Second Book

The Theory


Chapter 11

Political and Cosmopolitical Economy

    Before Quesnay and the French economists there existed only a
practice of political economy which was exercised by the State
officials, administrators, and authors who wrote about matters of
administration, occupied themselves exclusively with the
agriculture, manufactures, commerce, and navigation of those
countries to which they belonged, without analysing the causes of
wealth, or taking at all into consideration the interests of the
whole human race.
    Quesnay (from whom the idea of universal free trade originated)
was the first who extended his investigations to the whole human
race, without taking into consideration the idea of the nation. He
calls his work 'Physiocratie, ou du Gouvernement le plus avantageux
au Genre Humain,' his demands being that we must imagine that the
merchants of all nations formed one commercial republic. Quesnay
undoubtedly speaks of cosmopolitical economy, i.e. of that science
which teaches how the entire human race may attain prosperity; in
opposition to political economy, or that science which limits its
teaching to the inquiry how a given nation can obtain (under the
existing conditions of the world) prosperity, civilisation, and
power, by means of agriculture, industry, and commerce.
    Adam Smith(1*) treats his doctrine in a similarly extended
sense, by making it his task to indicate the cosmopolitical idea of
the absolute freedom of the commerce of the whole world in spite of
the gross mistakes made by the physiocrates against the very nature
of things and against logic. Adam Smith concerned himself as little
as Quesnay did with true political economy, i.e. that policy which
each separate nation had to obey in order to make progress in its
economical conditions. He entitles his work, 'The Nature and Causes
of the Wealth of Nations' (i.e. of all nations of the whole human
race). He speaks of the various systems of Political economy in a
separate part of his work solely for the purpose of demonstrating
their non-efficiency, and of proving that 'political' or national
economy must be replaced by 'cosmopolitical or world-wide economy.'
Although here and there he speaks of wars, this only occurs
incidentally. The idea of a perpetual state of peace forms the
foundation of all his arguments. Moreover, according to the
explicit remarks of his biographer, Dugald Stewart, his
investigations from the commencement are based upon the principle
that 'most of the State regulations for the promotion of public
prosperity are unnecessary, and a nation in order to be transformed
from the lowest state of barbarism into a state of the highest
possible prosperity needs nothing but bearable taxation, fair
administration of justice, and peace.' Adam Smith naturally
understood under the word 'peace' the 'perpetual universal peace'
of the Abbé St. Pierre.
    J. B. Say openly demands that we should imagine the existence
of a universal republic in order to comprehend the idea of general
free trade. This writer, whose efforts were mainly restricted to
the formation of a system out of the materials which Adam Smith had
brought to light, says explicitly in the sixth volume (p. 288) of
his 'Economie politique pratique'. 'We may take into our
consideration the economical interests of the family with the
father at its head; the principles and observations referring
thereto will constitute private economy. Those principles, however,
which have reference to the interests of whole nations, whether in
themselves or in relation to other nations, form public economy
(l'économie publique). Political economy, lastly, relates to the
interests of all nations, to human society in general.'
    It must be remarked here, that in the first place Say
recognises the existence of a national economy or political
economy, under the name 'économie publique,' but that he nowhere
treats of the latter in his works; secondly, that he attributes the
name political economy to a doctrine which is evidently of
cosmopolitical nature; and that in this doctrine he invariably
merely speaks of an economy which has for its sole object the
interests of the whole human society, without regard to the
separate interests of distinct nations.
    This substitution of terms might be passed over if Say, after
having explained what he calls political economy (which, however,
is nothing else but cosmopolitical or world-wide economy, or
economy of the whole human race), had acquainted us with the
principles of the doctrine which he calls 'économie publique,'
which however is, properly speaking, nothing else but the economy
of given nations, or true political economy.
    In defining and developing this doctrine he could scarcely
forbear to proceed from the idea and the nature of the nation, and
to show what material modifications the 'economy of the whole human
race' must undergo by the fact that at present that race is still
separated into distinct nationalities each held together by common
powers and interests, and distinct from other societies of the same
kind which in the exercise of their natural liberty are opposed to
one another. However, by giving his cosmopolitical economy the name
political, he dispenses with this explanation, effects by means of
a transposition of terms also a transposition of meaning, and
thereby masks a series of the gravest theoretical errors.
    All later writers have participated in this error. Sismondi
also calls political economy explicitly 'La science qui se charge
du bonheur de l'espèce humaine.' Adam Smith and his followers teach
us from this mainly nothing more than what Quesnay and his
followers had taught us already, for the article of the 'Revue
Méthodique' treating of the physiocratic school states, in almost
the same words: 'The well-being of the individual is dependent
altogether on the well-being of the whole human race.'
    The first of the North American advocates of free trade, as
understood by Adam Smith -- Thomas Cooper, President of Columbia
College -- denies even the existence of nationality; he calls the
nation 'a grammatical invention,' created only to save periphrases,
a nonentity, which has no actual existence save in the heads of
politicians. Cooper is moreover perfectly consistent with respect
to this, in fact much more consistent than his predecessors and
instructors, for it is evident that as soon as the existence of
nations with their distinct nature and interests is recognised, it
becomes necessary to modify the economy of human society in
accordance with these special interests, and that if Cooper
intended to represent these modifications as errors, it was very
wise on his part from the beginning to disown the very existence of
nations.
    For our own part, we are far from rejecting the theory of
cosmopolitical economy, as it has been perfected by the prevailing
school; we are, however, of opinion that political economy, or as
Say calls it 'économie publique,' should also be developed
scientifically, and that it is always better to call things by
their proper names than to give them significations which stand
opposed to the true import of words.
    If we wish to remain true to the laws of logic and of the
nature of things, we must set the economy of individuals against
the economy of societies, and discriminate in respect to the latter
between true political or national economy (which, emanating from
the idea and nature of the nation, teaches how a given nation in
the present state of the world and its own special national
relations can maintain and improve its economical conditions) and
cosmopolitical economy, which originates in the assumption that all
nations of the earth form but one society living in a perpetual
state of peace.
    If, as the prevailing school requites, we assume a universal
union or confederation of all nations as the guarantee for an
everlasting peace, the principle of international free trade seems
to be perfectly justified. The less every individual is restrained
in pursuing his own individual prosperity, the greater the number
and wealth of those with whom he has free intercourse, the greater
the area over which his individual activity can exercise itself,
the easier it will be for him to utilise for the increase of his
prosperity the properties given him by nature, the knowledge and
talents which he has acquired, and the forces of nature placed at
his disposal. As with separate individuals, so is it also the case
with individual communities, provinces, and countries. A simpleton
only could maintain that a union for free commercial intercourse
between themselves is not as advantageous to the different states
included in the United States of North America, to the various
departments of France, and to the various German allied states, as
would be their separation by internal provincial customs tariffs.
    In the union of the three kingdoms of Great Britain and Ireland
the world witnesses a great and irrefragable example of the
immeasurable efficacy of free trade between united nations. Let us
only suppose all other nations of the earth to be united in a
similar manner, and the most vivid imagination will not be able to
picture to itself the sum of prosperity and good fortune which the
whole human race would thereby acquire.
    Unquestionably the idea of a universal confederation and a
perpetual peace is commended both by common sense and religion.(2*)
If single combat between individuals is at present considered to be
contrary to reason, how much more must combat between two nations
be similarly condemned? The proofs which social economy can produce
from the history of the civilisation of mankind of the
reasonableness of bringing about the union of all mankind under the
law of right, are perhaps those which are the clearest to sound
human understanding.
    History teaches that wherever individuals are engaged in wars,
the prosperity of mankind is at its lowest stage, and that it
increases in the same proportion in which the concord of mankind
increases. In the primitive state of the human race, first unions
of families took place, then towns, then confederations of towns,
then union of whole countries, finally unions of several states
under one and the same government. If the nature of things has been
powerful enough to extend this union (which commenced with the
family) over hundreds of millions, we ought to consider that nature
to be powerful enough to accomplish the union of all nations. If
the human mind were capable of comprehending the advantages of this
great union, so ought we to venture to deem it capable of
understanding the still greater benefits which would result from a
union of the whole human race. Many instances indicate this
tendency in the spirit of the present times. We need only hint at
the progress made in sciences, arts, and discoveries, in industry
and social order. It may be already foreseen with certainty, that
after a lapse of a few decades the civilised nations of the earth
will, by the perfection of the means of conveyance, be united as
respects both material and mental interchange in as close a manner
as (or even closer than) that in which a century ago the various
counties of England were connected. Continental governments possess
already at the present moment in the telegraph the means of
communicating with one another, almost as if they were at one and
the same place. Powerful forces previously unknown have already
raised industry to a degree of perfection hitherto never
anticipated, and others still more powerful have already announced
their appearance. But the more that industry advances, and
proportionately extends over the countries of the earth, the
smaller will be the possibility of wars. Two nations equally well
developed in industry could mutually inflict on one another more
injury in one week than they would be able to make good in a whole
generation. But hence it follows that the same new forces which
have hitherto served particularly for production will not withhold
their services from destruction, and will principally favour the
side of defence, and especially the European Continental nations,
while they threaten the insular State with the loss of those
advantages which have been gained by her insular position for her
defence. In the congresses of the great European powers Europe
possesses already the embryo of a future congress of nations. The
endeavours to settle differences by protocol are clearly already
prevailing over those which obtain justice by force of arms. A
clearer insight into the nature of wealth and industry has led the
wiser heads of all civilised nations to the conviction that both
the civilisation of barbarous and semi-barbarous nations, and of
those whose culture is retrograding, as well as the formation of
colonies, offer to civilised nations a field for the development of
their productive powers which promises them much richer and safer
fruits than mutual hostilities by wars or restrictions on trade.
The farther we advance in this perception, and the more the
uncivilised countries come into contact with the civilised ones by
the progress made in the means of transport, so much more will the
civilised countries comprehend that the civilisation of barbarous
nations, of those distracted by internal anarchy, or which are
oppressed by bad government, is a task which offers to all equal
advantages -- a duty incumbent on them all alike, but one which can
only be accomplished by unity.
    That the civilisation of all nations, the culture of the whole
globe, forms a task imposed on the whole human race, is evident
from those unalterable laws of nature by which civilised nations
are driven on with irresistible power to extend or transfer their
powers of production to less cultivated countries. We see
everywhere, under the influence of civilisation, population, powers
of mind, material capital attaining to such dimensions that they
must necessarily flow over into other less civilised countries. If
the cultivable area of the country no longer suffices to sustain
the population and to employ the agricultural population, the
redundant portion of the latter seeks territories suitable for
cultivation in distant lands; if the talents and technical
abilities of a nation have become so numerous as to find no longer
sufficient rewards within it, they emigrate to places where they
are more in demand; if in consequence of the accumulation of
material capital, the rates of interest fall so considerably that
the smaller capitalist can no longer live on them, he tries to
invest his money more satisfactorily in less wealthy countries.
    A true principle, therefore, underlies the system of the
popular school, but a principle which must be recognised and
applied by science if its design to enlighten practice is to be
fulfilled, an idea which practice cannot ignore without getting
astray; only the school has omitted to take into consideration the
nature of nationalities and their special interests and conditions,
and to bring these into accord with the idea of universal union and
an everlasting peace.
    The popular school has assumed as being actually in existence
a state of things which has yet to come into existence. It assumes
the existence of a universal union and a state of perpetual peace,
and deduces therefrom the great benefits of free trade. In this
manner it confounds effects with causes. Among the provinces and
states which are already politically united, there exists a state
of perpetual peace; from this political union originates their
commercial union, and it is in consequence of the perpetual peace
thus maintained that the commercial union has become so beneficial
to them. All examples which history can show are those in which the
political union has led the way, and the commercial union has
followed.(3*) Not a single instance can be adduced in which the
latter has taken the lead, and the former has grown up from it.
That, however, under the existing conditions of the world, the
result of general free trade would not be a universal republic,
but, on the contrary, a universal subjection of the less advanced
nations to the supremacy of the predominant manufacturing,
commercial, and naval power, is a conclusion for which the reasons
are very strong and, according to our views, irrefragable. A
universal republic (in the sense of Henry IV and of the Abbé St.
Pierre), i.e. a union of the nations of the earth whereby they
recognize the same conditions of right among themselves and
renounce self-redress, can only be realised if a large number of
nationalities attain to as nearly the same degree as possible of
industry and civilisation, political cultivation, and power. Only
with the gradual formation of this union can free trade be
developed, only as a result of this union can it confer on all
nations the same great advantages which are now experienced by
those provinces and states which are politically united. The system
of protection, inasmuch as it forms the only means of placing those
nations which are far behind in civilisation on equal terms with
the one predominating nation (which, however, never received at the
hands of Nature a perpetual right to a monopoly of manufacture, but
which merely gained an advance over others in point of time), the
system of protection regarded from this point of view appears to be
the most efficient means of furthering the final union of nations,
and hence also of promoting true freedom of trade. And national
economy appears from this point of view to be that science which,
correctly appreciating the existing interests and the individual
circumstances of nations, teaches how every separate nation can be
raised to that stage of industrial development in which union with
other nations equally well developed, and consequently freedom of
trade, can become possible and useful to it.
    The popular school, however, has mixed up both doctrines with
one another; it has fallen into the grave error of judging of the
conditions of nations according to purely cosmopolitical
principles, and of ignoring from merely political reasons the
cosmopolitical tendency of the productive powers.
    Only by ignoring the cosmopolitical tendency of the productive
powers could Malthus be led into the error of desiring to restrict
the increase of population, or Chalmers and Torrens maintain more
recently the strange idea that augmentation of capital and
unrestricted production are evils the restriction of which the
welfare of the community imperatively demands, or Sismondi declare
that manufactures are things injurious to the community. Their
theory in this case resembles Saturn, who devours his own children
-- the same theory which allows that from the increase of
population, of capital and machinery division of labour takes
place, and explains from this the welfare of society, finally
considers these forces as monsters which threaten the prosperity of
nations, because it merely regards the present conditions of
individual nations, and does not take into consideration the
conditions of the whole globe and the future progress of mankind.
    It is not true that population increases in a larger proportion
than production of the means of subsistence; it is at least foolish
to assume such disproportion, or to attempt to prove it by
artificial calculations or sophistical arguments, so long as on the
globe a mass of natural forces still lies inert by means of which
ten times or perhaps a hundred times more people than are now
living can be sustained. It is mere narrow-mindedness to consider
the present extent of the productive forces as the test of how many
persons could be supported on a given area of land. The savage, the
hunter, and the fisherman, according to his own calculation, would
not find room enough for one million persons, the shepherd not for
ten millions, the raw agriculturist not for one hundred millions on
the whole globe; and yet two hundred millions are living at present
in Europe alone. The culture of the potato and of food-yielding
plants, and the more recent improvements made in agriculture
generally, have increased tenfold the productive powers of the
human race for the creation of the means of subsistence. In the
Middle Ages the yield of wheat of an acre of land in England was
fourfold, to-day it is ten to twenty fold, and in addition to that
five times more land is cultivated. In many European countries (the
soil of which possesses the same natural fertility as that of
England) the yield at present does not exceed fourfold. Who will
venture to set further limits to the discoveries, inventions, and
improvements of the human race? Agricultural chemistry is still in
its infancy; who can tell that to-morrow, by means of a new
invention or discovery, the produce of the soil may not be
increased five or ten fold? We already possess, in the artesian
well, the means of converting unfertile wastes into rich corn
fields; and what unknown forces may not yet be hidden in the
interior of the earth? Let us merely suppose that through a new
discovery we were enabled to produce heat everywhere very cheaply
and without the aid of the fuels at present known: what spaces of
land could thus be utilised for cultivation, and in what an
incalculable degree w ould the yield of a given area of land be
increased? If Malthus' doctrine appears to us in its tendency
narrow-minded, it is also in the methods by which it could act an
unnatural one, which destroys morality and power, and is simply
horrible. It seeks to destroy a desire which nature uses as the
most active means for inciting men to exert body and mind, and to
awaken and support their nobler feelings -- a desire to which
humanity for the greater part owes its progress. It would elevate
the most heartless egotism to the position of a law; it requires us
to close our hearts against the starving man, because if we hand
him food and drink, another might starve in his place in thirty
years' time. It substitutes cold calculation for sympathy. This
doctrine tends to convert the hearts of men into stones. But what
could be finally expected of a nation whose citizens should carry
stones instead of hearts in their bosoms? What else than the total
destruction of all morality, and with it of all productive forces,
and therefore of all the wealth, civilisation, and power of the
nation?
    If in a nation the population increases more than the
production of the means of subsistence, if capital accumulates at
length to such an extent as no longer to find investment, if
machinery throws a number of operatives out of work and
manufactured goods accumulate to a large excess, this merely
proves, that nature will not allow industry, civilisation, wealth,
and power to fall exclusively to the lot of a single nation, or
that a large portion of the globe suitable for cultivation should
be merely inhabited by wild animals, and that the largest portion
of the human race should remain sunk in savagery, ignorance, and
poverty.
    We have shown into what errors the school has fallen by judging
the productive forces of the human race from a political point of
view; we have now also to point out the mistakes which it has
committed by regarding the separate interests of nations from a
cosmopolitical point of view.
    If a confederation of all nations existed in reality, as is the
case with the separate states constituting the Union of North
America, the excess of population, talents, skilled abilities, and
material capital would flow over from England to the Continental
states, in a similar manner to that in which it travels from the
eastern states of the American Union to the western, provided that
in the Continental states the same security for persons and
property, the same constitution and general laws prevailed, and
that the English Government was made subject to the united will of
the universal confederation. Under these suppositions there would
be no better way of raising all these countries to the same stage
of wealth and cultivation as England than free trade. This is the
argument of the school. But how would it tally with the actual
operation of free trade under the existing conditions of the world?
    The Britons as an independent and separate nation would
henceforth take their national interest as the sole guide of their
policy. The Englishman, from predilection for his language, for his
laws, regulations, and habits, would whenever it was possible
devote his powers and his capital to develop his own native
industry, for which the system of free trade, by extending the
market for English manufactures over all countries, would offer him
sufficient opportunity; he would not readily take a fancy to
establish manufactures in France or Germany. All excess of capital
in England would be at once devoted to trading with foreign parts
of the world. If the Englishman took it into his head to emigrate,
or to invest his capital elsewhere than in England, he would as he
now does prefer those more distant countries where he would find
already existing his language, his laws, and regulations, rather
than the benighted countries of the Continent. All England would
thus be developed into one immense manufacturing city. Asia,
Africa, and Australia would be civilised by England, and covered
with new states modelled after the English fashion. In time a world
of English states would be formed, under the presidency of the
mother state, in which the European Continental nations would be
lost as unimportant, unproductive races. By this arrangement it
would fall to the lot of France, together with Spain and Portugal,
to supply this English world with the choicest wines, and to drink
the bad ones herself: at most France might retain the manufacture
of a little millinery. Germany would scarcely have more to supply
this English world with than children's toys, wooden clocks, and
philological writings, and sometimes also an auxiliary corps, who
might sacrifice themselves to pine away in the deserts of Asia or
Africa, for the sake of extending the manufacturing and commercial
supremacy, the literature and language of England. It would not
require many centuries before people in this English world would
think and speak of the Germans and French in the same tone as we
speak at present of the Asiatic nations.
    True political science, however, regards such a result of
universal free trade as a very unnatural one; it will argue that
had universal free trade been introduced at the time of the
Hanseatic League, the German nationality instead of the English
would have secured an advance in commerce and manufacture over all
other countries.
    It would be most unjust, even on cosmopolitical grounds, now to
resign to the English all the wealth and power of the earth, merely
because by them the political system of commerce was first
established and the cosmopolitical principle for the most part
ignored. In order to allow freedom of trade to operate naturally,
the less advanced nations must first be raised by artificial
measures to that stage of cultivation to which the English nation
has been artificially elevated. In order that, through that
cosmopolitical tendency of the powers of production to which we
have alluded, the more distant parts of the world may not be
benefited and enriched before the neighbouring European countries,
those nations which feel themselves to be capable, owing to their
moral, intellectual, social, and political circumstances, of
developing a manufacturing power of their own must adopt the system
of protection as the most effectual means for this purpose. The
effects of this system for the purpose in view are of two kinds: in
the first place, by gradually excluding foreign manufactured
articles from our markets, a surplus would be occasioned in foreign
nations, of workmen, talents, and capital, which must seek
employment abroad; and secondly by the premium which our system of
protection would offer to the immigration into our country of
workmen, talents, and capital, that excess of productive power
would be induced to find employment with us, instead of emigrating
to distant parts of the world and to colonies. Political science
refers to history, and inquires whether England has not in former
times drawn from Germany, Italy, Holland, France, Spain, and
Portugal by these means a mass of proDuctive power. She asks: Why
does the cosmopolitical school, when it pretends to weigh in the
balance the advantages and the disadvantages of the system of
protection, utterly ignore this great and remarkable instance of
the results of that system?

NOTES:

1. It is alleged that Adam Smith intended to have dedicated his
great work to Quesnay. -- TR. (See Life of Smith, published by T.
and J. Allman. 1825.)

2. The Christian religion inculcates perpetual peace. But until the
promise, 'There shall be one fold and one shepherd,' has been
fulfilled, the principle of the Quakers, however true it be in
itself, can scarcely be acted upon. There is no better proof for
the Divine origin of the Christian religion than that its doctrines
and promises are in perfect agreement with the demands of both the
material and spiritual well-being of the human race.

3. This statement was probably accurate up to the period when List
wrote, but a notable exception to it may now be adduced. The
commercial union of the various German states under the Zollverein
preceded by many years their political union under the Empire, and
powerfully promoted it. -- TR.

Chapter 12

The Theory of the Powers of Production and the Theory of Values

    Adam Smith's celebrated work is entitled, 'The Nature and
Causes of the Wealth of Nations.' The founder of the prevailing
economical school has therein indicated the double point of view
from which the economy of nations, like that of private separate
individuals, should be regarded.
    The causes of wealth are something totally different from
wealth itself. A person may possess wealth, i.e. exchangeable
value; if, however, he does not possess the power of producing
objects of more value than he consumes, he will become poorer. A
person may be poor; if he, however, possesses the power of
producing a larger amount of valuable articles than he consumes, he
becomes rich.
    The power of producing wealth is therefore infinitely more
important than wealth itself; it insures not only the possession
and the increase of what has been gained, but also the replacement
of what has been lost. This is still more the case with entire
nations (who cannot live out of mere rentals) than with private
individuals. Germany has been devastated in every century by
pestilence, by famine, or by civil or foreign wars; she has,
nevertheless, always retained a great portion of her powers of
production, and has thus quickly re-attained some degree of
prosperity; while rich and mighty but despot- and priest-ridden
Spain, notwithstanding her comparative enjoyment of internal
peace,(1*) has sunk deeper into poverty and misery. The same sun
still shines on the Spaniards, they still possess the same area of
territory, their mines are still as rich, they are still the same
people as before the discovery of America, and before the
introduction of the Inquisition; but that nation has gradually lost
her powers of production, and has therefore become poor and
miserable. The War of Independence of the United States of America
cost that nation hundreds of millions, but her powers of production
were immeasurably strengthened by gaining independence, and it was
for this reason that in the course of a few years after the peace
she obtained immeasurably greater riches than she.had ever
possessed before. If we compare the state of France in the year
1809 with that of the year 1839, what a difference in favour of the
latter! Nevertheless, France has in the interim lost her
sovereignty over a large portion of the European continent; she has
suffered two devastating invasions, and had to pay milliards of
money in war contributions and indemnities.
    It was impossible that so clear an intellect as Adam Smith
possessed could altogether ignore the difference between wealth and
its causes and the overwhelming influence of these causes on the
condition of nations. In the introduction to his work, he says in
clear words in effect: 'Labour forms the fund from which every
nation derives its wealth, and the increase of wealth depends first
on the productive power of labour, namely, on the degree of skill,
dexterity, and judgment with which the labour of the nation is
generally applied, and secondly, on the proportion between the
number of those employed productively and the number of those who
are not so employed.' From this we see how clearly Smith in general
perceived that the condition of nations is principally dependent on
the sum of their productive powers.
    It does not, however, appear to be the plan of nature that
complete sciences should spring already perfected from the brain of
individual thinkers. It is evident that Smith was too exclusively
possessed by the cosmopolitical idea of the physiocrats, 'universal
freedom of trade,' and by his own great discovery, 'the division of
labour,' to follow up the idea of the importance to a nation of its
powers of production. However much science may be indebted to him
in respect of the remaining parts of his work, the idea 'division
of labour' seemed to him his most brilliant thought. It was
calculated to secure for his book a name, and for himself
posthumous fame.
    He had too much worldly wisdom not to perceive that whoever
wishes to sell a precious jewel does not bring the treasure to
market most profitably by burying it in a sack of wheat, however
useful the grains of wheat may be, but better by exposing it at the
forefront. He had too much experience not to know that a débutant
(and he was this as regards political economy at the time of the
publication of his work) who in the first act creates a furore is
easily excused if in the following ones he only occasionally raises
himself above mediocrity; he had every motive for making the
introduction to his book, the doctrine of division of labour. Smith
has not been mistaken in his calculations; his first chapter has
made the fortune of his book, and founded his authority as an
economist.
    However, we on our part believe ourselves able to prove that
just this zeal to put the important discovery 'division of labour'
in an advantageous light, has hindered Adam Smith from following up
the idea 'productive power' (which has been expressed by him in the
introduction, and al so frequently afterwards, although merely
incidentally) and from exhibiting his doctrines in a much more
perfect form. By the great value which he attached to his idea
'division of labour' he has evidently been misled into representing
labour itself as the 'fund' of all the wealth of nations, although
he himself clearly perceives and also states that the
productiveness of labour principally depends on the degree of skill
and judgment with which the labour is performed. We ask, can it be
deemed scientific reasoning if we assign as the cause of a
phenomenon that which in itself is the result of a number of deeper
lying causes? It cannot be doubted that all wealth is obtained by
means of mental and bodily exertions (labour), but yet from that
circumstance no reason is indicated from which useful conclusions
may be drawn; for history teaches that whole nations have, in spite
of the exertions and of the thrift of their citizens, fallen into
poverty and misery. Whoever desires to know and investigate how one
nation from a state of poverty and barbarism has attained to one of
wealth and prosperity, and how another has fallen from a condition
of wealth and well-being into one of poverty and misery, has
always, after receiving the information that labour is the cause of
wealth and idleness the cause of poverty (a remark which King
Solomon made long before Adam Smith), to put the further question,
what are the causes of labour, and what the causes of idleness?
    It would be more correct to describe the limbs of men (the
head, hands, and feet) as the causes of wealth (we should thus at
least approach far nearer to the truth), and the question then
presents itself, what is it that induces these heads, arms, and
hands to produce, and calls into activity these exertions? What
else can it be than the spirit which animates the individuals, the
social order which renders their energy fruitful, and the powers of
nature which they are in a position to make use of? The more a man
perceives that he must provide for the future, the more his
intelligence and feelings incite him to secure the future of his
nearest connections, and to promote their well-being; the more he
has been from his youth accustomed to forethought and activity, the
more his nobler feelings have been developed, and body and mind
cultivated, the finer examples that he has witnessed from his
youth, the more opportunities he has had for utilising his mental
and bodily powers for the improvement of his condition, also the
less he has been restrained in his legitimate activity, the more
successful his past endeavours have been, and the more their fruits
have been secured to him, the more he has been able to obtain
public recognition and esteem by orderly conduct and activity, and
the less his mind suffers from prejudices, superstition, false
notions, and ignorance, so much the more will he exert his mind and
limbs for the object of production, so much the more will he be
able to accomplish, and so much the better will he make use of the
fruits of his labour. However, most depends in all these respects
on the conditions of the society in which the individual has been
brought up, and turns upon this, whether science and arts flourish,
and public institutions and laws tend to promote religious
character, morality and intelligence, security for person and for
property, freedom and justice; whether in the nation all the
factors of material prosperity, agriculture, manufactures, and
trade, have been equally and harmoniously cultivated; whether the
power of the nation is strong enough to secure to its individual
citizens progress in wealth and education from generation to
generation, and to enable them not merely to utilise the natural
powers of their own country to their fullest extent, but also, by
foreign trade and the possession of colonies, to render the natural
powers of foreign countries serviceable to their own.
    Adam Smith has on the whole recognised the nature of these
powers so little, that he does not even assign a productive
character to the mental labours of those who maintain laws and
order, and cultivate and promote instruction, religion, science,
and art. His investigations are limited to that human activity
which creates material values. With regard to this, he certainly
recognises that its productiveness depends on the 'skill and
judgment' with which it is exercised; but in his investigations as
to the causes of this skill and judgment, he does not go farther
than the division of labour, and that he illustrates solely by
exchange, augmentation of material capital, and extension of
markets. His doctrine at once sinks deeper and deeper into
materialism, particularism, and individualism. If he had followed
up the idea 'productive power' without allowing his mind to be
dominated by the idea of 'value,' 'exchangeable value,' he would
have been led to perceive that an independent theory of the
'productive power,' must be considered by the side of a 'theory of
values' in order to explain the economical phenomena. But he thus
fell into the mistake of explaining mental forces from material
circumstances and conditions, and thereby laid the foundation for
all the absurdities and contradictions from which his school (as we
propose to prove) suffers up to the present day, and to which alone
it must be attributed that the doctrines of political economy are
those which are the least accessible to the most intelligent minds.
That Smith's school teaches nothing else than the theory of values,
is not only seen from the fact that it bases its doctrine
everywhere on the conception of 'value of exchange,' but also from
the definition which it gives of its doctrine. It is (says J. B.
Say) that science which teaches how riches, or exchangeable values,
are produced, distributed, and consumed. This is undoubtedly not
the science which teaches how the productive powers are awakened
and developed, and how they become depressed and destroyed.
M'Culloch calls it explicitly 'the science of values,' and recent
English writers ' the science of exchange.'
    Examples from private economy will best illustrate the
difference between the theory of productive powers and the theory
of values.
    Let us suppose the case of two fathers of families, both being
landed proprietors, each of whom saves yearly 1,000 thalers and has
five sons. The one puts out his savings at interest, and keeps his
sons at common hard work, while the other employs his savings in
educating two of his sons as skilful and intelligent landowners,
and in enabling the other three to learn a trade after their
respective tastes; the former acts according to the theory of
values, the latter according to the theory of productive powers.
The first at his death may prove much richer than the second in
mere exchangeable value, but it is quite otherwise as respects
productive powers. The estate of the latter is divided into two
parts, and every part will by the aid of improved management yield
as much total produce as the whole did before; while the remaining
three sons have by their talents obtained abundant means of
maintenance. The landed property of the former will be divided into
five parts, and every part will be worked in as bad a manner as the
whole was heretofore. In the latter family a mass of different
mental forces and talents is awakened and cultivated, which will
increase from generation to generation, every succeeding generation
possessing more power of obtaining material wealth than the
preceding one, while in the former family stupidity and poverty
must increase with the diminution of the shares in the landed
property. So the slaveholder increases by slave-breeding the sum of
his values of exchange, but he ruins the productive forces of
future generations. All expenditure in the instruction of youth,
the promotion of justice, defence of nations, &c. is a consumption
of present values for the behoof of the productive powers. The
greatest portion of the consumption of a nation is used for the
education of the future generation, for promotion and nourishment
of the future national productive powers.
    The Christian religion, monogamy, abolition of slavery and of
vassalage, hereditability of the throne, invention of printing, of
the press, of the postal system, of money weights and measures, of
the calendar, of watches, of police, 'the introduction of the
principle of freehold property, of means of transport, are rich
sources of productive power. To be convinced of this, we need only
compare the condition of the European states with that of the
Asiatic ones. In order duly to estimate the influence which liberty
of thought and conscience has on the productive forces of nations,
we need only read the history of England and then that of Spain.
The publicity of the administration of justice, trial by jury,
parliamentary legislation, public control of State administration,
self-administration of the commonalties and municipalities, liberty
of the press, liberty of association for useful purposes, impart to
the citizens of constitutional states, as also to their public
functionaries, a degree of energy and power which can hardly be
produced by other means. We can scarcely conceive of any law or any
public legal decision which would not exercise a greater or smaller
influence on the increase or decrease of the productive power of
the nation.(2*) If we consider merely bodily labour as the cause of
wealth, how can we then explain why modern nations are incomparably
richer, more populous, more powerful, and prosperous than the
nations of ancient times? The ancient nations employed (in
proportion to the whole population) infinitely more hands, the work
was much harder, each individual possessed much more land, and yet
the masses were much worse fed and clothed than is the case in
modern nations. In order to explain these phenomena, we must refer
to the progress which has been made in the course of the last
thousand years in sciences and arts, domestic and public
regulations, cultivation of the mind and capabilities of
production. The present state of the nations is the result of the
accumulation of all discoveries, inventions, improvements,
perfections, and exertions of all generations which have lived
before us; they form the mental capital of the present human race,
and every separate nation is productive only in the proportion in
which it has known how to appropriate these attainments of former
generations and to increase them by its own acquirements, in which
the natural capabilities of its territory, its extent and
geographical position, its population and political power, have
been able to develop as completely and symmetrically as possible
all sources of wealth within its boundaries, and to extend its
moral, intellectual, commercial, and political influence over less
advanced nations and especially over the affairs of the world.
    The popular school of economists would have us believe that
politics and political power cannot be taken into consideration in
political economy. So far as it makes only values and exchange the
subjects of its investigations, this may be correct; we can define
the ideas of value and capital, profit, wages, and rent; we can
resolve them into their elements, and speculate on what may
influence their rising or falling, &c. without thereby taking into
account the political circumstances of the nation. Clearly,
however, these matters appertain as much to private economy as to
the economy of whole nations. We have merely to consider the
history of Venice, of the Hanseatic League, of Portugal, Holland,
and England, in order to perceive what reciprocal influence
material wealth and political power exercise on each other.
    The school also always falls into the strangest inconsistencies
whenever this reciprocal influence forces itself on their
consideration. Let us here only call to mind the remarkable dictum
of Adam Smith on the English Navigation Laws.(3*)
    The popular school, inasmuch as it does not duly consider the
nature of the powers of production, and does not take into account
the conditions of nations in their aggregate, disregards especially
the importance of developing in an equal ratio agriculture,
manufactures and commerce, political power and internal wealth, and
disregards especially the value of a manufacturing power belonging
specially to the nation and fully developed in all its branches. It
commits the error of placing manufacturing power in the same
category with agricultural power, and of speaking of labour,
natural power, capital, &c. in general terms without considering
the differences which exist between them. It does not perceive that
between a State devoted merely to agriculture and a State
possessing both agriculture and manufactures, a much greater
difference exists than between a pastoral State and an agricultural
one. In a condition of merely agricultural industry, caprice and
slavery, superstition and ignorance, want of means of culture, of
trade, and of transport, poverty and political weakness exist. In
the merely agricultural State only the least portion of the mental
and bodily powers existing in the nation is awakened and developed,
and only the least part of the powers and resources placed by
nature at its disposal can be made use of, while little or no
capital can be accumulated.
    Let us compare Poland with England: both nations at one time
were in the same stage of culture; and now what a difference.
Manufactories and manufactures are the mothers and children of
municipal liberty, of intelligence, of the arts and sciences, of
internal and external commerce, of navigation and improvements in
transport, of civilisation and political power. They are the chief
means of liberating agriculture from its chains, and of elevating
it to a commercial character and to a degree of art and science, by
which the rents, farming profits, and wages are increased, and
greater value is given to landed property. The popular school has
attributed this civilising power to foreign trade, but in that it
has confounded the mere exchanger with the originator. Foreign
manufactures furnish the goods for the foreign trade, which the
latter conveys to us, and which occasion consumption of products
and raw materials which we give in exchange for the goods in lieu
of money payments.
    If, however, trade in the manufactures of far distant lands
exercises admittedly so beneficial an influence on our agricultural
industry, how much more beneficial must the influence be of those
manufactures which are bound up with us locally, commercially, and
politically, which not only take from us a small portion, but the
largest portion of their requirements of food and of raw materials,
which are not made dearer to us by great costs of transport, our
trade in which cannot be interrupted by the chance of foreign
manufacturing nations learning to supply their own wants
themselves, or by wars and prohibitory import duties?
    We now see into what extraordinary mistakes and contradictions
the popular school has fallen in making material wealth or value of
exchange the sole object of its investigations, and by regarding
mere bodily labour as the sole productive power.
    The man who breeds pigs is, according to this school, a
productive member of the community, but he who educates men is a
mere non-productive. The maker of bagpipes or jews-harps for sale
is a productive, while the great composers and virtuosos are
non-productive simply because that which they play cannot be
brought into the market. The physician who saves the lives of his
patients does not belong to the productive class, but on the
contrary the chemist's boy does so, although the values of exchange
(viz. the pills) which he produces may exist only for a few minutes
before they pass into a valueless condition. A Newton, a Watt, or
a Kepler is not so productive as a donkey, a horse, or a draught-ox
(a class of labourers who have been recently introduced by
M'Culloch into the series of the productive members of human
society).
    We must not believe that J. B. Say has remedied this defect in
the doctrine of Adam Smith by his fiction of 'immaterial goods' or
products; he has thu s merely somewhat varnished over the folly of
its results, but not raised it out of its intrinsic absurdity. The
mental (immaterial) producers are merely productive, according to
his views, because they are remunerated with values of exchange,
and because their attainments have been obtained by sacrificing
values of exchange, and not because they produce productive
powers.(4*) They merely seem to him an accumulated capital.
M'Culloch goes still further; he says that man is as much a product
of labour as the machine which he produces, and it appears to him
that in all economical investigations he must be regarded from this
point of view. He thinks that Smith comprehended the correctness of
this principle, only he did not deduce the correct conclusion from
it. Among other things he draws the conclusion that eating and
drinking are productive occupations. Thomas Cooper values a clever
American lawyer at 3,000 dollars, which is about three times as
much as the value of a strong slave.
    The errors and contradictions of the prevailing school to which
we have drawn attention, can be easily corrected from the
standpoint of the theory of the productive powers. Certainly those
who fatten pigs or prepare pills are productive, but the
instructors of youths and of adults, virtuosos, musicians,
physicians, judges, and administrators, are productive in a much
higher degree. The former produce values of exchange, and the
latter productive powers, some by enabling the future generation to
become producers, others by furthering the morality and religious
character of the present generation, a third by ennobling and
raising the powers of the human wind, a fourth by preserving the
productive powers of his patients, a fifth by rendering human
rights and justice secure, a sixth by constituting and protecting
public security, a seventh by his art and by the enjoyment which it
occasions fitting men the better to produce values of exchange. In
the doctrine of mere values, these producers of the productive
powers can of course only be taken into consideration so far as
their services are rewarded by values of exchange; and this manner
of regarding their services may in some instances have its
practical use, as e.g. in the doctrine of public taxes, inasmuch as
these have to be satisfied by values of exchange. But whenever our
consideration is given to the nation (as a whole and in its
international relations) it is utterly insufficient, and leads to
a series of narrow-minded and false views.
    The prosperity of a nation is not, as Say believes, greater in
the proportion in which it has amassed more wealth (i.e. values of
exchange), but in the proportion in which it has more developed its
powers of production. Although laws and public institutions do not
produce immediate values, they nevertheless produce productive
powers, and Say is mistaken if he maintains that nations have been
enabled to become wealthy under all forms of government, and that
by weans of laws no wealth can be created. The foreign trade of a
nation must not be estimated in the way in which individual
merchants judge it, solely and only according to the theory of
values (i.e. by regarding merely the gain at any particular moment
of some material advantage); the nation is bound to keep steadily
in view all these conditions on which its present and future
existence, prosperity, and power depend.
    The nation must sacrifice and give up a measure of material
property in order to gain culture, skill, and powers of united
production; it must sacrifice some present advantages in order to
insure to itself future ones. If, therefore, a manufacturing power
developed in all its branches forms a fundamental condition of all
higher advances in civilisation, material prosperity, and political
power in every nation (a fact which, we think, we have proved from
history); if it be true (as we believe we can prove) that in the
present conditions of the world a new unprotected manufacturing
power cannot possibly be raised up under free competition with a
power which has long since grown in strength and is protected on
its own territory; how can anyone possibly undertake to prove by
arguments only based on the mere theory of values, that a nation
ought to buy its goods like individual merchants, at places where
they are to be had the cheapest -- that we act foolishly if we
manufacture anything at all which can be got cheaper from abroad --
that we ought to place the industry of the nation at the mercy of
the self-interest of individuals -- that protective duties
constitute monopolies, which are granted to the individual home
manufacturers at the expense of the nation? It is true that
protective duties at first increase the price of manufactured
goods; but it is just as true, and moreover acknowledged by the
prevailing economical school, that in the course of time, by the
nation being enabled to build up a completely developed
manufacturing power of its own, those goods are produced more
cheaply at home than the price at which they can be imported from
foreign parts. If, therefore, a sacrifice of value is caused by
protective duties, it is made good by the gain of a power of
production, which not only secures to the nation an infinitely
greater amount of material goods, but also industrial independence
in case of war. Through industrial independence and the internal
prosperity derived from it the nation obtains the means for
successfully carrying on foreign trade and for extending its
mercantile marine; it increases its civilisation, perfects its
institutions internally, and strengthens its external power. A
nation capable of developing a manufacturing power, if it makes use
of the system of protection, thus acts quite in the same spirit as
that landed proprietor did who by the sacrifice of some material
wealth allowed some of his children to learn a productive trade.
    Into what mistakes the prevailing economical school has fallen
by judging conditions according to the mere theory of values which
ought properly to be judged according to the theory of powers of
production, may be seen very clearly by the judgment which J. B.
Say passes upon the bounties which foreign countries sometimes
offer in order to facilitate exportation; he maintains that 'these
are presents made to our nation.' Now if we suppose that France
considers a protective duty of twenty-five per cent sufficient for
her not vet perfectly developed manufactures, while England were to
grant a bounty on exportation of thirty per cent, what would be the
consequence of the 'present' which in this manner the English would
make to the French? The French consumers would obtain for a few
years the manufactured articles which they needed much cheaper than
hitherto, but the French manufactories would be ruined, and
millions of men be reduced to beggary or obliged to emigrate, or to
devote themselves to agriculture for employment. Under the most
favourable circumstances, the present consumers and customers of
the French agriculturists would be converted into competitors with
the latter, agricultural production would be increased, and the
consumption lowered. The necessary consequence would be diminution
in value of the products, decline in the value of property,
national poverty and national weakness in France. The English
'present' in mere value would be dearly paid for in loss of power;
it would seem like the present which the Sultan is wont to make to
his pashas by sending them valuable silken cords.
    Since the time when the Trojans were 'presented' by the Greeks
with a wooden horse, the acceptance of 'presents' from other
nations has become for the nation which receives them a very
questionable transaction. The English have given the Continent
presents of immense value in the form of subsidies, but the
Continental nations have paid for them dearly by the loss of power.
These subsidies acted like a bounty on exportation in favour of the
English, and were detrimental to the German manufactories. If
England bound herself to-day to supply the Germans gratuitously for
years with all they required in manufactured articles, we could not
recommend them to accept such an offer. If the English are enabled
through new inventions to produce linen forty per cent. cheaper
than the Germans can by using the old process, and if in the use of
their new process they merely obtain a start of a few years over
the Germans, in such a case, were it not for protective duties, one
of the most important and oldest branches of Germany's industry
will be ruined. It will be as if a limb of the body of the German
nation had been lost. And who would be consoled for the loss of an
arm by knowing that he had nevertheless bought his shirts forty per
cent cheaper?
    If the English very often find occasion to offer presents to
foreign nations, very different are the forms in which this is
done; it is not unfrequently done against their will; always does
it behove foreign nations well to consider whether or not the
present should be accepted. Through their position as the
manufacturing and commercial monopolists of the world, their
manufactories from time to time fall into the state which they call
'glut,' and which arises from what they call 'overtrading.' At such
periods everybody throws his stock of goods into the steamers.
After the elapse of eight days the goods are offered for sale in
Hamburg, Berlin, or Frankfort, and after three weeks in New York,
at fifty per cent under their real value. The English manufacturers
suffer for the moment, but they are saved, and they compensate
themselves later on by better prices. The German and American
manufacturers receive the blows which were deserved by the English
-- they are ruined. The English nation merely sees the fire and
hears the report of the explosion; the fragments fall down in other
countries, and if their inhabitants complain of bloody heads, the
intermediate merchants and dealers say, 'The crisis has done it
all!' If we consider how often by such crises the whole
manufacturing power, the system of credit, nay the agriculture, and
generally the whole economical system of the nations who are placed
in free competition with England, are shaken to their foundations,
and that these nations have afterwards notwithstanding richly to
recompense the English manufacturers by higher prices, ought we not
then to become very sceptical as to the propriety, of the
commercial conditions of nations being regulated according to the
mere theory of values and according to cosmopolitical principles?
The prevailing economical school has never deemed it expedient to
elucidate the causes and effects of such commercial crises.
    The great statesmen of all modern nations, almost without
exception, have comprehended the great influence of manufactures
and manufactories on the wealth, civilisation, and power of
nations, and the necessity of protecting them. Edward III
comprehended this like Elizabeth; Frederick the Great like Joseph
II; Washington like Napoleon. Without entering into the depths of
the industry theory, their foreseeing minds comprehended the nature
of in its entirety, and appreciated it correctly. It was reserved
for the school of physiocrats to regard this nature from another
point of view in consequence of a sophistical line of reasoning.
Their castle in the air has disappeared; the more modern economical
school itself has destroyed it; but even the latter has also not
disentangled itself from the original errors, but has merely
advanced somewhat farther from them. Since it did not recognise the
difference between productive power and mere values of exchange,
and did not investigate the former independently of the latter, but
subordinated it to the theory of values of exchange, it was
impossible for that school to arrive at the perception how greatly
the nature of the agricultural productive power differs from the
nature of the manufacturing productive power. It does not discern
that through the development of a manufacturing industry in an
agricultural nation a mass of mental and bodily powers, of natural
powers and natural resources, and of instrumental powers too (which
latter the prevailing school terms 'capital'), is brought to bear,
and brought into use, which had not previously been active, and
would never have come into activity but for the formation and
development of an internal manufacturing power; it imagines that by
the establishment of manufacturing industry these forces must be
taken away from agriculture, and transferred to manufacture,
whereas the latter to a great extent is a perfectly new and
additional power, which, very far indeed from increasing at the
expense of the agricultural interest, is often the means of helping
that interest to attain a higher degree of prosperity and
development.

