By Nassau Senior
Definition of the Science.–
We propose in the following Treatise to give an outline of the Science which treats of the Nature, the Production, and the Distribution of Wealth. To that Science we give the name of Political Economy. Our readers must be aware that that term has often been used in a much wider sense. The earlier writers who assumed the name of Political Economists avowedly treated not of Wealth but of Government. Mercier de la Riviere entitled his Work The Natural and Essential Organization of Society, and professed to propose an organization “which shall necessarily produce all the happiness that can be enjoyed on earth.” Sir James Steuart states, that “the principal object of the Science is to secure a certain fund of subsistence for all the inhabitants, to obviate every circumstance which may render it precarious, and to provide everything necessary for supplying the wants of the society.” The modern continental writers have in general entered into an equally extensive inquiry. “Political Economy,” says M. Storch, “is the Science of the natural laws which determine the prosperity of nations, that is to say, their wealth and their civilization.” M. Sismondi considers “the physical welfare of man, so far as it can be the work of government, as the object of Political Economy.” “Political Economy,” says M. Say, “is the economy of society; a Science combining the results of our observations on the nature and functions of the different parts of the social body.” The modern writers of the English school have in general professed to limit their attention to the theory of Wealth; but some of the most eminent among them, after having expressed their intention to confine themselves within what appears to us to be their proper province, have invaded that of the general legislator or the statesman. Thus Mr. M’Culloch, after having defined Political Economy to be “the Science of the laws which regulate the production, accumulation, distribution, and consumption of those articles or products that are necessarily useful or agreeable to man, and possess exchangeable value” or, “the Science of Values;” adds, that “its object is to point out the means by which the industry of man may be rendered most productive of wealth, to ascertain the circumstances most favourable to its accumulation, the proportions in which it is divided, and the mode in which it may be most advantageously consumed.” [From the Introduction]
First Pub. Date
London: Richard Griffin and Co.
The text of this edition is in the public domain. Picture of Nassau Senior courtesy of The Warren J. Samuels Portrait Collection at Duke University.
- Chapter 1, Introduction
- Chapter 2, Nature of Wealth
- Chapter 3, Statement of the Four Elementary Propositions of the Science of Political Economy
- Chapter 3, Statement of the Four Elementary Propositions of the Science of Political Economy, continued
- Chapter 4, Distribution of Wealth
- Chapter 4, Distribution of Wealth, continued
- Chapter 4, Distribution of Wealth, continued
Causes which Divert Labour from the Production of Commodities for the use of Labouring Families.
I. Rent. II. Taxation. III. Profit.
DISTRIBUTION OF WEALTH (continued).
If all labourers were employed in the production, direct or indirect, of commodities for their own use, the rate of wages would depend solely on the productiveness of labour. But it is obvious that this could never be the case, unless the labourers themselves were the owners of all the capital and all the natural agents of the country; a state of existence so utterly barbarous as to be without distinction of ranks or division of labour; a state in which a few scattered savage families have sometimes been found, but which exhibits none of the phenomena which it is the business of Political Economy to trace to their causes. A great portion of the labour employed in a civilized community is employed in the production of things in the use of which the labourer is not to participate. In a civilized community, therefore, the extent of the fund for the maintenance of labour depends not only on the productiveness of labour, but also on the number of persons employed in the production of things for the use of labourers, compared with the whole number of labouring families.
It appears to us that there are three purposes to which labour, which might otherwise be employed in supplying the fund for the use of labourers, may be diverted; namely, the production of things, first, to be used by the proprietors of natural agents; secondly, to be used by the government; and thirdly, to be used by capitalists; or, to speak more concisely, though less correctly, Labour, instead of being employed in the production of Wages, may be employed in the production of Rent, Taxation, or Profit.
First, with respect to
We have already seen that Rent depends in part on the productiveness of the natural agent for the assistance of which it is paid. Now any increase in the productive powers of that agent has a tendency to increase Rent, and can have none to diminish Wages.
The improvements in agricultural skill which have taken place during the last one hundred years have greatly increased the productiveness of the Lowlands of Scotland, and greatly increased the amount of rent; but that increase has been accompanied by an increase, though not in an equal ratio, of the amount of wages. Adam Smith states, that at the time when he wrote, (the period of the American War,) the usual price of common labour there was 8d. a-day, or 4s. a-week. It is now more than 8s. a-week; a sum capable of purchasing one-third more of raw produce, and three or four times as much of manufactured produce, as the former wages. Though the rental of the Lowlands has more than tripled, though a much larger portion of what the labourer produces is produced for the benefit of the landlord, yet the positive increase of the whole produce more than compensates this apparent inconvenience. Instead of producing, we will say, twenty bushels, of which the landlord received ten, the capitalist two, and the labourer eight, he produces perhaps thirty-five, of which the landlord receives twenty, the capitalist three, and the labourer twelve.
It appears, therefore, that the whole fund for the maintenance of labour is not necessarily diminished in consequence of a considerable portion of the labourers in a Country being employed in producing commodities for the use of the proprietors of the natural agents in that Country. Such labourers may, in fact, be considered as existing only in consequence of the existence of natural agents of extraordinary productiveness. They draw their subsistence not from the common fund, such as it otherwise would be, but from the addition made to that fund by that extraordinary productiveness.
Of course, when we speak of the amount of rent as unimportant to the labourer, we must be understood to mean only that rent which arises from the peculiar or increased productiveness of the natural agent in question, not of that which arises merely from an increase of population. We have already stated that, in the absence of disturbing causes, subsistence may be expected to increase in a greater ratio than population. But, as we then remarked, it certainly is possible, and perhaps, under the influence of superstition and misgovernment, it is probable, that the number of inhabitants in a Country might increase without a commensurate increase of the means, direct or indirect, of obtaining raw produce. Under such circumstances, rents would rise, and labour, which, if the population had remained stationary, would have been employed in the production of commodities for the use of labourers, would now be employed in producing commodities for the use of landlords. A rise of rent so occasioned would of course be detrimental to the mass of the community. It must be recollected, also, that the government of every Country has in some measure the power of deciding in what proportions the different classes of its subjects shall contribute to the public burdens. Some governments have attempted to exempt, as far as they could, the labourers from these burdens, and to throw them as far as they could upon the landlords. Others again have charged, or have allowed individuals to charge, the revenue arising from land with an expenditure for purposes in which the landlords were not solely or principally interested; such as the establishment and maintenance of roads and bridges, the supply of religious, moral, and intellectual instruction, the affording gratuitous medical relief to the sick, and even support to the able-bodied poor or their families. Others, on the other hand, have endeavoured to favour the landlords by imposing public expenditure on the more defenceless portion of the community, the labourers; and many have adopted each of these different lines of conduct on different occasions, or with respect to different portions of their expenditure. The tendency of every such institution must be to augment or diminish the proportion of the labourers employed for the benefit of landlords, compared with that of those who are employed for the benefit of labourers.
Another cause disturbing these proportions is the attempt by a government to create rent, if it can be called rent, by forcibly limiting the bounty of nature. It is possible that, if we had continued to prohibit the corn of Ireland, the incomes of English landlords might have been increased. So, if no coal were allowed to be burned except the produce of a single colliery, the possessor of that colliery would enjoy a princely revenue. But the gain from such a monopoly is not strictly rent; it is oppression and robbery.
2. Taxation:—Direction of Labour to supply the Consumption of Government.—The second purpose to which labour may be diverted from the supply of commodities for the use of labourers is the supply of the consumption of government. It is clear that all the labour that is employed in the support of
unnecessary establishments, and all the surplus labour which is employed in supporting on an unnecessary scale of expense those establishments which are strictly wanted, is so much taken from the revenue of the whole people. Still more injurious is the employment of labour for the purposes not merely useless, but positively mischievous; in the support of pagodas or bonzes, to keep up or disseminate a demoralizing superstition; in the support of armies and navies to plunder the commerce and ravage the territories of States, which nature enabled to confer mutual benefits, but the folly or wickedness of their rulers force to inflict mutual evil; or in the support of barriers and blockades to maintain the commercial war in which nations are accustomed to spend the breathing time of actual hostility. Unnecessary taxation, even when innocently applied, is fraud or robbery. It is difficult to find a designation for that which is applied to ends still more mischievous than the means; for that which makes plunder and extortion the instruments of still further injury.
It appears at first sight that only this mischievous or useless expenditure ought to be considered as a deduction from wages, since the labour which is employed in effecting the legitimate purposes of government is as much employed for the benefit of the labouring classes as that which is employed in the direct production of commodities for their use. The great object of government is to afford security, and security is of all blessings the most important, and the one least capable of being obtained by uncombined exertions. Those writers who have maintained that whatever is raised by taxation is deducted from the revenue of the Country, seem to have been led to this conclusion, by observing that the object of government is to occasion not positive but negative effects, not to produce good, but to prevent evil. And they have thought it right to deduct what is so spent from the net revenue of the people. But it must be recollected that the mere prevention of evil is one of the principal objects even of individual expenditure. We do not build houses because it is pleasant to breathe the confined atmosphere of a room, but because roofs and walls are the only means by which the inclemency of the seasons can be avoided. We do not buy drugs for our pleasure, but to avert or remove disease. Yet no one ever thought what he spends on medicines and on house rent a deduction from his income. When the members of a Friendly Society raise among themselves a fund for their relief in sickness, they do not consider their contributions a deduction from their wages, but a mode of expenditure. And it may be asked, in what respect does each man’s contribution towards the means by which the community is to be protected against internal and external violence and fraud differ from his contribution to a Friendly Society, excepting that those evils are more severe and more constantly imminent than sickness, and less capable of being warded off by individual efforts? It is true that, if the protection could be less expensively obtained, the fund for the maintenance of labour would be increased. But this is merely an exemplification of what we have already stated, that the extent of the fund for the maintenance of labour depends mainly on the productiveness of labour. If fewer fleets, and armies, and magistrates, could preserve the peace, that is, if labour were more productive in affording security, the labouring classes would,
cœteris paribus, be better off, just as they would be better off if fewer husbandmen or artisans could produce, directly or indirectly, the same quantity of corn; that is, if labour were more productive in supplying food.
But admitting all this to be true, it is also true, as we have already remarked, that the labourer is interested not only in the amount and application of the public revenue, and in the degree in which its payment affects the productiveness of labour, but also in the manner in which the burthen of supplying it is distributed. If the duty on wine were abolished, and an equal revenue raised by substituting an additional duty on coarse tobacco, the labourers, who are the only consumers of coarse tobacco, would purchase, with the same proportion of their wages, less tobacco than before, and the landlords and capitalists, who are the only consumers of wine, would purchase, with the same proportions of their rent and profits, more wine. The productiveness of our labour and the export of our manufactures would be undiminished; even the nature of our exports need not be altered; the only change would be in the returns. More wine and less tobacco would be imported. More labourers, therefore, than before, would be employed in obtaining wine for landlords and capitalists, and fewer in obtaining tobacco for labourers.
Nor must it be forgotten that a part of the taxes received by the government of one Country is often paid by the inhabitants of another. We now purchase annually in China about thirty millions of pounds of tea, at about 1s. a pound. On the tea so purchased we impose in different ways taxes to the amount of about two hundred per cent. Were we to repeal that taxation, and the price in China were to remain unaltered, our consumption would probably quadruple; but it is highly improbable that we could purchase one hundred and twenty millions of pounds of tea at 1s. a pound. The price in China might possibly double; it probably would rise one-half. That rise would have a tendency to raise the rent of land and the wages of labour in the tea-growing districts of China. It must be admitted, therefore, that they are both kept down by the existence of the tax; and that a portion of our duty on tea is, in fact, paid by the inhabitants of the tea-growing districts of China. The same reasoning proves that a part of the English duty on claret is paid by France, and that a part of the duties imposed by foreign nations on some of the commodities which we export, is paid by England. As a portion of the taxes raised by every State is, in fact, paid by the inhabitants of those Countries with which it has commercial relations, and as war and misgovernment are the great causes of taxation, an additional proof is afforded of the degree in which each Country is interested in the freedom and tranquillity of its neighbours.
