The National System of Political Economy

Friedrich List
List, Friedrich
(1789-1846)
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Editor/Trans.
J. Shield Nicholson, ed. Sampson S. Lloyd, trans.
First Pub. Date
1841
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London: Longmans, Green, and Co.
Pub. Date
1909
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Book II, Chapter XX
THE MANUFACTURING POWER AND THE AGRICULTURAL INTEREST.

II.XX.1

IF protective duties in favour of home manufactures proved disadvantageous to the consumers of manufactured goods and served only to enrich the manufacturer, this disadvantage would especially be felt by the landed proprietor and the agriculturist, the most numerous and important class of those consumers. But it can be proved that even this class derives far greater advantages from the establishment of manufactures, than the manufacturers themselves do; for by means of these manufactures a demand for greater variety and for larger quantities of agricultural products is created, the value in exchange of these products is raised, the agriculturist is placed in a position to utilise his land and his powers of labour more profitably. Hence emanates an increase of rent, of profits, and wages; and the augmentation of rents and capital is followed by an increase in the selling value of land and in the wages of labour.

II.XX.2

The selling value of landed property is nothing else than capitalised rent; it is dependent, on the one hand, on the amount and the value of the rent, but, on the other hand, and chiefly, on the quantities of mental and material capital existing in the nation.

II.XX.3

Every individual and social improvement, especially every augmentation of productive power in the nation, but, most of all, of the manufacturing power, raises the amount of rents, while at the same time it lessens the proportion which rent bears to the gross produce. In an agricultural nation little developed and scantily peopled, e.g. in Poland, the proportion of rent amounts to one-half or one-third the gross produce; in a well-developed, populous, and wealthy nation, e.g. England, it only amounts to one-fourth or one-fifth part of that produce. Nevertheless, the actual worth of this smaller proportion is disproportionately greater than the worth of that larger proportion—in money value especially, and still more in manufactured goods. For the fifth part of twenty-five bushels (the average produce of wheat in England) equals five bushels; the third part, however, of nine bushels (the average produce of wheat in Poland) amounts only to three bushels; further, these five bushels in England are worth on an average 25s. to 30s.; while these three bushels in the interior of Poland are at the most worth 8s. to 9s. ; and finally, manufactured goods in England are at least twice as cheap as in Poland: consequently the English landed proprietor is able to buy for his 30s. of money-rent ten yards of cloth, but the Polish landowner for his 9s. of rent can obtain scarcely two yards, from which it is evident that the English landed proprietor by the fifth part of the gross produce is as rentier three times, and as consumer of manufactured goods five times, better off than the Polish landowner is by the third part of his gross produce. But that farmers and agricultural labourers also must in England (especially as consumers of manufactured goods) be disproportionately better off than in Poland, is shown by the fact that out of the produce of twenty-five bushels in England twenty bushels go for sowing, for cultivation of the field, wages, and profits : half of which (or ten bushels) devoted to the last two items have an average value of 60s. or twenty yards of cloth (at 3s. per yard), while from the produce of nine bushels in Poland only six bushels go for sowing, cultivation of the field, profit, and wages, half of which, or three bushels, devoted to the last two items, have merely a value of 10s. to 12s. or three and a half yards of cloth.

II.XX.4

Rent is a chief means of usefully employing material capital. Its price, therefore, depends also on the quantity of the capital existing in the nation and the proportion of the supply of it to the demand. By the surplus of the capital which accumulates in a manufacturing nation as the result of its home and foreign commerce, by the low rate of interest which there exists, and the circumstance that in a manufacturing and commercial nation a number of individuals who have become wealthy are always seeking to invest their surplus capital in land, the selling price of a given amount of rent of land is always disproportionately higher in such a nation than in the mere agricultural nation. In Poland the rent of land is sold at ten or twenty years' purchase; in England at thirty or forty years' purchase.

II.XX.5

In the proportion in which the selling value of the rent of land is higher in the manufacturing and commercial nation than in the agricultural nation, so also is the selling value of the land itself higher in the former than in the latter. For land of equal natural fertility in each country, the value is in England ten to twenty times higher than in Poland.

II.XX.6

That manufactures have an influence on the amount of rent, and therefore on the value in exchange of the land, is a fact which Adam Smith certainly notices at the conclusion of the ninth chapter of his first book, but only incidentally and without bringing the vast importance of manufactures in this respect properly to light. He there distinguishes those causes which influence directly the augmentation of rent (such as the improvement of the land itself, the increase in the number and the value of the cattle maintained upon it) from those causes which have only an indirect influence on that augmentation, among which latter he classes manufactures. In this manner he places the main cause of the augmentation of the rent and of the value of land (namely, the manufactures) in the background so that it is scarcely perceptible; while he places the improvement of the land itself and the increase of cattle, which are themselves for the most part the result of manufactures and of the commerce proceeding from them, as the chief cause, or at least as an equal cause, of that augmentation.