NOTES:


1. This is true respecting Spain up to the period of her invasion
by Napoleon, but not subsequently. Our author's conclusions are,
however, scarcely invalidated by that exception. -- TR.

2. Say states in his Economie Politique Pratique, vol. iii. p. 242,
'Les lois ne peuvent pas créer des richesses.' Certainly they
cannot do this, but they create productive power, which is more
important than riches, i.e. than possession of values of exchange.

3. Wealth of Nations, Book IV. chap. ii.

4. From the great number of passages wherein J. B. Say explains
this view, we merely quote the newest -- from the sixth volume of
Economie Politique Pratique, p. 307: 'Le talent d'un avocat, d'un
médecin, qui a été acquis au prix de quelque sacrifice et qui
produit un revenu, est une valeur capitale, non transmissible à la
vérité, mais qui réside néanmoins dans un corps visible, celui de
la personne qui le possède.'

Chapter 13

The National Division of Commercial Operations and the
Confederation of the National Productive Forces

    The school is indebted to its renowned founder for the
discovery of that natural law which it calls 'division of labour,'
but neither Adam Smith nor any of his successors have thoroughly
investigated its essential nature and character, or followed it out
to its most important consequences.
    The expression 'division of labour' is an indefinite one, and
must necessarily produce a false or indefinite idea.
    It is 'division of labour' if one savage on one and the same
day goes hunting or fishing, cuts down wood, repairs his wigwam,
and prepares arrows, nets, and clothes; but it is also 'division of
labour' if (as Adam Smith mentions as an example) ten different
persons share in the different occupations connected with the
manufacture of a pin: the former is an objective, and the latter a
subjective division of labour; the former hinders, the latter
furthers production. The essential difference between both is, that
in the former instance one person divides his work so as to produce
various objects, while in the latter several persons share in the
production of a single object.
    Both operations, on the other hand, may be called with equal
correctness a union of labour; the savage unites various tasks in
his person, while in the case of the pin manufacture various
persons are united in one work of production in common.
    The essential character of the natural law from which the
popular school explains such important phenomena in social economy,
is evidently not merely a division of labour, but a division of
different commercial operations between several individuals, and at
the same time a confederation or union of various energies,
intelligences, and powers on behalf of a common production. The
cause of the productiveness of these operations is not merely that
division, but essentially this union. Adam Smith well perceives
this himself when he states, 'The necessaries of life of the lowest
members of society are a product of joint labour and of the
co-operation of a number of individuals.'(1*) What a pity that he
did not follow out this idea (which he so clearly expresses) of
united labour.
    If we continue to consider the example of the pin manufacture
adduced by Adam Smith in illustration of the advantages of division
of labour, and seek for the causes of the phenomenon that ten
persons united in that manufacture can produce an infinitely larger
number of pins than if every one carried on the entire pin
manufacture separately, we find that the division of commercial
operations without combination of the productive powers towards one
common object could but little further this production.
    In order to create such a result, the different individuals
must co-operate bodily as well as mentally, and work together. The
one who makes the heads of the pins must be certain of the co
operation of the one who makes the points if he does not want to
run the risk of producing pin heads in vain. The labour operations
of all must be in the proper proportion to one another, the workmen
must live as near to one another as possible, and their
co-operation must be insured. Let us suppose e.g. that every one of
these ten workmen lives in a different country; how often might
their co-operation be interrupted by wars, interruptions of
transport, commercial crises, &c.; how greatly would the cost of
the product be increased, and consequently the advantage of the
division of operation diminished; and would not the separation or
secession of a single person from the union, throw all the others
out of work?
    The popular school, because it has regarded the division of
operation alone as the essence of this natural law, has committed
the error of applying it merely to the separate manufactory or
farm; it has not perceived that the same law extends its action
especially over the whole manufacturing and agricultural power,
over the whole economy of the nation.
    As the pin manufactory only prospers by the confederation of
the productive force of the individuals, so does every kind of
manufacture prosper only by the confederation of its productive
forces with those of all other kinds of manufacture. For the
success of a machine manufactory, for instance, it is necessary
that the mines and metal works should furnish it with the necessary
materials, and that all the hundred different sorts of
manufactories which require machines, should buy their products
from it. Without machine manufactories, a nation would in time of
war be exposed to the danger of losing the greater portion of its
manufacturing power.
    In like manner the entire manufacturing industry of a State in
connection with its agricultural interest, and the latter in
connection with the former, will prosper the more the nearer they
are placed to one another, and the less they are interrupted in
their mutual exchanges with one another. The advantages of their
confederation under one and the same political Power in times of
war, of national differences, of commercial crises, failure of
crops, &c., are not less perceptible than are the advantages of the
union of the persons belonging to a pin manufactory under one and
the same roof.
    Smith affirms that the division of labour is less applicable to
agriculture than to manufactures.(2*) Smith had in view only the
separate manufactory and the separate farm. He has, however,
neglected to extend his principle over whole districts and
provinces. Nowhere has the division of commercial operations and
the confederation of the productive powers greater influence than
where every district and every province is in a position to devote
itself exclusively, or at least chiefly, to those branches of
agricultural production for which they are mostly fitted by nature.
In one district corn and hops chiefly thrive, in another vines and
fruit, in a third timber production and cattle rearing, &c. If
every district is devoted to all these branches of production, it
is clear that its labour and its land cannot be nearly so
productive as if every separate district were devoted mainly to
those branches of production for which it is specially adapted by
nature, and as if it exchanged the surplus of its own special
products for the surplus produce of those provinces which in the
production of other necessaries of life and raw materials possess
a natural advantage equally peculiar to themselves. This division
of commercial operations, this confederation of the productive
forces occupied in agriculture, can only take place in a country
which has attained the greatest development of all branches of
manufacturing industry; for in such a country only can a great
demand for the greatest variety of products exist, or the demand
for the surplus of agricultural productions be so certain and
considerable that the producer can feel certain of disposing of any
quantity of his surplus produce during this or at least during next
year at suitable prices; in such a country only can considerable
capital be devoted to speculation in the produce of the country and
holding stocks of it, or great improvements in transport, such as
canals and railway systems, lines of steamers, improved roads, be
carried out profitably; and only by means of thoroughly good means
of transport can every district or province convey the surplus of
its peculiar products to all other provinces, even to the most
distant ones, and procure in return supplies of the peculiar
products of the latter. Where everybody supplies himself with what
he requires, there is but little opportunity for exchange, and
therefore no need for costly facilities of transport.
    We may notice how the augmentation of the powers of production
in consequence of the separation of occupations and the
co-operation of the powers of individuals begins in the separate
manufactory and extends to the united nation. The manufactory
prospers so much the more in proportion as the commercial
operations are divided, the more closely the workmen are united,
and the more the co-operation of each person is insured for the
whole. The productive powers of every separate manufactory are also
increased in proportion as the whole manufacturing power of the
country is developed in all its branches, and the more intimately
it is united with all other branches of industry. The agricultural
power of production is so much greater the more intimately a
manufacturing power developed in all its branches is united
locally, commercially, and politically with agriculture. In
proportion as the manufacturing power is thus developed will the
division of the commercial operations and the co-operation of the
productive powers in agriculture also develop themselves and be
raised to the highest stage of perfection. That nation will
therefore possess most productive power, and will consequently be
the richest, which has cultivated manufacturing industry in all
branches within its territory to the highest perfection, and whose
territory and agricultural production is large enough to supply its
manufacturing population with the largest part of the necessaries
of life and raw materials which they require.
    Let us now consider the opposite side of this argument. A
nation which possesses merely agriculture, and merely the most
indispensable industries, is in want of the first and most
necessary division of commercial operations among its inhabitants,
and of the most important half of its productive powers, indeed it
is in want of a useful division of commercial operations even in
the separate branches of agriculture itself. A nation thus
imperfect will not only be merely half as productive as a perfect
nation, but with an equal or even with a much larger territory,
with an equal or a much larger population, it will perhaps scarcely
obtain a fifth, probably scarcely a tenth, part of that material
wealth which a perfect nation is able to procure; and this for the
same reason owing to which in a very complicated manufactory ten
persons produce not merely ten times more, but perhaps thirty times
more, than one person, or a man with one arm cannot merely work
half as little, but infinitely less, than a man with two arms. This
loss in productive power will be so much greater, the more that the
manufacturing operations can be furthered by machinery, and the
less that machinery can be applied in agriculture. A part of the
productive power which the agricultural nation thus loses, will
fall to the lot of that nation which exchanges its manufactured
goods for agricultural products. This will, however, be a positive
loss only in case the agricultural nation has already reached that
stage of civilisation and political development which is necessary
for the establishment of a manufacturing power. If it has not yet
attained that stage, and still remains in a barbarous or
half-civilised state, if its agricultural power of production has
not yet developed itself even from the most primitive condition, if
by the importation of foreign fabrics and the exportation of raw
products its prosperity nevertheless increases considerably from
year to year, and its mental and social powers continue to be
awakened and increased, if such commerce as it can thus carry on is
not interrupted by foreign prohibition of importation of raw
products, or by wars, or if the territory of the agricultural
nation is situated in a tropical climate, the gain on both sides
will then be equal and in conformity with the laws of nature,
because under the influence of such an exchange of the native
products for foreign fabrics, a nation so situated will attain to
civilisation and development of its productive powers more quickly
and safely than when it has to develop them entirely out of its
resources. If, however, the agricultural nation has already reached
the culminating point of its agricultural development, as far as
that can be attained by the influence of foreign commerce, or if
the manufacturing nation refuses to take the products of the
agricultural nation in exchange for its manufactured goods, and if
nevertheless, owing to the successful competition of the
manufacturing nation in the markets of the agricultural nation, no
manufactures can spring up in the latter, in such a case the
agricultural productive power of the agricultural nation is exposed
to the danger of being crippled.
    By a crippled state of agriculture we mean that state of things
in which, from want of a powerful and steadily developing
manufacturing industry, the entire increase of population tends to
throw itself on agriculture for employment, consumes all the
surplus agricultural production of the country, and as soon as it
has considerably increased either has to emigrate or share with the
agriculturists already in existence the land immediately at hand,
till the landed property of every family has become so small that
it produces only the most elementary and necessary portion of that
family's requirements of food and raw materials, but no
considerable surplus which it might exchange with the manufacturers
for the manufactured products which it requires. Under a normal
development of the productive powers of the State, the greater part
of the increase of population of an agricultural nation (as soon as
it has attained a certain degree of culture) should transfer itself
to manufacturing industry, and the excess of the agricultural
products should partly serve for supplying the manufacturing
population with provisions and raw materials, and partly for
procuring for the agriculturists the manufactured goods, machines,
and utensils which they require for their consumption, and for the
increase of their own production.
    If this state of things sets in at the proper time,
agricultural and industrial productive power will increase
reciprocally, and indeed ad infinitum. The demand for agricultural
products on the part of the industrial population will be so great,
that no greater number of labourers will be diverted to
agriculture, nor any greater division of the existing land be made,
than is necessary to obtain the greatest possible surplus produce
from it. In proportion to this surplus produce the population
occupied in agriculture will be enabled to consume the products of
the workmen employed in manufacturing. A continuous increase of the
agricultural surplus produce will occasion a continuous increase of
the demand for manufacturing workmen. The excess of the
agricultural population will therefore continually find work in the
manufactories, and the manufacturing population will at length not
only equal the agricultural population in numbers, but will far
exceed it. This latter is the condition of England; that which we
formerly described is that of part of France and Germany. England
was principally brought to this natural division of industrial
pursuits between the two great branches of industry, by means of
her flocks of sheep and woollen manufactures, which existed there
on a large scale much sooner than in other countries. In other
countries agriculture was crippled mainly by the influence of
feudalism and arbitrary power. The possession of land gave
influence and power, merely because by it a certain number of
retainers could be maintained which the feudal proprietor could
make use of in his feuds. The more vassals he possessed, so many
more warriors he could muster. It was besides impossible, owing to
the rudeness of those times, for the landed proprietor to consume
his income in any other manner than by keeping a large number of
servants, and he could not pay these better and attach them to his
own person more surely than by giving them a bit of land to
cultivate under the condition of rendering him personal service and
of paying a smaller tax in produce. Thus the foundation for
excessive division of the soil was laid in an artificial manner;
and if in the present day the Government seeks by artificial means
to alter that system, in so doing it is merely restoring the
original state of things.
    In order to restrain the continued depreciation of the
agricultural power of a nation, and gradually to apply a remedy to
that evil in so far as it is the result of previous institutions,
no better means exists (apart from the promotion of emigration)
than to establish an internal manufacturing power, by which the
increase of population may be gradually drawn over to the latter,
and a greater demand created for agricultural produce, by which
consequently the cultivation of larger estates may be rendered more
profitable, and the cultivator induced and encouraged to gain from
his land the greatest possible amount of surplus produce.
    The productive power of the cultivator and of the labourer in
agriculture will always be greater or smaller according to the
degree in which the exchange of agricultural produce for
manufactures and other products of various kinds can proceed more
or less readily. That in this respect the foreign trade of any
nation which is but little advanced can prove in the highest degree
beneficial, we have shown in another chapter by the example of
England. But a nation which has already made considerable advances
in civilisation, in possession of capital, and in population, will
find the development of a manufacturing power of its own infinitely
more beneficial to its agriculture than the most flourishing
foreign trade can be without such manufactures, because it thereby
secures itself against all fluctuations to which it may be exposed
by war, by foreign restrictions on trade, and by commercial crises,
because it thereby saves the greatest part of the costs of
transport and commercial charges incurred in exporting its own
products and in importing manufactured articles, because it derives
the greatest advantages from the improvements in transport which
are called into existence by its own manufacturing industry, while
from the same cause a mass of personal and natural powers hitherto
unemployed will be developed, and especially because the reciprocal
exchange between manufacturing power and agricultural power is so
much greater, the closer the agriculturist and manufacturer are
placed to one another, and the less they are liable to be
interrupted in the exchange of their various products by accidents
of all kinds.
    In my letters to Mr. Charles J. Ingersoll, President of the
Society for Promoting Arts and Industries in Philadelphia, of the
year 1828 (entitled, 'Outlines of a New System of Political
Economy'), I tried to explain the advantages of a union of the
manufacturing power with agriculture in one and the same country,
and under one and the same political power, in the following
manner. Supposing you did not understand the art of grinding corn,
which has certainly been a great art in its time; supposing further
that the art of baking bread had remained unknown to you, as
(according to Anderson) the real art of salting herrings was still
unknown to the English in the seventeenth century; supposing,
therefore, that you had to send your corn to England to be ground
into flour and baked into bread, how large a quantity of your corn
would not the English retain as pay for the grinding and baking;
how much of it would the carters, seamen, and merchants consume,
who would have to be employed in exporting the corn and importing
the bread; and how much would come back into the hands of those who
cultivated the corn? There is no doubt that by such a process the
foreign trade would receive a considerable impetus, but it is very
doubtful whether this intercourse would be specially advantageous
to the welfare and independence of the nation. Consider only in
case of a war breaking out between your country (the United States)
and Great Britain, what would be the situation of those who
produced corn for the English mills and bakehouses, and on the
other hand the situation of those who had become accustomed to the
taste of the English bread. Just as, however, the economical
prosperity of the corn-cultivating interest requires that the corn
millers should live in its vicinity, so also does the prosperity of
the farmer especially require that the manufacturer should live
close to him, so also does the prosperity of a flat and open
country require that a prosperous and industrial town should exist
in its centre, and so does the prosperity of the whole agriculture
of a country require that its own manufacturing power should be
developed in the highest possible degree.
    Let us compare the condition of agriculture in the vicinity of
a populous town with its condition when carried on in distant
provinces. In the latter case the farmer can only cultivate for
sale those products which can bear a long transport, and which
cannot be supplied at cheaper prices and in better quality from
districts lying nearer to those who purchase them. A larger portion
of his profits will be absorbed by the costs of transport. He will
find it difficult to procure capital which he may employ usefully
on his farm. From want of better examples and means of education he
will not readily be led to avail himself of new processes, of
better implements, and of new methods of cultivation. The labourer
himself, from want of good example, of stimulus to exertion, and to
emulation in the exercise of his productive powers, will only
develop those powers inefficiently, and will indulge himself in
loitering about and in idleness.
    On the other hand, in the proximity of the town, the farmer is
in a position to use every patch of land for those crops which best
suit the character of the soil. He will produce the greatest
variety of things to the best advantage. Garden produce, poultry,
eggs, milk, butter, fruit, and especially articles which the farmer
residing at a distance considers insignificant and secondary
things, will bring to the farmer near the town considerable profit.
While the distant farmer has to depend mainly on the mere breeding
of cattle, the other will make much better profits from fattening
them, and will thereby be led to perfect his cultivation of root
crops and fodder. He can utilise with much profit a number of
things which are of little or no use to the distant farmer; e.g.
stone, sand, water power, &c. The most numerous and best machines
and implements as well as all means for his instruction, are close
at hand. It will be easy for him to accumulate the capital
necessary for the improvement of his farm. Landed proprietors and
workmen, by the means of recreation which the town affords, the
emulation which it excites among them, and the facility of making
profits, will be incited to exert all their mental and bodily
powers for the improvement of their condition. And precisely the
same difference exists between a nation which unites agriculture
and manufactures on its own territory, and a nation which can only
exchange its own agricultural products for foreign manufactured
goods.
    The whole social state of a nation will be chiefly determined
by the principle of the variety and division of occupations and the
cooperation of its productive powers. What the pin is in the pin
manufactory, that the national well-being is to the large society
which we term 'the nation.' The most important division of
occupations in the nation is that between the mental and material
ones. Both are mutually dependent on one another. The more the
mental producers succeed in promoting morality, religion,
enlightenment, increase of knowledge, extension of liberty and of
perfection of political institutions -- security of persons and
property within the State, and the independence and power of the
nation externally -- so much greater will be the production of
material Wealth. On the other hand, the more goods that the
material producers produce, the more will mental production be
capable of being promoted.
    The most important division of occupations, and the most
important co-operation of productive powers in material production,
is that of agriculture and manufacture. Both depend mutually upon
one another, as we have shown.
    As in the pin manufactory, so also in the nation does the
productiveness of every individual -- of every separate branch of
production -- and finally of the whole nation depend on the
exertions of all individuals standing in proper relation to one
another. We call this relation the balance or the harmony of the
productive powers. It is possible for a nation to possess too many
philosophers, philologers, and literati, and too few skilled
artisans, merchants, and seamen. This is the consequence of highly
advanced and learned culture which is not supported by a highly
advanced manufacturing power and by an extensive internal and
external trade; it is as if in a pin manufactory far more pin heads
were manufactured than pin points. The surplus pin heads in such a
nation are: a mass of useless books, subtle theoretical systems,
and learned controversies, through which the mind of the nation is
more obscured than cultivated, and is withdrawn from useful
occupations; consequently its productive powers are retarded in
their progress almost as much as if it possessed too many priests
and too few instructors of youth, too many soldiers and too few
politicians, too many administrators and too few judges and
defenders of justice and right.
    A nation which only carries on agriculture, is an individual
who in his material production lacks one arm. Commerce is merely
the medium of exchange between the agricultural and the
manufacturing power, and between their separate branches. A nation
which exchanges agricultural products for foreign manufactured
goods is an individual with one arm, which is supported by a
foreign arm. This support may be useful to it, but not so useful as
if it possessed two arms itself, and this because its activity is
dependent on the caprice of the foreigner. In possession of a
manufacturing power of its own, it can produce as much provisions
and raw materials as the home manufacturers can consume; but if
dependent upon foreign manufacturers, it can merely produce as much
surplus as foreign nations do not care to produce for themselves,
and which they are obliged to buy from another country.
    As between the different districts of one and the same country,
so does the division of labour and the co-operation of the
productive powers operate between the various nations of the earth.
The former is conducted by internal or national, the latter by
international commerce. The international co-operation of
productive powers is, however, a very imperfect one, inasmuch as it
may be frequently interrupted by wars, political regulations,
commercial crises, &c. Although it is the most important in one
sense, inasmuch as by it the various nations of the earth are
connected with one another, it is nevertheless the least important
with regard to the prosperity of any separate nation which is
already far advanced in civilisation. This is admitted by writers
of the popular school, who declare that the home market of a nation
is without comparison more important than its foreign market. It
follows from this, that it is the interest of every great nation to
make the national confederation of its productive powers the main
object of its exertions, and to consider their international
confederation as second in importance to it.
    Both international and national division of labour are chiefly
determined by climate and by Nature herself. We cannot produce in
every country tea as in China, spices as in Java, cotton as in
Louisiana, or corn, wool, fruit, and manufactured goods as in the
countries of the temperate zone. It would be folly for a nation to
attempt to supply itself by means of national division of labour
(i.e. by home production) with articles for the production of which
it is not favoured by nature, and which it can procure better and
cheaper by means of international division of labour (i.e. through
foreign commerce). And just as much does it betoken a want of
national intelligence or national industry if a nation does not
employ all the natural powers which it possesses in order to
satisfy its own internal wants, and then by means of the surplus of
its own productions to purchase those necessary articles which
nature has forbidden it to produce on its own territory.
    The countries of the world most favoured by nature, with regard
to both national and international division of labour, are
evidently those whose soil brings forth the most common necessaries
of life of the best quality and in the largest quantity, and whose
climate is most conducive to bodily and mental exertion, and these
are the countries of the temperate zone; for in these countries the
manufacturing power especially prospers, by means of which the
nation not merely attains to the highest degree of mental and
social development and of political power, but is also enabled to
make the countries of tropical climates and of inferior
civilisation tributary in a certain measure to itself. The
countries of the temperate zone therefore are above all others
called upon to bring their own national division of labour to the
highest perfection, and to use the international division of labour
for their enrichment.

NOTES:

1. Wealth of Nations, Book I. chap. i.

2. Wealth of Nations, Book I. chap. i.

Chapter 14

Private Economy and National Economy


    We have proved historically that the unity of the nation forms
the fundamental condition of lasting national prosperity; and we
have shown that only where the interest of individuals has been
subordinated to those of the nation, and where successive
generations have striven for one and the same object, the nations
have been brought to harmonious development of their productive
powers, and how little private industry can prosper without the
united efforts both of the individuals who are living at the time,
and of successive generations directed to one common object. We
have further tried to prove in the last chapter how the law of
union of powers exhibits its beneficial operation in the individual
manufactory, and how it acts with equal power on the industry of
whole nations. In the present chapter we have now to demonstrate
how the popular school has concealed its misunderstanding of the
national interests and of the effects of national union of powers,
by confounding the principles of private economy with those of
national economy.
    'What is prudence in the conduct of every private family,' says
Adam Smith,(1*) 'can scarce be folly in that of a great kingdom.'
Every individual in pursuing his own interests necessarily promotes
thereby also the interests of the community. It is evident that
every individual, inasmuch as he knows his own local circumstances
best and pays most attention to his occupation, is far better able
to judge than the statesman or legislator how his capital can most
profitably be invested. He who would venture to give advice to the
people how to invest their capital would not merely take upon
himself a useless task, but would also assume to himself an
authority which belongs solely to the producer, and which can be
entrusted to those persons least of all who consider themselves
equal to so difficult a task. Adam Smith concludes from this:
'Restrictions on trade imposed on the behalf of the internal
industry of a country, are mere folly; every nation, like every
individual, ought to buy articles where they can be procured the
cheapest; in order to attain to the highest degree of national
prosperity, we have simply to follow the maxim of letting things
alone (laisser faire et laisser aller).' Smith and Say compare a
nation which seeks to promote its industry by protective duties, to
a tailor who wants to make his own boots, and to a bootmaker who
would impose a toll on those who enter his door, in order to
promote his prosperity. As in all errors of the popular school, so
also in this one does Thomas Cooper go to extremes in his book(2*)
which is directed against the American system of protection.
'Political economy,' he alleges, 'is almost synonymous with the
private economy of all individuals; politics are no essential
ingredient of political economy; it is folly to suppose that the
community is something quite different from the individuals of whom
it is composed. Every individual knows best how to invest his
labour and his capital. The wealth of the community is nothing else
than the aggregate of the wealth of all its individual members; and
if every individual can provide best for himself, that nation must
be the richest in which every individual is most left to himself.'
The adherents of the American system of protection had opposed
themselves to this argument, which had formerly been adduced by
importing merchants in favour of free trade; the American
navigation laws had greatly increased the carrying trade, the
foreign commerce, and fisheries of the United States; and for the
mere protection of their mercantile marine millions had been
annually expended on their fleet; according to his theory those
laws and this expense also would be as reprehensible as protective
duties. ' In any case,' exclaims Mr Cooper, 'no commerce by sea is
worth a naval war; the merchants may be left to protect
themselves.'
    Thus the popular school, which had begun by ignoring the
principles of nationality and national interests, finally comes to
the point of altogether denying their existence, and of leaving
individuals to defend them as they may solely by their own
individual powers.
    How? Is the wisdom of private economy, also wisdom in national
economy? Is it in the nature of individuals to take into
consideration the wants of future centuries, as those concern the
nature of the nation and the State? Let us consider only the first
beginning of an American town; every individual left to himself
would care merely for his own wants, or at the most for those of
his nearest successors, whereas all individuals united in one
community provide for the convenience and the wants of the most
distant generations; they subject the present generation for this
object to privations and sacrifices which no reasonable person
could expect from individuals. Can the individual further take into
consideration in promoting his private economy, the defence of the
country, public security and the thousand other objects which can
only be attained by the aid of the whole community? Does not the
State require individuals to limit their private liberty according
to what these objects require? Does it not even require that they
should sacrifice for these some part of their earnings, of their
mental and bodily labour, nay, even their own life? We must first
root out, as Cooper does, the very ideas of 'State' and 'nation'
before this opinion can be entertained.
    No; that may be wisdom in national economy which would be folly
in private economy, and vice versâ; and owing to the very simple
reason, that a tailor is no nation and a nation no tailor, that one
family is something very different from a community of millions of
families, that one house is something very different from a large
national territory. Nor does the individual merely by understanding
his own interests best, and by striving to further them, if left to
his own devices, always further the interests of the community. We
ask those who occupy the benches of justice, whether they do not
frequently have to send individuals to the tread-mill on account of
their excess of inventive power, and of their all too great
industry. Robbers, thieves, smugglers, and cheats know their own
local and personal circumstances and conditions extremely well, and
pay the most active attention to their business; but it by no means
follows therefrom, that society is in the best condition where such
individuals are least restrained in the exercise of their private
industry.
    In a thousand cases the power of the State is compelled to
impose restrictions on private industry. It prevents the shipowner
from taking on board slaves on the west coast of Africa, and taking
them over to America. It imposes regulations as to the building of
steamers and the rules of navigation at sea, in order that
passengers and sailors may not be sacrificed to the avarice and
caprice of the captains. In England certain rules have recently
been enacted with regard to shipbuilding, because an infernal union
between assurance companies and shipowners has been brought to
light, whereby yearly thousands of human lives and millions in
value were sacrificed to the avarice of a few persons. In North
America millers are bound under a penalty to pack into each cask
not less than 198 lbs. of good flour, and for all market goods
market inspectors are appointed, although in no other country is
individual liberty more highly prized. Everywhere does the State
consider it to be its duty to guard the public against danger and
loss, as in the sale of necessaries of life, so also in the sale of
medicines, &c.
    But the cases which we have mentioned (the school will reply)
concern unlawful damages to property and to the person, not the
honourable exchange of useful objects, not the harmless and useful
industry of private individuals; to impose restrictions on these
latter the State has no right whatever. Of course not, so long as
they remain harmless and useful; that which, however, is harmless
and useful in itself, in general commerce with the world, can
become dangerous and injurious in national internal commerce, and
vice versâ. In time of peace, and considered from a cosmopolitan
point of view, privateering is an injurious profession; in time of
war, Governments favour it. The deliberate killing of a human being
is a crime in time of peace, in war it becomes a duty. Trading in
gunpowder, lead, and arms in time of peace is allowed; but whoever
provides the enemy with them in time of war, is punished as a
traitor.
    For similar reasons the State is not merely justified in
imposing, but bound to impose, certain regulations and restrictions
on commerce (which is in itself harmless) for the best interests of
the nation. By prohibitions and protective duties it does not give
directions to individuals how to employ their productive powers and
capital (as the popular school sophistically alleges); it does not
tell the one, 'You must invest your money in the building of a
ship, or in the erection of a manufactory;' or the other, 'You must
be a naval captain or a civil engineer;' it leaves it to the
judgment of every individual how and where to invest his capital,
or to what vocation he will devote himself. It merely says, 'It is
to the advantage of our nation that we manufacture these or the
other goods ourselves; but as by free competition with foreign
countries we can never obtain possession of this advantage, we have
imposed restrictions on that competition, so far as in our opinion
is necessary, to give those among us who invest their capital in
these new branches of industry, and those who devote their bodily
and mental powers to them, the requisite guarantees that they shall
not lose their capital and shall not miss their vocation in life;
and further to stimulate foreigners to come over to our side with
their productive powers. In this manner, it does not in the least
degree restrain private industry; on the contrary, it secures to
the personal, natural, and moneyed powers of the nation a greater
and wider field of activity. It does not thereby do something which
its individual citizens could understand better and do better than
it; on the contrary it does something which the individuals, even
if they understood it, would not be able to do for themselves.
    The allegation of the school, that the system of protection
occasions unjust and anti-economical encroachments by the power of
the State against the employment of the capital and industry of
private individuals, appears in the least favourable light if we
consider that it is the foreign commercial regulations which allow
such encroachments on our private industry to take place, and that
only by the aid of the system of protection are we enabled to
counteract those injurious operations of the foreign commercial
policy. If the English shut out our corn from their markets, what
else are they doing than compelling our agriculturists to grow so
much less corn than they would have sent out to England under
systems of free importation? If they put such heavy duties on our
wool, our wines, or our timber, that our export trade to England
wholly or in great measure ceases, what else is thereby effected
than that the power of the English nation restricts proportionately
our branches of production? In these cases a direction is evidently
given by foreign legislation to our capital and our personal
productive powers, which but for the regulations made by it they
would scarcely have followed. It follows from this, that were we to
disown giving, by means of our own legislation, a direction to our
own national industry in accordance with our own national
interests, we could not prevent foreign nations from regulating our
national industry after a fashion which corresponds with their own
real or presumed advantage, and which in any case operates
disadvantageously to the development of our own productive powers.
But can it possibly be wiser on our part, and more to the advantage
of those who nationally belong to us, for us to allow our private
industry to be regulated by a foreign national Legislature, in
accordance with foreign national interests, rather than regulate it
by means of our own Legislature and in accordance with our own
interests? Does the German or American agriculturist feel himself
less restricted if he has to study every year the English Acts of
Parliament, in order to ascertain whether that body deems it
advantageous to encourage or to impose restrictions on his
production of corn or wool, than if his own Legislature imposes
certain restrictions on him in respect of foreign manufactured
goods, but at the same time insures him a market for all his
products, of which he can never again be deprived by foreign
legislation?
    If the school maintains that protective duties secure to the
home manufacturers a monopoly to the disadvantage of the home
consumers, in so doing it makes use of a weak argument. For as
every individual in the nation is free to share in the profits of
the home market which is thus secured to native industry, this is
in no respect a private monopoly, but a privilege, secured to all
those who belong to our nation, as against those who nationally
belong to foreign nations, and which is the more righteous and just
inasmuch as those who nationally belong to foreign nations possess
themselves the very same monopoly, and those who belong to us are
merely thereby put on the same footing with them. It is neither a
privilege to the exclusive advantage of the producers, nor to the
exclusive disadvantage of the consumers; for if the producers at
first obtain higher prices, they run great risks, and have to
contend against those considerable losses and sacrifices which are
always connected with all beginnings in manufacturing industry. But
the consumers have ample security that these extraordinary profits
shall not reach unreasonable limits, or become perpetual, by means
of the competition at home which follows later on, and which, as a
rule, always lowers prices further than the level at which they had
steadily ranged under the free competition of the foreigner. If the
agriculturists, who are the most important consumers to the
manufacturers, must also pay higher prices, this disadvantage will
be amply repaid to them by increased demands for agricultural
products, and by increased prices obtained for the latter.
    It is a further sophism, arrived at by confounding the theory
of mere values with that of the powers of production, when the
popular school infers from the doctrine, 'that the wealth of the
nation is merely the aggregate of the wealth of all individuals in
it, and that the private interest of every individual is better
able than all State regulations to incite to production and
accumulation of wealth,' the conclusion that the national industry
would prosper best if only every individual were left undisturbed
in the occupation of accumulating wealth. That doctrine can be
conceded without the conclusion resulting from it at which the
school desires thus to arrive; for the point in question is not (as
we have shown in a previous chapter) that of immediately increasing
by commercial restrictions the amount of the values of exchange in
the nation, but of increasing the amount of its productive powers.
But that the aggregate of the productive powers of the nation is
not synonymous with the aggregate of the productive powers of all
individuals, each considered separately -- that the total amount of
these powers depends chiefly on social and Political conditions,
but especially on the degree in which the nation has rendered
effectual the division of labour and the confederation of the
powers of production within itself -- we believe we have
sufficiently demonstrated in the preceding chapters.
    This system everywhere takes into its consideration only
individuals who are in free unrestrained intercourse among
themselves, and who are contented if we leave everyone to pursue
his own private interests according to his own private natural
inclination. This is evidently not a system of national economy,
but a system of the private economy of the human race, as that
would constitute itself were there no interference on the part of
any Government, were there no wars, no hostile foreign tariff
restrictions. Nowhere do the advocates of that system care to point
out by what means those nations which are now prosperous have
raised themselves to that stage of power and prosperity which we
see them maintain, and from what causes others have lost that
degree of prosperity and power which they formerly maintained. We
can only learn from it how in private industry, natural ability,
labour and capital, are combined in order to bring into exchange
valuable products, and in what manner these latter are distributed
among the human race and consumed by it. But what means are to be
adopted in order to bring the natural powers belonging to any
individual nation into activity and value, to raise a poor and weak
nation to prosperity and power, cannot be gathered from it, because
the school totally ignoring politics, ignores the special
conditions of the nation, and concerns itself merely about the
prosperity of the whole human race. Wherever international commerce
is in question, the native individual is throughout simply pitted
against the foreign individual; examples from the private dealings
of separate merchants are throughout the only ones adduced -- goods
are spoken of in general terms (without considering whether the
question is one of raw products or of manufactured articles) -- in
order to prove that it is equally for the benefit of the nation
whether its exports and imports consist of money, of raw materials,
or of manufactured goods, and whether or not they balance one
another. If we, for example, terrified at the commercial crises
which prevail in the United States of North America like native
epidemics, consult this theory as to the means of averting or
diminishing them, it leaves us utterly without comfort or
instruction; nay, it is indeed impossible for us to investigate
these phenomena scientifically, because, under the penalty of being
taken for muddleheads and ignoramuses, we must not even utter the
term 'balance of trade,' while this term is, notwithstanding, made
use of in all legislative assemblies, in all bureaux of
administration, on every exchange. For the sake of the welfare of
humanity, the belief is inculcated on us that exports always
balance themselves spontaneously by imports; notwithstanding that
we read in public accounts how the Bank of England comes to the
assistance of the nature of things; notwithstanding that corn laws
exist, which make it somewhat difficult for the agriculturist of
those countries which deal with England to pay with his own produce
for the manufactured goods which he consumes.
    The school recognises no distinction between nations which have
attained a higher degree of economical development, and those which
occupy a lower stage. Everywhere it seeks to exclude the action of
the power of the State; everywhere, according to it, will the
individual be so much better able to produce, the less the power of
the State concerns itself for him. In fact, according to this
doctrine savage nations ought to be the most productive and wealthy
of the earth, for nowhere is the individual left more to himself
than in the savage state, nowhere is the action of the power of the
State less perceptible.
    Statistics and history, however, teach, on the contrary, that
the necessity for the intervention of legislative power and
administration is everywhere more apparent, the further the economy
of the nation is developed. As individual liberty is in general a
good thing so long only as it does not run counter to the interests
of society, so is it reasonable to hold that private industry can
only lay claim to unrestricted action so long as the latter
consists with the well-being of the nation. But whenever the
enterprise and activity of individuals does not suffice for this
purpose, or in any case where these might become injurious to the
nation, there does private industry rightly require support from
the whole power of the nation, there ought it for the sake of its
own interests to submit to legal restrictions.
    If the school represents the free competition of all producers
as the most effectual means for promoting the prosperity of the
human race, it is quite right from the point of view which it
assumes. On the hypothesis of a universal union, every restriction
on the honest exchange of goods between various countries seems
unreasonable and injurious. But so long as other nations
Subordinate the interests of the human race as a whole to their
national interests, it is folly to speak of free competition among
the individuals of various nations. The arguments of the school in
favour of free competition are thus only applicable to the exchange
between those who belong to one and the same nation. Every great
nation, therefore, must endeavour to form an aggregate within
itself, which will enter into commercial intercourse with other
similar aggregates so far only as that intercourse is Suitable to
the interests of its own special community. These interests of the
community are, however, infinitely different from the private
interests of all the separate individuals of the nation, if each
individual is to be regarded as existing for himself alone and not
in the character of a member of the national community, if we
regard (as Smith and Say do) individuals as mere producers and
consumers, not citizens of states or members of nations; for as
such, mere individuals do not concern themselves for the prosperity
of future generations -- they deem it foolish (as Mr Cooper really
demonstrates to us) to make certain and present sacrifices in order
to endeavour to obtain a benefit which is as yet uncertain and
lying in the vast field of the future (if even it possess any value
at all); they care but little for the continuance of the nation --
they would expose the ships of their merchants to become the prey
of every bold pirate -- they trouble themselves but little about
the power, the honour, or the glory of the nation, at the most they
can persuade themselves to make some material sacrifices for the
education of their children, and to give them the opportunity of
learning a trade, provided always that after the lapse of a few
years the learners are placed in a position to earn their own
bread.
    Indeed, according to the prevailing theory, so analogous is
national economy to private economy that J. B. Say, where
(exceptionally) he allows that internal industry may be protected
by the State, makes it a condition of so doing, that every
probability must exist that after the lapse of a few years it will
attain independence, just as a shoemaker's apprentice is allowed
only a few years' time in order to perfect himself so far in his
trade as to do without parental assistance.