We have lastly to consider the influence of profits on wages; or, in other words, the extent to which wages may be affected by the employment of labour to produce, instead of wages, things for the use of capitalists. In civilized and well-governed communities, this is the principal purpose to which labour, that otherwise might be employed for the benefit of the labourers, is diverted. The labourers who are employed for the benefit of the owners of natural agents may, as we have seen, be in general considered as a separate class, not withdrawn from the general body, but added to it by the existence of those natural agents. Those who are necessarily employed in effecting the legitimate purposes of government are, in fact, employed for the benefit of the labouring population, and the taxation which supplies their maintenance is not necessarily a deduction from wages, but a mode of expenditure. That few governments have confined themselves to their legitimate office, or employed in effecting that office only the necessary amount of labour, is a melancholy truth; and it is true that the fund for the maintenance of labour may be, and in most Countries has been, and is, more diminished in its amount, and more retarded in its increase, by misgovernment than by all other causes put together. But both misgovernment and that interference of the ruling power between the different classes of its subjects which we have already described as affecting the proportions of rent, profit, and wages to one another, are rather disturbing causes than necessary elements in the calculations of Political Economy; and with these allusions to their influence we shall dismiss them.
3. Influence of Profit on Wages.—Rent, then, being considered as something extrinsic, and Taxation a mode of expenditure, the only remaining deduction from Wages is Profit. And the productiveness of labour being given, the extent of the fund for the maintenance of labour will depend on the proportion which the number of labourers employed in producing things for the use of capitalists bears to that of those employed in producing things for the use of labourers; or, to use a more common expression, on the proportions in which the produce of labour is shared between the capitalist and the labourer.
In a previous portion of this Treatise we defined the word “abstinence” to mean the conduct of him who abstains from the unproductive consumption of any commodity, or who employs labour to produce distant results. In fact, the act of deferring enjoyment. And we explained that labour cannot be efficient unless assisted by, what is the result of abstinence, capital; nor abstinence in itself efficient unless assisted by labour; that each is disagreeable, and must therefore be called into exertion by the prospect of its specific remuneration; abstinence by the hope of profit, and labour by the hope of wages: and we stated, that although in fact the same individual often undergoes both abstinence and labour, yet that we thought it more convenient to consider the capitalist and the labourer as different persons. In the absence of rent, and of unnecessary or unequally distributed taxation, it is between these two classes that all that is produced is divided; and the question now to be considered is, what decides the proportion of the shares?
The facts which decide in what proportions the capitalist and labourer share the common fund appear to be two:
first, the general rate of profit in the Country on the advance of capital for a given period; and, secondly, the period which in each particular case has elapsed between the advance of the capital and the receipt of the profit.
General Rate of Profit.—First, as to the General Rate of Profit. We have seen that Profit is the remuneration of abstinence, and that abstinence is the deferring of enjoyment. The commodity which owes its existence or its preservation to abstinence is Capital. Its owner is termed a Capitalist, and he is said to
advance the means by which it is created or preserved. These means are partly materials and implements, (including, under the last term, not merely the ordinary tools of manual labour, but machinery, ships, and even roads, wharfs, and canals,) and partly labour. The materials and implements are supplied by the capitalist directly, the labour is supplied by him indirectly, by advancing the wages of the labourers. The labourers, aided by their implements, convert the materials into a new and vendible commodity, which is termed the
return of the capitalist. And the capitalist’s profit depends on the difference between the value of the advance and the value of the return. In producing the return, the wages and materials are necessarily consumed; they are parted with by the capitalist, and therefore termed circulating capital. The implements are not necessarily consumed; so far as they are unconsumed they remain the property of the capitalist, and are therefore termed fixed capital. The value of that portion of them which remains unconsumed must be added to that of the other returns before the profit can be estimated. The capital of a builder is almost entirely circulating. It consists principally of the bricks, lime, timber, stone, and slate which are the materials with which the house is to be constructed, and of the money necessary to pay the wages of the workmen. His fixed capital (exclusively of his knowledge) consists merely of scaffolding and ladders. All these he advances, and the result, after a certain interval, is a house, together with the former ladders and scaffolding somewhat the worse for wear. The cotton-spinner’s advances consist of raw cotton and wages, which are his circulating capital, and buildings and machinery, which are his fixed capital. His returns are a certain quantity of manufactured cotton, and the old buildings and machinery. So, a ship-owner’s advances consist of his ship, which is his fixed capital, and of its stores, and the wages of his sailors, which are his circulating capital; his returns are his freight, or, in other words, the hire which he receives for the use of his ship, the ship itself, such as it may be, after the voyage, and the stores, if any of them remain unconsumed. The profit in every case consists, as we have already stated, of the difference between the value of the advances and the value of the returns.
How Profit is to be Estimated.—But in what is this value to be estimated? Of course in something as unsusceptible as possible of variations in its general value. If the value of the advances and returns of the capitalist were estimated in corn or in hops, an abundant season might so reduce the value of either as to make him appear a gainer when in fact a loser. His returns might be worth twenty per cent. more of corn or hops than his advances, and yet be inferior in general value. The commodity least susceptible of variation in its general value, during short periods, is money; and partly from this circumstance, and partly from its general use as a measure of value, it is the medium in which calculations of profit are usually expressed. But, if considerable periods are to be taken, even money is subject to great variations, and any sudden change in the facility of obtaining it, arising from an increased fertility of the mines, or an increased productiveness of labour, or an abuse of banking or paper currency, or from similar causes operating in an opposite direction, may materially raise or depress the general value of money in any one Country, even during short periods.
The best Standard of Value for philosophical purposes appears to be the command of labour. In the first place, labour, next to money, is the principal subject of exchange. And, in the second place, labour, as the principal instrument of production, as the only instrument that can be employed at will in the creation of whatever is most wanted, varies less in its general value than any other article of exchange. Money, and the necessaries of life which approach nearest to it, derive in part their steadiness of value from their constant power of commanding labour, a power belonging to no other commodity. Estimated indeed in one class of objects, and it is the class most coveted by man, we mean power and pre-eminence, the value of the command of labour is almost invariable. Two persons who, at different times or in different places, can each command the labour of one thousand average labourers, may indeed enjoy in very different degrees the comforts and conveniences of life; but in power and pre-eminence in their respective Countries they must be nearly on a par. Each must be one man in a thousand. Each must be a thousand times richer than the mass of his Countrymen. If two shillings in Hindostan will command as many labourers as twenty in England, a Hindoo with £3000 a-year is, generally speaking, as great a man in Hindostan as an Englishman with £30,000 a-year in England.
Philosophically, therefore, we think that the value of the capitalist’s advances and returns ought to be estimated in their command of labour; popularly, their value is estimated in money; and, as the reciprocal values of money and labour seldom vary much between the times of those advances and returns, the popular mode of estimation is seldom incorrect; and we shall therefore use both indifferently.
The great difficulty of the subject arises from the circumstance, that the rate of profit is not the subject of contract, but of experiment, and cannot be ascertained even by an individual, except as to his
past operations. While a transaction is going on, the capitalist may hope that the value of the returns will exceed the value of the advances; he may hope that the excess will be considerable; but he cannot be certain that there will be any excess at all; that there will not be a positive loss. He may say what his profit
has been, but not what it
is. Frequently, indeed, he cannot say what it
has been. A whole series of mercantile or manufacturing transactions may be so linked together that, after having been apparently profitable for years, they may terminate in ruin.
If, however, we could ascertain the value of the returns in all the transactions in this Country which were concluded in the year ending yesterday; and also could ascertain what was the value of the advances, and the average time for which those advances were made before the returns were received, we should know what was the average rate of profit in this Country during the last year. Suppose this point ascertained, and the result to be, that the average rate of profit on an advance of capital for a year was in this Country during the last year ten per cent., the question recurs, what were the causes which determined it to be ten per cent. rather than five per cent. or twenty per cent.?
It appears to us that it must have depended principally on the previous conduct of the capitalists and of the labourers of this Country; on the value of the capital which at some previous period was appropriated by the capitalists to produce commodities for the use of labourers, or, to use a more concise expression, to produce wages; and the number of labourers whom the previous conduct of the labouring population had caused to exist.
Causes regulating the Rate of Profit.—It will be admitted that, in the absence of disturbing causes, the rate of profit in all employments of capital is equal. If we can ascertain, therefore, what are the causes which regulate the rate of profit in any one of the main employments of capital, we may infer that, in the absence of peculiar disturbance, either the same causes, or, causes of equal force, occasion it to be the same in all others. We will inquire, therefore, into the causes which regulate the rate of profit in one of the main employments of capital,—the advance of wages to the labourers who are themselves employed in producing wages,
using the word wages to signify commodities for the use of the labouring population.
To simplify the question, we will suppose a small colony settled in a district where there is abundance of fertile land, and protected by situation and character from external and internal violence, so that neither rent nor taxation need be supposed to exist: we will suppose it to be inhabited by ten capitalists and one thousand two hundred labouring families;
that the use of money is unknown; that all the buildings, the clothes, the furniture, and the food, in fact, the whole consumption of the people, is consumed in one year and reproduced in the next; that each family receives its wages for the year on the first day of the year, and completes its production on the last day, so that all the advances are made on the first day of the year, and all the returns received on the last day; and that, at the time when the situation of the colony was first noticed, each capitalist had in his possession wages for one hundred and twenty families during a year, the produce of the labour of one hundred families during the previous year, (being his capital, and which, to reduce it to one denomination, we will call one thousand quarters of corn;) and commodities for his own use, which we will call twenty casks of wine, the produce of the labour of twenty families during the previous year; (being the stock reserved for his own consumption.)
Under such circumstances, if each capitalist should employ his capital in setting one hundred families to work to reproduce wages, and twenty more to reproduce commodities for his own use, and the labouring population should neither increase nor diminish, the rate of profit would remain stationary at twenty per cent. per annum. The advances every year would be one thousand quarters of corn, being wages produced by the labour of one hundred families, and commanding the labour of one hundred and twenty; the returns would be a stock of wages commanding the labour of one hundred and twenty families during the next year, which would be, in fact, a reproduction of the previous capital of one thousand quarters, and also a stock of commodities for the capitalist’s own use, produced by one-sixth of the labour employed in reproducing the capital, and therefore one-sixth of the value of the capital. The value of the returns on an advance of capital for a year would exceed the value of the advances by one-sixth. The rate of profit therefore would, as we said before, remain stationary at twenty per cent. per annum. And five-sixths of the labourers would be employed in producing commodities for their own use, and one-sixth in producing commodities for the use of the capitalists.
We will now consider the effects of any alteration in the proportion of capital to labour. Suppose that emigration or an unhealthy season should diminish by fifty the number of labouring families: each capitalist would have the same capital; consisting of wages produced by the labour of one hundred families during the year, and which we have called one thousand quarters of corn: but the number of labourers being diminished by one-twenty-fourth, instead of commanding the labour of one hundred and twenty families, they would command the labour of only one hundred and fifteen. The one thousand quarters of corn would be divided among one hundred and fifteen families instead of among one hundred and twenty, and the capitalist would get only fifteen casks of wine during the subsequent year instead of twenty. To take the converse: if immigration or an increase of population should have increased the number of labourers by fifty, each capitalist, instead of one hundred and twenty families, would be able to command the labour of one hundred and twenty-five. The one thousand quarters would be divided among one hundred and twenty-five families, instead of among one hundred and twenty, and the capitalist might employ twenty-five families to produce wine for himself instead of twenty. In the one case, profits rise from twenty to about twenty-five per cent.; in the other, they fall to about fifteen. On the other hand, if we suppose the labouring population to remain stationary at one thousand two hundred families, but the capitalists, instead of employing each one hundred families in the production of wages, and twenty in the production of profits, to employ each one hundred and five in the production of wages, each capitalist would at the end of the year have a capital of one thousand and fifty quarters produced by the labour of one hundred and five families, and commanding the labour of one hundred and twenty; or if they each employed in the production of wages only ninety-five families, and in the production of profits twenty-five, each would have at the end of the year a capital of nine hundred and fifty quarters, produced by the labour of ninety-five families, and commanding the labour of one hundred and twenty. Profits would fall in the first instance from twenty per cent. to less than fifteen; in the second, they would rise to more than twenty-five. If, however, the increase of the number of labourers employed in the production of wages should be accompanied by a proportionate increase in the whole number of labourers; or if, when the number of labourers employed in the production of wages was diminished, the whole number of labourers should be diminished in proportion; or, in other words, if the proportion of capital to labour remained unaltered, the rate of profit would be also unaltered. If each were increased, or each diminished, but in different proportions, profits would rise or fall according to the relative variations in the supply of wages and labour.
It appears, therefore, that, under the most simple state of circumstances, the rate of profits depends, as we said before, on the previous conduct of the capitalists and the labourers in a Country.
In this hypothesis we have supposed all the capitalists to act together. And as every permanent increase of capital while the number of labourers remained the same would, under the supposed circumstances, occasion a proportionate diminution of the rate of profit, it never could be the interest of the capitalists, as a body, to increase their capital, except with a view to increase the number of labourers; or even to keep up their capital, except so far as it should be necessary to keep up the existing number of labourers. It would be their interest, if the population were incapable of increase, to devote to the production of wages labour just sufficient to produce the necessaries of life for that stationary population, if the population were advancing just sufficient to enable it to advance; to treat the labourers, in short, as a farmer treats his horses, or a slave-owner his slaves.
