[208-1]The consequences of this are very important to the character of French and German industry. (Junghanns, Fortschritte des Zollvereins, I, 28, 51, 58.) Rapidly as the Parisian fashions in dress make their way into the provinces, their fashions in the matter of the table are very slow to do so. (Rocquefort, Hist. de la Vie privée des Fr., I, 88 seq.)
[208-2]Sir W. Temple.Observations on the U. Provinces, ch. 6.
[208-3]As most persons adorn themselves for the sake of the opposite sex, this invariability is caused by the oriental separation of two sexes. Our manufacturers would largely increase their market, if they could succeed in civilizing the East in this respect. In Persia, shawls are frequently inherited through many generations, and even persons of distinction buy clothes which had been worn before. (Polak, Persien, I, 153.) In China, the Minister of Ceremonies rigidly provided what clothes should be worn by all classes and under severe penalties. (Davis, The Chinese, I, 352 seq.)
[208-4]Jaubert, Voyage en Perse, 1821. While cities like Seleucia, Ctesiphon, Almadin, Kufa, and even Bagdad, were built from the ruins of Babylon.
[208-5]In Moscow, merchants close their accounts at Easter. Then begins a new cycle of fashions, after which all that remains is sold at mock-prices. (Kohl, Reise, 98.) In Paris, there are houses which buy up everything as it begins to go out of fashion and then send it into the provinces and to foreign parts. Thus, there are immense amounts of old clothing shipped from France and England to Ireland. Hence, the latter country can have no national costume appropriate to the different classes; and the traveler sees with regret, crowds of Irish going to work in ragged frock-coats, short trowsers and old silk hats. In Prussia, many of the peasantry, in the time of Frederick the Great, wore the discarded uniforms of the soldiery.
[208-6]Schäffle, N. Oek.Hermann, Staatsw. Untersuchungen, II, Aufl., 100.
SECTION CCIX.
CONSUMPTION WHICH IS THE WORK OF NATURE.
The least enjoyable of all consumption (loss-consumption) is that which is the work of nature; and nature is certainly most consuming in the tropics. During the rainy season, in the region of the upper Ganges, mushrooms shoot up in every corner of the houses; books on shelves swell to such an extent that three occupy the place previously occupied by four; those left on the table get covered over with a coat of moss one-eighth of an inch in thickness. The saltpetre that gathers on the walls has to be removed every week in baskets, to keep it from eating into the bricks. Numberless moths devour the clothing. Schomburgk found that, in Guiana, iron instruments which lay on the ground during the rainy season became entirely useless within a few days, that silver coins oxydized, etc.; evidently a great obstacle in the way of the employment of machinery. In summer, the soil of this same region, so rich in roots, is so parched by the heat, that subterranean fires sometimes cause the most frightful destruction.
In Spanish America, there are so many termites and other destructive insects that paper more than sixty years old is very seldom to be found there.[209-1]
The warmer portions of the temperate zone are naturallymost favorable to the preservation of stone monuments. Thus, for instance, in Persepolis, where there has been no intentional destruction, the stones lie so accurately superimposed the one on the other that the lines of junction can frequently be not even seen. The amphitheatre of Pola has lost in two thousand years only two lines from the angles of the stones.[209-2]The Elgin marble statues would certainly have lasted longer in Greece than they will in England. On the other hand, warm and dry climates have a very peculiar and exceedingly frightful species of nature-consumption in the locust plagues. The principal countries affected by such consumption are Asiatic and African Arabistan, the land of the Jordan and Euphrates, Asia Minor, parts of Northern India. On Sinai, locust plagues occur, on an average, every four or five years; but from 1811 to 1816, for instance, they destroyed everything each year. Their course is in its effects like an advancing conflagration. It turns the green country, frequently in a single day, into a brown desert; and famine and pestilence follow in its path.[209-3]
The colder regions of the temperate zone are exposed to danger and damage from land-slides in their long series of mountains, and from avalanches, from quicksands in many of their plains, from floods and the total destruction of land alongtheir coasts;[209-4]but, on the other hand, they are, relatively speaking, freest from hurricanes, earthquakes and volcanoes, the ravages of which no human art or foresight is competent to cope with. From the point of view of civilization and of politics there is here a great advantage. See § 36. The former maritime power of Venice and of Holland is closely allied to the dangers with which the sea continually threatened them, and which was a continual spur to both. But, on the other hand, the danger from earthquakes which always impends over South America and Farther India, must produce consequences similar to those of anarchy or of despotism, because of the uncertainty with which they surround all relations. See § 39.[209-5]
[209-1]Ritter, Erdkunde VI, 180 ff;Schomburgkin the Ausland, 1843, Nr. 274;Humboldt, Relation hist., I, 306; Neuspanein, IV, 379;Pöpping, Reise, II, 197 ff., 237 ff. The ant, even in Marcgrav's time, was called therey do Brazil.