NOTES:

1. Wealth of Nations, Book IV. chap. ii.

2. Lectures on Political Economy, by Thomas Cooper, pp. 1, 15, 19,
117.

Chapter 15

Nationality and the Economy of the Nation

    The system of the school suffers, as we have already shown in
the preceding chapters, from three main defects: firstly, from
boundless cosmopolitanism, which neither recognises the principle
of nationality, nor takes into consideration the satisfaction of
its interests; secondly, from a dead materialism, which everywhere
regards chiefly the mere exchangeable value of things without
taking into consideration the mental and political, the present and
the future interests, and the productive powers of the nation;
thirdly, from a disorganising particularism and individualism,
which, ignoring the nature and character of social labour and the
operation of the union of powers in their higher consequences,
considers private industry only as it would develop itself under a
state of free interchange with society (i.e. with the whole human
race) were that race not divided into separate national societies.
    Between each individual and entire humanity, however, stands
THE NATION, with its special language and literature, with its
peculiar origin and history, with its special manners and customs,
laws and institutions, with the claims of all these for existence,
independence, perfection, and continuance for the future, and with
its separate territory; a society which, united by a thousand ties
of mind and of interests, combines itself into one independent
whole, which recognises the law of right for and within itself, and
in its united character is still opposed to other societies of a
similar kind in their national liberty, and consequently can only
under the existing conditions of the world maintain self-existence
and independence by its own power and resources. As the individual
chiefly obtains by means of the nation and in the nation mental
culture, power of production, security, and prosperity, so is the
civilisation of the human race only conceivable and possible by
means of the civilisation and development of the individual
nations.
    Meanwhile, however, an infinite difference exists in the
condition and circumstances of the various nations: we observe
among them giants and dwarfs, well-formed bodies and cripples,
civilised, half-civilised, and barbarous nations; but in all of
them, as in the individual human being, exists the impulse of
self-preservation, the striving for improvement which is implanted
by nature. It is the task of politics to civilise the barbarous
nationalities, to make the small and weak ones great and strong,
but, above all, to secure to them existence and continuance. It is
the task of national economy to accomplish the economical
development of the nation, and to prepare it for admission into the
universal society of the future.
    A nation in its normal state possesses one common language and
literature, a territory endowed with manifold natural resources,
extensive, and with convenient frontiers and a numerous population.
Agriculture, manufactures, commerce, and navigation must be all
developed in it proportionately. arts and sciences, educational
establishments, and universal, cultivation must stand in it on an
equal footing with material production. Its constitution, laws, and
institutions must afford to those who belong to it a high degree of
security and liberty, and must promote religion, morality, and
prosperity; in a word, must have the well-being of its citizens as
their object. It must possess sufficient power on land and at sea
to defend its independence and to protect its foreign commerce. It
will possess the power of beneficially affecting the civilisation
of less advanced nations, and by means of its own surplus
population and of their mental and material capital to found
colonies and beget new nations.
    A large population, and an extensive territory endowed with
manifold national resources, are essential requirements of the
normal nationality; they are the fundamental conditions of mental
cultivation as well as of material development and political power.
A nation restricted in the number of its population and in
territory, especially if it has a separate language, can only
possess a crippled literature, crippled institutions for promoting
art and science. A small State can never bring to complete
perfection within its territory the various branches of production.
In it all protection becomes mere private monopoly. Only through
alliances with more powerful nations, by partly sacrificing the
advantages of nationality, and by excessive energy, can it maintain
with difficulty its independence.
    A nation which possesses no coasts, mercantile marine, or naval
power, or has not under its dominion and control the mouths of its
rivers, is in its foreign commerce dependent on other countries; it
can neither establish colonies of its own nor form new nations; all
surplus population, mental and material means, which flows from
such a nation to uncultivated countries, is lost to its own
literature, civilisation and industry, and goes to the benefit of
other nationalities.
    A nation not bounded by seas and chains of mountains lies open
to the attacks of foreign nations, and can only by great
sacrifices, and in any case only very imperfectly, establish and
maintain a separate tariff system of its own.
    Territorial deficiencies of the nation can be remedied either
by means of hereditary succession, as in the case of England and
Scotland; or by purchase, as in the case of Florida and Louisiana;
or by conquests, as in the case of Great Britain and Ireland.
    In modern times a fourth means has been adopted, which leads to
this object in a manner much more in accordance with justice and
with the prosperity of nations than conquest, and which is not so
dependent on accidents as hereditary succession, namely, the union
of the interests of various States by means of free conventions.
    By its Zollverein, the German nation first obtained one of the
most important attributes of its nationality. But this measure
cannot be considered complete so long as it does not extend over
the whole coast, from the mouth of the Rhine to the frontier of
Poland, including Holland and Denmark. A natural consequence of
this union must be the admission of both these countries into the
German Bund, and consequently into the German nationality, whereby
the latter will at once obtain what it is now in need of, namely,
fisheries and naval power, maritime commerce and colonies. Besides,
both these nations belong, as respects their descent and whole
character, to the German nationality. The burden of debt with which
they are oppressed is merely a consequence of their unnatural
endeavours to maintain themselves as independent nationalities, and
it is in the nature of things that this evil should rise to a point
when it will become intolerable to those two nations themselves,
and when incorporation with a larger nationality must seem
desirable and necessary to them.
    Belgium can only remedy by means of confederation with a
neighbouring larger nation her needs which are inseparable from her
restricted territory and population. The United States and Canada,
the more their population increases, and the more the protective
system of the United States is developed, so much the more will
they feel themselves drawn towards one another, and the less will
it be possible for England to prevent a union between them.
    As respects their economy, nations have to pass through the
following stages of development: original barbarism, pastoral
condition, agricultural condition, agricultural-manufacturing
condition, and agricultural-manufacturing-commercial condition.
    The industrial history of nations, and of none more clearly
than that of England, proves that the transition from the savage
state to the pastoral one, from the pastoral to the agricultural,
and from agriculture to the first beginnings in manufacture and
navigation, is effected most speedily and advantageously by means
of free commerce with further advanced towns and countries, but
that a perfectly developed manufacturing industry, an important
mercantile marine, and foreign trade on a really large scale, can
only be attained by means of the interposition of the power of the
State.
    The less any nation's agriculture has been perfected, and the
more its foreign trade is in want of opportunities of exchanging
the excess of native agricultural products and raw materials for
foreign manufactured goods, the deeper that the nation is still
sunk in barbarism and fitted only for an absolute monarchical form
of government and legislation, the more will free trade (i.e. the
exportation of agricultural products and the importation of
manufactured goods) promote its prosperity and civilisation.
    On the other hand, the more that the agriculture of a nation,
its industries, and its social, political, and municipal
conditions, are thoroughly developed, the less advantage will it be
able to derive for the improvement of its social conditions, from
the exchange of native agricultural products and raw materials for
foreign manufactured goods, and the greater disadvantages will it
experience from the successful competition of a foreign
manufacturing power superior to its own.
    Solely in nations of the latter kind, namely, those which
possess all the necessary mental and material conditions and means
for establishing a manufacturing power of their own, and of thereby
attaining the highest degree of civilisation, and development of
material prosperity and political power, but which are retarded in
their progress by the competition of a foreign manufacturing power
which is already farther advanced than their own -- only in such
nations are commercial restrictions justifiable for the purpose of
establishing and protecting their own manufacturing power; and even
in them it is justifiable only until that manufacturing power is
strong enough no longer to have any reason to fear foreign
competition, and thenceforth only so far as may be necessary for
protecting the inland manufacturing power in its very roots.
    The system of protection would not merely be contrary to the
principles of cosmopolitical economy, but also to the rightly
understood advantage of the nation itself, were it to exclude
foreign competition at once and altogether, and thus isolate from
other nations the nation which is thus protected. If the
manufacturing power to be protected be still in the first period of
its development, the protective duties must be very moderate, they
must only rise gradually with the increase of the mental and
material capital, of the technical abilities and spirit of
enterprise of the nation. Neither is it at all necessary that all
branches of industry should be protected in the same degree. Only
the most important branches require special protection, for the
working of which much outlay of capital in building and management,
much machinery, and therefore much technical knowledge, skill, and
experience, and many workmen are required, and whose products
belong to the category of the first necessaries of life, and
consequently are of the greatest importance as regards their total
value as well as regards national independence (as, for example,
cotton, woollen and linen manufactories, &c.). If these main
branches are suitably protected and developed, all other less
important branches of manufacture will rise up around them under a
less degree of protection. It will be to the advantage of nations
in which wages are high, and whose population is not yet great in
proportion to the extent of their territory, e.g. in the United
States of North America, to give less protection to manufactures in
which machinery does not play an important part, than to those in
which machinery does the greater part of the work, providing that
those nations which supply them with similar goods allow in return
free importation to their agricultural products.
    The popular school betrays an utter misconception of the nature
of national economical conditions if it believes that such nations
can promote and further their civilisation, their prosperity, and
especially their social progress, equally well by the exchange of
agricultural products for manufactured goods, as by establishing a
manufacturing power of their own. A mere agricultural nation can
never develop to any considerable extent its home and foreign
commerce, its inland means of transport, and its foreign
navigation, increase its population in due proportion to their
wellbeing, or make notable progress in its moral, intellectual,
social, and political development: it will never acquire important
political power, or be placed in a position to influence the
cultivation and progress of less advanced nations and to form
colonies of its own. A mere agricultural State is an infinitely
less perfect institution than an agricultural manufacturing State.
The former is always more or less economically and politically
dependent on those foreign nations which take from it agricultural
products in exchange for manufactured goods. It cannot determine
for itself how much it will produce; it must wait and see how much
others will buy from it. These latter, on the contrary (the
agricultural-manufacturing States), produce for themselves large
quantities of raw materials and provisions, and supply merely the
deficiency by importation from the purely agricultural nations. The
purely agricultural nations are thus in the first place dependent
for their power of effecting sales on the chances of a more or less
plentiful harvest in the agricultural-manufacturing nations; in the
next place they have to compete in these sales with other purely
agricultural nations, whereby their power of sale, in itself very
uncertain, thus becomes still more uncertain. Lastly, they are
exposed to the danger of being totally ruined in their trading with
foreign manufacturing nations by wars, or new foreign tariff
regulations whereby they suffer the double disadvantage of finding
no buyers for their surplus agricultural products, and of failing
to obtain supplies of the manufactured goods which they require. An
agricultural nation is, as we have already stated, an individual
with one arm, who makes use of a foreign arm, but who cannot make
sure of the use of it in all cases; an agricultural-manufacturing
nation is an individual who has two arms of his own always at his
disposal.
    It is a fundamental error of the school when it represents the
system of protection as a mere device of speculative politicians
which is contrary to nature. History is there to prove that
protective regulations originated either in the natural efforts of
nations to attain to prosperity, independence, and power, or in
consequence of wars and of the hostile commercial legislation of
predominating manufacturing nations.
    The idea of independence and power originates in the very idea
of 'the nation.' The school never takes this into consideration,
because it does not make the economy of the separate nation, but
the economy of society generally, i.e. of the whole human race, the
object of its investigations. If we imagine, for instance, that all
nations were united by means of a universal confederation, their
individual independence and power would cease to be an object of
regard. The security for the independence of every nation would in
such a case rest on the legal provisions of the universal society,
just as e.g. the security of the independence of the states of
Rhode Island and Delaware lies in the union of all the free states
constituting the American Union. Since the first foundation of that
Union it has never yet occurred to any of these smaller states to
care for the enlargement of its own political power, or to consider
its independence less secured than is that of the largest states of
the Union.
    In proportion, however, as the principle of a universal
confederation of nations is reasonable, in just the same degree
would a given nation act contrary to reason if, in anticipation of
the great advantages to be expected from such a union, and from a
state of universal and perpetual peace, it were to regulate the
principles of its national policy as though this universal
confederation of nations existed already. We ask, would not every
sane person consider a government to be insane which, in
consideration of the benefits and the reasonableness of a state of
universal and perpetual peace, proposed to disband its armies,
destroy its fleet, and demolish its fortresses? But such a
government would be doing nothing different in principle from what
the popular school requires from governments when, because of the
advantages which would be derivable from general free trade, it
urges that they should abandon the advantages derivable from
protection.
    War has a ruinous effect on the reciprocal commercial relations
between nation and nation. The agriculturist living in one country
is by it forcibly separated from the manufacturer living in another
country. While, however, the manufacturer (especially if he belongs
to a nation powerful at sea, and carrying on extensive commerce)
readily finds compensation from the agriculturists of his own
country, or from those of other accessible agricultural countries,
the inhabitant of the purely agricultural country suffers doubly
through this interruption of intercourse.
    The market for his agricultural products will fail him
entirely, and he will consequently lose the means of paying for
those manufactured goods which have become necessaries to him owing
to previously existing trade; his power both of production and
consumption will be diminished.
    If, however, one agricultural nation whose production and
consumption are thus diminished by war has already made
considerable advances in population, civilisation, and agriculture,
manufactures and factories will spring up in it in consequence of
the interruption of international commerce by war. War acts on it
like a prohibitive tariff system. It thereby becomes acquainted
with the great advantages of a manufacturing power of its own, it
becomes convinced by practical experience that it has gained more
than it has lost by the commercial interruptions which war has
occasioned. The conviction gains ground in it, that it is called to
pass from the condition of a mere agricultural State to the
condition of an agricultural-manufacturing State, and in
consequence of this transition, to attain to the highest degree of
prosperity, Civilisation, and power. But if after such a nation has
already made considerable progress in the manufacturing career
which was opened to it by war, peace is again established, and
should both nations then contemplate the resumption of their
previously existing commercial intercourse, they will both find
that during the war new interests have been formed, which would be
destroyed by re-establishing the former commercial interchange.(1*)
The former agricultural nation will feel, that in order to resume
the sale of its agricultural products to the foreigner, it would
have to sacrifice its own manufacturing industry which has in the
meanwhile been created; the manufacturing nation will feel that a
portion of its home agricultural production, which has been formed
during the war, would again be destroyed by free importation. Both,
therefore, try to protect these interests by means of imposing
duties on imports. This is the history of commercial politics
during the last fifty years.
    It is war that has called into existence the more recent
systems of protection; and we do not hesitate to assert, that it
would have been to the interest of the manufacturing nations of the
second and third rank to retain a protective policy and further
develop it, even if England after the conclusion of peace had not
committed the monstrous mistake of imposing restrictions on the
importation of necessaries of life and of raw materials, and
consequently of allowing the motives which had led to the system of
protection in the time of the war, to continue during peace. As an
uncivilised nation, having a barbarous system of agriculture, can
make progress only by commerce with civilised manufacturing
nations, so after it has attained to a certain degree of culture,
in no other way can it reach the highest grade of prosperity,
civilisation, and power, than by possessing a manufacturing
industry of its own. A war which leads to the change of the purely
agricultural State into an agricultural-manufacturing State is
therefore a blessing to a nation, just as the War of Independence
of the United States of North America, in spite of the enormous
sacrifices which it required, has become a blessing to all future
generations. But a peace which throws back into a purely
agricultural condition a nation which is fitted to develop a
manufacturing power of its own, becomes a curse to it, and is
incomparably more injurious to it than a war.
    It is fortunate for the manufacturing powers of the second and
third rank, that England after the restoration of the general peace
has herself imposed a limit to her main tendency (of monopolising
the manufacturing market of the whole earth), by imposing
restrictions on the importation of foreign means of subsistence and
raw materials. Certainly the English agriculturists, who had
enjoyed a monopoly of supplying the English market with products
during the war, would of course have painfully felt the foreign
competition, but that only at first; at a later period (as we will
show more particularly elsewhere), these losses would have been
made up to them tenfold by the fact that England had obtained a
monopoly of manufacturing for the whole world. But it would have
been still more injudicious if the manufacturing nations of the
second and third rank, after their own manufacturing power had just
been called into existence, in consequence of wars lasting for
twenty-five years, and after (in consequence of twenty-five years'
exclusion of their agricultural products from the English market)
that power has been strengthened so far that possibly it only
required another ten or fifteen years of strict protection in order
to sustain successfully free competition with English manufactures
-- if (we say) these nations, after having endured the sacrifices
of half a century, were to give up the immense advantages of
possessing a manufacturing power of their own, and were to descend
once more from the high state of culture, prosperity, and
independence, which is peculiar to agricultural-manufacturing
countries, to the low position of dependent agricultural nations,
merely because it now pleases the English nation to perceive its
error and the closely impending advances of the Continental nations
which enter into competition with it.
    Supposing also that the manufacturing interest of England
should obtain sufficient influence to force the House of Lords,
which chiefly consists of large landed proprietors, and the House
of Commons, composed mostly of country squires, to make concessions
in respect of the importation of agricultural products, who would
guarantee that after a lapse of a few years a new Tory ministry
would not under different circumstances again pass a new Corn Law?
Who can guarantee that a new naval war or a new Continental system
may not separate the agriculturists of the Continent from the
manufacturers of the island kingdom, and compel the Continental
nations to recommence their manufacturing career, and to spend
their best energies in overcoming its primary difficulties, merely
in order, at a later period to sacrifice everything again at the
conclusion of peace.
    In this manner the school would condemn the Continental nations
for ever to be rolling the stone of Sisyphus, for ever to erect
manufactories in time of war in order to allow them to fall to ruin
in time of peace.
    To results so absurd as these the school could never have
arrived had it not (in spite of the name which it gives to the
science which it professes) completely excluded politics from that
science, had it not completely ignored the very existence of
nationality, and left entirely out of consideration the effects of
war on the commercial intercourse between separate nations.
    How utterly different is the relation of the agriculturist to
the manufacturer if both live in one and the same country, and are
consequently really connected with one another by perpetual peace.
Under those circumstances, every extension or improvement of an
already existing manufactory increases the demand for agricultural
products. This demand is no uncertain one; it is not dependent on
foreign commercial regulations or foreign commercial fluctuations,
on foreign political commotions or wars, on foreign inventions and
improvements, or on foreign harvests; the native agriculturist has
not to share it with other nations, it is certain to him every
year. However the crops of other nations may turn out, whatever
misunderstandings may spring up in the political world, he can
depend on the sale of his own produce, and on obtaining the
manufactured goods which he needs at suitable and regular prices.
On the other hand, every improvement of the native agriculture,
every new method of culture, acts as a stimulant on the native
manufacture, because every augmentation of native agricultural
production must result in a proportionate augmentation of native
manufacturing production. Thus, by means of this reciprocal action,
progress is insured for all time to both these main sources of the
nation's strength and support.
    Political power not merely secures to the nation the increase
of its prosperity by foreign commerce and by colonies abroad, it
also secures to it the possession of internal prosperity, and
secures to it its own existence, which is far more important to it
than mere material wealth. England has obtained political power by
means of her navigation laws; and by means of political power she
has been placed in a position to extend her manufacturing power
over other nations. Poland, however, was struck out of the list of
nations because she did not possess a vigorous middle class, which
could only have been called into existence by the establishment of
an internal manufacturing power.
    The school cannot deny that the internal market of a nation is
ten times more important to it than its external one, even where
the latter is in the most flourishing condition; but it has omitted
to draw from this the conclusion, which is very obvious, that it is
ten times more important to cultivate and secure the home market,
than to seek for wealth abroad, and that only in those nations
which have developed their internal industry to a high degree can
foreign commerce attain importance.
    The school has formed its estimate of the nature and character
of the market only from a cosmopolitical, but not from a political
point of view. Most of the maritime countries of the European
continent are situated in the natural market district of the
manufacturers of London, Liverpool, or Manchester; only very few of
the inland manufacturers of other nations can, under free trade,
maintain in their own seaports the same prices as the English
manufacturers. The possession of larger capital, a larger home
market of their own, which enables them to manufacture on a larger
scale and consequently more cheaply, greater progress in
manufacture itself, and finally cheaper sea transport, give at the
present time to the English manufacturers advantages over the
manufacturers of other countries, which can only be gradually
diverted to the native industry of the latter by means of long and
continuous protection of their home market, and through perfection
of their inland means of transport. The market of the inhabitants
of its coasts is, however, of great importance to every nation,
both with reference to the home market, and to foreign commerce;
and a nation the market of whose coasts belongs more to the
foreigner than to itself, is a divided nation not merely in
economical respects, but also in political ones. Indeed, there can
be no more injurious position for a nation, whether in its
economical or political aspect, than if its seaports sympathise
more with the foreigner than with itself.
    Science must not deny the nature of special national
circumstances, nor ignore and misrepresent it, in order to promote
cosmopolitical objects. Those objects can only be attained by
paying regard to nature, and by trying to lead the Separate nations
in accordance with it to a higher aim. We may see what small
success has hitherto attended the doctrines of the school in
practice. This is not so much the fault of practical statesmen, by
whom the character of the national circumstances has been
comprehended tolerably correctly, as the fault of the theories
themselves, the practice of which (inasmuch as they are opposed to
all experience) must necessarily err. Have those theories prevented
nations (like those of South America) from introducing the
protectionist system, which is contrary to the requirements of
their national circumstances? Or have they prevented the extension
of protectionism to the production of provisions and raw materials,
which, however, needs no protection, and in which the restriction
of commercial intercourse must be disadvantageous under all
circumstances to both nations -- to that which imposes, as well as
to that which suffers from such restrictions? Has this theory
prevented the finer manufactured goods, which are essentially
articles of luxury, from being comprehended among objects requiring
protection, while it is nevertheless clear that these can be
exposed to competition without the least danger to the prosperity
of the nation? No; the theory has till now not effected any
thorough reform, and further will never effect any, so long as it
stands opposed to the very nature of things. But it can and must
effect great reforms as soon as it consents to base itself on that
nature.
    It will first of all establish a benefit extending to all
nations, to the prosperity and progress of the whole human race, if
it shows that the prevention of free trade in natural products and
raw materials causes to the nation itself which prevents it the
greatest disadvantage, and that the system of protection can be
justified solely and only for the purpose of the industrial
development of the nation. It may then, by thus basing the system
of protection as regards manufactures on correct principles, induce
nations which at present adopt a rigidly prohibitive system, as
e.g. the French, to give up the prohibitive system by degrees. The
manufacturers will not oppose such a change as soon as they become
convinced that the theorists, very far from planning the ruin of
existing manufactures, consider their preservation and their
further development as the basis of every sensible commercial
policy.
    If the theory will teach the Germans, that they can further
their manufacturing power advantageously only by protective duties
previously fixed, and on a gradually increasing scale at first, but
afterwards gradually diminishing, and that under all circumstances
partial but carefully limited foreign competition is really
beneficial to their own manufacturing progress, it will render far
better service in the end to the cause of free trade than if it
simply helps to strangle German industry.
    The theory must not expect from the United States of North
America that they are to sacrifice to free competition from the
foreigner, those manufactures in which they are protected by cheap
raw materials and provisions, and by machine power. It will,
however, meet no contradiction if it maintains that the United
States, as long as wages are disproportionately higher there than
in the older civilised States, can best promote the development of
their productive powers, their civilisation and political power, by
allowing the free import as much as possible of those manufactured
articles in the cost of which wages are a principal element,
provided that other countries admit their agricultural products and
raw materials.
    The theory of free trade will then find admission into Spain,
Portugal, Naples, Turkey Egypt, and all barbarous and
half-civilised or hot countries. In such countries as these the
foolish idea will not be held any longer, of wanting to establish
(in their present state of culture) a manufacturing power of their
own by means of the system of protection.
    England will then give up the idea that she is designed to
monopolise the manufacturing power of the whole world. She will no
longer require that France, Germany, and North America should
sacrifice their own manufactures in consideration of the concession
by England of permitting the import, duty free, of agricultural
products and raw materials. She will recognise the legitimacy of
protective systems in those nations, although she will herself more
and more favour free trade; the theory having taught her that a
nation which has already attained manufacturing supremacy, can only
protect its own manufacturers and merchants against retrogression
and indolence, by the free importation of means of subsistence and
raw materials, and by the competition of foreign manufactured
goods.
    England will then follow a practice totally opposed to her
present commercial policy, instead of lecturing, as hitherto, other
nations to adopt free trade, whilst herself maintaining the
strictest prohibitory system; she will herself permit competition
without regard to the foreign systems of protection. She will defer
her hopes of the general adoption of free trade, until other
nations have no longer to fear that the ruin of their manufactories
would result from free competition.
    Meanwhile, and until that period has arrived, England will be
able to compensate herself for the losses which she suffers from
foreign systems of protection, in respect of her export trade in
manufactures of every-day use, by a greater export of goods of
finer quality, and by opening, establishing, and cultivating new
markets for her manufactures.
    She will endeavour to bring about peace in Spain, in the East,
and in the states of Central and South America, and will use her
influence in all the barbarous and half-civilised countries of
Central and South America, of Asia and Africa, in order that
powerful and civilised governments may be formed in them, that
security of persons and of property may be introduced into them,
for the construction in them of roads and canals, the promotion of
education and civilisation, morality and industry, and for rooting
out fanaticism, superstition, and idleness. If concurrently with
these endeavours she abolishes her restrictions on the importation
of provisions and raw materials, she will increase her exports of
manufactures immensely, and much more successfully than by
continually speculating on the ruin of the Continental
manufactories.
    If, however, these operations of civilisation on the part of
England are to be successful as respects barbarous and
half-civilised nations, she must not act in an exclusive manner,
she must not endeavour by special commercial privileges, such as,
for instance, she has managed to procure in Brazil, to monopolise
these markets, and to shut out other nations from them. Such a
policy as the latter will always excite the just jealousy of other
nations, and give them a motive for opposing the exertions of
England. It is evident that this selfish policy is the cause why
the influence of the civilised powers on the civilisation of such
countries as we have specified has been hitherto so unimportant.
England ought therefore to introduce into the law of nations the
maxim: that in all such countries the commerce of all manufacturing
nations should have equal rights. England would thereby not merely
secure the aid of all civilised powers in her own work of
civilisation, but also no disadvantage would result to her own
commerce if similar experiments of civilisation were undertaken by
other manufacturing nations. On account of their superiority in all
branches of manufacture and commerce, the English would everywhere
always obtain the greatest share of the exports to such markets.
    The striving and ceaseless intrigues of the English against the
manufactures of other nations might still be justified, if a
world-manufacturing monopoly were indispensable for the prosperity
of England, if it could not be proved by evidence that the nations
which aspire, after the example of England, to attain to a large
manufacturing power can very well attain their object without the
humiliation of England; that England need not become poorer than
she is because others become richer; and that nature offers
sufficient means for the creation in Germany, France, and North
America (without detriment to the prosperity of England), of a
manufacturing power equal to that of the English.
    With regard to this, it must further be remarked, that every
nation which gains entire possession of its own home market for
manufactures, gains in the course of time, by its home production
and consumption of manufactured goods, infinitely more than the
nation which has hitherto provided the former with manufactured
goods loses by being excluded; because a nation which manufactures
for itself, and which is perfectly developed in its economical
conditions, becomes more than proportionately richer and more
populous, consequently is enabled to consume infinitely more
fabrics, than it could import while depending on a foreign
manufacturing nation for its supply.
    As respects the exportation of manufactured goods, however, the
countries of the temperate zone (being specially fitted By nature
for manufacturing) have a special field for their efforts in
supplying the consumption of the countries of the torrid zone,
which latter provide the former with colonial produce in exchange
for their manufactured goods. The consumption of manufactured goods
by the countries of the torrid zone, however, is partly determined
by their ability to produce a surplus of the articles peculiar to
their climate, and partly according to the proportion in which the
countries of the temperate zone augment their demand for the
products of the torrid zone.
    If it can now be proved, that in the course of time the
countries of the torrid zone can produce sugar, rice, cotton,
coffee, &c. to an extent five or ten times greater than hitherto,
and that the countries of the temperate zone can consume five or
ten times more of these articles than hitherto, it will be
simultaneously proved that the countries of the temperate zone can
increase their exportation of manufactured goods to the countries
of the torrid zone by from five to ten times their present total
quantity.
    The capability of the Continental nations to increase their
consumption of colonial produce thus considerably, is indicated by
the increase of consumption in England for the last fifty years; in
reference to which it must further be borne in mind, that that
increase would probably have become very much greater still were it
not for the excessive taxes on consumption.
    Of the possibility of augmenting the productions of the torrid
zone, Holland in Sumatra and Java, and England in the East Indies,
have given us during the last five years irrefragable proofs.
England has quadrupled her importation of sugar from the East
Indies from 1835 to 1839; her importation of coffee has increased
even in a still larger proportion, while the importation of East
India cotton is also greatly increasing. In one word, the latest
English papers (February, 1840) announced with great rejoicing that
the capability of the East Indies for the production of these
articles is unlimited, and that the time is not far distant when
England will make herself independent of the importation of these
articles from America and the West Indies. Holland on her part is
already embarrassed for means of sale of her colonial products, and
seeks actively for new markets. Let us further remember that North
America continues to augment her cotton production -- that in Texas
a State has risen up which without doubt will become possessed of
the whole of Mexico, and will make out of that fertile country a
territory such as the Southern States of the North American Union
now are. We may well imagine that order and law, industry and
intelligence, will extend themselves gradually over the South
American States from Panama to Cape Horn, then over the whole of
Africa and Asia, and augment everywhere production and a surplus of
products; and we may then comprehend without difficulty that here
there is room enough for more than one nation for the sale of
manufactured goods.
    By calculating the area of the land which has up to this time
been actually used for the production of colonial produce, and
comparing it with the entire area which is fitted By nature for
such production, we shall find that at present scarcely the
fiftieth part of the land fitted for this production is actually
used.
    How, then, could England be able to monopolise the
manufacturing markets of all countries which yield colonial
produce, if she is able to supply her own entire requirements of
such produce by means of importation from the East Indies alone?
How can England indulge the hope of selling manufactured goods to
countries whose colonial products she cannot take in exchange? Or
how can a great demand for colonial produce spring up in the
continent of Europe, if the Continent is not enabled by its
manufacturing production to pay for, and thus to consume, these
goods?
    It is therefore evident, that keeping down the manufacturing
industry of the Continent, though it certainly hinders the progress
of the Continental nations, does not in the least further the
prosperity of England.
    It is further clear, that, at present, as well as for some long
time to come, the countries of the torrid zone will offer to all
nations which are fitted for manufacturing production abundant
materials for exchange.
    Lastly, it is evident that a world-manufacturing monopoly such
as is at present established by the free competition of English
manufactured goods on the European and American continents is not
in the least more conducive to the welfare of the human race than
the system of protection, which aims at developing the
manufacturing power of the whole temperate zone, for the benefit of
the agriculture of the whole torrid zone.
    The advance which England has made in manufactures, navigation,
and commerce, need therefore not discourage any other nation which
is fitted for manufacturing production, by the possession of
suitable territory, of national power and intelligence, from
entering into the lists with England's manufacturing supremacy. A
future is approaching for manufactures, commerce, and navigation
which will surpass the present as much as the present surpasses the
past. Let us only have the courage to believe in a great national
future, and in that belief to march onward. But above all things we
must have enough national spirit at once to plant and protect the
tree, which will yield its first richest fruits only to future
generations. We must first gain possession of the home market of
our own nation, at least as respects articles of general necessity,
and try to procure the products of tropical countries direct from
those countries which allow us to pay for them with our own
manufactured goods. This is especially the task which the German
commercial union has to solve, if the German nation is not to
remain far behind the French and North Americans, nay, far behind
even the Russians.

NOTES:


1. Vide Wealth of Nations, Book IV. chap. ii. (TR.)

Chapter 16

Popular and State Financial Administration, Political and National
Economy

    That which has reference to the raising, the expending, and the
administration of the material means of government of a community
(the financial economy of the State), must necessarily be
distinguished everywhere from those institutions, regulations,
laws, and conditions on which the economy of the individual
subjects of a State is dependent, and by which it is regulated;
i.e. from the economy of the people. The necessity for this
distinction is apparent in reference to all political communities,
whether these comprise a whole nation or merely fractions of a
nation, and whether they are small or large.
    In a confederated State, the financial economy of the State is
again divided into the financial economy of the separate states and
the financial economy of the entire union.
    The economy of the people becomes identical with national
economy where the State or the confederated State embraces a whole
nation fitted for independence by the number of its population, the
extent of its territory, by its political institutions,
civilisation, wealth, and power, and thus fitted for stability and
political influence. The economy of the people and national economy
are, under these circumstances, one and the same. They constitute
with the financial economy of the State the political economy of
the nation.
    But, on the other hand, in States whose population and
territory merely consist of the fraction of a nation or of a
national territory, which neither by complete and direct union, nor
by means of a federal union with other fractions, constitutes a
whole, we can only take into consideration an 'economy of the
people' which is directly opposed to 'private economy' or to
'financial economy of the State.'
    In such an imperfect political condition, the objects and
requirements of a great nationality cannot be taken into
consideration; especially is it impossible to regulate the economy
of the people with reference to the development of a nation
complete in itself, and with a view to its independence,
permanence, and power. Here politics must necessarily remain
excluded from economy, here can one only take account of the
natural laws of social economy, as these would develop and shape
themselves if no large united nationality or national economy
existed anywhere.
    It is from this standpoint that that science has been
cultivated in Germany which was formerly called 'State
administration,' then 'national economy,' then 'political economy,'
then 'popular administration,' without anyone having clearly
apprehended the fundamental error of these systems.
    The true conception and real character of national economy
could not be recognised because no economically united nation was
in existence, and because for the distinct and definite term
'nation' men had everywhere substituted the general and vague term
'society', an idea which is as applicable to entire humanity, or to
a small country, or to a single town, as to the nation.