Under such circumstances, supposing the capitalists to be governed solely by their interest, the rate of profit would depend partly on the productiveness of labour, and partly on the period that must elapse between the time of the advances and of the returns. Given the period of advance, it would depend on the productiveness of labour. If a labourer by a year’s labour could produce a return which, to reduce it to one denomination, we will call ten quarters of corn, and five quarters were enough for his support, the rate of profit would be one hundred per cent. per annum. By an advance of five quarters the capitalist would obtain a return of ten. If the labourer could produce fifteen, the rate of profit would be two hundred per cent.; by an advance of five the capitalist would obtain fifteen. If the labourer could produce only seven and a-half, profits would be fifty per cent. On the other hand, the productiveness of labour being given, the rate of profit would depend on the period for which the capital must be advanced. When the labourer receiving five quarters as wages could, by a year’s labour, produce ten, a capitalist with a capital consisting of ten quarters could employ two labourers, each of whom would return to him ten quarters every year. But if, instead of returning ten quarters at the end of one year, a labourer returned twenty quarters at the end of two years, a capitalist with a capital of ten quarters would be able to employ only one labourer instead of two; for if he were to employ two his capital would be exhausted before it was reproduced. Only one-half of the number of labourers could be employed by the same amount of capital, and instead of getting a net revenue of ten quarters every year, the capitalist would get a net revenue of only ten quarters every two years.
Happily, however, the capitalists of a Country, do not act as a body. Each pursues his own scheme of aggrandizement, indifferent to its effect on his neighbours, and it is chiefly to their mutual competition that we owe the increase both of capital and of population. To revert to our original hypothesis; suppose one of the capitalists, instead of employing, like each of the others, twenty labourers to produce commodities for his own use and one hundred to produce wages, to employ one hundred and ten labourers in the production of wages. At the end of the year he would have a capital consisting of one thousand one hundred quarters of corn produced by the labour of one hundred and ten families, and commanding,
at the existing rate of wages, the labour of one hundred and thirty-two families; and the nine others would have each a capital consisting of one thousand quarters, produced by the labour of one hundred families, and commanding,
at the existing rate of wages, one hundred and twenty families. The whole capital of the Country, instead of its former amount, namely, ten thousand quarters, being wages for one thousand two hundred families, would amount to ten thousand one hundred quarters, being wages for one thousand two hundred and twelve families. But as there would be only one thousand two hundred families to receive them, profits would fall about one per cent., or from twenty per cent. to a fraction less than nineteen per cent. per annum. This fall of profits would prevent the capitalist, to whose conduct it was owing, from reaping the full benefit of his accumulation. He would find himself possessed of a capital consisting of one thousand one hundred quarters, being wages produced by the labour of one hundred and ten families, and commanding the labour of one hundred and thirty and a fraction; but every other capitalist would find his capital of one thousand quarters, produced by the labour of one hundred families, commanding the labour of a small fraction less than one hundred and nineteen families. The first, or accumulating capitalist, would find the value of his capital and the amount of his profits increased, though the rate of profits had fallen one per cent. But all the other capitalists would find both the value of their capital and the amount of their profits diminished.
Now there is nothing to which a capitalist submits so reluctantly as the diminution of the value of his capital. He is dissatisfied if it even remain stationary. Capitals are generally formed from small beginnings by acts of accumulation, which become in time habitual. The capitalist soon regards the increase of his capital as the great business of his life; and considers the greater part of his profit more as a means to that end than as a subject of enjoyment. It is probable, therefore, that the other capitalists in the Country would endeavour to keep the value of their capitals unimpaired, though at the expense of a diminution of the general rate of profit. One after another would follow the example of the first-mentioned capitalist, and devote to the increase of their respective capitals a portion of the labour previously employed in furnishing commodities for their own use. In time each capitalist, instead of employing one hundred families in the reproduction of capital, and twenty in supplying his own enjoyments, would employ one hundred and ten in the reproduction of capital, and only ten for his own purposes. The rate of profit would fall from twenty to ten per cent., and, of the one thousand two hundred labouring families, one thousand one hundred would be employed in producing wages, and only one hundred in producing profits. The annual produce of the Country, instead of ten thousand quarters of corn and two hundred casks of wine, would consist of ten thousand one hundred quarters of corn and one hundred casks of wine. Instead of five-sixths of the labourers in the Country being employed in producing commodities for the use of the labourers and one-sixth for the use of capitalists, eleven-twelfths would be employed for the benefit of the labourers, and only one-twelfth for the benefit of the capitalists.
This fall of profit, however, could take place only on the supposition of the number of labouring families remaining unaltered. But it is highly improbable that it could remain unincreased. The increase of wages would enable the labourers to marry earlier, or to raise more numerous families. If labour should remain equally productive, their numbers might increase until the former proportion of labourers to capital had been restored. All the results would be beneficial. The labourers would not be worse off than before the additional accumulation took place, and the capitalists would be better off. The value of their capitals and the amount of their profits would be increased, and the rate of profit would be again twenty per cent. per annum.
We set out with supposing a Country possessing an abundance of fertile land. Under such circumstances the productiveness of labour might for a long period continue, or even increase, with every addition to the number of its inhabitants. But in a densely-peopled Country the powers of labour seldom remain the same during an increase of population. In manufactures labour becomes proportionably more productive. In agriculture, unless aided by increased industry or skill, or by permanent improvements of the soil, it becomes proportionably less so. And, as the labourer consumes chiefly raw or slightly-manufactured produce, the increased facility of obtaining manufactures may not make up for an increased difficulty in obtaining raw produce. In an old country, therefore, when the rate of profit has been reduced by an increase of capital, it seldom can be fully restored by a proportionate increase of population, unless either the labourer receives a smaller quantity of raw produce than before, or the necessity of cultivating lands of inferior productiveness is obviated either by permanent improvements, such as draining marshes, or fertilizing bogs, or by additional industry or skill, or by the importation of raw produce. In such Countries the natural progress seems to be an increase of capital, occasioning a fall of the rate of profit; a check to that fall, occasioned by an increase of the labouring population; a check to that increase, occasioned by an increased difficulty in obtaining raw produce; and a diminution, rarely amounting to a removal, of that difficulty, occasioned by permanent agricultural improvements, increased industry or skill, or foreign importation; leaving, as the general result, a constant tendency towards an increase of capital and population, and towards a fall in the rate of profits.
In our hypothesis we have supposed the whole capital of the Country to be consumed and reproduced every year. Under such circumstances it has appeared that, the number of labourers remaining the same, no permanent addition could be made to capital without occasioning immediately a proportionate diminution of the rate of profit, since that addition would disappear in a year unless reproduced by a repetition of the sacrifice on the part of the capitalist by whom it was originally created. But the result would be different if that addition were made in a form requiring no further labour for its reproduction. Suppose the capitalist, instead of adding five to the hundred families employed in producing wages, were to employ the additional five in the construction of a durable machine enabling one man to do some piece of work that previously required two. At the end of the first year each capitalist would possess wages for one hundred and twenty families, produced by the labour of one hundred families; commodities for his own use, produced by the labour of fifteen families; and his machine, produced by the labour of five families. But in every subsequent year he might obtain wages for one hundred and twenty families by employing only ninety-nine families and his machine, and might employ twenty-one families in producing commodities for himself. Both the rate and the amount of profit would be increased without any diminution of wages. Such a machine is a new labourer added to the existing number of labourers, but a new labourer whom it costs nothing to maintain. It adds to the amount of the profit of the capitalist who has constructed it, without either taking from the profits of other capitalists, as must be the case when additional capital is created, which must be kept up and worked by additional labour; or taking from the wages of the other labourers, as must be the case when an additional labourer is added, whose subsistence must be taken from the common fund. A machine or implement is, in fact, merely a means by which the productiveness of labour is increased. The millions which have been expended in this Country in making roads, bridges, and ports, have had no tendency to reduce either the rate of profit or the amount of wages. They have, in fact, had a tendency to keep up both, by enabling labour to be more productive, and consequently enabling the circulating capital and the population of the Country to increase in corresponding ratios.
It appears, therefore, that in one of the main employments of capital, namely, the employment of labourers to produce commodities for the use of labourers, or, in other words, to produce wages, the difference between the value of the returns and the value of the advances depends on the amount of labour which at a previous period was devoted to the production of wages, compared with the amount of labour which those wages when produced can command. And as the rate of profits in every different employment of capital has a tendency to equality, we may infer that all capitals, however employed, yield about the same rate of profit as those which are employed in the production of wages.
Average Period of Advance of Capital.—The first of the two principles which regulate the division of the produce between the capitalist and the labourer, namely,
the rate of profit in the advance of capital for a given time, having been, in some measure, ascertained, we proceed to inquire into the causes which regulate the second principle, namely,
the average time for which the capital must be advanced.
It must be recollected, however, that the expression “the capitalist’s share,” though familiarly used by Economists, is not strictly correct. When the product is completed, it is the sole property of the capitalist, who has purchased it by paying in advance the labourer’s wages. What is meant, therefore, by “the capitalist’s share,” is that portion of the product, or of the price for which it sells, which the capitalist can retain and apply for his own purposes, keeping the value of his capital unimpaired. What is meant by “the labourer’s share,” is that portion of the produce, or of the price for which it sells, which the capitalist, if he keep his capital unimpaired, cannot employ for his own purposes, but must employ in advancing the price of the labour by which the work of reproduction is to be performed. We have already shown that, the period of advance being given, these proportions are determined by the rate of profit. It is equally clear that, the rate of profit being given, they must be determined by the period of advance. If a capitalist has a return which we will call twelve quarters of corn, and we wish to know how much of it he must retain as capital, and how much he may use as profit, the first inquiry is, For what period must he advance his capital before he can again obtain a similar return? The next inquiry is, What is the current rate of profit? If the answer to the first inquiry be, one year, and to the second, twenty per cent. per annum, it follows that, by constantly employing ten quarters as wages, he will receive two as profit. If the period of advance be only six months, the rate of profit continuing at twenty per cent. per annum, he must employ eleven and a fraction as capital, and will not receive quite one as profit. If the period of advance be two years, the rate of profit continuing at twenty per cent. per annum, rather less than eight quarters will form a sufficient capital, and rather more than four will be profit. With every prolongation of the period of advance, the rate of profit continuing the same, the capitalist’s share must increase. With every abridgement of that period it must diminish. And it is equally obvious that, the period of advance being given, the capitalist’s share must augment with every increase of the rate of profit, and diminish as that rate decreases.
On what then does the period for which capital is to be advanced depend? To this question no general answer can be given. The period differs according to the accidents of soil and climate; it varies indefinitely in every different business, and even in employments which, in other respects, are perfectly similar.
In Europe the harvest is annual; in Hindostan it recurs every six months. The average period for which agricultural wages are advanced must at least be twice as long in Europe as in Hindostan. A great part of the capital employed in breeding horses must be advanced four or five years; that employed in planting must be advanced forty or fifty. A very small part of the capital of a butcher or a baker is advanced for more than a week. The stock of a fishmonger spoils in a day; that of a Reinish wine-merchant is improved by being kept a century. As a general rule, the average period is longer or shorter in one Country than in another, in an inverse proportion to the general rate of profit. In the general market of the world, a Country in which the rate of profit is low has over one where it is high an advantage which increases at compound interest, as the period of advance is prolonged. The rate of profit in Russia is supposed to be above twice as high as in England. We will suppose that rate to be five per cent. per annum in England, and ten in Russia. A commodity produced in Russia by an advance of £10 for twenty years would sell for nearly £70. A commodity produced in England by the advance of £20 for the same time would sell for less than £60. The difference in the rate of profit would far outbalance a doubling of the first expenditure. Profits are supposed to be lower in Holland and in England than in any other part of the globe. The English and the Dutch, therefore, have almost a monopoly in those trades in which the returns are distant. Abstinence with them is a cheap instrument of production, and they use it to the utmost. In their commerce with other nations they generally pay in ready money, but give a very long credit. They purchase raw produce, and sell manufactures. In many instances they even advance to the foreign Countries the first expenses of production. The indigo of Bengal, the wines of the Cape, the wool of Australia, and the silver of Mexico, are in a great measure produced by the advance of English capital. The accumulated interest on such advances would be an intolerable addition to the value of the returns if the rate of profit were high. This circumstance occasions a tendency to uniformity in the proportion, in different Countries, in which the produce is shared between the capitalist and the labourer. Where profits are high, the capitalist’s share is kept down by the shortness of the period for which his capital is advanced. Where they are low, it is kept up by the prolongation of that period.