II.XX.7

Adam Smith and his followers have not recognised by any means to its full extent the value of manufactures in this respect.

II.XX.8

We have remarked that in consequence of manufactures and of the commerce connected with them, the value of land of equal natural fertility in England is ten to twenty times greater than in Poland. If we now compare the total produce of the English manufacturing production and of the English manufacturing capital with the total produce of the English agricultural production and of the English agricultural capital, we shall find that the greatest part of the wealth of the nation shows itself in the thus increased value of landed property.

II.XX.9

MacQueen*86has prepared the following estimate of the national wealth and national income of England:

I. NATIONAL CAPITAL.
1. In agriculture, lands, mines, and fisheries   2,604 mill.
Working capital in cattle, implements, stocks, and money   655 "
Household furniture and utensils of the agriculturists   52 "
    3,311 "
2. Invested in manufactures and commerce:    
Manufactures, and home trade in manufactured goods 178½ mill.  
Trade in colonial goods 11 "  
Foreign trade in manufactured goods 16½ "
 
  206 "  
To this add increase since 1835 (in which year this estimate was made) 12 "
218 mill.
Then in town buildings of all kinds, and in manufacturing buildings 605 mill.  
In ships 33½ "  
In bridges, canals, and railways 118 "  
In horses which are not used in agriculture 20 "
776½ mill.
Amount of the whole national capital (exclusive of the capital invested in the colonies, in foreign loans, and in the English public funds)   4,305½ mill.

II. GROSS NATIONAL PRODUCTION.
1. Of agriculture, mines, and fisheries 539 mill.
2. Manufacturing production 259½ "
  798½ "

II.XX.10

From this estimate it may be seen:

II.XX.11

1. That the value of the land devoted to agriculture amounts to 26/43 of the whole English national property, and is about twelve times more than the value of the whole capital invested in manufactures and in commerce.

II.XX.12

2. That the whole capital invested in agriculture amounts to over three-fourths of the English national capital.

II.XX.13

3. That the value of the whole fixed property in England, namely:

Of the land, &c. 2,604 mill.
Of houses in towns, and manufacturing buildings 605 "
Of canals and railways 118 "
  3,327 "

is therefore equal to more than three-fourths of the whole English national capital.

II.XX.14

4. That the manufacturing and commercial capital, inclusive of ships, does not altogether amount to more than 241½ millions, and therefore to only about 1/18 of the English national wealth.

II.XX.15

5. That the whole English agricultural capital, with 3,311 millions, yields a gross income of 539 millions, consequently about 16 per cent.; while manufacturing and commercial capital, amounting to 218 millions, gives a gross annual production of 259½ millions or of 120 per cent.

II.XX.16

It must here, above all things, be noted that the 218 millions manufacturing capital, with an annual production of 259½ millions, constitute the chief reason why the English agricultural capital could have attained to the enormous amount of 3,311 millions, and its annual produce to the sum of 539 millions. By far the greatest part of the agricultural capital consists in the value of land and cattle. Manufactures, by doubling and trebling the population of the country, by furnishing the means for an immense foreign commerce, for the acquisition and exploration of a number of colonies, and for a large mercantile marine, have increased in the same proportion the demand for means of subsistence and raw materials, have afforded to the agriculturist at once the means and the motive for satisfying this increased demand, have increased the exchangeable value of these products, and thus caused the proportionate increase in the amount and the selling value of the rent of land, consequently of the land itself. Were these 218 millions of manufacturing and commercial capital destroyed, we should see not merely the 259½ millions manufacturing production, but also the greatest part of the 3,311 millions agricultural capital, and consequently of the 539 millions agricultural production, disappear. The English national production would not merely lose 259½ millions (the value of its manufacturing production), but the value of land would decline to the value which it has in Poland, i.e. to the tenth or twentieth part of its present value.

II.XX.17

From this it follows that all capital which is devoted by the agricultural nation in a profitable manner to manufactures, increases in the course of time the value of the land tenfold. Experience and statistics everywhere confirm this statement. Everywhere it has been seen that in consequence of the establishment of manufactures the value of land and also that of the stock of capital rapidly increases. Let anyone compare these values in France (in 1789 and in 1840), in North America (in 1820 and in 1830), or in Germany (in 1830 and in 1840), how they have corresponded with a less developed or a more fully developed condition of manufactures, and he will find our observation everywhere confirmed.

II.XX.18

The reason for this appearance lies in the increased power of production in the nation, which emanates from the regular division of labour and from the strengthened confederation of the national powers, also from a better use of the mental and natural powers placed at the disposal of the nation, and from foreign commerce.

