by means of a public administrator of intestate estates, to take cognizance of special claims and see justice done in detail, is a question of some difficulty into which I forbear to enter. I shall only consider what might with best reason be laid down as a general rule.” ]

2

[From the 3rd ed. (1852) was omitted the following passage of the original: “If any near relatives, known to be such, were in a state of indigence, a donation, or a small pension, according to circumstances, might, in case of intestacy, be assigned to them when the State appropriated the inheritance. This would be a justice, or a generosity, which they do not experience from the present law, since that gives all to the nearest collaterals, however great may be the necessities of those more distant.” ]

1

[So since the 3rd ed. (1852). The original ran “It is questionable whether,” &c.]

2

[From the 3rd ed. was here omitted the following passage of the original: “But however the case may be as to a mere provision, I hold that justice and expediency are wholly, against compelling anything beyond. That a person should be certain from childhood of succeeding to a large fortune independently of the good will and affection of any human being, is, unless under very favourable influences of other kinds, almost a fatal circumstance in his education.” ]

∗

[1865] In the case of capital employed in the hands of the owner himself, in carrying on any of the operations of industry, there are strong grounds for leaving to him the power of bequeathing to one person the whole of the funds actually engaged in a single enterprise. It is well that he should be enabled to leave the enterprise under the control of whichever of his heirs he regards as best fitted to conduct it virtuously and efficiently: and the necessity (very frequent and inconvenient under the French law) would be thus obviated, of breaking up a manufacturing or commercial establishment at the death of its chief. In like manner, it should be allowed to a proprietor who leaves to one of his successors the moral burthen of keeping up an ancestral mansion and park or pleasure-ground, to bestow along with them as much other property as is required for their sufficient maintenance.

1

[“Over” was added in the 3rd ed. (1852).]

∗

“Munificent bequests and donations for public purposes, whether charitable or educational, form a striking feature in the modern history of the United States, and especially of New England. Not only is it common for rich capitalists to leave by will a portion of their fortune towards the endowment of national institutions, but individuals during their lifetime make magnificent grants of money for the same objects. There is here no compulsory law for the equal partition of property among children, as in France, and on the other hand no custom of entail or primogeniture, as in England, so that the affluent feel themselves at liberty to share their wealth between their kindred and the public; it being impossible to found a family, and parents having frequently the happiness of seeing all their children well provided for and independent long before their death. I have seen a list of bequests and donations made during the last thirty years for the benefit of religious, charitable, and literary institutions in the state of Massachusetts alone, and they amounted to no less a sum than six millions of dollars, or more than a million sterling.‘—Lyell’ Travels in America, vol. i. p. 263.

[1852] In England, whoever leaves anything beyond trifling legacies for public or beneficent objects when he has any near relatives living, does so at the risk of being declared insane by a jury after his death, or at the least, of having the property wasted in a Chancery suit to set aside the will.

∗

“What endowed man with intelligence and perseverance in labour, what made him direct all his efforts towards an end useful to his race, was the sentiment of perpetuity. The lands which the streams have deposited along their course are always the most fertile, but are also those which they menace with their inundations or corrupt by marshes. Under the guarantee of perpetuity men undertook long and painful labours to give the marshes an outlet, to erect embankments against inundations, to distribute by irrigation-channels fertilizing waters over the same fields which the same waters had condemned to sterility. Under the same guarantee, man, no longer contenting himself with the annual products of the earth, distinguished among the wild vegetation the perennial plants, shrubs, and trees which would be useful to him, improved them by culture, changed, it may almost be said, their very nature, and multiplied their amount. There are fruits which it required centuries of cultivation to bring to their present perfection, and others which have been introduced from the most remote regions. Men have opened the earth to a great depth to renew the soil, and fertilize it by the mixture of its parts and by contact with the air; they have fixed on the hillsides the soil which would have slid off, and have covered the face of the country with a vegetation everywhere abundant, and everywhere useful to the human race. Among their labours there are some of which the fruits can only be reaped at the end of ten or of twenty years; there are others by which their posterity will still benefit after several centuries. All have concurred in augmenting the productive force of nature, in giving to mankind a revenue infinitely more abundant, a revenue of which a considerable part is consumed by those who have no share in the ownership of the land, but who ‘would not have found a maintenance but for that appropriation of the soil’ by which they seem, at first sight, to have been disinherited.” —Sismondi, Etude sur l'Economie Politique, Troisième Essai, De la Richesse Territoriale.

∗

[1862] I must beg the reader to bear in mind that this paragraph was written fifteen years ago. So wonderful are the changes, both moral and economical, taking place in our age, that, without perpetually re-writing a work like the present, it is impossible to keep up with them. [In ed. 1865, “eighteen years”; in ed. 1871, “more than twenty.” ]

1

[This, and the previous sentence replaced in the 3rd ed. (1852) the original text: “Public reasons exist for its being appropriated. But if those reasons lost their force, the thing would be unjust.” ]

1

[In the 3rd ed. the following passage of the original was here omitted: “I do not pretend that occasions can often arise on which so drastic a measure would be fit to be taken into serious consideration. But even if this ultimate prerogative of the state should never require to be actually exercised, it ought nevertheless to be asserted, because the principle which permits the greater of two things permits the less, and though to do all which the principle would sanction should never be advisable, to do much less than all not only may be so, but often is so in a very high degree.” ]

2

[The parenthesis “(without which these acts would be nothing better than robbery)” was omitted from the 3rd ed. (1852).]

1

[Parenthesis added in 5th ed. (1862).]

∗

“The Norwegian return” (say the Commissioners of Poor Law Enquiry, to whom information was furnished from nearly every country in Europe and America by the ambassadors and consuls there) “states that at the last census in 1825, out of a population of 1,051,318 persons, there were 59,464 freeholders. As by 59,464 freeholders must be meant 59,464 heads of families, or about 300,000 individuals, the freeholders must form more than a fourth of the whole population. Mr. Macgregor states that in Denmark (by which Zealand and the adjoining islands are probably meant) out of a population of 926,110, the number of landed proprietors and farmers is 415,110, or nearly one-half. In Sleswick-Holstein, out of a population of 604,085, it is 196,017, or about one-third. The proportion of proprietors and farmers to the whole population is not given in Sweden; but the Stockholm return estimates the average quantity of land annexed to a labourer' habitation at from one to five acres; and though the Gottenburg return gives a lower estimate; it adds that the peasants possess much of the land. In Wurtemburg we are told that more than two-thirds of the labouring population are the proprietors of their own habitations, and that almost all own at least a garden of from three-quarters of an acre to an acre and a half.” In some of these statements, proprietors and farmers are not discriminated; but “all the returns concur in stating the number of day-labourers to be very small.” —(Preface to Foreign Communications, p. xxxviii.) As the general status of the labouring people, the condition of a workman for hire is [1848] almost peculiar to Great Britain.

∗

The ancient law books of the Hindoos mention in some cases one-sixth, in others one-fourth of the produce, as a proper rent; but there is no evidence that the rules laid down in those books were, at any period of history, really acted upon.

∗

[So since the 6th ed. (1865). The original (1848) ran: “though it seldom leaves him much more than a bare subsistence.” ]

1

[Substituted in the 3rd ed. (1852) for the original “very often.” ]

1

[Until the 4th ed. (1857) the text ran: “the bookselling trade is one of these... competition does not produce” &c.]

1

[The original text ran on: “and in those States of the American Union which receive a regular supply of negroes from other States.” These latter words were omitted from the 4th ed. (1857).]

1

[“Or of production” was added in the 3rd ed. (1852), and the following passage of the original omitted: “This” (i.e. slow growth of population) “cannot be from physical privation, for no slave-labourers are worse fed, clothed, or lodged, than the free peasantry of Ireland. The cause usually assigned is the great disproportion of the sexes which almost always exists where slaves are not bred but imported; this cannot however be the sole cause, as the negro population of our West India colonies continued nearly stationary, after the slave-trade to those colonies was suppressed. Whatever be the causes, a slave population is seldom a rapidly increasing one.” The text of the next sentence was slightly readjusted.]

1

[“Usually” replaced “always” in the 3rd ed. (1852).]

2

[Until the 6th ed. (1865) the reference was vague: “in some countries it is.” In the 7th ed. (1871) “is” became “was.” ]

3

[This sentence was inserted in the 6th ed.]

∗

Essay on the Distribution of Wealth and on the Sources of Taxation. By the Rev. Richard Jones. Page 50. [P. 43 of the reprint published in 1895 under the title Peasant Rents.]

†

“Schmalz, Economie Politique, French translation, vol. i. p. 66.”

‡

“Vol. ii. p. 107.”

§

The Hungarian revolutionary government, during its brief existence, bestowed on that country one of the greatest benefits it could receive, and one which the tyranny that succeeded did not dare to take away: it freed the peasantry from what remained of the bondage of serfdom, the labour rents; decreeing compensation to the landlords at the expense of the state, and not at that of the liberated peasants.

||

Jones, pp. 53, 54. [Peasant Rents, pp. 46, 47.]

1

[“In all probability less,” until the 5th ed. (1862).]

2

[The rest of the paragraph as here found was written for the 6th ed. (1865). The original (1848) ran thus: “It will be curious to see how long the other nations possessing slave colonies will be content to remain behind England in a matter of such concernment both to justice, which decidedly is not at present a fashionable virtue, and to philanthropy, which certainly is so. Europe is far more inexcusable than America in tolerating an enormity, of which she could rid herself with so much greater case. I speak of negro-slavery, not of the servage of the Slavonic nations, who have not yet advanced beyond a state of civilization corresponding to the age of villenage in Western Europe, and can only be expected to emerge from it in the same gradual manner, however much accelerated by the salutary influence of the ideas of more advanced countries.”

To this, in the 2nd ed. (1849) was added the note: “Denmark has the honour of being the first Continental nation which followed the example of England; and the emancipation of the slaves was one of the earliest acts of the French Provisional Government. Still more recently, the progress of the American mind towards a determination to rid itself of this odious stain has been manifested by very gratifying symptoms.”

In the 3rd ed. (1852) the latter part of the reference to the Slavonic nations was made to read: “who, to all appearance, will be indebted for their liberation from this great evil to the influence of the ideas of the more advanced countries, rather than to the rapidity of their own progress in improvement.” In the note, “heroic and calumniated” was inserted before “French Provisional Government.” In the 5th ed. (1862) the second sentence of the note was replaced by “The Dutch Government is now seriously engaged in the same beneficent enterprise.” ]

∗

In Mr. Wordsworth' little descriptive work on the scenery of the Lakes, he speaks of the upper part of the dales as having been for centuries “a perfect republic of shepherds and agriculturists, proprietors, for the most part, of the lands which they occupied and cultivated. The plough of each man was confined to the maintenance of his own family, or to the occasional accommodation of his neighbour. Two or three cows furnished each family with milk and cheese. The chapel was the only edifice that presided over these dwellings, the supreme head of this pure commonwealth; the members of which existed in the midst of a powerful empire, like an ideal society, or an organized community, whose constitution had been imposed and regulated by the mountains which protected it. Neither high-born nobleman, knight, nor esquire was here; but many of these humble sons of the hills had a consciousness that the land which they walked over and tilled had for more than five hundred years been possessed by men of their name and blood... Corn was grown in these vales sufficient upon each estate to furnish bread for each family, no more. The storms and moisture of the climate induced them to sprinkle their upland property with outhouses of native stone, as places of shelter for their sheep, where in tempestuous weather, food was distributed to them. Every family spun from its own flock the wool with which it was clothed; a weaver was here and there found among them, and the rest of their wants was supplied by the produce of the yarn, which they carded and spun in their own houses, and carried to market either under their arms or more frequently on packhorses, a small train taking their way weekly down the valley, or over the mountains, to the most commodious town.” —A Description of the Scenery of the Lakes in the North of England, 3rd edit. pp. 50 to 53 and 63 to 65.

1

[Substituted in the 7th ed. (1871) for “wherever free from the curse of slavery.” ]

∗

Etudes sur l'Economie Politique, Essai III.

∗

And in another work (Nouveaux Principes d'Economie Politique, liv. iii. ch. 3,) he says: “When we traverse nearly the whole of Switzerland, and several provinces of France, Italy, and Germany, we need never ask, in looking at any piece of land, if it belongs to a peasant proprietor or to a farmer. The intelligent care, the enjoyments provided for the labourer, the adornment which the country has received from his hands, are clear indications of the former. It is true an oppressive government may destroy the comfort and brutify the intelligence which should be the result of property; taxation may abstract the best produce of the fields, the insolence of government officers may disturb the security of the peasant, the impossibility of obtaining justice against a powerful neighbour may sow discouragement in his mind, and in the fine country which has been given back to the administration of the King of Sardinia, the proprietor, equally with the day-labourer, wears the livery of indigence.” He was here speaking of Savoy, where the peasants were generally proprietors, and, according to authentic accounts, extremely miserable. But, as M. de Sismondi continues, “it is in vain to observe only one of the rules of political economy; it cannot by itself suffice to produce good; but at least it diminishes evil.”

∗

Switzerland, the South of France, and the Pyrenees, in 1830. By H. D. Inglis. Vol. i. ch. 2.

†

52. Ibid. ch. 8 and 10.

∗

[1852] There have been considerable changes in the Poor Law administration and legislation of the Canton of Berne since the sentence in the text was written. But I am not sufficiently acquainted with the nature and operation of these changes to speak more particularly of them here.

†

“Eine an das unglaubliche gränzende Schuldenmasse” is the expression. (Historisch-geographisch-statistische Gemälde der Schweiz. Erster Theil. Der Kanton Zürich. Von Gerold Meyer von Knonau, 1834, pp. 80–81.) There are villages in Zurich, he adds, in which there is not a single property unmortgaged. It does not, however, follow that each individual proprietor is deeply involved because the aggregate mass of encumbrances is large. In the Canton of Schaffhausen, for instance, it is stated that the landed properties are almost all mortgaged, but rarely for more than one-half their registered value (Zwölfler Theil. Der Kanton Schaffhausen, von Edward Im-Thurn, 1840, p. 52), and the mortgages are often for the improvement and enlargement of the estate. (Siebenzehnter Theil. Der Kanton Thürgau, von J. A. Pupikofer, 1837, p. 209.)

∗

Thürgau, p. 72.

†

[1852] Reichensperger (Die Agrarfrage) quoted by Mr. Kay (Social Condition and Education of the People in England and Europe,) observes, “that the parts of Europe where the most extensive and costly plans for watering the meadows and lands have been carried out in the greatest perfection, are those where the lands are very much subdivided, and are in the hands of small proprietors. He instances the plain round Valencia, several of the southern departments of France, particularly those of Vaucluse and Bouches du Rhône, Lombardy, Tuscany, the districts of Sienna, Lucca, and Bergamo, Piedmont, many parts of Germany, &c., in all which parts of Europe the land is very much subdivided among small proprietors. In all these parts great and expensive systems and plans of general irrigation have been carried out, and are now being supported by the small proprietors themselves; thus showing how they are able to accomplish, by means of combination, work requiring the expenditure of great quantities of capital.” Kay, i. 126.

∗

Laing, Journal of a Residence in Norway, pp. 36, 37. [From the 3rd ed. (1852) was omitted the following further passage from Laing, quoted in the 1st and 2nd: “It is, I am aware, a favourite and constant observation of our agricultural writers, that these small proprietors make the worst farmers. It may be so; but a population may be in a wretched condition, although their country is very well farmed; or they may be happy, although bad cultivators.... Good farming is a phrase composed of two words which have no more application to the happiness or well-being of a people than good weaving or good iron-founding. That the human powers should be well applied, and not misapplied, in the production of grain, or iron, or clothing, is, no doubt, an object of great importance; but the happiness or well-being of a people does not entirely depend upon it. It has more effect on their numbers than on their condition. The producer of grain who is working for himself only, who is owner of his land, and has not a third of its produce to pay as rent, can afford to be a worse farmer by one-third, than a tenant, and is, notwithstanding, in a preferable condition. Our agricultural writers tell us, indeed, that labourers in agriculture are much better off as farm-servants than they would be as small proprietors. We have only the master' word for this. Ask the servant. The colonists told us the same thing of their slaves. If property is a good and desirable thing, I suspect that the smallest quantity of it is good and desirable; and that the state of society in which it is most widely diffused is the best constituted.” ]

†

Notes of a Traveller, pp. 299 et seqq.

∗

The manner in which the Swiss peasants combine to carry on cheesemaking by their united capital deserves to be noted. “Each parish in Switzerland hires a man, generally from the district of Gruyère in the canton of Freyburg, to take care of the herd, and make the cheese. One cheeseman, one pressman or assistant, and one cowherd are considered necessary for every forty cows. The owners of the cows get credit each of them, in a book daily for the quantity of milk given by each cow. The cheeseman and his assistants milk the cows, put the milk all together, and make cheese of it, and at the end of the season each owner receives the weight of cheese proportionable to the quantity of milk his cows have delivered. By this co-operative plan, instead of the small-sized unmarketable cheeses only, which each could produce out of his three or four cows' milk, he has the same weight in large marketable cheese superior in quality, because made by people who attend to no other business. The cheeseman and his assistants are paid so much per head of the cows, in money or in cheese, or sometimes they hire the cows, and pay the owners in money or cheese.” Notes of a Traveller, p. 351. A similar system exists in the French Jura. See, for full details, Lavergne, Economie Rurale de la France, 2nd ed., pp. 139 et seqq. One of the most remarkable points in this interesting case of combination of labour is the confidence which it supposes, and which experience must justify, in the integrity of the persons employed.

∗

Rural and Domestic Life of Germany, p. 27.

†

Ibid. p. 40.

∗

Ueber die Landwirthschaft der Rheinpfalz, und insbesondere in der Heidelberger Gegend. Von Dr. Karl Heinrich Rau. Heidelberg, 1830.

†

Ibid. p. 50.

∗

Uber die Landwirthechaft der Rheinpfalz, und insobesondere in der Heidel berger Gegend. Von Dr. Karl Heinrich Rau Heidel berg 1930.

†

Rau, pp. 15, 16.

1

[The rest of this section was added in the 3rd ed. (1852).]

∗

The Social Condition and Education of the People in England and Europe; showing the results of the Primary Schools, and of the division of Landed Property in Foreign Countries. By Joseph Kay, M.A., Barrister-at-Law, and late Travelling Bachelor of the University of Cambridge. Vol. i. pp. 138–40.

∗

Kay, i. 116–8.

†

Geographical Dictionary, art. “Belgium.”

‡

Pp. 11–14.

∗

Flemish Husbandry, p. 3.

∗

Flemish Husbandry, p. 13.

†

Ibid. pp. 73 et seq.

∗

Flemish Husbandry, p. 81.

∗

[1849] As much of the distress lately complained of in Belgium, as partakes in any degree of a permanent character, appears to be almost confined to the portion of the population who carry on manufacturing labour, either by itself or in conjunction with agricultural; and to be occasioned by a diminished demand for Belgic manufactures.

To the preceding testimonies respecting Germany, Switzerland, and Belgium, may be added the following from Niebuhr, respecting the Roman Campagna. In a letter from Tivoli, he says, “Wherever you find hereditary farmers, or small proprietors, there you also find industry and honesty. I believe that a man who would employ a large fortune in establishing small freeholds might put an end to robbery in the mountain districts.” —Life and Letters of Niebuhr, vol. ii. p. 149.

Book II. Chapter VI. Section 6. 1

Book II. Chapter VI. Section 6

1

[This section was added to the 2nd ed. (1849).]

∗

A Plea for Peasant Proprietors. By William Thomas Thornton, pp. 99–104.

†

Ibid. p. 38.

‡

Ibid. p. 9.

§

Ibid. p. 32.

∗

Arthur Young' Travels in France, vol. i. p. 50. [In the edition of a portion of the work by Miss Betham-Edwards, p. 53.]

†

Ibid. p. 88 [ed. Betham-Edwards, p. 109].

‡

Ibid. p. 51 [ed. Betham-Edwards, p. 54].

∗

Young, vol. i. p. 56 [ed. Betham-Edwards, p. 61].

∗

Young, vol. i. pp. 322–4.

†

Ibid. p. 325.

‡

Ibid. p. 357.

§

Ibid. p. 364.

||

Ibid. p. 412.

∗

Der Canton Schaffhausen (ut supra), p. 53.

∗

Supra, Book i. ch. ix. § 4.

∗

Read the graphic description by the historian Michelet, of the feelings of a peasant proprietor towards his land.

“If we would know the inmost thought, the passion, of the French peasant, it is very easy. Let us walk out on Sunday into the country and follow him. Behold him yonder, walking in front of us. It is two o'clock; his wife is at vespers; he has on his Sunday clothes; I perceive that he is going to visit his mistress.

“What mistress? His land.

“I do not say he goes straight to it. No, he is free to-day, and may either go or not. Does he not go every day in the week? Accordingly, he turns aside, he goes another way, he has business elsewhere. And yet—he goes.

“It is true, he was passing close by; it was an opportunity. He looks, but apparently he will not go in; what for? And yet—he enters.

“At least it is probable that he will not work; he is in his Sunday dress: he has a clean shirt and blouse. Still, there is no harm in plucking up this weed and throwing out that stone. There is a stump, too, which is in the way; but he has not his tools with him, he will do it to-morrow.

“Then he folds his arms and gazes, serious and careful. He gives a long, a very long look, and seems lost in thought. At last, if he thinks himself observed, if he sees a passer-by, he moves slowly away. Thirty paces off he stops, turns round, and casts on his land a last look; sombre and profound, but to those who can see it, the look is full of passion, of heart, of devotion.” —Le Peuple, by J. Michelet, Ire partie, ch. 1.

1

[This paragraph was added in the 5th ed. (1862).]

∗

Essai sur l'Economie Rurale de l'Angleterre, de l'Ecosse, et de l'Irlande, 3me éd. p. 127. [Cf. English translation in Rural Economy of Great Britain and Ireland (1855), p. 116.]

1

[Here followed in the original text the following words, omitted in the 3rd ed, (1852): “then indeed he may feel with the old doggrel—

Hang sorrow, cast away care,

The parish is bound to find us.