The labourer is far more interested in the comparative rate of profit than in the comparative period for which capital is advanced. The productiveness of labour and the period of advance being given, we have seen that the amount of his share of the product depends on the rate of profit. It is his interest, therefore, in the first place, that when capital is employed
in the production of the commodities which he consumes, all other things remaining the same, the rate of profit should be low. And if it were possible that the rate of profit in other employments could be higher, capital would be diverted from the only production in which the labourer is directly interested—the production of commodities for his own use—and the general fund for the maintenance of labour would be diminished. All other things, therefore, remaining the same, it is the labourer’s interest that the rate of profit should be
universally low. But it must be recollected, first, that the average period for which capital is advanced, especially in the production of the commodities used by labourers, is so short that the capitalist’s share is small even when profits are high: if the advance has been for six months, the capitalist’s share, at the high rate of twenty per cent. per annum, would be less than one-eleventh: and, secondly, that a high rate of profit is generally found to accompany a great productiveness of labour. And therefore that, in general, the labourer is better paid, or, in other words, receives a larger amount of commodities, when profits are high, that is when he receives a small share, than when profits are low, that is when he receives a large share, of the value of what he produces. The increase of the labourer’s share from ten-elevenths to twenty-one-twenty-seconds, which would be the consequence in the case which we have supposed of a fall of profits by one-half, would add very little to the
amount of his wages.
On the other hand, it is his interest that, when capital is employed in the production of
what he himself consumes, the period of advance should be short. We will suppose a labourer employed on the least productive soil to produce by a year’s labour, employed in hoeing and weeding, an additional produce of twenty-two quarters of corn; the wages of labour to be £20 a-year; the rate of profit to be ten per cent. per annum, and a year to elapse between the advance of the wages and the corn being fit for use; the price of the corn would be £22; the labourer would receive twenty quarters, or, what is the same, £20, with which he could purchase twenty quarters. But if corn were not fit for use until it had been kept for ten years, on the same data, the corn, instead of selling for £22, would sell for above £50; the labourer would receive less than ten quarters instead of twenty, or, what comes to the same, his wages, instead of twenty, would purchase less than ten quarters. To produce the corn would require the same degree of labour as before, but ten times as much abstinence.
Another consequence of the prolongation of the period of advance would be, that with the same amount of capital the capitalist would be able to maintain much fewer labourers than before. If ten quarters were necessary to maintain a labouring family during a year, and they could reproduce eleven in a state fit for consumption at the end of the year, a capital of one hundred quarters would enable a capitalist to keep in constant employ ten labouring families during the first year, and eleven during every subsequent year. But, if the corn were not fit for consumption till the end of ten years, a capitalist starting with a capital of one hundred quarters could not maintain more than a single family, for, if he were to maintain more, the capital would be exhausted before it was reproduced. The prolongation of the period of advance would have precisely the same effect as a diminished productiveness of labour.
But the prolongation of the period of advance of the capital employed in the production of the commodities which the labourer does not consume is utterly indifferent to him. If a labourer by a year’s labour can produce twenty-two ounces of lace, his wages being £20 a-year, and advanced for a year, and the rate of profit being ten per cent., he will receive ten-elevenths of the value of the lace, or, in other words, he might purchase with his wages twenty ounces of lace. If the lace required keeping for ten years, his wages would purchase less than ten ounces of the lace in its complete state. But as he never wishes to purchase lace, and as the prolongation of the period for which capital must be advanced in the production of lace would not affect either the productiveness of labour, or the rate of profit, or the period of advance in any other employment, it would be utterly indifferent to him; it would affect only the consumers of lace.
We have seen that, although practically high wages and high profits generally go together, yet, all other things remaining the same, it is the interest of the labourers that profits should be universally low. It is equally clear that it is the interest of the capitalists that they should be universally high. A fall in the rate of profit in any one employment has a tendency to force capital into the others. This diminishes the competition among the first-mentioned capitalists, but increases it among the others. The first are relieved, but it is only by the loss being spread over the whole body.
But a prolongation of the period of advance affects the capitalist only so far as he uses the specific commodity with respect to which that prolongation has taken place. The rate of profit on the advance of capital for a given period being given, the length of the period between the bottling of a pipe of port and its being fit for use affects a wine merchant only so far as he drinks port. As a consumer, it is his interest that the period should be short; as a capitalist it is immaterial to him.
We have now given an outline of the causes which affect the general rate of wages, the most important and the most difficult of all the subjects embraced by Political Economy. It has appeared, first, that the general rate of wages depends on the amount of the fund for the maintenance of labourers, compared with the number of labourers to be maintained.
Secondly, that the amount of that fund depends partly on the productiveness of labour in the production of the commodities used by the labourer, or, to speak more concisely, in the production of wages, and partly on the number of labourers employed in the production of wages compared with the whole number of labourers.
Thirdly, that the productiveness of labour depends on the character of the labourer, or the assistance which he derives from natural agents, and from capital, and on his freedom from interference.
Fourthly, that, in the absence of rent and improper or unequally-distributed taxation, the proportion of the labourers employed in producing wages to the whole number of labourers depends partly on the rate of profit, and partly on the time for which the capital employed in the production of wages must be advanced.
Fifthly, that the rate of profit, at any given time, depends on the previous conduct of capitalists and labourers.
And, sixthly, that the period for which capital must be advanced is subject to no general rule, but has a tendency to be prolonged when profits are low, and shortened when they are high.
The inquiry into the causes which regulate wages has, in a great measure, ascertained those which affect profits. We have to add only that profits may be considered in three points of view: first, as to their rate; secondly, as to their amount; and, thirdly, as to the amount of desirable objects which a given amount of profit will command. The causes which decide the rate of profit have been already considered. It has been shown that they depend on the proportion which the supply of capital employed in providing wages bears to the supply of labour. The rate being given, the amount of the profit received by any given capitalist must depend, of course, on the amount of his capital. It follows that, when the rate of profit falls in consequence of an increase of capital without a proportionate increase of labourers, the situation of the existing capitalists, as a body, cannot be deteriorated, unless the fall in the rate has been so great as to overbalance the increase of the amount. Two millions, at five per cent., would give as large an amount of profit as one million at ten. At seven and a-half per cent. they would give a much larger. And such is the tendency of an increase of capital to produce, not indeed a corresponding, but still a positive increase of population, that we believe there is no instance on record of the whole amount of profits having diminished with an increase of the whole amount of capital.
Totally distinct from the amount of profit is the amount of desirable objects which a given amount of profit will purchase. A Chinese and an English capitalist, each of whose annual profit will command the labour of ten families for a year, will enjoy in different degrees the comfort and conveniences of life. The Englishman will have more woollen goods and hardware, the Chinese more tea and silk. The difference depends on the different productiveness of labour in China and in England in the production of those commodities which are used by the capitalists in each Country. In the command of labour, and, in the rank in society which that command gives, they are on a par. We have seen that, as population advances, labour has a tendency to become less efficient in the production of raw produce, and more productive in manufactures. The same amount of profit therefore, will enable the capitalist in a thinly-peopled Country to enjoy coarse profusion, or among a dense population moderate refinement. A South American, with an annual income commanding the labour of one hundred families, would live in a log-house on the skirts of a forest, and keep, perhaps, one hundred horses. An Englishman with the same command of labour would live in a well-furnished villa and keep a chariot and pair. Each would possess sources of enjoyment totally beyond the reach of the other.
Variations of the Amount of Wages and the Rate of Profits in different Employments of Labour and Capital.
In the previous discussion we have assumed the existence of a certain average rate of Wages and average rate of Profits. We now propose to consider the influence of some specific causes on the amount of wages and the rate of profits in Different Employments of Labour and Capital.
The justly celebrated chapter on this subject in the
Wealth of Nations begins with the following words:—
“The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others. 1. The agreeableness or disagreeableness of the employments themselves. 2. The easiness and cheapness, or the difficulty and expense, of learning them. 3. The constancy or inconstancy of employment in them. 4. The small or great trust which must be reposed in those who exercise them. 5. The probability or improbability of success in them.” Book I. Ch. X.
As our remarks will be chiefly a commentary on those of Adam Smith, we shall, as far as we can, follow his arrangement. We shall begin, therefore, by the influence of agreeableness or disagreeableness.
1. Agreeableness.—The act of labouring implies a sacrifice of ease, and it is chiefly to this sacrifice that our attention is directed when we speak of wages as the remuneration for labour. But, as we have already observed, the indolence which generally indisposes to severe or long-continued bodily exertion is not in all cases the only feeling which the labourer has to conquer. His employment may be dangerous, or physically disagreeable, or degrading. In any one of these cases his wages are the reward not only of the fatigue, but of the hazard, the discomfort, or the discredit which he has encountered. Adam Smith, however, has remarked, that the prospect of hazards from which we can hope to extricate ourselves by courage and address is not disagreeable, and does not raise the wages of labour in any employment. “The dangers and hair-breadth escapes of a life of adventure, instead of disheartening young people, seem frequently to recommend a trade to them. But it is otherwise,” he observes, “with those in which courage and address can be of no avail. In trades which are known to be very unwholesome the wages of labour are always remarkably high.”
Unwholesomeness, indeed, is generally united to other disagreeable circumstances. Dirt, dust, deleterious atmosphere, exposure to continued heat or cold, or to sudden transitions from the one to the other, which are the principal causes of unhealthiness in any business, are also the principal causes of its being generally disagreeable. When toil, disease, and discomfort, are all to be encountered, the temptation must indeed be high. But this union is not universal. The trade of a house-painter is one of the most agreeable, and one of the most unwholesome, among ordinary occupations. On the other hand, that of a butcher, though brutal and disgusting, is eminently healthy. The wages of each are, we believe, about equal, and considerably exceed the remuneration for the mere labour undergone, which, in fact, is in both cases very trifling. But the fear of popular odium, and, what is always strongest amongst the least educated, the fear of popular ridicule, as they are amongst the most powerful feelings of our nature, are the most effectual means by which the wages of an employment can be increased. To Adam Smith’s instance of a public executioner may be added that of a common informer; both of whom are remunerated at a rate quite disproportioned to the quantity of work which they do. They are paid not so much for encountering toil as for being pelted and hissed. The most degrading of all common trades, perhaps, is that of a beggar; but when pursued as a trade, it is believed to be a very gainful one.
Such appears to be the influence upon wages of danger, discomfort, and disgrace. And it may be supposed that any peculiarly agreeable employment is generally as comparatively underpaid as peculiarly disagreeable ones are overpaid. Adam Smith has accordingly remarked that in a civilized society hunters and fishers, who follow as a trade what other people pursue as a pastime, are generally very poor people. “Fishermen” he observes, “have been poor from the times of Theocritus. The natural taste for these employments makes more people follow them than can live comfortably by them; and the produce of their labour, in proportion to its quantity, comes always too cheap to market to afford any thing but the most scanty subsistence to the labourers.” Hunting, however, can scarcely be said to exist as a trade in any well-civilized Country. And we doubt the accuracy of Adam Smith’s statement as to fishermen; unless, as perhaps was the case, he intended to confine them to the small number of anglers and poachers on rivers, who do, in fact, follow as a trade what other men enjoy as a pastime. Marine fishery is a business of too much toil and hardship to be very attractive; and if any proof, besides the well-fed persons and ample clothing of the men and their families were required, of its being well paid, it would be found in the fact that the capital employed in it, which is far from inconsiderable, generally belongs to the fishermen themselves.
As a general rule, we fear it must be admitted that the occupations open to those who are not possessed of capital differ only in the degree in which they are disagreeable. The least disagreeable are man’s primeval occupations, those of a shepherd and a tiller of the ground. And, accordingly, we believe that in every state of society the lowest wages are those which are paid to agricultural labourers. The current wages of common agricultural labourers, may, therefore, in general be considered as representing the value, at the time and place where they are paid, of mere bodily labour. If, at the same time and place, we find the services of any other labourer more highly paid, we may infer either that this employment is subject to some peculiar disadvantage, or that, in fact, rent or profit enter into his remuneration.
Adam Smith states that, in point of agreeableness or disagreeableness, there is little or no difference in the greater part of the different employments of stock, though a great deal in those of labour; and he infers, as we have seen, that average profits are more nearly on a level than average wages. That portion of profit which is simply the remuneration for abstinence is certainly, at the same time and place, nearly on a level; for abstinence, being a negative idea, does not admit of degrees, excepting in the amount of capital from the unproductive use of which the capitalist abstains, and the length of time during which he abstains.