[209-2]Ritter, Erdkunde VIII, 895;Burger, Reise in Oberitalien, I, 7. The monuments of Nubia have suffered much less from the hand of time than those of Upper Egypt, because the air of the plateau is drier. The effects of climate have been most severely felt in Lower Egypt, where the air is most moist. (Ritter, I, 336, 701.) In the case of wood, on the other hand, dryness may be a great agent of destruction. Thus, in Thibet, wooden pillars, balconies, etc., have to be protected with woolen coverings to keep them from splitting. (Turner, Gesandtsreise, German translation, 393 ff.)
[209-3]CompareRitter, Erdkunde, VIII, 789-815, especially the beautiful collection of passages from the Bible bearing on the locust plague, 812 ff.Pliny, H. N., XI, 85.Volney, Voyages enSyrie, I, 305. For account of an invasion of locusts, which, in 1835, covered half a square mile, four inches in thickness, seev. Wrede, R. in Hadhrammaut, 202. It is estimated that, in England, the destruction caused by rats, mice, insects, etc., amounts to ten shillings an acre per year; i. e., to £10,000,000 per annum. (Dingler, Polyt. Journal, XXX, 237.)
[209-4]Origin of the gulf of Dollart in Friesland, 2½ square miles in area between 1177 and 1287; and of Biesboch of 2 square miles in 1421. On the repeated destruction of lands in Schleswig by inundations, seeThaarup, Dänische Statistik, I, 180 seq. It is a remarkable fact that in relation to the Mediterranean,Strabo, VII, 293, considers all such accounts fables.
[209-5]As to how the grandeur and irresistibleness, etc. of this nature-consumption in the tropics leads men to superstition and the indulgence of wild fancies, seeBuckle, History of Civilization in England, 1859, I, 102 ff. Since the conquest of Chili, sixteen earthquakes, which have destroyed large cities totally or in part, have been recorded.
SECTION CCX.
NECESSITY OF CONSIDERING WHAT IS REALLY CONSUMED.
Whenever there is question of consumption, it is necessary to examine with rigid scrutiny, what it is that has been really consumed; that is, that has lost in utility. The person, for instance, who pays twenty dollars for a coat, has consumed that amount of capital only when the coat has been worn out.[210-1]What is called the consumption of one's income in advance is nothing but the consumption of a portion of capital which theconsuming party intends to make good from his future income.[210-2]Fixed capital, too, can certainly be directly consumed; for instance, when the owner of a house treats the entire rent he receives from it as net income, makes no repairs, and no savings to put up a new building at some future time. As a rule, however, the owner of fixed capital must, in order to consume it, first exchange it against circulating capital. Thus the prodigality and dissipation, especially of courts of absolute princes, have found numerous defenders who have claimed that they are uninjurious, provided only the money spent in extravagance remained in the country.[210-3]The prodigality itself, that is, the unnecessary destruction of wealth is not, on that account, any the less disastrous.[210-4]If, for instance, there are fire-works to the amount of 10,000 dollars, manufactured exclusively by the workmen of the country, ordered for a gala day; the night before they are used for purposes of display, the national wealth embraces two separate amounts, aggregating 20,000 dollars; that is, 10,000 dollars in silver and 10,000 in rockets, etc. The day after, the 10,000 in silver are indeed still in existence, but of the 10,000 in rockets, etc., there is nothing left. If the order had been made from a foreign country the reverse would have been the case, the silver storesof the people would have been diminished, but their supply of powder would remain intact.