II.XX.19

These are the very same causes and effects which we may perceive in respect to improved means of transport; which not merely yield in themselves a revenue, and through it a return for the capital spent upon them, but also powerfully promote the development of manufactures and agriculture, whereby they increase in the course of time the value of the landed property within their districts to tenfold the value of the actual material capital which has been employed in creating them. The agriculturist, in comparison with the undertaker of such works (improved means of transport), has the great advantage of being quite sure of his tenfold gain on his invested capital and of obtaining this profit without making any sacrifices, while the contractor for the works must stake his whole capital. The position of the agriculturist is equally favourable as compared with that of the erector of new manufactories.

II.XX.20

If, however, this effect of manufactures on agricultural production, on rent, and therefore on the value of landed property, is so considerable and advantageous for all who are interested in agriculture; how, then, can it be maintained that protective measures would favour manufactures merely at the cost of the agriculturists?

II.XX.21

The material prosperity of agriculturists, as well as of all other private persons, principally depends on the point that the value of what they produce shall exceed the value of what they consume. It, therefore, is not so important to them that manufactured goods should be cheap, as especially that a large demand for various agricultural products should exist, and that these should bear a high value in exchange. Now, if measures of protection operate so that the agriculturist gains more by the improvement of the market for his own produce than he loses by the increase of the prices of such manufactured goods as he requires to buy, he cannot rightly be described as making a sacrifice in favour of the manufacturer. This effect is, however, always observable in the case of all nations who are capable of establishing a manufacturing power of their own, and in their case is most apparent during the first period of the rise of the native manufacturing industry; since just at that time most of the capital transferred to manufacturing industry is spent on the erection of dwelling houses and manufactories, the application of water power, &c., an expenditure which chiefly benefits the agriculturist. However much in the beginning the advantages of the greater sale of agricultural produce and of its increased value outweighs the disadvantage of the increased price of manufactured goods, so must this favourable condition always increase further to the advantage of the agriculturists, because the flourishing of the manufactories always tends in the course of time continually more and more to increase the prices obtainable for agricultural produce and to lessen the prices of manufactured goods.

II.XX.22

Further, the prosperity of the agriculturist and landed proprietor is especially dependent on the circumstance that the value of the instrument from which his income is derived, namely, his landed property, at least maintains its former position. This is not merely the chief condition of his prosperity, but frequently of his entire economical existence. For instance, it frequently happens that the annual production of the agriculturist exceeds his consumption, and nevertheless he finds himself ruined. This occurs if while his landed property is encumbered with money debts, the general credit becomes fluctuating; if on one side the demand for money capital exceeds the supply of it, and on the other hand the supply of land exceeds the demand. In such cases a general withdrawal of money loans and a general offer of land for sale arises, and consequently land becomes almost valueless, and a large number of the most enterprising, active, and economical land cultivators are ruined, not because their consumption has exceeded their production, but because the instrument of their production, their landed property, has lost in their hands a considerable portion of its value, in consequence of causes over which they had no control; further, because their credit has thereby become destroyed; and finally, because the amount of the money debts with which their landed property is encumbered is no longer in proportion to the money value of their possessions, which has become depressed by the general worthlessness of landed property. Such crises have occurred in Germany and North America during the last fifty years more than once, and in this manner a large proportion of the German nobility find themselves no longer in possession of property or landed estate, without having clearly perceived that they really owe this fate to the policy adopted by their brothers in England, the Tories whom they regard as so well disposed. The condition of the agriculturist and landed proprietor is, however, totally different in countries where manufactures flourish vigorously. There, while the productive capabilities of the land and the prices of produce are increased, he not merely gains the amount by which the value of his production exceeds the value of his consumption; he gains, as landed proprietor, not only an increase of annual rent, but the amount of capital represented by the increase of rent. His property doubles and trebles itself in value, not because he works more, improves his fields more, or saves more, but because the value of his property has been increased in consequence of the establishment of manufactures. This effect affords to him means and inducement for greater mental and bodily exertions, for improvement of his land, for the increase of his live stock, and for greater economy, notwithstanding increased consumption. With the increase in the value of his land his credit is raised, and with it the capability of procuring the material capital required for his improvements.

II.XX.23

Adam Smith passes over these conditions of the exchangeable value of land in silence. J. B. Say, on the contrary, believes that the exchangeable value of land is of little importance, inasmuch as, whether its value be high or low, it always serves equally well for production. It is sad to read from an author whom his German translators regard as a universal national authority, such fundamentally wrong views about a matter which affects so deeply the prosperity of nations. We, on the contrary, believe it essential to maintain that there is no surer test of national prosperity than the rising and falling of the value of the land, and that fluctuations and crises in that are to be classed among the most ruinous of all plagues that can befall a country.