But we cannot admit that the agreeableness or disagreeableness of the greater part of the different employments of capital is about the same. Nor would Adam Smith have stated them to be so unless he had used wages in a wider, and profit in a narrower sense than that which has been adopted in this Treatise. Wages, in the sense in which we have used the word, are paid almost exclusively for undergoing bodily labour or bodily inconvenience, and bodily labour is almost always disagreeable. But the labour of employing capital is principally mental, and mental exertion is often delightful. We frequently hear of men who are devoted to their profession or their business, however generally unattractive. A surgeon once told us that, whatever were his income, his utmost happiness would be to superintend a great military hospital. Half the miseries of mankind have arisen from the delight of statesmen in governing, and of generals in war. Again, the mere labourer receives mere pecuniary wages, or food, shelter, and clothing, of equal value. The capitalist is often paid by power or reputation, and sometimes receives the highest of human rewards, the consciousness that he has been widely and permanently useful. And, on the other hand, there are employments, as for instance the slave-trade, which imply fatigue, hardship, and danger, public execration, and, if a slave-trader can be supposed to reflect on the nature of his occupation, self-reproach. It is unnecessary to prove by a formal induction that, when almost all that renders life agreeable, or even endurable, is sacrificed to profit, the profit must be great, or that competition must reduce very low the pecuniary reward or valuable remuneration of occupations which seem to carry with them their own reward.
It may not appear obvious why the extra profit of a disagreeable employment should bear any proportion to the value of the capital employed in it. It must be remembered that, since the number of persons possessed of a given capital becomes rapidly smaller as the amount of the supposed capital is larger, the possessors of any given amount of capital enjoy a sort of monopoly, which becomes stricter and stricter as the given amount is larger; and, secondly, that the larger a man’s capital, and consequently his income, the greater must be the temptation necessary to induce him to encounter moral or physical evil in the hope of increasing it. On the other hand, both the trouble and the inferiority of rank that accompany any trade are generally in inverse proportion to the capital employed. Where, indeed, the objection to a trade arises from its moral turpitude, as in the case of the keeper of a gambling-house, or of any place of still more shameful resort, its extent will only increase its infamy. But in the absence of this peculiar objection, the same trade which on a small scale is mean, is respectable in a large way, and almost dignified when carried to its greatest extent. The trouble cannot be so completely got rid of, but, when the capital is large enough to enable the employment of clerks and junior partners of great knowledge and high character, it may often be so far reduced as to occupy a small portion of the principal’s daily time. There are at this instant many persons busily engaged, and even distinguished in politics and literature, who are also at the head of great banking, brewing, or mercantile establishments. It is not probable that their occupations in business can employ much of their time.
The result that might be anticipated from these opposing circumstances is, that that part of profit which is the remuneration for the trouble and other sacrifices, independent of abstinence made by the capitalist, though it must positively increase in amount, yet generally bears a smaller proportion to the capital employed as that capital increases in value. And this anticipation is, we think, confirmed by observation. There are, we apprehend, few persons employing in England a capital of £100,000, who would not be satisfied with a profit of less than ten per cent. per annum. A manufacturer of considerable eminence, with a capital of £40,000, complained to us of the smallness of his profits, which he estimated at twelve and a half per cent. About fifteen per cent. we believe to be the average that is expected by men with mercantile capitals between £10,000 and £20,000. Scarcely any wholesale trade can be carried on with a capital of less than £10,000. The capitals of less value, therefore, generally belong to farmers, shopkeepers, and small manufacturers, who, even when their capital amounts to £5000 or £6000, expect twenty per cent., and when it is lower a much larger per centage. We have heard that stall fruit-sellers calculate their gains at 2d. in the shilling, or twenty per cent. per day, or something more than 7000 per cent. per annum. This seems, however, almost too low. The capital employed at any one time seldom exceeds in value 5s., twenty per cent. on which would only be 1s. a-day; a sum which would scarcely pay the wages of the mere labour employed. It is, however, possible that the capital may sometimes be turned more than once in a day; and the capitalists in question, if they can be called so, are generally the old and infirm, whose labour is of little value. The calculation, therefore, may probably be correct, and we have mentioned it as the highest apparent rate of profit that we know.
2. Facility of learning the Business.—“Secondly,” says Adam Smith, “the wages of labour vary with the easiness and cheapness, or the difficulty and expense, of learning the business.
“When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out on it with at least the ordinary profits. A man educated at the expense of much labour and time may be compared to one of these expensive machines. The work which he learns to perform, it must be expected, over and above the usual wages of common labour, will replace to him the whole expense of his education with at least the ordinary profits of an equally valuable capital. It must do this in a reasonable time, regard being had to the very uncertain duration of human life, in the same manner as to the more certain duration of the machine. The difference between the wages of skilled labour and those of common labour is founded on this principle.” Book I. Ch. X.
We agree with the whole of this admirable passage, except that we think it shows the propriety of rather terming the surplus remuneration of skilled over common labour profit than wages. It is an advantage derived by the skilled labourer in consequence partly of his own previous conduct, and partly of that of his parents or friends;—of the labour and of the expense which they respectively contributed to his education. It is profit on a capital, though on that sort of capital which cannot be made available without the labour of its possessor.
Adam Smith has remarked that, in the liberal professions, this labour and expense are very inadequately remunerated; and he attributes the slightness of their remuneration first to the desire of the reputation which attends upon superior excellence in any of them; secondly, to the natural confidence which every man has, more or less, not only in his own abilities, but in his own good fortune; and thirdly, as far as literature and the church are concerned, to the number of persons who are educated for those occupations at the public expense.
The two first causes operate very forcibly. The influence of the third he has, we think, exaggerated, or, perhaps, its force may have much diminished since he wrote. In the first place, though our population has nearly doubled in the interval, the number of provisions for affording gratuitously the means of a liberal education has not materially increased. And, secondly, from the change which has taken place in the style of living at the places of education, and in many cases from the nominal value of the provisions having remained unaltered, while money has lost more than half its value, these provisions now afford much less real assistance to the persons who obtain them. Adam Smith seems to have supposed that the greater part of the clergy were educated at the expense of the public, and he expressly states that few were educated altogether at their own. But at present there are scarcely any undergraduates at either of our Universities wholly maintained by a foundation: probably there are not twenty who receive from such a source one-half of their expenditure, and by far the greater number receive no pecuniary assistance except from the relative cheapness of instruction. We say
relative cheapness, because the sum of money positively paid for instruction is perhaps as great at Oxford and Cambridge as at most other Universities; but the attention bestowed by the teacher on each individual student is considerably greater. In the foreign Universities a lecture is a discourse delivered by the professor; in ours, the College lectures, which are the principal means of instruction, are, in a great degree, examinations undergone by the pupils. There can be no comparison between the labour imposed on the teacher in these two modes of education. But that which is the laborious one necessarily confines each tutor to a small number of pupils. If our foundations did not afford them an income, our tutors must either require a much larger remuneration from each pupil, or adopt the foreign mode of teaching by discourses delivered to large assemblies.
The principal cause which fills the avenues to some of the liberal professions with candidates so numerous as materially to diminish one another’s reward is one which Adam Smith has omitted.
The average expense of providing in the cheapest manner for the maintenance of a child until it can maintain itself by ordinary labour may perhaps amount to about £40. This is double the sum for which a parish will indemnify the father of a bastard. The parish, however, speculates on the chances of the child’s death. The average expense of giving to a gentleman’s son the education which is essential to his holding his father’s rank cannot be estimated at less than £2040. But neither the labour which the boy undergoes, nor the expense borne by his father, is incurred principally in order to obtain future profit. The boy works under the stimulus of immediate praise or immediate punishment. It never occurs to the father that it would be cheaper to have his child nursed in the country at 2s. a-week till he is eight years old, and then removed to a farm-yard or a cotton-mill; and that in giving him a more expensive education he is engaging in a speculation which is likely to be unprofitable. To witness a son’s daily improvement is, with all well-disposed men, or rather with all men, except a few outcasts, one of the greatest sources of immediate gratification. The expense incurred for that purpose is as much repaid by immediate enjoyment as that which is incurred to obtain the most transitory pleasures. It is true that a further object may also be obtained, but the immediate motive is ample.
But the extra expense and labour thus incurred in some cases constitute the whole expense and labour of preparation for a liberal profession, and in all cases constitute the bulk of that expense, and labour. In the church they constitute the whole of the expense, and almost all the labour. A graduate of Oxford or Cambridge may have a very little more to read before he takes orders, but has absolutely nothing more to pay. What he obtains, therefore, as a clergyman, after deducting the mere wages of his additional labour, is pure gain. And when we consider how many are the motives for undergoing that labour, besides the merely pecuniary ones, we might be tempted to wonder that the pecuniary rewards should remain so high. Three circumstances keep them up: two by diminishing the number of candidates, and the third by raising the fund applicable to their use. The two former ones are the indelibility of the clerical character, and the interdiction of clergymen from almost all secular employments, especially from those which offer the most glittering rewards. Many men would enter the church if they could combine it with other occupations, or if they might quit it at pleasure, who refuse to enter into a path in which it is not permitted to turn back or to diverge. These are probably the principal causes which tend in this Country to keep down the number of clergymen. The revenue of the existing members is kept up by means of the fund set apart by law for their use, and somewhat equalized by the repeated intervention of the Legislature to raise the remuneration of curates by prohibiting the incumbent from offering, and the curate from accepting, a stipend as low as would have been fixed on mere principles of competition. The expense of entering the army is probably about equal to that of the church; for though about £600 is to be added for the price of the first commission and for outfit, the difference is about made up by the early age at which the profession can be begun. The expense of the navy is much less, and either profession may be entered upon without further preparatory study. The Legislature has fixed the pay and other advantages of the army and navy (moderate as they appear to be) much higher than would have been necessary to keep up the supply of qualified candidates. The difficulty of obtaining permission to enter either of them is so notorious, that few persons without considerable interest ever think of them. Yet, notwithstanding the influence of this feeling in diminishing the number of competitors, the Admiralty and the Horse Guards are besieged by candidates for first commissions ten times more numerous than the vacancies.
The same may be said of what are the subjects of almost a distinct profession, public offices. Small as the emoluments are, if they are to be considered as repaying the expenses of education, they are objects of eager competition.
If further proof were wanted that the number of the candidates for the liberal professions is principally kept up by the feeling which forces every parent to endeavour to give to his children at least the education of his own rank rather than by calculation, it may be found in the abundance of governesses. The expense of giving to a girl the education which will fit her to be a governess, though not quite equal to that of educating a boy as a gentleman, is yet very considerable: no part of it is ever supplied by the public; and yet that profession is so overstocked with candidates that the pay scarcely equals that of a servant.
An expense of nearly £1000 beyond the common expense of a regular education may be necessary to start a young man as a physician, and perhaps nearly £1500 as a barrister. The lower branches of the legal and medical professions are about as expensive as the church or the army. But no branch of either law or physic admits of practice till after an apprenticeship of from three to five years, or of success, without three or four years of diligent study. The effect of all these causes has been so much to diminish the number of competitors in the medical and legal professions, that we much doubt whether they are now, as Adam Smith states them to have been in his time, under-recompensed in point of pecuniary gain. We speak more doubtfully as to medicine; but we can say, from the observation of many years, that his statement that, “if you send your son to study the law, it is at least twenty to one if he ever makes such proficiency as will enable him to live by the business,” has no resemblance to the existing state of things. We have watched the progress of perhaps a hundred legal students, and, where fair diligence has been employed, success has been the rule, and failure the exception. Many, indeed, have not applied fair diligence; but we have seen much more success among the idle than failure among the laborious. So far from the chances being twenty to one
against a young lawyer, we should be inclined to rate them at two to one in his favour.
3. Constancy of Employment.—A third cause of variableness both in wages and in profits is constancy or inconstancy of employment. The variations which it occasions are, however, rather apparent than real. A London porter, employed for an hour, would think himself ill paid by less than a shilling. A pavior or a hodman, whose labour is much more severe, seldom receives more than 3d. an hour. But the pavior can always find a market for his services. At 3d. an hour, he can at an average earn three shillings a-day, or about £46 a-year. The porter may be sometimes a day without a job. If his employment be less regular by three-fourths than that of the pavior, to make his annual wages equal, his hourly wages must of course be three times as high. Adam Smith, indeed, thinks that his annual wages ought to be higher than the average, to make him some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion. But this evil is compensated, and, in most dispositions, more than compensated, by the diminution of his toil. We believe, after all, that nothing is so much disliked as steady, regular labour; and that the opportunities of idleness afforded by an occupation of irregular employment are so much more than an equivalent for its anxiety as to reduce the annual wages of such occupations to below the common average.