Chapter 17

The Manufacturing Power and the Personal, Social, and Political
Productive Powers of the Nation

    In a country devoted to mere raw agriculture, dullness of mind,
awkwardness of body, obstinate adherence to old notions, customs,
methods, and processes, want of culture, of prosperity, and of
liberty prevail. The spirit of striving for a steady increase in
mental and bodily acquirements, of emulation, and of liberty,
characterise, on the contrary, a State devoted to manufactures and
commerce.
    The cause of this difference lies partly in the different kind
of social habits and of education which respectively characterise
these two classes of people, partly in the different character of
their occupation and in the things which are requisite for it. The
agricultural population lives dispersed over the whole surface of
the country; and also, in respect to mental and material
intercourse, agriculturists are widely separated from one another.
One agriculturist does almost precisely what the other does; the
one produces, as a rule, what the other produces. The surplus
produce and the requirements of all are almost alike; everybody is
himself the best consumer of his own products; here, therefore,
little inducement exists for mental intercourse or material
exchange. The agriculturist has to deal less with his fellow-men
than with inanimate nature. Accustomed to reap only after a long
lapse of time where he has sown, and to leave the success of his
exertions to the will of a higher power, contentment with little,
patience, resignation, but also negligence and mental laziness,
become to him a second nature. As his occupation keeps him apart
from intercourse with his fellow-men, so also does the conduct of
his ordinary business require but little mental exertion and bodily
skill on his part. He learns it by imitation in the narrow circle
of the family in which he was born, and the idea that it might be
conducted differently and better seldom occurs to him. From the
cradle to the grave he moves always in the same limited circle of
men and of circumstances. Examples of special prosperity in
consequence of extraordinary mental and bodily exertions are seldom
brought before his eyes. The possession of means or a state of
poverty are transmitted by inheritance in the occupation of mere
agriculture from generation to generation, and almost all that
power which originates in emulation lies dead.
    The nature of manufactures is fundamentally different from that
of agriculture. Drawn towards one another by their business,
manufacturers live only in society, and consequently only in
commercial intercourse and by means of that intercourse. The
manufacturer procures from the market all that he requires of the
necessaries of life and raw materials, and only the smallest part
of his own products is destined for his own consumption. If the
agriculturist expects a blessing on his exertions chiefly from
nature, the prosperity and existence of the manufacturer mainly
depend on his commercial intercourse. While the agriculturist does
not know the purchasers of his produce, or at any rate need have
little anxiety as to disposing of it, the very existence of the
manufacturer depends on his customers. The prices of raw materials,
of the necessaries of life and wages, of goods and of money, vary
incessantly; the manufacturer is never certain how his profits will
turn out. The favour of nature and mere ordinary industry do not
guarantee to him existence and prosperity as they do to the
agriculturist; both these depend entirely upon his own intelligence
and activity. He must strive to gain more than enough in order to
be certain of having enough of what is absolutely necessary; he
must endeavour to become rich in order not to be reduced to
poverty. If he goes on somewhat faster than others, he thrives; if
he goes slower, he is certain of ruin. He must always buy and sell,
exchange and make bargains. Everywhere he has to deal with men,
with changing circumstances, with laws and regulations; he has a
hundred times more opportunity for developing his mind than the
agriculturist. In order to qualify himself for conducting his
business, he must become acquainted with foreign men and foreign
countries; in order to establish that business, he must make
unusual efforts, While the agriculturist simply has to do with his
own neighbourhood, the trade of the manufacturer extends itself
over all countries and parts of the world. The desire to gain the
respect of his fellow-citizens or to retain it, and the continual
competition of his rivals, which perpetually threaten his existence
and prosperity, are to him a sharp stimulus to uninterrupted
activity, to ceaseless progress. Thousands of examples prove to
him, that by extraordinary performances and exertions it is
possible for a man to raise himself from the lowest degree of
well-being and position to the highest social rank, but that, on
the other hand, by mental inactivity and negligence, he can sink
from the most respectable to the meanest position. These
circumstances produce in the manufacturer an energy which is not
observable in the mere agriculturist.
    If we regard manufacturing occupations as a whole, it must be
evident at the first glance that they develop and bring into action
an incomparably greater variety and higher type of mental qualities
and abilities than agriculture does. Adam Smith certainly expressed
one of those paradoxical opinions which (according to Dugald
Stewart, his biographer) he was very fond of, when he maintained
that agriculture requires more skill than manufactures and
commerce. Without entering into the investigation whether the
construction of a clock requires more skill than the management of
a farm, we have merely to observe that all agricultural occupations
are of the same kind, while in manufactures a thousand fold variety
exists. It must also not be forgotten, that for the purpose of the
present comparison, agriculture must be regarded as it exists in
the primitive state, and not as it has been improved by the
influence of manufactures. If the condition of English
agriculturists appeared to Adam Smith much nobler than the
condition of English manufacturers, he had forgotten that the
condition of the former has been thus ennobled through the
influence of manufactures and commerce.
    It is evident that by agriculture merely personal qualities of
the same kind are put into requisition, and merely those which
combine bodily power and perseverance in executing raw and manual
labour with the simple idea of order; while manufactures require a
thousand fold variety of mental ability skill, and experience. The
demand for such a variety of talents makes it easy for every
individual in a manufacturing State to find an occupation and
vocation corresponding with his individual abilities and taste,
while in an agricultural State but little choice exists. In the
former mental gifts are infinitely more prized than in the latter,
where as a rule the usefulness of a man is determined according to
his bodily strength. The labour of the weak and the cripple in the
former is not unfrequently valued at a much higher rate than that
of the strongest man is in the latter. Every power, even the
smallest, that of children and women, of cripples and old men,
finds in manufactures employment and remuneration.
    Manufactures are at once the offspring, and at the same time
the supporters and the nurses, of science and the arts. We may
observe how little the condition of raw agriculture puts sciences
and arts into requisition, how little of either is necessary to
prepare the rude implements which it employs. It is true that
agriculture at first had, by yielding rents of land, made it
possible for men to devote themselves to science and art; but
without manufactures they have always remained private treasures,
and have only extended their beneficial effects in a very slight
degree to the masses. In the manufacturing State the industry of
the masses is enlightened by science, and the sciences and arts are
supported by the industry of the masses. There scarcely exists a
manufacturing business which has not relations to physics,
mechanics, chemistry, mathematics, or to the art of design, &c. No
progress, no new discoveries and inventions, can be made in these
sciences by which a hundred industries and processes could not be
improved or altered. In the manufacturing State, therefore,
sciences and arts must necessarily become popular. The necessity
for education and instruction, through writings and lectures by a
number of persons who have to bring into practice the results of
scientific investigations, induces men of special talents to devote
themselves to instruction and authorship. The competition of such
talents, owing to the large demand for their efforts, creates both
a division and co-operation of scientific activity, which has a
most beneficial influence not merely on the further progress of
science itself, but also on the further perfection of the arts and
of industries. The effects of these improvements are soon
afterwards extended even to agriculture. Nowhere can more perfect
agricultural machines and implements be found, nowhere is
agriculture carried on with so much intelligence, as in countries
where industry flourishes. Under the influence of manufactures,
agriculture itself is raised to a skilled industry, an art, a
science.
    The sciences and industry in combination have produced that
great material power which in the new state of society has replaced
with tenfold benefits the slave labour of ancient times, and which
is destined to exercise on the condition of the masses, on the
civilisation of barbarous countries, on the peopling of uninhabited
lands, and on the power of the nations of primitive culture, such
an immeasurable influence-namely, the power of machinery.
    A manufacturing nation has a hundred times more opportunities
of applying the power of machinery than an agricultural nation. A
cripple can accomplish by directing a steam engine a hundred times
more than the strongest man can with his mere hand.
    The power of machinery, combined with the perfection of
transport facilities in modern times, affords to the manufacturing
State an immense superiority over the mere agricultural State. It
is evident that canals, railways, and steam navigation are called
into existence only by means of the manufacturing power, and can
only by means of it be extended over the whole surface of the
country. In the mere agricultural State, where everybody produces
for himself the greater part of what he requires, and consumes
himself the greater part of what he produces, where the individuals
among themselves can only carry on a small amount of goods and
passenger traffic, it is impossible that a sufficiently large
traffic in either goods or passengers can take place to defray the
costs of the erection and maintenance of the machinery of
transport.
    New inventions and improvements in the mere agricultural State
are of but little value. Those who occupy themselves with such
things in such a State fall themselves, as a rule, a sacrifice to
their investigations and endeavours, while in the manufacturing
State there is no path which leads more rapidly to wealth and
position than that of invention and discovery. Thus, in the
manufacturing State genius is valued and rewarded more highly than
skill, and skill more highly than mere physical force. In the
agricultural State, however, excepting in the public service, the
reverse is almost the rule.
    As, however, manufactures operate beneficially on the
development of the mental powers of the nation, so also do they act
on the development of the physical power of labour, by affording to
the labourers means of enjoyment, inducements to exert their
powers, and opportunities for making use of them. It is an
undisputed observation, that in flourishing manufacturing States
the workman, irrespective of the aid which he obtains from better
machinery and tools, accomplishes a far larger day's work than in
mere agricultural countries.
    Moreover, the circumstance that in manufacturing States the
value of time is recognised much more than in agricultural States,
affords proof of the higher standing in the former of the power of
labour. The degree of civilisation of a nation and the value of its
labour power cannot be estimated more accurately than according to
the degree of the value which it attributes to time. The savage
lies for days idle in his hut. How can the shepherd learn to
estimate the value of time, to whom time is simply a burden which
his pastoral pipe or sleep alone makes tolerable to him? How can a
slave, a serf, a peasant, subject to tributes of forced labour,
learn to value time, he to whom labour is penalty, and idleness
gain? Nations only arrive at the recognition of the value of time
through industry. At present time gained brings gain of profit;
loss of time, loss of profit. The zeal of the manufacturer to
utilise his time in the highest possible degree imparts itself to
the agriculturist. Through the increased demand for agricultural
products caused by manufactures, the rent and therefore the value
of land is raised, larger capital is employed in cultivating it,
profits are increased, a larger produce must be obtained from the
soil in order to be able to provide for the increased rent and
interest of capital, and for the increased consumption. One is in
a position to offer higher wages, but one also requires more work
to be done. The workman begins to feel that he possesses in his
bodily powers, and in the skill with which he uses them, the means
of improving his condition. He begins to comprehend why the
Englishman says, 'Time is money.'
    Owing to the isolation in which the agriculturist lives, and to
his limited education, he is but little capable of adding anything
to general civilisation or learning to estimate the value of
political institutions, and much less still to take an active part
in the administration of public affairs and of justice, or to
defend his liberty and rights. Hence he is mostly in a state of
dependence on the landed proprietor. Everywhere merely agricultural
nations have lived in slavery, or oppressed by despotism,
feudalism, or priestcraft. The mere exclusive possession of the
soil gave the despot, the oligarchy, or the priestly caste a power
over the mass of the agricultural population, of which the latter
could not rid themselves of their own accord.
    Under the powerful influence of habit, everywhere among merely
agricultural nations has the yoke which brute force or superstition
and priestcraft imposed upon them so grown into their very flesh,
that they come to regard it as a necessary constituent of their own
body, as a condition of their very existence.
    On the other hand, the separation and variety of the operations
of business, and the confederation of the productive powers, press
with irresistible force the various manufacturers towards one
another. Friction produces sparks of the mind, as well as those of
natural fire. Mental friction, however, only exists where people
live together closely, where frequent contact in commercial,
scientific, social, civil, and political matters exists, where
there is large interchange both of goods and ideas. The more men
live together in one and the same place, the more every One of
these men depends in his business on the co-operation of all
others, the more the business of every one of these individuals
requires knowledge, circumspection, education, and the less that
obstinacy, lawlessness, oppression and arrogant opposition to
justice interfere with the exertions of all these individuals and
with the objects at which they aim, so much the more perfect will
the civil institutions be found, so much larger will be the degree
of liberty enjoyed, so much more opportunity will be given for
self-improvement and for co-operation in the improvement of others.
Therefore liberty and civilisation have everywhere and at all times
emanated from towns; in ancient times in Greece and Italy; in the
Middle Ages in Italy, Germany, belgium, and Holland; later on in
England, and still more recently in North America and France.
    But there are two kinds of towns, one of which we may term the
productive, the other the consuming kind. There are towns which
work up raw materials, and pay the country districts for these, as
well as for the means of subsistence which they require, by means
of manufactured goods. These are the manufacturing towns, the
productive ones. The more that these prosper, the more the
agriculture of the country prospers, and the more powers that
agriculture unfolds, so much the greater do those manufacturing
towns become. But there are also towns where those live who simply
consume the rents of the land. In all countries which are civilised
to some extent, a large portion of the national income is consumed
as rent in the towns. It would be false, however, were we to
maintain as a general principle that this consumption is injurious
to production, or does not tend to promote it. For the possibility
of securing to oneself an independent life by the acquisition of
rents, is a powerful stimulus to economy and to the utilisation of
savings in agriculture and in agricultural improvements. Moreover
the man who lives on rents, stimulated by the inclination to
distinguish himself before his fellow-citizens, supported by his
education and his independent position, will promote civilisation,
the efficiency of public institutions, of State administration,
science and art. But the degree in which rent influences in this
manner the industry, prosperity, and civilisation of the nation
will always depend on the degree of liberty which that nation has
already obtained. That inclination to become useful to the
commonwealth by voluntary activity, and to distinguish oneself
before one's fellow-citizens, will only develop itself in countries
where this activity leads to public recognition, to public esteem,
and to offices of honour, but not in countries where every attempt
to gain public esteem and every manifestation of independence is
regarded by the ruling power with a jealous eye. In such countries
the man of independent income will give himself up to debauchery
and idleness, and because in this manner he brings useful industry
into contempt, and injures the morality as well as the industrious
impulse of the nation, he will radically imperil the nation's
productive power. Even if under such conditions the manufactures of
towns are to some extent promoted by the consumption of the
rentier, such manufactures are nevertheless to be regarded as
barren and unsound fruits, and especially they will aid very little
in promoting the civilisation, prosperity, and liberty of the
nation. Inasmuch as a sound manufacturing industry especially tends
to produce liberty and civilisation, it may also be said that
through it rent itself is redeemed from forming a fund for
idleness, debauchery, and immorality, and is converted into a fund
for promoting mental culture, and consequently that through it the
merely consuming towns are changed into productive towns. Another
element by which the consuming towns are supported is, the
consumption of the public servants and of the State administration.
These also may occasion some apparent prosperity in a town; but
whether such consumption especially promotes or is injurious to the
productive power, prosperity and institutions of the nation,
depends altogether on the question how far the functions of the
consumers tend to promote or to injure those powers.
    From this the reason is evident why in mere agricultural States
large towns can exist, which, although they contain a large number
of wealthy inhabitants and manifold trades, exercise only a very
inconsiderable influence on the civilisation, liberty, and
productive power of the nation. The persons engaged in those trades
necessarily participate in the views of their customers; they are
to be regarded in a great measure as mere domestic servants of the
rentiers and public employees. In contrast to great luxury in those
towns, poverty, misery, narrow-mindedness, and a slavish
disposition are found among the inhabitants of the surrounding
country districts. A prosperous effect of manufactures on the
civilisation, the improvement of public institutions, and the
liberty of the nation, is only perceptible if in a country a
manufacturing power is established which, quite independently of
the rentiers and public servants, works for the large mass of the
agricultural population or for export trade, and consumes the
products of that population in large quantities for working up in
manufacture and for subsistence. The more such a sound and healthy
manufacturing power increases in strength, the more will it draw to
its side the manufacturing power which originated in the
consumption above named, and also the rentiers and public servants,
and the more also will the public institutions be regulated with a
view to the interest of the commonwealth.
    Let us consider the condition of a large town in which the
manufacturers are numerous, independent, lovers of liberty,
educated, and wealthy where the merchants participate in their
interests and position, where the rentiers feel themselves
compelled to gain the respect of the public, where the public
servants are subject to the control of public opinion, where the
men of science and art work for the public at large, and draw from
it their means of subsistence; let us consider the mass of mental
and material means which are combined together in such a narrow
space, and further how closely this mass of power is united through
the law of the division of the operations of business and the
confederation of powers; we may note again how quickly every
improvement, every progress in public institutions, and in social
and economical conditions, on the one hand, and how, on the other
hand, every retrogression, every injury of the public interests,
must be felt by this mass; then, again, how easily this mass,
living in one and the same place, can come to an agreement as to
their common objects and regulations, and what enormous means it
can concentrate on the spot for these purposes; and finally, in
what a close union a community so powerful, enlightened, and
liberty-loving, stands in relation to other similar communities in
the same nation -- if we duly consider all these things, we shall
easily be convinced that the influence on the maintenance and
improvement of the public welfare exercised by an agricultural
population living dispersed over the whole surface of the country
(however large its aggregate number may be) will be but slight in
comparison with that of towns, whose whole power (as we have shown)
depends upon the prosperity of their manufactures and of those
trades which are allied to and dependent on them.
    The predominating influence of the towns on the political and
municipal conditions of the nation, far from being disadvantageous
to the rural population, is of inestimable advantage to it. The
advantages which the towns enjoy make them feel it a duty to raise
the agriculturists to the enjoyment of similar liberty,
cultivation, and prosperity; for the larger the sum of these
mental; and social advantages is among the rural population, the
larger will be the amount of the provisions and raw materials which
they send into the towns, the greater also will be the quantity of
the manufactured goods which they purchase from the towns, and
consequently the prosperity of the towns. The country derives
energy, civilisation, liberty, and good institutions from the
towns, but the towns insure to themselves the possession of liberty
and good institutions by raising the country people to be partakers
of these acquisitions. Agriculture, which hitherto merely supported
landowners and their servants, now furnishes the commonwealth with
the most independent and sturdy defenders of its liberty. In the
culture of the soil, also, every class is now able to improve its
position. The labourer can raise himself to become a farmer, the
farmer to become a landed proprietor. The capital and the means of
transport which industry creates and establishes now give
prosperity to agriculture everywhere. Serfdom, feudal burdens, laws
and regulations which injure industry and liberty disappear. The
landed proprietor will now derive a hundred times more income from
his forest possessions than from his hunting. Those who formerly
from the miserable produce of serf labour scarcely obtained the
means of leading a rude country life, whose sole pleasure consisted
in the keeping of horses and dogs and chasing game, who therefore
resented every infringement of these pleasures as a crime against
their dignity as lords of the soil, are now enabled by the
augmentation of their rents (the produce of free labour) to spend
a portion of the year in the towns. There, through the drama and
music, through art and reading, their manners are softened; they
learn by intercourse with artists and learned men to esteem mind
and talents. From mere Nimrods they become cultivated men. The
aspect of an industrious community, in which everybody is striving
to improve his condition, awakens in them also the spirit of
improvement. They pursue instruction and new ideas instead of stags
and hares. Returning to the country, they offer to the middle and
small farmer examples worthy of imitation, and they gain his
respect instead of his curse.
    The more industry and agriculture flourish, the less can the
human mind be held in chains, and the more are we compelled to give
way to the spirit of toleration, and to put real morality and
religious influence in the place of compulsion of conscience.
Everywhere has industry given birth to tolerance; everywhere has it
converted the priests into teachers of the people and into learned
men. Everywhere have the cultivation of national language and
literature, have the civilising arts, and the perfection of
municipal institutions kept equal pace with the development of
manufactures and commerce. It is from manufactures that the
nation's capability originates of carrying on foreign trade with
less civilised nations, of increasing its mercantile marine, of
establishing a naval power, and by founding colonies, of utilising
its surplus population for the further augmentation of the national
prosperity and the national power.
    Comparative statistics show that by the complete and relatively
equal cultivation of manufactures and agriculture in a nation
endowed with a sufficiently large and fertile territory, a
population twice or three times as large can be maintained, and
maintained, moreover, in a far higher degree of well-being than in
a country devoted exclusively to agriculture. From this it follows
that all the mental powers of a nation, its State revenues, its
material and mental means of defence, and its security for national
independence, are increased in equal proportion by establishing in
it a manufacturing power.
    At a time where technical and mechanical science exercise such
immense influence on the methods of warfare, where all warlike
operations depend so much on the condition of the national revenue,
where successful defence greatly depends on the questions, whether
the mass of the nation is rich or poor, intelligent or stupid,
energetic or sunk in apathy; whether its sympathies are given
exclusively to the fatherland or partly to foreign countries;
whether it can muster many or but few defenders of the country --
at such a time, more than ever before, must the value of
manufactures be estimated from a political point of view.

Chapter 18

The Manufacturing Power and the Natural Productive Powers of the
Nation.

    The more that man and the community perfect themselves, the
more are they enabled to make use of the natural powers which are
within their reach for the accomplishment of their objects, and the
more does the sphere of what is within their reach extend itself.
    The hunter does not employ the thousandth part, the shepherd
not the hundredth part, of those natural advantages which surround
him. The sea, foreign climates and countries, yield him either
none, or at least only an inconsiderable amount of enjoyment,
assistance, or stimulants to exertion.
    In the case of a people in a primitive agricultural condition,
a large portion of the existing natural resources lies yet
unutilised, and man still continues limited to his nearest
surroundings. The greater part of the water power and wind power
which exists, or can be obtained, is unemployed; the various
mineral products which the manufacturers so well understand how to
utilise profitably, lie dead; various sorts of fuel are wasted or
regarded (as, for instance, peat turf) as a mere hindrance to
cultivation; stone, sand, and lime are used but little as building
materials; the rivers, instead of being means of freight and
transport for man, or of fertilising the neighbouring fields, are
allowed to devastate the country by floods; warmer climates and the
sea yield to the agricultural country but few of their products.
    In fact, in the agricultural State, that power of nature on
which production especially depends, the natural fertility of the
soil, can only be utilised to a smaller extent so long as
agriculture is not supported by manufacturing industry.
    Every district in the agricultural State must itself produce as
much of the things necessary to it as it requires to use, for it
can neither effect considerable sales of that which it has in
excess to other districts, nor procure that which it requires from
other districts. A district may be ever so fertile and adapted for
the culture of plants yielding oil, dyeing materials, and fodder,
yet it must plant forests for fuel, because to procure fuel from
distant mountain districts, over wretched country roads, would be
too expensive. Land which if utilised for the cultivation of the
vine and for garden produce could be made to yield three to four
times more returns must be used for cultivating corn and fodder. He
who could most profitably devote himself solely to the breeding of
cattle must also fatten them: on the other hand, he who could most
profitably devote himself merely to fattening stock, must also
carry on cattle breeding. How advantageous it would be to make use
of mineral manures (gypsum, lime, marl), or to burn peat, coal, &c.
instead of wood, and to bring the forest lands under cultivation;
but in such a State there exists no means of transport by means of
which these articles can be conveyed with advantage for more than
very short distances. What rich returns would the meadows in the
valleys yield, if irrigation works on a large scale were
established -- the rivers now merely serve to wash down and carry
away the fertile soil.
    Through the establishment of manufacturing power in an
agricultural State, roads are made, railways constructed, canals
excavated, rivers rendered navigable, and lines of steamers
established. By these not merely is the surplus produce of the
agricultural land converted into machinery for yielding income, not
merely are the powers of labour of those who are employed by it
brought into activity, not only is the agricultural population
enabled to obtain from the natural resources which it possesses an
infinitely greater return than before, but all minerals, all
metals, which heretofore were lying idle in the earth are now
rendered useful and valuable. Articles which could formerly only
bear a freight of a few miles, such as salt, coals, stone, marble,
slate, gypsum, lime, timber, bark, &c., can now be distributed over
the surface of an entire kingdom. Hence such articles, formerly
quite valueless, can now assume a degree of importance in the
statistical returns of the national produce, which far surpasses
the total of the entire agricultural production in previous times.
Not a cubic foot of water-fall will then exist which is not made to
perform some service; even in the most distant districts of a
manufacturing country, timber and fuel will now become valuable, of
which previously no one knew how to make any use.
    Through the introduction of manufactures, a demand for a
quantity of articles of food and raw materials is created, to the
production of which certain districts can be far more profitably
devoted than to the growth of corn (the usual staple article of
rude agricultural countries). The demand which now springs up for
milk, butter, and meat adds a higher value to the existing pasture
land, and leads to the breaking up of fallows and the erection of
works of irrigation. The demand for fruit and garden produce
converts the former bare agricultural land into vegetable gardens
and orchards.
    The loss which the mere agricultural State sustains by not
making use of these natural powers, is so much the greater the more
it is fitted by nature for carrying on manufactures, and the more
its territory is adapted for the production of raw materials and
natural powers which manufacturers specially require; that loss
will therefore be the greatest in mountainous and hilly countries
less suitable for agriculture on the whole, but which offer to
manufactures plenty of water power, of minerals, timber, and stone,
and to the farmer the opportunity of cultivating the products which
are specially required by the manufacturer.
    Countries with a temperate climate are (almost without
exception) adapted for factories and manufacturing industry. The
moderate temperature of the air promotes the development and
exertion of power far more than a hot temperature. But the severe
season of the year, which appears to the superficial observer as an
unfavourable effect of nature, is the most powerful promoter of
habits of energetic activity, of forethought, order, and economy.
A man who has the prospect before him of six months in which he is
not merely unable to obtain any fruits from the earth, but also
requires special provisions and clothing materials for the
sustenance of himself and his cattle, and for protection against
the effects of cold, must necessarily become far more industrious
and economical than the one who merely requires protection from the
rain, and into whose mouth the fruits are ready to drop during the
whole year. Diligence, economy, order, and forethought are at first
produced by necessity afterwards by habit, and by the steady
cultivation of those virtues. Morality goes hand in hand with the
exertion of one's powers and economy, and immorality with idleness
and extravagance: each are reciprocally fertile sources, the one of
power, the other of weakness.
    An agricultural nation, which inhabits a country of temperate
climate, leaves therefore the richest part of its natural resources
unutilised.
    The school, inasmuch as, in judging the influences of climate
on the production of wealth, it has not distinguished between
agriculture and manufacturing industry, has fallen into the gravest
errors in respect to the advantages and disadvantages of protective
regulations, which we cannot here omit thoroughly to expose,
although we have already made mention of them in general terms
elsewhere.
    In order to prove that it is foolish to seek to produce
everything in one and the same country, the school asks the
question: whether it would be reasonable if we sought to produce
wine by growing grapes in Scottish and English greenhouses? It is
of course possible to produce wine in this manner, only lt would be
of much worse quality and more expensive than that which England
and Scotland could procure in exchange for their manufactured
goods. To anyone who either is unwilling or unable to penetrate
more deeply into the nature of things, this argument is a striking
one, and the school is indebted to it for a large portion of its
popularity; at any rate among the French vine growers and silk
manufacturers, and among the North American cotton planters and
cotton merchants. Regarded in the light of day, however, it is
fundamentally false, since restrictions on commercial intercourse
operate quite differently on the productive power of agriculture
than they do on the productive power of manufacturing industry.
    Let us first see how they operate on agriculture.
    If France rejects from her frontiers German fat cattle, or
corn, what will she effect thereby? In the first place, Germany
will thereby be unable to buy French wines. France will therefore
have to use those portions of her soil which are fitted for the
cultivation of the vine less profitably in proportion as this
destruction of commercial interchange lessens her exportation of
wines. So many fewer persons will be exclusively occupied with the
cultivation of the vine, and therefore so much less native
agricultural products will be required, which these persons would
have consumed, who would have otherwise devoted themselves
exclusively to vine culture. This will be the case in the
production of oil as well as in that of wine. France will therefore
always lose in her agricultural power on other points much more
than she gains on one single point, because by her exclusion of the
German cattle she protects a trade in the rearing and fattening of
cattle which had not been spontaneously developed, and for which,
therefore, probably the agriculture of those districts where this
branch of industry has had to be artificially developed is not
adapted. Thus will it be if we consider France merely as an
agricultural State opposed to Germany as a merely agricultural
State, and if we also assume that Germany will not retaliate on
that policy by a similar one. This policy, however, appears still
more injurious if we assume that Germany, as she will be compelled
to out of regard to her own interests, adopts similarly restrictive
measures, and if we consider that France is not merely an
agricultural, but also a manufacturing State. Germany will, namely,
not merely impose higher duties on French wines, but on all those
French products which Germany either produces herself, or can more
or less do without, or procure elsewhere; she will further restrict
the importation of those manufactured goods which she cannot at
present produce with special benefit, but which she can procure
from other places than from France. The disadvantage which France
has brought upon herself by those restrictions, thus appears twice
or three times greater than the advantage. It is evident that in
France only so many persons can be employed in the cultivation of
the vine, in the cultivation of olives, and in manufacturing
industry, as the means of subsistence, and raw materials which
France either produces herself or procures from abroad, are able to
support and employ. But we have seen that the restriction of
importation has not increased the agricultural production, but has
merely transferred it from one district to another. If free course
had been permitted to the interchange of products, the importation
of products and raw materials, and consequently the sale of wine,
oil, and manufactured goods, would have continually increased, and
consequently the number of persons employed in the cultivation of
the vine and olives, and in manufactures; while with the increasing
traffic, on the one hand, the means of subsistence and raw
materials, and, on the other hand, the demand for her manufactured
products, would have augmented. The augmentation of this population
would have produced a larger demand for those provisions and raw
materials which cannot easily be imported from abroad, and for
which the native agriculture possesses a natural monopoly; the
native agriculture therefore would thus have obtained a far greater
profit. The demand for those agricultural products for which the
character of the French soil is specially adapted, would be much
more considerable under this free interchange than that produced
artificially by restriction. One agriculturist would not have lost
what another gained; the whole agriculture of the country would
have gained, but still more the manufacturing industry. Through
restriction, the agricultural power of the country therefore is not
increased, but limited; and besides this, that manufacturing power
is annihilated which would have grown up from the augmentation of
the internal agriculture, as well as from the foreign importation
of provisions and raw materials. All that has been attained through
the restriction is an increase of prices in favour of the
agriculturists of one district at the expense of the agriculturists
of another district, but above all, at the expense of the total
productive force of the country.
    The disadvantages of such restrictions on the interchange of
products are still more clearly brought to light in the case of
England than in that of France. Through the corn laws, on doubt, a
quantity of unfertile land is brought under cultivation; but it is
a question whether these lands would not have been brought under
cultivation without them. The more wool, timber, cattle, and corn
that England would have imported, the more manufactured goods would
she have sold, the greater number of workmen would have been
enabled to live in England, the higher would the prosperity of the
working classes have risen. England would probably have doubled the
number of her workmen. Every single workman would have lived
better, would have been better able to cultivate a garden for his
pleasure and for the production of useful vegetables, and would
have supported himself and his family much better. It is evident
that such a large augmentation of the working population, as well
as of its prosperity and of the amount of what it consumed, would
have produced an enormous demand for those products for which the
island possesses a natural monopoly, and it is more than probable
that thereby double and three times as much land could have been
brought into cultivation than by unnatural restrictions. The proof
of this may be seen in the vicinity of every large town. However
large the mass of products may be which is brought into this town
from distant districts for miles around it, one cannot discover a
single tract of land uncultivated, however much that land may have
been neglected by nature. If you forbid the importation into such
a town of corn from distant districts, you thereby merely effect a
diminution of its population, of its manufacturing industry, and
its prosperity, and compel the farmer who lives near the town to
devote himself to less profitable culture.
    It will be perceived that thus far we are quite in accord with
the prevailing theory. With regard to the interchange of raw
products, the school is perfectly correct in supposing that the
most extensive liberty of commerce is, under all circumstances,
most advantageous to the individual as well as to the entire State.
One can, indeed, augment this production by restrictions; but the
advantage obtained thereby is merely apparent. We only thereby
divert, as the school says, capital and labour into another and
less useful channel. But the manufacturing productive power, on the
contrary, is governed by other laws, which have, unfortunately,
entirely escaped the observation of the school.
    If restriction on the importation of raw products hinder (as we
have seen) the utilisation of the natural resources and powers of
a State, restrictions on the importation of manufactured goods, on
the contrary, call into life and activity (in the case of a
populous country already far advanced in agriculture and
civilisation) a mass of natural powers; indeed, without doubt, the
greater half of all natural powers, which in the merely
agricultural State lie idle and dead for ever. If, on the one hand,
restrictions on the importation of raw products are a hindrance to
the development not only of the manufacturing, but also of the
agricultural productive, powers of a State, on the other hand, an
internal manufacturing productive power produced by restrictions on
the importation of foreign manufactures, stimulates the whole
agricultural productive powers of a State to a degree which the
most flourishing foreign trade is never able to do. If the
importation of raw products makes the foreign country dependent on
us and takes from it the means of manufacturing for itself, so in
like manner, by the importation of foreign manufactures, are we
rendered dependent on the foreign country, and the means are taken
from us of manufacturing for ourselves. If the importation of
products and raw materials withdraws from the foreign country the
material for the employment and support of its population and
diverts it to our nation, so does the importation of manufactured
fabrics take from us the opportunity of increasing our own
population and of providing it with employment. If the importation
of natural products and raw materials increases the influence of
our nation on the affairs of the world and gives us the means of
carrying on commerce with all other nations and countries, so by
the importation of manufactured fabrics are we chained to the most
advanced manufacturing nation, which can rule over us almost as it
pleases, as England rules over Portugal. In short, history and
statistics alike prove the correctness of the dictum expressed by
the ministers of George I: that nations are richer and more
powerful the more they export manufactured goods, and import the
means of subsistence and raw materials. In fact, it may be proved
that entire nations have been ruined merely because they have
exported only means of subsistence and raw materials, and have
imported only manufactured goods. Montesquieu,(1*) who understood
better than anyone either before or after him how to learn from
History the lessons which she imparts to the legislator and
politician, has well perceived this, although it was impossible for
him in his times, when political economy was as yet but little
studied, clearly to unfold the causes of it. In contradiction to
the groundless system of the physiocratic school, he maintained
that Poland would be more prosperous if she gave up altogether
foreign commerce, i.e. if she established a manufacturing power of
her own, and worked up and consumed her own raw materials and means
of subsistence. Only by the development of an internal
manufacturing power, by free, populous, and industrious cities,
could Poland obtain a strong internal organisation, national
industry, liberty, and wealth; only thus could she maintain her
independence and political superiority over less cultivated
neighbours. Instead of foreign manufactured goods she should have
introduced (as England did at one time, when she was on the same
footing as regards culture with Poland) foreign manufacturers and
foreign manufacturing capital. Her aristocracy, however, preferred
to export the paltry fruits of serf labour to foreign markets, and
to obtain in return the cheap and fine goods made by foreign
countries. Their successors now may answer the question: whether it
is advisable for a nation to buy the fabrics of a foreign country
so long as its own native manufactures are not yet sufficiently
strengthened to be able to compete in prices and quality with the
foreigner. The aristocracy of other countries may bear her fate in
mind whenever they are instigated by feudal inclinations; they may
then cast a glance at the English aristocracy in order to inform
themselves as to what is the value to the great landed proprietors
of a strengthened manufacturing power, of free municipal
institutions, and of wealthy towns.
    Without here entering on an inquiry whether it would have been
possible for the elective kings of Poland, under the circumstances
under which they were placed, to introduce such a commercial system
as the hereditary kings of England have gradually developed and
established, let us imagine that it had been done by them: can we
not perceive what rich fruits such a system would have yielded to
the Polish nation? By the aid of large and industrious towns, the
crown would have been rendered hereditary, the nobility would have
been obliged to make it convenient to take part in legislation in
a House of Peers, and to emancipate their serfs; agriculture would
have developed itself, as it has developed itself in England; the
Polish nobility would now be rich and respected; the Polish nation
would, even if not so respected and influential in the affairs of
the world as the English nation is, would have long ago become so
civilised and powerful as to extend its influence over the less
cultivated East. Without a manufacturing power she has become
ruined and partitioned, and were she not so already she must have
become so. Of its own accord and spontaneously no manufacturing
power was developed in her; it could not be so, because its efforts
would have been always frustrated by further advanced nations.
Without a system of protection, and under a system of free trade
with further advanced nations, even if Poland had retained her
independence up to the present time, she could never have carried
on anything more than a crippled agriculture; she could never have
become rich, powerful, and outwardly influential.
    By the circumstance that so many natural resources and natural
powers are converted by the manufacturing power into productive
capital is the fact chiefly to be accounted for, that protective
regulations act so powerfully on the augmentation of national
wealth. This prosperity is not a false appearance, like the effects
of restrictions on the trade in mere natural products, it is a
reality. They are natural powers which are otherwise quite dead --
natural resources which are otherwise quite valueless, which an
agricultural nation calls to life and renders valuable by
establishing a manufacturing power of its own.