In a similar way, there is occasion given for the greatest misunderstanding when people so frequently speak of producers and consumers as if they were two different classes of people. Every man is a consumer of many kinds of goods; but, at the same time, he is a producer, unless he be a child, an invalid, a robber, a pick-pocket, etc.[210-5]At the same time, Bastiat is right in saying that in case of doubt when the interests of production and of consumption come in conflict, the state, as the representative of the aggregate interest, should range itself on the side of the latter. If we carry things on both sides to their extremest consequences, the self-seeking desire of consumers would lead to the utmost cheapness, that is, to universal superfluity, and the self-seeking wish of producers to the utmost dearness, that is, to universal want.[210-6]
[210-1]CompareMirabeau, Philosophie rurale, ch. 1;Prittwitz; Kunst reich zu werden, 474.
[210-2]A very important principle for the understanding of the real effects of the spending of a state loan!
[210-3]In this wayVoltaire, Siècle de Louis XIV., ch. 30, excuses for instance the extravagant (?) buildings at Versailles; and in a very similar way Catharine II. expressed herself in speaking to the Prince de Ligne: Mémoires et Mélanges par le Prince de Ligne, 1827, II, 358.v. Schrödereven thinks that the Prince might consume as much and even more than "the entire capital" of the country amounted to; only, he would have him "let it get quickly among the people again." He is also in favor of the utmost splendor in dress, provided the public see to it that nothing was worn in the country which was not made in the country. (Fürstl. Schatz- u. Rentkammer, 47, 172.) Similarly evenBotero, Della Ragion di Stato VII, 85; VIII, 191; and recentlyv. Struensee, Abhandlungen I, 190. The principle of Polycrates inHerodotusis nearly to the same effect. Compare, per contra,Ferguson, Hist. of Civil Society, V, 5.
[210-4]With the exception of the profit made by the manufacturers.
[210-5]Strikingly ignored bySismondi, N. P., IV, ch. II.
[210-6]Bastiat, Sophismes économiques, 1847, ch. IV. Everything which, in the long run, either promotes or injures production, "steps over the producer and turns in the end to the gain or loss of the consumer." Only for this principle, inequality and dissensions among men would keep growing perpetually. All that the systems of Saint Simonism and communism contain that is relatively true is thus realized.
SECTION CCXI.
NATURE AND KINDS OF CONSUMPTION.—PRODUCTIVE CONSUMPTION.
There is no production possible without consumption. The embodiment of a special utility into any substance is a limitation of its general utility. Thus, for instance, when corn is baked into bread, it can no longer be used for the manufacture of brandy or of starch.[211-1]
When, therefore, consumption is a condition (outlay) to production it is called productive (reproductive).[211-2]Here, indeed, the form of the consumed goods is destroyed, but the value of the goods lives on in the new product.