II.XX.24

Into this erroneous view the school has also been led by its predilection for the theory of free trade (as it desires the latter term to be understood). For nowhere are fluctuations and crises in the value and price of land greater than in those purely agricultural nations which are in unrestricted commercial intercourse with rich and powerful manufacturing and commercial nations.

II.XX.25

Foreign commerce also, it is true, acts on the increase of rent and the value of land, but it does so incomparably less decidedly, uniformly, and permanently, than the establishment of home manufactures, the continuous regular increase of manufacturing production, and the exchange of home manufacturing products for home agricultural products.

II.XX.26

So long as the agricultural nation still possesses a large quantity of uncultivated or badly cultivated land, so long as it produces staple articles which are readily taken by the richer manufacturing nation in exchange for manufactured goods, so long as these articles are easy of transport, so long also as the demand for them is lasting and capable of annual increase at a rate corresponding with the growth of the productive powers of the agricultural nation, and so long as it is not interrupted by wars or foreign tariff regulations, under such circumstances foreign commerce has a powerful effect on the increase of rents and on the exchangeable value of land. But as soon as any one of these conditions fails or ceases to operate, foreign commerce may become the cause of national stagnation, nay frequently of considerable and long-continued retrogression.

II.XX.27

The fickleness of foreign demand has the most baneful effect of all in this respect, if in consequence of wars, failure of crops, diminution of importation from other parts, or owing to any other circumstances and occurrences, the manufacturing nation requires larger quantities especially of the necessaries of life or raw materials, or of the special staple articles referred to, and then if this demand again to a great extent ceases, in consequence of the restoration of peace, of rich harvests, of larger importation from other countries, or in consequence of political measures. If the demand lasts merely for a short time, some benefit may result from it to the agricultural nation; but if it last for years or a series of years then all the circumstances of the agricultural nation, the scale of expenditure of all private establishments, will have become regulated by it. The producer becomes accustomed to a certain scale of consumption; and certain enjoyments, which under other circumstances he would have regarded as luxuries, become necessaries to him. Relying on the increased yield and value of his landed property, he undertakes improvements in cultivation, in buildings, and makes purchases which otherwise he would never have done. Purchases and sales, contracts of letting land, loans, are concluded according to the scale of increased rents and values. The State itself does not hesitate to increase its expenses in accordance with the increased prosperity of private persons. But if this demand afterwards suddenly ceases, disproportion between production and consumption follows; disproportion between the decreased values of land and the money encumbrances upon it which continue undiminished in amount; disproportion between the money rent payable under the leases, and the money produce of the land which has been taken on lease; disproportion between national income and national expenditure; and in consequence of these disproportions, bankruptcy, embarrassment, discouragement, retrogression in the economical as well as in the mental and political development of the nation. Agricultural prosperity would under these circumstances act like the stimulant of opium or strong drink, stimulating merely for a moment, but weakening for a whole lifetime. It would be like Franklin's flash of lightning, which for a moment displayed the objects in a shining light, but only to throw them back into deeper darkness.

II.XX.28

A period of temporary and passing prosperity in agriculture is a far greater misfortune than uniform and lasting poverty. If prosperity is to bring real benefit to individuals and nations, it must be continuous. It, however, becomes continuous only in case it increases gradually, and in case the nation possesses guarantees for this increase and for its duration. A lower value of land is incomparably better than fluctuations in its value; it is only a gradual but steady increase in that value that affords to the nation lasting prosperity. And only by the possession of a manufacturing power of their own, can well-developed nations possess any guarantee for the steady and permanent increase of that value.

II.XX.29

To how very small an extent clear ideas prevail as to the effect of a home manufacturing power on the rent and value of land in comparison with the effect which foreign trade has on them, is shown most plainly by the circumstance that the proprietors of vineyards in France still always believe that they are injuriously affected by the French system of protection, and demand the greatest possible freedom of commerce with England in hopes of thereby increasing their rents.

II.XX.30

Dr. Bowring, in his report of the commercial relations existing between England and France, the fundamental tendency of which is to show the benefit to France which a larger importation of English fabrics and a consequently increasing exportation of French wines would occasion, has adduced facts from which the most striking proof against his own argument can be brought.

II.XX.31

Dr. Bowring quotes the importation of French wines into the Netherlands (2,515,193 gallons, 1829) against the annual importation into England (431,509 gallons) to prove how greatly the sale of French wines in England could be increased by freer commercial interchange between the two countries.