    It is an old observation, that the human race, like the various
breeds of animals, is improved mentally and bodily by crossings;
that man, if a few families always intermarry amongst one another,
just as the plant if the seed is always sown in the same soil,
gradually degenerates. We seem obliged to attribute to this law of
nature the circumstance that among many wild or half-wild tribes in
Africa and Asia, whose numbers are limited, the men choose their
wives from foreign tribes. The fact which experience shows, that
the oligarchies of small municipal republics, who continually
intermarry among themselves, gradually die out or visibly
degenerate, appears similarly attributable to such a natural law.
It is undeniable that the mixing of two quite different races
results, almost without exception, in a powerful and fine future
progeny; and this observation extends to the mixing of the white
race with the black in the third and the fourth generation. This
observation seems to confirm more than any other thing the fact,
that those nations which have emanated from a crossing of race
frequently repeated and comprising the whole nation, have surpassed
all other nations in power and energy of the mind and character, in
intelligence, bodily strength, and personal beauty.(2*)
    We think we may conclude from this that men need not
necessarily be such dull, clumsy, and unintellectual beings as we
perceive them to be when occupied in crippled agriculture in small
villages, where a few families have for thousands of years
intermarried only with one another; where for centuries it has
occurred to no one to make use of an implement of a new form, or to
adopt a new method of culture, to alter the style of a single
article of clothing, or to adopt a new idea; where the greatest art
consisted, not in exerting one's bodily and mental powers in order
to obtain as much enjoyment as possible, but to dispense with as
much of it as possible.
    This condition of things is entirely changed (and for the best
purposes of the improvement of race of a whole nation) by
establishing a manufacturing power. While a large portion of the
increase of the agricultural population goes over into the
manufacturing community, while the agricultural population of
various districts becomes mixed by marriages between one another
and with the manufacturing population, the mental, moral, and
physical stagnation of the population is broken up. The intercourse
which manufactures and the commerce between various nations and
districts which is based upon them bring about, brings new blood
into the whole nation as well as into separate communities and
families.
    The development of the manufacturing power has no less
important an influence on the improvement of the breeds of cattle.
Everywhere, where woollen manufactures have been established, the
race of sheep has quickly been improved. Owing to a greater demand
for good meat, which a numerous manufacturing population creates,
the agriculturist will endeavour to introduce better breeds of
cattle. The greater demand for 'horses of luxury' is followed by
the improvement of the breeds of horses. We shall then no longer
see those wretched primitive breeds of cattle, horses, and sheep,
which having resulted from the crippled state of agriculture and
everywhere from neglect of crossing of breeds, exhibit a side
spectacle worthy of their clumsy owners.
    How much do the productive powers of the nations already owe to
the importation of foreign breeds of animals and to the improvement
of the native breeds; and how much has yet to be done in this
respect! All the silkworms of Europe are derived from a few eggs,
which (under Constantine) were brought to Constantinople in hollow
sticks, by Greek monks from China, where their exportation was
strictly prohibited. France is indebted to the importation of the
Thibet goat for a beautiful product of her industry. It is very
much to be regretted, that hitherto the breeding and improving of
animals has been chiefly carried on in order to satisfy the
requirements of luxury, and not in order to promote the welfare of
the large masses. The descriptions of travellers show that in some
countries of Asia a race of cattle has been seen which combines
considerable draught power with great swiftness of pace, so that
they can be used with almost the same advantage as horses for
riding and driving. What immense advantages would such a breed of
cattle confer on the smaller agriculturists of Europe! What an
increase in means of subsistence, productive power, and
convenience, would the working classes thereby obtain! But even far
more than by improved breeds, and importation from one country into
another of various animals, has the productive power of the human
race been increased by the improvement and importation of trees and
plants. This is at once evident, if we compare the original plants
as they have sprung from the bosom of nature, with their improved
species. How little do the primitive plants of the various species
of corn and of fruit trees, of edible vegetables and of the olive,
resemble in form and utility their improved offspring! What masses
of means of nourishment, of enjoyment, and comfort, and what
opportunities for the useful application of human powers, have been
derived from them! The potato, the beet-root, the cultivation of
root crops for cattle, together with the improved systems of
manuring and improved agricultural machines, have increased
ten-fold the returns of agriculture, as it is at present carried on
by the Asiatic tribes.
    Science has already done much with regard to the discovery of
new plants and the improvement of them; but governments have not
yet devoted to this important object so much attention as they
ought to have done, in the interests of economy. Quite recently,
species of grass are said to have been discovered in the savannas
of North America, which from the poorest soil yield a higher
produce than any fodder plants, which are as yet known to us, do
from the richest soil. It is very probable that in the wild regions
of America, Asia, Africa, and Australia, a quantity of plants still
vegetate uselessly, the transplantation and improvement of which
might infinitely augment the prosperity of the inhabitants of
temperate climates.
    It is clear that most of the improvements and transportations
of animals and vegetables, most of the new discoveries which are
made with respect to them, as well as all other progress,
inventions, and discoveries, are chiefly calculated to benefit the
countries of the temperate zone, and of those most of all, the
manufacturing countries.

NOTES:

1. Esprit des Lois, Livre xx. chap. xxiii.

2. According to Chardin, the Guebres, an unmixed tribe of the old
Persians, are an ugly, deformed, and clumsy race, like all nations
of Mongol descent, while the Persian nobility, which for centuries
has intermarried with Georgian and Circassian women, is
distinguished for beauty and strength. Dr Pritchard remarks that
the unmixed Celts of the Scottish highlands are far behind the
Scottish Lowlanders (descendants of Saxons and Celts) in height,
bodily power, and fine figure. Pallas makes similar observations
respecting the descendants of the Russians and Tartars in
comparison with the unmixed tribes to which they are related. Azara
affirms that the descendants of the Spaniards and the natives of
Paraguay are a much more handsome and powerful race of men than
their ancestors on both sides. The advantages of the crossing of
race are not only apparent in the mixing of different nations, but
also in the mixing of different family stocks in one and the same
nation. Thus the Creole negroes far surpass those negroes who have
sprung from unmixed tribes, and who have come direct from Africa to
America, in mental gifts as well as in bodily power. The
Caribbeans, the only Indian race which chooses regularly its women
From neighbouring tribes, are in every respect superior to all
other American tribes. If this is a law of nature, the rise and
progress which the cities of the Middle Ages displayed shortly
after their foundation, as well as the energy and fine bodily
appearance of the American people, are hence partly explained.

Chapter 19

The Manufacturing Power and the Instrumental Powers (Material
Capital) Of the Nation

    The nation derives its productive power from the mental and
physical powers of the individuals; from their social, municipal,
and political conditions and institutions; from the natural
resources placed at its disposal, or from the instruments it
possesses as the material products of former mental and bodily
exertions (material, agricultural, manufacturing, and commercial
capital). In the last two chapters we have dealt with the influence
of manufactures on the three first-named sources of the national
productive powers; the present and the following chapter are
devoted to the demonstration of its influence on the one last
named.
    That which we understand by the term 'instrumental powers' is
called 'capital' by the school. It matters but little by what word
an object is signified, but it matters very much (especially with
regard to scientific investigations) that the word selected should
always indicate one and the same object, and never more or less. As
often, therefore, as different branches of a matter are discussed,
the necessity for a distinction arises. The school now understands
by the term 'capital' not merely the material, but also all mental
and social means of and aids to production. It clearly ought,
therefore, to specify wherever it speaks of capital, whether the
material capital, the material instruments of production, or the
mental capital, the moral and physical powers which are inherent in
individuals, or which individuals derive from social, municipal,
and political conditions, are meant. The omission of this
distinction, where it ought to be drawn, must necessarily lead to
false reasoning, or else serve to conceal false reasoning.
Meanwhile, however, as it is not so much our business to found a
new nomenclature as to expose the errors committed under the cover
of an inexact and inadequate nomenclature, we will adopt the term
'capital,' but distinguish between mental and material capital,
between material, agricultural, manufacturing, and commercial
capital, between private and national capital.
    Adam Smith (by means of the common expression, capital) urges
the following argument against the protective commercial policy
which is adopted to the present day by all his followers: 'A
country can indeed by means of such (protective) regulations
produce a special description of manufactures sooner than without
them; and this special kind of manufactures will be able to yield
after some time as cheap or still cheaper productions than the
foreign country. But although in this manner we can succeed in
directing national industry sooner into those channels into which
it would later have flowed of its own accord, it does not in the
least follow that the total amount of industry or of the incomes of
the community can be increased by means of such measures. The
industry of the community can only be augmented in proportion as
its capital increases, and the capital of the community can only
increase in accordance with the savings which it gradually makes
from its income. Now, the immediate effect of these measures is to
decrease the income of the community. But it is certain that that
which decreases that income cannot increase the capital more
quickly than it would have been increased by itself, if it, as well
as industry, had been left free.'(1*)
    As a proof of this argument, the founder of the school adduces
the well-known example, refuted by us in the previous chapter, how
foolish it would be to plant the vine in Scotland.
    In the same chapter he states, the annual income of the
community is nothing else but the value in exchange of those
objects which the national industry produces annually.
    In the above-named argument lies the chief proof of the school
against the protective commercial policy. It admits that by
measures of protection manufactories can be established and enabled
to produce manufactured goods as cheap or even cheaper than they
can be obtained from abroad; but it maintains that the immediate
effect of these measures is to decrease the income of the community
(the value in exchange of those things which the national industry
produces annually). It thereby weakens its power of acquiring
capital, for capital is formed by the savings which the nation
makes out of its annual income; the total of the capital, however,
determines the total of the national industry, and the latter can
only increase in proportion to the former. It therefore weakens its
industry by means of those measures -- by producing an industry
which, in the nature of things, if they had been left to their own
free course would have originated of its own accord.
    It is firstly to be remarked in opposition to this reasoning,
that Adam Smith has merely taken the word capital in that sense in
which it is necessarily taken by rentiers or merchants in their
book-keeping and their balance-sheets, namely, as the grand total
of their values of exchange in contradistinction to the income
accruing therefrom.
    He has forgotten that he himself includes (in his definition of
capital) the mental and bodily abilities of the producers under
this term.
    He wrongly maintains that the revenues of the nation are
dependent only on the sum of its material capital. His own work, on
the contrary contains a thousand proofs that these revenues are
chiefly conditional on the sum of its mental and bodily powers, and
on the degree to which they are perfected, in social and political
respects (especially by means of more perfect division of labour
and confederation of the national productive powers), and that
although measures of protection require sacrifices of material
goods for a time, these sacrifices are made good a hundred-fold in
powers, in the ability to acquire values of exchange, and are
consequently merely reproductive outlay by the nation.
    He has forgotten that the ability of the whole nation to
increase the sum of its material capital consists mainly in the
possibility of converting unused natural powers into material
capital, into valuable and income-producing instruments, and that
in the case of the merely agricultural nation a mass of natural
powers lies idle or dead which can bequickened into activity only
by manufactures. He has not considered the influence of
manufactures on the internal and external commerce, on the
civilisation and power of the nation, and on the maintenance of its
independence, as well as on the capability arising from these of
gaining material wealth.
    He has e.g. not taken into consideration what a mass of capital
the English have obtained by means of colonisation (Martin
estimates the amount of this at more than two and a half milliards
of pounds sterling).
    He, who nevertheless elsewhere proves so clearly that the
capital employed in intermediate commerce is not to be regarded as
belonging to any given nation, so long as it is not equally
embodied in that nation's land, has here not duly considered that
the nationalisation of such capital is most effectually realised by
favouring the nation's inland manufactures.
    He has not taken into account, that by the policy of favouring
native manufacture a mass of foreign capital, mental as well as
material, is attracted into the country.
    He falsely maintains that these manufactures have originated in
the natural course of things and of their own accord;
notwithstanding that in every nation the political power interferes
to give to this so-called natural course an artificial direction
for the nation's own special advantage.
    He has illustrated his argument, founded on an ambiguous
expression and consequently fundamentally wrong, by a fundamentally
wrong example, in seeking to prove that because it would be foolish
to produce wine in Scotland by artificial methods, therefore it
would be foolish to establish manufactures by artificial methods.
    He reduces the process of the formation of capital in the
nation to the operation of a private rentier, whose income is
determined by the value of his material capital, and who can only
increase his income by savings which he again turns into capital.
    He does not consider that this theory of savings, which in the
merchant's office is quite correct, if followed by a whole nation
must lead to poverty, barbarism, powerlessness, and decay of
national progress. Where everyone saves and economises as much as
he possibly can, no motive can exist for production. Where everyone
merely takes thought for the accumulation of values of exchange,
the mental power required for production vanishes. A nation
consisting of such insane misers would give up the defence of the
nation from fear of the expenses of war, and would only learn the
truth after all its property had been sacrificed to foreign
extortion, that the wealth of nations is to be attained in a manner
different to that of the private rentier.
    The private rentier himself, as the father of a family, must
follow a totally different theory to the shopkeeper theory of the
material values of exchange which is here set up. He must at least
expend on the education of his heirs as much value of exchange as
will enable them to administer the property which is some day to
fall to their lot.
    The building up of the material national capital takes place in
quite another manner than by mere saving as in the case of the
rentier, namely, in the same manner as the building up of the
productive powers, chiefly by means of the reciprocal action
between the mental and material national capital, and between the
agricultural, manufacturing, and commercial capital.
    The augmentation of the national material capital is dependent
on the augmentation of the national mental capital, and vice versâ.
    The formation of the material agricultural capital is dependent
on the formation of the material manufacturing capital, and vice
versâ.
    The material commercial capital acts everywhere as an
intermediary, helping and compensating between both.
    In the uncivilised state, in the state of the hunter and the
fisher, the powers of nature yield almost everything, capital is
almost nil. Foreign commerce increases the latter, but also in so
doing (through fire-arms, powder, lead) totally destroys the
productiveness of the former. The theory of savings cannot profit
the hunter; he must be ruined or become a shepherd.
    In the pastoral state the material capital increases quickly,
but only so far as the powers of nature afford spontaneously
nourishment to the cattle. The increase of population, however,
follows closely upon the increase of flocks and herds and of the
means of subsistence. On the one hand, the flocks and herds as well
as pastures become divided into smaller shares; on the other hand,
foreign commerce offers inducements to consumption. It would be in
vain to preach to the pastoral nation the theory of savings; it
must sink into poverty or pass over into the agricultural State.
    To the agricultural nation is open an immense, but at the same
time limited, field for enriching itself by utilising the dormant
powers of nature.
    The agriculturist for himself alone can save provisions,
improve his fields, increase his cattle; but the increase of the
means of subsistence always follows the increase of population. The
material capital (namely, cultivated land and cattle), in
proportion as the former becomes more fertile and the latter
increase, becomes divided among a larger number of persons.
Inasmuch, however, as the surface of the land cannot be increased
by industry, and the land cannot be utilised up to the measure of
its natural capacity, for want of means of transport, which (as we
showed in the preceding chapter) must remain imperfect in such a
state of things owing to lack of intercourse; and as moreover the
merely agricultural nation is mostly in want of those instruments,
intelligence, motives to exertion, and also of that energy and
social development which are imparted to the nation through
manufactures and the commerce which originates from them, the mere
agricultural population soon reaches a point in which the increase
of material agricultural capital can no longer keep pace with the
increase of population, and where consequently individual poverty
increases more and more, notwithstanding that the total capital of
the nation is continually increasing.
    In such a condition the most important product of the nation
consists of men, who, as they cannot find sufficient support in
their own country, emigrate to other countries. It can be but
little consolation to such a country, that the school regards man
as an accumulated capital; for the exportation of men does not
occasion return freights, but, on the contrary, causes the
unproductive export of considerable amounts of material values(in
the shape of implements, utensils, money, &c.).
    It is clear that in such a state of things, where the national
division of labour is not properly developed, neither industry nor
economy can bring about the augmentation of the material capital
(material enrichment of individuals).
    The agricultural country is, of course, rarely quite without
any foreign commerce, and foreign commerce, as far as it extends,
also supplies the place of internal manufactures with regard to the
augmentation of capital, inasmuch as it places the manufacturer of
the foreign country in commercial relation with the agriculturist
of the home country. This, however, takes place only partially and
very imperfectly; firstly, because this commerce extends merely to
special staple products, and chiefly only to those districts which
are situated on the sea-coast and on navigable rivers; and
secondly, because it is in any case but a very irregular one, and
is liable to be frequently interrupted by wars, fluctuations in
trade and changes in commercial legislation, by specially rich
harvests, and by foreign importations.
    The augmentation of the material agricultural capital can only
take place on a large scale, with regularity and continuously, if
a completely developed manufacturing power is established in the
midst of the agriculturists.
    By far the greatest portion of the material capital of a nation
is bound to its land and soil. In every nation the value of landed
property, of dwelling houses in rural districts and in towns, of
workshops, manufactories, waterworks, mines, &c. amounts to from
two-thirds to nine-tenths of the entire property of the nation. It
must therefore be accepted as a rule, that all that increases or
decreases the value of the fixed property, increases or decreases
the total of the material capital of the nation. Now, it is evident
that the capital value of land of equal natural fertility is
incomparably larger in the proximity of a small town than in remote
districts; that this value is incomparably larger still in the
neighbourhood of a large town than in that of a small one; and that
in manufacturing nations these values are beyond all comparison
greater than in mere agricultural nations. We may observe
(inversely) that the value of the dwelling houses and manufacturing
buildings in towns, and that of building land, rises or falls (as
a rule) in the same ratio in which the commercial intercourse of
the town with the agriculturists is extended or restricted, or in
which the prosperity of these agriculturists progresses or recedes.
From this it is evident that the augmentation of the agricultural
capital is dependent on the augmentation of the manufacturing
capital; and (inversely) the latter on the former.(2*)
    This reciprocal action is, however, in the case of the change
from the agricultural state into the manufacturing state much
stronger on the part of manufacture than on the part of
agriculture. For as the increase of capital which results from the
change from the condition of the mere hunter to the pastoral
condition is chiefly effected by the rapid increase of flocks and
herds, as the increase of capital resulting from the change from
the pastoral condition into the agricultural condition is chiefly
effected by the rapid increase in cultivated land and in surplus
produce, so, in the event of a change from the agricultural
condition into the manufacturing condition, is the augmentation of
the material capital of the nation chiefly effected by those values
and powers which are devoted to the establishment of manufactures,
because thereby a mass of formerly unutilised natural and mental
powers are converted into mental and material capital. Far from
hindering the saving of material capital, the establishment of
manufactures is the first thing which affords to the nation the
means of employing its agricultural savings in an economical
manner, and it is the first means by which the nation can be
incited to agricultural economy.
    In the legislative bodies of North America it has often been
mentioned that corn there rots in the ear from want of sale,
because its value will not pay the expense of harvesting it. In
Hungary it is asserted that the agriculturist is almost choked with
excess of produce, while manufactured goods are three to four times
dearer there than in England. Germany even can remember such times.
In agricultural States, therefore, all surplus agricultural produce
is not material capital. By means of manufactures it first becomes
commercial capital by being warehoused, and then by being sold to
the manufacturers it is turned into manufacturing capital. What may
be unutilised stock in the hand of the agriculturist, becomes
productive capital in the hand of the manufacturer, and vice versâ.
    Production renders consumption possible, and the desire to
consume incites to production. The mere agricultural nation is in
its consumption dependent on foreign conditions, and if these are
not favourable to it, that production dies out which would have
arisen in consequence of the desire to consume. But in that nation
which combines manufactures with agriculture in its territory, the
reciprocal inducement continually exists, and therefore, also,
there will be continuous increase of production and with it
augmentation of capital on both sides.
    As the agricultural-manufacturing nation is (for the reasons
which we have already given) always incomparably richer in material
capital than the mere agricultural nation (which is evident at a
glance), so in the former the rate of interest is always much
lower, and larger capital and more favourable conditions are at the
disposal of men of enterprise, than in the purely agricultural
nation. It follows that the former can always victoriously compete
with the newly formed manufactories in the agricultural nation;
that the agricultural nation remains continually in debt to the
manufacturing nation, and that in the markets of the former
continual fluctuations in the prices of produce and manufactured
goods and in the value of money take place, whereby the
accumulation of material wealth in the purely agricultural nation
is no less endangered than its morality and its habits of economy.
    The school distinguishes fixed capital from circulating
capital, and classes under the former in a most remarkable manner
a multitude of things which are in circulation without making any
practical application whatever of this distinction. The only case
in which such a distinction can be of value, it passes by without
notice. The material as well as the mental capital is (namely)
bound in a great measure to agriculture, to manufactures, to
commerce, or to special branches of either -- nay often, indeed, to
special localities. Fruit trees, when cut down, are clearly not of
the same value to the manufacturer (if he uses them for woodwork)
as they are to the agriculturist (if he uses them for the
production of fruit). Sheep, if, as has already frequently happened
in Germany and North America, they have to be slaughtered in
masses, have evidently not the value which they would possess when
used for the production of wool. Vineyards have (as such) a value
which, if used as arable fields, they would lose. Ships, if used
for timber or for firewood, have a much lower value than when they
serve as means of transport. What use can be made of manufacturing
buildings, water-power, and machinery if the spinning industry is
ruined? In like manner individuals lose, as a rule, the greatest
part of their productive power, consisting in experience, habits,
and skill, when they are displaced. The school gives to all these
objects and properties the general name of capital, and would
transplant them (by virtue of this terminology) at its pleasure
from one field of employment to another. J. B. Say thus advises the
English to divert their manufacturing capital to agriculture. How
this wonder is to be accomplished he has not informed us, and it
has probably remained a secret to English statesmen to the present
day. Say has in this place evidently confounded private capital
with national capital. A manufacturer or merchant can withdraw his
capital from manufactures or from commerce by selling his works or
his ships and buying landed property with the proceeds. A whole
nation, however, could not effect this operation except by
sacrificing a large portion of its material and mental capital. The
reason why the school so deliberately obscures things which are so
clear is apparent enough. If things are called by their proper
names, it is easily comprehended that the transfer of the
productive powers of a nation from one field of employment to
another is subject to difficulties and hazards which do not always
speak in favour of 'free trade,' but very often in favour of
national protection.

NOTES:

1. Wealth of Nations, book IV. chap. ii.

2. Compare the following paragraph, which appeared in the Times
during 1883:
    'MANUFACTURES AND AGRICULTURE. The statistician of the
Agricultural Department of the United States has shown in a recent
report that the value of farm lands decreases in exact proportion
as the ratio of agriculture to other industries increases. That is,
where all the labour is devoted to agriculture, the land is worth
less than where only half of the people are farm labourers, and
where only a quarter of them are so engaged the farms and their
products are still more valuable. It is, in fact, proved by
statistics that diversified industries are of the greatest value to
a State, and that the presence of a manufactory near a farm
increases the value of the farm and its crops. It is further
established that, dividing the United States into four sections or
classes, with reference to the ratio of agricultural workers to the
whole population, and putting those States having less than 30 per
cent of agricultural labourers in the first class, all having over
30 and less than 50 in the second, those between 50 and 70 in the
third, and those having 70 or more in the fourth, the value of
farms is in inverse ratio to the agricultural population; and that,
whereas in the purely agricultural section, the fourth class, the
value of the farms per acre is only $5 28c, in the next class it is
$13 03c, in the third $22 21c, and in the manufacturing districts
$40 91c. This shows an enormous advantage for a mixed district. Yet
not only is the land more valuable -- the production per acre is
greater, and the wages paid to farm hands larger. Manufactures and
varied industries thus not only benefit the manufacturers, but are
of equal benefit and advantage to the farmers as well. The latter
would, therefore, do well to abandon their prejudice against
factories, which really increase the value of their property
instead of depreciating it.' -- TR.

Chapter 20

The Manufacturing Power and the Agricultural Interest


    If protective duties in favour of home manufactures proved
disadvantageous to the consumers of manufactured goods and served
only to enrich the manufacturer, this disadvantage would especially
be felt by the landed proprietor and the agriculturist, the most
numerous and important class of those consumers. But it can be
proved that even this class derives far greater advantages from the
establishment of manufactures, than the manufacturers themselves
do; for by means of these manufactures a demand for greater variety
and for larger quantities of agricultural products is created, the
value in exchange of these products is raised, the agriculturist is
placed in a position to utilise his land and his powers of labour
more profitably. Hence emanates an increase of rent, of profits,
and wages; and the augmentation of rents and capital is followed by
an increase in the selling value of land and in the wages of
labour.
    The selling value of landed property is nothing else than
capitalised rent; it is dependent, on the one hand, on the amount
and the value of the rent, but, on the other hand, and chiefly, on
the quantities of mental and material capital existing in the
nation.
    Every individual and social improvement, especially every
augmentation of productive power in the nation, but, most of all,
of the manufacturing power, raises the amount of rents, while at
the same time it lessens the proportion which rent bears to the
gross produce. In an agricultural nation little developed and
scantily peopled, e.g. in Poland, the proportion of rent amounts to
one-half or one third the gross produce. in a well-developed,
populous, and wealthy nation, e.g. England, it only amounts to
one-fourth or one-fifth part of that produce. Nevertheless, the
actual worth of this smaller proportion is disproportionately
greater than the worth of that larger proportion-in money value
especially, and still more in manufactured goods. For the fifth
part of twenty-five bushels (the average produce of wheat in
England) equals five bushels; the third part, however, of nine
bushels (the average produce of wheat in Poland) amounts only to
three bushels; further, these five bushels in England are worth on
an average 25s. to 30s.; while these three bushels in the interior
of Poland are at the most worth 8s. to 9s.; and finally, goods in
England are at least twice as cheap as in manufactured Poland:
consequently the English landed proprietor is able to buy for his
30s. of money-rent ten yards of cloth, but the Polish landowner for
his 9s. of rent can obtain scarcely two yards, from which it is
evident that the English landed proprietor by the fifth part of the
gross produce is as rentier three times, and as consumer of
manufactured goods five times, better off than the Polish landowner
is by the third part of his gross produce. But that farmers and
agricultural labourers also must in England (especially as
consumers of manufactured goods) be disproportionately better off
than in Poland, is shown by the fact that out of the produce of
twenty-five bushels in England twenty bushels go for sowing, for
cultivation of the field, wages, and profits: half of which (or ten
bushels) devoted to the last two items have an average value of
60s. or twenty yards of cloth (at 3s. per yard), while from the
produce of nine bushels in Poland only six bushels go for sowing,
cultivation of the field, profit, and wages, half of which, or
three bushels, devoted to the last two items, have merely a value
of 10s. to 12s. or three and a half yards of cloth.
    Rent is a chief means of usefully employing material capital.
Its price. therefore, depends also on the quantity of the capital
existing in the nation and the proportion of the supply of it to
the demand. By the surplus of the capital which accumulates in a
manufacturing nation as the result of its home and foreign
commerce, by the low rate of interest which there exists, and the
circumstance that in a manufacturing and commercial nation a number
of individuals who have become wealthy are always seeking to invest
their surplus capital in land, the selling price of a given amount
of rent of land is always disproportionately higher in such a
nation than in the mere agricultural nation. In Poland the rent of
land is sold at ten or twenty years' purchase; in England at thirty
or forty years' purchase. In the proportion in which the selling
value of the rent of land is higher in the manufacturing and
commercial nation than in the agricultural nation, so also is the
selling value of the land itself higher in the former than in the
latter. For land of equal natural fertility in each country, the
value is in England ten to twenty times higher than in Poland.
    That manufactures have an influence on the amount of rent, and
therefore on the value in exchange of the land, is a fact which
Adam Smith certainly notices at the conclusion of the ninth chapter
of his first book, but only incidentally and without bringing the
vast importance of manufactures in this respect properly to light.
He there distinguishes those causes which influence directly the
augmentation of rent (such as the improvement of the land itself,
the increase in the number and the value of the cattle maintained
upon it) from those causes which have only an indirect influence on
that augmentation, among which latter he classes manufactures. In
this manner he places the main cause of the augmentation of the
rent and of the value of land (namely, the manufactures) in the
background so that it is scarcely perceptible; while he places the
improvement of the land itself and the increase of cattle, which
are themselves for the most part the result of manufactures and of
the commerce proceeding from them, as the chief cause, or at least
as an equal cause, of that augmentation.
    Adam Smith and his followers have not recognised by any means
to its full extent the value of manufactures in this respect.
    We have remarked that in consequence of manufactures and of the
commerce connected with them, the value of land of equal natural
fertility in England is ten to twenty times greater than in Poland.
If we now compare the total produce of the English manufacturing
production and of the English manufacturing capital with the total
produce of the English agricultural production and of the English
agricultural capital, we shall find that the greatest part of the
wealth of the nation shows itself in the thus increased value of
landed property.
    MacQueen(1*) has prepared the following estimate of the
national wealth and national income of England:



        I. NATIONAL CAPITAL.

1. In agriculture, lands, mines, and fisheries....            
2,604 mill.
   Working capital in cattle, implements, stocks, and money.... 
655  "
   Household furniture and utensils of the agriculturists....    
52  "
                                                              
3,311  "

2. Invested in manufactures and commerce:
   Manufactures, and home trade in manufactured
                     goods.....                                178
1/2 "
   Trade in colonial goods...                                  11 
    "
   Foreign trade in manufactured goods.....                    16 
1/2 "
                                                              206 
    "
   To this add increase since 1835 (in which year this
        estimate was made)......                               12 
    "
                                                              218
mill.
   Then in town buildings of all kinds, and in manu-
        facturing buildings                                   605 
   "
   In ships........                                            33
1/2  "
   In bridges, canals, and railways...                        118 
    "
   In horses which are not used in agriculture...              20 
    "
                                                              776
1/2 mill.
   Amount of the whole national capital (exclusive of
      the capital invested in the colonies, in foreign loans,
      and in the English public funds)......                4,305
1/2 mill.


        II. GROSS NATIONAL PRODUCTION.

     1. Of agriculture, mines, and fisheries....              539
mill.
     2. Manufacturing production.......                       259
1/2 "
                                                              798
1/2 "

    From this estimate it may be seen:
    1. That the value of the land devoted to agriculture amounts to
26/43 of the whole English national, property, and is about twelve
times more than the value of the whole capital invested in
manufactures and in commerce.
    2. That the whole capital invested in agriculture amounts to
over three-fourths of the English national capital.
    3. That the value of the whole fixed property in England,
namely:

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

is therefore equal to more than three-fourths of the whole English
national capital.
    4. That the manufacturing and commercial capital, inclusive of
ships, does not altogether amount to more than 241 1/2 millions,
and therefore to only about 1/18 of the English national wealth.
    5. That the whole English agricultural capital, with 3,311
millions, yields a gross income of 539 millions, consequently about
16 per cent; while manufacturing and commercial capital, amounting
to 218 millions, gives a gross annual production of 259 1/2
millions or of 120 per cent.
    It must here, above all things, be noted that the 218 millions
manufacturing capital, with an annual production of 259 1/2
millions, constitute the chief reason why the English agricultural
capital could have attained to the enormous amount of 3,311
millions, and its annual produce to the sum of 539 millions. By far
the greatest part of the agricultural capital consists in the value
of land and cattle. Manufactures, by doubling and trebling the
population of the country, by furnishing the means for an immense
foreign commerce, for the acquisition and exploration of a number
of colonies, and for a large mercantile marine, have increased in
the same proportion the demand for means of subsistence and raw
materials, have afforded to the agriculturist at once the means and
the motive for satisfying this increased demand, have increased the
exchangeable value of these products, and thus caused the
proportionate increase in the amount and the selling value of the
rent of land, consequently of the land itself. Were these 218
millions of manufacturing and commercial capital destroyed, we
should see not merely the 259 1/2 millions manufacturing
production, but also the greatest part of the 3,311 millions
agricultural capital, and consequently of the 539 millions
agricultural production, disappear. The English national production
would not merely lose 259 1/2 millions (the value of its
manufacturing production), but the value of land would decline to
the value which it has in Poland, i.e. to the tenth or twentieth
part of its present value.
    From this it follows that all capital which is devoted by the
agricultural nation in a profitable manner to manufactures,
increases in the course of time the value of the land tenfold.
Experience and statistics everywhere confirm this statement.
Everywhere it has been seen that in consequence of the
establishment of manufactures the value of land and also that of
the stock of capital rapidly increases. Let anyone compare these
values in France (in 1789 and in 1840), in North America (in 1820
and in 1830), or in Germany (in 1830 and in 1840), how they have
corresponded with a less developed or a more fully developed
condition of manufactures, and he will find our observation
everywhere confirmed.
    The reason for this appearance lies in the increased power of
production in the nation, which emanates from the regular division
of labour and from the strengthened confederation of the national
powers, also from a better use of the mental and natural powers
placed at the disposal of the nation, and from foreign commerce.
    These are the very same causes and effects which we may
perceive in respect to improved means of transport; which not
merely yield in themselves a revenue, and through it a return for
the capital spent upon them, but also powerfully promote the
development of manufactures and agriculture, whereby they increase
in the course of time the value of the landed property within their
districts to tenfold the value of the actual material capital which
has been employed in creating them. The agriculturist, in
comparison with the undertaker of such works (improved means of
transport), has the great advantage of being quite sure of his
tenfold gain on his invested capital and of obtaining this profit
without malting any sacrifices, while the contractor for the works
must stake his whole capital. The position of the agriculturist is
equally favourable as compared with that of the erector of new
manufactories.
    If, however, this effect of manufactures on agricultural
production, on rent, and therefore on the value of landed property,
is so considerable and advantageous for all who are interested in
agriculture; how, then, can it be maintained that protective
measures would favour manufactures merely at the cost of the
agriculturists?
    The material prosperity of agriculturists, as well as of all
other private persons, principally depends on the point that the
value of what they produce shall exceed the value of what they
consume. It, therefore, is not so important to them that
manufactured goods should be cheap, as especially that a large
demand for various agricultural products should exist, and that
these should bear a high value in exchange. Now, if measures of
protection operate so that the agriculturist gains more by the
improvement of the market for his own produce than he loses by the
increase of the prices of such manufactured goods as he requires to
buy, he cannot rightly be described as making a sacrifice in favour
of the manufacturer. This effect is, however, always observable in
the case of all nations who are capable of establishing a
manufacturing power of their own, and in their case is most
apparent during the first period of the rise of the native
manufacturing industry; since just at that time most of the capital
transferred to manufacturing industry is spent on the erection of
dwelling houses and manufactories, the application of water power,
&c., an expenditure which chiefly benefits the agriculturist.
However much in the beginning the advantages of the greater sale of
agricultural produce and of its increased value outweighs the
disadvantage of the increased price of manufactured goods, so must
this favourable condition always increase further to the advantage
of the agriculturists, because the flourishing of the manufactories
always tends in the course of time continually more and more to
increase the prices obtainable for agricultural produce and to
lessen the prices of manufactured goods.
    Further, the prosperity of the agriculturist and landed
proprietor is especially dependent on the circumstance that the
value of the instrument from which his income is derived, namely,
his landed property, at least maintains its former position. This
is not merely the chief condition of his prosperity, but frequently
of his entire economical existence. For instance, it frequently
happens that the annual production of the agriculturist exceeds his
consumption, and nevertheless he finds himself ruined. This occurs
if while his landed property is encumbered with money debts, the
general credit becomes fluctuating; if on one side the demand for
money capital exceeds the supply of it, and on the other hand the
supply of land exceeds the demand. In such cases a general
withdrawal of money loans and a general offer of land for sale
arises, and consequently land becomes almost valueless, and a large
number of the most enterprising, active, and economical land
cultivators are ruined, not because their consumption has exceeded
their production, but because the instrument of their production,
their landed property, has lost in their hands a considerable
portion of its value, in consequence of causes over which they had
no control; further, because their credit has thereby become
destroyed; and finally, because the amount of the money debts with
which their landed property is encumbered is no longer in
proportion to the money value of their possessions, which has
become depressed by the general worthlessness of landed property.
Such crises have occurred in Germany and North America during the
last fifty years more than once, and in this manner a large
proportion of the German nobility find themselves no longer in
possession of property or landed estate, without having clearly
perceived that they really owe this fate to the policy adopted by
their brothers in England, the Tories whom they regard as so well
disposed. The condition of the agriculturist and landed proprietor
is, however, totally different in countries where manufactures
flourish vigorously. There, while the productive capabilities of
the land and the prices of produce are increased, he not merely
gains the amount by which the value of his production exceeds the
value of his consumption; he gains, as landed proprietor, not only
an increase of annual rent, but the amount of capital represented
by the increase of rent. His property doubles and trebles itself in
value, not because he works more, improves his fields more, or
saves more, but because the value of his property has been
increased in consequence of the establishment of manufactures. This
effect affords to him means and inducement for greater mental and
bodily exertions, for improvement of his land, for the increase of
his live stock, and for greater economy, notwithstanding increased
consumption. With the increase in the value of his land his credit
is raised, and with it the capability of procuring the material
capital required for his improvements.
    Adam Smith passes over these conditions of the exchangeable
value of land in silence. J. B. Say, on the contrary, believes that
the exchangeable value of land is of little importance, inasmuch
as, whether its value be high or low, it always serves equally well
for production. It is sad to read from an author whom his German
translators regard as a universal national authority, such
fundamentally wrong views about a matter which affects so deeply
the prosperity of nations. We, on the contrary, believe it
essential to maintain that there is no surer test of national
prosperity than the rising and falling of the value of the land,
and that fluctuations and crises in that are to be classed among
the most ruinous of all plagues that can befall a country.
    Into this erroneous view the school has also been led by its
predilection for the theory of free trade (as it desires the latter
term to be understood). For nowhere are fluctuations and crises in
the value and price of land greater than in those purely
agricultural nations which are in unrestricted commercial
intercourse with rich and powerful manufacturing and commercial
nations.
    Foreign commerce also, it is true, acts on the increase of rent
and the value of land, but it does so incomparably less decidedly,
uniformly, and permanently, than the establishment of home
manufactures, the continuous regular increase of manufacturing
production, and the exchange of home manufacturing products for
home agricultural products.
    So long as the agricultural nation still possesses a large
quantity of uncultivated or badly cultivated land, so long as it
produces staple articles which are readily taken by the richer
manufacturing nation in exchange for manufactured goods, so long as
these articles are easy of transport, so long also as the demand
for them is lasting and capable of annual increase at a rate
corresponding with the growth of the productive powers of the
agricultural nation, and so long as it is not interrupted by wars
or foreign tariff regulations, under such circumstances foreign
commerce has a powerful effect on the increase of rents and on the
exchangeable value of land. But as soon as any one of these
conditions fails or ceases to operate, foreign commerce may become
the cause of national stagnation, nay frequently of considerable
and long-continued retrogression.
    The fickleness of foreign demand has the most baneful effect of
all in this respect, if in consequence of wars, failure of crops,
diminution of importation from other parts, or owing to any other
circumstances and occurrences, the manufacturing nation requires
larger quantities especially of the necessaries of life or raw
materials, or of the special staple articles referred to, and then
if this demand again to a great extent ceases, in consequence of
the restoration of peace, of rich harvests, of larger importation
from other countries, or in consequence of political measures. If
the demand lasts merely for a short time, some benefit may result
from it to the agricultural nation; but if it last for years or a
series of years then all the circumstances of the agricultural
nation, the scale of expenditure of all private establishments,
will have become regulated by it. The producer becomes accustomed
to a certain scale of consumption; and certain enjoyments, which
under other circumstances he would have regarded as luxuries,
become necessaries to him. Relying on the increased yield and value
of his landed property, he undertakes improvements in cultivation,
in buildings, and makes purchases which otherwise he would never
have done. Purchases and sales, contracts of letting land, loans,
are concluded according to the scale of increased rents and values.
The State itself does not hesitate to increase its expenses in
accordance with the increased prosperity of private persons. But if
this demand afterwards suddenly ceases, disproportion between
production and consumption follows; disproportion between the
decreased values of land and the money encumbrances upon it which
continue undiminished in amount; disproportion between the money
rent payable under the leases, and the money produce of the land
which has been taken on lease; disproportion between national
income and national expenditure; and in consequence of these
disproportions, bankruptcy, embarrassment, discouragement,
retrogression in the economical as well as in the mental and
political development of the nation. Agricultural prosperity would
under these circumstances act like the stimulant of opium or strong
drink, stimulating merely for a moment, but weakening for a whole
lifetime. It would be like Franklin's flash of lightning, which for
a moment displayed the objects in a shining light, but only to
throw them back into deeper darkness.
    A period of temporary and passing prosperity in agriculture is
a far greater misfortune than uniform and lasting poverty. If
prosperity is to bring real benefit to individuals and nations, it
must be continuous. It, however, becomes continuous only in case it
increases gradually, and in case the nation possesses guarantees
for this increase and for its duration. A lower value of land is
incomparably better than fluctuations in its value; it is only a
gradual but steady increase in that value that affords to the
nation lasting prosperity. And only by the possession of a
manufacturing power of their own, can well-developed nations
possess any guarantee for the steady and permanent increase of that
value.
    To how very small an extent clear ideas prevail as to the
effect of a home manufacturing power on the rent and value of land
in comparison with the effect which foreign trade has on them, is
shown most plainly by the circumstance that the proprietors of
vineyards in France still always believe that they are injuriously
affected by the French system of protection, and demand the
greatest possible freedom of commerce with England in hopes of
thereby increasing their rents.
    Dr Bowring, in his report of the commercial relations existing
between England and France, the fundamental tendency of which is to
show the benefit to France which a larger importation of English
fabrics and a consequently increasing exportation of French wines
would occasion, has adduced facts from which the most striking
proof against his own argument can be brought. Dr Bowring quotes
the importation of French wines into the Netherlands (2,515,193
gallons, 1829) against the annual importation into England (431,509
gallons) to prove how greatly the sale of French wines in England
could be increased by freer commercial interchange between the two
countries.
    Now supposing (although it is more than improbable that the
sale of French wines in England would not find obstacles in the
predilection existing there for spirituous liquors, for strong
beer, and for the strong and cheap wines of Portugal, Spain,
Sicily, Teneriffe, Madeira, and the Cape) -- supposing that England
really was to extend her consumption of French wines to the same
proportion as that of the Netherlands, she would certainly
(calculating according to her population) be able to increase her
consumption to five or six million gallons (i.e. to from ten to
fifteen fold her present amount); and from a superficial point of
view this certainly appears to promise great advantage to France,
and to the French vineyard proprietors.
    If, however, we investigate this matter to the bottom, we
obtain another result. By as much freedom of trade as is possible
-- we will not say complete freedom of trade, although the latter
would have to be accepted according to the principle enunciated,
and to Bowring's arguments -- it can scarcely be doubted that the
English would draw to themselves a large part of the French market
for manufactured goods (especially as regards the manufactures of
woollens, cotton, linen, iron, and pottery). On the most moderate
estimate we must assume, that in consequence of this decreased
French manufacturing production one million fewer inhabitants would
live in the French towns, and that one million fewer persons would
be employed in agriculture for the purpose of supplying the
citizens of those towns with raw material and necessaries of life.
Now, Dr Bowring himself estimates the consumption of the country
population in France at 16 1/2 gallons per head, and that of the
town population at double that quantity, or 33 gallons per head.
Thus in consequence of the diminution of the home manufacturing
power effected by free trade, the internal consumption of wines
would decrease by 50 million gallons, while the exportation of wine
could only increase by 5 or 6 million gallons. Such a result could
scarcely be to the special advantage of the French proprietors of
vineyards, since the internal demand for wines would necessarily
suffer ten times more than the external demand could possibly gain.
    In one word: it is evident as respects the production of wine,
as also in that of meat, of corn, and of raw materials and
provisions generally, that in the case of a great nation well
fitted to establish a manufacturing power of its own, the internal
manufacturing production occasions ten to twenty times more demand
for the agricultural products of temperate climates, consequently
acts ten to twenty times more effectually on the increase of the
rent and exchangeable value of real estate, than the most
flourishing exportation of such products can do. The most
convincing proof of this may also be seen in the amount of rents
and the exchangeable value of land near large towns, as compared
with their amount and value in distant provinces, even though these
latter are connected with the capital by good roads and
conveniences for commercial intercourse.
    The doctrine of rent can either be considered from the point of
view of values or from the point of view of productive powers; it
can further be considered with respect merely to private relations,
namely, the relations between landed proprietor, farmer, and
labourer, or with especial regard to the social and national
relations and conditions. The school has taken up this doctrine
chiefly from the sole point of view of private economy. So far as
we know, for instance, nothing has been adduced by it to show how
the consumption of the rents of the nation is the more advantageous
the more it takes place in the proximity of the place whence it is
derived, but how nevertheless in the various States that
consumption takes place principally at the seat of the sovereign
(e.g. in absolute monarchies mostly in the national metropolis),
far away from the provinces where it is produced, and therefore in
a manner the least advantageous to agriculture, to the most useful
industries, and to the development of the mental powers of the
nation. Where the landowning aristocracy possess no rights and no
political influence unless they live at the Court, or occupy
offices of State, and where all public power and influence is
centralised in the national metropolis, landowners are attracted to
that central point, where almost exclusively they can find the
means of satisfying their ambition, and opportunities for spending
the income of their landed property in a pleasant manner; and the
more that most landowners get accustomed to live in the capital,
and the less that a residence in the provinces offers to each
individual opportunities for social intercourse and for mental and
material enjoyments of a more refined character, the more will
provincial life repel him and the metropolis attract him. The
province thereby loses and the metropolis gains almost all those
means of mental improvement which result from the spending of
rents, especially those manufactures and mental producers which
would have been maintained by the rent. The metropolis under those
circumstances, indeed, appears extremely attractive because it
unites in itself all the talents of the intellectual workers and
the greatest part of the material trades which produce articles of
luxury. But the provinces are thereby deprived of those mental
powers, of those material means, and especially of those
industries, which chiefly enable the agriculturist to undertake
agricultural improvements, and stimulate him to effect them.
    In these circumstances lies to a great extent the reason why in
France, especially under absolute monarchy, alongside of a
metropolis surpassing in intellect and splendour all towns of the
European continent, agriculture made but slight progress, and the
provinces were deficient in mental culture and in useful
industries. But the more that the landed aristocracy gains in
independence of the Court, and in influence in legislation and
administration, the more that the representative system and the
system of administration grants to the towns and provinces the
right of administering their own local affairs and of taking part
in the legislation and government of the State, and consequently
the more that respect and influence can be attained in the
provinces and by living there, so much the more will the landed
aristocracy, and the educated and well-to-do citizens, be drawn to
those localities from which they derived their rents, the greater
also will be the influence of the expenditure of those rents on the
development of the mental powers and social institutions, on the
promotion of agriculture, and on the development of those
industries which are useful to the great masses of the people in
the province.
    The economical conditions of England afford proof of this
observation. The fact that the English landed proprietor lives for
the greatest portion of the year on his estates, promotes in
manifold ways the improvement of English agriculture: directly,
because the resident landowner devotes a portion of his rent to
undertaking on his own account improvements in agriculture, or to
supporting such improvements when undertaken by his tenants;
indirectly, because his own consumption tends to support the
manufactures and agencies of mental improvement and Civilisation
existing in the neighbourhood. From these circumstances it can
further partly be explained why in Germany and in Switzerland, in
spite of the want of large towns, of important means of transport,
and of national institutions, agriculture and Civilisation in
general are in a much higher condition than in France.
    But the great error into which in this matter Adam Smith and
his school have fallen is that which we have already before
indicated, but which can be here more clearly shown, viz. that he
did not clearly recognise the influence of manufactures on the
increase of rents, on the market value of landed property itself,
and on the agricultural capital, and did not state this by any
means to its full extent, but, on the contrary, has drawn a
comparison between agriculture and manufactures in such a manner
that he would to a make it appear that agriculture is far more
valuable and important nation than manufactures, and that the
prosperity resulting from it is far more lasting than the
prosperity resulting from the latter. Adam Smith in so doing merely
sanctioned the erroneous view of the physiocratic school, although
in a somewhat modified manner. He was evidently misled by the
circumstance that -- as we have already demonstrated by the
statistical conditions of England -- the material agricultural
capital is (even in the richest manufacturing country) ten to
twenty times more important than the material manufacturing
capital; in fact, even the annual agricultural productiOn far
exceeds in value the total manufacturing capital. The same
circumstance may also have induced the physiocratic school to
over-estimate the value of agriculture in comparison with
manufactures. Superficially considered, it certainly appears as if
agriculture enriches a country ten times more, and consequently
deserves ten times more consideration, and is ten times more
important to the State than manufactures. This, however, is merely
apparent. If we investigate the causes of this agricultural
prosperity to their basis, we find them principally in the
existence of manufactures. It is those 218 millions of
manufacturing capital which have principally called into existence
those 3,311 millions of agricultural capital. The same
consideration holds good as respects means of transport; it is the
money expended in constructing them which has made those lands
which are within the reach of the canals more valuable. If the
means of transport along a canal be destroyed, we may use the water
which has been hitherto employed for transport, for irrigating
meadows -- apparently, therefore, for increasing agricultural
capital and agricultural rents, &c.; but even supposing that by
such a process the value of these meadows rose to millions, this
alteration, apparently profitable to agriculture, will nevertheless
lower the total value of the landed property which is within reach
of the canal ten times more.
    Considered from this point of view, from the circumstance that
the total manufacturing capital of a country is so small in
comparison with its total agricultural capital, conclusions must be
drawn of a totally different character from those which the present
and preceding school have drawn from it. The maintenance and
augmentation of the manufacturing power seem now, even to the
agriculturist, the more valuable, the less capital as compared with
agriculture it requires to absorb in itself and to put into
circulation. Yes, it must now become evident to the agriculturist,
and especially to the rent-owners and the landed proprietors of a
country, that it would be to their interest to maintain and develop
an internal manufacturing power, even had they to procure the
requisite capital without hope of direct recompense; just as it is
to their interest to construct canals, railways, and roads even if
these undertakings yield no real nett profit. Let us apply the
foregoing considerations to those industries which lie nearest and
are most necessary to agriculture, e.g. flour mills; and there will
be no room for doubt as to the correctness of our views. Compare,
on the one hand, the value of landed property and rent in a
district where a mill is not within reach of the agriculturist,
with their value in those districts where this industry is carried
on in their very midst, and we shall find that already this single
industry has a considerable effect on the value of land and on
rent; that there, under similar conditions of natural fertility,
the total value of the land has not merely increased to double, but
to ten or twenty times more than the cost of erecting the mill
amounted to; and that the landed proprietors would have obtained
considerable advantage by the erection of the mill, even if they
had built it at their common expense and presented it to the
miller. The latter circumstance, in fact, takes place every day in
the backwoods of North America, where, in cases when an individual
has not adequate capital to erect such works entirely at his own
expense, the landowner gladly helps him by contributing labour, by
team work, free gifts of timber, &c. In fact, the same thing also
occurred, although in another form, in countries of earlier
civilisation; here must undoubtedly be sought the origin of many
ancient feudal 'common mill' rights.
    As it is in the case of the corn mill, so is it in those of
saw, oil, and plaster mills, so is it in that of iron works;
everywhere it can be proved that the rent and the value of landed
property rise in proportion as the property lies nearer to these
industries, and especially according as they are in closer or less
close commercial relations with agriculture.
    And why should this not be the case with woollen, flax, hemp,
paper, and cotton mills? Why not with all manufacturing industries?
We see, at least, everywhere that rent and value of landed property
rise in exactly the same proportion with the proximity of that
property to the town, and with the degree in which the town is
populous and industrious. If in such comparatively small districts
we calculate the value of the landed property and the capital
expended thereon, and, on the other hand, the value of the capital
employed in various industries, and compare their total amount, we
shall find everywhere that the former is at least ten times larger
than the latter. But it would be folly to conclude from this that
a nation obtains greater advantages by investing its material
capital in agriculture than in manufactures, and that the former is
in itself more favourable to the augmentation of capital than the
latter. The increase of the material agricultural capital depends
for the most part on the increase of the material manufacturing
capital; and nations which do not recognise this truth, however
much they may be favoured by nature in agriculture, will not only
not progress, but will retrograde in wealth, population, culture,
and power.
    We see, nevertheless, how the proprietors of rent and of landed
property not unfrequently regard those fiscal and political
regulations which aim at the establishment of a native
manufacturing power as privileges which serve merely to enrich the
manufacturers, the burden of which they (the landed interest) have
exclusively to bear. They, who at the beginning of their
agricultural operations so clearly perceived what great advantages
they might obtain if a corn mill, a saw mill, or an iron work were
established in their neighbourhood, that they themselves submitted
to the greatest sacrifices in order to contribute towards the
erection of such works, can no longer, when their interests as
agriculturists have somewhat improved, comprehend what immense
advantages the total agricultural interest of the country would
derive from a perfectly developed national industry of its own, and
how its own advantage demands that it should submit to those
sacrifices without which this object cannot be attained. It
therefore happens, that, only in a few and only in very
well-educated nations, the mind of each separate landed proprietor,
though it is generally keenly enough alive to those interests which
lie close at hand, is sagacious enough to appreciate those greater
ones which are manifest to a more extended view.
    It must not, moreover, be forgotten that the popular theory has
materially contributed to confuse the opinions of landed
proprietors. Smith and Say endeavoured everywhere to represent the
exertions of manufacturers to obtain measures of protection as
inspirations of mere self-interest, and to praise, on the contrary,
the generosity and disinterestedness of the landed proprietors, who
are far from claiming any such measures for themselves. It appears,
however, that the landed proprietors have merely become mindful of
and been stimulated to the virtue of disinterestedness, which is so
highly attributed to them, in order to rid themselves of it. For in
the greatest number of, and in the most important, manufacturing
states, these landowners have also recently demanded and obtained
measures of protection, although (as we have shown in another
place) it is to their own greatest injury. If the landed
proprietors formerly made sacrifices to establish a national
manufacturing power of their own, they did what the agriculturist
in a country place does when he makes sacrifices in order that a
corn mill or an iron forge may be established in his vicinity. If
the landed proprietors now require protection also for their
agriculture, they do what those former landed proprietors would
have done if, after the mill has been erected by their aid, they
required the miller to help in cultivating their fields. Without
doubt that would be a foolish demand. Agriculture can only
progress, the rent and value of land can only increase, in the
ratio in which manufactures and commerce flourish; and manufactures
cannot flourish if the importation of raw materials and provisions
is restricted. This the manufacturers everywhere felt. For the
fact, however, that the landed proprietors notwithstanding obtained
measures of protection in most large states, there is a double
reason. Firstly, in states having representative government, the
landowner's influence is paramount in legislation, and the
manufacturers did not venture to oppose themselves perseveringly to
the foolish demand of the landowners, fearing lest they might
thereby incline the latter to favour the principles of free trade;
they preferred to agree with the landed proprietors.
    It was then insinuated by the school to the landed proprietors
that it is just as foolish to establish manufactures by artificial
means as it would be to produce wine in cold climates in
greenhouses; that manufactures would originate in the natural
course of things of their own accord; that agriculture affords
incomparably more opportunity for the increase of capital than
manufactures; that the capital of the nation is not to be augmented
by artificial measures; that laws and State regulations can only
induce a condition of things less favourable to the augmentation of
wealth. Finally, where the admission could not be avoided that
manufactures had an influence over agriculture, it was sought at
least to represent that influence to be as little and as uncertain
as possible. In any case (it was said) if manufactures had an
influence over agriculture, at least everything is injurious to
agriculture that is injurious to manufactures, and accordingly
manufactures also had an influence on the increase of the rent of
land, but merely an indirect one. But, on the other hand, the
increase of population and of cattle, the improvements in
agriculture, the perfection of the means of transport, &c. had a
direct influence on the increase of rent. The case is the same here
in reference to this distinction between direct and indirect
influence as on many other points where the school draws this
distinction (e.g. in respect of the results of mental culture), and
here also is the example already mentioned by us applicable; it is
like the fruit of the tree, which clearly (in the sense of the
school) is an indirect result, inasmuch as it grows on the twig,
which again is a fruit of the branch, this again is a fruit of the
trunk, and the latter a fruit of the root, which alone is a direct
product of the soil. Or would it not be just as sophistical to
speak of the population, the stock of cattle, the means of
transport, &c. as direct causes; but of manufactures, on the
contrary, as an indirect cause of the augmentation of rents, while,
nevertheless, one's very eyesight teaches one in every large
manufacturing country that manufactures themselves are a chief
cause of the augmentation of population, of the stock of cattle,
and of means of transport, &c.? And would it be logical and just to
co-ordinate these effects of manufactures with their cause -- in
fact, to put these results of manufactures at the head as main
causes, and to put the manufactures themselves as an indirect
(consequently, almost as a secondary) cause behind the former? And
what else can have induced so deeply investigating a genius as Adam
Smith to make use of an argument so perverted and so little in
accordance with the actual nature of things, than a desire to put
especially into the shade manufactures, and their influence on the
prosperity and the power of the nation, and on the augmentation of
the rent and the value of the land? And from what other motive can
this have taken place than a wish to avoid explanations whose
results would speak too loudly in favour of the system of
protection? The school has been especially unfortunate since the
time of Adam Smith in its investigations as to the nature of rent.
Ricardo, and after him Mill, M'Culloch, and others, are of opinion
that rent is paid on account of the natural productive fertility
inherent in the land itself. Ricardo has based a whole system on
this notion. If he had made an excursion to Canada, he would have
been able to make observations there in every valley, on every
hill, which would have convinced him that his theory is based on
sand. As he, however, only took into account the circumstances of
England, he fell into the erroneous idea that these English fields
and meadows for whose pretended natural productive capability such
handsome rents are now paid, have at all times been the same fields
and meadows. The original natural productive capability of land is
evidently so unimportant, and affords to the person using it so
small an excess of products, that the rent derivable from it alone
is not worth mentioning. All Canada in its original state
(inhabited merely by hunters) would yield in meat and skins
scarcely enough income to pay the salary of a single Oxonian
professor of political economy. The natural productive capability
of the soil in Malta consists of rocks, which would scarcely have
yielded a rent at any time. If we follow up with the mind's eye the
course of the civilisation of whole nations, and of their
conversion from the condition of hunters to the pastoral condition,
and from this to that of agriculturists, &c., we may easily
convince ourselves that the rent everywhere was originally nil, and
that it rose everywhere with the progress of civilisation, of
population, and with the increase of mental and material capital.
By comparing the mere agricultural nation with the agricultural,
manufacturing, and commercial nation, it will be seen that in the
latter twenty times more people live on rents than in the former.
According to Marshal's statistics of Great britain, for example, in
England and Scotland 16,537,398 human beings were living in 1831,
among whom were 1,116,398 rentiers. We could scarcely find in
Poland on an equal space of land the twentieth part of this number.
If we descend from generals to particulars and investigate the
origin and cause of the rental of separate estates, we find
everywhere that it is the result of a productive capability which
has been bestowed on it not spontaneously by nature, but chiefly
(directly or indirectly) through the mental and material labour and
capital employed thereon and through the development of society. We
see, indeed, how pieces of land yield rents which the hand of men
has never stirred by cultivation, as, for instance, quarries, sand
pits, pasture grounds; but this rent is merely the effect of the
increase of culture, capital, and population in the vicinity. We
see, on the other hand, that those pieces of land bring most rent
whose natural productive capability has been totally destroyed, and
which serve for no other use than for men to eat and drink, sit,
sleep, or walk, work, or enjoy themselves, teach or be taught upon,
viz. building sites.
    The basis of rent is the exclusive benefit or advantage which
the ground yields to that individual at whose exclusive disposal it
is placed, and the greatness of this benefit is determined
especially according to the amount of available mental and material
capital in the community in which he is placed, and also according
to the opportunity which the special situation and peculiar
character of the property and the utilisation of capital previously
invested therein affords to the person exclusively possessing the
property for obtaining material values, or for satisfying mental
and bodily requirements and enjoyments.
    Rent is the interest of a capital which is fixed to a natural
fund, or which is a capitalised natural fund. The territory,
however, of that nation which has merely capitalised the natural
funds devoted to agriculture, and which does so in that imperfect
manner which is the case in mere agriculture, yields incomparably
less rent than the territory of that nation which combines
agricultural and manufacturing industry on its territory. The
rentiers of such a country live mostly in the same nation which
supplies the manufactured goods. But when the nation which is far
advanced in agriculture and population establishes a manufacturing
industry of its own, it capitalises (as we have already proved in
a former chapter) not merely those powers of nature which are
specially serviceable for manufactures and were hitherto
unemployed, but also the greatest part of the manufacturing powers
serving for agriculture. The increase of rent in such a nation,
therefore, infinitely exceeds the interest of the material capital
required to develop the manufacturing power.

NOTES:

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

Chapter 21

The Manufacturing Power and Commerce

    We have hitherto merely spoken of the relations between
agriculture and manufactures, because they form the fundamental
ingredients of the national production, and because, before
obtaining a clear view of their mutual relations, it is impossible
to comprehend correctly the actual function and position of
commerce. Commerce is also certainly productive (as the school
maintains); but it is so in quite a different manner from
agriculture and manufactures. These latter actually produce goods,
commerce only brings about the exchange of the goods between
agriculturists and manufacturers, between producers and consumers.
From this it follows that commerce must be regulated according to
the interests and wants of agriculture and manufactures, not vice
versâ.
    But the school has exactly reversed this last dictum by
adopting as a favourite expression the saying of old Gourney,
'Laissez faire, laissez passer,' an expression which sounds no less
agreeably to robbers, cheats, and thieves than to the merchant, and
is on that account rather doubtful as a maxim. This perversity of
surrendering the interests of manufactures and agriculture to the
demands of commerce, without reservation, is a natural consequence
of that theory which everywhere merely takes into consideration
present values, but nowhere the powers that produce them, and
regards the whole world as but one indivisibie republic of
merchants. The school does not discern that the merchant may be
accomplishing his purpose (viz. gain of values by exchange) at the
expense of the agriculturists and manufacturers, at the expense of
the nation's productive powers, and indeed of its independence. It
is all the same to him; and according to the character of his
business and occupation, he need not trouble himself much
respecting the manner in which the goods imported or exported by
him act on the morality, the prosperity, or the power of the
nation. He imports poisons as readily as medicines. He enervates
whole nations through opium and spirituous liquors. Whether he by
his importations and smugglings brings occupation and sustenance to
hundreds of thousands, or whether they are thereby reduced to
beggary, does not signify to him as a man of business, if only his
own balance is increased thereby. Then if those who have been
reduced to want bread seek to escape the misery in their fatherland
by emigrating, he can still obtain profit by the business of
arranging their emigration. In the time of war he provides the
enemy with arms and ammunition. He would, if it were possible, sell
fields and meadows to foreign countries, and when he had sold the
last bit of land would place himself on board his ship and export
himself.
    It is therefore evident that the interest of individual
merchants and the interest of the commerce of a whole nation are
widely different things. In this sense Montesquieu has well said,
'If the State imposes restrictions on the individual merchant, it
does so in the interest of commerce, and his trade is nowhere more
restricted than in free and rich nations, and nowhere less so than
in nations governed by despots.'(1*) Commerce emanates from
manufactures and agriculture, and no nation which has not brought
within its own borders both these main branches of production to a
high state of development can attain (in our days) to any
considerable amount of internal and external commerce. In former
times there certainly existed separate cities or leagues of cities
which were enabled by means of foreign manufacturers and foreign
agriculturists to carry on a large exchange trade; but since the
great agricultural manufacturing commercial states have sprung up,
we can no longer think of originating a mere exchange trade such as
the Hanse Towns possessed. In any case such a trade is of so
precarious a character, that it hardly deserves consideration in
comparison with that which is based on the nation's own production.
    The most important objects of internal commerce are articles of
food, salt, fuel, and building material, clothing materials, then
agricultural and manufacturing utensils and implements, and the raw
materials of agricultural and mining production which are necessary
for manufactures. The extent of this internal inter change is
beyond all comparison greater in a nation in which manufacturing
industry has attained a high stage of development than in a merely
agricultural nation. At times in the latter the agriculturist lives
chiefly on his own productions. From want of much demand for
various products and lack of means of transport, he is obliged to
produce for himself all his requirements without regard to what his
land is more specially fitted to produce; from want of means of
exchange he must manufacture himself the greater part of the
manufactured articles which he requires. Fuel, building materials,
provisions, and mineral products can find only a very limited
market because of the absence of improved means of transport, and
hence cannot serve as articles for a distant trade.
    Owing to the limited market and the limited demand for such
products, no inducement for storing them or for the accumulation of
capital exists. Hence the capital devoted by mere agricultural
nations to internal commerce is almost nil; hence all articles of
production, which depend especially on good or bad weather, are
subject to extraordinary fluctuation in prices; hence the danger of
scarcity and famine is therefore greater the more any nation
restricts itself to agriculture.
    The internal commerce of a nation mainly arises in consequence
of and in proportion to the activity of its internal manufactures,
of the improved means of transport called forth by them, and of the
increase of population, and attains an importance which is ten to
twenty fold greater than the internal trade of a merely
agricultural nation, and five to ten fold that of the most
flourishing foreign trade. If anyone will compare the internal
commerce of England with that of Poland or Spain, he will find this
observation confirmed.
    The foreign commerce of agricultural nations of the temperate
zone, so long as it is limited to provisions and raw materials,
cannot attain to importance.
    Firstly, because the exports of the agricultural nation are
directed to a few manufacturing nations, which themselves carry on
agriculture, and which indeed, because of their manufactures and
their extended commerce, carry it on on a much more perfect system
than the mere agricultural nation; that export trade is therefore
neither certain nor uniform. The trade in mere products is always
a matter of extraordinary speculation, whose benefits fall mostly
to the speculating merchants, but not to the agriculturists or to
the productive power of the agricultural nation.
    Secondly, because the exchange of agricultural products for
foreign manufactured goods is liable to be greatly interrupted by
the commercial restrictions of foreign states and by wars.
    Thirdly, because the export of mere products chiefly benefits
countries which are situated near sea coasts and the banks of
navigable rivers, and does not benefit the inland territory, which
constitutes the greater part of the territory of the agricultural
nation.
    Fourthly and finally, because the foreign manufacturing nation
may find it to its interest to procure its means of subsistence and
raw materials from other countries and newly formed colonies.
    Thus the export of German wool to England is diminished by
importations into England from Australia; the exports of French and
German wines to England by importations from Spain, Portugal,
Sicily, the Spanish and Portuguese islands, and from the Cape; the
exports of Prussian timber by importations from Canada.
    In fact, preparations have already been made to supply England
with cotton chiefly from the East Indies. If the English succeed in
restoring the old commercial route, if the new State of Texas
becomes strong, if civilisation in Syria and Egypt, in Mexico and
the South American states progresses, the cotton planters of the
United States will also begin to perceive that their own internal
market will afford them the safest, most uniform, and constant
demand.
    In temperate climates, by far the largest part of a nation's
foreign commerce originates in its internal manufactures, and can
only be maintained and augmented by means of its own manufacturing
power.
    Those nations only which produce all kinds of manufactured
goods at the cheapest prices, can have commercial connections with
the people of all climates and of every degree of civilisation; can
supply all requirements, or if they cease, create new ones; can
take in exchange every kind of raw materials and means of
subsistence. Such nations only can freight ships with a variety of
objects, such as are required by a distant market which has no
internal manufactured goods of its own. Only when the export
freights themselves suffice to indemnify the voyage, can ships be
loaded with less valuable return freights.
    The most important articles of importation of the nations of
the temperate zone consist in the products of tropical climates, in
sugar, coffee, cotton, tobacco, tea, dye stuffs, cacao, spices, and
generally in those articles which are known under the name of
colonial produce. By far the greatest part of these products is
paid for with manufactured goods. In this interchange chiefly
consists the cause of the progress of industry in manufacturing
Countries of the temperate zone, and of the progress of
civilisation and production in the countries of the torrid zone.
This constitutes the division of labour, and combination of the
powers of production to their greatest extent, as these never
existed in ancient times, and as they first originated from the
Dutch and English.
    Before the discovery of the route round the Cape, the East
still far surpassed Europe in manufactures. Besides the precious
metals and small quantities of cloth, linen, arms, iron goods, and
some fabrics of luxury, European articles were but little used
there. The transport by land rendered both inward and outward
conveyance expensive. The export of ordinary agricultural products
and common manufactured goods, even if they had been produced in
excess, in exchange for the silks and cotton stuffs, sugar, and
spices, of the East, could not be hoped for. Whatever we may,
therefore, read of the importance of Oriental commerce in those
times, must always be understood relatively; it was important only
for that time, but unimportant compared with what it is now.
    The trade in the products of the torrid zone became more
important to Europe through the acquisition of larger quantities of
the precious metals in the interior and from America, and through
the direct intercourse with the East by the route round the Cape.
It could not, however, attain to universal importance as long as
the East produced more manufactured goods than she required.
    This commerce attained its present importance through the
colonisation of Europeans in the East and West Indies, and in North
and South America through the transplantation of the sugar cane, of
the coffee tree, of cotton, rice, indigo, &c., through the
transportation of negroes as slaves to America and the West Indies,
then through the successful competition of the European with the
East Indian manufacturers, and especially through the extension of
the Dutch and English sovereignty in foreign parts of the world,
while these nations, in contrast to the Spaniards and Portuguese,
sought and found their advantage more in the exchange of
manufactured goods for colonial goods, than in extortion.
    This commerce at present employs the most important part of the
large shipping trade and of the commercial and manufacturing
capital of Europe which is employed in foreign commerce; and all
the hundreds of millions in value of such products which are
transported annually from the countries of the torrid zone to those
of the temperate zone are, with but little exception, paid for in
manufactured goods.
    The exchange of colonial products for manufactured goods is of
manifold use to the productive powers of the countries of the
temperate zone. These articles serve either, as e.g. sugar, coffee,
tea, tobacco, partly as stimulants to agricultural and
manufacturing production, partly as actual means of nourishment;
the production of the manufactured goods which are required to pay
for the colonial products, occupies a larger number of
manufacturers; manufactories and manufacturing business can be
conducted on a much larger scale, and consequently more profitably;
this commerce, again, employs a larger number of ships, of seamen,
and merchants; and through the manifold increase of the population
thus occasioned, the demand for native agricultural products is
again very greatly increased.
    In consequence of the reciprocal operation which goes on
between manufacturing production and the productions of the torrid
zone, the English consume on an average two to three times more
colonial produce than the French, three to four times more than the
Germans, five to ten times more than the Poles.
    Moreover, the further extension of which colonial production is
still capable, may be recognised from a superficial calculation of
the area which is required for the production of those colonial
goods which are at present brought into commerce.
    If we take the present consumption of cotton at ten million
centners, and the average produce of an acre (40,000 square feet)
only at eight centners, this production requires not more than 1
1/4 million acres of land. If we estimate the quantity of sugar
brought into commerce at 14 million centners, and the produce of an
acre at 10 centners, this total production requires merely 1 1/2
million acres.
    If we assume for the remaining articles (coffee, rice, indigo,
spices, &c.) as much as for these two main articles, all the
colonial goods at present brought into commerce require no more
than seven to eight million acres, an area which is probably not
the fiftieth part of the surface of the earth which is suitable for
the culture of such articles.
    The English in the East Indies, the French in the Antilles, the
Dutch in Java and Sumatra, have recently afforded actual proof of
the possibility of increasing these productions in an extraordinary
manner. has increased her imports of cotton from England,
especially, the East Indies fourfold, and the English papers
confidently maintain that Great Britain (especially if she succeeds
in getting possession of the old commercial route to the East
Indies) could procure all her requirements of colonial products in
the course of a few years from India. This anticipation will not
appear exaggerated if we take into consideration the immense extent
of the English East Indian territory, its fertility, and the cheap
wages paid in those countries.
    While England in this manner gains advantage from the East
Indies, the progress in cultivation of the Dutch in the islands
will increase; in consequence of the dissolution of the Turkish
Empire a great portion of Africa and the west and middle of Asia
will become productive; the Texans will extend North American
cultivation over the whole of Mexico; orderly governments will
settle down in South America and promote the yield of the immense
productive capacity of these tropical countries.
    If thus the countries of the torrid zone produce enormously
greater quantities of colonial goods than heretofore, they will
supply themselves with the means of taking from the countries of
the temperate zone much larger quantities of manufactured goods;
and from the larger sale of manufactured goods the manufacturers
will be enabled to consume larger quantities of colonial goods. In
consequence of this increased production, and increase of the means
of exchange, the commercial intercourse between the agriculturists
of the torrid zone and the manufacturers of the temperate zone,
i.e. the great commerce of the world, will increase in future in a
far larger proportion than it has done in the course of the last
century.
    This present increase, and that yet to be anticipated, of the
now great commerce of the world, has its origin partly in the great
progress of the manufacturing powers of production, partly in the
perfection of the means of transport by water and by land, partly
in political events and developments.
    Through machinery and new inventions the imperfect
manufacturing industry of the East has been destroyed for the
benefit of the European manufacturing power, and the latter enabled
to supply the countries of the torrid zone with large quantities of
fabrics at the cheapest prices; and thus to give them motives for
augmenting their own powers of labour and production.
    In consequence of the great improvements in means of transport,
the countries of the torrid zone have been brought infinitely
nearer to the countries of the temperate zone; their mutual
commercial intercourse has infinitely increased through diminution
of risk, of time employed and of freights, and through greater
regularity; and it will increase infinitely more as soon as steam
navigation has become general, and the systems of railways extend
themselves to the interior of Asia, Africa, and South America.
    Through the secession of South America from Spain and Portugal,
and through the dissolution of the Turkish Empire, a mass of the
most fertile territories of the earth have been liberated, which
now await with longing desire for the civilised nations of the
earth to lead them in peaceful concord along the path of the
security of law and order, of civilisation and prosperity; and
which require nothing more than that manufactured goods should be
brought to them, and their own productions taken in exchange.
    One may see that there is sufficient room here for all
countries of Europe and North America which are fitted to develop
a manufacturing power of their own, to bring their manufacturing
production into full activity, to augment their own consumption of
the products of tropical countries, and to extend in the same
proportion their direct commercial intercourse with the latter.


NOTES:

1. Esprit des Lois, Book xx. chap. xii.

Chapter 22

The manufacturing Power and Navigation, Naval Power and
Colonization

    Manufactures as the basis of a large home and foreign commerce
are also the fundamental conditions of the existence of any
considerable mercantile marine. Since the most important function
of inland transport consists in supplying manufacturers with fuel
and building materials, raw materials and means of subsistence, the
coast and river navigation cannot well prosper in a merely
agricultural State. The coast navigation, however, is the school
and the depôt of sailors, ships' captains, and of shipbuilding, and
hence in merely agricultural countries the main foundation for any
large maritime navigation is lacking.
    International commerce consists principally (as we have shown
in the previous chapter) in the interchange of manufactured goods
for raw materials and natural products, and especially for the
products of tropical countries. But the agricultural countries of
the temperate zone have merely to offer to the countries of the
torrid zone what they themselves produce, or what they cannot make
use of, namely, raw materials and articles of food; hence direct
commercial intercourse between them and the countries of the torrid
zone, and the ocean transport which arises from it, is not to be
expected. Their consumption of colonial produce must be limited to
those quantities for which they can pay by the sale of agricultural
products and raw materials to the manufacturing and commercial
nations; they must consequently procure these articles second-hand.
In the commercial intercourse between an agricultural nation and a
manufacturing commercial nation, however, the greatest part of the
sea transport must fall to the latter, even if it is not in its
power by means of navigation laws to secure the lion's share to
itself.
    Besides internal and international commerce, sea fisheries
occupy a considerable number of ships; but again from this branch
of industry, as a rule, nothing or very little falls to the
agricultural nation; as there cannot exist in it much demand for
the produce of the sea, and the manufacturing commercial nations
are, out of regard to the maintenance of their naval power,
accustomed to protect their home market exclusively for their own
sea fisheries.
    The fleet recruits its sailors and pilots from the private
mercantile marine, and experience has as yet always taught that
able sailors cannot be quickly drilled like land troops, but must
be trained up by serving in the coasting and international
navigation and in sea fisheries. The naval power of nations will
therefore always be on the same footing with these branches of
maritime industry, it will consequently in the case of the mere
agricultural nation be almost nil.
    The highest means of development of the manufacturing power, of
the internal and external commerce proceeding from it, of any
considerable coast and sea navigation, of extensive sea fisheries,
and consequently of a respectable naval power, are colonies.
    The mother nation supplies the colonies with manufactured
goods, and obtains in return their surplus produce of agricultural
products and raw materials; this interchange gives activity to its
manufactures, augments thereby its population and the demand for
its internal agricultural products, and enlarges its mercantile
marine and naval power. The superior power of the mother country in
population, capital, and enterprising spirit, obtains through
colonisation an advantageous outlet, which is again made good with
interest by the fact that a considerable portion of those who have
enriched themselves in the colony bring back the capital which they
have acquired there, and pour it into the lap of the mother nation,
or expend their income in it.
    Agricultural nations, which already need the means of forming
colonies, also do not possess the power of utilising and
maintaining them. What the colonies require, cannot be offered by
them, and what they can offer the colony itself possesses.
    The exchange of manufactured goods for natural products is the
fundamental condition on which the position of the present colonies
continues. On that account the United States of North America
seceded from England as soon as they felt the necessity and the
power of manufacturing for themselves, of carrying on for
themselves navigation and commerce with the countries of the torrid
zone; on that account Canada will also secede after she has reached
the same point, on that account independent agricultural
manufacturing commercial States will also arise in the countries of
temperate climate in Australia in the course of time.
    But this exchange between the countries of the temperate zone
and the countries of the torrid zone is based upon natural causes,
and will be so for all time. Hence India has given up her
manufacturing power with her independence to England; hence all
Asiatic countries of the torrid zone will pass gradually under the
dominion of the manufacturing commercial nations of the temperate
zone; hence the islands of the torrid zone which are at present
dependent colonies can hardly ever liberate themselves from that
condition; and the States of South America will always remain
dependent to a certain degree on the manufacturing commercial
nations.
    England owes her immense colonial possessions solely to her
surpassing manufacturing power. If the other European nations wish
also to partake of the profitable business of cultivating waste
territories and civilising barbarous nations, or nations once
civilised but which are again sunk in barbarism, they must commence
with the development of their own internal manufacturing powers, of
their mercantile marine, and of their naval power. And should they
be hindered in these endeavours by England's manufacturing,
commercial, and naval supremacy, in the union of their powers lies
the only means of reducing such unreasonable pretensions to
reasonable ones.