There are different degrees of productiveness in consumption also. Thus, to a scholar, his outlay for books in his own branch is immediately productive; but nevertheless, books in departments of literature very remote from his own, pleasure trips, etc. may serve as nutrition and as a stimulus to his mind. According to § 52, we are compelled to consider all consumption productive which constitutes a necessary means towards the satisfaction of a real economic want. We may, indeed, distinguish between productive consumption in aid of material goods, of personal goods and useful relations; but in estimating the productiveness of these different sorts of consumption we are concerned not so much with the nature of the consumption as the results in relation to the nation's wants. The powder that explodes when a powder magazine burns is consumed unproductively; but the powder shot away in war may be productively consumed just as that used to explode a mine may be unproductively consumed; for instance, when the war is a just and victorious one and the mining enterprise has failed.[211-3]
The maintenance or support of those workmen whom they themselves acknowledge to be productive is presumably accounted productive consumption by all political economists. Why not, therefore, the cost of supporting and educating our children, who, it is to be hoped, will grow up later to be productive workmen. Man's labor-power is, doubtless, one of the greatest of all economic goods. But without the means of subsistence, it would die out in a few days. Hence we may, and even without an atomistic enumeration of the individual services and products of labor, consider the continued durationof that labor-power itself as the continued duration of the value of the consumed means of subsistence.[211-4]
[211-1]Even when air-dried bricks are made from water and clay which cost nothing; when purely occupatory work is done, and purely intellectual labor performed, some consumption of the means of subsistence by the workmen is always necessary.
[211-2]Χρηματιστικαὶ[TN 37]in contradistinction to ἀναλωτικαὶ,[TN 38]according toPlato, De Rep., VIII, 559. Temporary consumption. (Umpfenbach.)
[211-3]Storch, Handbuch, II, 450.
[211-4]Against the difference formerly usually assumed between productive and unproductive consumption, seeJacob, Grundsätze der Nat. Oek., II, 530. It is because of a too narrow view thatHermann(II, Aufl., 311), instead of reproductive consumption, speaks of technic consumption.
SECTION CCXII.
UNPRODUCTIVE CONSUMPTION.
Moreover, unproductive consumption embraces not only every economic loss, every outlay for injurious purposes,[212-1]but also every superfluous outlay for useful purposes.[212-2]Yet, not to err in our classification here, it is necessary to possess the impartiality and many-sidedness of the historian, which enable one to put himself in the place of others and feel after them as they felt. The man, for instance, who, in cities like Regensburg and especially Rome, sees numberless churches often, so to speak, elbowing one another, cannot fail to recognize the difference between the buildings of to-day for business, political, educational and recreative purposes,[TN 39]and the medieval, for the satisfaction of spiritual wants. The latter also may, in their own sphere, and in their own time, have, as a rule, operated productively, as the former operate, often enough, by way of exception unproductively; as in the case of railway and canal speculations which have ended in failure. It would be difficult to decide between the relative value of the two kinds of wants, because the parties to the controversy do not, for the most part, share the want (Bedürfniss) of their respective opponents, frequently do not evenunderstand it, and therefore despise it. Thus, there are semi-barbarous nations, who can entertain that respect for the laws which is necessary even from an economic point of view only to the extent that they see the person whose duty it is to cause them to be observed seated on a throne and surrounded by impressive splendor. Hence, such splendor here could not be considered merely unproductive consumption.[212-3]
We must, moreover, remark in this place as we did above, § 54, that it is easiest to pass the boundary line between productive and unproductive consumption in personal services. In 1830, the expenses of the state, in Spain, amounted to 897,000,000 of reals per annum; the outlay of municipal corporations, to 410,000,000, and that for external purposes of religion, 1,680,000,000. (Borrego.) This is certainly no salutary proportion; but it is scarcely evidence of a worse economic condition than the fact that in Prussia it would require a basin one Prussian mile in length, thirty-three and eight-tenths feet broad, and ten feet deep to hold all the brandy drunk in the country (Dieterici); or this other, that the British people spend yearly £68,000,000 sterling for taxes and £100,000,000 yearly for spirituous liquors.[212-4]Berkeley rightly says that the course practiced in Ireland, with its famishing proletarian population, of exporting the means of subsistence and exchanging them against delicate wines, etc., is as if a mother should sell her children's bread to buy dainties and finery for herself with the proceeds.[212-5][212-6]
[212-1]Thus, for instance, food which spoils unused, and food which is stolen and which puts a thief in a condition to preserve his strength to steal still more.