In the employment of capital, however, this compensation does not often exist. The occasional unproductiveness of his capital, generally speaking, affords no relief to the capitalist. It must, therefore, be compensated by a surplus profit, when productive, at least enough to balance its periods of unproductiveness. A house-builder’s capital often lies unproductive; there are some places in which the majority of the houses are unoccupied for nine months in the year. The builder’s profit during their occupation must be at least four times as great as if they were regularly inhabited. One of the consequences of the effect of irregularity of employment on wages and profits is to occasion many services and commodities to cheapen as the demand for them increases. A man who can count on employment for four hours a-day would be forced by competition to sell his services for nearly half of what he might have asked if he could have reckoned on only two hours. Prices in a watering-place always fall as the season becomes longer.
4. Trust.—The fourth cause assigned by Adam Smith for the variation in wages, the small or great Trust which must be reposed in the workman, appears to be in a great measure included in the second of his causes, the expense of education. Occasionally, indeed, we see persons receiving and deserving confidence though brought up under disadvantageous circumstances. The integrity of such persons must arise from a peculiarly happy natural disposition, and its reward may then be considered a species of rent; but, as a general rule, trustworthiness is the result of early moral cultivation, and in that case is as much to be considered a part of a man’s immaterial capital as his prudence or his knowledge.
5. Probability of Success.—The last of the causes mentioned by Adam Smith, as affecting the remuneration of different employments, is the Probability or Improbability of Success.
Uncertainty of success, in some respects, resembles inconstancy of employment. A few examples will show them to be different. The legal and medical professions are generally thought to be remarkably uncertain, but the employment of a successful physician or barrister is painfully incessant. On the other hand, a man may be morally sure that in a given occupation he will have a day’s work forty or fifty times during a year, and that his earnings on those occasions will supply well his annual subsistence. Such an occupation would be certain, notwithstanding its inconstancy.
Uncertainty of success cannot well affect the wages of common labour, since no man, unless he be to a certain extent a capitalist, unless he have a fund for his intermediate support, can devote himself to an employment in which the success is uncertain. But its apparent, and indeed its real effect on
profits, is very considerable.
Perfect knowledge, of course, excludes the idea of chance; but if all men had sufficient information to enable them to calculate fairly the chances of success, and were subject neither to rashness nor to timidity, it appears clear that even then the average profits of any employment would be raised by uncertainty of success.
When the sums are equal, to lose is obviously a greater evil than to gain is a good. If two men, with each a capital of £2000, toss up for £1000, the gainer augments his fortune by only one-third, and the loser sacrifices one-half. Laplace calculates the disadvantage at twenty-six per cent. At an equal game, he observes, the loss is relatively greater than the gain. Suppose a player with a fortune of 100 francs to risk 50 of them at heads and tails, his fortune, after he has deposited his stake, will be reduced to 87 francs; that is to say, 87 francs unhazarded would procure him as much happiness as 50 unhazarded, with 50 more subjected to the chance of being doubled or lost. Admitting this calculation to be correct, and admitting the existence of the degree of information and prudence which we have supposed, no one possessed of £10,000 would venture £5000 with an even chance of losing it, unless he had an even chance of gaining not merely £10,000, and an adequate profit on his capital of £5000, but could reckon on a further profit of £1300, as the price for undergoing the risk.
It is needless to say that men are far from possessing this degree either of information or of prudence. It is to be observed, however, that there are two sorts of uncertainty. In some cases the hazard is essentially connected with the employment itself, and recurs, in about an equal degree, at every operation. Smuggling, and the manufacture of gunpowder, are instances. Experience and skill may somewhat diminish the risk; but the best smuggler, and the best maker of gunpowder, probably each, suffers an average amount of loss. But there are employments in which success, if once obtained, is permanent. Such is often the case in mining. That mining is generally the road to ruin is notorious in all mining Countries; but there are miners who have never suffered a loss. The same may be said of the liberal professions. Granting them to be as uncertain as Adam Smith believed them to be, the evil to which that uncertainty refers is experienced only by those who fail. To those who succeed they afford a revenue eminently safe and regular. Their uncertainty is personal. It arises from the error to which every man is subject when he compares his own qualifications with those of his rivals. If he be found on the actual trial inferior, his failure is irretrievable. In the other alternative his success is as permanent. Where any business is necessarily and permanently hazardous, the fortunes of any one individual engaged in it afford a sample from which we may estimate the fortunes of all. If only one old farmer could give to us all his personal experience, we should probably have a tolerably correct conception of the hazards to which farming is exposed. But, if we were to estimate the chances of legal or medical success from the average of ten or twenty selected instances, we should be likely to be grossly misled. The first sort of uncertainty, therefore, is likely to be estimated with a much greater approach to correctness than the second.
Adam Smith believed both to be under-estimated, and, consequently, that the average profits of all hazardous employments are below the average profits of safe ones. His views are stated with so much force and ingenuity, that we will extract them at considerable length.
“The overweening conceit which the greater part of men have of their own abilities is an ancient evil remarked by the philosophers and moralists of all ages. Their absurd presumpt ionin their own good fortune has been less taken notice of. It is, however, if possible, still more universal. There is no man living who, when in tolerable health and spirits, has not some share of it. The chance of gain is by every man, more or less, overvalued; and the chance of loss is by most men undervalued; and by scarce any man, who is in tolerable health and spirits, valued at more than it is worth.
“That the chance of gain is naturally overvalued we may learn from the universal success of lotteries. The world neither ever saw, nor ever will see, a perfectly fair lottery, or one in which the whole gain compensated the whole loss, because the undertaker could make nothing by it. In the state lotteries the tickets are really not worth the price which is paid by the original subscribers, and yet commonly sell in the market for twenty, thirty, and sometimes forty per cent. advance. The vain hope of gaining some of the great prizes is the sole cause of this demand. The soberest people scarce look upon it as a folly to pay a small sum for the chance of gaining £10,000 or £20,000, though they know that even that small sum is perhaps twenty or thirty per cent. more than the chance is worth. In a lottery in which no prize exceeded £20, though, in other respects, it approached much nearer to a perfectly fair one than the common state lotteries, there would not be the same demand for tickets. In order to have a better chance for some of the great prizes, some people purchase several tickets, and others small shares in a still greater number. There is not, however, a more certain proposition in Mathematics, than that the more tickets you adventure upon, the more likely you are to be a loser. Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets, the nearer you approach to this certainty.
“That the chance of loss is frequently undervalued, and scarce ever valued more than it is worth, we may learn from the very moderate profit of insurers. In order to make insurance either from fire or sea risk a trade at all, the common premium must be sufficient to compensate the common losses, to pay the expenses of management, and to afford such a profit as might have been drawn from an equal capital employed in any common trade. The person who pays no more than this evidently pays no more than the real value of the risk, or the lowest price at which he can reasonably expect to insure it. But, though many people have made a little money by insurance, very few have made a great fortune: and from this consideration alone it seems evident enough that the ordinary balance of profit and loss is not more advantageous in this than in other common trades, by which so many people make fortunes. Moderate, however, as the premium of insurance commonly is, many people despise the risk too much to care to pay it. Taking the whole kingdom at an average, nineteen houses in twenty, or rather perhaps ninety-nine in a hundred, are not insured from fire. Sea risk is more alarming to the greater part of people, and the proportion of ships insured to those not insured is much greater. Many sail, however, at all seasons, and even in time of war, without any insurance. This may sometimes, perhaps, be done without any imprudence. When a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it were, insure one another. The premium saved upon them all may more than compensate such losses as they are likely to meet with in the common course of chances. The neglect of insurance upon shipping, however, in the same manner as upon houses, is, in most cases, the effect of no such nice calculation, but of mere thoughtless rashness and presumptuous contempt of the risk. The ordinary rate of profit always rises, more or less, with the risk. It does not, however, seem to rise in proportion to it, or so as to compensate it completely. Bankruptcies are most frequent in the most hazardous trades. The most hazardous of all trades, that of a smuggler, though, when the adventure succeeds, it is likewise the most profitable, is the infallible road to bankruptcy. The presumptuous hope of success seems to act here as upon all other occasions, and to entice so many adventurers into those hazardous trades, that their competition reduces their profit below what is sufficient to compensate the risk. To compensate it completely, the common returns ought, over and above the ordinary profits of stock, not only to make up for all occasional losses, but to afford a surplus profit to the adventurers of the same nature with the profits of insurers. But if the common returns were sufficient for all this, bankruptcies would not be more frequent in these than in other trades.” Book I. ch. X.
Whether Adam Smith’s conclusions be true or false, they certainly do not follow from his premises. Bankruptcies might be frequent in a trade of extraordinary profit. We will suppose ten merchants each to employ for a year a capital of £10,000 in a remarkably safe trade, and ten others to employ equal capitals for the same period in a hazardous trade; and ten per cent. per annum to be the average rate of profit in undertakings involving similar trouble. The capital of £100,000 engaged in the safe trade would, at the end of the year, be raised to £110,000, but be distributed in the same proportions as before. If the capital engaged in the hazardous trade were also, at the end of the year, to amount to £110,000, it is clear that each trade would have been equally profitable, although a different distribution of the capital might have ruined some, and made the fortunes of others, among the merchants engaged in it. Two might have lost, and two others might have doubled, their whole property. If the capital in the hazardous trade were found, at the end of the year, to have been raised from £100,000 to £120,000, it is clear that the hazardous trade must have been twice as profitable as the safe one, though the whole of the advantage might have fallen to two or three or even to one of the supposed ten merchants, leaving all the others to bankruptcy.
Insurance was a still more unfortunate source of argument; for all the premises that it affords lead to a conclusion directly opposed to Adam Smith’s. Insurance is one of the safest of employments. If its profits be remarkably moderate, their moderation can be accounted for only by the extra competition which its safety invites. It affords, therefore, at least one example in favour of the superior profit of hazardous employments. Nor can it be said that the majority of persons despise the risk too much to secure themselves against it by paying a moderate premium. So much do they fear the risk that they are willing to guard against it by paying a most immoderate premium. The sum received by the insurance office must, as Adam Smith has remarked, exceed the value of the risk by an amount sufficient to pay the expenses of management, and afford ordinary profit. The sum received by the office on common insurance against fire is 1s. 6d. per £100; of which at least 6d. must go to pay expenses and profit, leaving 1s. as the value of the risk. But a duty is also paid to government by the insured of 3s. per £100; so that the whole expense of insurance is 4s. 6d. per £100, or nearly five times the value of the risk. And, even at this extravagant rate, we believe that of good houses not one in a hundred is uninsured. So little do people despise the risk that, with their eyes open, they purchase a security against it at nearly five times its real value.
We suspect the fact to be that the imagination is unduly affected by the prospect either of enormous gain or of enormous loss; and, consequently, that men are ready to purchase the chance of obtaining a very great advantage, or the certainty of not suffering a very great disadvantage, at a price far beyond the value of either contingency. And this appears to be sufficiently proved by the facts which have been stated respecting insurance and lotteries. The English state lotteries of late times, indeed, afforded much more striking proofs of men’s tendency to over-estimate the chances of extravagant gain than those which Adam Smith had seen. The tickets were always worth exactly £10 a-piece—£10 for each ticket forming always a sum equal to the aggregate amount of all the prizes; the average price of a ticket was from £21 to £24 a-piece. Instead of twenty or thirty per cent. the purchasers paid more than one hundred per cent. more than the value of their hope, just as, in the case of insurance, they pay nearly five hundred per cent. more than the value of their fear. The purchasers of tickets seem to have considered the relation between £24 and £20,000, not that between £24 and the one two-thousandth chance of getting £20,000. Just as those who insure their houses compare £2 5s. with £1000 instead of comparing it with the one two-thousandth chance of losing £1000. Adam Smith has well remarked, that if the disproportion between the sum paid and the sum attainable were altered, even though the bargain were rendered more favourable, the competition for it would diminish. No one would buy half the tickets in a lottery, even at £12 a ticket; he would at once see the absurdity of paying £120,000 for an even chance of getting £200,000, though, if the state lottery were now opened, a folly just twice as great in kind would be committed by thousands. So if, instead of one in two thousand, which we believe to be about the present average, one house in ten were annually burned down, and the annual expense of insurance were £22 10s. per cent., insurance would diminish, though the terms would be twice as favourable as they now are.