But unless so shielded, the day labourer,” &c.]

∗

Essay on the Distribution of Wealth, p. 146. [Peasant Rents, p. 132.]

†

Ibid. p. 68. [Peasant Rents, p. 59.]

∗

Notes of a Traveller, p. 46.

∗

Nouveaux Principes, Book iii. ch. 3.

†

Residence in Norway, p. 18.

1

[This and the next two paragraphs were added in the 3rd ed. (1852).]

∗

Vol. i. pp. 67–9.

†

Vol. i. pp. 75–9.

‡

Ibid. p. 90.

§

The Prussian minister of statistics, in a work (Der Volkswohlstand im Preussischen Staate) which I am obliged to quote at second hand from Mr. Kay, after proving by figures the great and progressive increase of the consumption of food and clothing per head of the population, from which he justly infers a corresponding increase of the productiveness of agriculture, continues: “The division of estates has, since 1831, proceeded more and more throughout the country. There are now many more small independent proprietors than formerly. Yet, however many complaints of pauperism are heard among the dependent labourers, we never hear it complained that pauperism is increasing among the peasant proprietors.” —Kay, i. 262–6.

∗

In a communication to the Commissioners of Poor Law Enquiry, p. 640 of their Foreign Communications, Appendix F to their First Report.

†

Ibid. 268.

∗

The following is the table (see p. 168 of the Belgian translation of Mr. Rau' large work):

Per cent.

Per cent.

United States . 1820–30 . . 2.92 Scotland . . 1821–31 . . 1.30

Hungary (according to Rohrer) 2.40 Saxony . . . 1815–30 . . 1.15

England . . 1811–21 . . 1.78 Baden . 1820–30 (Heunisch) 1.13

” . . . 1821–31 . . 1.60 Bavaria . . 1814–28 . . 1.08

Austria (Rohrer) . . . . 1.30 Naples . . . 1814–24 . . 0.83

Prussia . . . 1816–27 . . 1.54 France . . 1817–27 (Mathieu) 0.63

” . . . 1820–30 . . 1.37 and more recently (Moreau de Jonnès) . . . . . . 0.55

” . . . 1821–31 . . 1.27

Netherlands . 1821–28 . . 1.28

But the number given by Moreau de Jonnès, he adds, is not entitled to implicit confidence.

The following table given by M. Quetelet (Sur l'Homme et le Développement de ses Facultés, vol. i. ch. 7) also on the authority of Rau, contains additional matter, and differs in some items from the preceding, probably from the author' having taken, in those cases, an average of different years:

Per cent.

Per cent.

Per cent.

Ireland . . . 2.45 Rhenish Prussia . 1.33 Naples . . . . 0.83

Hungary . . . 2.40 Austria . . . 1.30 France . . . . 0.63

Spain . . . . 1.66 Bavaria . . . 1.08 Sweden . . . 0.58

England . . . 1.65 Netherlands . . 0.94 Lombardy . . . 0.45

A very carefully prepared statement, by M. Legoyt, in the Journal des Economistes for May 1847, which brings up the results for France to the census of the preceding year 1846, is summed up in the following table:

∗

Journal des Economistes for March and May 1847.

†

M. Legoyt is of opinion that the population was understated in 1841, and the increase between that time and 1846 consequently overstated, and that the real increase during the whole period was something intermediate between the last two averages, or not much more than one in two hundred.

1

[This sentence was added to the 4th ed. (1857).]

‡

Journal des Economistes for February 1847.—[1865] In the Journal for January 1865, M. Legoyt gives some of the numbers slightly altered, and I presume corrected. The series of percentages is 1.28, 0.31, 0.69, 0.60, 0.41, 0.68, 0.22, and 0.20. The last census in the table, that of 1861, shows a slight reaction, the percentage, independently of the newly acquired departments, being 0.32. [M. Emile Levasscur (La Population Francaise, 1889, vol. i. p. 315) cites a calculation of M. Loua, according to which the increase per cent for the territory which has constituted France since 1871, was for the period 1801–1821 0.56; 1821–1841, 0.59; 1841–1861, 0.36; 1861–1881, 0.27.]

‡

The following are the numbers given by M. Legoyt:

In the last two years the births, according to M. Legoyt, were swelled by the effects of a considerable immigration. “This diminution of births,” he observes, “while there is a constant, though not a rapid increase both of population and of marriages, can only be attributed to the progress of prudence and forethought in families. It was a foreseen consequence of our civil and social institutions, which, producing a daily increasing subdivision of fortunes, both landed and moveable, call forth in our people the instincts of conservation and of comfort.”

In four departments, among which are two of the most thriving in Normandy, the deaths even then exceeded the births.—[1857] The census of 1856 exhibits the remarkable fact of a positive diminution in the population of 54 out of the 86 departments. A significant comment on the pauper-warren theory. See M. de Lavergne' analysis of the returns.

∗

“The classes of our population which have only wages, and are therefore the most exposed to indigence, are now (1846) much better provided with the necessaries of food, lodging, and clothing than they were at the beginning of the century. This may be proved by the testimony of all persons who can remember the earlier of the two periods compared. Were there any doubts on the subject they might easily be dissipated by consulting old cultivators and workmen, as I have myself done in various localities, without meeting with a single contrary testimony; we may also appeal to the facts collected by an accurate observer, M. Villermé (Tableau de l'Etat Physique et Moral des Ouvriers, liv. ii. ch. i.).” From an intelligent work published in 1846, Recherches sur les Causes de l'Indigence, par A. Clément, pp. 84–5. The same writer speaks (p. 118) of: “the considerable rise which has taken place since 1789 in the wages of agricultural day-labourers;” and adds the following evidence of a higher standard of habitual requirements, even in that portion of the town population, the state of which is usually represented as most deplorable. “In the last fifteen or twenty years a considerable change has taken place in the habits of the operatives in our manufacturing towns: they now expend much more than formerly on clothing and ornament.... Certain classes of workpeople, such as the canuts of Lyons,” (according to all representations, like their counterpart, our handloom weavers, the very worst paid class of artizans,) “no longer snow themselves, as they did formerly, covered with filthy rags.” (Page 164.)

[1862] The preceding statements were given in former editions of this work, being the best to which I had at the time access; but evidence, both of a more recent, and of a more minute and precise character, will now be found in the important work of M. Léonce de Lavergne, Economie Rurale de la France depuis 1789. According to that painstaking, well-informed, and most impartial enquirer, the average daily wages of a French labourer have risen, since the commencement of the Revolution, in the ratio of 19 to 30, while, owing to the more constant employment, the total earnings have increased in a still greater ratio, not short of double. The following are the words of M. de Lavergne (2nd ed. p. 57): “Arthur Young estimates at 19 sous [9½d.] the average of a day' wages, which must now be about 1 franc 50 centimos [1s. 3d.], and this increase only represents a part of the improvement. Though the rural population has remained about the same in numbers, the addition made to the population since 1789 having centred in the towns, the number of actual working days has increased, first because, the duration of life having augmented, the number of able-bodied men is greater, and next, because labour is better organized, partly through the suppression of several festival-holidays, partly by the mere effect of a more active demand. When we take into account the increased number of his working days, the annual receipts of the rural workman must have doubled. This augmentation of wages answers to at least an equal augmentation of comforts, since the prices of the chief necessaries of life have changed but little, and those of manufactured, for example of woven, articles, have materially diminished. The lodging of the labourers has also improved, if not in all, at least in most of our provinces.”

M. de Lavergne' estimate of the average amount of a day' wages is grounded on a careful comparison, in this and in all other economical points of view, of all the different provinces of France.

∗

In his little book on the agriculture of the Palatinate, already cited. He says that the daily wages of labour, which during the last years of the war were unusually high, and so continued until 1817, afterwards sank to a lower money-rate, but that the prices of many commodities, having fallen in a still greater proportion, the condition of the people was unequivocally improved. The food given to farm labourers by their employers has also greatly improved in quantity and quality. “It is to-day considerably better than it was about forty years ago, when the poorer class obtained less flesh-meat and puddings, and no cheese, butter, and the like” (p. 20). “Such an increase of wages” (adds the Professor), “which must be estimated not in money, but in the quantity of necessaries and conveniences which the labourer is enabled to procure, is by universal admission, a proof that the mass of capital must have increased.” It proves not only this, but also that the labouring population has not increased in an equal degree; and that, in this instance as well as in that of France, the division of the land, even when excessive, has been compatible with a strengthening of the prudential checks to population.

∗

Page 334 of the Brussels translation. He cites as an authority, Schwerz, Landwirthschaftliche Mittheilungen, i. 185.

†

One of the many important papers which have appeared in the Journal des Economistes, the organ of the principal political economists of France, and doing great and increasing honour to their knowledge and ability. M. Passy' essay has been reprinted separately in a pamphlet.

1

[This paragraph was added in the 5th ed. (1862).]

∗

Economie Rurale de la France, p. 455.

†

P. 117. See, for facts of a similar tendency, pp. 141, 250, and other passages of the same important treatise: which, on the other hand, equally abounds with evidence of the mischievous effect of subdivision when too minute, or when the nature of the soil and of its products is not suitable to it.

‡

[1852] Mr. Laing, in his latest publication, Observations on the Social and Political State of the European People in 1848 and 1849, a book devoted to the glorification of England and the disparagement of everything elsewhere which others, or even he himself in former works, had thought worthy of praise, argues that “although the land itself is not divided and subdivided” on the death of the proprietor, “the value of the land is, and with effects almost as prejudicial to social progress. The value of each share becomes a debt or burden upon the land.” Consequently the condition of the agricultural population is retrograde; “each generation is worse off than the preceding one, although the land is neither less nor more divided, nor worse cultivated.” And this he gives as the explanation of the great indebtedness of the small landed proprietors in France (pp. 97–9). If these statements were correct, they would invalidate all which Mr. Laing affirmed so positively in other writings, and repeats in this, respecting the peculiar efficacy of the possession of land in preventing over-population. But he is entirely mistaken as to the matter of fact. In the only country of which he speaks from actual residence, Norway, he does not pretend that the condition of the peasant proprietors is deteriorating. The facts already cited prove that in respect to Belgium, Germany, and Switzerland, he assertion is equally wide of the mark; and what has been shown respecting the slow increase of population in France, demonstrates that if the condition of the French peasantry was deteriorating, it could not be from the cause supposed by Mr. Laing. The truth I believe to be that in every country without exception, in which peasant properties prevail, the condition of the people is improving, the produce of the land and even its fertility increasing, and from the larger surplus which remains after feeding the agricultural classes, the towns are augmenting both in population and in the well-being of their inhabitants.

∗

French history strikingly confirms these conclusions. Three times during the course of ages the peasantry have been purchasers of land; and these times immediately preceded the three principal eras of French agricultural prosperity.

“In the worst times,” says the historian Michelet (Le Peuple, 1re partie, ch. 1), “the times of universal poverty, when even the rich are poor and obliged to sell, the poor are enabled to buy: no other purchaser presenting himself, the peasant in rags arrives with his piece of gold, and acquires a little bit of land. These moments of disaster in which the peasant was able to buy land at a low price, have always been followed by a sudden gush of prosperity which people could not account for. Towards 1500, for example, when France, exhausted by Louis XI., seemed to be completing its ruin in Italy, the noblesse who went to the wars were obliged to sell: the land, passing into new hands, suddenly began to flourish: men began to labour and to build. This happy moment, in the style of courtly historians, was called the good Louis XII.

“Unhappily it did not last long. Scarcely had the land recovered itself when the tax-collector fell upon it; the wars of religion followed, and seemed to rase everything to the ground; with horrible miseries, dreadful famines, in which mothers devoured their children. Who would believe that the country recovered from this? Scarcely is the war ended, when from the devastated fields, and the cottages still black with the flames, comes forth the hoard of the peasant. He buys; in ten years, France wears a new face; in twenty or thirty, all possessions have doubled and trebled in value. This moment, again baptized by a royal name, is called the good Henry IV. and the great Richelieu.”

Of the third era it is needless again to speak: it was that of the Revolution.

Whoever would study the reverse of the picture, may compare these historic periods, characterized by the dismemberment of large and the construction of small properties, with the wide-spread national suffering which accompanied, and the permanent deterioration of the condition of the labouring classes which followed the “clearing” away of small yeomen to make room for large grazing farms, which was the grand economical event of English history during the sixteenth century. [This quotation from Michelet originally came at the end of chapter x, infra, on Means of Abolishing Cottier Tenancy. It was transferred to its present position in the 5th ed. (1862).]

1

[The last two sentences replaced in the 3rd ed. (1852) the concluding sentence of the original text: “Whether and in what these considerations admit of useful application to any of the social questions of our time, will be considered in a future chapter.”

The position of peasant proprietors in Germany in more recent decades may be studied in Buchenberger, Agrarwesen, one of the volumes in Wagner' Lehrbuch der Politischen Oekonomie (1892), §§ 69, 70, 73; Blondel, Études sur les Populations Rurales de l'Allemagne (1897); and David, Sozialismus and Landwirthschaft (1903). As to whether morcellement is progressing in France, see Gide, Économic Sociale (1905), pp. 429 seq.]

∗

In France before the Revolution, according to Arthur Young (i. 403), there was great local diversity in this respect. In Champagne “the landlord commonly finds half the cattle and half the seed, and the metayer, labour, implements, and taxes; but in some districts the landlord bears a share of these. In Roussillon, the landlord pays half the taxes; and in Guienne, from Aueh to Fleuran, many landlords pay all. Near Augillon, on the Garonne, the metayers furnish half the cattle. At Nangis, in the Isle of France, I met with an agreement for the landlord to furnish live stock, implements, harness, and taxes; the metayer found labour and his own capitation tax: the landlord repaired the house and gates, the metayer the windows: the landlord provided seed the first year, the metayer the last; in the intervening years they supply half and half. In the Bourbonnois the landlord finds all sorts of live stock, yet the metayer sells, changes, and buys at his will; the steward keeping an account of these mutations, for the landlord has half the product of sales, and pays half the purchases.” In Piedmont, he says, “the landlord commonly pays the taxes and repairs the buildings, and the tenant provides cattle, implements, and seed.” (ii. 151.)

†

Etudes sur l'Economie Politique, 6me essai: De la Condition des Cultivateurs en Toscane.

‡

Letters from Italy. I quote from Dr. Rigby' translation (p. 22).

∗

This virtual fixity of tenure is not however universal even in Italy; and it is to its absence that Sismondi attributes the inferior condition of the metayers in some provinces of Naples, in Lucca, and in the Riviera of Genoa; where the landlords obtain a larger (though still a fixed) share of the produce. In those countries the cultivation is splendid, but the people wretchedly poor. “The same misfortune would probably have befallen the people of Tuscany if public opinion did not protect the cultivator; but a proprietor would not dare to impose conditions unusual in the country, and even in changing one metayer for another he alters nothing in the terms of the engagement.” —Nouveaux Principes, liv. iii. ch. 5.

∗

M. Bastiat affirms that even in France, incontestably the least favourable example of the metayer system, its effect in repressing population is conspicuous.

“It is a well-ascertained fact that the tendency to excessive multiplication is chiefly manifested in the class who live on wages. Over these the forethought which retards marriages has little operation, because the evils which flow from excessive competition appear to them only very confusedly, and at a considerable distance. It is, therefore, the most advantageous condition of a people to be so organized as to contain no regular class of labourers for hire. In metayer countries, marriages are principally determined by the demands of cultivation; they increase when, from whatever cause, the metairies offer vacancies injurious to production; they diminish when the places are filled up. A fact easily ascertained, the proportion between the size of the farm and the number of hands, operates like forethought, and with greater effect. We find, accordingly, that when nothing occurs to make an opening for a superfluous population, numbers remain stationary: as is seen in our southern departments.” Considérations sur le Métayage, Journal des Economistes for February 1846. [The description of Bastiat as “a high authority among French political economists” was omitted from the 3rd ed. (1852).]

†

Wealth of Nations, book iii. ch. 2.

∗

Travels, vol. i. pp. 404–5.

†

Ibid. vol. ii. 151–3.

∗

Travels, vol. ii. 217.

†

Principles of Political Economy, 3rd. ed. p. 471.

‡

Essay on the Distribution of Wealth, pp. 102–4. [Peasant Rents, pp. 90–92.]

§

M. de Tracy is partially an exception, inasmuch as his experience reaches lower down than the revolutionary period; but he admits (as Mr. Jones has himself stated in another place) that he is acquainted only with a limited district, of great subdivision and unfertile soil.

M. Passy is of opinion, that a French peasantry must be in indigence and the country badly cultivated on a metayer system, because the proportion of the produce claimable by the landlord is too high; it being only in more favourable climates that any land, not of the most exuberant fertility, can pay half its gross produce in rent, and leave enough to peasant farmers to enable them to grow successfully the more expensive and valuable products of agriculture. (Systèmes de Culture, p. 35.) This is an objection only to a particular numerical proportion, which is indeed the common one, but is not essential to the system.

||

See the “Mémoire sur la Surcharge des Impositions qu'éprouvait la Généralité de Limoges, adressé au Conseil d'Etat on 1766,” pp. 260–304 of the fourth volume of Turgot' Works. The occasional engagements of landlords (as mentioned by Arthur Young) to pay a part of the taxes, were, according to Turgot, of recent origin, under the compulsion of actual necessity. “The proprietor only consents to it when he can find no metayer on other terms; consequently, even in that case, the metayer is always reduced to what is barely sufficient to prevent him from dying of hunger” (p. 275).

∗

Vol. i. p. 404.

∗

Letters from Italy, translated by Rigby, p. 16.

‡

Ibid. pp. 19, 20.

§

Ibid. pp. 24–31.

∗

Pp. 78–9.

∗

Pp. 73–6.

†

Travels, vol. ii. p. 156.

‡

Letters from Italy, p. 75.

∗

Letters from Italy, pp. 295–6.

†

From his Sixth Essay, formerly referred to.

∗

Inventory of the trousseau of Jane, daughter of Valente Papini, on her marriage with Giovacchino Landi, the 29th of April 1835, at Porta Vecchia, near Pescia:

“28 shifts, 7 best dresses (of particular fabrics of silk), 7 dresses of printed cotton, 2 winter working dresses (mezza lana), 3 summer working dresses and petticoats (mola), 3 white petticoats, 5 aprons of printed linen, 1 of black silk, 1 of black merino, 9 coloured working aprons (mola), 4 white, 8 coloured, and 3 silk, handkerchiefs, 2 embroidered veils and one of tulle, 3 towels, 14 pairs of stockings, 2 hats (one of felt, the other of fine straw); 2 canicos set in gold, 2 golden earrings, 1 chaplet with two Roman silver crowns, 1 coral necklace with its cross of gold.... All the richer married women of the class have, besides, the veste di seta, the great holiday dress, which they only wear four or five times in their lives.”

∗

Of the intelligence of this interesting people, M. de Sismondi speaks in the most favourable terms. Few of them can read; but there is often one member of the family destined for the priesthood, who reads to them on winter evenings. Their language differs little from the purest Italian. The taste for improvisation in verse is general. “The peasants of the Vale of Nievole frequent the theatre in summer on festival days, from nine to eleven at night: their admission costs them little more than five French sous [2½d.]. Their favourite author is Alfieri; the whole history of the Atridae is familiar to these people who cannot read, and who seek from that austere poet a relaxation from their rude labours.” Unlike most rustics, they find pleasure in the beauty of their country. “In the hills of the vale of Nievole there is in front of every house a threshing-ground, seldom of more than 25 or 30 square fathoms; it is often the only level space in the whole farm; it is at the same time a terrace which commands the plains and the valley, and looks out upon a delightful country. Scarcely ever have I stood still to admire it, without the metayer' coming out to enjoy my admiration, and point out with his finger the beauties which he thought might have escaped my notice.”

∗

“We never,” says Sismondi, “find a family of metayers proposing to their landlord to divide the metairie, unless the work is really more than they can do, and they feel assured of retaining the same enjoyments on a smaller piece of ground. We never find several sons all marrying, and forming as many new families; only one marries and undertakes the charge of the household: none of the others marry unless the first is childless, or unless some one of them has the offer of a new metairie.” New Principles of Political Economy, book iii. ch. 5.

∗

In its original acceptation, the word “cottier” designated a class of subtenants, who rent a cottage and an acre or two of land from the small farmers. But the usage of writers has long since stretched the term to include those small farmers themselves,and generally all peasant farmers whose rents are determined by competition.

1

[“May be said to be” in 1st ed. (1848); altered as above in 5th ed. (1862). Similarly the account of the labourers in the following sentences was changed from the present to the past tense.]

∗

“It is not uncommon for a tenant without a lease to sell the bare privilege of occupancy or possession of his farm, without any visible sign of improvement having been made by him, at from ten to sixteen, up to twenty and even forty years' purchase of the rent.” —(Digest of Evidence taken by Lord Devon' Commission, Introductory Chapter.) The compiler adds, “the comparative tranquillity of that district” (Ulster) “may perhaps be mainly attributable to this fact.”

†

“It is in the great majority of cases not a reimbursement for outlay incurred, or improvements effected on the land, but a mere life insurance or purchase of immunity from outrage.” —(Digest, ut supra.) “The present tenant-right of Ulster” (the writer judiciously remarks) “is an embryo copyhold.” “Even there, if the tenant-right be disregarded, and a tenant be ejected without having received the price of his goodwill, outrages are generally the consequence.” —(Ch. viii.) “The disorganised state of Tipperary, and the agrarian combination throughout Ireland, are but a methodized war to obtain the Ulster tenant-right.”

1

[“Is unhappily” until the 5th ed. (1862).]

∗

Evils of the State of Ireland, their Causes and their Remedy. Page 10. A pamphlet containing, among other things, an excellent digest and selection of evidence from the mass collected by the Commission presided over by Archbishop Whately.

∗

Evidence, p. 851.

1

[“Are” until the 5th ed. (1862).]

∗

Mill' History of British India, book vi. ch. 8.