II.XX.32

Now supposing (although it is more than improbable that the sale of French wines in England would not find obstacles in the predilection existing there for spirituous liquors, for strong beer, and for the strong and cheap wines of Portugal, Spain, Sicily, Teneriffe, Madeira, and the Cape)—supposing that England really was to extend her consumption of French wines to the same proportion as that of the Netherlands, she would certainly (calculating according to her population) be able to increase her consumption to five or six million gallons (i.e. to from ten to fifteen fold her present amount); and from a superficial point of view this certainly appears to promise great advantage to France, and to the French vineyard proprietors.

II.XX.33

If, however, we investigate this matter to the bottom, we obtain another result. By as much freedom of trade as is possible—we will not say complete freedom of trade, although the latter would have to be accepted according to the principle enunciated, and to Bowring's arguments—it can scarcely be doubted that the English would draw to themselves a large part of the French market for manufactured goods (especially as regards the manufactures of woollens, cotton, linen, iron, and pottery). On the most moderate estimate we must assume, that in consequence of this decreased French manufacturing production one million fewer inhabitants would live in the French towns, and that one million fewer persons would be employed in agriculture for the purpose of supplying the citizens of those towns with raw material and necessaries of life. Now, Dr. Bowring himself estimates the consumption of the country population in France at 16½ gallons per head, and that of the town population at double that quantity, or 33 gallons per head. Thus in consequence of the diminution of the home manufacturing power effected by free trade, the internal consumption of wines would decrease by 50 million gallons, while the exportation of wine could only increase by 5 or 6 million gallons. Such a result could scarcely be to the special advantage of the French proprietors of vineyards, since the internal demand for wines would necessarily suffer ten times more than the external demand could possibly gain.

II.XX.34

In one word: it is evident as respects the production of wine, as also in that of meat, of corn, and of raw materials and provisions generally, that in the case of a great nation well fitted to establish a manufacturing power of its own, the internal manufacturing production occasions ten to twenty times more demand for the agricultural products of temperate climates, consequently acts ten to twenty times more effectually on the increase of the rent and exchangeable value of real estate, than the most flourishing exportation of such products can do. The most convincing proof of this may also be seen in the amount of rents and the exchangeable value of land near large towns, as compared with their amount and value in distant provinces, even though these latter are connected with the capital by good roads and conveniences for commercial intercourse.

II.XX.35

The doctrine of rent can either be considered from the point of view of values or from the point of view of productive powers; it can further be considered with respect merely to private relations, namely, the relations between landed proprietor, farmer, and labourer, or with especial regard to the social and national relations and conditions. The school has taken up this doctrine chiefly from the sole point of view of private economy. So far as we know, for instance, nothing has been adduced by it to show how the consumption of the rents of the nation is the more advantageous the more it takes place in the proximity of the place whence it is derived, but how nevertheless in the various States that consumption takes place principally at the seat of the sovereign (e.g. in absolute monarchies mostly in the national metropolis), far away from the provinces where it is produced, and therefore in a manner the least advantageous to agriculture, to the most useful industries, and to the development of the mental powers of the nation. Where the landowning aristocracy possess no rights and no political influence unless they live at the Court, or occupy offices of State, and where all public power and influence is centralised in the national metropolis, landowners are attracted to that central point, where almost exclusively they can find the means of satisfying their ambition, and opportunities for spending the income of their landed property in a pleasant manner; and the more that most landowners get accustomed to live in the capital, and the less that a residence in the provinces offers to each individual opportunities for social intercourse and for mental and material enjoyments of a more refined character, the more will provincial life repel him and the metropolis attract him. The province thereby loses and the metropolis gains almost all those means of mental improvement which result from the spending of rents, especially those manufactures and mental producers which would have been maintained by the rent. The metropolis under those circumstances, indeed, appears extremely attractive because it unites in itself all the talents of the intellectual workers and the greatest part of the material trades which produce articles of luxury. But the provinces are thereby deprived of those mental powers, of those material means, and especially of those industries, which chiefly enable the agriculturist to undertake agricultural improvements, and stimulate him to effect them.

II.XX.36

In these circumstances lies to a great extent the reason why in France, especially under absolute monarchy, alongside of a metropolis surpassing in intellect and splendour all towns of the European continent, agriculture made but slight progress, and the provinces were deficient in mental culture and in useful industries. But the more that the landed aristocracy gains in independence of the Court, and in influence in legislation and administration, the more that the representative system and the system of administration grants to the towns and provinces the right of administering their own local affairs and of taking part in the legislation and government of the State, and consequently the more that respect and influence can be attained in the provinces and by living there, so much the more will the landed aristocracy, and the educated and well-to-do citizens, be drawn to those localities from which they derived their rents, the greater also will be the influence of the expenditure of those rents on the development of the mental powers and social institutions, on the promotion of agriculture, and on the development of those industries which are useful to the great masses of the people in the province.