Those employments which offer the possibility of a great return for a small outlay are of the nature of lotteries; and it may be supposed that they attract competition in proportion not so much to the real value of the contingency as to the excess of the possible return over the certain outlay. If that excess be very great, it may be supposed that the number of competitors in proportion to that of prizes will reduce so low the value of each man’s contingency as to render such employments on the whole unprofitable. In this Country the church, the army, and the bar, are such employments. They offer prizes that may satisfy to its utmost almost every human desire; and they require, as we have seen, from those who have already received a gentleman’s education, a very moderate further outlay: the church and the army scarcely any; the bar perhaps £1500. Under these circumstances, if the number of barristers were not kept down by the necessity of years of irksome study, and the emoluments of the church and of the army and navy kept up by the funds appropriated to their respective use, we have no doubt that the competition in these professions would reduce their average profit far below even its present moderate amount. We often hear proposals for equalizing, or rather for diminishing, the inequality in ecclesiastical preferments. At first sight it appears a waste to pay £20,000 a-year to an Archbishop for doing less than is required from the curate of a populous parish with only £100 a-year. But if our object were to obtain an expensively educated clergy on the cheapest terms, that object would probably be best effected, not by diminishing, but by increasing, the value of the highest prizes. The revenues of all the English Bishoprics put together fall short of £150,000 a-year. This sum, divided among the ten thousand livings, would raise the value of each by £15. Can any one believe that such a change would not diminish the worldly attractions of the church? Nothing sells so dearly as what is disposed of by a well-constructed lottery, and if we wish to sell salaries dearly, that is, to obtain as much work and knowledge as possible for as little pay as possible, the best means is to dazzle the imagination with a few splendid prizes, and, by magnificently overpaying one or two, to induce thousands to sell their services at half price.
We have been told that it was once proposed at Rome, as the easiest mode of constructing a vast dome, to raise a mound of earth of the required shape, and build over it. But the expense of then removing the earth appeared enormous. On the principle which we have endeavoured to illustrate it was proposed that in raising the mound the earth should be irregularly mixed with coins of gold, silver, and copper, amounting in the aggregate to a sum equal to about half the aggregate amount of the wages which it would have cost to remove it by paid labourers, and then to allow the populace to remove it in barrows, without payment. It was supposed that a sufficient number of persons would offer their services, though, in fact, working, in the aggregate, at half price.
We have already expressed an opinion that the bar is better paid than the church, and we attribute this to its being less of a lottery. The expenditure, as we have seen, is far greater, and the prizes, on the whole, are smaller. The learned profession which offers the fewest prizes and requires the largest outlay, that of a schoolmaster, as it ceases to be a lottery, is by far the best paid. There are probably few capitals which in the aggregate yield so certain and at the same time so large a profit.
In some few cases commercial adventures are of the nature of a lottery. Such were the shares which excited the strange fevers of cupidity and speculation which marked the years of 1720 and 1825. Of the thousands who crowded to buy Chili and Peruvian, and Rio la Plata, and Columbian, and Mexican shares, how many can be supposed not to have ascertained, but to have endeavoured to ascertain, or even to have thought of ascertaining, the probability of their Company’s success? All they knew was that Real del Monte shares, for which £70 had been given, were selling for £1200: and they bought a few shares in other Companies, because, if the speculation succeeded, they might get one thousand per cent., and if it failed they had only lost one or two hundred pounds.
Generally speaking, however, those commercial adventures which offer a large immediate advantage are more in the nature of ordinary gambling than of a lottery. The possible loss often equals or exceeds, and generally bears a large proportion to, the possible gain. The undue hopes and the undue fears, which we have described as excited by the prospect of enormous gain and enormous loss, may now be supposed to balance one another, and to leave room for the action of Adam Smith’s principle, an absurd presumption in our own good fortune. If his theory be correct, if every man in tolerable health and spirits have a tendency to miscalculate the chances in his own favour, it must follow that those speculations, which offer a great gain at the hazard of a great loss, invite so much competition as to be, if not positively unprofitable, at least less advantageous than ordinary employments. And we believe such to be the case. Mining and stock-jobbing are employments of capital which offer splendid success at the hazard of ruinous failure. The former employment is notorious not merely as affording less than average profits, but as affording no aggregate balance of profit at all as productive in the aggregate of loss. Knowledge, diligence, capital, all the materials of success, are applied in Cornwall to one of the richest mineral districts in the world, and yet it is supposed that the aggregate price of the whole of the copper and tin annually raised in Cornwall is not equal to the whole of the expense of raising it. A few capitalists, however, make large fortunes, and their success draws on the rest, generally to loss, often to ruin.
Even if speculation in the funds were attended by no expense, it is mathematically certain that it could in the aggregate afford no profit, as what is gained by one must be lost by another. But it is carried on at a very great expense. Every transfer costs a commission of 2s. 6d. for every £100 stock. A man who annually buys and sells stock to the amount of £800,000, and that is far from a large amount for any habitual speculator, must at an average pay for commission £1000 a-year; and that £1000 exactly represents the amount of his annual loss, supposing him to speculate with average success.
On the whole, however, though we attribute something to men’s confidence in their superior good fortune, we attribute much more to their confidence in their superior ability. A confidence which, if universal, would,
on the whole, produce as much miscalculation as the former, but which is not obviously irrational in
each particular instance, and on that very account is stronger, and more general.
The third and last class of the employments of capital which are subject to uncertainty comprises those which are just the reverse of a lottery: those in which the gain is in each instance small, but nearly certain; and the loss great, but highly improbable.
If our theory be correct, this remote contingency of great loss must in general be overvalued, and the capitalist who submits to it must, in addition to the profit which would content him if his business were perfectly safe, receive at an average in the first place an extra profit equal to the risk, and in the second place, a further profit to compensate his anxiety, to compensate the excess of evil occasioned by loss over the benefit that attends on gain, and a still further profit to compensate the undue importance which he is likely to attribute to the chances against him.
Now this class comprises almost all those employments of capital which, to distinguish them from those attended by extraordinary risk, are generally termed safe. A merchant or a manufacturer who wishes to be safe must in general give up the hope of obtaining great profit by any single transaction. But no productive employment of capital can be
perfectly safe. A capitalist may, indeed,
lend his capital to one who wishes to employ it, on receiving a pledge, and the pledge may so much exceed in value the sum lent as to make the loan secure; but the capital itself, if employed, must be risked. Credit must be given, confidence must be reposed in agents, and when every precaution has been taken, an extraordinary season, an unexpected source of supply, a sudden change in foreign or domestic politics, or a commercial panic, may produce ruin out of the best-arranged operations. No man in business can be perfectly sure that in ten years’ time he will not be a bankrupt. If we are right, this risk of enormous loss, when unbalanced by the hope of enormous gain, must be compensated by an extra profit of something more than its value, just as the chance of enormous gain, when not balanced by the fear of enormous loss, is purchased at more than its value; and as the latter class of employments gives a smaller, so the former must give a greater average return than would be afforded by an employment perfectly safe, if any such there be.
Inequalities in Wages and Profits occasioned by the difficulty of transferring Capital and Labour from one Employment to another.
The inequalities in wages and profits which we have as yet considered arise from causes inherent in the employments themselves which have been the subjects of discussion, and would, generally speaking, exist even if one occupation could at will be exchanged for another. But great inequalities are found which cannot be accounted for by any circumstances leading men to prefer one employment to another, and which therefore continue only in consequence of the difficulties experienced by the labourers and the capitalists in changing their employments.
The difficulty with which labour is transferred from one occupation to another is the principal evil of a high state of civilization. It exists in proportion to the division of labour. In a savage state almost every man is equally fit to exercise, and in fact does exercise, almost every employment. But in the progress of improvement two circumstances combine to render narrower and narrower the field within which a given individual can be profitably employed. In the first place the operations in which he is engaged become fewer and fewer. “In a pin-manufactory,” says Adam Smith, “one man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is in this manner divided into about eighteen distinct operations.” In a large manufactory the man who is engaged in one of these operations has little experience in any of the others.
And, in the second place, the skill which the division of labour gives to each distinct class of artificers generally prevents whatever peculiar dexterity an individual may have from being of any value in a business to which he has not been brought up. A workman whose specific labour has ceased to be in demand finds every other long-established employment filled by persons whose time has been devoted to it from the age at which their organs were still pliable and their attention fresh.
Mr. Ewart, one of the many intelligent witnesses examined by the Committee on Artisans and Machinery, is asked:—
“Can you state any facts to prove the inefficiency of even the best workmen when they are taken out of the immediate line of their daily business, though in the same trade?”
He replies, “Yes, I can: I should state particularly the case of the clock and watch tool and movement makers in Lancashire; they are considered the best workmen; they use the same sort of tools that the cotton-machine makers use; but they are brought up to no employment but making those clock and watch tools and movements. When those men come to be employed in making cotton machines, we find that they have almost as much to learn as if they had never learnt any working in metal at all. We have found them quite insufficient to do any ordinary filing and turning.”
Garnier, in the amusing notes to his translation of Adam Smith, contrasts the comfort of the lower orders in France with the pauperism of England, and ascribes the difference which he discovers to artificial restraints on the circulation of labour in England, and the absence of such restraints in France. “Under a government,” he observes, “which does not interfere with the direction of industry, it is impossible that a man in health and strength can be without employment, unless his vices make employment intolerable to him. Let the workman be allowed to choose the market for his labour, and you may be sure that he will find one, and more and more certainly in proportion to the wealth of the Country. The complaint of want of work is the threadbare excuse of the idler who prefers relief to wages. If he were to search for it, he would find it as well as his companions. In France, though our population is one-third more numerous than that of England, and the fund for the support of labour much smaller, the labouring classes are free from want, or even discomfort.”
There can be no doubt that we have among our institutions and our habits much that fetters and misdirects the industry of our labourers; and that these causes frequently occasion, and always prolong, the want of employment to which large portions of our labourers are frequently exposed. We believe, too, that from many of these causes France is comparatively free. The monopolies possessed by towns and by incorporated bodies of artificers, with their oppressive bye-laws and duties, were swept away by the Revolution. Much, however, that is productive of evils similar in kind, still remains. Not long ago the number of butchers in Paris was, by an ordonnance of police, restricted to four hundred. The most important of all employments, that of affording education, is a government monopoly; and the commercial code of France is even worse than our own. If, therefore, the labouring classes of France never suffer from want of employment, they do not owe their immunity to a complete, or even a very considerable, freedom from interference. If their employment be actually more constant than that of our labouring classes, we believe that they owe that constancy principally to the inferior extent of their manufactures, and, what is both the cause and the effect of that inferiority, to a much less subdivision of labour. Less than one-third of the population of England, and more than two-thirds of the population of France, are employed in the cultivation of the soil. We are inclined to think that, notwithstanding this disproportion, the English labouring classes are better fed than the French. But there is no comparison between their respective enjoyment of clothing and other manufactures. The greater part of the coarser manufactures are both cheaper and better in England; while the wages in France, both of manufacturing and agricultural labourers, are about half what they are with us. “A peasant suffering severely from rheumatism,” says M. Say, (
Cours Complet, Tome I. p. 46,) “asked my advice. I recommended to him a flannel waistcoat next the skin. He did not know that there was such a thing as flannel. I told him then to wear under his shirt a cloth waistcoat turned inside-out. How, he asked, am I to get cloth to wear under my shirt, when I have never been able to afford to wear it above? And yet he was no worse off than his neighbours.”
The French labourer, being employed in more capacities than the Englishman, has more trades to turn to, and for that very reason is less efficient at any one. The Russian is probably more seldom out of employ than the Frenchman, and the Tartar less frequently than either. But few principles are more clearly established than that,
cœteris paribus, the productiveness of labour is in proportion to its subdivision, and that,
cœteris paribus, in proportion to that subdivision must be the occasional suffering from want of employment. A savage may be compared to one of his own instruments, to his club, or his adze, clumsy and inefficient, but yet complete in itself. A civilized artificer is like a single wheel or roller, which, when combined with many thousand others in an elaborate piece of machinery, contributes to effects which seem beyond human force and ingenuity, but, alone, is almost utterly useless.
The difficulty in transferring
material capital from one employment to another depends principally on the degree in which it has been manufactured, and on the change to be made in the disposition of its parts. The destination of raw material can, in general, be changed with little inconvenience. The stones that have been collected for a bridge may easily be employed for a house. But if they have been formed into a house, or a bridge, the value of the materials would scarcely pay the expense of removing them. Those costly instruments which form the principal part of fixed capital can scarcely ever be applied in their original state to any but their original purposes. They are employed, therefore, in the same way, long after they have ceased to afford average profit on the expense of their construction, because a still greater loss would be incurred by attempting to use them in a different manner. It would be a bad speculation to erect a steam-engine at the cost of £20,000, which should return an annual profit of only £100, but it would be a still worse one to sell it as old iron for £500.