[212-2]So farSenior, Outlines, 66, is right: the richer a nation or a man becomes, the greater does the national or personal productive consumption become.
[212-3]Such gigantic constructions as the palaces, pyramids, etc. of Egypt, Mexico or Peru are a certain sign of the oppression of the people by rulers, priests or nobles. One of the Egyptian pyramids is said to have occupied 360,000 men for twenty years. (Diodor., I, 63;Herodot., II, 175;Prescott, History of Mexico, I, 153, History of Peru, I, 18.)
[212-4]Edinburg Rev., Apr., 1873, 399.
[212-5]Berkeley, Querist, 168, 175, says that the national wants should be the guiding rule of commerce, and that besides, the most pressing wants of the majority should be first considered.
[212-6]Ricardo, Principles, p. 475, was of opinion that an outlay of the national or of private income in the payment of personal services increased the demand for labor and the wages of labor in a higher degree than an equal outlay for material things. The error at the foundation of this is well refuted bySenior, Outlines, 160 ff.
The first to zealously advocate and treat the theory of productive consumption wasJ. B. Say, Traité, III, ch. 2, seq.; Cours pratique, II, 265. But the germs of the doctrine are to be found inDutot, Réflexions politiques sur le Commerce et les Finances, 1738, 974,éd. Daire. His distinctions are in part drawn with great accuracy. Thus he says that, among others, a manufacturer of cloth, productively consumes the results of his workmen, but that the workmen themselves who exchange these results for bread, consume the latter unproductively.Sayis guilty of the inconsistency of claiming that only that consumption is productive which contributes directly to the creation of material exchangeable goods, spite of the fact that he gave the productiveness of labor a much wider scope.Rau, Lehrbuch, I, § 102 ff., 323 seq., is more consistent in so far as he applies the same limitation in both cases. (Compare also § 333, 336.)Hermann, Staatsw. Untersuchungen, 170 seq., 231 ff., would prefer to see the idea of productive consumption banished from the science, for the reason that if the value of the thing alleged to be consumed continues, there can be no such thing as its consumption. But, I would rejoin: in a good national economy, there would be, according to this, scarcely any consumption whatever, because the aggregate value of that which I have called above productive consumption is unquestionably preserved, and continues in the aggregate value of the national products.
Productive consumption is ultimately a stage of production, just as production itself is ultimately a means to an end, consumption, and therefore a preparation for the latter. Both ideas may be rigorously kept apart from each other, just as the expenses and receipts of a private business man, who makes a great portion of his outlay simply with the intention of reaping receipts therefrom, may be. Every one desires his production to be as large as possible, and his productive consumption, so far it does not fail of its object, as small as possible.Riedelrightly says that the theory of reproductive consumption serves Political Economy as the bridge which closes the circle formed by the action of production, distribution and consumption. (Nat. Oek. III, 49.) One of the chief fore-runners of the view we advocate wasMcCulloch, Principles, IV, 3 ff.Gr. Soden, Nat. Oek., distinguishes economic consumption, un-economic and anti-economic consumption. (Nat. Oek., I, 147.)
SECTION CCXIII.
EQUILIBRIUM BETWEEN PRODUCTION AND CONSUMPTION.
In all cases economic production is a means to some kind of consumption as its end.[213-1]The sharpest spur to productiveactivity is the feeling of want.[213-2]"Want teaches art, want teaches prayer, blessed want!" Well too has it been said: "Necessity is the mother of invention!" Leaving mere animals out of consideration,[213-3]those men who experience very few wants, with the exception of some rare and highly intellectual natures, prefer rest to labor. Therefore, when European merchants desire to engage in trade with a savage nation they have uniformly to begin by sending them their nails, axes, looking-glasses, brandy, etc., as gifts. Not until the savage has experienced a new enjoyment does the want of continuing it make itself felt; or is he prepared to produce for purposes of commerce.[213-4]In a state of normal development, the complete and continuing satisfaction of the coarser wants should constitute the foundation for the higher.[213-5]
[213-1]We should not, indeed, say, on this account, withAdam Smith,[TN 40]IV, ch. 8, that "consumption is the sole end and purpose of all production," for labor and saving, besides their economic object have a higher one, imperishable and personal. CompareKnies, Polit. Oek. 129, andsupra, § 30.