Chapter 23

The Manufacturing Power and the Instrument of Circulation

    If the experience of the last twenty-five years has confirmed,
as being partly correct, the principles which have been set up by
the prevailing theory in contradiction to the ideas of the
so-called 'mercantile' system on the circulation of the precious
metals and on the balance of trade, it has, on the other hand,
brought to light important weak points in that theory respecting
those subjects.
    Experience has proved repeatedly (and especially in Russia and
North America) that in agricultural nations, whose manufacturing
market is exposed to the free competition of a nation which has
attained manufacturing supremacy, the value of the importation of
manufactured goods exceeds frequently to an enormous extent the
value of the agricultural products which are exported, and that
thereby at times suddenly an extraordinary exportation of precious
metals is occasioned, whereby the economy of the agricultural
nation, especially if its internal interchange is chiefly based on
paper circulation, falls into confusion, and national calamities
are the result.
    The popular theory maintains that if we provide ourselves with
the precious metals in the same manner as every other article, it
is in the main indifferent whether large or small quantities of
precious metals are in circulation, as it merely depends on the
relation of the price of any article in exchange whether that
article shall be cheap or dear; a derangement in the rate of
exchange acts simply like a premium on a larger exportation of
goods from that country, in favour of which it oscillates from time
to time: consequently the stock of metallic money and the balance
between the imports and exports, as well as all the other
economical circumstances of the nation, would regulate themselves
in the safest and best manner by the operation of the natural
course of things.
    This argument is perfectly correct as respects the internal
interchange of a nation; it is demonstrated in the commercial
intercourse between town and town, between town and country
districts, between province and province, as in the union between
State and State. Any political economist would be deserving of pity
who believed that the balance of the mutual imports and exports
between the various states of the American Union or the German
Zollverein, or between England, Scotland, and Ireland, can be
regulated better through State regulations and laws than through
free interchange. On the hypothesis that a similar union existed
between the various states and nations of the earth, the argument
of the theory of trusting to the natural course of things would be
quite consistent. Nothing, however, is more contrary to experience
than to suppose under the existing conditions of the world that in
international exchange things act with similar effect.
    The imports and exports of independent nations are regulated
and controlled at present not by what the popular theory calls the
natural course of things, but mostly by the commercial policy and
the power of the nation, by the influence of these on the
conditions of the world and on foreign countries and peoples, by
colonial possessions and internal credit establishments, or by war
and peace. Here, accordingly, all conditions shape themselves in an
entirely different manner than between societies which are united
by political, legal, and administrative bonds in a state of
unbroken peace and of perfect unity of interests.
    Let us take into consideration as an example the conditions
between England and North America. If England from time to time
throws large masses of manufactured goods on to the North American
market; if the Bank of England stimulates or restricts, in an
extraordinary degree, the exports to North America and the credit
granted to her by its raising or lowering its discount rates; if,
in addition to and as a consequence of this extraordinary glut of
the American market for manufactured goods, it happens that the
English manufactured goods can be obtained cheaper in North America
than in England, nay, sometimes much below the cost price of
production; if thus North America gets into a state of perpetual
indebtedness and of an unfavourable condition of exchange towards
England, yet would this disorganised state of things readily
rectify itself under a state of perfectly unrestricted exchange
between the two countries. North America produces tobacco, timber,
corn, and all sorts of means of subsistence very much cheaper than
England does. The more English manufactured goods go to North
America, the greater are the means and inducements to the American
planter to produce commodities of value sufficient to exchange for
them; the more credit is given to him the greater is the impulse to
procure for himself the means of discharging his liabilities; the
more the rate of exchange on England is to the disadvantage of
North America, the greater is the inducement to export American
agricultural products, and hence the more successful will be the
competition of the American agriculturist in the English produce
market.
    In consequence of these exportations the adverse rate of
exchange would speedily rectify itself; indeed, it could not even
reach any very unfavourable point, because the certain anticipation
in North America that the indebtedness which had been contracted
through the large importation of manufactured goods in the course
of the present year, would equalise itself through the surplus
production and increased exports of the coming year, would be
followed by easier accommodation in the money market and in credit.
    Such would be the state of things if the interchange between
the English manufacturer and the American agriculturist were as
little restricted as the interchange between the English
manufacturer and the Irish agriculturist is. But they are and must
be different: if England imposes a duty on American tobacco of from
five hundred to one thousand per cent; if she renders the
importation of American timber impossible by her tariffs, and
admits the American means of subsistence only in the event of
famine, for at present the American agricultural production cannot
balance itself with the American consumption of English
manufactured goods, nor can the debt incurred for those goods be
liquidated by agricultural products; at present the American
exports to England are limited by narrow bounds, while the English
exports to North America are practically unlimited; the rate of
exchange between both countries under such circumstances cannot
equalise itself, and the indebtedness of America towards England
must be discharged by exports of bullion to the latter country.
    These exports of bullion, however, as they undermine the
American system of paper circulation, necessarily lead to the ruin
of the credit of the American banks, and therewith to general
revolutions in the prices of landed property and of the goods in
circulation, and especially to those general confusions of prices
and credit which derange and overturn the economy of the nation,
and with which, we may observe, that the North American free States
are visited whenever they have found them selves unable to restore
a balance between their imports and their exports by S tate tariff
regulations.
    It cannot afford any great consolation to the North American
that in consequence of bankruptcies and diminished consumption, the
imports and exports between both countries are at a later period
restored to a tolerable proportion to one another. For the
destruction and convulsions of commerce and in credit, as well as
the reduction in consumption, are attended with disadvantages to
the welfare and happiness of individuals and to public order, from
which one cannot very quickly recover and the frequent repetition
of which must necessarily leave permanently, ruinous consequences.
    Still less can it afford any consolation to the North
Americans, if the popular theory maintains that it is an
indifferent matter whether large or small quantities of precious
metals are in circulation; that we exchange products merely for
products; whether this exchange is made by means of large or small
quantities of metallic circulation is of no importance to
individuals. To the producer or proprietor it certainly may be of
no consequence whether the object of his production or of his
possession is worth 100 centimes or 100 francs, provided always
that he can procure with the 100 centimes as large a quantity of
objects of necessity and of enjoyment as he can with the 100
francs. But low or high prices are thus a matter of indifference
only in case they remain on the same footing uninterruptedly for a
long period of time.
    If, however, they fluctuate frequently and violently,
disarrangements arise which throw the economy of every individual,
as well as that of society, into confusion. Whoever has purchased
raw materials at high prices, cannot under low prices, by the sale
of his manufactured article, realise again that sum in precious
metals which his raw materials have cost him. Whoever has bought at
high prices landed property and has left a portion of the purchase
money as a mortgage debt upon it, loses his ability of payment and
his property; because, under diminished prices, probably the value
of the entire property will scarcely equal the amount of the
mortgage. Whoever has taken leases of property under a state of
high prices, finds himself ruined by the decrease in prices, or at
least unable to fulfil the covenants of his leases. The greater the
rising and falling of prices, and the more frequently that
fluctuations occur, the more ruinous is their effect on the
economical conditions of the nation and especially on credit. But
nowhere are these disadvantageous effects of the unusual influx or
efflux of precious metals seen in a more glaring light than in
those countries which are entirely dependent on foreign nations in
respect of their manufacturing requirements and the sale of their
own products, and whose commercial transactions are chiefly based
on paper circulation.
    It is acknowledged that the quantity of bank notes which a
country is able to put into and to maintain in circulation, is
dependent on the largeness of the amount of metallic money which it
possesses. Every bank will endeavour to extend or limit its paper
circulation and its business in proportion to the amount of
precious metals lying in its vaults. If the increase in its own
money capital or in deposits is large, it will give more credit;
and through this credit, increase the credit given by its debtors,
and by so doing raise the amount of consumption and prices;
especially those of landed property. If, on the contrary, an efflux
of precious metals is perceptible, such a bank will limit its
credit, and thereby occasion restriction of credit and consumption
by its debtors, and by the debtors of its debtors, and so on to
those who by credit are engaged in bringing into consumption the
imported manufactured goods. In such countries, therefore, the
whole system of credit, the market for goods and products, and
especially the money value of all landed property, is thrown into
confusion by any unusual drain of metallic money.
    The cause of the latest as well as of former American
commercial crises, has been alleged to exist in the American
banking and paper system. The truth is that the banks have helped
to bring about these crises in the manner above named, but the main
cause of their occurrence is that since the introduction of the '
compromise, bill the value of the English manufactured goods has
far surpassed the value of the exported American products, and that
thereby the United States have become indebted to the English to
the amount of several hundreds of millions for which they could not
pay in products. The proof that these crises are occasioned by
disproportionate importation is, that they have always taken place
whenever (in consequence of peace having set in or of a reduction
being made in the American customs duties) importation of
manufactured goods into the United States has been unusually large,
and that they have never occurred as long as the imports of goods
have been prevented by customs duties on imports from exceeding the
value of the exports of produce.
    The blame for these crises has further been laid on the large
capital which has been expended in the United States in the
construction of canals and railways, and which has mostly been
procured from England by means of loans. The truth is that these in
loans have merely assisted in delaying the crises for several
years, and increasing it when it arose; but these very loans
themselves have evidently been incurred through the inequality
which had arisen between the imports and exports, and but for that
inequality would not have been made and could not have been made.
    While North America became indebted to the English for large
sums through the large importation of manufactured goods which
could not be paid for in produce, but only in the precious metals,
the English were enabled, and in consequence of the unequal rates
of exchange and interest found it to their advantage, to have this
balance paid for in American railway, canal and bank stocks, or in
American State paper.
    The more the import of manufactured goods into America
surpassed her exports in produce, and the greater that the demand
for such paper in England became, the more were the North Americans
incited to embark in public enterprises; and the more that capital
was invested in such enterprises in North America, the greater was
the demand for English manufactured goods, and at the same time the
disproportion between the American imports and exports.
    If on the one hand the importation of English manufactured
goods into North America was promoted by the credit given by the
American banks, the Bank of England on the other side through the
credit facilities which it gave and by its low rates of discount
operated in the same direction. It has been proved by an official
account of the English Committee on Trade and Manufactures, that
the Bank of England lessened (in consequence of these discounts)
the cash in its possession from eight million pounds to two
millions. It thereby on the one hand weakened the effect of the
American protective system to the advantage of the English
competition with the American manufactories; on the other hand it
thus offered facilities for, and stimulated, the placing of
American stocks and State paper in England. For as long as money
could be got in England at three per cent. the American contractors
and loan procurers who offered six per cent interest had no lack of
buyers of their paper in England.
    These conditions of exchange afforded the appearance of much
prosperity, although under them the American manufactories were
being gradually crushed. For the American agriculturists sold a
great part of that surplus produce which under free trade they
would have sold to England, or which under a moderate system of
protection of their own manufactories they would have sold to the
working men employed therein, to those workmen who were employed in
public works and who were paid with English capital. Such an
unnatural state of things could not, however, last long in the face
of opposing and divided national interests, and the break up of it
was the more disadvantageous to North America the longer it was
repressed. As a creditor can keep the debtor on his legs for a long
time by renewals of credit, but the bankruptcy of the debtor must
become so much the greater the longer he is enabled to prolong a
course of ruinous trading by means of continually augmented credit
from the creditor, so was it also in this case.
    The cause of the bankruptcy in America was the unusual export
of bullion which took place from England to foreign countries in
consequence of insufficient crops and in consequence of the
Continental protective systems. We say in consequence of the
Continental protective systems, because the English -- if the
European Continental markets had remained open to them -- would
have covered their extraordinary importations of corn from the
Continent chiefly by means of extraordinary export of English
manufactured goods to the Continent, and because the English
bullion -- even had it flown over for a time to the continent --
would again have found its way back to England in a short time in
consequence of the augmented export of manufactured goods. In such
a case the Continental manufactories would undoubtedly have fallen
a sacrifice to the English-American commercial operations.
    As matters stood, however, the Bank of England could only help
itself by limiting its credit and increasing its rate of discount.
In consequence of this measure not only the demand for more
American stocks and State paper fell off in England, but also such
paper as was already in circulation now forced itself more on the
market. The United States were thereby not merely deprived of the
means of covering their current deficit by the further sale of
paper, but payment of the whole debt they had contracted in the
course of many years with England by means of their sales of stocks
and State paper became liable to be demanded in money. It now
appeared that the cash circulation in America really belonged to
the English. It appeared yet further that the English could dispose
of that ready money on whose possession the whole bank and paper
system of the United States was based, according to their own
inclination. If, however, they disposed of it, the American bank
and paper system would tumble down like a house built of cards, and
with it the foundation would fall whereon rested the prices of
landed property, consequently the economical means of existence of
a great number of private persons.
    The American banks tried to avoid their fall by suspending
specie payments, and indeed this was the only means of at least
modifying it; on the one hand they tried by this means to gain time
so as to decrease the debt of the United States through the yield
of the new cotton crops and to pay it off by degrees in this
manner; on the other hand they hoped by means of the reduction of
credit occasioned by the suspension to lessen the imports of
English manufactured goods and to equalise them in future with
their own country's exports.
    How far the exportation of cotton can afford the means of
balancing the importation of manufactured goods is, however, very
doubtful. For more than twenty years the production of this article
has constantly outstripped the consumption, so that with the
increased production the prices have fallen more and more. Hence it
happens that, on the one hand, the cotton manufacturers are exposed
to severe competition with linen manufactures, perfected as these
are by greatly improved machinery; while the cotton planters, on
the other hand, are exposed to it from the planters of Texas,
Egypt, Brazil, and the East Indies.
    It must, in any case, be borne in mind that the exports of
cotton of North America benefit those States to the least extent
which consume most of the English manufactured goods.
    In these States, namely, those which derive from the
cultivation of corn and from cattle-breeding the chief means of
procuring manufactured goods, a crisis of another kind now
manifests itself. In consequence of the large importation of
English manufactured goods the American manufactures were
depressed. All increase in population and capital was thereby
forced to the new settlements in the west. Every new settlement
increases at the commencement the demand for agricultural products,
but yields after the lapse of a few years considerable surplus of
them. This has already taken place in those settlements. The
Western States will therefore pour, in the course of the next few
years, into the Eastern States considerable surplus produce, by the
newly constructed canals and railways; while in the Eastern States,
in consequence of their manufactories being depressed by foreign
competition, the number of consumers has decreased and must
continually decrease. From this, depreciation in the value of
produce and of land must necessarily result, and if the Union does
not soon prepare to stop up the sources from which the
above-described money crises emanate, a general bankruptcy of the
agriculturists in the corn-producing States is unavoidable.
    The commercial conditions between England and North America
which we have above explained, therefore teach:
    (1) That a nation which is far behind the English in capital
and manufacturing power cannot permit the English to obtain a
predominating competition on its manufacturing market without
becoming permanently indebted to them; without being rendered
dependent on their money institutions, and drawn into the whirlpool
of their agricultural, industrial, and commercial crises.
    (2) That the English national bank is able by its operations to
depress the prices of English manufactured goods in the American
markets which are placed under its influence -- to the advantage of
the English and to the disadvantage of the American manufactories.
    (3) That the English national bank could effect by its
operations the consumption by the North Americans, for a series of
years, of a much larger value of imported goods than they would be
able to repay by their exportation of products, and that the
Americans had to cover their deficit during several years by the
exportation of stocks and State paper.
    (4) That under such circumstances the Americans carried on
their internal interchange and their bank and paper-money system
with ready money, which the English bank was able to draw to itself
for the most part by its own operations whenever it felt inclined
so to do.
    (5) That the fluctuations in the money market under all
circumstances act on the economy of the nations in a highly
disadvantageous manner, especially in countries where an extensive
bank and paper-money system is based on the possession of certain
quantities of the precious metals.
    (6) That the fluctuations in the money market and the crises
which result therefrom can only be prevented, and that a solid
banking system can only be founded and maintained, if the imports
of the country are placed on a footing of equality to the exports.
    (7) That this equality can less easily be maintained in
proportion as foreign manufactured goods can successfully compete
in the home manufacturing markets, and in proportion as the
exportation of native agricultural products is limited by foreign
commercial restrictions; finally, that this equality can less
easily be disturbed in proportion as the nation is independent of
foreign nations for its supply of manufactured goods, and for the
disposal of its own produce.
    These doctrines are also confirmed by the experience of Russia.
We may remember to what convulsions public credit in the Russian
Empire was subjected as long as the market there was open to the
overwhelming consignments of English manufactured goods, and that
since the introduction of the tariff of 1821 no similar convulsion
has occurred in Russia.
    The popular theory has evidently fallen into the opposite
extreme to the errors of the so-called mercantile system. It would
be of course false if we maintained that the wealth of nations
consisted merely in precious metals; that a nation can only become
wealthy if it exports more goods than it imports, and if hence the
balance is discharged by the importation of precious metals. But it
is also erroneous if the popular theory maintains, under the
existing conditions of the world, that it does not signify how much
or how little precious metals circulate in a nation; that the fear
of possessing too little of the precious metals is a frivolous one,
that we ought rather to further their exportation than favour their
importation, &c. &c. This manner of reasoning would only be correct
in case we could consider all nations and countries as united under
one and the same system of law; if no commercial restrictions of
any kind against the exportation of our products existed in those
nations for whose manufactured goods we can only repay with the
productions of our agriculture; if the changes wrought by war and
peace caused no fluctuations in production and consumption, in
prices, and on the money market; if the great credit institutions
do not seek to extend their influence over other nations for the
special interest of the nation to which they belong. But as long as
separate national interests exist, a wise State policy will advise
every great nation to guard itself by its commercial system against
extraordinary money fluctuations and revolutions in prices which
overturn its whole internal economy, and it will attain this
purpose only by placing its internal manufacturing production in a
position of proper equality with its internal agricultural
production and its imports with its exports.
    The prevailing theory has evidently not sufficiently
discriminated between the mere possession of the precious metals
and the power of disposition of the precious metals in
international interchange. Even in private exchange, the necessity
of this distinction is clearly evident. No one wishes to keep money
by him, everyone tries to remove it from the house as soon as
possible; but everybody at the same time seeks to be able to
dispose at any time of the sums which he requires. The indifference
in regard to the actual possession of ready money is manifested
everywhere in proportion to wealth. The richer the individual is,
the less he cares about the actual possession of ready money if
only he is able at any hour to dispose of the ready cash lying in
the safes of other individuals; the poorer, however, the individual
is, and the smaller his power of disposing of the ready money lying
in other people's hands, the more anxiously must he take care to
have in readiness what is required. The same is the case with
nations which are rich in industry or poor in industry. If England
cares but little as a rule about how great or how small a quantity
of gold or silver bars are exported out of the country, she is
perfectly well aware that an extraordinary export of precious
metals occasions on the one hand a rise in the value of money and
in discount rates, on the other hand a fall in the prices of
fabrics, and that she can regain through larger exportation of
fabrics or through realisation of foreign stocks and State paper
speedy possession of the ready money required for her trade.
England resembles the rich banker who, without having a thaler in
his pocket, can draw for any sum he pleases on neighbouring or more
distant business connections. If, however, in the case of merely
agricultural nations extraordinary exports of coin take place, they
are not in the same favourable position, because their means of
procuring the ready money they require are very limited, not merely
on account of the small value in exchange of their products and
agricultural values, but also on account of the hindrances which
foreign laws put in the way of their exportation. They resemble the
poor man who can draw no bills on his business friends, but who is
drawn upon if the rich man gets into any difficulty; who can,
therefore, not even call what is actually in his hands, his own.
    A nation obtains the power of disposition of the amount of
ready money which is always required for its internal trade, mainly
through the possession or the production of those goods and values
whose facility of exchange approaches most nearly to that of the
precious metals.
    The diversity of this property of the facility of exchange in
respect to the various articles of commerce and of property, has
been as little taken into consideration by the popular school of
economists in judging of international commerce, as the power of
disposition of the precious metals. If we consider in this respect
the various articles of value existing in private interchange, we
perceive that many of them are fixed in such a way that their value
is exchangeable only on the spot where they are, and that even
there their exchange is attended with great costs and difficulties.
To that class belong more than three-fourths of all national
property-namely, immovable properties and fixed plant and
instruments. However large the landed property of an individual may
be, he cannot send his fields and meadows to town in order to
obtain money or goods for them. He can, indeed, raise mortgages on
such property, but he must first find a lender on them; and the
further from his estate that such an individual resides, the
smaller will be the probability of the borrower's requirements
being satisfied.
    Next after property thus fixed to the locality, the greatest
part of agricultural products (excepting colonial produce and a few
less valuable articles) have in regard to international intercourse
the least facility for exchange. The greatest part of these values,
as e.g. building materials and wood for fuel, bread stuffs, &c.,
fruit, and cattle, can only be sold within a reasonable distance of
the place where they are produced, and if a great surplus of them
exists they have to be warehoused in order to become realisable. So
far as such products can be exported to foreign countries their
sale again is limited to certain manufacturing and commercial
nations, and in these also their sale is generally limited by
duties on importation and is affected by the larger or smaller
produce of the purchasing nation's own harvests. The inland
territories of North America might be completely overstocked with
cattle and products, but it would not be possible for them to
procure through exportation of this excess considerable amounts of
the precious metals from South America, from England, or from the
European continent. The valuable manufactured goods of common use,
on the other hand, possess incomparably greater facilities for
exchange. They find at ordinary times a sale in all open markets of
the world; and at extraordinary crises they also find a sale (at
lower prices) in those markets whose protective tariffs are
calculated to operate adversely merely in ordinary times. The power
of exchange of these articles clearly approaches most nearly to
that of the precious metals, and the experience of England shows
that if in consequence of deficient harvests money crises occur,
the increased exportation of fabrics, and of foreign stocks and
State paper, quickly rectifies the balance. The latter, the foreign
stocks and State paper, which are evidently the results of former
favourable balances of exchange caused by exportations of fabrics,
constitute in the hands of the nation which is rich in
manufacturing industry so many bills which can be drawn on the
agricultural nation, which at the time of an extraordinary demand
for the precious metals are indeed drawn with loss to the
individual owner of them (like the manufactured goods at the time
of money crises), but, nevertheless, with immense advantage to the
maintenance of the economical conditions of that nation which is
rich in manufacturing industry.
    However much the doctrine of the balance of trade may have been
scorned by the popular school, observations like those above
described encourage us nevertheless to express the opinion that
between large and independent nations something of the nature of a
balance of trade must exist; that it is dangerous for great nations
to remain for a long period at very considerable disadvantage in
respect of this balance, and that a considerable and lasting efflux
of the precious metals must always be followed as a consequence by
important revolutions in the system of credit and in the condition
of prices in the interior of the nation. We are far from wishing in
these remarks to revive the doctrine of the balance of trade as it
existed under the so-called 'mercantile system,' and to maintain
that the nation ought to impose obstacles in the way of the
exportation of precious metals, or that we must keep a specially
exact account with each individual nation, or that in the commerce
between great nations a few millions difference between the imports
and exports is of great moment. What we deny is merely this: that
a great and independent nation, as Adam Smith maintains at the
conclusion of his chapter devoted to this subject,(1*) 'may
continually import every year considerably larger values in
products and fabrics than it exports; that the quantities of
precious metals existing in such a nation may decrease considerably
from year to year and be replaced by paper circulation in the
interior; moreover, that such a nation may allow its indebtedness
towards another nation continually to increase and expand, and at
the same time nevertheless make progress from year to year in
prosperity.
    This opinion, expressed by Adam Smith and maintained since that
time by his school, is alone that which we here characterise as one
that has been contradicted a hundred times by experience, as one
that is contrary in the very nature of things to common sense, in
one word (to retort upon Adam Smith his own energetic expression)
as 'an absurdity.'
    It must be well understood that we are not speaking here of
countries which carry on the production of the precious metals
themselves at a profit, from which therefore the export of these
articles has quite the character of an export of manufactured
goods. We are also not speaking of that difference in the balance
of trade which must necessarily arise if the nation rates its
exports and imports at those prices which they have in their own
seaport towns. That in such a case the amount of imports of every
nation must exceed its exports by the total amount of the nation's
own commercial profits (a circumstance which speaks to its
advantage rather than to its disadvantage), is clear and
indisputable. Still less do we mean to deny the extraordinary cases
where the greater exportation rather denotes loss of value than
gain, as e.g. if property is lost by shipwreck. The popular school
has made clever use of all those delusions arising from a
shopkeeper-like calculation and comparison of the value of the
exchanges arising from the exports and imports, in order to make us
disbelieve in the disadvantages which result from a real and
enormous disproportion between the exports and imports of any great
and independent nation, even though such disproportion be not
permanent, which shows itself in such immense sums as for instance
in the case of France in 1786 and 1789, in that of Russia in 1820
and 1821, and in that of the United States of North America after
the 'Compromise Bill.'
    Finally, we desire to speak (and this must be specially noted)
not of colonies, not of dependent countries, not of small states or
of single independent towns, but of entire, great, independent
nations, which possess a commercial system of their own, a national
system of agriculture and industry, a national system of money and
credit.
    It evidently consists with the character of colonies that their
exports can surpass their imports considerably and continuously,
without thereby involving any conclusion as to the decrease or
increase of their prosperity. The colony always prospers in the
proportion in which the total amount of its exports and imports
increases year by year. If its export of colonial produce exceeds
its imports of manufactured goods considerably and lastingly the
main cause of this may be that the landed proprietors of the colony
live in the mother country, and that they receive their income in
the shape of colonial goods, in produce, or in the money which has
been obtained for them. If, however, the exports of fabrics to the
colony exceed the imports of colonial goods considerably, this may
be chiefly due to the fact that by emigrations or loans from year
to year large masses of capital go to the colony. This latter
circumstance is, of course, of the utmost advantage to the
prosperity of the colony. It can continue for centuries and yet
commercial crises under such circumstances may be infrequent or
impossible, because the colony is endangered neither by wars nor by
hostile commercial measures, nor by operations of the national bank
of the mother country, because it possesses no independent system
of commerce, credit, and industry peculiar to itself, but is, on
the contrary, supported and constantly upheld by the institutions
of credit and political measures of the mother country.
    Such a condition existed for more than a century with advantage
between North America and England, exists still between England and
Canada, and will probably exist for centuries between England and
Australia.
    This condition becomes fundamentally changed, however, from the
moment in which the colony appears as an independent nation with
every claim to the attributes of a great and independent
nationality -- in order that it may develop a power and policy of
its own and its own special system of commerce and credit. The
former colony then enacts laws for the special benefit of its own
navigation and naval power -- it establishes in favour of its own
internal industry a customs tariff of its own; it establishes a
national bank of its own, &c., provided namely that the new nation
thus passing from the position of a colony to independence feels
itself capable, by reason of the mental, physical, and economical
endowments which it possesses, of becoming an industrial and
commercial nation. The mother country, in consequence, places
restrictions, on its side, on the navigation, commerce, and
agricultural production of the former colony, and acts, by its
institutions of credit, exclusively for the maintenance of its own
national economical conditions.
    But it is precisely the instance of the North American colonies
as they existed before the American War of Independence by which
Adam Smith seeks to prove the above-mentioned highly paradoxical
opinion: that a country can continually increase its exportation of
gold and silver, decrease its circulation of the precious metals,
extend its paper circulation, and increase its debts contracted
with other nations while enjoying simultaneously steadily
increasing prosperity. Adam Smith has been very careful not to cite
the example of two nations which have been independent of one
another for some time, and whose interests of navigation, commerce,
industry, and agriculture are in competition with those of other
rival nations, in proof of his opinion he merely shows us the
relation of a colony to its mother country. If he had lived to the
present time and only written his book now, he would have been very
careful not to cite the example of North America, as this example
proves in our days just the opposite of what he attempts by it to
demonstrate.
    Under such circumstances, however, it may be urged against us
that it would be incomparably more to the advantage of the United
States if they returned again to the position of an English colony.
To this we answer, yes, provided always that the United States do
not know how to utilise their national independence so as to
cultivate and develop a national industry of their own, and a
self-supporting system of commerce and credit which is independent
of the world outside. But (it may be urged) is it not evident that
if the United States had continued to exist as a British colony no
English corn law would ever have been passed; that England would
never have imposed such high duties on American tobacco; that
continual quantities of timber would have been exported from the
United States to England; that England, far from ever entertaining
the idea of promoting the production of cotton in other countries,
would have endeavoured to give the citizens of the United States a
monopoly in this article, and to maintain it; that consequently
commercial crises such as have occurred within the last decades in
North America, would have been impossible? Yes; if the United
States do not manufacture, if they do not found a durable system of
credit of their own; if they do not desire or are not able to
develop a naval power. But then, in that case, the citizens of
Boston have thrown the tea into the sea in vain; then all their
declamation as to independence and future national greatness is in
vain: then indeed would they do better if they re-enter as soon as
possible into dependence on England as her colony. In that event
England will favour them instead of imposing restrictions on them;
she will rather impose restrictions on those who compete with the
North Americans in cotton culture and corn production, &c. than
raise up with all possible energy competitors against them. The
Bank of England will then establish branch banks in the United
States, the English Government will promote emigration and the
export of capital to America, and through the entire destruction of
the American manufactories, as well as by favouring the export of
American raw materials and agricultural produce to England, take
maternal care to prevent commercial crises in North America, and to
keep the imports and exports of the colony always at a proper
balance with one another. In one word, the American slaveholders
and cotton planters will then realise the fulfilment of their
finest dreams. In fact, such a position has already for some time
past appeared to the patriotism, the interests, and requirements of
these planters more desirable than the national independence and
greatness of the United States. Only in the first emotions of
liberty and independence did they dream of industrial independence.
They soon, however, grew cooler, and for the last quarter of a
century the industrial prosperity of the middle and eastern states
is to them an abomination; they try to persuade the Congress that
the prosperity of America depends on the industrial sovereignty of
England over North America. What else can be meant by the assertion
that the United States would be richer and more prosperous if they
again went over to England as a colony?
    In general it appears to us that the defenders of free trade
would argue more consistently in regard to money crises and the
balance of trade, as well as to manufacturing industry, if they
openly advised all nations to prefer to subject themselves to the
English as dependencies of England, and to demand in exchange the
benefits of becoming English colonies, which condition of
dependence would be, in economical respects, clearly more
favourable to them than the condition of half independence in which
those nations live who, without maintaining an independent system
of industry, commerce, and credit of their own, nevertheless always
want to assume towards England the attitude of independence. Do not
we see what Portugal would have gained if she had been governed
since the Methuen Treaty by an English viceroy -- if England had
transplanted her laws and her national spirit to Portugal, and
taken that country (like the East Indian Empire) altogether under
her wings? Do not we perceive how advantageous such a condition
would be to Germany -- to the whole European continent?
    India, it is true, has lost her manufacturing power to England,
but has she not gained considerably in her internal agricultural
production and in the exportation of her agricultural products?
Have not the former wars under her Nabobs ceased? Are not the
native Indian princes and kings extremely well off? Have they not
preserved their large private revenues? Do not they find themselves
thereby completely relieved of the weighty cares of government?
    Moreover, it is worthy of notice (though it is so after the
manner of those who, like Adam Smith, make their strong points in
maintaining paradoxical opinions) that this renowned author, in
spite of all his arguments against the existence of a balance of
trade, maintains, nevertheless, the existence of a thing which he
calls the balance between the consumption and production of a
nation, which, however, when brought to light, means nothing else
but our actual balance of trade. A nation whose exports and imports
tolerably well balance each other, may rest assured that, in
respect of its national interchange, it does not consume much more
in value than it produces, while a nation which for a series of
years (as the United States of America have done in recent years)
imports larger quantities in value of foreign manufactured goods
than it exports in value of products of its own, may rest assured
that, in respect to international interchange, it consumes
considerably larger quantities in value of foreign goods than it
produces at home. For what else did the crises of France
(1786-1789), of Russia (1820-1821), and of the United States since
1833, prove?
    In concluding this chapter we must be permitted to put a few
questions to those who consider the whole doctrine of the balance
of trade as a mere exploded fallacy.
    How is it that a decidedly and continuously disadvantageous
balance of trade has always and without exception been accompanied
in those countries to whose detriment it existed (with the
exception of colonies) by internal commercial crises, revolutions
in prices, financial difficulties, and general bankruptcies, both
in the public institutions of credit, and among the individual
merchants, manufacturers, and agriculturists?
    How is it that in those nations which possessed a balance of
trade decidedly in their favour, the opposite appearances have
always been observed, and that commercial crises in the countries
with which such nations were connected commercially, have only
affected such nations detrimentally for periods which passed away
very quickly?
    How is it that since Russia has produced for herself the
greatest part of the manufactured goods which she requires, the
balance of trade has been decidedly and lastingly in her favour,
that since that time nothing has been heard of economical
convulsions in Russia, and that since that time the internal
prosperity of that empire has increased year by year?
    How is it that in the United States of North America the same
effects have always resulted from similar causes? How is it that in
the United States of North America, under the large importation of
manufactured goods which followed the 'Compromise bill,' the
balance of trade was for a series of years so decidedly adverse to
them, and that this appearance was accompanied by such great and
continuous convulsions in the internal economy of that nation?
    How is it that we, at the present moment, see the United States
so glutted with primitive products of all kinds (cotton, tobacco,
cattle, corn, &c.) that the prices of them have fallen everywhere
one-half, and that at the same time these states are unable to
balance their exports with their imports, to satisfy their debt
contracted with England, and to put their credit again on sound
footing?
    How is it, if no balance of trade exists, or if it does not
signify whether it is in our favour or not, if it is a matter of
indifference whether much or little of the precious metals flows to
foreign countries, that England in the case of failures of harvests
(the only case where the balance is adverse to her) strives, with
fear and trembling, to equalise her exports with her imports, that
she then carefully estimates every ounce of gold or silver which is
imported or exported, that her national bank endeavours most
anxiously to stop the exportation of precious metals and to promote
their importation -- how is it, we ask, if the balance of trade is
an 'exploded fallacy,' that at such a time no English newspaper can
be read wherein this 'exploded fallacy' is not treated as a matter
of the most important concern to the nation?
    How is it that, in the United States of North America, the same
people who before the Compromise bill spoke of the balance of trade
as an exploded fallacy, since the Compromise bill cannot cease
speaking of this exploded fallacy as a matter of the utmost
importance to their country?
    How is it, if the nature of things itself always suffices to
provide every country with exactly the quantity of precious metals
which it requires, that the Bank of England tries to turn this
so-called nature of things in her own favour by limiting her
credits and increasing her rates of discount, and that the American
banks are obliged from time to time to suspend their cash payments
till the imports of the United States are reduced to a tolerably
even balance with the exports?

NOTES:

1. Wealth of Nations, book IV. chapter iii.

Chapter 24

The Manufacturing Power and the Principle of Stability and
Continuity of Work

    If we investigate the origin and progress of individual
branches of industry we shall find that they have only gradually
become possessed of improved methods of operation, machinery
buildings, advantages in production, experiences, and skill, and of
all those knowledges and connections which insure to them the
profitable purchase of their raw materials and the profitable sale
of their products. We may rest assured that it is (as a rule)
incomparably easier to perfect and extend a business already
established than to found a new one. We see everywhere old business
establishments that have lasted for a series of generations worked
with greater profits than new ones. We observe that it is the more
difficult to set a new business going in proportion as fewer
branches of industry of a similar character already exist in a
nation; because, in that case, masters, foremen, and workmen must
first be either trained up at home or procured from abroad, and
because the profitableness of the business has not been
sufficiently tested to give capitalists confidence in its success.
If we compare the conditions of distinct classes of industry in any
nation at various periods, we everywhere find, that when special
causes had not operated to injure them, they have made remarkable
progress, not only in regard to cheapness of prices, but also with
respect to quantity and quality, from generation to generation. On
the other hand, we observe that in consequence of external
injurious causes, such as wars and devastation of territory, &c.,
or oppressive tyrannical or fanatical measures of government and
finance (as e.g. the revocation of the Edict of Nantes), whole
nations have been thrown back for centuries, either in their entire
industry or in certain branches of it, and have in this manner been
far outstripped by nations in comparison with which they had
previously been far advanced.
    One can see at a glance that, as in all human institutions so
also in industry, a law of nature lies at the root of important
achievements which has much in common with the natural law of the
division of labour and of the confederation of the productive
forces, whose principle, namely, consists in the circumstance that
several generations following one another have equally united their
forces towards the attainment of one and the same object, and have
participated in like manner in the exertions needed to attain it.
    It is the same principle which in the cases of hereditary
kingdoms has been incomparably more favourable to the maintenance
and increase of the power of the nation than the constant changes
of the ruling families in the case of electoral kingdoms.
    It is partly this natural law which secures to nations who have
lived for a long time past under a rightly ordered constitutional
form of government, such great successes in industry, commerce, and
navigation.
    Only through this natural law can the effect of the invention
of printing on human progress be partially explained. Printing
first rendered it possible to hand down the acquisitions of human
knowledge and experience from the present to future generations
more perfectly and completely than could be done by oral tradition.
    To the recognition of this natural law is undoubtedly partly
attributable the division of the people into castes, which existed
among the nations of antiquity, and also the law of the old
Egyptians -- that the son must continue to follow the trade or
profession of his father. Before the invention and general
dissemination of printing took place, these regulations may have
appeared to be indispensable for the maintenance and for the
development of arts and trades.
    Guilds and trade societies also have partly originated from
this consideration. For the maintenance and bringing to perfection
of the arts and sciences, and their transfer from one generation to
another, we are in great measure indebted to the priestly castes of
ancient nations, to the monasteries and universities.
    What power and what influence have the orders of priesthood and
orders of knights, as well as the papal chair, attained to, by the
fact that for centuries they have aspired to one and the same aim,
and that each successive generation has always continued to work
where the other had left off.
    The importance of this principle becomes still more evident in
respect to material achievements.
    Individual cities, monasteries, and corporations have erected
works the total cost of which perhaps surpassed the value of their
whole property at the time. They could only obtain the means for
this by successive generations devoting their savings to one and
the same great purpose.
    Let us consider the canal and dyke system of Holland; it
comprises the labours and savings of many generations. Only to a
series of generations is it possible to complete systems of
national transport or a complete system of fortifications and
defensive works.
    The system of State credit is one of the finest creations of
more recent statesmanship, and a blessing for nations, inasmuch as
it serves as the means of dividing among several generations the
costs of those achievements and exertions of the present generation
which are calculated to benefit the nationality for all future
times, and which guarantee to it continued existence, growth,
greatness, power, and increase of the powers of production; it
becomes a curse only if it serves for useless national expenditure,
and thus not merely does not further the progress of future
generations, but deprives them beforehand of the means of
undertaking great national works, or also if the burden of the
payment of interest of the national debt is thrown on the
consumptions of the working classes instead of on capital.
    State debts are bills which the present generation draws on
future ones. This can take place either to the special advantage of
the present generation or the special advantage of the future one,
or to the common advantage of both. In the first case only is this
system an objectionable one. But all cases in which the object in
view is the maintenance and promotion of the greatness and welfare
of the nationality, so far as the means required for the purpose
surpass the powers of the present generation, belong to the last
category.
    No expenditure of the present generation is so decidedly and
specially profitable to future generations as that for the
improvement of the means of transport, especially because such
undertakings as a rule, besides increasing the powers of production
of future generations, do also in a constantly increasing ratio not
merely pay interest on the cost in the course of time, but also
yield dividends. The present generation is, therefore, not merely
entitled to throw on to future generations the capital outlay of
these works and fair interest on it (as long as they do not yield
sufficient income), but further acts unjustly towards itself and to
the true fundamental principles of national economy, if it takes
the burden or even any considerable part of it on its own
shoulders.
    If in our consideration of the subject of the continuity of
national industry we revert to the main branches which constitute
it, we may perceive, that while this continuity has an important
influence on agriculture, yet that interruptions to it, in the case
of that industry, are much less decided and much less injurious
when they occur, also that their evil consequences can be much more
easily and quickly made good than in the case of manufactures.
    However great may be any damage or interruption to agriculture,
the actual personal requirements and consumption of the
agriculturist, the general diffusion of the skill and knowledge
required for agriculture, and the simplicity of its operations and
of the implements which it requires, suffice to prevent it from
coming entirely to an end.
    Even after devastations by war it quickly raises itself up
again. Neither the enemy nor the foreign competitor can take away
the main instrument of agriculture, the land; and it needs the
oppressions of a series of generations to convert arable fields
into uncultivated waste, or to deprive the inhabitants of a country
of the capability of carrying on agriculture.
    On manufactures, however, the least and briefest interruption
has a crippling effect; a longer one is fatal. The more art and
talent that any branch of manufacture requires, the larger the
amounts of capital which are needful to carry it on, the more
completely this capital is sunk in the special branch of industry
in which it has been invested, so much the more detrimental will be
the interruption. By it machinery and tools are reduced to the
value of old iron and fire-wood, the buildings become ruins, the
workmen and skilled artificers emigrate to other lands or seek
subsistence in agricultural employment. Thus in a short time a
complex combination of productive powers and of property becomes
lost, which had been created only by the exertions and endeavours
of several generations.
    Just as by the establishment and continuance of industry one
branch of trade originates, draws after it, supports and causes to
flourish many others, so is the ruin of one branch of industry
always the forerunner of the ruin of several others, and finally of
the chief foundations of the manufacturing power of the nation.
    The conviction of the great effects produced by the steady
continuation of industry and of the irretrievable injuries caused
by its interruption, and not the clamour and egotistical demands of
manufacturers and traders for special privileges, has led to the
idea of protective duties for native industry.
    In cases where the protective duty cannot help, where the
manufactories, for instance, suffer from want of export trade,
where the Government is unable to provide any remedy for its
interruption, we often see manufacturers continuing to produce at
an actual loss. They want to avert, in expectation of better times,
the irrecoverable injury which they would suffer from a stoppage of
their works.
    By free competition it is often hoped to oblige the competitor
to discontinue work which has compelled the manufacturer or
merchant to sell his products under their legitimate price and
often at an actual loss. The object is not merely to prevent the
interruption of our own industry, but also to force others to
discontinue theirs in the hope later on of being able by better
prices to recoup the losses which have been suffered.
    In any case striving after monopoly forms part of the very
nature of manufacturing industry. This circumstance tends to
justify and not to discredit a protective policy; for this
striving, when restricted in its operation to the home market,
tends to promote cheaper prices and improvements in the art of
production, and thus increases the national prosperity; while the
same thing, in case it presses from without with overwhelming force
on the internal industry, will occasion the interruption of work
and downfall of the internal national industry.
    The circumstance that there are no limits to manufacturing
production (especially since it has been so extraordinarily aided
and promoted by machinery) except the limits of the capital which
it possesses and its means of effecting sales, enables that
particular nation whose manufacturing industry has continued for a
century, which has accumulated immense capitals, extended its
commerce all over the world, dominated the money market by means of
large institutions of credit (whose operations are able to depress
the prices of fabrics and to induce merchants to export), to
declare a war of extermination against the manufacturers of all
other countries. Under such circumstances it is quite impossible
that in other nations, 'in the natural course of things' (as Adam
Smith expresses himself), merely in consequence of their progress
in agriculture, immense manufactures and works should be
established, or that those manufactures which have originated in
consequence of the commercial interruptions caused by war should be
able, 'in the natural course of things,' to continue to maintain
themselves. The reason for this is the same as that why a child or
a boy in wrestling with a strong man can scarcely be victorious or
even offer steady resistance. The manufactories which constitute
the commercial and industrial supremacy (of England) have a
thousand advantages over the newly born or half-grown manufactories
of other nations. The former, for instance, can obtain skilled and
experienced workmen in the greatest number and at the cheapest
wages, the best technical men and foremen, the most perfect and the
cheapest machinery, the greatest benefit in buying and selling
advantageously; further, the cheapest means of transport, as
respects raw materials and also in respect of transporting goods
when sold, more extended credit for the manufacturers with banks
and money institutions at the lowest rates of interest, greater
commercial experience, better tools, buildings, arrangements,
connections, such as can only be acquired and established in the
course of generations; an enormous home market, and, what is
equally good, a colonial market equally enormous. Hence under all
circumstances the English manufacturers can feel certainty as to
the sale of large quantities of manufactured products by vigorous
efforts, and consequently possess a guarantee for the continuance
of their business and abundant means to sell on credit for years to
come in the future, if it is required to acquire the control of a
foreign market. If we enumerate and consider these advantages one
after another, we may easily be convinced that in competition with
such a power it is simply foolish to rest our hopes on the
operation of 'the natural course of things' under free competition,
where, as in our case, workmen and technical men have in the first
place yet to be trained, where the manufacture of machinery and
proper means of transport are merely in course of erection, where
even the home market is not secured to the manufacturer -- not to
mention any important export market, where the credit that the
manufacturer can obtain is under the most fortunate circumstances
limited to the lowest point, where no man can be certain even for
a day that, in consequence of English commercial crises and bank
operations, masses of foreign goods may not be thrown on the home
market at prices which scarcely recoup the value of the raw
materials of which they are made, and which bring to a stand for
years the progress of our own manufacturing industries.
    It would be in vain for such nations to resign themselves to a
state of perpetual subordination to the English manufacturing
supremacy, and content themselves with the modest determination to
supply it with what it may not be able to produce for itself or to
procure elsewhere. Even by this subordination they will find no
permanent benefit. What benefit is it to the people of the United
States, for instance, that they sacrifice the welfare of their
finest and most cultivated states, the states of free labour, and
perhaps their entire future national greatness, for the advantage
of supplying England with raw cotton? Do they thereby restrict the
endeavours of England to procure this material from other districts
of the world? In vain would the Germans be content to obtain their
requirements of manufactured goods from England in exchange for
their fine sheep's wool; they would by such a policy hardly prevent
Australia from flooding all Europe with fine wool in the course of
the next twenty years.
    Such a condition of dependence appears still more deplorable
when we consider that such nations lose in times of war their means
of selling their agricultural products, and thereby the means of
purchasing the manufacturing products of the foreigner. At such
times all economical considerations and systems are thrust into the
background. It is the principle of self-maintenance, of
self-defence, which counsels the nations to work up their
agricultural products themselves, and to dispense with the
manufactured goods of the enemy. Whatever losses may be involved in
adopting such a war-prohibitive system, cannot be taken into
account during such a state of things. However great the exertions
and the sacrifices may have been by which the agricultural nation
during the time of war has called into existence manufactures and
works, the competition of the manufacturing supremacy which sets in
on the recurrence of peace will again destroy all these creations
of the times of necessity. In short, it is an eternal alternation
of erecting and destroying, of prosperity and calamity which those
nations have to undergo who do not strive to insure, through
realisation of their national division of labour and through the
confederation of their own powers of production, the benefits of
the continuation of their own industries from generation to
generation.