1

[In the original text there next came the following passages: “But in this ill judged measure there was one redeeming point, to which may probably be ascribed all the progress which the Bengal provinces have since made in production and in amount of revenue. The ryots were reduced, indeed, to the rank of tenants of the zemindar; but tenants with fixity of tenure. The rents were left to the zemindars to fix at their discretion; but once fixed, were never more to be altered. This is now the law and practice of landed tenure, in the most flourishing part of the British Indian dominions.

“In the parts of India into which the British rule has been more recently introduced, the blunder has been avoided of endowing a useless body of great landlords with gifts from the public revenue; but along with the evil, the good also has been left undone. The government has done less for the ryots than it has required to be done for them by the landlords of its creation.”

These were omitted (as incorrect—see note of 1871, infra, p. 328) in the 3rd ed. (1852). In that edition was added the reference to Madras and Bombay, with the statement that “the rent on each class of land is fixed in perpetuity.” This incorrect statement was struck out of the 4th ed. (1857), and the reference to the North-Western Provinces added.]

∗

[1871] Since this was written, the resolution has been adopted by the Indian government of converting the long leases of the northern provinces into perpetual tenures at fixed rents.

1

[See Appendix M. Indian Tenures.]

1

[These words were added in the 3rd ed. (1852), and the following sentences changed from the present to the past tense.]

1

[This and the next two paragraphs date from the 3rd ed. (1852), and take the place of the whole of the original § 2.]

1

[This clause was inserted in the 3rd ed. (1852).]

∗

Author of numerous pamphlets, entitled True Political Economy of Ireland, Letter to the Earl of Devon, Two Letters on the Rackrent Oppression of Ireland, and others. Mr. Conner has been an agitator on the subject since 1832.

1

[Here was dropt out, from the 3rd ed. (1852) the following section of the original text:

“§ 5. Some persons who desire to avoid the term fixity of tenure, but who cannot be satisfied without some measure co-extensive with the whole country, have proposed the universal adoption of ‘tenant-right.’ Under this equivocal phrase, two things are confounded. What it commonly stands for in Irish discussion, is the Ulster practice, which is in fact, fixity of tenure. It supposes a customary, though not a legal, limitation of the rent; without which the tenant evidently could not acquire a beneficial and saleable interest. Its existence is highly salutary, and is one principal cause of the superiority of Ulster in efficiency of cultivation, and in the comfort of the people, notwithstanding a minuter sub-division of holdings than in the other provinces. But to convert this customary limitation of rent into a legal one, and to make it universal, would be to establish a fixity of tenure by law, the objections to which have already been stated.

“The same appellation (tenant right) has of late years been applied, more particularly in England, to something altogether different, and falling as much short of the exigency, as the enforcement of the Ulster custom would exceed it. This English tenant right, with which a high agricultural authority has connected his name by endeavouring to obtain for it legislative sanction, amounts to no more than this, that on the expiration of a lease, the landlord should make compensation to the tenant for ‘unexhausted improvements.’ This is certainly very desirable, but provides only for the case of capitalist farmers, and of improvements made by outlay of money; of the worth and cost of which, an experienced land agent or a jury of farmers could accurately judge. The improvements to be looked for from peasant cultivators are the result not of money but of their labour, applied at such various times and in such minute portions as to be incapable of judicial appreciation. For such labour, compensation could not be given on any principle but that of paying to the tenant the whole difference between the value of the property when he received it, and when he gave it up: which would as effectually annihilate the right of property of the landlord as if the rent had been fixed in perpetuity, while it would not offer the same inducements to the cultivator, who improves from affection and passion as much as from calculation, and to whom his own land is a widely different thing from the most liberal possible pecuniary compensation for it.” ]

1

[Little more than this remained in the 3rd ed. (1852)—modified to its present shape in the 5th (1862)—of the argument in favour of measures of reclamation of waste land which occupied five pages in the original edition. It opened thus: “There is no need to extend them to all the population, or all the land. It is enough if there be land available, on which to locate so great a portion of the population, that the remaining area of the country shall not be required to maintain greater numbers than are compatible with large farming and hired labour. For this purpose there is an obvious resource in the waste lands; which are happily so extensive, and a large proportion of them so improvable, as to afford a means by which, without making the present tenants proprietors, nearly the whole surplus population might be converted into peasant proprietors elsewhere.”

After this argument came the following account of the English experiments associated with the name of Feargus O'Connor: “There are yet other means, by which not a little could be done in the dissemination of peasant proprietors over even the existing area of cultivation. There is at the present time an experiment in progress, in more than one part of England, for the creation of peasant proprietors. The project is of Chartist origin, and its first colony is now in full operation near Rickmansworth, in Hertfordshire. The plan is as follows:—Funds were raised by subscription, and vested in a joint-stock company. With part of these funds an estate of several hundred acres was bought. This estate was divided into portions of two, three, and four acres, on each of which a house was erected by the Association. These holdings were let to select labourers, to whom also such sums were advanced as were thought to amount to a sufficient capital for cultivation by spade labour. An annual payment, affording to the Company an interest of five per cent. on their outlay, was laid on the several holdings as a fixed quit-rent, never in any circumstances to be raised. The tenants are thus proprietors from the first, and their redemption of the quit-rent, by saving from the produce of their labour, is desired and calculated upon.

“The originator of this experiment appears to have successfully repelled (before a tribunal by no means prepossessed in his favour, a Committee of the House of Commons) the imputations which were lavished upon his project, and upon his mode of executing it. Should its issue ultimately be unfavourable, the cause of failure will be in the details of management, not in the principle. These well-conceived arrangements afford a mode in which private capital may co-operate in renovating &c.” In the first edition it was said that “at present there seems no reason to believe” the issue would be unfavorable; and in the second the reference was inserted to the parliamentary enquiry. For the subsequent history of the National Land Company, see L. Jobb, Small Holdings, (1907), p. 121.]

∗

[1857] Though this society, during the years succeeding the famine, was forced to wind up its affairs, the memory of what is accomplished ought to be preserved. The following is an extract in the Proceedings of Lord Devon' Commission (page 84) from the report made to the society in 1845, by their intelligent manager, Colonel Robinson:—

“Two hundred and forty-five tenants, many of whom were a few years since in a state bordering on pauperism, the occupiers of small holdings of from ten to twenty plantation acres each, have, by their own free labour, with the society' aid, improved their farms to the value of 4396l.; 605l. having been added during the last year, being at the rate of 17l. 18s. per tenant for the whole term, and 2l. 9s. for the past year; the benefit of which improvements each tenant will enjoy during the unexpired term of a thirty-one years' lease.

“These 245 tenants and their families have, by spade industry, reclaimed and brought into cultivation 1032 plantation acres of land, previously unproductive mountain waste, upon which they grew, last year, crops valued by competent practical persons at 3896l., being in the proportion of 15l. 18s. each tenant; and their live stock, consisting of cattle, horses, sheep, and pigs, now actually upon the estates, is valued, according to the present prices of the neighbouring markets, at 4162l., of which 1304l. has been added since February 1844, being at the rate of 16l. 19s. for the whole period, and 5l. 6s. for the last year; during which time their stock has thus increased in value a sum equal to their present annual rent; and by the statistical tables and returns referred to in previous reports, it is proved that the tenants, in general, improve their little farms, and increase their cultivation and crops, in nearly direct proportion to the number of available working persons of both sexes of which their families consist.”

There cannot be a stronger testimony to the superior amount of gross, and even of net produce, raised by small farming under any tolerable system of landed tenure; and it is worthy of attention that the industry and zeal were greatest among the smaller holders; Colonel Robinson noticing, as exceptions to the remarkable and rapid progress of improvement, some tenants who were “occupants of larger farms than twenty acres, a class too often deficient in the enduring industry indispensable for the successful prosecution of mountain improvements.”

1

[A brief section, beginning thus, was added in the 5th ed. (1862). This was omitted, and the present § 2 added in the 6th ed. (1865).]

∗

There is, however, a partial counter-current, of which I have not seen any public notice. “A class of men, not very numerous, but sufficiently so to do much mischief, have, through the Landed Estates Court, got into possession of land in Ireland, who, of all classes, are least likely to recognise the duties of a landlord' position. These are small traders in towns, who by dint of sheer parsimony, frequently combined with money-lending at usurious rates, have succeeded, in the course of a long life, in scraping together as much money as will enable them to buy fifty or a hundred acres of land. These people never think of turning farmers, but, proud of their position as landlords, proceed to turn it to the utmost account. An instance of this kind came under my notice lately. The tenants on the property were, at the time of the purchase, some twelve years ago, in a tolerably comfortable state. Within that period their rent has been raised three several times; and it is now, as I am informed by the priest of the district, nearly double its amount at the commencement of the present proprietor' reign. The result is that the people, who were formerly in tolerable comfort, are now reduced to poverty: two of them have left the property and squatted near an adjacent turf bog, where they exist trusting for support to occasional jobs. If this man is not shot, he will injure himself through the deterioration of his property, but meantime he has been getting eight or ten per cent on his purchase-money. This is by no means a rare case. The scandal which such occurrences cause, casts its reflection on transactions of a wholly different and perfectly legitimate kind, where the removal of the tenants is simply an act of mercy for all parties.

“The anxiety of landlords to get rid of cottiers is also to some extent neutralized by the anxiety of middlemen to get them. About one-fourth of the whole land of Ireland is held under long leases; the rent received, when the lease is of long standing, being generally greatly under the real value of the land. It rarely happens that the land thus held is cultivated by the owner of the lease: instead of this, he sublets it at a rackrent to small men, and lives on the excess of the rent which he receives over that which he pays. Some of these leases are always running out; and as they draw towards their close, the middleman has no other interest in the land than, at any cost of permanent deterioration, to get the utmost out of it during the unexpired period of the term. For this purpose the small cottier tenants precisely answer his turn. Middlemen in this position are as anxious to obtain cottiers as tenants, as the landlords are to be rid of them; and the result is a transfer of this sort of tenant from one class of estates to the other. The movement is of limited dimensions, but it does exist, and so far as it exists, neutralizes the general tendency. Perhaps it may be thought that this system will reproduce itself; that the same motives which led to the existence of middlemen will perpetuate the class; but there is no danger of this. Landowners are now perfectly alive to the ruinous consequences of this system, however convenient for a time; and a clause against sub-letting is now becoming a matter of course in every lease.” —(Private Communication from Professor Cairnes.)

1

[See Appendix N. Irish Agrarian Development.]

1

[The present text of this paragraph dates from the 3rd ed. (1852). The original text ran, after the word “custom” “but the last is not a common case. A custom on the subject, even if established, could not easily maintain itself unaltered in any other than a stationary state of society. An increase or a falling off in the demand for labour, an increase or diminution of the labouring population, could hardly fail to engender a competition which would break down any custom respecting wages, by giving either to one side or to the other a strong direct interest in infringing it. We may at all events speak of the wages of labour as determined, in ordinary circumstances, by competition.” ]

1

[The qualification inserted in 3rd ed. (1852).]

2

[See Appendix O. The Wages Fund Doctrine.]

∗

See the historical sketch of the condition of the English peasantry, prepared from the best authorities, by Mr. William Thornton, in his work entitled Over-Population and its Remedy: a work honourably distinguished from most others which have been published in the present generation, by its rational treatment of questions affecting the economical condition of the labouring classes.

∗

Supra, pp. 293–5.

†

A similar, though not an equal, improvement in the standard of living took place among the labourers of England during the remarkable fifty years from 1715 to 1765, which were distinguished by such an extraordinary succession of fine harvests (the years of decided deficiency not exceeding five in all that period) that the average price of wheat during those years was much lower than during the previous half century. Mr. Malthus computes that on the average of sixty years preceding 1720, the labourer could purchase with a day' earnings only two-thirds of a peck of wheat, while from 1720 to 1750 he could purchase a whole peck. The average price of wheat, according to the Eton tables, for fifty years ending with 1715, was 41s. 7¾d. per quarter, and for the last twenty-three of these, 45s. 8d., while for the fifty years following, it was no more than 34s. 11d. So considerable an improvement in the condition of the labouring class, though arising from the accidents of seasons, yet continuing for more than a generation, had time to work a change in the habitual requirements of the labouring class; and this period is always noted as the date of “a marked improvement of the quality of the food consumed, and a decided elevation in the standard of their comforts and conveniences.” —(Malthus, Principles of Political Economy, p. 225.) For the character of the period, see Mr. Tooke' excellent History of Prices, vol. i. pp. 38 to 61, and for the prices of corn, the Appendix to that work.

1

[The original text of 1848 is practically unchanged in this paragraph.]

∗

Forming an Appendix (F) to the General Report of the Commissioners, and also published by authority as a separate volume.

∗

Preface, p. xxxix.

†

Preface, p. xxxiii., or p. 554 of the Appendix itself.

‡

Appendix, p. 419.

§

Ibid. p. 567.

1

[This paragraph was added in the 3rd ed. (1852).]

∗

Kay, op. cit. i. 68.

†

“In general,” says Sismondi, “the number of masters in each corporation was fixed, and no one but a master could keep a shop, or buy and sell on his own account. Each master could only train a certain number of apprentices, whom he instructed in his trade; in some corporations he was only allowed one. Each master could also employ only a limited number of workmen, who were called companions, or journeymen; and in the trades in which he could only take one apprentice, he was only allowed to have one, or at most two, journeymen. No one was allowed to buy, sell, or work at a trade, unless he was either an apprentice, a journeyman, or a master; no one could become a journeyman without having served a given number of years as an apprentice, nor a master, unless he had served the same number of years as a journeyman, and unless he had also executed what was called his chef d'œuvre (masterpiece), a piece of work appointed in his trade, and which was to be judged of by the corporation. It is seen that this organization threw entirely into the hands of the masters the recruiting of the trade. They alone could take apprentices; but they were not compelled to take any; accordingly they required to be paid, often at a very high rate, for the favour; and a young man could not enter into a trade if he had not, at starting, the sum required to be paid for his apprenticeship, and the means necessary for his support during that apprenticeship; since for four, five, or seven years, all his work belonged to his master. His dependence on the master during that time was complete; for the master' will, or even caprice, could close the door of a lucrative profession upon him. After the apprentice became a journeyman he had a little more freedom; he could engage with any master he chose, or pass from one to another; and as the condition of a journeyman was only accessible through apprenticeship, he now began to profit by the monopoly from which he had previously suffered, and was almost sure of getting well paid for a work which no one else was allowed to perform. He depended, however, on the corporation for becoming a master, and did not, therefore, regard himself as being yet assured of his lot, or as having a permanent position. In general he did not marry until he had passed as a master.

“It is certain both in fact and in theory that the existence of trade corporations hindered, and could not but hinder, the birth of a superabundant population. By the statutes of almost all the guilds, a man could not pass as a master before the age of twenty-five; but if he had no capital of his own, if he had not made sufficient savings, he continued to work as a journeyman much longer; some, perhaps the majority of artisans, remained journeymen all their lives. There was, however, scarcely an instance of their marrying before they were received as masters; had they been so imprudent as to desire it, no father would have given his daughter to a man without a position.” —Nouveaux Principes, book iv. ch. 10. See also Adam Smith, book i. ch. 10, part 2.

∗

See Thornton on Over-Population, page 18, and the authorities there cited.

†

Supra, p. 201.

1

[The proposal was mentioned in the 1st ed. (1848); the Act was referred to in the 7th ed. (1871). For the Union Chargeability Act of 1865 and previous and subsequent legislation, see Majority Report of the Poor Law Commission (1909), Part iv. ch. 4.]

2

[The words here following in the original text: “Especially considering how much the Irish themselves contribute to it, by migrating to this country and underbidding its native inhabitants,” were omitted from the 5th ed. (1862).]

3

[So ed. 5 (1862). In 1st ed. (1848) “seven or perhaps eight.” ]

1

[From the 3rd ed. (1852) was here omitted a paragraph of the original text criticising “the conduct, during ten important years, of a large portion of the Tory party” with regard to “an enactment” (the Poor Law Reform of 1834) “most salutary in principle, in which their own party had concurred, but of which their rivals were almost accidentally the nominal authors.”]

1

[See Appendix P. The Movement of Population.]

1

[This and the two following sentences were inserted in the 2nd ed. (1849), and allowed to remain in subsequent editions.]

1

[The present text dates only from the 7th ed. (1871). Until then it had read: “This deplorable system... has been abolished, and of this one abuse at least it may be said that nobody professes to wish for its revival.” ]

∗

See the Evidence on the subject of Allotments, collected by the Commissioners of Poor Law Enquiry.

∗

Laing' Notes of a Traveller, p. 456.

†

See Thornton on Over-Population, ch. viii.

1

[The remainder of this sentence appeared first in the 3rd ed. (1852). In the 1st and 2nd ed. (1848, 1849), the text ran: “Is it not to this hour the favourite recommendation for any parochial office bestowed by popular election to have a large family and to be unable to maintain them? Do not the candidates placard their intemperence upon walls, and publish it through the town in circulars?” Cf. Dickens, The Election for Beadle in Sketches by Boz, “Our Parish,” ch. iv.]

∗

Little improvement can be expected in morality until the producing large families is regarded with the same feelings as drunkenness or any other physical excess. But while the aristocracy and clergy are foremost to set the example of this kind of incontinence, what can be expected of the poor?

†

Nouveaux Principes, liv. vii. ch. 5.

1

[The two last sentences were added in the 3rd ed. (1852).]

1

[The following sentences of the original text were omitted in the 3rd ed. (1852) from the beginning of this paragraph: “To the case of Ireland, in her present crisis of transition, colonization, as the exclusive remedy, is, I conceive, unsuitable. The Irish are nearly the worst adapted people in Europe for settlers in the wilderness: nor should the founders of nations, destined perhaps to be the most powerful in the world, be drawn principally from the least civilized and least improved inhabitants of old countries. It is most fortunate therefore that the unoccupied lands of Ireland herself afford a resource so nearly adequate to the emergency, as reduces emigration to a rank merely subsidiary. In England and Scotland, with a population much less excessive, and better adapted to a settler' life, colonization must be the chief resource for easing the labour market, and improving the condition of the existing generation of labourers so materially as to raise the permanent standard of habits in the generation following. But England too has waste lands, though less extensive than those of Ireland: and the second resource, &c.”

1

[Added in the 6th ed. (1865).]

∗

Wealth of Nations, book i. ch. 10.

∗

Mr. Muggeridge' Report to the Handloom Weavers Inquiry Commission.

1

[This paragraph was inserted in the 3rd ed. (1852). At the same time the following paragraph disappeared from the preceding page: “There is no difficulty in understanding the operative principle in all these cases. If, with complete freedom of competition, labour of different degrees of desireableness were paid alike, competitors would crowd into the more attractive employments, and desert the less eligible, thus lowering wages in the first, and raising them in the second, until there would be such a difference of reward as to balance in common estimation the difference of eligibility. Under the unobstructed influence of competition, wages tend to adjust themselves in such a manner that the situation and prospects of the labourers in all employments shall be, in the general estimation, as nearly as possible on a par.” ]

1

[Writing in 1848.]

∗

See the Statute of Labourers, 25 Edw. IIL

∗

Four-fifths of the manufacturers of the Canton of Zurich are small farmers, generally proprietors of their farms. The cotton manufacture occupies either wholly or partially 23,000 people, nearly a tenth part of the population, and they consume a greater quantity of cotton per inhabitant than either France or England. See the Statistical Account of Zurich formerly cited, pp. 105, 108, 110.

1

[The first and third of the following sentences were added in the 3rd ed. (1852); the second was inserted in the 6th ed. (1865).]

1

[So from the 3rd ed. (1852). The original text ran: “it does not appear that they are in general unequally paid.” ]

2

[“Sometimes” added in the 3rd ed.]

3

[Here the following passage was omitted from the 3rd ed.: “When an employment (as is the case with many trades) is divided into several parts, of some of which men alone are considered capable, while women or children are employed in the others, it is natural that those who cannot be dispensed with, should be able to make better terms for themselves than those who can.” ]

1

[The present text of this paragraph dates from the 5th ed. (1862). In the original of 1848 it ran, after the words “this peculiar nature”: “I find it impossible to wish, in the present state of the general habits of the people, that no such combinations existed. Acts of atrocity are sometimes committed by them, in the way... repressed: and even their legitimate liberty of refusing to work unless their own terms are conceded to them, they not unfrequently exercise in an injudicious, unenlightened manner, ultimately very injurious to themselves. But in so far as they do succeed in keeping up the wages of any trade by limiting its numbers, I look upon them as simply intrenching... themselves. And I should rejoice if by trade regulations, or even by trades unions, the employments thus specially protected could be multiplied to a much greater extent than experience has shown to be practicable. What at first sight seems the injustice... level. If indeed the general mass of the people were so improved in their standard of living, as not to press closer against the means of employment than those trades do; if, in other words, there were no greater degree of overcrowding outside the barrier, than within it—there would be no need of a barrier, and if it had any effects at all, they must be bad ones; but in that case the barrier would fall of itself, since there would no longer be any motive for keeping it up. On similar grounds, if there were no other escape from that fatal immigration of Irish, which has done and is doing so much to degrade the condition of our agricultural, and some classes of our town population, I should see no injustice, and the greatest possible expediency, in checking that destructive inroad by prohibitive laws. But there is a better mode of putting an end to this mischief, namely, by improving the condition of the Irish themselves; and England owes an atonement to Ireland for past injuries, which she ought to suffer almost any inconvenience rather than fail to make good, by using her power in as determined a manner for the elevation of that unfortunate people, as she used it through so many dreary centuries for their abasement and oppression.”

