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SHORT CHAPTERS ON PUBLIC ECONOMY.

IX.

LARGE CAPITAL AND SMALL CAPITAL.

Nothing can be more absurd or more capitalists, either as importers or manufaccontrary to the facts than the proposition turers. The demand is moderate but steaput forth by certain would-be statisticians, dy and the prices good. Under these cirthat low prices with large production is a cumstances, our frugal artizan will be able state of things favorable to the operative or to establish a small factory of his own, with manual laborer.

his capital of $500, and can engage another The smaller the capital the larger must man to work with him as a journeyman be the return from its investment. If I receiving wages. With moderate success, have only a thousand dollars, but can make he will make his five hundred yield five or it bring me five hundred every year, I am six hundred, aided by his own labor, beas well off, nay, in a better condition, than sides enough to pay his journeyman. The if I had two thousand yielding the same next year he will have gained a credit, and sum. One thousand is easier to manage, can borrow 500 more, at 7 per cent. and and less liable to loss than two thousand with these two capitals he will employ two A farm of 100 acres, yielding $500 worth journeymen, pay the interest, support his of produce per annum, is a better property family and lay up money. than one of 200, yielding the same per The success of such a management deannum. There is less ground to be gone pends in the first place upon the existence over, and in every respect less care to be of a good demand with good prices, and in taken on the smaller, than the larger do the second upon the thrift and good manmain.

agement of the small capitalist. Let us It is extremely difficult to find an invest- suppose that he and his journeyman with the ment of capital which will yield the owner families of both, require altogether $1000 more than 10 per cent. interest, with no for their support, and that the sale of what trouble or risk to himself. So rare indeed he manufactures produces that sum, and

the opportunity for a safe and profitable enough more to pay the interest on the investment without risk or labor, that large capital borrowed. Our artizan will now capitalists are well contented with 7, and subsist but he will make no money–he will even with 4 per cent. and in England with have no surplus, or profit, at the end of the 3 and 2 1-2 per cent. interest, when the year. capital is absolutely secured against loss, Let us now suppose that a number of and gives its owner no trouble in employ- other artizans, observing the success of this

one, combine their labor and capital and A thrifty industrious mechanic, working engage in the same business, one of them at good wages, say at $1,50 a day, can having credit enough somewhere, to borrow support himself and a small family, and a considerable sum to be laid out in mahave something laid up in a Saving's Bank chinery. Or, let us imagine, what is quite at the end of the year. After a few years as likely to happen, that an opulent imof labor, economy and accumulation, he porter has got wind of the matter; and will find himself master of a small capital, that now, through a larger quantity being say of $500. Let us suppose that the offered for sale, the price of our artizan's business at which he works is one which product suffers a depression. He will now has not as yet attracted the attention of find that to make the same profit he must

ing it.

sell more of his manufactures, and to do As long as other fields of industry conthis he must employ more journeymen and tinue open, the production of any particuborrow, or unite with a larger capital, lar manufacture will not, in the natural and put his wares for sale at a lower price, course of things, exceed the limit of a reabesides engaging in a system of correspon- sonable profit. Workmen's wages will nedence and advertisement. If he has not ver be ruinously low, and the prices of the ability to launch out on such a tide, he manufactured articles will at the same time must dismiss his journeymen, sell his ma- fall to the limit of the least possible profit chinery and again live as before, by his daily to the capitalists who produce them. wages paid him by some more able or for- We have now to consider the effect of tunate person than himself.

the introduction of several disturbing causes He takes the former course. He is bold, into the above described natural order of skillful and thrifty. He becomes a large events. Let us suppose that in the counmanufacturer. By competition prices have try where these manufactures have grown fallen to such a pitch he must now sell ten up, it was thought necessary that the reor an hundred times as much as formerly venues of the state should be collected by to make the same profit. A great number a duty upon imports. This duty was laid of journeymen have learned the business; as a most convenient method of collecting it has become common and its wages are the revenues of government; a method by less. They have fallen from $1,50 to which to avoid, in the most effectual man$1 a day. But the profits of the mas- ner, the expense, the trouble, the danger, ter workman have fallen in a much lar- and the odium of a direct taxation of perger ratio, and for that which used to bring sonal and real property in the country. him two dollars, he now gets perhaps only This method of collecting revenue was esone, and of that one he has but a small teemed to be an equitable and a just methshare himself—the profits of his manufac- od, and one which, more than any other, tures not much exceeding the interest of would compel the wealthier part of the the capital borrowed for their production. people to bear their full share of the exWhen our artizan began life he could make penses of government; for as the greater his borrowed capital double itself in two part of the imports of every country have years. He now barely pays the interest and the character of luxuries, which can be supports his family, and is involved in the dispensed with by the poor, a revenue colcare and responsibility of managing a large lected chiefly upon imports would be very amount of other people's money,