Chapter 25

The Manufacturing Power and the Inducement to Production and
Consumption

    In society man is not merely productive owing to the
circumstance that he directly brings forth products or creates
powers of production, but he also becomes productive by creating
inducements to production and to consumption, or to the formation
of productive powers.
    The artist by his works acts in the first place on the
ennobling and refinement of the human spirit and on the productive
power of society; but inasmuch as the enjoyment of art presupposes
the possession of those material means whereby it must be
purchased, the artist also offers inducements to material
production and to thrift.
    Books and newspapers act on the mental and material production
by giving information; but their acquisition costs money, and so
far the enjoyment which they afford is also an inducement to
material production.
    The education of youth ennobles society; but what great
exertions do parents make to obtain the means of giving their
children a good education!
    What immense performances in both mental and material
production arise out of the endeavour to move in better society!
    We can live as well in a house made of boards as in a villa, we
can protect ourselves for a few florins against rain and cold as
well as by means of the finest and most elegant clothing. Ornaments
and utensils of gold and silver add no more to comfort than those
of iron and tin; but the distinction connected with the possession
of the former acts as an inducement to exertions of the body and
the mind, and to order and thrift; and to such inducements society
owes a large part of its productiveness. Even the man living on his
private property who merely occupies himself with preserving,
increasing, and consuming his income, acts in manifold ways on
mental and material production : firstly, by supporting through his
consumption art and science, and artistic trades; next, by
discharging, as it were, the function of a preserver and augmenter
of the material capital of society; finally, by inciting through
his display all other classes of society to emulation. As a whole
school is encouraged to exertions by the offer of prizes, although
only a few become winners of the principal prizes, so does the
possession of large property, and the appearance and display
connected with it, act on civil society. This action of course
ceases when the great property is the fruit of usurpation, of
extortion, or fraud, or where the possession of it and the
enjoyment of its fruits cannot be openly displayed.
    Manufacturing production yields either productive instruments
or the means of satisfying the necessities of life and the means of
display. The last two advantages are frequently combined. The
various ranks of society are everywhere distinguished by the manner
in which and where they live, and how they are furnished and
clothed, by the costliness of their equipages and the quality,
number, and external appearance of their servants. Where the
commercial production is on a low scale, this distinction is but
slight, i.e. almost all people live badly and are poorly clothed,
emulation is nowhere observable. It originates and increases
according to the ratio in which industries flourish. In flourishing
manufacturing countries almost everyone lives and dresses well,
although in the quality of manufactured goods which are consumed
the most manifold degrees of difference take place. No one who
feels that he has any power in him to work is willing to appear
outwardly needy. Manufacturing industry, therefore, furthers
production by the community by means of inducements which
agriculture, with its mean domestic manufacture, its productions of
raw materials and provisions, cannot offer.
    There is of course an important difference between various
modes of living, and everyone feels some inducement to eat and
drink well; but we do not dine in public; and a German proverb says
strikingly, 'Man sieht mir auf den Kragen, nicht auf den Magen'
(One looks at my shirt collar, not at my stomach). If we are
accustomed from youth to rough and simple fare, we seldom wish for
better. The consumption of provisions also is restricted to very
narrow limits where it is confined to articles produced in the
immediate neighbourhood. These limits are extended in countries of
temperate climate, in the first instance, by procuring the products
of tropical climates. But as respects the quantity and the quality
of these products, in the enjoyment of which the whole population
of a country can participate, they can only be procured (as we have
shown in a former chapter) by means of foreign commerce in
manufactured goods.
    Colonial products, so far as they do not consist of raw
materials for manufacturing purposes, evidently act more as
stimulants than necessary means of subsistence. No one will deny
that barley coffee without sugar is as nutritious as mocha coffee
with sugar; and admitting also that these products contain some
nutritious matter, their value in this respect is nevertheless so
unimportant that they can scarcely be considered as substitutes for
native provisions. With regard to spices and tobacco, they are
certainly mere stimulants, i.e. they chiefly produce a useful
effect on society only so far as they augment the enjoyments of the
masses, and incite them to mental and bodily labour.
    In many countries very erroneous notions prevail among those
who live by salaries or rents, respecting what they are accustomed
to call the luxurious habits of the lower classes; such persons are
shocked to observe that labourers drink coffee with sugar, and
regret the times when they were satisfied with gruel; they deplore
that the peasant has exchanged his poor clothing of coarse homespun
for woollen cloth; they express fears that the maid-servant will
soon not be distinguishable from the lady of the house; they praise
the legal restrictions on dress of previous centuries. But if we
compare the result of the labour of the workman in countries where
he is clad and nourished like the well-to-do man with the result of
his labour where he has to be satisfied with the coarsest food and
clothing, we shall find that the increase of his comfort in the
former case has been attained not at the expense of the general
welfare, but to the advantage of the productive powers of the
community. The day's work of the workman is double or three times
greater in the former case than in the latter. Attempts to regulate
dress and restrictions on luxury have destroyed wholesome emulation
in the large masses of society, and have merely tended to the
increase of mental and bodily idleness.
    In any case products must be created before they can be
consumed, and thus production must necessarily generally precede
consumption. In popular and national practice, however, consumption
frequently precedes production. Manufacturing nations, supported by
large capital and less restricted in their production than mere
agricultural nations, make, as a rule, advances to the latter on
the yield of future crops; the latter thus consume before they
produce -- they produce later on because they have previously
consumed. The same thing manifests itself in a much greater degree
in the relation between town and country: the closer the
manufacturer is to the agriculturist, the more will the former
offer to the latter both an inducement to consume and means for
consumption, the more also will the latter feel himself stimulated
to greater production.
    Among the most potent stimulants are those afforded by the
civil and political institutions of the country. Where it is not
possible to raise oneself by honest exertions and by prosperity
from one class of society to another, from the lowest to the
highest; where the possessor necessarily hesitates to show his
property publicly or to enjoy the fruits of it because it would
expose his property to risk, or lest he should be accused of
arrogance or impropriety; where persons engaged in trade are
excluded from public honour, from taking part in administration,
legislation, and juries; where distinguished achievements in
agriculture, industry, and commerce do not lead also to public
esteem and to social and civil distinction, there the most
important motives for consumption as well as for production are
wanting.
    Every law, every public regulation, has a strengthening or
weakening effect on production or on consumption or on the
productive forces.
    The granting of patent privileges offers a prize to inventive
minds. The hope of obtaining the prize arouses the mental powers,
and gives them a direction towards industrial improvements. It
brings honour to the inventive mind in society, and roots out the
prejudice for old customs and modes of operation so injurious among
uneducated nations. It provides the man who merely possesses mental
faculties for new inventions with the material means which he
requires, inasmuch as capitalists are thus incited to support the
inventor, by being assured of participation in the anticipated
profits.
    Protective duties act as stimulants on all those branches of
internal industry the produce of which foreign countries can
provide better than the home country but of the production of which
the home country is capable. They guarantee a reward to the man of
enterprise and to the workman for acquiring new knowledge and
skill, and offer to the inland and foreign capitalist means for
investing his capital for a definite and certain time in a
specially remunerative manner.

Chapter 26

Customs Duties as a Chief Means of Establishing and Protecting the
internal Manufacturing Power

    It is not part of our plan to treat of those means of promoting
internal industry whose efficacy and applicability are nowhere
called in question. To these belong e.g. educational establishments
(especially technical schools), industrial exhibitions, offers of
prizes, transport improvements, patent laws, &c.; in short, all
those laws and institutions by means of which industry is
furthered, and internal and external commerce facilitated and
regulated. We have here merely to speak of the institution of
customs duties as a means for the development of industry.
    According to our system, prohibitions of, or duties on, exports
can only be thought of as exceptional things; the imports of
natural products must everywhere be subject to revenue duties only,
and never to duties intended to protect native agricultural
production. In manufacturing states, articles of luxury from warm
climates are chiefly subject to duties for revenue, but not the
common necessaries of life, as e.g. corn or fat cattle; but the
countries of warmer climate or countries of smaller population or
limited territory, or countries not yet sufficiently populous, or
such as are still far behind in civilisation and in their social
and political institutions, are those which should only impose mere
revenue duties on manufactured goods.
    Revenue duties of every kind, however, should everywhere be so
moderate as not essentially to restrict importation and
consumption; because, otherwise, not only would the internal
productive power be weakened, but the object of raising revenue be
defeated.
    Measures of protection are justifiable only for the purpose of
furthering and protecting the internal manufacturing power, and
only in the case of nations which through an extensive and compact
territory, large population, possession of natural resources, far
advanced agriculture, a high degree of civilisation and political
development, are qualified to maintain an equal rank with the
principal agricultural manufacturing commercial nations, with the
greatest naval and military powers.
    Protection can be afforded, either by the prohibition of
certain manufactured articles, or by rates of duty which amount
wholly, or at least partly, to prohibition, or by moderate import
duties. None of these kinds of protection are invariably beneficial
or invariably objectionable; and it depends on the special
circumstances of the nation and on the condition of its industry
which of these is the right one to be applied to it.
    War exercises a great influence on the selection of the precise
system of protection, inasmuch as it effects a compulsory
prohibitive system. In time of war, exchange between the
belligerent parties ceases, and every nation must endeavour,
without regard to its economical conditions, to be sufficient to
itself. Hence, on the one hand, in the less advanced manufacturing
nations commercial industry, on the other hand, in the most
advanced manufacturing nation agricultural production, becomes
stimulated in an extraordinary manner, indeed to such a degree that
it appears advisable to the less advanced manufacturing nation
(especially if war has continued for several years) to allow the
exclusion which war has occasioned of those manufactured articles
in which it cannot yet freely compete with the most advanced
manufacturing nation, to continue for some time during peace.
    France and Germany were in this condition after the general
peace. If in 1815 France had allowed English competition, as
Germany, Russia, and North America did, she would also have
experienced the same fate; the greatest part of her manufactories
which had sprung up during the war would have come to grief; the
progress which has since been made in all branches of manufacture,
in improving the internal means of transport, in foreign commerce,
in steam river and sea navigation, in the increase in the value of
land (which, by the way, has doubled in value during this time in
France), in the augmentation of population and of the State's
revenues, could not have been hoped for. The manufactories of
France at that time were still in their childhood; the country
possessed but few canals; the mines had been but little worked;
political convulsions and wars had not yet permitted considerable
capital to accumulate, sufficient technical cultivation to exist,
a sufficient number of really qualified workmen or an industrial
and enterprising spirit to have been called into existence; the
mind of the nation was still turned more towards war than towards
the arts of peace; the small capital which a state of war permitted
to accumulate, still flowed principally into agriculture, which had
declined very much indeed. Then, for the first time, could France
perceive what progress England had made during the war; then, for
the first time, was it possible for France to import from England
machinery, artificers, workmen, capital, and the spirit of
enterprise; then, to secure the home market exclusively for the
benefit of home industry, demanded the exertion of her best powers,
and the utilisation of all her natural resources. The effects of
this protective policy are very evident; nothing but blind
cosmopolitanism can ignore them, or maintain that France would
have, under a policy of free competition with other nations, made
greater progress. Does not the experience of Germany, the United
States of America, and Russia, conclusively prove the contrary?
    If we maintain that the prohibitive system has been useful to
France since 1815, we do not by that contention wish to defend
either her mistakes or her excess of protection, nor the utility or
necessity of her continued maintenance of that excessive protective
policy. It was an error for France to restrict the importation of
raw materials and agricultural products (pig-iron, coal, wool,
corn, cattle) by import duties; it would be a further error if
France, after her manufacturing power has become sufficiently
strong and established, were not willing to revert gradually to a
moderate system of protection, and by permitting a limited amount
of competition incite her manufacturers to emulation.
    In regard to protective duties it is especially important to
discriminate between the case of a nation which contemplates
passing from a policy of free competition to one of protection, and
that of a nation which proposes to exchange a policy of prohibition
for one of moderate protection; in the former case the duties
imposed at first must be low, and be gradually increased, in the
latter they must be high at first and be gradually diminished.
    A nation which has been formerly insufficiently protected by
customs duties, but which feels itself called upon to make greater
progress in manufactures, must first of all endeavour to develop
those manufactures which produce articles of general consumption.
In the first place the total value of such industrial products is
incomparably greater than the total value of the much more
expensive fabrics of luxury. The former class of manufactures,
therefore, brings into motion large masses of natural, mental, and
personal productive powers, and gives -- by the fact that it
requires large capital -- inducements for considerable saving of
capital, and for bringing over to its aid foreign capital and
powers of all kinds. The development of these branches of
manufacture thus tends powerfully to promote the increase of
population, the prosperity of home agriculture, and also especially
the increase of the trade with foreign countries, inasmuch as less
cultivated countries chiefly require manufactured goods of common
use, and the countries of temperate climates are principally
enabled by the production of these articles to carry on direct
interchange with the countries of tropical climates. A country e.g.
which trade has to import cotton yarns and cotton goods cannot
carry on direct with Egypt, Louisiana, or Brazil, because it cannot
supply those countries with the cotton goods which they require,
and cannot take from them their raw cotton. Furthermore, these
articles, on account of the magnitude of their total value, serve
especially to equalise the exports of the nation tolerably well
with its imports, and always to retain in the nation the amount of
circulating medium which it requires, or to provide it with the
same. Thus it is by the prosperity and preservation of these
important branches of industry that the industrial independence of
the nation is gained and maintained, for the disturbance of trade
resulting from wars is of little importance if it merely hinders
the purchase of expensive articles of luxury, but, on the other
hand, it always occasions great calamities if it is attended by
scarcity and rise in price of common manufactured goods, and by the
interruption of a previously considerable sale of agricultural
products. Finally, the evasion of customs duties by smuggling and
false declarations of value is much less to be feared in the case
of these articles, and can be much more easily prevented than in
the case of costly fabrics of luxury.
    Manufactures and manufactories are always plants of slow
growth, and every protective duty which suddenly breaks off
formerly existing commercial connections must be detrimental to the
nation for whose benefit it is professedly introduced. Such duties
ought only to be increased in the ratio in which capital, technical
abilities, and the spirit of enterprise are increasing in the
nation or are being attracted to it from abroad, in the ratio in
which the nation is in a condition to utilise for itself its
surplus of raw materials and natural products which it had
previously exported. It is, however, of special importance that the
scale by which the import duties are increased should be determined
beforehand, so that an assured remuneration can be offered to the
capitalists, artificers, and workmen, who are found in the nation
or who can be attracted to it from abroad. It is indispensable to
maintain these scales of duty inviolably , and not to diminish them
before the appointed time, because the very fear of any such breach
of promise would already destroy for the most part the effect of
that assurance of remuneration.
    To what extent import duties should be increased in the case of
a change from free competition to the protective system, and how
much they ought to be diminished in the case of a change from a
system of prohibition to a moderate system of protection, cannot be
determined theoretically: that depends on the special conditions as
well as on the relative conditions in which the less advanced
nation is placed in relation to the more advanced ones. The United
States of North America e.g. have to take into special
consideration their exports of raw cotton to England, and of
agricultural and maritime products to the English colonies, also
the high rate of wages existing in the United States; whereby they
again profit by the fact that they can depend more than any other
nation on attracting to themselves English capital, artificers, men
of enterprise, and workmen.
    It may in general be assumed that where any technical industry
cannot be established by means of an original protection of forty
to sixty per cent and cannot continue to maintain itself under a
continued protection of twenty to thirty per cent the fundamental
conditions of manufacturing power are lacking.
    The causes of such incapacity can be removed more or less
readily; to the class more readily removable belong want of
internal means of transport, want of technical knowledge, of
experienced workmen, and of the spirit of industrial enterprise; to
the class which it is more difficult to remove belong the lack of
industrious disposition, civilisation, education, morality, and
love of justice on the part of the people; want of a sound and
vigorous system of agriculture, and hence of material capital; but
especially defective political institutions, and want of civil
liberty and of security of justice; and finally , want of
compactness of territory, whereby it is rendered impossible to put
down contraband trade.
    Those industries which merely produce expensive articles of
luxury require the least consideration and the least amount of
protection; firstly, because their production requires and assumes
the existence of a high degree of technical attainment and skill;
secondly because their total value is inconsiderable in proportion
to that of the whole national production, and the imports of them
can be readily paid for by means of agricultural products and raw
materials, or with manufactured products of common use; further,
because the interruption of their importation occasions no
important inconvenience in time of war; lastly, because high
protective duties on these articles can be most readily evaded by
smuggling.
    Nations which have not yet made considerable advances in
technical art and in the manufacture of machinery should allow all
complicated machinery to be imported free of duty, or at least only
levy a small duty upon them, until they themselves are in a
Position to produce them as readily as the most advanced nation.
Machine manufactories are in a certain sense the manufacturers of
manufactories, and every tax on the importation of foreign
machinery is a restriction on the internal manufacturing power.
Since it is, however, of the greatest importance, because of its
great influence on the whole manufacturing power, that the nation
should not be dependent on the chances and changes of war in
respect of its machinery, this particular branch of manufacture has
very special claims for the direct support of the State in case it
should not be able under moderate import duties to meet
competition. The State should at least encourage and directly
support its home manufactories of machinery, so far as their
maintenance and development may be necessary to provide at the
commencement of a time of war the most necessary requirements, and
under a longer interruption by war to serve as patterns for the
erection of new machine factories.
    Drawbacks can according to our system only be entertained in
cases where half-manufactured goods which are still imported from
abroad, as for instance cotton yarn, must be subjected to a
considerable protective duty in order to enable the country
gradually to produce them itself.
    Bounties are objectionable as permanent measures to render the
exports and the competition of the native manufactories possible
with the manufactories of further advanced nations in neutral
markets; but they are still more objectionable as the means of
getting possession of the inland markets for manufactured goods of
nations which have themselves already made progress in
manufactures. Yet there are cases where they are to be justified as
temporary means of encouragement, namely, where the slumbering
spirit of enterprise of a nation merely requires stimulus and
assistance in the first period of its revival, in order to evoke in
it a powerful and lasting production and an export trade to
countries which themselves do not possess flourishing manufactures.
But even in these cases it ought to be considered whether the State
would not do better by making advances free of interest and
granting special privileges to individual men of enter prise, or
whether it would not be still more to the purpose to promote the
formation of companies to carry into effect such primary
experimental adventures, to advance to such companies a portion of
their requisite share capital out of the State treasury, and to
allow to the private persons taking shares in them a preferential
interest on their invested capital. As instances of the cases
referred to, we may mention experimental undertakings in trade and
navigation to distant countries, to which the commerce of private
persons has not yet been extended; the establishment of lines of
steamers to distant countries; the founding of new colonies, &c.

Chapter 27

The Customs System and the Popular School

    The popular school does not discriminate (in respect of the
operation of protective duties) between natural or primitive
products and manufactured products. It perverts the fact that such
duties always operate injuriously on the production of primitive or
natural products, into the false conclusion that they exercise an
equally detrimental influence on the production of manufactured
goods.
    The school recognises no distinction in reference to the
establishment of manufacturing industry in a State between those
nations which are not adapted for such industry and those which,
owing to the nature of their territory, to perfectly developed
agriculture, to their civilisation, and to their just claims for
guarantees for their future prosperity for their permanence, and
for their power, are clearly qualified, to establish such an
industry for themselves.
    The school fails to perceive that under a system of perfectly
free competition with more advanced manufacturing nations, a nation
which is less advanced than those, although well fitted for
manufacturing, can never attain to a perfectly developed
manufacturing power of its own, nor to perfect national
independence, without protective duties.
    It does not take into account the influence of war on the
necessity for a protective system; especially it does not perceive
that war effects a compulsory prohibitive system, and that the
prohibitive system of the custom-house is but a necessary
continuation of that prohibitive system which war has brought
about.
    It seeks to adduce the benefits which result from free internal
trade as a proof that nations can only attain to the highest degree
of prosperity and power by absolute freedom in international trade;
whereas history everywhere proves the contrary.
    It maintains that protective measures afford a monopoly to
inland manufacturers, and thus tend to induce indolence; while,
nevertheless, all the time internal competition amply suffices as
a stimulus to emulation among manufacturers and traders.
    It would have us believe that protective duties on manufactured
goods benefit manufacturers at the expense of agriculturists;
whereas it can be proved that enormous benefits accrue to home
agriculture from the existence of a home manufacturing power,
compared to which the sacrifices which the former has to make to
the protective system are inconsiderable.
    As a main point against protective duties, the popular school
adduces the expenses of the custom-house system and the evils
caused by contraband trade. These evils cannot be denied; but can
they be taken seriously into account in comparison of measures
which exercise such enormous influence on the existence, the power,
and the prosperity of the nation? Can the evils of standing armies
and wars constitute an adequate motive for the nation to neglect
means of defence? If it is maintained that protective duties which
far exceed the limit which offers an assured remuneration to
smuggling, serve merely to favour contraband trade, but not to
benefit home manufactures, that can apply only to ill-regulated
customs establishments, to countries of small extent and irregular
frontiers, to the consumption which takes place on the frontiers,
and only to high duties on articles of luxury of no great aggregate
bulk.
    but experience everywhere teaches us that with well-ordered
customs establishments, and with wisely devised tariffs, the
objects of protective duties in large and compact states cannot be
materially impeded by contraband trade.
    So far as regards the mere expenses of the customs system, a
large portion of these would, if it were abolished, have to be
incurred in the collection of revenue duties; and that revenue
duties can be dispensed with by great nations, even the school
itself does not maintain.
    Moreover, the school itself does not condemn all protective
duties.
    Adam Smith allows in three cases the special protection of
internal industry: firstly, as a measure of retaliation in case a
foreign nation imposes restrictions on our imports, and there is
hope of inducing it by means of reprisals to repeal those
restrictions; secondly, for the defence of the nation, in case
those manufacturing requirements which are necessary for defensive
purposes could not under open competition be produced at home;
thirdly, as a means of equalisation in case the products of
foreigners are taxed lower than those of our home producers. J. B.
Say objects to protection in all these cases, but admits it in a
fourth case -- namely, when some branch of industry is expected to
become after the lapse of a few years so remunerative that it will
then no longer need protection.
    Thus it is Adam Smith who wants to introduce the principle of
retaliation into commercial policy -- a principle which would lead
to the most absurd and most ruinous measures, especially if the
retaliatory duties, as Smith demands, are to be repealed as soon as
the foreign nation agrees to abolish its restrictions. Supposing
Germany made reprisals against England, because of the duties
imposed by the latter on German corn and timber, by excluding from
Germany English manufactured goods, and by this exclusion called
artificially into existence a manufacturing power of her own; must
Germany then allow this manufacturing industry, created at immense
sacrifice, to come to grief in case England should be induced to
reopen her ports to German corn and timber? What folly. It would
have been ten times better than that if Germany had submitted
quietly to all measures of restriction on the part of England, and
had discouraged the growth of any manufacturing power of her own
which might grow up notwithstanding the English import
prohibitions, instead of stimulating its growth.
    The principle of retaliation is reasonable and applicable only
if it coincides with the principle of the industrial development of
the nation, if it serves as it were as an assistance to this
object.
    Yes, it is reasonable and beneficial that other nations should
retaliate against the English import restrictions on their
agricultural products, by imposing restrictions on the importation
of manufactured goods, but only when those nations are qualified to
establish a manufacturing power of their own and to maintain it for
all times.
    By the second exception, Adam Smith really justifies not merely
the necessity of protecting such manufactures as supply the
immediate requirements of war, such as, for instance, manufactories
of arms and powder, but the whole system of protection as we
understand it; for by the establishment in the nation of a
manufacturing power of its own, protection to native industry tends
to the augmentation of the nation's population, of its material
wealth, of its machine power, of its independence, and of all
mental powers, and, therefore, of its means of national defence, in
an infinitely higher degree than it could do by merely
manufacturing arms and powder.
    The same must be said of Adam Smith's third exception. If the
burden of taxation to which our productions are subjected, affords
a just ground for imposing protective duties On the less taxed
products of foreign countries, why should not also the other
disadvantages to which our manufacturing industry is subjected in
comparison with that of the foreigner afford just grounds for
protecting our native industry against the overwhelming competition
of foreign industry?
    J. B. Say has clearly perceived the contradictory character of
this exception, but the exception substituted by him is no better;
for in a nation qualified by nature and by its degree of culture to
establish a manufacturing power of its own, almost every branch of
industry must become remunerative under continued and powerful
protection; and it is ridiculous to allow a nation merely a few
years for the task of bringing to perfection one great branch of
national industry or the whole industry of the nation; just as a
shoemaker's apprentice is allowed only a few years to learn
shoemaking.
    In its eternal declamations on the immense advantages of
absolute freedom of trade, and the disadvantages of protection, the
popular school is accustomed to rely on the examples of a few
nations; that of Switzerland is quoted to prove that industry can
prosper without protective duties, and that absolute liberty of
international commerce forms the safest basis of national
prosperity. The fate of Spain is quoted to exhibit to all nations
which seek aid and preservation in the protective system, a
frightful example of its ruinous effects. The case of England,
which, as we have shown in a former chapter, affords such an
excellent example for imitation to all nations which are capable of
developing a manufacturing power, is adduced by these theorists
merely to support their allegation that capability for
manufacturing production is a natural gift exclusively peculiar to
certain countries, like the capability to produce burgundy wines;
and that nature has bestowed on England, above all other countries
of the earth, the destiny and the ability to devote herself to
manufacturing industry and to an extensive commerce.
    Let us now take these examples more closely into consideration.
    As for Switzerland, it must be remarked in the first place that
she does not constitute a nation, at least not one of normal
magnitude which can be ranked as a great nation, but is merely a
conglomeration of municipalities. Possessing no sea-coast, hemmed
in between three great nations, she lacks all inducement to strive
to obtain a native commercial marine, or direct trade with tropical
countries; she need pay no regard to the establishment of a naval
power, or to founding or acquiring colonies. Switzerland laid the
foundation of her present very moderate degree of prosperity at the
time when she still belonged to the German Empire. Since that time,
she has been almost entirely free from internal wars, her capital
has been permitted to increase from generation to generation, as
scarcely any of it was required by her municipal governments for
discharging their expenses. Amid the devastations occasioned by the
despotism, fanaticism, wars, and revolutions, with which Europe was
perturbed during the last centuries, Switzerland offered an asylum
to all who desired to transfer their capital and talents to another
country than their own, and thus acquired considerable wealth from
abroad. Germany has never adopted strong commercial restrictions
against Switzerland, and a large part of the manufactured products
of the latter has obtained a market in Germany. Moreover, the
industry of Switzerland was never a national one, one comprising
the production of articles of common use, but chiefly an industry
in articles of luxury, the products of which could be easily
smuggled into the neighbouring countries or transported to distant
parts of the world. Furthermore, her territory is most favourably
situated for intermediate trade, and in this respect is in some
measure privileged. Again, their excellent opportunity of becoming
acquainted with the languages, laws, institutions, and
circumstances of the three nations which adjoin her must have given
the Swiss important advantages in intermediate commerce and in
every other respect. Civil and religious liberty and universal
education have evoked in the Swiss, activity and a spirit of
enterprise which, in view of the narrow limits of their country's
internal agriculture, and of her internal resources for supporting
her population, drove the Swiss to foreign countries, where they
amassed wealth, by means of military service, by commerce, by
industries of every kind, in order to bring it home to their
fatherland. If under such special circumstances they managed to
acquire mental and material resources, in order to develop a few
branches of industry for producing articles of luxury, if these
industries could maintain themselves without protective duties by
sales to foreign countries, it cannot thence be concluded that
great nations could follow a similar policy under wholly different
circumstances. In her small national expenditure Switzerland
possesses an advantage which great nations could only attain if
they, like Switzerland, resolved themselves into mere
municipalities and thus exposed their nationality to foreign
attacks.
    That Spain acted foolishly in preventing the exportation of the
precious metals, especially since she herself produced such a large
excess of these articles, must be admitted by every reasonable
person. It is a mistake, however, to attribute the decline of the
industry and national well-being of Spain to her restrictions
against the importation of manufactured goods. If Spain had not
expelled the Moors and Jews, and had never had an Inquisition; if
Charles V had permitted religious liberty in Spain; if the priests
and monks had been changed into teachers of the people, and their
immense property secularised, or at least reduced to what was
actually necessary for their maintenance; if, in consequence of
these measures, civil liberty had gained a firm footing, the feudal
nobility had been reformed and the monarchy limited; if, in a word,
Spain had politically developed herself in consequence of a
Reformation, as England did, and if the same spirit had extended to
her colonies, a prohibitive and protective policy would have had
similar effects in Spain as it had in England, and this all the
more because at the time of Charles V the Spaniards were more
advanced than the English and French in every respect, and the
Netherlands only (of all countries) occupied a more advanced
position than Spain, whose industrial and commercial spirit might
have been transferred to Spain by means of the protective policy,
provided that the institutions and conditions of Spain were such as
would have invited foreign talents and capital to her shores,
instead of driving her own native talents and capital into foreign
countries.
    To what causes England owes her manufacturing and commercial
supremacy, we have shown in our fifth chapter.
    It is especially owing to her civil, mental, and religious
liberty, to the nature and excellence of her political
institutions, that the commercial policy of England has been
enabled to make the most of the natural riches of the country, and
fully to develop the productive powers of the nation. But who would
deny that other nations are capable of raising themselves to the
same degree of liberty? Who would venture to maintain that nature
has denied to other nations the means which are requisite for
manufacturing industry?
    In the latter respect the great natural wealth in coal and iron
which England possesses has often been adduced as a reason why the
English are specially destined to be a manufacturing nation. It is
true that in this respect England is greatly favoured by nature;
but against this it may be stated that even in respect of these
natural products, nature has not treated other countries merely
like a stepmother; for the most part the want of good transport
facilities is the chief obstacle to the full utilisation of these
products by other nations; that other countries possess enormous
unemployed water power, which is cheaper than steam power; that
where it is necessary they are able to counterbalance the want of
coal by the use of other fuels; that many other countries possess
inexhaustible means for the production of iron, and that they are
also able to procure these raw materials from abroad by commercial
exchange.
    In conclusion, we must not omit here to make mention of
commercial treaties based on mutual concessions of duties. The
school objects to these conventions as unnecessary and detrimental,
whereas they appear to us as the most effective means of gradually
diminishing the respective restrictions on trade, and of leading
the nations of the world gradually to freedom of international
intercourse. Of course, the specimens of such treaties which the
world has hitherto seen, are not very encouraging for imitation. We
have shown in former chapters what injurious effects the Methuen
Treaty has produced in Portugal, and the Eden Treaty has produced
in France. It is on these injurious effects of reciprocal
alleviation of duties, that the objections of the school to
commercial treaties appear principally to be founded. Its principle
of absolute commercial liberty has evidently experienced a
practical contradiction in these cases, inasmuch as, according to
that principle, those treaties ought to have operated beneficially
to both contracting nations, but not to the ruin of the one, and to
the immense advantage of the other. If, however, we investigate the
cause of this disproportionate effect, we find that Portugal and
France, in consequence of those conventions, abandoned in favour of
England the progress they had already made in manufacturing
industry, as well as that which they could expect to make in it in
the future, with the expectation of increasing by that means their
exportation of natural products to England; that, accordingly, both
those nations have declined, in consequence of the treaties thus
concluded, from a higher to a lower standpoint of industrial
development. From this, however, it merely follows that a nation
acts foolishly if it sacrifices its manufacturing power to foreign
competition by commercial treaties, and thereby binds itself to
remain for all future time dependent on the low standpoint of
merely agricultural industry; but it does not in the least follow
from this, that those treaties are also detrimental and
objectionable whereby the reciprocal exchange of agricultural
products and raw materials, or the reciprocal exchange of
manufactured products, is promoted.
    We have previously explained that free trade in agricultural
products and raw materials is useful to all nations at all stages
of their industrial development; from this it follows that every
commercial treaty which mitigates or removes prohibitions and
restrictions on freedom of trade in such articles must have a
beneficial effect on both contracting nations, as e.g. a convention
between France and England whereby the mutual exchange of wines and
brandies for pig-iron and coal, or a treaty between France and
Germany whereby the mutual exchange of wine, oil, and dried fruit,
for corn, wool, and cattle, were promoted.
    According to our former deductions, protection is only
beneficial to the prosperity of the nation so far as it corresponds
with the degree of the nation's industrial development. Every
exaggeration of protection is detrimental; nations can only obtain
a perfect manufacturing power by degrees. On that account also, two
nations which stand at different stages of industrial cultivation,
can with mutual benefit make reciprocal concessions by treaty in
respect to the exchange of their various manufacturing products.
The less advanced nation can, while it is not yet able to produce
for itself with profit finer manufactured goods, such as fine
cotton and silk fabrics, nevertheless supply the further advanced
nation with a portion of its requirements of coarser manufactured
goods.
    Such treaties might be still more allowable and beneficial
between nations which stand at about the same degree of industrial
development, between which, therefore, competition is not
overwhelming, destructive, or repressive, nor tending to give a
monopoly of everything to one side, but merely acts, as competition
in the inland trade does, as an incentive to mutual emulation,
perfection, and cheapening of production. This is the case with
most of the Continental nations. France, Austria, and the German
Zollverein might, for instance, anticipate only very prosperous
effects from moderately low reciprocal protective duties. Also,
between these countries and Russia mutual concessions could be made
to the advantage of all sides. What they all have to fear at this
time is solely the preponderating competition of England.
    Thus it appears also from this point of view, that the
supremacy of that island in manufactures, in trade, in navigation,
and in her colonial empire, constitutes the greatest existing
impediment to all nations drawing nearer to one another; although
it must be at the same time admitted that England, in striving for
this supremacy, has immeasurably increased, and is still daily
increasing, the productive power of the entire human race.