In the 3rd ed. (1852) this was replaced by the following (which appeared also in the 4th (1857)): “their existence, it is probable, has, in time past, produced more good than evil. Putting aside the atrocities sometimes committed by them, in the way... themselves. The time, however, is past when the friends of human improvement can look with complacency on the attempts of small sections of the community, whether belonging to the labouring or any other class, to organize a separate class interest in antagonism to the general body of labourers, and to protect that interest by shutting out, even if only by a moral compulsion, all competitors from their more highly paid department. The mass of the people are no longer to be thrown out of the account, as too hopelessly brutal to be capable of benefiting themselves by any opening made for them, and sure only, if admitted into competition, to lower others to their own level. The aim of all efforts should now be, not to keep up the monopoly of separate knots of labourers against the rest, but to raise the moral state and social condition of the whole body; and of this it is an indispensable part that no one should be excluded from the superior advantages of any skilled employment, who has intelligence enough to learn it, and honesty enough to be entrusted with it.” ]

∗

It is to be regretted that this word, in this sense, is not familiar to an English ear. French political economists enjoy a great advantage in being able to speak currently of les profits de l'entrepreneur.

1

[So from the 3rd ed. (1852). The original text had “for his self-denial.” ]

1

[“Much more than” replaced in the 3rd ed. (1852) the “like” of the original text. Cf. supra, book ii. ch. xiv. § 1.]

1

[So from the 4th ed. (1857). In earlier editions: “this sort of combination exists; though individual interest is often too strong for its rules; nor, indeed, does the combination itself include the whole trade.” ]

1

[Altered from “chances” as late as the 5th ed. (1862).]

1

[The rest of this paragraph was added in the 3rd ed. (1852).]

∗

Vide supra, book ii. ch. iv. § 3.

2

[The remainder of this section was added in the 4th ed. (1857).]

1

[Added in the 4th ed. (1857).]

1

[So from the 6th ed. (1865). The earlier editions ran: “the cost of labour to the capitalist is considerably lower than in Europe. It must be so, since the rate of profit is higher; as indicated by the rate of interest, which is six per cent at New York when it is three or three and a quarter per cent in London.” ]

1

[See Appendix Q. Profits.]

1

[This clause was inserted in the 6th ed. (1865).]

1

[This explanatory phrase was added in the 6th ed. (1865).]

2

[This sentence was inserted in the 3rd ed. (1852).]

1

[The reference to Bastiat was inserted in the 3rd ed. (1852). The remainder of this paragraph, together with the following paragraph, took their present form finally in the 6th ed. (1865).]

1

[So from the 5th ed. (1862). Until then the concluding sentence of the paragraph had been: “It would be difficult to show that the whole land of the country can yield a rent on any other supposition.” ]

1

[See Appendix R. Rent.]

1

[The remaining words of the sentence were added in the 6th ed. (1865).]

∗

Logic of Political Economy, p. 13.

∗

Adam Smith, who introduced the expression “effectual demand,” employed it to denote the demand of those who are willing and able to give for the commodity what he calls its natural price, that is the price which will enable it to be permanently produced and brought to market.—See his chapter on Natural and Market Price (book i. ch. 7).

∗

“The price of corn in this country has risen from 100 to 200 per cent and upwards, when the utmost computed deficiency of the crops has not been more than between one-sixth and one-third below an average, and when that deficiency has been relieved by foreign supplies. If there should be a deficiency of the crops amounting to one-third, without any surplus from a former year, and without any chance of relief by importation, the price might rise five, six, or even tenfold.”—Tooke's History of Prices, vol. i. pp. 13–5.

∗

See Tooke, and the Report of the Agricultural Committee of 1821.

∗

Supra, p. 412.

∗

Logic of Political Economy, pp. 230–1.

∗

Supra, pp. 29–31.

∗

Principles of Political Economy and Taxation, ch. i. sect. 3.

∗

[1862] Some of these quarries, I believe, have been rediscovered, and are again worked.

∗

Esprit des Lois, liv. xi. ad finem. [See Appendix S. The Theory of Value.]

∗

Montesquieu, Esprit des Lois, liv. xxii. oh. 8.

1

[I.e. the Napoleonic war.]

2

[So from the 3rd ed. (1852). In the 1st ed. (1848): “so abundant as the mines of the Ural mountains and of Siberia.” In the 2nd ed. (1849): “to which may now be added California.”]

1

[“As yet” added in 2nd ed. (1849).]

∗

Infra, chap. xxiii.

1

[“Invested” substituted for “employed” in 3rd ed. (1852).]

∗

Fullarton, Regulation of Currencies, 2nd edit. pp. 87–9.

1

[The rest of the sentence was added in the 4th ed. (1857), and the proposition described as “a totally incorrect expression of the fact.” In the 5th ed. (1862) “extremely” was substituted for “totally.”]

∗

The effect of the prohibition cannot, however, have been so entirely insignificant as it has been supposed to be by writers on the subject. The facts adduced by Mr. Fullarton, in the note to page 7 of his work on the Regulation of Currencies, shows that it required a greater percentage of difference in value between coin and bullion than has commonly been imagined, to bring the coin to the melting-pot.

∗

In England, though there is no seignorage on gold coin, (the Mint returning in coin the same weight of pure metal which it receives in bullion,) there is a delay of a few weeks after the bullion is deposited, before the coin can be obtained, occasioning a loss of interest, which, to the holder, is equivalent to a trifling seignorage. From this cause, the value of coin is in general slightly above that of the bullion it contains. An ounce of gold, according to the quantity of metal in a sovereign, should be worth 3l. 17s. 10½d.; but it was usually quoted at 3l. 17s. 6d., until the Bank Charter Act of 1844 made it imperative on the Bank to give its notes for all bullion offered to it at the rate of 3l. 17s. 9d.

1

[The final sentence of this paragraph was added in the 3rd ed. (1852).]

∗

From some printed, but not published, Lectures of Mr. Senior: in which the great differences in the business done by money, as well as in the rapidity of its circulation, in different states of society and civilization, are interestingly illustrated.

1

[See Appendix T. The Value of Money.]

1

[The following passage, which occurred in the original ed. (1848) at this point, was omitted in the 3rd ed. (1852):

“This is the case in France. Silver alone is (I believe) a legal tender, and all sums are expressed and accounts kept in francs, a silver coin. Gold is also coined, for convenience, but does not pass at a fixed valuation: the twenty francs marked on a napoleon are merely nominal, napoleons being never to be bought for that sum, but always bearing a small premium, or agio as it is called; though, as the agio is very trifling, (the bullion value differing very little from twenty francs), it is seldom possible to pass a napoleon for more than that sum in ordinary retail transactions. Silver, then, is the real money of the country, and gold coin only a merchandise; but, though not a legal tender, it answers all the real purposes of one, since no creditor is at all likely to refuse receiving it at the market price, in payment of his debt.”]

1

[See Appendix U. Bimetallism.]

∗

[1865] To make the proposition in the text strictly true, a corrective, though a very slight one, requires to be made. The circulating medium existing in a country at a given time, is partly employed in purchases for productive, and partly for unproductive consumption. According as a larger proportion of it is employed in the one way or in the other, the real capital of the country is greater or less. If, then, an addition were made to the circulating medium in the hands of unproductive consumers exclusively, a larger portion of the existing stock of commodities would be bought for unproductive consumption, and a smaller for a productive, which state of things, while it lasted, would be equivalent to a diminution of capital; and on the contrary, if the addition made be to the portion of the circulating medium which is in the hands of producers, and destined for their business, a greater portion of the commodities in the country will for the present be employed as capital, and a less portion unproductively. Now an effect of this latter character naturally attends some extensions of credit, especially when taking place in the form of bank notes, or other instruments of exchange. The additional bank notes are, in ordinary course, first issued to producers or dealers, to be employed as capital; and though the stock of commodities in the country is no greater than before, yet as a greater share of that stock now comes by purchase into the hands of producers and dealers, to that extent what would have been unproductively consumed is applied to production, and there is a real increase of capital. The effect ceases, and a counter-process takes place, when the additional credit is stopped, and the notes called in.

∗

Enquiry into the Nature and Effects of the Paper Credit of Great Britain, p. 24. This work, published in 1802, is even now [1848] the clearest exposition that I am acquainted with, in the English language, of the modes in which credit is given and taken in a mercantile community.

∗

Pp. 29–33.

∗

P. 40.

1

[So from the 4th ed. (1857). The original (1848) ran: “Up to twenty years ago.”]

1

[The concluding clause of this sentence was added in the 4th ed. (1857).]

∗

According to Mr. Tooke (Inquiry into the Currency Principle, p. 27) the adjustments of the Clearing-house “in the year 1839 amounted to 954,401,600l., making an average amount of payments of upwards of 3,000,000l. of bills of exchange and cheques daily effected through the medium of little more than 200,000l. of bank notes.”—[1862] At present a very much greater amount of transactions is daily liquidated, without bank notes at all, cheques on the Bank of England supplying their place.

∗

[1865] The commercial difficulties, not however amounting to a commercial crisis, of 1864, had essentially the same origin. Heavy payments for cotton imported at high prices, and large investments in banking and other joint stock projects, combined with the loan operations of foreign governments, made such large drafts upon the loan market as to raise the rate of discount on mercantile bills as high as nine per cent.

∗

Tooke, History of Prices, vol. iv. pp. 125–6.

∗

Inquiry into the Currency Principle, pp. 79 and 136–8.

∗

The most approved estimate is that of Mr. Leatham, grounded on the official returns of bill stamps issued. The following are the results:—

Year. Bills created in Great Britain

and Ireland, founded on

returns of Bill Stamps

issued from the Stamp Office. Average amount in

circulation at one time in

each year.

1832 £356,153,409 £89,038,352

1833 383,659,585 95,914,896

1834 379,155,052 94,788,763

1835 405,403,051 101,350,762

1836 485,943,473 121,485,868

1837 455,084,445 113,771,111

1838 465,504,041 116,376,010

1839 528,493,842 132,123,460

“Mr. Leatham,” says Mr. Tooke, “gives the process by which, upon the data furnished by the returns of stamps, he arrives at these results; and I am disposed to think that they are as near an approximation to the truth as the nature of the materials admits of arriving at.”—Inquiry into the Currency Principle, p. 26.—[1862] Mr. Newmarch (Appendix No. 39 to Report of the Committee on the Bank Acts in 1857, and History of Prices, vol. vi, p. 587) shows grounds for the opinion that the total bill circulation in 1857 was not much less than 180 millions sterling, and that it sometimes rises to 200 millions.

∗

On the Regulation of Currencies, p. 41.

1

[This section was added in the 4th ed. (1857).]

1

[This and the preceding sentence replaced in the 4th ed. (1857) the following sentence of the original text: “I can see no reason for the doctrine, that according as there are more or fewer bank notes, there will be more or less of other descriptions of credit.”]

1

[Until the 6th ed. (1865) the paragraph ended with “five hundred francs to pay for a cup of coffee.”]

∗

Among the schemes of currency to which, strange to say, intelligent writers have been found to give their sanction, one is as follows: that the state should receive, in pledge or mortgage, any kind or amount of property, such as land, stock, &c., and should advance to the owners inconvertible paper money to the estimated value. Such a currency would not even have the recommendations of the imaginary assignats supposed in the text; since those into whose hands the notes were paid by the persons who received them, could not return them to the government, and demand in exchange land or stock which was only pledged, not alienated. There would be no reflux of such assignats as these, and their depreciation would be indefinite.

1

[In the 2nd ed. (1849) was inserted the following section, which did not disappear till the 5th ed. (1862):

“§ 4. One of the most transparent of the fallacies by which the principle of the convertibility of paper money has been assailed, is that which pervades a recent work by Mr. John Gray, Lectures on the Nature and Use of Money: the author of the most ingenious, and least exceptionable plan of an inconvertible currency which I have happened to meet with. This writer has seized several of the leading doctrines of political economy with no ordinary grasp, and among others, the important one, that commodities are the real market for commodities, and that Production is essentially the cause and measure of Demand. But this proposition, true in a state of barter, he affirms to be false under a monetary system regulated by the precious metals, because if the aggregate of goods is increased faster than the aggregate of money, prices must fall, and all producers must be losers; now neither gold nor silver, nor any other valuable thing, ‘can by any possibility be increased ad libitum, as fast as all other valuable things put together:’ a limit, therefore, is arbitrarily set to the amount of production which can take place without loss to the producers: and on this foundation Mr. Gray accuses the existing system of rendering the produce of this country less by at least one hundred million pounds annually, than it would be under a currency which admitted of expansion in exact proportion to the increase of commodities.

“But, in the first place, what hinders gold, or any other commodity whatever, from being ‘increased as fast as all other valuable things put together?’ If the produce of the world, in all commodities taken together, should come to be doubled, what is to prevent the annual produce of gold from being doubled likewise? for that is all that would be necessary, and not (as might be inferred from Mr. Gray's language) that it should be doubled as many times over as there are other ‘valuable things’ to compare it with. Unless it can be proved that the production of bullion cannot be increased by the application of increased labour and capital, it is evident that the stimulus of an increased value of the commodity will have the same effect in extending the mining operations, as it is admitted to have in all other branches of production.

“But, secondly, even if the currency could not be increased at all, and if every addition to the aggregate produce of the country must necessarily be accompanied by a proportional diminution of general prices; it is incomprehensible how any person who has attended to the subject can fail to see that a fall of price, thus produced, is no loss to producers: they receive less money; but the smaller amount goes exactly as far, in all expenditure, whether productive or personal, as the larger quantity did before. The only difference would be in the increased burthen of fixed money payments; and of that (coming, as it would, very gradually) a very small portion would fall on the productive classes, who have rarely any debts of old standing, and who would suffer almost solely in the increased onerousness of their contribution to the taxes which pay the interest of the National Debt.”]

1

[Until the 5th ed. (1862) the text ran: “from 1819 to the present time, it has been... contended,” and “the answer” was spoken of in the present tense.]

∗

Supra, pp. 66–8.

∗

Infra, book iv. chap. 4.

∗

Essays on some Unsettled Questions of Political Economy, Essay I.

†

[1862] I at one time believed Mr. Ricardo to have been the sole author of the doctrine now universally received by political economists, on the nature and measure of the benefit which a country derives from foreign trade. But Colonel Torrens, by the republication of one of his early writings, The Economists Refuted, has established at least a joint claim with Mr. Ricardo to the origination of the doctrine, and an exclusive one to its earliest publication.

‡

Third ed. p. 120.

∗

Vide supra, book i. chap. ix. § 1.

∗

Supra, book iii. chap. ii. § 4.

1

[Here was omitted in the 3rd ed. (1852) the following passage of the original: “Several of those consequences were indicated in the Essay already quoted; and others have been pointed out in the writings of Colonel Torrens, who appears to me substantially correct in his general view of the subject, and who has supported it with great closeness and consecutiveness of reasoning, though his conclusions are occasionally pushed much beyond what appear to me the proper limits of the principle on which they are grounded.”]

1

[§§ 6–8 were inserted in the 3rd ed. (1852).]

∗

It may be asked, why we have supposed the number n to have as its extreme limits, m and 2m (or

)? why may not n be less than m, or greater than 2m; and if so, what will be the result?

This we shall now examine; and, when we do so, it will appear that n is always, practically speaking, confined within these limits.

Suppose, for example, that n is less than m; or, reverting to our former figures, that the million yards of cloth, which England can make, will not satisfy the whole of Germany's pre-existing demand; that demand being (let us suppose) for 1,200,000 yards. It would then, at first sight, appear that England would supply Germany with cloth up to the extent of a million; that Germany would continue to supply herself with the remaining 200,000 by home production: that this portion of the supply would regulate the price of the whole; that England therefore would be able permanently to sell her million of cloth at the German cost of production (viz. for two millions of linen) and would gain the whole advantage of the trade, Germany being no better off than before.

That such, however, would not be the practical result, will soon be evident. The residuary demand of Germany for 200,000 yards of cloth furnishes a resource to England for purposes of foreign trade of which it is still her interest to avail herself; and though she has no more labour and capital which she can withdraw from linen for the production of this extra quantity of cloth, there must be some other commodities in which Germany has a relative advantage over her (though perhaps not so great as in linen): these she will now import, instead of producing, and the labour and capital formerly employed in producing them will be transferred to cloth, until the required amount is made up. If this transfer just makes up the 200,000, and no more, this augmented n will now be equal to m; England will sell the whole 1,200,000 at the German values: and will still gain the whole advantage of the trade. But if the transfer makes up more than the 200,000, England will have more cloth than 1,200,000 yards to offer; n will become greater than m, and England must part with enough of the advantage to induce Germany to take the surplus. Thus the case, which seemed at first sight to be beyond the limits, is transformed practically into a case either coinciding with one of the limits or between them. And so with every other case which can be supposed.

∗

The increase of demand from 800,000 to 900,000, and that from a million to 1,440,000, are neither equal in themselves, nor bear an equal proportion to the increase of cheapness. Germany's demand for cloth has increased one-eighth, while the cheapness is increased one-fourth. England's demand for linen is increased 44 per cent, while the cheapness is increased 60 per cent.

∗

Three Lectures on the Cost of Obtaining Money.

1

[See Appendix V. International Values.]

1

[In the 1st and 2nd editions here followed: “(as has been done in the controversies called forth by the recent publications of Colonel Torrens).”]

∗

[1862] Written before the change in the relative value of the two metals produced by the gold discoveries. The par of exchange between gold and silver currencies is now variable, and no one can foresee at what point it will ultimately rest.

∗

On the news of Bonaparte's landing from Elba, the price of bills advanced in one day as much as ten per cent. Of course this premium was not a mere equivalent for cost of carriage, since the freight of such an article as gold, even with the addition of war insurance, could never have amounted to so much. This great price was an equivalent not for the difficulty of sending gold, but for the anticipated difficulty of procuring it to send; the expectation being that there would be such immense remittances to the Continent in subsidies and for the support of armies, as would press hard on the stock of bullion in the country (which was then entirely denuded of specie), and this, too, in a shorter time than would allow of its being replenished. Accordingly the price of bullion rose likewise, with the same suddenness. It is hardly necessary to say that this took place during the Bank restriction. In a convertible state of the currency, no such thing could have occurred until the Bank stopped payment.

∗

The subjoined extract from the separate Essay previously referred to, will give some assistance in following the course of the phenomena. It is adapted to the imaginary case used for illustration throughout that Essay, the case of a trade between England and Germany in cloth and linen.

“We may, at first, make whatever supposition we will with respect to the value of money. Let us suppose, therefore, that before the opening of the trade, the price of cloth is the same in both countries, namely six shillings per yard. As ten yards of cloth were supposed to exchange in England for 15 yards of linen, in Germany for 20, we must suppose that linen is sold in England at four shillings per yard, in Germany at three. Cost of carriage and importer's profit are left, as before, out of consideration.

“In this state of prices, cloth, it is evident, cannot yet be exported from England into Germany: but linen can be imported from Germany into England. It will be so; and, in the first instance, the linen will be paid for in money.

“The efflux of money from England, and its influx into Germany, will raise money prices in the latter country and lower them in the former. Linen will rise in Germany above three shillings per yard, and cloth above six shillings. Linen in England, being imported from Germany, will (since cost of carriage is not reckoned) sink to the same price as in that country, while cloth will fall below six shillings. As soon as the price of cloth is lower in England than in Germany, it will begin to be exported, and the price of cloth in Germany will fall to what it is in England. As long as the cloth exported does not suffice to pay for the linen imported, money will continue to flow from England into Germany, and prices generally will continue to fall in England and rise in Germany. By the fall, however, of cloth in England, cloth will fall in Germany also, and the demand for it will increase. By the rise of linen in Germany, linen must rise in England also, and the demand for it will diminish. As cloth fell in price and linen rose, there would be some particular price of both articles at which the cloth exported and the linen imported would exactly pay for each other. At this point prices would remain, because money would then cease to move out of England into Germany. What this point might be, would entirely depend upon the circumstances and inclinations of the purchasers on both sides. If the fall of cloth did not much increase the demand for it in Germany, and the rise of linen did not diminish very rapidly the demand for it in England, much money must pass before the equilibrium is restored; cloth would fall very much, and linen would rise, until England, perhaps, had to pay nearly as much for it as when she produced it for herself. But if, on the contrary, the fall of cloth caused a very rapid increase of the demand for it in Germany, and the rise of linen in Germany reduced very rapidly the demand in England from what it was under the influence of the first cheapness produced by the opening of the trade; the cloth would very soon suffice to pay for the linen, little money would pass between the two countries, and England would derive a large portion of the benefit of the trade. We have thus arrived at precisely the same conclusion, in supposing the employment of money, which we found to hold under the supposition of barter.

“In what shape the benefit accrues to the two nations from the trade is clear enough. Germany, before the commencement of the trade, paid six shillings per yard for broadcloth: she now obtains it at a lower price. This, however, is not the whole of her advantage. As the money prices of all her other commodities have risen, the money-incomes of all her producers have increased. This is no advantage to them in buying from each other, because the price of what they buy has risen in the same ratio with their means of paying for it; but it is an advantage to them in buying anything which has not risen, and, still more, anything which has fallen. They, therefore, benefit as consumers of cloth, not merely to the extent to which cloth has fallen, but also to the extent to which other prices have risen. Suppose that this is one-tenth. The same proportion of their money incomes as before will suffice to supply their other wants; and the remainder, being increased one-tenth in amount, will enable them to purchase one-tenth more cloth than before, even though cloth had not fallen: but it has fallen; so that they are doubly gainers. They purchase the same quantity with less money, and have more to expend upon their other wants.

“In England, on the contrary, general money-prices have fallen. Linen, however, has fallen more than the rest, having been lowered in price by importation from a country where it was cheaper; whereas the others have fallen only from the consequent efflux of money. Notwithstanding, therefore, the general fall of money-prices, the English producers will be exactly as they were in all other respects, while they will gain as purchasers of linen.

“The greater the efflux of money required to restore the equilibrium, the greater will be the gain of Germany, both by the fall of cloth and by the rise of her general prices. The less the efflux of money requisite, the greater will be the gain of England; because the price of linen will continue lower, and her general prices will not be reduced so much. It must not, however, be imagined that high money-prices are a good, and low money-prices an evil, in themselves. But the higher the general money-prices in any country, the greater will be that country's means of purchasing those commodities which, being imported from abroad, are independent of the causes which keep prices high at home.”