II.XX.37

The economical conditions of England afford proof of this observation. The fact that the English landed proprietor lives for the greatest portion of the year on his estates, promotes in manifold ways the improvement of English agriculture: directly, because the resident landowner devotes a portion of his rent to undertaking on his own account improvements in agriculture, or to supporting such improvements when undertaken by his tenants; indirectly, because his own consumption tends to support the manufactures and agencies of mental improvement and civilisation existing in the neighbourhood. From these circumstances it can further partly be explained why in Germany and in Switzerland, in spite of the want of large towns, of important means of transport, and of national institutions, agriculture and civilisation in general are in a much higher condition than in France.

II.XX.38

But the great error into which in this matter Adam Smith and his school have fallen is that which we have already before indicated, but which can be here more clearly shown, viz. that he did not clearly recognise the influence of manufactures on the increase of rents, on the market value of landed property itself, and on the agricultural capital, and did not state this by any means to its full extent, but, on the contrary, has drawn a comparison between agriculture and manufactures in such a manner that he would make it appear that agriculture is far more valuable and important to a nation than manufactures, and that the prosperity resulting from it is far more lasting than the prosperity resulting from the latter. Adam Smith in so doing merely sanctioned the erroneous view of the physiocratic school, although in a somewhat modified manner. He was evidently misled by the circumstance that—as we have already demonstrated by the statistical conditions of England—the material agricultural capital is (even in the richest manufacturing country) ten to twenty times more important than the material manufacturing capital; in fact, even the annual agricultural production far exceeds in value the total manufacturing capital. The same circumstance may also have induced the physiocratic school to over-estimate the value of agriculture in comparison with manufactures. Superficially considered, it certainly appears as if agriculture enriches a country ten times more, and consequently deserves ten times more consideration, and is ten times more important to the State than manufactures. This, however, is merely apparent. If we investigate the causes of this agricultural prosperity to their basis, we find them principally in the existence of manufactures. It is those 218 millions of manufacturing capital which have principally called into existence those 3,311 millions of agricultural capital. The same consideration holds good as respects means of transport; it is the money expended in constructing them which has made those lands which are within the reach of the canals more valuable. If the means of transport along a canal be destroyed, we may use the water which has been hitherto employed for transport, for irrigating meadows—apparently, therefore, for increasing agricultural capital and agricultural rents, &c.; but even supposing that by such a process the value of these meadows rose to millions, this alteration, apparently profitable to agriculture, will nevertheless lower the total value of the landed property which is within reach of the canal ten times more.

II.XX.39

Considered from this point of view, from the circumstance that the total manufacturing capital of a country is so small in comparison with its total agricultural capital, conclusions must be drawn of a totally different character from those which the present and preceding school have drawn from it. The maintenance and augmentation of the manufacturing power seem now, even to the agriculturist, the more valuable, the less capital as compared with agriculture it requires to absorb in itself and to put into circulation. Yes, it must now become evident to the agriculturist, and especially to the rent-owners and the landed proprietors of a country, that it would be to their interest to maintain and develop an internal manufacturing power, even had they to procure the requisite capital without hope of direct recompense; just as it is to their interest to construct canals, railways, and roads even if these undertakings yield no real nett profit. Let us apply the foregoing considerations to those industries which lie nearest and are most necessary to agriculture, e.g. flour mills; and there will be no room for doubt as to the correctness of our views. Compare, on the one hand, the value of landed property and rent in a district where a mill is not within reach of the agriculturist, with their value in those districts where this industry is carried on in their very midst, and we shall find that already this single industry has a considerable effect on the value of land and on rent; that there, under similar conditions of natural fertility, the total value of the land has not merely increased to double, but to ten or twenty times more than the cost of erecting the mill amounted to; and that the landed proprietors would have obtained considerable advantage by the erection of the mill, even if they had built it at their common expense and presented it to the miller. The latter circumstance, in fact, takes place every day in the backwoods of North America, where, in cases when an individual has not adequate capital to erect such works entirely at his own expense, the landowner gladly helps him by contributing labour, by team work, free gifts of timber, &c. In fact, the same thing also occurred, although in another form, in countries of earlier civilisation; here must undoubtedly be sought the origin of many ancient feudal 'common mill' rights.

II.XX.40

As it is in the case of the corn mill, so is it in those of saw, oil, and plaster mills, so is it in that of iron works; everywhere it can be proved that the rent and the value of landed property rise in proportion as the property lies nearer to these industries, and especially according as they are in closer or less close commercial relations with agriculture.