There is a considerable resemblance in this respect between mental and inanimate capital. Probity, industry, judgment, elementary knowledge, and the other moral and intellectual habits and acquirements to which we give the general name of a “good education,” are a kind of mental raw material, of which the destination can be altered at pleasure. The peculiar knowledge and habits of a given profession are like a steam-engine or a water-mill, of comparatively small value for any but their appropriate purposes. In general, however, mental capital is the more transferable of the two, and becomes more and more so the more exclusively mental it is. The professional knowledge and dexterity of a weaver would be of little use to him in any other employment. A lawyer or a physician, prevented by circumstances from continuing to practise, would find the information and the intellectual habits which he had acquired in his former profession of considerable advantage in any new one. Bodily labour, especially when the labourer is confined to a very few operations, so that a few muscles have too much and the rest too little to do, often weakens, and almost always distorts, the frame. Mr. Shaw, a surgeon of great eminence in the treatment of distortion, told us that, as he walked along the streets, he could in general tell each man’s trade by his characteristic deformity. But mental exertion, unless in those rare cases in which it is carried to such an excess as to produce cerebral derangement, never seems to weaken the mind. It may sometimes, perhaps, a little distort it, may sometimes give to one or two faculties an undue preponderance; but even this, to such an extent as to diminish the productiveness of the individual’s subsequent exertions, is comparatively rare. And, in general, it will be found, that the more work a man’s mind has done, the more he is able to do, and the better he will do it.
Difficulty of Transferring Labour and Capital from one Country to Another.
The obstacles which exist, even within the same neighbourhood and the same Country, to the transfer of labour and capital from one employment to another, are of course aggravated, when not only the occupation but the neighbourhood or the Country is to be changed. Adam Smith states the common price of labour in London and its neighbourhood to have been, when he wrote, 1s. 6d. a-day, and the usual price in the Lowlands of Scotland to have been 8d. “Such a difference of prices,” he adds, “which it seems is not always sufficient to transport a man from one parish to another, would necessarily occasion so great a transportation of the most bulky commodities, not only from one parish to another but from one end of the kingdom, almost from one end of the world, to another, as would soon reduce them more nearly to a level. After all that has been said of the levity and inconstancy of human nature, it appears evidently from experience, that a man is, of all sorts of luggage, the most difficult to be transported.” Book I. Ch. VI.
When we compare the wages of labour in different Countries, we usually estimate them in money. And we are forced to do this for two reasons: first, because the precious metals are the only important commodities universally distributed throughout the world; and, secondly, because they are the only commodities of which the value is every where the same, or very nearly the same. We should gain little information by comparing the number of pine-apples that can be earned in Java and in England by a week’s ordinary labour. And still less by comparing the quantity of pulque earned by a Mexican with the quantity of whisky earned by an Irishman. But money wages, though they measure accurately the value of national labour in the general market of the world, afford a very imperfect test of the degree of comfort and convenience obtained by the labourer in different Countries. Now it is this difference, not the difference in money wages, that leads him to change his residence; and we can ascertain, or rather approximate to ascertaining, these differences only by translating the money wages in different Countries into the commodities used by the labourer. The money wages of labour in North America are about one-third higher than in England; this is in some measure compensated by the higher price of manufactures. But as food, which every where forms the largest portion of the labourer’s expenses, is considerably cheaper than with us, the real superiority of the American over the English labourer is greater than is indicated by the difference in their wages. We are told (Crawford’s
Embassy, p. 468) that a day labourer in Bengal can hardly earn £3 a-year. Notwithstanding this low rate of wages, most manufactures are dearer there than in England. Food, of course, is cheaper; for were it at the same price as the cheapest food in England, a family could not exist at about 1s. a-week. And it is obvious that in every Country the average wages of labour must be sufficient to support an average family. In proportion to the quantity of land and labour required, rice is, perhaps, the most abundant food that the earth affords. Rice, therefore, is the food of the Bengallee, and his wages, supposing them to be all laid out in food, would produce him about eight hundred pounds; the same quantity of rice might be purchased
here for about £10 sterling. Estimated in money, therefore, wages in England, at £30 a-year, are ten times as high as in Bengal; estimated in manufactures, they are more than ten times; estimated in rice, they are about three times as high.
In comparing the rate of profits in two Countries, this difficulty does not exist; both the advances and the returns being always estimated in money, the apparent must be the real difference between the rate of profits in any two Countries.
The great obstacles to the circulation of labour are difference of climate, distance of place, and difference of language. The first is by far the most powerful, and is so great that there is little voluntary emigration of labourers to a very dissimilar climate. Difference of language seems often a greater obstacle than very considerable distance of place. The advance of wages obtained by an English mechanic in France is greater than he can get by going to America; but ten go to America for one who will venture to France. Differences in habits, government, and religion are comparatively weak obstacles, except in those cases where the differences have caused an antipathy, making immigration dangerous. Few Countries differ more in habits and religion than England and Ireland, or in government than Ireland and the United States. Yet we know how great is the emigration from Ireland to both those Countries. In general, however, the physical and moral obstacles to the emigration of single labourers, or even of bodies of labourers, unless supported and directed by a very considerable capital, are such that it seldom takes place unless under peculiar circumstances; such as those of Ireland and England, or Ireland and America, where the temptation is very great, the physical obstacle only a passage of a few weeks in the one case, and a few hours in the other, and the language the same.
But the voluntary migrations of capitalists and labourers united, and the attempts by capitalists to force the involuntary migration of labourers, have been among the principal causes that have advanced and retarded the improvement of mankind. To the first class belong those hostile migrations in which a whole nation, in the hope of obtaining a climate or a soil more favourable to production, has moved in a body to seize the territory of a neighbour. From the invasion of Egypt by the Shepherd Kings to that of Greece by the Turks, these movements have kept the inhabitants of the whole of our hemisphere in a constant fluctuation. Many Countries, and among them our own, have been so covered by successive strata of occupants, that no trace of the first settlers can be discovered; in others, the poor remains of the aborigines are discovered, like the Helots of Lacenia, the Fellahs of Egypt, or the Bheels of Hindostan, by their misery and degradation. Europe, in its present state, does not fear these invasions. They could not be attempted by a civilized nation, nor, in the present state of the art of war, could they be successful
against one. But, until the improvement of military science and the extensive use of machinery in war, gave to wealth and knowledge their present superiority, these attributes seem to have been sources rather of weakness than of strength. The least polished people seem, on the whole, to have had the advantage. Cicero confesses the warlike superiority of the Gauls over the Romans. It was not till after Gaul had become comparatively civilized that her military fame was recalled as a tradition.
*37 A few centuries of peace made the Britons an easy prey to the Saxons, and the Saxons to the Danes. Under such circumstances the permanent improvement of the human race seemed almost hopeless. And if gunpowder had not been brought into use just at the time when those military virtues which belong to semi-barbarism were decaying, it appears probable that another irruption of barbarians might have brought back another middle age, in which Europe might have lost all that she gained between the XIIth and the XVth Centuries.
Resembling in kind these migratory invasions, but very different from them in effect, have been those emigrations on a smaller scale, to which we give the name of Colonization; in which a portion of a comparatively civilized nation have gone out, with their knowledge and wealth, their material, and moral, and intellectual capital, and settled in an unoccupied or thinly peopled district. It is a remarkable and a most unhappy circumstance that, notwithstanding the progress of political knowledge, the true principles of Colonization have been less and less understood, or, if understood, less and less acted on, as civilization has advanced. The earliest Colonies with which we are acquainted, those founded by the Phœnicians and the Greeks, seem to have been founded for the benefit of the Colonists. They were allowed to appoint their own governors, to direct their own industry, and to manage their own concerns; and they relied on themselves for their defence. They were children, but emancipated children; and their progress was in proportion to their independence. the Phœnician Colonies in Africa and Syria, and the Grecian Colonies in Italy, Thrace, Sicily, and Asia, seem quickly to have risen to an equality with, or to have surpassed, their Mother Countries; to have obtained, in fact, all the wealth and power which their extent of territory, and the religion and knowledge of the times, made it possible to acquire. The Roman Colonies scarcely deserve that name. They were generally formed by grants of the lands, the capital, and the persons of conquered Tribes, almost as civilized as their conquerors, to the armies or to the populace of Rome, as a reward for services in foreign or civil war, or for sedition and riot in the forum. It may be a question whether they accelerated or retarded the improvement of the world.
The Colonies of modern Europe have been established partly for the benefit of the Colonists, and partly, as it was supposed, for that of the parent state. The latter has, in general, contributed a part of the expense of outfit, and almost all the expense of protection against foreign aggression. She has also, in general, given to her Colonies a monopoly, or something approaching to a monopoly of her market. On the other hand, she has, in general, required her Colonies to give to her own productions a much stricter monopoly. She has, in general, required her Colonies to receive European productions solely from the Mother Country, and to export only to the Mother Country colonial productions. She has, in general, appointed the principal officers, and interfered in the internal management of her Colonies. She has not only prohibited the Colonists from purchasing in any other market what could be produced in the Mother Country, but has prohibited them from producing for themselves. She has peopled them with the refuse of her gaols, and governed them by the refuse of her aristocracy. The Court of Spain commanded the vineyards of Mexico to be rooted up; the English Parliament forbade Jamaica to discontinue the slavetrade, prohibited the establishment of iron, woollen, and hat manufactures in our North American Colonies, and even now forbids the West Indians to refine their own sugar. The Mother Country dragged the Colonists into all her wars, and, from their comparatively defenceless situation, exposed their trade to more loss, and their persons and property to more danger, than she encountered herself. And when the rising strength of the Colony rendered these oppressions intolerable, no Mother Country has yet had the good sense to submit quietly to a separation, which, even if it could have been avoided, might have been desirable; and which, whether expedient or not, was inevitable. England, France, Portugal, and Spain have all wasted, in the vain attempt to retain their Colonies, ten times more wealth than was expended in founding them.
But, mismanaged as Colonies have been, they have, without doubt, been one of the principal means by which civilization has been diffused.
The separate attempts by independent capitalists to procure the voluntary Emigration of labourers have generally been made on a small scale, and have been unprofitable to the undertakers, in consequence of the difficulty of compelling or inducing the labourers to perform their engagements, and work diligently at a rate of wages sufficiently inferior to the current rate of the Colony to repay the expense and risk of the capitalist. Sir R. Wilmot Horton’s plans for effecting Emigration on an extended scale, and as a national undertaking, have not received the attention which the magnitude of the probable advantage, and the unwearied diligence and public spirit of its proposer, deserved. And the scheme for founding in Australia a Colony in which the first price of all the land shall be employed in transporting labourers, has not yet been submitted to the test of experience.
The attempts by capitalists to force the involuntary migration of labourers have been productive of almost unmixed evil. They produced, and have continued, the abominable traffic in which
man is the commodity;—a traffic which, partly by its direct effects, and partly by the wars and general insecurity which are its necessary accompaniments, retarded more than any other cause the early civilization of Europe; has kept, and continues to keep, the greater part of Asia, and the whole of Africa, in hopeless barbarism; and has divided the inhabitants of the most fertile portions of the Continent of America, and, until lately, those of almost all her islands, into two classes only, the oppressors and the oppressed.
The transfer of
Capital from one Country to another is subject to less difficulty. When the exchange is at par between any two Countries, Capital can be transmitted in the shape of money without any expense. And as the occasional loss which occurs when the exchange is against the Country to which it is to be exported is compensated by the occasional gain when it is in favour of that Country, it may fairly be said that monied Capital is transferred from Country to Country without expense. The chief obstacle is the unwillingness of Capitalists either to trust their Capital out of their own superintendence, or to encounter a change of government, habits, climate, and language, by accompanying it. Difference of language, however, is felt as a slight objection by educated men. Nor is difference of government of great importance to those who propose only a transitory residence. The difference indeed is often considered an advantage. During the late war, London was filled by foreign Capitalists, whose principal motive was to escape the tyranny of Napoleon. Differences of habits and climate are more material, especially the latter; but even those do not seem to counterbalance a great increase of profit. There is scarcely a port in the civilized world in which a considerable part of the mercantile class does not consist of the natives of Great Britain. The inequality in the rate of profit throughout the civilized world is, therefore, much less than the inequality of wages. And as the general progress of improvement tends more and more to equalize the advantages possessed by different Countries in government and habits, and even in salubrity of climate, the existing inequalities of profits are likely to diminish.