In practice, the cloth and the linen would not, as here supposed, be at the same price in England and in Germany: each would be dearer in money-price in the country which imported than in that which produced it, by the amount of the cost of carriage, together with the ordinary profit on the importer's capital for the average length of time which elapsed before the commodity could be disposed of. But it does not follow that each country pays the cost of carriage of the commodity it imports; for the addition of this item to the price may operate as a greater cheek to demand on one side than on the other; and the equation of international demand, and consequent equilibrium of payments, may not be maintained. Money would then flow out of one country into the other, until, in the manner already illustrated, the equilibrium was restored: and, when this was effected, one country would be paying more than its own cost of carriage, and the other less.

∗

Principles of Political Economy and Taxation, 3rd ed. p. 143.

∗

[1862] I am here supposing a state of things in which gold and silver mining are a permanent branch of industry, carried on under known conditions; and not the present state of uncertainty, in which gold-gathering is a game of chance, prosecuted (for the present) in the spirit of an adventure, not in that of a regular industrial pursuit.

∗

Supra, pp. 525–7.

∗

Supra, book ii. ch. xv. § 1.

∗

I do not include in the general loan fund of the country the capitals, large as they sometimes are, which are habitually employed in speculatively buying and selling the public funds and other securities. It is true that all who buy securities add, for the time, to the general amount of money on loan, and lower pro tanto the rate of interest. But as the persons I speak of buy only to sell again at a higher price, they are alternately in the position of lenders and of borrowers: their operations raise the rate of interest at one time, exactly as much as they lower it at another. Like all persons who buy and sell on speculation, their function is to equalize, not to raise or lower, the value of the commodity. When they speculate prudently, they temper the fluctuations of price; when imprudently, they often aggravate them.

1

[This paragraph and the accompanying note were added in the 6th ed. (1865).]

∗

[1865] To the cause of augmentation in the rate of interest, mentioned in the text, must be added another, forcibly insisted on by the author of an able article in the Edinburgh Review for January, 1865; the increased and increasing willingness to send capital abroad for investment. Owing to the vastly augmented facilities of access to foreign countries, and the abundant information incessantly received from them, foreign investments have ceased to inspire the terror that belongs to the unknown; capital flows, without misgiving, to any place which affords an expectation of high profit; and the loan market of the whole commercial world is rapidly becoming one. The rate of interest, therefore, in the part of the world out of which capital most freely flows, cannot any longer remain so much inferior to the rate elsewhere, as it has hitherto been.

1

[The first three paragraphs of this section were added in the 6th ed. (1865).]

1

[The text of this and the next seven paragraphs is an expansion in the 6th ed. (1865) of two paragraphs of the earlier editions.]

∗

Inquiry into the Currency Principle, ch. xiv.

1

[So from the 7th ed. (1871). In the original (1848): “a temporary suspension” &c.; in the 5th ed. (1862): “two temporary suspensions.”]

∗

Regulation of Currencies, p. 85.

1

[Sentence inserted in 5th ed. (1862).]

∗

[1857] I think myself justified in affirming that the mitigation of commercial revulsions is the real, and only serious, purpose of the Act of 1844. I am quite aware that its supporters insist (especially since 1847) on its supreme efficacy in “maintaining the convertibility of the Bank note.” But I must be excused for not attaching any serious importance to this one among its alleged merits. The convertibility of the Bank note was maintained, and would have continued to be maintained, at whatever cost, under the old system. As was well said by Lord Overstone in his evidence, the Bank can always, by a sufficiently violent action on credit, save itself at the expense of the mercantile public. That the Act of 1844 mitigates the violence of that process, is a sufficient claim to prefer in its behalf. Besides, if we suppose such a degree of mismanagement on the part of the Bank, as, were it not for the Act, would endanger the continuance or convertibility, the same (or a less) degree of mismanagement, practised under the Act, would suffice to produce a suspension of payments by the Banking Department; an event which the compulsory separation of the two departments brings much nearer to possibility than it was before, and which, involving as it would the probable stoppage of every private banking establishment in London, and perhaps also the non-payment of the dividends to the national creditor, would be a far greater immediate calamity than a brief interruption of the convertibility of the note; insomuch that, to enable the Bank to resume payment of its deposits, no Government would hesitate a moment to suspend payment of the notes, if suspension of the Act of 1844 proved insufficient.

†

A conditional increase of this maximum is permitted, but only when by arrangement with any country bank the issues of that bank are discontinued, and Bank of England notes substituted; and even then the increase is limited to two-thirds of the amount of the country notes to be thereby superseded. Under this provision the amount of notes which the Bank of England is now [1871] at liberty to issue against securities, is about fifteen millions.

1

[Paragraph inserted in 4th ed. (1857).]

1

[The present text of the remainder of this paragraph dates only from the 6th ed. (1865). The original simply ran: “If, instead of lending their notes, the banks allow the demand of their customers for disposable capital to act on the deposits, there is the same increase of currency, (for a short time at least,) but there is not an increase of loans. The rate of interest, therefore, is not prevented from rising at the first moment when the difficulties consequent on excess of speculation begin to be felt. Speculative holders,” &c. No change was made in this before 1865, except the insertion of the words “On the contrary... interest” before the last sentence in the 4th ed. (1857).]

1

[From the 6th ed. (1865) disappeared the following lines and the accompanying footnote, which had remained since 1848:

“If the restrictions of the Act of 1844 were no obstacle to the advances of banks in the interval preceding the crisis, why were they found an insuperable obstacle during the crisis? an obstacle which nothing less could overcome than a suspension of the law, through the assumption by the Government of a temporary dictatorship? Evidently they were an obstacle.”

Footnote.—“It would not be to the purpose to say, by way of objection, that the obstacle may be evaded by granting the increased advance in book credits, to be drawn against by cheques, without the aid of bank notes. This is indeed possible, as Mr. Fullarton has remarked, and as I have myself said in a former chapter. But this substitute for bank note currency certainly has not yet been organised; and the law having clearly manifested its intention that, in the case supposed, increased credits should not be granted, it is yet a problem whether the law would not reach what might be regarded as an evasion of its prohibitions, or whether deference to the law would not produce (as it has hitherto done), on the part of banking establishments, conformity to its spirit and purpose, as well as to its mere letter.”]

∗

P. 106.

∗

[1857] True, the Bank is not precluded from making increased advances from its deposits, which are likely to be of unusually large amount, since, at these periods, every one leaves his money in deposit in order to have it within call. But, that the deposits are not always sufficient was conclusively proved in 1847, when the Bank stretched to the very utmost the means of relieving commerce which its deposits afforded, without allaying the panic, which however ceased at once when the Government decided on suspending the Act.

†

[1862] This prediction was verified on the very next occurrence of a commercial crisis, in 1857; when Government were again under the necessity of suspending, on their own responsibility, the provisions of the Act.

1

[“Wholly” inserted in 4th ed. (1857).]

∗

It is known, from unquestionable facts, that the hoards of money at all times existing in the hands of the French peasantry, often from a remote date, surpass any amount which could have been imagined possible; and even in so poor a country as Ireland, it has of late been ascertained that the small farmers sometimes possess hoards quite disproportioned to their visible means of subsistence.

∗

Regulation of Currencies, pp. 71–4.

∗

Regulation of Currencies, pp. 139–42.

1

[The rest of this paragraph replaced in the 6th ed. (1865) the following passage of the original text:

“The machinery, however, of the new system insists upon bringing about by force, what its principle not only does not require, but positively condemns. Every drain for exportation, whatever may be its cause, and whether under a metallic currency it would affect the circulation or not, is now compulsorily drawn from that source alone. The bank-note circulation, and the discounts or other advances of the Bank, must be diminished by an amount equal to that of the metal exported, though it be to the full extent of seven or ten millions. And this, be it remembered,” &c.]

2

[From this point to the end of the section the text was largely rewritten in the 4th ed. (1857), and the note added in the 5th (1862).]

∗

[1862] This, which I have called “the double action of drains,” has been strangely understood as if I had asserted that the Bank is compelled to part with six millions' worth of property by a drain of three millions. Such an assertion would be too absurd to require any refutation. Drains have a double action, not upon the pecuniary position of the Bank itself, but upon the measures it is forced to take in order to stop the drain. Though the Bank itself is no poorer, its two reserves, the reserve in the banking department and the reserve in the issue department, have each been reduced three millions by a drain of only three. And as the separation of the departments renders it necessary that each of them separately should be kept as strong as the two together need be if they could help one another, the Bank's action on the money market must be as violent on a drain of three millions, as would have been required on the old system for one of six. The reserve in the banking department being less than it otherwise would be by the entire amount of the bullion in the issue department, and the whole amount of the drain falling in the first instance on that diminished reserve, the pressure of the whole drain on the half reserve is as much felt, and requires as strong measures to stop it, as a pressure of twice the amount on the entire reserve. As I have said elsewhere,∗ “it is as if a man having to lift a weight were restricted from using both hands to do it, and were only allowed to use one hand at a time; in which case it would be necessary that each of his hands should be as strong as the two together.”

∗

Evidence before the Committee of the House of Commons on the Bank Acts, in 1857.

∗

Pp. 89–92.

1

[The remainder of this paragraph replaced in the 4th ed. (1857) the following sentences of the original (1848) text:

“The numerous joint-stock banks since established have, by furnishing a more trustworthy currency, made it almost impossible for any private banker to maintain his circulation, unless his capital and character inspire the most complete confidence. And although there has been in some instances very gross mismanagement by joint-stock banks (less, however, in the department of issues than in that of deposits) the failure of these banks is extremely rare, and the cases still rarer in which loss has ultimately been sustained by any one except the shareholders. The banking system of England is now almost as secure to the public, as that of Scotland (where banking was always free) has been for two centuries past; and the legislature might without any bad consequences, at least of this kind, revoke its interdict (which was never extended to Scotland) against one and two pound notes. I cannot, therefore, think it at all necessary, or that it would be anything but vexatious meddling, to enforce any kind of special security in favour of the holders of notes. The true protection to creditors of all kinds is a good law of insolvency (a part of the law at present shamefully deficient), and, in the case of joint-stock companies at least, complete publicity of their accounts: the publicity now very properly given to their issues being a very small portion of what a state has a right to require in return for their being allowed to constitute themselves, and be recognised by the law, as a collective body.”]

1

[See Appendix W. The Regulation of Currency.]

1

[Until the 6th ed. (1865) the concluding clause ran: “as is proved by the fact that the general rate of profits and of interest is very much higher.”]

2

[The concluding clause of this sentence was added in the 7th ed. (1871); the following sentences changed from the present to the past tense; and the sentence about the price of American cotton was inserted.]

∗

Historisch-geographisch-statistisches Gemälde der Schweiz. Erstes Heft, 1834, p. 105.

∗

Supra, book iii. oh. iv.

1

[So since 6th ed. (1865); replacing “ten or twelve” in 1st ed. (1848).]

2

[“Some of” inserted in 5th ed. (1862).]

1

[So since 3rd ed. (1852). The original text ran: “the commodities without which they will not consent to continue the race.”]

∗

Supra, book iii. eh. iv. § 2, and eh. xxv, § 4.

1

[The words “as at present in the United States” were omitted at this point from the 6th ed. (1865).]

∗

Essay IV. on Profits and Interest. 1

Essay IV. on Profits and Interest.

1

[“Usually” inserted in 4th ed. (1857)]

1

[The remaining words of the sentence were added in the 6th ed. (1865).]

1

[The following passage of the original (1848) text was omitted in the 5th ed. (1862): “The former, indeed, so far as present foresight can extend, does not seem to be susceptible to improved processes to so great a degree as some branches of manufacture; but inventions may be in reserve for the future which may invert this relation.”]

1

[The “fifteen or twenty” of the 1st ed. (1848) was replaced in the 6th ed. (1865) by “twenty or twenty-five,” and in the 7th (1871) by “twenty or thirty.”]

2

[Written in 1848.]

∗

[1852] A still better criterion, perhaps, than that suggested in the text, would be the increase or diminution of the amount of the labourer's wages estimated in agricultural produce.

3

[See Appendix X. Prices in the 19th Century.]

1

[“Or good fortune” added in 3rd ed. (1852).]

1

[See Appendix Y. Commercial Cycles.]

∗

Supra, pp. 183–4.

1

[Parenthesis added in 2nd ed. (1849).]

1

[See Appendix Z. Rents in the 19th Century.]

2

[See Appendix AA. Wages in the 19th Century.]

∗

Wealth of Nations, book i. ch. 9.

∗

[1862] Now so much better known through his apostolic exertions, by pen, purse, and person, for the improvement of popular education, and especially for the introduction into it of the elements of practical political economy.

∗

Book iii. ch. 14. 1

Book iii. ch. 14.

1

[So since the 6th ed. (1865). The original (1848) ran: “the condition of the labourers certainly is not on the whole declining.”]

1

[So from the 5th ed. (1862). In the 1st ed. (1848) the parenthesis had been: “(which is now very nearly, and will soon be entirely, our own case).”]

1

[See Appendix BB. The Importation of Food.]

1

[See Appendix CC. The Tendency of Profits to a Minimum.]

∗

Supra, p. 94.

1

[The present form of this sentence dates from the 6th ed. (1865). The original [1848] text ran: “the great sums in process of being sunk,” and “I cannot agree.”]

∗

[1852] It is hardly needful to point out how fully the remarks in the text have been verified by subsequent facts. The capital of the country, far from having been in any degree impaired by the large amount sunk in railway construction, was soon again overflowing.

1

[This and the preceding sentence replaced in the 6th ed. (1865) the following passage of the original [1848] text: “The northern and middle states of America are a specimen of this stage of civilization in very favourable circumstances; having, apparently, got rid of all social injustices and inequalities that affect persons of Caucasian race and of the male sex, while the proportion of population to capital and land is such as to ensure abundance to every able-bodied member of the community who does not forfeit it by misconduct. They have the six points of Chartism, and they have no poverty: and all that these advantages seem to have done for them is that the life of the whole of one sex is devoted to dollar-hunting, and of the other to breeding dollar-hunters.” Into this, however, had been inserted since the 2nd ed. (1849), after “done for them,” the parenthesis “(notwithstanding some incipient signs of a better tendency).”]

1

[“Permanently” inserted in 2nd ed. (1849); “of themselves” in 3rd (1852).]

∗

Supra, pp. 227–9.

1

[This paragraph replaced in the 3rd ed. (1852) the following paragraph of the original (1848) text:

“The economic condition of that class, and along with it of all society, depends therefore essentially on its moral and intellectual, and that again on its social, condition. In the details of political economy, general views of society and politics are out of place; but in the more comprehensive inquiries it is impossible to exclude them; since the various leading departments of human life do not develop themselves separately, but each depends on all, or is profoundly modified by them. To obtain any light on the great economic question of the future, which gives the chief interest to the phenomena of the present—the physical condition of the labouring classes—we must consider it, not separately, but in conjunction with all other points of their condition.”]

1

[Parenthesis inserted in 3rd ed. (1852).]

1

[Carlyle's Past and Present appeared in 1843.]

1

[In the 3rd ed. (1852) “qualities” replaced “virtues,” and the next sentence was omitted: “That the most beautiful developments of feeling and character often grow out of the most painful, and in many respects the most hardening and corrupting, circumstances of our condition, is now, and probably will long be, one of the chief stumbling-blocks both in the theory and in the practice of morals and education.”]

2

[“Whether... women” inserted in 3rd ed.]

3

[So since the 3rd ed. The original text ran: “The laws protect them: where laws do not reach, manners and opinion shield them.” The reference to police reports and atrocities later in the paragraph was introduced in the 3rd ed., and “the protection of the law” was expanded into the protection which the law “ought to give.”]

1

[The last clause inserted in 3rd ed. (1852).]

1

[This and the following sentence were inserted in the 6th ed. (1865).]

1

[Here was omitted from the 2nd ed. (1849) the following passage of the 1st (1848): “It is of little importance that some of them may, at a certain stage of their progress, adopt mistaken opinions. Communists are already numerous, and are likely to increase in number; but nothing tends more to the mental development of the working classes than that all the questions which Communism raises should be largely and freely discussed by them; nothing could be more instructive than that some should actually form communities, and try practically what it is to live without the institution of property.”]

1

[The original (1848) text ran: “that there should be no other carrière possible... is one of those social injustices which call loudest for remedy. Among the salutary consequences of correcting it, one of the most probable would be a great diminution,” &c.

In the 2nd ed. (1849) the following sentence was inserted after “remedy”: “The ramifications of this subject are far too numerous and intricate to be pursued here. The social and political equality of the sexes is not a question of economical detail, but one of principle, so intimately connected with all the more vital points of human improvement, that none of them can be thoroughly discussed independently of it. But for this very reason it cannot be disposed of by way of parenthesis, in a treatise devoted to other subjects. It is sufficient for the immediate purpose, to point out, among the probable consequences of the industrial and social independence of women, a great diminution,” &c.

This was replaced in the 3rd ed. (1852) by the present text, and a note attached: “It is truly disgraceful that in a woman's reign not one step has been made by law towards removing even the smallest portion of the existing injustice to women. The brutal part of the populace can still maltreat, not to say kill, their wives, with the next thing to impunity; and as to civil and social status, in framing a new reform bill for the extension of the elective franchise, the opportunity was not taken for so small a recognition of something like equality of rights, as would have been made by admitting to the suffrage women of the same class and the same householding and tax-paying qualifications as the men who already possess it.”

Further comments were added to the note in the 4th ed. (1857): “Mr. Fitzroy's Act for the Better Protection of Women and Children against Assaults, is a well-meant though inadequate attempt to wipe off the former reproach. The second is more flagrant than ever, another Reform Bill having been since presented, largely extending the franchise among many classes of men, but leaving all women in their existing state of political as well as social servitude.”

The whole note disappeared in the 5th ed. (1862).]

1

[At this point was omitted from the 3rd ed. (1852) the following passage of the original (1848) text: “To work at the bidding and for the profit of another, without any interest in the work—the price of their labour being adjusted by hostile competition, one side demanding as much and the other paying as little as possible—is not, even when wages are high, a satisfactory state to human beings of educated intelligence, who have ceased to think themselves naturally inferior to those whom they serve.”]

1

[The rest of the paragraph, with the exception of the two sentences indicated in the next note, replaced in the 3rd ed. (1852) the following single sentence of the original text: “But something else is required when wealth increases slowly, or has reached the stationary state, when positions, instead of being more mobile, would tend to be much more permanent than at present, and the condition of any portion of mankind could only be desirable, if made desirable from the first.”]

2

[This and the following sentence are an expansion in the 4th ed. (1857) of the clause in the 3rd: “while the return given in the shape of service is sought to be reduced to the lowest minimum.”]

1

[The remainder of this paragraph (subjected subsequently to verbal alterations) replaced in the 3rd ed. (1852) the following original (1848) text: “The problem is, to obtain the efficiency and economy of production on a large scale, without dividing the producers into two parties with hostile interests, employers and employed, the many who do the work being mere servants under the command of the one who supplies the funds, and having no interest of their own in the enterprise, except to fulfil their contract and earn their wages.”]

1

[3rd ed. (1852), “five”; 4th (1857), “ten”; 6th (1865), “twenty”; 7th (1871), “thirty.”]

2

[So since 5th ed. (1862). In the 3rd and 4th, “Unless the military despotism now triumphant on the Continent should succeed in its nefarious attempts to throw back the human mind.”]

1

[In 3rd ed.: “temporarily and in some cases..., in other cases and finally in all.” In 5th ed. (1862): “perhaps finally in all.” In 6th ed. (1865), “temporarily” omitted.]

2

[The following passage, inserted at this point in the 2nd ed. (1849) disappeared from the 3rd (1852).

“§ 5. It is this feeling, of the nature of the problem” (see supra, p. 761, n. 1), “almost as much as despair of the improvement of the condition of the labouring masses by other means, which has caused so great a multiplication of projects for the ‘organization of industry’ by the extension and development of the co-operative or joint stock principle: some of the more conspicuous of which have been described and characterized in an early chapter of this work. It is most desirable that all these schemes should have opportunity and encouragement to test their capabilities by actual experiment. There are, in almost all of them, many features, in themselves well worth submitting to that test; while, on the other hand, the exaggerated expectations entertained by large and growing multitudes in all the principal nations of the world, concerning what it is possible, in the present state of human improvement, to effect by such means, have no chance of being corrected except by a fair trial in practice. The French Revolution of February 1848, at first seemed to have opened a fair field for the trial of such experiments, on a perfectly safe scale, and with every advantage that could be derived from the countenance of a government which sincerely desired their success. It is much to be regretted that these prospects have been frustrated, and that the reaction of the middle class against anti-property doctrines has engendered for the present an unreasoning and undiscriminating antipathy to all ideas, however harmless or however just, which have the smallest savour of Socialism. This is a disposition of mind, of which the influential classes, both in France and elsewhere, will find it necessary to divest themselves. Socialism has now become irrevocably one of the leading elements in European politics. The questions raised by it will not be set at rest by merely refusing to listen to it; but only by a more and more complete realization of the ends which Socialism aims at, not neglecting its means so far as they can be employed with advantage.”]

∗

This passage is from the Prize Essay on the Causes and Remedies of National Distress, by Mr. Samuel Laing. The extracts which it includes are from the Appendix to the Report of the Children's Employment Commission.

∗

Economy of Machinery and Manufactures, 3rd edition, ch. 26.

1

[The long quotation from Babbage, which appeared in the 1st and 2nd eds. (1848, 1849), disappeared from the 3rd (1852): “I venture to quote the principal part of his observations on the subject.

‘The general principles on which the proposed system is founded, are—1st. That a considerable part of the wages received by each person employed, should depend on the profits made by the establishment; and 2nd. That every person connected with it should derive more advantage from applying any improvement he might discover, to the factory in which he is employed, than he could by any other course.

‘It would be difficult to prevail on the large capitalist to enter upon any system, which would change the division of the profits arising from the employment of his capital in setting skill and labour in action; any alteration, therefore, must be expected rather from the small capitalist, or from the higher class of workmen, who combine the two characters; and to these latter classes, whose welfare will be first affected, the change is most important. I shall therefore first point out the course to be pursued in making the experiment; and then, taking a particular branch of trade as an illustration, I shall examine the merits and defects of the proposed system as applied to it.