II.XX.41

And why should this not be the case with woollen, flax, hemp, paper, and cotton mills? Why not with all manufacturing industries? We see, at least, everywhere that rent and value of landed property rise in exactly the same proportion with the proximity of that property to the town, and with the degree in which the town is populous and industrious. If in such comparatively small districts we calculate the value of the landed property and the capital expended thereon, and, on the other hand, the value of the capital employed in various industries, and compare their total amount, we shall find everywhere that the former is at least ten times larger than the latter. But it would be folly to conclude from this that a nation obtains greater advantages by investing its material capital in agriculture than in manufactures, and that the former is in itself more favourable to the augmentation of capital than the latter. The increase of the material agricultural capital depends for the most part on the increase of the material manufacturing capital; and nations which do not recognise this truth, however much they may be favoured by nature in agriculture, will not only not progress, but will retrograde in wealth, population, culture, and power.

II.XX.42

We see, nevertheless, how the proprietors of rent and of landed property not unfrequently regard those fiscal and political regulations which aim at the establishment of a native manufacturing power as privileges which serve merely to enrich the manufacturers, the burden of which they (the landed interest) have exclusively to bear. They, who at the beginning of their agricultural operations so clearly perceived what great advantages they might obtain if a corn mill, a saw mill, or an iron work were established in their neighbourhood, that they themselves submitted to the greatest sacrifices in order to contribute towards the erection of such works, can no longer, when their interests as agriculturists have somewhat improved, comprehend what immense advantages the total agricultural interest of the country would derive from a perfectly developed national industry of its own, and how its own advantage demands that it should submit to those sacrifices without which this object cannot be attained. It therefore happens, that, only in a few and only in very well-educated nations, the mind of each separate landed proprietor, though it is generally keenly enough alive to those interests which lie close at hand, is sagacious enough to appreciate those greater ones which are manifest to a more extended view.

II.XX.43

It must not, moreover, be forgotten that the popular theory has materially contributed to confuse the opinions of landed proprietors. Smith and Say endeavoured everywhere to represent the exertions of manufacturers to obtain measures of protection as inspirations of mere self-interest, and to praise, on the contrary, the generosity and disinterestedness of the landed proprietors, who are far from claiming any such measures for themselves. It appears, however, that the landed proprietors have merely become mindful of and been stimulated to the virtue of disinterestedness, which is so highly attributed to them, in order to rid themselves of it. For in the greatest number of, and in the most important, manufacturing states, these landowners have also recently demanded and obtained measures of protection, although (as we have shown in another place) it is to their own greatest injury. If the landed proprietors formerly made sacrifices to establish a national manufacturing power of their own, they did what the agriculturist in a country place does when he makes sacrifices in order that a corn mill or an iron forge may be established in his vicinity. If the landed proprietors now require protection also for their agriculture, they do what those former landed proprietors would have done if, after the mill has been erected by their aid, they required the miller to help in cultivating their fields. Without doubt that would be a foolish demand. Agriculture can only progress, the rent and value of land can only increase, in the ratio in which manufactures and commerce flourish; and manufactures cannot flourish if the importation of raw materials and provisions is restricted. This the manufacturers everywhere felt. For the fact, however, that the landed proprietors notwithstanding obtained measures of protection in most large states, there is a double reason. Firstly, in states having representative government, the landowner's influence is paramount in legislation, and the manufacturers did not venture to oppose themselves perseveringly to the foolish demand of the landowners, fearing lest they might thereby incline the latter to favour the principles of free trade; they preferred to agree with the landed proprietors.