effectually a tax upon the rich, but which The whole attention of our adventurous avoids entirely the odium of an excise or manufacturer is now directed upon two ob- of a graduated tax. jects : first to extend the sale of his wares While there was a manufacture of these to the utmost, by forcing them into every imported articles in the country which remarket and at every sacrifice, short of ruin; ceived them, the duty advanced their price and second, to make them at the least much more than it checked their consumpwages and with the cheapest and most ra- tion, so that the importers had to pay but pid machinery. The likelihood is, that by a small proportion of the duty—they sold this time he has connected himself in part- off their goods somewhat less, or at slightly nership with some large capitalist, who has reduced prices, throwing the payment of the money to employ, and who now becomes duty back upon the foreign producer. As the real owner of the establishment. To soon, however, as manufactures of the same this person the financial department is made articles and at the same prices began to over. It is he who stimulates production, spring up in the country, it was found newho reduces wages, who multiplies opera- cessary by the importers either to withdraw tives, and extends the business by his agents from the trade or to sell at reduced prices; into every region of the earth.

this went on until the profits of importaOther capitalists have meanwhile become tion began to be less than the profits of employed in the same kind of manufacture, manufacture, which had the effect to divert and by competition prices and consequently capital in New England from commerce wages, are driven down to the lowest to manufactures. point.

The very large and powerful importing

to a civilized existence, which is not easily tion, but to legislate for the good of the and abundantly procured in the temperate people--for the good of the greatest numclimate of the North American Continent. ber. If every want of the people, nay every The ability to export is measured by the comfort, is not fully and effectually pro- ability to produce a surplus for exportavided for, it is because of some serious er- tion; it is also measured by the value of ror, or some wilful perversion in the mind that surplus. If it is the raw material, the of the governing power ; that is to say, of ores of metals, the first substance of cloth, that portion of the people who make gov- or the like, it is not, and it never will be a ernment and its offices their peculiar care ; profitable exportation : the risk and the exto which

may

be added, those whose fortune pense of its conveyance will fall upon the or whose ability gives them power over the producer ; that this is the fact may be easiprejudices of that nameless multitude ly shown from the history of the cotton whose opinions are all prejudice.