‘Let us suppose, in some large manufacturing town, ten or twelve of the most intelligent and skilful workmen to unite, whose characters for sobriety and steadiness are good, and are well known among their class. Such persons will each possess some small portion of capital; and let them join with one or two others who have raised themselves into the class of small master-manufacturers, and therefore possess rather a larger portion of capital. Let these persons, after well considering the subject, agree to establish a manufactory of fire-irons and fenders; and let us suppose that each of the ten workmen can command forty pounds, and each of the small capitalists possesses two hundred pounds: thus they have a capital of 800l. with which to commence business, and for the sake of simplifying, let us further suppose the labour of each of these twelve persons to be worth two pounds a week. One portion of their capital will be expended in procuring the tools necessary for their trade, which we shall take at 400l., and this must be considered as their fixed capital. The remaining 400l. must be employed as circulating capital, in purchasing the iron with which their articles are made, in paying the rent of their workshops, and in supporting themselves and their families until some portion of it is replaced by the sale of the goods produced.

‘Now the first question to be settled is, what proportion of the profit should be allowed for the use of capital, and what for skill and labour? It does not seem possible to decide this question by any abstract reasoning: if the capital supplied by each partner is equal, all difficulty will be removed; if otherwise, the proportion must be left to find its level, and will be discovered by experience; and it is probable that it will not fluctuate much. Suppose it to be agreed that the capital of 800l. shall receive the wages of one workman. At the end of each week, every workman is to receive one pound as wages, and one pound is to be divided amongst the owners of the capital. After a few weeks the returns will begin to come in; and they will soon become nearly uniform. Accurate accounts should be kept of every expense and of all the sales; and at the end of each week the profit should be divided. A certain portion should be laid aside as a reserved fund, another portion for repair of the tools, and the remainder being divided into thirteen parts, one of these parts would be divided amongst the capitalists and one belong to each workman. Thus each man would, in ordinary circumstances, make up his usual wages of two pounds weekly. If the factory went on prosperously, the wages of the men would increase; if the sales fell off, they would be diminished. It is important that every person employed in the establishment, whatever might be the amount paid for his services, whether he act as labourer or porter, or as the clerk who keeps the accounts, or as book-keeper employed for a few hours once a week to superintend them, should receive one-half of what his service is worth in fixed salary, the other part varying with the success of the undertaking.

‘The result of such arrangements in a factory would be,

‘1. That every person engaged in it would have a direct interest in its prosperity; since the effect of any success, or falling off, would almost immediately produce a corresponding change in his own weekly receipts.

‘2. Every person concerned in the factory would have an immediate interest in preventing any waste or mismanagement in all the departments.

‘3. The talents of all connected with it would be strongly directed to improvement in every department.

‘4. None but workmen of high character and qualifications could obtain admission into such establishments, because when any additional hands were required, it would be the common interest of all to admit only the most respectable and skilful, and it would be far less easy to impose upon a dozen workmen than upon the single proprietor of a factory.

‘5. When any circumstance produced a glut in the market, more skill would be directed to diminishing the cost of production; and a portion of the time of the men might then be occupied in repairing and improving their tools, for which a reserved fund would pay, thus checking present, and at the same time facilitating future, production.

‘6. Another advantage, of no small importance, would be the total removal of all real or imaginary causes for combinations. The workmen and the capitalist would so shade into each other—would so evidently have a common interest, and their difficulties and distresses would be mutually so well understood, that instead of combining to oppress one another, the only combination which could exist would be a most powerful union between both parties to overcome their common difficulties.

‘One of the difficulties attending such a system is, that capitalists would at first fear to embark in it, imagining that the workmen would receive too large a share of the profits: and it is quite true that the workmen would have a larger share than at present: but at the same time, it is presumed the effect of the whole system would be, that the total profits of the establishment being much increased, the smaller proportion allowed to capital under this system would yet be greater in actual amount, than that which results to it from the larger share in the system now existing.

‘A difficulty would occur also in discharging workmen who behaved ill, or who were not competent to their work; this would arise from their having a certain interest in the reserved fund, and perhaps from their possessing a certain portion of the capital employed; but without entering into detail, it may be observed, that such cases might be determined on by meetings of the whole establishment; and that if the policy of the laws favoured such establishments, it would scarcely be more difficult to enforce just regulations than it now is to enforce some which are unjust, by means of combinations either amongst the masters or the men.’”]

1

[In the original ed. (1849) this paragraph began thus: “In this imaginary case” described by Babbage, see supra, p. 766, n. 1, “it is supposed that each labourer brings some small portion of capital into the concern: but the principle is equally applicable to the ordinary case in which the whole capital belongs to an individual capitalist. An application of it to such a case is actually in progress by a Paris tradesman,” &c. The present text, but with “about ten years ago,” dates from the 3rd ed. (1852). The 4th, 5th, and 6th eds. (1857, 1862, 1865) have “about sixteen years ago”; the 7th (1871) “above thirty.”]

∗

His establishment is 11, Rue Saint Georges.

†

[1849] It appears, however, that the workmen whom M. Leclaire had admitted to this participation of profits, were only a portion (rather less than half) of the whole number whom he employed. This is explained by another part of his system. M. Leclaire pays the full market rate of wages to all his workmen. The share of profit assigned to them is, therefore, a clear addition to the ordinary gains of their class, which he very laudably uses as an instrument of improvement, by making it the reward of desert, or the recompense for peculiar trust.

‡

For September 27, 1845.

1

[Added in 2nd ed. (1849).]

∗

Lettres sur l'Organisation du Travail, by Michel Chevalier, lettre xiv.

2

[The concluding sentence of this paragraph, together with the next paragraph and the examples quoted in the note, were added in the 5th ed. (1862).]

†

Nouveau Traité d'Economie Politique.

∗

[1865] At the present time M. Leclaire's establishment is conducted on a somewhat altered system, though the principle of dividing the profits is maintained. There are now three partners in the concern: M. Leclaire himself, one other person (M. Defournaux), and a Provident Society (Société de Secours Mutuels), of which all persons in his employment are the members. (This Society owns an excellent library, and has scientific, technical, and other lectures regularly delivered to it.) Each of the three partners has 100,000 francs invested in the concern; M. Leclaire having advanced to the Provident Society as much as was necessary to supply the original insufficiency of their own funds. The partnership, on the part of the Society, is limited; on that of M. Leclaire and M. Defournaux, unlimited. These two receive 6000 francs (240l.) per annum each as wages of superintendence. Of the annual profits they receive half, though owning two-thirds of the capital. The remaining half belongs to the employés and workpeople; two-fifths of it being paid to the Provident Society, and the other three-fifths divided among the body. M. Leclaire, however, now reserves to himself the right of deciding who shall share in the distribution, and to what amount; only binding himself never to retain any part, but to bestow whatever has not been awarded to individuals, on the Provident Society. It is further provided that in case of the retirement of both the private partners, the goodwill and plant shall become, without payment, the property of the Society.

†

“In March 1847, M. Paul Dupont, the head of a Paris printing-office, had the idea of taking his workmen into partnership by assigning to them a tenth of the profits. He habitually employs three hundred; two hundred of them on piece work, and a hundred by the day. He also employs a hundred extra hands, who are not included in the association. The portion of profit which falls to the workmen does not bring them in, on the average, more than the amount of a fortnight's wages; but they receive their ordinary pay according to the rates established in all the great Paris printing offices; and have, besides, the advantage of medical attendance in illness at the expense of the association, and a franc and a half per day while incapacitated for work. The workmen cannot draw out their share of profit except on quitting the association. It is left at interest (sometimes invested in the public funds), and forms an accumulating reserve of savings for its owners.

“M. Dupont and his partners find this association a source of great additional profit to them: the workmen, on their side, congratulate themselves daily on the happy idea of their employer. Several of them have by their exertions caused the establishment to gain a gold medal in 1849, and an honorary medal at the Universal Exhibition of 1855: some even have personally received the recompense of their inventions and of their labours. Under an ordinary employer, these excellent people would not have had leisure to prosecute their inventions, unless by leaving the whole honour to one who was not the author of them: but, associated as they were, if the employer had been unjust, two hundred men would have obliged him to repair the wrong.

“I have visited this establishment, and have been able to see for myself the improvement which the partnership produces in the habits of the workpeople.

“M. Gisquet, formerly Prefect of Police, has long been the proprietor of an oil manufactory at St. Denis, the most important one in France next to that of M. Darblay, of Corbeil. When in 1848 he took the personal management of it, he found workmen who got drunk several days in the week, and during their work sung, smoked, and sometimes quarrelled with one another. Many unsuccessful attempts had been made to alter this state of things: he accomplished it by forbidding his workmen to get drunk on working days, on pain of dismissal, and at the same time promising to share with them, by way of annual gratuity, five per cent of his net profits, in shares proportioned to wages, which are fixed at the current rates. From that time the reformation has been complete, and he is surrounded by a hundred workmen full of zeal and devotion. Their comforts have been increased by what they have ceased to spend in drink, and what they gain by their punctuality at work. The annual gratuity has amounted, on the average, to the equivalent of six weeks' wages.

“M. Beslay, a member of the Chamber of Deputies from 1830 to 1839, and afterwards of the Constituent Assembly, has founded an important manufactory of steam engines at Paris, in the Faubourg of the Temple. He has taken his workpeople into partnership ever since the beginning of 1847, and the contract of association is one of the most complete which have been made between employers and workpeople.”

The practical sagacity of Chinese emigrants long ago suggested to them, according to the report of a recent visitor to Manilla, a similar constitution of the relation between an employer and labourers. “In these Chinese shops” (at Manilla) “the owner usually engages all the activity of his countrymen employed by him in them, by giving each of them a share in the profits of the concern, or in fact by making them all small partners in the business, of which he of course takes care to retain the lion's share, so that while doing good for him by managing it well, they are also benefiting themselves. To such an extent is this principle carried that it is usual to give even their coolies a share in the profits of the business in lieu of fixed wages, and the plan appears to suit their temper well; for although they are in general most complete eye-servants when working for a fixed wage, they are found to be most industrious and useful ones when interested even for the smallest share.”—McMicking's Recollections of Manilla and the Philippines during 1848, 1849, and 1850, p. 24.

1

[This paragraph was added in the 6th ed. (1865); and it was said that Messrs. Briggs “have issued a proposal to work”; changed to “They now work” &c., in the 7th ed. (1871).]

1

[For the abandonment of the Briggs experiment in 1875 see Schloss, Methods of Industrial Remuneration (2nd ed.), p. 282.]

2

[The opening paragraphs of this section and the account of French cooperative societies which follows were added in the 3rd ed. (1852). At the same time the following paragraph and section of the original (1848) text were removed:

“Under this system,” of M. Leclaire, “as well as under that recommended by Mr. Babbage, the labourers are, in reality, taken into partnership with their employer. Bringing nothing into the common concern but their labour, while he brings not only his labour of direction and superintendence but his capital also, they have justly a smaller share of the profits; this, however, is a matter of private arrangement in all partnerships; one partner has a large, another a small share, according to their agreement, grounded on the equivalent which is given by each. The essence, however, of a partnership is obtained, since each benefits by all things that are beneficial to the concern, and loses by all which are injurious. It is, in the fullest sense, the common concern of all.

“§ 6. To this principle, in whatever form embodied, it seems to me that futurity has to look for obtaining the benefits of co-operation, without constituting the numerical majority of the co-operators an inferior caste. The objections that apply to a ‘co-operative society,’ in the Communist or Owenite sense, in which, by force of giving to every member of the body a share in the common interest, no one has a greater share in it than another, are not applicable to what is now suggested. It is expedient that those, whose performance of the part assigned to them is the most essential to the common end, should have a greater amount of personal interest in the issue of the enterprise. If those who supply the funds, and incur the whole risk of the undertaking, obtained no greater reward or more influential voice than the rest, few would practise the abstinence through which those funds are acquired and kept in existence. Up to a certain point, however, the principle of giving to every person concerned an interest in the profits is an actual benefit to the capitalist, not only (as M. Leclaire has testified) in point of ease and comfort, but even in pecuniary advantage. And after the point of greatest benefit to the employers has been attained, the participation of the labourers may be carried somewhat further without any material abatement from that maximum of benefit. At what point, in each employment of capital, this ultimatum is to be found, will one day be known and understood from experience; and up to that point it is not unreasonable to expect that the partnership principle will be, at no very distant time, extended.

“The value of this ‘organization of industry,’ for healing the widening and embittering feud between the class of labourers and the class of capitalists, must, I think, impress itself by degrees on all who habitually reflect on the condition and tendencies of modern society. I cannot conceive how any such person can persuade himself that the majority of the community will for ever, or even for much longer, consent to hew wood and draw water all their lives in the service and for the benefit of others; or can doubt, that they will be less and less willing to co-operate as subordinate agents in any work, when they have no interest in the result, and that it will be more and more difficult to obtain the best work-people, or the best services of any work-people, except on conditions similar in principle to those of M. Leclaire. Although, therefore, arrangements of this sort are now in their infancy, their multiplication and growth, when once they enter into the general domain of popular discussion, are among the things which may most confidently be expected.”]

1

[So since 4th ed. (1857). Originally, in 3rd ed. (1852), “a few months ago.”]

2

[“Strengthened” &c., added in 5th ed. (1862).]

∗

P. 112.

∗

Pp. 113–6.

‡

Article by M. Cherbuliez on “Operative Associations,” in the Journal des Economistes for November 1860.

I subjoin, from M. Villiaumé and M. Cherbuliez, detailed particulars of other eminently successful experiments by associated workpeople.

“We will first cite,” says M. Cherbuliez, “as having attained its object and arrived at a definitive result, the Association Remquet, of the Rue Garancière, at Paris, whose founder, in 1848, was a foreman in M. Renouard's printing establishment. That firm being under the necessity of winding up, he proposed to his fellow-workmen to join with him in continuing the enterprise on their own account, asking a subvention from the government to cover the purchase-money of the business and the first expenses. Fifteen of them accepted the proposal, and formed an association, whose statutes fixed the wages for every kind of work, and provided for the gradual formation of a working capital by a deduction of 25 per cent from all wages and salaries, on which deduction no dividend or interest was to be allowed during the ten years that the association was intended to last. Remquet asked and obtained for himself the entire direction of the enterprise, at a very moderate fixed salary. At the winding up, the entire profits were to be divided among all the members, proportionally to their share in the capital, that is, to the work they had done. A subvention of 80,000 francs was granted by the State, not without great difficulty, and on very onerous conditions. In spite of these conditions, and of the unfavourable circumstances resulting from the political situation of the country, the association prospered so well, that on the winding up, after repaying the advance made by the State, it was in possession of a clear capital of 155,000 francs [6200l.], the division of which gave on the average between ten and eleven thousand francs to each partner; 7000 being the smallest and 18,000 the largest share.

“The Fraternal Association of Working Tinmen and Lampmakers had been founded in March 1848 by 500 operatives, comprising nearly the whole body of the trade. This first attempt, inspired by unpractical ideas, not having survived the fatal days of June, a new association was formed of more modest proportions. Originally composed of forty members, it commenced business in 1849 with a capital composed of the subscriptions of its members, without asking for a subvention. After various vicissitudes, which reduced the number of partners to three, then brought it back to fourteen, then again sunk it to three, it ended by keeping together forty-six members, who quietly remodelled their statutes in the points which experience had shown to be faulty, and their number having been raised by successive steps to 100, they possessed, in 1858, a joint property of 50,000 francs, and were in a condition to divide annually 20,000 francs.

“The Association of Operative Jewellers, the oldest of all, had been founded in 1831 by eight workmen, with a capital of 200 francs [8l.] derived from their united savings. A subvention of 24,000 francs enabled them in 1849 greatly to extend their operations, which in 1858 had already attained the value of 140,000 francs, and gave to each partner an annual dividend equal to double his wages.”

The following are from M. Villiaumé:—

“After the insurrection of June 1848, work was suspended in the Faubourg St. Antoine, which, as we know, is principally occupied by furniture-makers. Some operative arm-chair makers made an appeal to those who might be willing to combine with them. Out of six or seven hundred composing the trade, four hundred gave in their names. But capital being wanting, nine of the most zealous began the association with all that they possessed; being a value of 369 francs in tools, and 135 francs 20 centimes in money.

“Their good taste, honesty, and punctuality having increased their business, they soon numbered 108 members. They received from the State an advance of 25,000 francs, reimbursable in 14 years by way of annuity, with interest at 3¾ per cent.

“In 1857 the number of partners is 65, the auxiliaries average 100. All the partners vote at the election of a council of eight members, and a manager whose name represents the firm. The distribution and superintendence of all the works is entrusted to foremen chosen by the manager and council. There is a foreman to every 20 or 25 workmen.

“The payment is by the piece, at rates determined in general assembly. The earnings vary from 3 to 7 francs a day, according to zeal and ability. The average is 50 francs [2l.] a fortnight, and no one gains much less than 40 francs per fortnight, while many earn 80. Some of the carvers and moulders make as much as 100 francs, being 200 francs [8l.] a month. Each binds himself to work 120 hours per fortnight, equal to ten per day. By the regulations, every hour short of the number subjects the delinquent to a penalty of 10 centimes [one penny] per hour up to thirty hours, and 15 centimes [1½d.] beyond. The object of this rule was to abolish Saint Monday, and it succeeded in its effort. For the last two years the conduct of the members has been so good, that fines have fallen into disuse.

“Though the partners started with only 359 francs, the value of the plant (Rue de Chavonne, Cour St. Joseph, Faubourg St. Antoine) already in 1851 amounted to 5713 francs, and the assets of the association, debts due to them included, to 24,000 francs. Since then the association has become still more flourishing, having resisted all the attempts made to impede its progress. It does the largest business, and is the most considered, of all the houses in Paris in the trade. Its business amounts to 400,000 francs a year.” Its inventory in December 1855 showed, according to M. Villiaumé, a balance of 100,398 francs 90 centimes in favour of the association, but it possessed, he says, in reality, 123,000 francs.

But the most important association of all is that of the Masons. “The Association of Masons was founded August 10th, 1848. Its address is Rue St. Victor, 155. Its number of members is 85, and its auxiliaries from three to four hundred. There are two managers, one for the building department, the other for the pecuniary administration: these are regarded as the ablest master-masons in Paris, and are content with a moderate salary. This association has lately constructed three or four of the most remarkable mansions in the metropolis. Though it does its work more economically than ordinary contractors, yet as it has to give long credits, it is called upon for considerable advances: it prospers, however, as is proved by the dividend of 56 per cent which has been paid this year on its capital, including in the payment those who have associated themselves in its operations. It consists of workmen who bring only their labour, of others who bring their labour and a capital of some sort, and of a third class who do not work, but contribute capital only.

“The masons, in the evening, carry on mutual instruction. They, as well as the arm-chair makers, give medical attendance at the expense of the association, and an allowance to its sick members. They extend their protection over every member in every action of his life. The arm-chair makers will soon each possess a capital of two or three thousand francs, with which to portion their daughters or commence a reserve for future years. Of the masons, some have already 4000 francs, which are left in the common stock.

“Before they were associated, these workmen were poorly clad in jackets and blouses; because, for want of forethought, and still more from want of work, they had never 60 francs beforehand to buy an overcoat. Most of them are now as well dressed as shopkeepers, and sometimes more tastefully. For the workman, having always a credit with the association, can get whatever he wants by signing an order; and the association reimburses itself by fortnightly stoppages,making him save as it were in spite of himself. Some workmen who are not in debt to the concern, sign orders payable to themselves at five months date, to resist the temptation of needless expense. They are put under stoppages of 10 francs per fortnight, and thus at the end of five months they have saved the amount.”

The following table, taken by M. Cherbuliez from a work (Die gewerblichen und wirthschaftlichen Genossenschaften der arbeitenden Classen in England, Frankreich und Deutschland), published at Tübingen in 1860, by Professor Huber (one of the most ardent and high-principled apostles of this kind of cooperation) shows the rapidly progressive growth in prosperity of the Masons' Association up to 1858:—

Year Amount of

business done.

francs. Profits

realized.

francs.

1852 . . . . . . 45,530 . . 1,000

1853 . . . . . . 297,208 . . 7,000

1854 . . . . . . 344,240 . . 20,000

1855 . . . . . . 614,694 . . 46,000

1856 . . . . . . 998,240 . . 80,000

1857 . . . . . . 1,330,000 . . 100,000

1858 . . . . . . 1,231,461 . . 130,000

“Of this last dividend,” says M. Cherbuliez, “30,000 francs were taken for the reserve fund, and the remaining 100,000, divided among the shareholders, gave to each from 500 to 1500 francs, besides their wages or salaries, and their share in the fixed capital of the concern.”

Of the management of the associations generally, M. Villaumé says, “I have been able to satisfy myself personally of the ability of the managers and councils of the operative associations. The managers are far superior in intelligence, in zeal, and even in politeness, to most of the private masters in their respective trades. And among the associated workmen, the fatal habit of intemperance is gradually disappearing, along with the coarseness and rudeness which are the consequence of the too imperfect education of the class.”

∗

Even the association founded by M. Louis Blane, that of the tailors of Clichy, after eighteen months' trial of this system, adopted piece-work. One of the reasons given by them for abandoning the original system is well worth extracting. “Besides the vices I have mentioned, the tailors complained that it caused incessant disputes and quarrels, through the interest which each had in making his neighbours work. Their mutual watchfulness degenerated into a real slavery; nobody had the free control of his time and his actions. These dissensions have disappeared since piece-work was introduced.”—Feugueray, p. 88. One of the most discreditable indications of a low moral condition given of late by part of the English working classes, is the opposition to piece-work. When the payment per piece is not sufficiently high, that is a just ground of objection. But dislike to piece-work in itself, except under mistaken notions, must be dislike to justice and fairness; a desire to cheat, by not giving work in proportion to pay. Piece-work is the perfection of contract; and contract, in all work, and in the most minute detail—the principle of so much pay for so much service, carried out to the utmost extremity—is the system, of all others, in the present state of society and degree of civilization, most favourable to the worker; though most unfavourable to the non-worker who wishes to be paid for being idle.