[213-2]According toSir F. M. Eden, State of the Poor, I, 254, it is one of the most unambiguous symptoms of advanced civilization when families eat regularly at the same table; so also sleeping in real beds. "Bed and board!" It is said that the regularity of meal times was introduced among the Greeks by Palamedes.Athen.I, 11, afterÆschylus.
[213-3]Hibernating animals have supplies and dwellings, that is something analogous[TN 41]to capital.
[213-4]This advance is generally observed to be introduced by thejus fortioris.Steuart, Principles I, ch. 7. (Compare §§ 45-6-8.) In this way, the earliest oriental despotisms have unwittingly been of great service to mankind. What the sultan here accomplished with his few favorites was done in the lower stages of civilization of the west by the aristocracy of great vassals, in a manner more worthy of human beings, and in a much more stable form. (J. S. Mill, Principles I, 14 ff.)
[213-5]Banfield, Organization of Industry, 1848, 11.
SECTION CCXIV.
CAUSES OF AN INCREASE OF PRODUCTION.
Only when wants increase does production increase also.[214-1]The old maxim:Si quem volueris esse divitem, non est quod augeas divitias, sed minuas cupiditates (Seneca), would, if consistently carried out, have thwarted the advance of civilization and frustrated the improvement of man's condition. On the other hand, most political economists, without more ado, assume that individuals, and still more nations, are wont to extend the aggregate of their enjoyments just as far as there is a possibility of satisfying their wants. But they forget here how great a part is played in the world, as men are constituted, by the principle of inertia.[214-2]At the first blush, what seems more natural than that the less labor a people need employ to obtain the most indispensable means of subsistence, the more time and taste would remain to them to satisfy their more refined wants. According to this, we should expect to discover a more refined civilization, especially, in intellectual matters, in the earliest periods, when population is small, when land exists in excess and is not yet exhausted. But, in reality, precisely the reverse is the case. In the earliest stages of civilization[TN 42]accessible to our observation, we find materialism prevailing in its coarsest form, and life absorbed entirely by the lowest physical wants. (Tropical lands.) Where bread grows on the trees, and one needs only to reach out his hand and pluck it; where all one wants to cover his nakedness is a few palm leaves, ordinary souls find no incentive to an ant-like activity, or to a union among themselves for economic purposes.[214-3]When a Mexican countryman earns enough to keep himself and his family from absolute want by two days' labor in a week, he idles away the other five. It never occurs to him that he might devote his leisure time to putting his hut or his household furniture, etc., in better shape. The necessity of foresight even is almost unknown; and in the most luxuriantly fertile country in the world, a bad harvest immediately leads to the most frightful famine. Humboldt was assured that there was no hope of making the people more industrious except by the destruction of the banana plantations.[214-4]But, indeed, there would be little gained by such compulsory industry. To work for any other end than satiation, it is necessary that man should feel wants beyond the want created by mere hunger.[214-5]There are so many conditions precedent (and mutually limiting one another) to a general advance in civilization, that such an advance can, as a rule, take place only very gradually. Let us suppose, for instance, a single Indian in Mexico, perfectly willing to work six days in the week, and in this way to cultivate a piece of land three times as great as his fellow Indians. Where would he get the land? He would, for a time find no purchasers for his surplus, andtherefore not be in a condition to pay the landlord as much as the latter hitherto received from the pasturage alone. Not until cities are built and offer the rural population the products of industry in exchange for theirs, can they be incited to, or become capable of effecting a better cultivation of the land. This incentive and this capacity, are inseparably connected with each other. Where the