Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
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New York: Maynard, Merrill, and Co.
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Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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EXCHANGE OF WEALTH. Human society was organized originally in accordance with the restricted principle of the community. The community whose essential characteristics are labor in common and the division of its fruits, is, in fact, the simplest and most elementary form of human society. It is a suitable form so long as the men who compose the same group are engaged exclusively in one and the same kind of labor. This is the case with the savage tribes whose only labor is the chase. Animals which work in common, such as the bee, the ant, the beaver, etc., also adopt or conform to this form of society. But it ceases to be sufficient for man the moment he extends his sphere of action, and employs his labor in different ways. Thus it gradually disappeared, as communities enlarged and civilization began; it reappeared afterward only accidentally, and remained always and necessarily confined to small groups of individuals engaged in some one kind of labor.


—This first form of society was succeeded by another, in which men divided among themselves the different kinds of labor, the result of the wants of a growing civilization. In this new system, the germ of which was contained in the primitive communities, production was not in common. Each person chose for himself the kind of work which suited him, and devoted his energies to that alone. He may indeed have associated himself with a few others when the work which he proposed to undertake exceeded the powers of a single man; but all the different kinds of labor in the production of wealth were none the less performed separately. Does this mean that men hereby renounced society and social ties? On the contrary, man became in consequence more than ever a social animal; but the association of men changed in character; it assumed a form at once freer, more varied, and skillful. Instead of working in common, as they could and should have done when the work of production was one and simple, they divided the different kinds of the labor of production which had become more complex, among them. This was a new and more extensive mode of associating and combining their different kinds of labor; then they exchanged the results of these different kinds of labor, which served to complete one another. To the rudimentary system of laboring in common, and sharing the fruits of the common labor, succeeded the superior system of separate kinds of labor, and of the exchange of the products of that labor.


—The adoption of this system, gradually supplanting that of the primitive community, is the true source of man's greatness and power. So long as man is obliged to labor in a community, like the bee, the ant and the beaver, and to share the fruit of this common labor, he does not rise much above these animals, which have, like him—and perhaps in a higher degree than he possessed them in his state of primitive ignorance—the gifts of order and foresight. The savage tribes would perhaps be lower than the troops of beavers and swarms of bees, were it not for the fact that they bore within them, even in the community, the germs of the higher organization which humanity was afterward to attain. From that time onward we find men manifesting a propensity for bartering, trading, and exchanging one thing for another; a propensity which, as Adam Smith justly remarks, is not observable in other animals, and which by degrees produced the division of labor with all its consequences.


—But the disappearance of the system of the community, and the establishment of the system of divided labor which succeeded it, together with the exchange of products, which is at once its point of departure and its necessary complement, were not effected all at once. The change has been slow and gradual.


—We have just seen that the propensity of man for bartering and trading appears even among the savage tribes. The community subsists to divide among its members the much greater part of production and consumption, but exchange takes place in the case of things which are only accessory. The chase is engaged in in common, and is the great industry of the tribe; and the flesh, skin, horns, etc., of the animals killed are divided among the members of the tribe. War, which is at times another branch of industry, is waged in common, and the booty taken from the enemy is divided; but barter is carried on, elsewhere, in the objects of which the separate members of the tribe have acquired exclusive possession. One warrior, who is skilled in making bows and arrows, exchanges the weapons he has made for the skin of a wild beast, which another warrior offers him. A third gives his share of the booty for an ornament, which he intends for his wife. And owing to these exceptional cases of exchange, which become more and more frequent in proportion as the tribe becomes richer and its products more varied, there was some attempt at that division of labor which in time became general.


—Among nations which are simply barbarous, that is to say, which are no longer savage and yet not civilized, the community of production and its fruits is not so absolute as among the primitive tribes, but it is still very great. Whether it be a pastoral and nomadic people, or a people who have already begun to cultivate the soil, the chief wealth is always in common, and their chief labor collective labor. They possess a common herd, which furnishes wool and milk for all; they cultivate the soil in common, and divide the fruits it produces. And this must necessarily be so, for, in this stage of civilization, man is so weak in the presence of the obstacles of all kinds which brute nature puts in his way, that divided labor is impossible.


—"Wherever it has been possible," says Charles Comte, "to observe nations when they began to emerge from barbarism, it has been noticed that they cultivated the soil in common; that its products were placed in public storehouses, and that each family then received a part of them proportionate to its wants. This community of labor and of goods the Romans found in practice among several of the German nations; it was likewise observed among the tribes of North America by the first explorers who visited them; the English who founded the state of Virginia were obliged to have recourse to the same means to bring the soil under cultivation, * * * *," a fact which Charles Comte rightly explains by the powerlessness of man at such a time to subdue the earth, except by the united and energetic efforts of all.