II.XX.44

It was then insinuated by the school to the landed proprietors that it is just as foolish to establish manufactures by artificial means as it would be to produce wine in cold climates in green-houses; that manufactures would originate in the natural course of things of their own accord; that agriculture affords incomparably more opportunity for the increase of capital than manufactures; that the capital of the nation is not to be augmented by artificial measures; that laws and State regulations can only induce a condition of things less favourable to the augmentation of wealth. Finally, where the admission could not be avoided that manufactures had an influence over agriculture, it was sought at least to represent that influence to be as little and as uncertain as possible. In any case (it was said) if manufactures had an influence over agriculture, at least everything is injurious to agriculture that is injurious to manufactures, and accordingly manufactures also had an influence on the increase of the rent of land, but merely an indirect one. But, on the other hand, the increase of population and of cattle, the improvements in agriculture, the perfection of the means of transport, &c. had a direct influence on the increase of rent. The case is the same here in reference to this distinction between direct and indirect influence as on many other points where the school draws this distinction (e.g. in respect of the results of mental culture), and here also is the example already mentioned by us applicable; it is like the fruit of the tree, which clearly (in the sense of the school) is an indirect result, inasmuch as it grows on the twig, which again is a fruit of the branch, this again is a fruit of the trunk, and the latter a fruit of the root, which alone is a direct product of the soil. Or would it not be just as sophistical to speak of the population, the stock of cattle, the means of transport, &c. as direct causes; but of manufactures, on the contrary, as an indirect cause of the augmentation of rents, while, nevertheless, one's very eyesight teaches one in every large manufacturing country that manufactures themselves are a chief cause of the augmentation of population, of the stock of cattle, and of means of transport, &c.? And would it be logical and just to co-ordinate these effects of manufactures with their cause—in fact, to put these results of manufactures at the head as main causes, and to put the manufactures themselves as an indirect (consequently, almost as a secondary) cause behind the former? And what else can have induced so deeply investigating a genius as Adam Smith to make use of an argument so perverted and so little in accordance with the actual nature of things, than a desire to put especially into the shade manufactures, and their influence on the prosperity and the power of the nation, and on the augmentation of the rent and the value of the land? And from what other motive can this have taken place than a wish to avoid explanations whose results would speak too loudly in favour of the system of protection? The school has been especially unfortunate since the time of Adam Smith in its investigations as to the nature of rent. Ricardo, and after him Mill, M'Culloch, and others, are of opinion that rent is paid on account of the natural productive fertility inherent in the land itself. Ricardo has based a whole system on this notion. If he had made an excursion to Canada, he would have been able to make observations there in every valley, on every hill, which would have convinced him that his theory is based on sand. As he, however, only took into account the circumstances of England, he fell into the erroneous idea that these English fields and meadows for whose pretended natural productive capability such handsome rents are now paid, have at all times been the same fields and meadows. The original natural productive capability of land is evidently so unimportant, and affords to the person using it so small an excess of products, that the rent derivable from it alone is not worth mentioning. All Canada in its original state (inhabited merely by hunters) would yield in meat and skins scarcely enough income to pay the salary of a single Oxonian professor of political economy. The natural productive capability of the soil in Malta consists of rocks, which would scarcely have yielded a rent at any time. If we follow up with the mind's eye the course of the civilisation of whole nations, and of their conversion from the condition of hunters to the pastoral condition, and from this to that of agriculturists, &c., we may easily convince ourselves that the rent everywhere was originally nil, and that it rose everywhere with the progress of civilisation, of population, and with the increase of mental and material capital. By comparing the mere agricultural nation with the agricultural, manufacturing, and commercial nation, it will be seen that in the latter twenty times more people live on rents than in the former. According to Marshal's statistics of Great Britain, for example, in England and Scotland 16,537,398 human beings were living in 1831, among whom were 1,116,398 rentiers. We could scarcely find in Poland on an equal space of land the twentieth part of this number. If we descend from generals to particulars and investigate the origin and cause of the rental of separate estates, we find everywhere that it is the result of a productive capability which has been bestowed on it not spontaneously by nature, but chiefly (directly or indirectly) through the mental and material labour and capital employed thereon and through the development of society. We see, indeed, how pieces of land yield rents which the hand of men has never stirred by cultivation, as, for instance, quarries, sand pits, pasture grounds; but this rent is merely the effect of the increase of culture, capital, and population in the vicinity. We see, on the other hand, that those pieces of land bring most rent whose natural productive capability has been totally destroyed, and which serve for no other use than for men to eat and drink, sit, sleep, or walk, work, or enjoy themselves, teach or be taught upon, viz. building sites.

II.XX.45

The basis of rent is the exclusive benefit or advantage which the ground yields to that individual at whose exclusive disposal it is placed, and the greatness of this benefit is determined especially according to the amount of available mental and material capital in the community in which he is placed, and also according to the opportunity which the special situation and peculiar character of the property and the utilisation of capital previously invested therein affords to the person exclusively possessing the property for obtaining material values, or for satisfying mental and bodily requirements and enjoyments.

II.XX.46

Rent is the interest of a capital which is fixed to a natural fund, or which is a capitalised natural fund. The territory, however, of that nation which has merely capitalised the natural funds devoted to agriculture, and which does so in that imperfect manner which is the case in mere agriculture, yields incomparably less rent than the territory of that nation which combines agricultural and manufacturing industry on its territory. The rentiers of such a country live mostly in the same nation which supplies the manufactured goods. But when the nation which is far advanced in agriculture and population establishes a manufacturing industry of its own, it capitalises (as we have already proved in a former chapter) not merely those powers of nature which are specially serviceable for manufactures and were hitherto unemployed, but also the greatest part of the manufacturing powers serving for agriculture. The increase of rent in such a nation, therefore, infinitely exceeds the interest of the material capital required to develop the manufacturing power.


Notes for this chapter


86.
General Statistics of the British Empire. London, 1836.

Chapter XXI

End of Notes


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