1

[This paragraph dates from the 5th ed. (1862), and replaced the following passages of the 3rd (1852): “It is painful to think that these bodies, formed by the heroism and maintained by the public spirit and good sense of the working people of Paris, are in danger of being involved in the same ruin with everything free, popular, or tending to improvement in French institutions. The unprincipled adventurer who has for the present succeeded in reducing France to the political condition of Russia, knows that two or three persons cannot meet together to discuss, though it be only the affairs of a workshop, without danger to his power. He has therefore already suppressed most of the provincial associations, and many of those of Paris, and the remainder, instead of waiting to be dissolved by despotism, are, it is said, preparing to emigrate. Before this calamity overtook France, the associations could be spoken of not with the hope merely, but with positive evidence, of their being able to compete successfully with individual capitalists. ‘The associations,’ says M. Feugueray,” &c., as in the present text, supra, p. 781.

“Though the existing associations may be dissolved, or driven to expatriaté, their experience will not be lost. They have existed long enough to furnish the type of future improvement: they have exemplified the process for bringing about a change in society, which would combine the freedom and independence of the individual,” &c., as in the present text, infra, p. 791.

To the 4th ed. (1857) was added this note: “It appears however from subsequent accounts that in 1854 twenty-five associations still existed in Paris and several in the provinces, and that many of these were in a most flourishing condition. This number is exclusive of Co-operative Stores, which have greatly multiplied, especially in the South of France, and are not understood to be discouraged by the Government.”]

∗

[1865] In the last few years the co-operative movement among the French working classes has taken a fresh start. An interesting account of the Provision Association (Association Alimentaire) of Grenoble has been given in a pamphlet by M. Casimir Périer (Les Sociétés de Co-opération); and in the Times of November 24, 1864, we read the following passage:—“While a certain number of operatives stand out for more wages, or fewer hours of labour, others, who have also seceded, have associated for the purpose of carrying on their respective trades on their own account, and have collected funds for the purchase of instruments of labour. They have founded a society, ‘Société Générale d'Approvisionnement et de Consommation.’ It numbers between 300 and 400 members, who have already opened a ‘co-operative store’ at Passy, which is now within the limits of Paris. They calculate that by May next, fifteen new self-supporting associations of the same kind will be ready to commence operations; so that the number will be for Paris alone from 50 to 60.”

1

[This paragraph and the subsequent account of the Rochdale Pioneers date from the 5th ed. (1862), though the reference to the Zürich society and to Mr. Plummer in the footnote were added in the 6th ed. (1865). From the 4th (1857) disappeared the following footnote:

“Though this beneficent movement has been so seriously checked in the country in which it originated, it is rapidly spreading in those other countries which have acquired, and still retain, any political freedom. It forms already an important feature in the social improvement which is proceeding at a most rapid pace in Piedmont. In England also, under the impulse given by the writings and personal exertions of a band of friends, chiefly clergymen and barristers, the movement has made some progress. On the 15th of February, 1856, there had been registered under the Industrial and Provident Societies' Act, thirty-three associations, seventeen of which were industrial societies, the remainder being associations for co-operative consumption only: without reckoning Scotland, where, also, these associations were rapidly spreading. It is believed that all such societies are now registered under the Limited Liabilities Act. From later information it appears that the productive associations (excluding the flour mills, which partake more of the nature of stores) have fallen off in number since their first start; and their progress, in the present moral condition of the bulk of the population, cannot possibly be rapid. But those which subsist, continue to do as much business as they ever did: and there are in the North of England instances of brilliant and steadily progressive success. Co-operative stores are increasing both in number and prosperity, especially in the North; and they are the best preparation for a wider application of the principle.”]

∗

Self-help by the People—History of Co-operation in Rochdale. An instructive account of this and other co-operative associations has also been written in the Companion to the Almanack for 1862, by Mr. John Plummer, of Kettering; himself one of the most inspiring examples of mental cultivation and high principle in a self-instructed working man.

∗

“But it is not,” adds Mr. Holyoake, “the brilliancy of commercial activity in which either writer or reader will take the deepest interest; it is in the new and improved spirit animating this intercourse of trade. Buyer and seller meet as friends; there is no overreaching on one side, and no suspicion on the other.... These crowds of humble working men, who never knew before when they put good food in their mouths, whose every dinner was adulterated, whose shoes let in the water a month too soon, whose waistcoats shone with devil's dust, and whose wives wore calico that would not wash, now buy in the markets like millionaires, and as far as pureness of food goes, live like lords.” Far better, probably, in that particular; for assuredly lords are not the customers least cheated in the present race of dishonest competition. “They are weaving their own stuffs, making their own shoes, sewing their own garments, and grinding their own corn. They buy the purest sugar and the best tea, and grind their own coffee. They slaughter their own cattle, and the finest beasts of the land waddle down the streets of Rochdale for the consumption of flannel weavers and cobblers. (Last year the Society advertised for a Provision Agent to make purchases in Ireland, and to devote his whole time to that duty.) When did competition give poor men these advantages? And will any man say that the moral character of these people is not improved under these influences? The teetotallers of Rochdale acknowledge that the Store has made more sober men since it commenced than all their efforts have been able to make in the same time. Husbands who never knew what it was to be out of debt, and poor wives who during forty years never had sixpence uncondemned in their pockets, now possess little stores of money sufficient to build them cottages, and go every week into their own market with money jingling in their pockets; and in that market there is no distrust and no deception; there is no adulteration, and no second prices. The whole atmosphere is honest. Those who serve neither hurry, finesse, nor flatter. They have no interest in chicanery. They have but one duty to perform—that of giving fair measure, full weight, and a pure article. In other parts of the town, where competition is the principle of trade, all the preaching in Rochdale cannot produce moral effects like these.

“As the Store has made no debts, it has incurred no losses; and during thirteen years' transactions, and receipts amounting to 303,852l., it has had no law-suits. The Arbitrators of the Societies, during all their years of office, have never had a case to decide, and are discontented that nobody quarrels.”

1

[This paragraph added in 6th ed. (1865).]

2

[This paragraph is from the 5th ed. (1862), and so is the explanation, in the next paragraph but one, of the increase in the productiveness of industry. The argument as to the limitation of the number of distributors was inserted in the 6th ed. (1865).]

1

[The present text from this point to the point indicated in the next paragraph but two dates from the 6th ed. (1865).]

1

[The rest of this paragraph dates from the 3rd ed. (1852).]

∗

[1865] In this respect also the Rochdale Society has given an example of reason and justice, worthy of the good sense and good feeling manifested in their general proceedings. “The Rochdale Store,” says Mr. Holyoake, “renders incidental but valuable aid towards realizing the civil independence of women. Women may be members of this Store, and vote in its proceedings. Single and married women join. Many married women become members because their husbands will not take the trouble, and others join it in self-defence to prevent the husband from spending their money in drink. The husband cannot withdraw the savings at the Store standing in the wife's name unless she signs the order.”

1

[This section added in 3rd ed. (1852).]

∗

P. 90.

1

[“Of their class” was inserted in 4th ed. (1857); and the words of the 3rd ed. (1852), “so unjustly and illiberally railed at—as if they were one iota worse in their motives or practices than other people, in the existing state of society,—” were omitted.]

1

[See Appendix DD. The Subsequent History of Co-operation.]

1

[This explanation added in 2nd ed. (1849).]

2

[So since the 4th ed. (1857). The original text ran: “he has a claim to do as he likes, without being molested or restricted by judges and legislators.”

∗

Wealth of Nations, book v. ch. ii.

∗

[1865] This principle of assessment has been partially adopted by Mr. Gladstone in renewing the income-tax. From 100l., at which the tax begins, up to 200l., the income only pays tax on the excess above 60l.

[For the subsequent history of the Income Tax see Appendix EE.]

1

[Added in 5th ed. (1862). The original (1848) text ran: “An income of 100l. a year would, as it seems to me, obtain all the relief it is entitled to,” &c.]

2

[This last sentence replaced in the 3rd ed. (1852) the following sentence of the original text: “To tax all incomes in an equal ratio, would be unjust to those the greater part of whose income is required for necessaries; but I can see no fairer standard of real equality than to take from all persons, whatever may be their amount of fortune, the same arithmetical proportion of their superfluities.”]

1

[So since the 3rd ed. (1852). The original text ran: “but not so as to impair the motives on which society depends for keeping up (not to say increasing) the produce of its labour and capital.]

2

[This sentence replaced in the 3rd ed. a sentence of the original: “It is partial taxation, which is a mild form of robbery.”]

3

[This sentence replaced in the 3rd ed. the original sentence: “A just and wise legislation would scrupulously abstain from opposing obstacles to the acquisition of even the largest fortune by honest exertion.”]

4

[So since 3rd ed. Originally: “and not that, whether they were swift or slow, all should reach the goal at once.”]

5

[So since 3rd ed. Instead of the second half of this sentence the original ran: “and it is the part of a good government to provide, that, as far as more paramount considerations permit, the inequality of opportunities shall be remedied. When all kinds of useful instruction shall be as accessible as they might be made, and when the cultivated intelligence of the poorer classes, aided so far as necessary by the guidance and co-operation of the state, shall obviate, as it might so well do, the major part of the disabilities attendant on poverty, the inequalities of fortune arising,” &c.]

1

[At this point were omitted in the 3rd ed. (1852) the following words of the original text: “is as much a part of the right of property as the power of using: that is not in the fullest sense a person's own, which he is not free to bestow on others. But this is,” &c.]

∗

Supra, book ii. ch. 2.

2

[So since 3rd ed. Originally: “the most eligible mode.”]

3

[So since 3rd ed. Originally: “would be a violation of first principles.”]

4

[So since 3rd ed. Originally: “is quite unobjectionable.”]

5

[The principle of graduation has been applied to inheritance and legacy duties since 1894. See Bastable, Public Finance, 3rd ed. p. 599; Book iv. ch. 9, § 6. For its application to the Income Tax see Appendix EE.]

1

[The rest of this paragraph,—with the exception of the last sentence, added in the 4th ed. (1857),—was inserted in the 2nd ed. (1849).]

1

[This paragraph inserted in 5th ed. (1862).]

2

[Added in 2nd ed. (1849).]

3

[Added in 3rd ed. (1852) with “greater wants”: changed to “greater necessities” in 5th ed.]

1

[This paragraph was inserted in the 3rd ed. (1852), in the place of the following passage which was made a footnote, but disappeared from the 5th ed. (1862):

“I say really applied, because (as before remarked in the case of an income not more than sufficient for subsistence) an exemption grounded on an assumed necessity ought not to be claimable by any one who practically emancipates himself from the necessity. One expedient might be, that the Income-Tax Commissioners should allow, as a deduction from income, all bonâ fide payments for insurance on life. This, however, would not provide for the case which most of all deserves consideration, that of persons whose lives are not insurable; nor would it include the case of savings made as a provision for age. The latter case might, perhaps, be met by allowing as a deduction from income all payments made in the purchase of deferred annuities; and the former by remitting income-tax on sums actually settled, and on sums paid into the hands of a public officer, to be invested in securities, and repaid only to the executor or administrator: the tax so remitted, with interest from the date of deposit, being retained (for the prevention of fraud) as a first debt chargeable on the deposit itself, before other debts could be paid out of it; but not demanded if satisfactory proof were given that all debts had been paid from other resources. I throw out these suggestions for the consideration of those whose experience renders them adequate judges of practical difficulties.”]

1

[This paragraph inserted in 5th ed. (1862).]

2

[Here the text again dates from the 3rd ed. (1852) down to the proposal of “two different rates of assessment,” from which point the text becomes that of the original edition (1848).]

∗

[1862] Mr. Hubbard, the first person who, as a practical legislator, has attempted the rectification of the income tax on principles of unimpeachable justice, and whose well-conceived plan wants little of being as near an approximation to a just assessment as it is likely that means could be found of carrying into practical effect, proposes a reduction not of a fourth but of a third, in favour of industrial and professional incomes. He fixes on this ratio, on the ground that, independently of all consideration as to what the industrial and professional classes ought to save, the attainable evidence goes to prove that a third of their incomes is what on an average they do save, over and above the proportion saved by other classes. “The savings” (Mr. Hubbard observes) “effected out of incomes derived from invested property are estimated at one-tenth. The savings effected out of industrial incomes are estimated at fourtenths. The amounts which would be assessed under these two classes being nearly equal, the adjustment is simplified by striking off one-tenth on either side, and then reducing by three-tenths, or one-third, the assessable amount of industrial incomes.” Proposed Report (p. xiv. of the Report and Evidence of the Committee of 1861). In such an estimate there must be a large element of conjecture; but in so far as it can be substantiated, it affords a valid ground for practical conclusion which Mr. Hubbard founds on it.

[1848] Several writers on the subject, including Mr. Mill in his Elements of Political Economy, and Mr. M'Culloch in his work on Taxation, have contended that as much should be deducted as would be sufficient to insure the possessor's life for a sum w which would give to his successors for ever an income. equal to what he reserves for himself; since this is what the possessor of heritable property can do without saving at all: in other words, that temporary incomes should be converted into perpetual incomes of equal present value, and taxed as such. If the owners of life-incomes actually did save this large proportion of their income, or even a still larger, I would gladly grant them an exemption from taxation on the whole amount, since, if practical means could be found of doing it, I would exempt savings altogether. But I cannot admit that they have a claim to exemption on the general assumption of their being obliged to save this amount. Owners of life-incomes are not bound to forego the enjoyment of them for the sake of leaving to a perpetual line of successors an independent provision equal to their own temporary one; and no one ever dreams of doing so. Least of all is it to be required or expected from those whose incomes are the fruits of personal exertion, that they should leave to their posterity for ever, without any necessity for exertion, the same incomes which they allow to themselves. All they are bound to do, even for their children, is to place them in circumstances in which they will have favourable chances of earning their own living. To give, however, either to children or to others, by bequest, being a legitimate inclination, which these persons cannot indulge without laying by a part of their income, while the owners of heritable property can; this real inequality in cases where the incomes themselves are equal, should be considered, to a reasonable degree, in the adjustment of taxation, so as to require from both, as nearly as practicable, an equal sacrifice.

1

[The remainder of this paragraph dates from the 3rd ed. (1852). In the original it was said, “Of the net profits of persons in business one half may perhaps be considered as interest on capital... and the other half as remuneration” &c.; and the paragraph ended thus: “For profits, therefore, an intermediate rate might be adopted, one half of the net income being taxed on the higher scale and the other half on the lower.”]

1

[Between the last revision of this chapter and the present edition (1909), important changes have been made in the Income Tax:—

(1) The extension of the system of abatements has made the tax in effect progressive up to incomes of £700.

(2) It has been made allowable to deduct life insurance premiums actually paid, up to one sixth of the income.

(3) A distinction has been introduced between “earned” and “unearned” incomes, and a lower rate charged on the former. See Appendix EE].

1

[See Appendix FF. The Taxation of Land.]

∗

[1849] The same remarks obviously apply to those local taxes, of the peculiar pressure of which on landed property so much has been said by the remnant of the Protectionists. As much of these burthens as is of old standing, ought to be regarded as a prescriptive deduction or reservation, for public purposes, of a portion of the rent. And any recent additions have either been incurred for the benefit of the owners of landed property, or occasioned by their fault: in neither case giving them any just ground of complaint.

1

[Remaining words of the paragraph added in 4th ed. (1857).]

∗

Supra; pp. 79–88.

1

[So since the 4th ed. (1857). The original ran: “on the ground that some taxes on necessaries are still kept up, and that almost all the existing taxes on indulgences press more heavily” &c.]

2

[The third condition was altered in its wording in the 3rd ed. (1852), to give effect to the arguments introduced in that edition in the preceding chapter.]

3

[So since the 3rd ed. The original ran: “The objection to it, which, with much regret I cannot help regarding as insuperable” &c.]

1

[“Cannot” replacing in the 3rd ed. (1852) “can never” of the original text.]

∗

A Percentage Tax on Domestic Expenditure to supply the whole of the Public Revenue. By John Revans. Published by Hatchard, in 1847.

1

[The remainder of this paragraph, together with the next, appeared first in the 4th ed. (1857), and the following passage of the original (1848) was removed: “There is thus no difference between the two component elements of house-rent, in respect to the incidence of the tax. Both alike fall ultimately on the occupier: while, in both alike, if the occupier in consequence reduces his demand by contenting himself with inferior accommodation, that is, if he prefers saving his tax from house-rent to saving it from other parts of his expenditure, he indirectly lowers ground-rent, or retards its increase; just as a diminished consumption of agricultural produce, by making cultivation retrograde, would lower ordinary rent.”]

∗

[1852] Another common objection is that large and expensive accommodation is often required, not as a residence, but for business. But it is an admitted principle that buildings or portions of buildings occupied exclusively for business, such as shops, warehouses, or manufactories, ought to be exempted from house-tax. The plea that persons in business may be compelled to live in situations, such as the great thoroughfares of London, where house-rent is at a monopoly rate, seems to me unworthy of regard; since no one does so but because the extra profit, which he expects to derive from the situation, is more than an equivalent to him for the extra cost. But in any case, the bulk of the tax on this extra rent will not fall on him, but on the ground-landlord.

[1848] It has been also objected that house-rent in the rural districts is much lower than in towns, and lower in some towns and in some rural districts than in others: so that a tax proportioned to it would have a corresponding inequality of pressure. To this, however, it may be answered, that in places where house-rent is low persons of the same amount of income usually live in larger and better houses, and thus expend in house-rent more nearly the same proportion of their incomes than might at first sight appear. Or if not, the probability will be, that many of them live in those places precisely because they are too poor to live elsewhere, and have therefore the strongest claim to be taxed lightly. In some cases, it is precisely because the people are poor that house-rent remains low.

∗

[1865] It is true, this does not constitute, as at first sight it appears to do, a case of taking more out of the pockets of the people than the state receives; since, if the state needs the advance, and gets it in this manner, it can dispense with an equivalent amount of borrowing in stock or exchequer bills. But it is more economical that the necessities of the state should be supplied from the disposable capital in the hands of the lending class, than by an artificial addition to the expenses of one or several classes of producers or dealers.

1

[The reference to “free admission,” &c., inserted in 4th ed. (1857).]

∗

Probably the strongest known instance of a large revenue raised from foreigners by a tax on exports, is the opium trade with China. The high price of the article under the government monopoly (which is equivalent to a high export duty) has so little effect in discouraging its consumption, that it is said to have been occasionally sold in China for as much as its weight in silver.

1

[So since the 3rd ed. (1852). The original text ran: “and when the contract relates to property the tax rises, though in an irregular manner, with the pecuniary value of the property.”]

∗

[1865] The statement in the text requires modification in the case of countries where the land is owned in small portions. These, being neither a badge of importance, nor in general an object of local attachment, are readily parted with at a small advance on their original cost, with the intention of buying elsewhere; and the desire of acquiring land even on disadvantageous terms is so great as to be little checked by even a high rate of taxation.

1

[The long footnote in the original edition illustrating the higher rate of stamp duties on smaller contracts, disappeared from the 3rd ed. (1852).]

2

[At this point the following passage remained, with an unimportant verbal alteration, through the first six editions and disappeared in 1871: “In the case of fire insurances, the tax is exactly double the amount of the premium of insurance on common risks; so that the person insuring is obliged by the government to pay for the insurance just three times the value of the risk. If this tax existed in France, we should not see, as we do in some of her provinces, the plate of an insurance company on almost every cottage or hovel. This, indeed, must be ascribed to the provident and calculating habits produced by the dissemination of property through the labouring class: but a tax of so extravagant an amount would be a heavy drag upon any habits of providence.”]

1

[“Is not” until the 7th ed. (1871).]

2

[The next sentence of the original text disappeared from the 3rd ed. (1852): “In this country the amount of the duty is moderate, and the abuse of advertising, which is quite as conspicuous as the use, renders the abolition of the tax, though right in principle, a matter of less urgency than it might otherwise be deemed.”]

1

[The parenthesis added in 7th ed. (1871).]

1

[See Appendix GG. The Incidence of Taxation.]

1

[So since the 3rd ed. (1852). According to the original text, the expenditure on civil and military establishments was “still in many cases unnecessarily profuse, but though many of the items will bear great reduction, others certainly require increase,” and the hope was not held out, as in the parenthesis also inserted further on in the paragraph in the 3rd ed., that retrenchment would provide sufficient means for the new purposes.]

1

[The present text of the first two sentences of this paragraph dates from the 3rd ed. (1852). The original (1848) ran:

“The decisive objection, however, to raising the whole or the greater part of a large revenue by direct taxes, is the impossibility of assessing them fairly. In the case of an income-tax, I have pointed out that the burthen can never be apportioned with any tolerable approach to fairness upon those whose incomes are derived from a business or profession.”]

1

[So since the 3rd ed. (1852). The original ran: “in disregarding the inequality and unfairness inseparable from every practicable form of income tax.”]

∗

Some argue that the materials and instruments of all production should be exempt from taxation; but these, when they do not enter into the production of necessaries, seem as proper subjects of taxation as the finished article. It is chiefly with reference to foreign trade that such taxes have been considered injurious. Internationally speaking, they may be looked upon as export duties, and, unless in cases in which an export duty is advisable, they should be accompanied with an equivalent drawback on exportation. But there is no sufficient reason against taxing the materials and instruments used in the production of anything which is itself a fit object of taxation.