—But even in this barbarous state the system of exchange, which embraces all products of secondary importance, is more extended than it was among the savage tribes, because production is more varied. It afterward extends by degrees, according as civilization progresses and the power of man increases, itself contributing largely to the increase of that power. The system of the community becomes restricted and contracted in the same proportion, without, however, disappearing entirely, even in the most advanced state of civilization. Some primary attempts at exchange are observed in the nascent societies which we see organized into close communities, and some remnants of the primitive community are found even in the most civilized nations.


—It is not, as Adam Smith remarks, a blind instinct that determines men to barter, trade and exchange, but a clear conception of the actual advantages which result from it. In fact, it is no very difficult matter to perceive that it is an advantage for each one to be able to part with his surplus, or that of which he has no present need, and receive in return what he is wanting in. This is what even the most untutored savage can understand. Exchange in early times scarcely extended beyond the things which each had in greater quantity than he needed; it was not until later, that, after having produced the division of labor, it embraced in most cases the sum total of production. The smallest intellect can understand the idea of exchange within these narrow limits. Nor could we understand why the practice of exchange did not spread more rapidly from the very first, did we not reflect that in primitive society it met with many obstacles which impeded its course.


—The practice of exchange as Skarbek well says, in his Théorie des richesses sociales, is subject to three essential conditions: the appropriation, the transmissibility and the diversity of things. To these three conditions we may add a fourth, the liberty and security of trade transactions. But let us first consider the three given by Skarbek.


—If when exchange takes place, "there is always one thing given by one party as compensation for another thing or equivalent value, these values must be previously possessed by the two parties who enter into a contract of exchange. This same principle of equity, which is the basis of exchange, does not admit as legal the exchange of a thing which the party exchanging does not possess by virtue of the right of property: the existence of this right, therefore, forms the first indispensable condition to the introduction and existence of exchange, for if all values were common to all men, if all had the same right to enjoy them, and no person could be excluded from their possession and their enjoyment, there would be no exchange, as ad would have the same right to the values capable of satisfying our wants. The existence of the exclusive right to property is, therefore, indispensable to the establishment of exchange among men."


—The transmissibility of things is no less necessary than their appropriation, and this quality all values do not possess. "A man's talents, intellectual faculties, or his ability to perform some special task, are goods, are real values, which can not be parted with to any one else, giving to the latter the right of ownership in them, for it is impossible for their possessor to divest himself of these goods in favor of another. The light and heat diffused through the atmosphere are also real goods and values indispensable to our existence, but they can not be appropriated by any one because they can not become the exclusive property of any one. This line of reasoning and these examples lead us to the conviction that even the values most precious to man can not become objects of exchange if not transmissible, if they can not be transferred by one man to another in virtue of the right of ownership. The second condition of exchange is the property inherent in things of passing from hand to hand, and of being transmissible, with the right of property."


—Finally, there must be diversity of values, or of exchangeable objects, without which exchange change itself would have no object. "If all the individuals who compose society were equally provided with the things able to satisfy their wants, if all possessed the same values, no one would desire to possess what belonged to others, being sufficiently provided with all things necessary to his existence. There must, therefore, be a diversity of exchangeable things, and men must possess different values, in order that exchange may be practiced among them. This diversity constitutes the third condition indispensable to the existence of all exchange.


—The idea of appropriation, even of individual appropriation, is so natural to man that it is found in all stages of civilization, even among savage tribes. But if private property exists in the earliest society, at least in the case of a certain number of objects, it is, as a general thing, very little respected. The stronger violates the private property of the weaker, even in the same tribe; and à fortiori is it thus outside the limits of the tribe. Under such conditions it is evident that exchange can not easily extend very far. As to transmissibility, although, strictly speaking, it exists in the case of all material values, it is in fact limited, among savage nations, by the general insecurity of circulation and of transportation. War being almost the permanent condition of primitive nations, it is only within their respective limits that the transmission of products can take place. What is true of savage tribes, is also true, though in a less degree, of barbarous nations. In this state of things, there may be a virtual but there can hardly be an effective transmissibility of products, since transmission is impossible except within a very small circle. For the same reason, there is no great diversity. So far as natural products are concerned, diversity can be great only when the nation extends over a large surface, for it is only then that the fruits of the earth are varied; and in the case of the products of human industry great diversity supposes a rather extensive division of labor, which can scarcely be realized within such narrow limits. Thus is exchange limited on all sides in this first stage of civilization. The spirit of violence, hostility and war reigns everywhere, and the general insecurity that results from this hostile spirit is the chief obstacle to the progress of exchange.