trade. It has been demonstrated, in the When every thing has been produced and previous number of this journal, that the wrought up-when the last degree of value expense of exporting the raw material of has been communicated by agriculture and manufacture is far greater, in proportion to manufacture to the material which the its value, than the expense of exporting the earth offers to the industry of man-when manufactured article. The expense of the iron has been wrought into steel, and transporting a rod of iron worth only one the steel into implements--when the wool, dollar is greater than the expense of transthe flax and the cotton have been made in- porting a case of surgical instruments worth to cloth, and the hemp into cordage—when one hundred dollars, and so of other artithe copper and its kindred metals have cles; the higher the value communicated been wrought up into utensils and orna- to them by the industry of artizans, the ments; in short, when every possible value less the expense to the producer and manhas been communicated to the raw material ufacturer of bringing them to market. —when the home market is supplied with Because the supply in general exceeds these, it then becomes advantageous to a the demand, or very nearly equals it in most country to export its surplus to foreign coun- branches of trade, the producer is contintries, and not before. During the famine ually seeking a market; that is to say, the in Ireland, two years ago, grain was exported commerce of the country is eagerly and from Cork and from Dublin; that exporta- assiduously extending itself, seeking new tion, although profitable to the merchants customers in every quarter of the globe, who engaged in it, was injurious to Ireland. and sending out ships of war to establish The exportation of food from England at the its markets in foreign ports, to open new present time, to a country where food hap- channels of commerce with barbarous napened to be dearer than in England, might tions—to negotiate treaties for the advantage indeed bring fortunes to a few grain pro- of home industry, and sometimes to make ducers and exporters, but it would be highly conquests for the establishment of mercaninjurious to the English artizan who starves tile colonies. when grain rises beyond a certain price. It is thus absolutely shown by the conPolitical economy, after the school of Mal- duct of all trading nations, from the earlithus and Ricardo, regards all laws against est periods of time, that it is, in general, the exportation as a mere absurdity-as con- producer and the manufacturer who bear trary to the laws of trade-as an interfer- the cost of transportation, who send out ence with the natural and indefeasible right their products in their own ships, and defend of free trade. Humanity and common their commerce by expensive naval armasense may sometimes, it seems, array them- ments. That it is on the producer that selves against our political economists; a all risks fall, or if not all, the greater part prohibition of exportation may sometimes of risks, may be seen in the trade between be absolutely necessary to the safety of a any manufacturing town and its neighborpeople, and so may a prohibition of impor- ing great city, to which it sends its mertation. The rule of common sense and of chandize. It is chiefly the manufacturer true statesmanship is to legislate, not from who loses, and not the commission mera theory, either of free trade or of protec-chant, by fluctuations of the market. It

Unless the capitalist is protected against considering; that a country shall produce the foreigner, he will not lay out his wealth more than is necessary for its own conto the advantage of the country in which sumption ere it can become rich by a comhe is; he will spend his surplus in the pur- merce with foreign nations, and that the chase of foreign luxuries and conveniences, greater its home production, the more cerwhich the poor man, having no employment tain, and extended, and profitable will be to which he can turn his hand, that will its foreign commerce. The prohibition, yield him any profit, contents himself with by tariff, of a foreign manufacture, in such cultivating a small farm, just sufficient for a country as ours, creates a bome manufachis own maintenance and that of his fam- ture of the same. By the introduction of ily. As soon, however, as the capital of this new species of industry, either a new the wealthy is forced to remain at home, population is introduced from abroad, inand employ itself for the benefit of home creasing the market of the agriculturalist, industry, a positive increase begins to be or the same number of persons is withperceived in the productive power of the drawn from agricultural and other occupacountry ; population increases with greater tions, leaving of course a smaller number rapidity; a distribution of employment engaged in these, and consequently securensues ; numbers engaged in agriculture, ing to them not only a larger market, but quit that employment for manufacture ; the a larger profit in that market. If one man consequence being that those who remain supplies an entire village with food produupon their farms find themselves able to ced upon his own land, he will become the produce more, and at better prices. The dis- most important man in it, and other things tribution of employment tends invariably to being equal, the wealthiest. The smaller the the increase of productive power and of pro- proportion of population engaged in agriculduction. Every new mode of industry, which ture, other things being equal, the larger makes the proportion of agriculturists or the profits of the agriculturalist ; indeed, food producers smaller in proportion to the nothing could be a greater proof of the stuwhole, augments their profits, and gives pidity and dullness of the agricultural pothem opportunities of disposing of a larger pulation generally, than their opposition to surplus. Let us imagine a community the introduction of manufactures. By the composed of one thousand men, with their most stupid jealousy they mar their own families, employed in agriculture. They pro- fortunes. duce enough for themselves and their fam- The ability to export will be measured ilies, and, having no market, their wealth by the ability to produce ;* the ability to does not increase; add to that community produce will depend upon the variety of a thousand more, with their families, em- occupation assisted by the economy and ployed as artizans, in various trades, that industry of the population. An economicommunity will shortly become rich. The cal and industrious population, working at agricultural part of them have found a a variety of employments, will produce market for their surplus, and the artizans everything out of the earth, in such a counat the same time, have found a market for try as ours, (that is to say, if they are well their wares. A healthy man is always able protected,) everything that is necessary to produce more than is enough for his own for sustenance, clothing, and habitation. immediate necessities, in any occupation; For these purposes they will require no and therefore it is that free and orderly foreign assistance. The raw material of communities become wealthy when a mar- iron and steel, of copper, zinc, tin, and ket is opened to them for a sale for the lead, and other valuable metals used in the products of their industry.