∗

“Were we to suppose that diamonds could only be procured from one particular and distant country, and pearls from another, and were the produce of the mines in the former, and of the fishery in the latter, from the operation of natural causes, to become doubly difficult to procure, the effect would merely be that in time half the quantity of diamonds and pearls would be sufficient to mark a certain opulence and rank, that it had before been necessary to employ for that purpose. The same quantity of gold or some commodity reducible at last to labour, would be required to produce the now reduced amount, as the former larger amount. Were the difficulty interposed by the regulations of legislators... . . it could make no difference to the fitness of these articles to serve the purposes of vanity.” Suppose that means were discovered whereby the physiological process which generates the pearl might be induced ad libitum, the result being that the amount of labour expended in procuring each pearl came to be only the five-hundredth part of what it was before. “The ultimate effect of such a change would depend on whether the fishery were free or not. Were it free to all, as pearls could be got simply for the labour of fishing for them, a string of them might be had for a few pence. The very poorest class of society could therefore afford to decorate their persons with them. They would thus soon become extremely vulgar and unfashionable, and so at last valueless. If however we suppose that instead of the fishery being free, the legislator owns and has complete command of the place, where alone pearls are to be procured; as the progress of discovery advanced, he might impose a duty on them equal to the diminution of labour necessary to procure them. They would then be as much esteemed as they were before. What simple beauty they have would remain unchanged. The difficulty to be surmounted in order to obtain them would be different, but equally great, and they would therefore equally serve to mark the opulence of those who possessed them.” The net revenue obtained by such a tax “would not cost the society anything. If not abused in its application, it would be a clear addition of so much to the resources of the community.”—Rae, New Principles of Political Economy, pp. 369–71. [Sociological Theory of Capital, pp. 286–88.]

1

[So since the 5th ed. (1862). The original (1848) ran: “Among the excise and custom duties now existing in this country, some must, on the principles we have laid down, be altogether condemned.”]

1

[The footnote added to the 6th ed. (1865) was omitted from the 7th (1871): “Except the shilling per quarter duty on corn, ostensibly for registration, and scarcely felt as a burthen.”]

2

[So since 5th ed. (1862). In the original: “enormous.”]

∗

Supra, pp. 77–8.

1

[The concluding words of this paragraph were added in the 4th ed. (1857). At the same time the parenthesis “(in every respect... the tax)” was inserted above; and the words “by the whole of that great fact” were omitted after “was therefore worse.”]

∗

Supra, p. 114.

1

[Added in 4th ed. (1857).]

∗

[1865] Lord Westbury's recent Act is a material mitigation of this grievous defect in English law, and will probably lead to further improvements.

†

Supra, pp. 110–2.

∗

Principles of Political Economy, ed. 1843, p. 264. There is much more to the same effect in the more recent treatise by the same author, On the Succession to Properly vacant by Death.

1

[The concluding words of this paragraph took the place in the 5th ed. (1862) of the following words of the original text: “and English entails are not, in point of fact, much less injurious than those of other countries.”]

∗

[1852] Mr. Cecil Fane, the Commissioner of the Bankruptcy Court, in his evidence before the Committee on the Law of Partnership, says: “I remember a short time ago reading a written statement by two eminent solicitors, who said that they had known many partnership accounts go into Chancery, but that they never knew one come out.... Very few of the persons who would be disposed to engage in partnerships of this kind” (co-operative associations of working men) “have any idea of the truth, namely, that the decision of questions arising amongst partners is really impracticable.

“Do they not know that one partner may rob the other without any possibility of his obtaining redress?—The fact is so; but whether they know it or not, I cannot undertake to say.”

This flagrant injustice is, in Mr. Fane's opinion, wholly attributable to the defects of the tribunal. “My opinion is, that if there is one thing more easy than another, it is the settlement of partnership questions, and for the simple reason, that everything which is done in a partnership is entered in the books; the evidence therefore is at hand; if therefore a rational mode of proceeding were once adopted, the difficulty would altogether vanish.”—Minutes of Evidence annexed to the Report of the Select Committee on the Law of Partnership (1851), pp. 85–7.

∗

Report, ut supra, p. 167.

1

[So since the 3rd ed. (1852). In the original: “this necessity is done away, and the formalities which have been substituted for it are not sufficiently onerous to be very much of an impediment to such undertakings.”]

2

[The comment: “and this liberty, in England, they cannot now be fairly said not to have,” (“though they have had it but for a little more than three years,” omitted in 2nd ed. 1849), was dropt out of the 3rd ed.]

3

[“Though less, I believe, owing to the defects of the law than to those of the courts of judicature”; omitted in 3rd ed.]

4

[So since 4th ed. (1857). In the original: “which it absolutely disallows, and which can still be only” &c. “Until lately” was inserted in the 3rd ed. in the next paragraph.]

∗

See the Report already referred to, pp. 145–158.

1

[So since the 5th ed. (1862). The addition, as made in the 3rd ed. (1852), began: “It has however been proved by the evidence of several experienced witnesses before a late committee of the House of Commons that associations” &c. The original text, after “improper hazards” went on: “Admitting that this is one of the disadvantages of such associations, it is a consideration of more importance” &c.]

∗

The quotation is from a translation published by Mr. H. C. Carey, in an American periodical, Hunt's Merchant's Magazine, for May and June 1845.

1

[They have been allowed since 1908. See Appendix HH. Company and Partnership Law.]

∗

[1852] “There has been a great deal of commiseration professed,” says Mr. Duncan, solicitor, “towards the poor inventor; he has been oppressed by the high cost of patents; but his chief oppression has been the partnership law, which prevents his getting any one to help him to develop his invention. He is a poor man, and therefore cannot give security to a creditor; no one will lend him money; the rate of interest offered, however high it may be, is not an attraction. But if by the alteration of the law he could allow capitalists to take an interest with him and share the profits, while the risk should be confined to the capital they embarked, there is very little doubt at all that he would frequently get assistance from capitalists; whereas at the present moment, with the law as it stands, he is completely destroyed, and his invention is useless to him; he struggles month after month; he applies again and again to the capitalists without avail. I know it practically in two or three cases of patented inventions; especially one where parties with capital were desirous of entering into an undertaking of great moment in Liverpool, but five or six different gentlemen were deterred from doing so, all feeling the strongest objection to what each one called the cursed partnership law.”—Report, p. 155.

Mr. Fane says, “In the course of my professional life, as a Commissioner of the Court of Bankruptcy, I have learned that the most unfortunate man in the world is an inventor. The difficulty which an inventor finds in getting at capital involves him in all sorts of embarrassments, and he ultimately is for the most part a ruined man, and somebody else gets possession of his invention.”—Ib. p. 82.

∗

[1865] It has been found possible to effect this through the Limited Liability Act, by erecting the capitalist and his workpeople into a Limited Company; as proposed by Messrs. Briggs (supra, p. 771).

†

[1862] By an Act of the year 1852, called the Industrial and Provident Societies Act, for which the nation is indebted to the public-spirited exertions of Mr. Slaney, industrial associations of working people are admitted to the statutory privileges of Friendly Societies. This not only exempts them from the formalities applicable to joint-stock companies, but provides for the settlement of disputes among the partners without recourse to the Court of Chancery. There are still some defects in the provisions of this Act, which hamper the proceedings of the Societies in several respects; as is pointed out in the Almanack of the Rochdale Equitable Pioneers for 1861.

∗

In a note appended to his translation of M. Coquelin's paper.

1

[This sentence replaced in the 6th ed. (1865) the comment of the original: “and I concur in thinking that to this conclusion science and legislation must ultimately come.”]

1

[The original parenthesis “(and is indeed little better than a timid shrinking from the infliction of anything like pain, next neighbour to the cowardice which shrinks from unnecessary endurance of it)” was omitted from the 3rd ed. (1852).]

1

[So since the 5th ed. (1862). The original ran: “Everything... has been gradually relaxed and much of it entirely got rid of. Because insolvency was formerly treated as if it were necessarily a crime, everything is now done to make it, if possible, not even a misfortune.” The present reference to an opposite movement “by a recent enactment” was introduced in the 3rd ed. (1852), and spoken of as “partial but very salutary.”]

2

[So since the 3rd ed. (1852). The original ran: “In depriving creditors of this instrument, the law has not furnished them with a sufficient equivalent”: and went on as follows: “And it is seldom difficult for a dishonest debtor, by an understanding with one or more of his creditors, or by means of pretended creditors set up for the purpose, to abstract a part, perhaps the greatest part, of his assets, from the general fund, through the forms of the law itself. The facility and frequency of such frauds are a subject of much complaint, and their prevention demands a vigorous effort of the legislature, under the guidance of judicious persons practically conversant with the subject.”]

1

[So since the 3rd ed. The original ran: “The humanitarians do not deny that what is technically... pay, may reasonably, when detected, be” &c.]

∗

From a volume published in 1845, entitled, Credit the Life of Commerce, by J. H. Elliott.

∗

Pp. 50–1.

∗

The following extracts from the French Code de Commerce (the translation is that of Mr. Fane) show the great extent to which the just distinctions are made, and the proper investigations provided for, by French law. The word banqueroute, which can only be translated by bankruptcy, is, however, confined in France to culpable insolvency, which is distinguished into simple bankruptcy and fraudulent bankruptcy. The following are cases of simple bankruptcy:—

“Every insolvent who, in the investigation of his affairs, shall appear chargeable with one or more of the following offences, shall be proceeded against as a simple bankrupt:—

“If his house expenses, which he is bound to enter regularly in a day-book, appear excessive:

“If he had spent considerable sums at play, or in operations of pure hazard:

“If it shall appear that he has borrowed largely, or resold merchandize at a loss, or below the current price, after it appeared by his last account-taking that his debts exceeded his assets by one-half:

“If he has issued negotiable securities to three times the amount of his available assets, according to his last account-taking.

“The following may also be proceeded against as simple bankrupts:—

“He who has not declared his own insolvency in the manner prescribed by law:

“He who has not come in and surrendered within the time limited, having no legitimate excuse for his absence:

“He who either produces no books at all, or produces such as have been irregularly kept, and this although the irregularities may not indicate fraud.”

The penalty for “simple bankruptcy” is imprisonment for a term of not less than one month, nor more than two years. The following are cases of fraudulent bankruptcy, of which the punishment is travaux forcés (the galleys) for a term:—

“If he has attempted to account for his property by fictitious expenses and losses, or if he does not fully account for all his receipts:

“If he has fraudulently concealed any sum of money or any debt due to him, or any merchandize or other movables:

“If he has made fraudulent sales or gifts of his property:

“If he has allowed fictitious debts to be proved against his estate:

“If he has been entrusted with property, either merely to keep, or with special directions as to its use, and has nevertheless appropriated it to his own use:

“If he has purchased real property in a borrowed name:

“If he has concealed his books.

“The following may also be proceeded against in a similar way:—

“He who has not kept books, or whose books shall not exhibit his real situation as regards his debts and credits:

“He who, having obtained a protection (sauf-conduit), shall not have duly attended.”

These various provisions relate only to commercial insolvency. The laws in regard to ordinary debts are considerably more rigorous to the debtor.

∗

Supra, pp. 79 et seqq.

1

[The “will” of the original (1848) text was changed into “might” in the 7th ed. (1871), and “it is essential that” was inserted in the next sentence.]

2

[The next three paragraphs were added in the 6th ed. (1865).]

∗

To this Mr. Carey would reply (indeed he has already so replied in advance) that of all commodities manure is the least susceptible of being conveyed to a distance. This is true of sewage, and of stable manure, but not true of the ingredients to which those manures owe their efficiency. These, on the contrary, are chiefly substances containing great fertilizing power in small bulk; substances of which the human body requires but a small quantity, and hence peculiarly susceptible of being imported; the mineral alkalics and the phosphates. The question indeed mainly concerns the phosphates, for of the alkalies, soda is procurable everywhere; while potass, being one of the constituents of granite and the other feldspathic rocks, exists in many subsoils, by whose progressive decomposition it is renewed, a large quantity also being brought down in the deposits of rivers. As for the phosphates, they, in the very convenient form of pulverized bones, are a regular article of commerce, largely imported into England; as they are sure to be into any country where the conditions of industry make it worth while to pay the price.

1

[See Appendix II. Protection.]

1

[See Appendix JJ. Usury Laws.]

1

[The remainder of this paragraph was added in the 5th ed. (1862).]

2

[So since 7th ed. (1871). Originally (1848) “not much more than twenty years ago, and is in full vigour at this day in some other countries.”]

1

[This and the preceding sentence replaced, but not until the 7th ed. (1871), the following sentence of the original (1848) text: “But if they aimed at obtaining actually higher wages than the rate fixed by demand and supply—the rate which distributes the whole circulating capital of the country among the entire working population—this could only be accomplished by keeping a part of their number permanently out of employment.”]

1

[So since 3rd ed. (1852). Originally: “ought to be regarded as a benefit.”]

1

[This and the following paragraph were added in the 3rd ed. (1852); and the sentence of the original text, “Combinations to keep up wages are therefore not only permissible but useful, wherever really calculated to have that effect,” was removed at this point.]

2

[This paragraph was added in the 5th ed. (1862). The second sentence, however, then ran: “I grant that a strike is wrong whenever it is foolish, and it is foolish whenever it attempts to raise wages above that market rate which is rendered possible by supply and demand. But demand and supply are not physical agencies,” &c. The present text dates from the 7th ed. (1871).]

∗

Supra, book v. chap. vii.

1

[At this point the following passage of the original text was omitted from the 3rd ed. (1852): “and a limitation of the number of persons in employment may be a necessary condition of these. Combinations, therefore, not to work for less than certain wages, or for more than a certain number of hours, or even not to work for a master who employs more than a certain number of apprentices, are, when voluntary on the part of all who engage in them, not only unexceptionable, but would be desirable, were it not that they almost always fail of their effect.”]

2

[This sentence was inserted in the 3rd ed.]

3

[So since the 5th ed. (1862). In the earlier editions: “avowed object.”]

4

[The rest of this paragraph dates from the 3rd ed. The first edition (1848) read: “Every society which exacts from its members obedience to rules of this description, and endeavours to enforce compliance with them on the part of employers by refusal to work, is a public nuisance. Whether the law would be warranted in making the formation of such associations illegal and punishable, depends upon the difficult question of the legitimate bounds of constitutional liberty. What are the proper limits to the right of association? To associate for the purpose of violating the law could not of course be tolerated under any government. But among the numerous acts which, although mischievous in themselves, the law ought not to prohibit from being done by individuals, are there not some which are rendered so much more mischievous when people combine to do them, that the legislature ought to prohibit the combination, though not the act itself? When these questions have been philosophically answered, which belongs to a different branch of social philosophy from the present, it may be determined whether the kind of associations here treated of can be a proper subject of any other than merely moral repression.”

But in the 2nd ed. (1849) this had already been replaced by: “Any society which exacts from its members obedience to rules of this description, and endeavours to enforce compliance with them on the part of employers by refusal to work, incurs the inconveniences of Communism, without getting rid of any of those of individual property. It does not follow, however, that the law would be warranted” &c., as at present.]

∗

[1862] Whoever desires to understand the question of Trade Combinations as seen from the point of view of the working people, should make himself acquainted with a pamphlet published in 1860, under the title Trades Unions and Strikes, their Philosophy and Intention, by T. J. Dunning, Secretary to the London Consolidated Society of Bookbinders. There are many opinions in this able tract in which I only partially, and some in which I do not at all, coincide. But there are also many sound arguments, and an instructive exposure of the common fallacies of opponents. Readers of other classes will see with surprise, not only how great a portion of truth the Unions have on their side, but how much less flagrant and condemnable even their errors appear, when seen under the aspect in which it is only natural that the working classes should themselves regard them.

1

[So in 7th ed. (1871). In 1st (1848): “two or three.”]

∗

Supra, book v. ch. 1.

∗

The only cases in which government agency involves nothing of a compulsory nature, are the rare cases in which, without any artificial monopoly, it pays its own expenses. A bridge built with public money, on which tolls are collected sufficient to pay not only all current expenses, but the interest of the original outlay, is one case in point. The government railways in Belgium and Germany are another example. The Post Office, if its monopoly were abolished and it still paid its expenses, would be another.

1

[So since 5th ed. (1862). Originally: “and.”]

∗

De la Liberté du Travail, vol. i. pp. 353–4.

∗

I quote at second hand, from Mr. Carey's Essay on the Rate of Wages, pp. 195–6.

∗

In opposition to these opinions, a writer, with whom on many points I agree, but whose hostility to government intervention seems to me too indiscriminate and unqualified, M. Dunoyer, observes, that instruction, however good in itself, can only be useful to the public in so far as they are willing to receive it, and that the best proof that the instruction is suitable to their wants is its success as a pecuniary enterprise. This argument seems no more conclusive respecting instruction for the mind, than it would be respecting medicine for the body. No medicine will do the patient any good if he cannot be induced to take it; but we are not bound to admit as a corollary from this, that the patient will select the right medicine without assistance. Is it not probable that a recommendation, from any quarter which he respects, may induce him to accept a better medicine than he would spontaneously have chosen ? This is, in respect to education, the very point in debate. Without doubt, instruction which is so far in advance of the people that they cannot be induced to avail themselves of it, is to them of no more worth than if it did not exist. But between what they spontaneously choose, and what they will refuse to accept when offered, there is a breadth of interval proportioned to their deference for the recommender. Besides, a thing of which the public are bad judges may require to be shown to them and pressed on their attention for a long time, and to prove its advantages by long experience, before they learn to appreciate it, yet they may learn at last; which they might never have done, if the thing had not been thus obtruded upon them in act, but only recommended in theory. Now, a pecuniary speculation cannot wait years, or perhaps generations for success; it must succeed rapidly, or not at all. Another consideration which M. Dunoyer seems to have overlooked, is, that institutions and modes of tuition which never could be made sufficiently popular to repay, with a profit, the expenses incurred on them, may be invaluable to the many by giving the highest quality of education to the few, and keeping up the perpetual succession of superior minds, by whom knowledge is advanced, and the community urged forward in civilization.

1

[The paragraph originally went on: “but which it might be proper to demand, merely in recognition of a principle: the remainder of the cost to be defrayed, as in Scotland, by a local rate, that the inhabitants of the locality might have a greater interest in watching over the management, and checking negligence and abuse.” These words were omitted in the 4th ed. (1857).]

∗

[1852] The practice of the English law with respect to insane persons, especially on the all-important point of the ascertainment of insanity, most urgently demands reform. At present no persons, whose property is worth coveting, and whose nearest relations are unscrupulous, or on bad terms with them, are secure against a commission of lunacy. At the instance of the persons who would profit by their being declared insane, a jury may be impanelled and an investigation held at the expense of the property, in which all their personal peculiarities, with all the additions made by the lying gossip of low servants, are poured into the credulous ears of twelve petty shopkeepers, ignorant of all ways of life except those of their own class, and regarding every trait of individuality in character or taste as eccentricity, and all eccentricity as either insanity or wickedness. If this sapient tribunal gives the desired verdict, the property is handed over to perhaps the last persons whom the rightful owner would have desired or suffered to possess it. Some recent instances of this kind of investigation have been a scandal to the administration of justice. Whatever other changes in this branch of law may be made, two at least are imperative: first, that, as in other legal proceedings, the expenses should not be borne by the person on trial, but by the promoters of the inquiry, subject to recovery of costs in case of success: and secondly, that the property of a person declared insane should in no case be made over to heirs while the proprietor is alive, but should be managed by a public officer until his death or recovery.

1

[“Acts” since 7th ed. (1871). Originally (1848): “the recent Factory Act.”]

2

[See Appendix KK. The Factory Acts.]

1

[This last sentence added in 3rd ed. (1852).]

∗

A parallel case may be found in the distaste for politics, and absence of public spirit, by which women, as a class, are characterized in the present state of society, and which is often felt and complained of by political reformers, without, in general, making them willing to recognise, or desirous to remove, its cause. It obviously arises from their being taught, both by institutions and by the whole of their education, to regard themselves as entirely apart from politics. Wherever they have been politicians, they have shown as great interest in the subject, and as great aptitude for it, according to the spirit of their time, as the men with whom they were contemporaries; in that period of history (for example) in which Isabella of Castile and Elizabeth of England were, not rare exceptions, but merely brilliant examples of a spirit and capacity very largely diffused among women of high station and cultivation in Europe.

1

[The original “twelve to ten” (1848) was changed to the present text, and the consequent alterations made in the rest of the paragraph, in the 5th ed. (1862).]

1

[“Which has never... recommend” was added in the 5th ed. (1862). A Nine Hours Movement made its appearance in the 70's. The hours of labour for women, young persons and children in textile factories were reduced to 56½ per week by the Act of 1874, and to 55½ by the Act of 1901. A Miners' Eight Hours Act was passed in 1908.]

1

[The remark in the original, “and to get rid of this is important, even as a matter of justice,” was omitted from the 3rd ed. (1852).]

2

[See Appendix LL. The Poor Law.]

1

[The exception was added in the 5th ed. (1862). In the next line “cannot have” had been changed into “rarely has” in the 3rd (1852).]

1

[“The price of land being generally fixed too low and” omitted from 3rd ed. (1852).]

∗

[1857] The objections which have been made, with so much virulence, in some of these colonies, to the Wakefield system, apply, in so far as they have any validity, not to the principle, but to some provisions which are no part of the system, and have been most unnecessarily and improperly engrafted on it; such as the offering only a limited quantity of land for sale, and that by auction, and in lots of not less than 640 acres, instead of selling all land which is asked for, and allowing to the buyer unlimited freedom of choice, both as to quantity and situation, at a fixed price.

2

[From the 3rd ed. was omitted the following passage of the original (1848): “The oldest of the Wakefield colonies, South Australia, is scarcely” (in 2nd ed. (1849), “little more than”) “twelve years old; Port Philip” (Victoria) “is still more recent; and they are probably at this moment the two places, in the known world, where labour on the one hand, and capital on the other, are the most highly remunerated.”]

1

[The reference to Irish emigration was added in the 3rd ed. (1852), and concluded with this sentence: “While the stream of this emigration continues flowing, as broad and deep as at present, the principal office required from government would be to direct a portion of it to quarters (such as Australia) where, both for local and national interests, it is most of all required, but which it does not sufficiently reach in its spontaneous course.” This was replaced in the 4th ed. (1857) by the reference to emigration to the gold fields. The slackening of the stream was noticed in the 5th ed. (1862), and the partial revival of Irish emigration in the 6th ed. (1865).]

1

[See Appendix MM. Limits of the Sphere of Government.]