—But as soon as security begins to be established among men, the practice of exchange spreads rapidly. It is generally understood, however, that its development may be either favored or impeded by certain advantages or inconveniences of position. The particular circumstances which favor it among certain peoples are well indicated by Adam Smith in the passage which follows. After having shown, by several examples, the advantages of transportation by water over transportation by water over transportation by land, he thus continues: "Since such, therefore, are the advantages of water carriage, it is natural that the first improvements of art and industry should be made where this conveniency opens the whole world for a market to the produce of every sort of labor, and that they should always be much later in extending themselves into the inland parts of the country. The inland parts of the country can for a long time have no other market for the greater part of their goods but the country which lies about them and separates them from the seacoast and the great navigable rivers. The extent of this market, therefore, must for a long time be in proportion to the riches and populousness of that country, and consequently their improvement must always be posterior to the improvement of that country. In our North American colonies the plantations have constantly followed either the seacoast or the banks of the navigable rivers, and have scarce anywhere extended themselves to any considerable distance from both. The nations that, according to the best authenticated history, appear to have been first civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the greatest inlet that is known in the world, having no tides, nor consequently any waves, except such as are caused by the wind only, was, by the smoothness of its surface, as well as by the multitude of its islands and the proximity of its neighboring shores, extremely favorable to the infant navigation of the world, when, from their ignorance of the compass, men were afraid to quit the view of the coast, and from the imperfection of the art of ship building, to abandon themselves to the boisterous waves of the ocean. * * * *." "Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. Upper Egypt extends itself nowhere above a few miles from the Nile, and in lower Egypt that great river breaks itself into many different canals, which, with the assistance of a little art, seem to have afforded communication by water carriage not only between all the great towns, but between all the considerable villages, and even to many farm houses in the country; nearly in the same manner as the Rhine and the Meuse do in Holland at present. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt."


—These natural advantages lose, however, something of their original value, now that human industry has discovered so many means of supplying their place.


—However this may be, with the progress of time and civilization exchange has grown to be almost universally practiced among men. It has, in turn, introduced the division of labor, which is at once its consequence and complement, and which takes place more or less in all branches of industry. These two phenomena, which are intimately connected, constitute the fundamental basis of the industrial order existing in the world to-day. We shall not enlarge upon the advantages which result therefrom with regard to the relative productivity of labor, for these advantages have been sufficiently explained already while treating of the division of labor; but it remains for us here to show some general consequences that particularly belong to this part of the subject.


—Exchange, and the division of labor which flows from it, create between men relations as necessary, and ties as strong and as numerous, to say nothing more, as those which existed between them under the primitive system of the community. It is sometimes said that in society as it now is, man isolates himself—that he separates himself from his fellow-men, to with draw himself into his own individuality. But is he not, on the contrary, because of this division of labor, and of the law of exchange which is connected with it, in a constant and very restricted dependence upon everything that surrounds him? He works for his fellow-men, and they work for him; when the work of production is terminated by each, they exchange its products among themselves. Is there any closer bond of dependence than this? The difference between this new bond and the primitive one is, that the new one is more complex, and incomparably more favorable to the increase of production. There is, however, still another difference in its favor; it is much more susceptible of extension.


—In society in its primitive state production in common and the division of its fruits were necessarily confined within a very restricted circle. By its very nature, which was opposed to expansion, such a system could not extend beyond the limits of one tribe. Thus all social relations of man with his fellows ended here. Everything outside this limit was foreign to him, if not hostile. But from the moment that industry felt the influence of the division of labor and of exchange, the social bonds which it created among men were susceptible of indefinite increase. Provided peace reigns between different nations, exchange may take place from one to the other, just as it takes place within each one of them, and the division of labor may follow the same line of progress. Thus human sociability extends, it does not even stop now at the conventional limits of states; it crosses, if we may say so, mountains and seas, and aims at forming, little by little, upon the earth one immense society, varied in its forms, but always one, embracing the whole human race. Exchange could never have reached the point to which it has come, without the fulfillment of certain necessary conditions. (See CIRCULATION, DIVISION of LABOR, and MONEY; see also COMMERCE, and FREE TRADE.)


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