arts ; every species of timber ; every maWe have said that the commercial pow- terial used for the manufacture of clother of a country depends upon two circum- ing, rough cloth, cordage, and felts ; every stances; that the first of these is its abil- kind of grain and serviceable fruit, all ity to produce, and the second its ability to kinds of animals employed in the economy command a market; for the first is need of the farm,—there is, in short, nothing ed an industrious and frugal population; that can be esteemed absolutely necessary for the second, a naval armament; but it is the first necessity that we are at present First shown by H. C. Carey.

to a civilized existence, which is not easily | tion, but to legislate for the good of the and abundantly procured in the temperate people--for the good of the greatest numclimate of the North American Continent. ber. If every want of the people, nay every The ability to export is measured by the comfort, is not fully and effectually pro- ability to produce a surplus for exportavided for, it is because of some serious er- tion ; it is also measured by the value of ror, or some wilful perversion in the mind that surplus. If it is the raw material, the of the governing power ; that is to say, of ores of metals, the first substance of cloth, that portion of the people who make gov- or the like, it is not, and it never will be a ernment and its offices their peculiar care ; profitable exportation: the risk and the exto which may be added, those whose fortune pense of its conveyance will fall upon the or whose ability gives them power over the producer ; that this is the fact may be easiprejudices of that nameless multitude ly shown from the history of the cotton whose opinions are all prejudice.

trade. It has been demonstrated, in the When every thing has been produced and previous number of this journal, that the wrought up-when the last degree of value expense of exporting the raw material of has been communicated by agriculture and manufacture is far greater, in proportion to manufacture to the material which the its value, than the expense of exporting the earth offers to the industry of man-when manufactured article. The expense of the iron has been wrought into steel, and transporting a rod of iron worth only one the steel into implements—when the wool, dollar is greater than the expense of transthe flax and the cotton have been made in- porting a case of surgical instruments worth to cloth, and the hemp into cordage—when one hundred dollars, and so of other artithe copper and its kindred metals have cles; the higher the value communicated been wrought up into utensils and orna- to them by the industry of artizans, the ments; in short, when every possible value | less the expense to the producer and manhas been communicated to the raw material ufacturer of bringing them to market. —when the home market is supplied with Because the supply in general exceeds these, it then becomes advantageous to a the demand, or very nearly equals it in most country to export its surplus to foreign coun- branches of trade, the producer is contintries, and not before. During the famine ually seeking a market ; that is to say, the in Ireland, two years ago, grain was exported commerce of the country is eagerly and from Cork and from Dublin; that exporta- assiduously extending itself, seeking new tion, although profitable to the merchants customers in every quarter of the globe, who engaged in it, was injurious to Ireland. and sending out ships of war to establish The exportation of food from England at the its markets in foreign ports, to open new present time, to a country where food hap- channels of commerce with barbarous napened to be dearer than in England, might tions—to negotiate treaties for the advantage indeed bring fortunes to a few grain pro- of home industry, and sometimes to make ducers and exporters, but it would be highly conquests for the establishment of mercaninjurious to the English artizan who starves tile colonies. when grain rises beyond a certain price. It is thus absolutely shown by the conPolitical economy, after the school of Mal- duct of all trading nations, from the earlithus and Ricardo, regards all laws against est periods of time, that it is, in general, the exportation as a mere absurdity—as con- producer and the manufacturer who bear trary to the laws of trade-as an interfer- the cost of transportation, who send out ence with the natural and indefeasible right their products in their own ships, and defend of free trade. Humanity and common their commerce by expensive naval armasense may sometimes, it seems, array them- ments. That it is on the producer that selves against our political economists; a all risks fall, or if not all, the greater part prohibition of exportation may sometimes of risks, may be seen in the trade between be absolutely necessary to the safety of a any manufacturing town and its neighborpeople, and so may a prohibition of impor- ing great city, to which it sends its mertation. The rule of common sense and of chandize. It is chiefly the manufacturer true statesmanship is to legislate, not from who loses, and not the commission mera theory, either of free trade or of protec- chant, by fluctuations of the market. It

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