agricultural population produce no real surplus, but after the fashion of medieval times, produce everything they want themselves, and consume all their own products with the exception of the part paid to the state as a tax, there can scarcely be an industrial class, a commercial class, or a class devoted to science, art, etc. And, conversely, it is only the higher civilization which finds expression in the development of these classes, that, by a more skillful guidance of the national labor, can call forth its productiveness to an extent sufficient to yield a considerable surplus of agricultural commodities over and above the most immediate wants of the cultivators of the soil themselves. Hence, we find that precisely in those countries which are most advanced in the economic sense, there is relatively the smallest number of men engaged in agriculture, and relatively the largest number in production of a finer kind.[214-6]It is here as in private housekeeping: the poorer a man is, the greater is the portion of his income which he is wont to lay out for indispensable necessities.[214-7][214-8]
[214-1]There is obviously here supposed besides the want thus increased, a capacity for development. Thus, for instance, the inhabitants of New Zealand brought with them, in what concerns clothing, dwellings, etc., the customs of a tropical into a colder country, and did not understand how to oppose the rigor of the new climate, except by building immoderately large fires, until they became acquainted with European teachers. (Edinb. Review, April, 1850, 466.)
[214-2]CompareR. S. Zachariä, Vierzig Bücher vom Staate, VII, 37. Men in the lower stages of civilization cherish a greater contempt for those more advanced than they are themselves visited with by the latter. Thus it was customary for the Siberian hunting races to utter a malediction: May your enemy live like a Tartar, and have the folly to engage in the breeding of cattle. (Abulghazi Bahadur, Histoire généalogique des Tartares.) Nomadic races look upon the inhabitants of cities as for the most part prisoners.
[214-3]The "happy, contented negroes," as Lord John Russel called them, work in Jamaica, on an average, only one hour a day since their emancipation. (Colonial Magazine, Nov. 1849, 458.) Egypt, India, etc., from time immemorial, the classic lands of monkish laziness. CompareHume, Discourses, No. 1, on Commerce. On the other hand, the person who has six months before him for which he must labor and lay up a store, if he would not famish or freeze, must necessarily be active and frugal; and there are other virtues which go along with these. (List, System der polit. Oek., I, 304.) According toHumboldt, the change of seasons compels man to get accustomed to different kinds of food, and thus fits him to migrate. The inhabitants of tropical countries are, on the other hand, like caterpillars, which cannot emigrate nor be made to emigrate, on account of the uniform nature of their food.
[214-4]Humboldt, N. Espagne, IV, ch. 9, II, ch. 5. Similarly among the coarser Malayan tribes, the facility with which fish is caught and the cheapness of sago are the principal causes of their inertia and of their unprogressive uncivilization. (Crawfurd.)
[214-5]Le travail de la faim est toujours borné comme elle. (Raynal.)
[214-6]CompareAdam Smith, I, ch. 11, 2;supra, § 54. In Russia, nearly 80 per cent. of the population live immediately from agriculture; in Great Britain, in 1835, only 35; in 1821, only 33; in 1831, only 31½; in 1841, only 26 per cent. (Porter.) According toMarshall, there were, in 1831, in British Europe, 1,116,000 persons who lived from their rents, etc. In Ireland, there were, in 1831, over 65 per cent. of the population engaged in agriculture (Porter); in 1841, even 66 per cent.
[214-7]In Paris, in 1834, the average income per capita was estimated to be 1,029.9 francs, of which 46 francs were paid out for service; 55.7 for education; 11.5 for physicians' services, etc.; 7 on theatrical shows; 36 for washing; 13.6 for public purposes. (Dingler, Polyt. Journal, LIII, 464.) According toDucpétiaux, Budgets économiques des Classes ouvrières en Belgique, 1855, andEngel, Sächs. Statist. Ztschr., 1857, 170, the proportional percentage of family expenses for the following articles of consumption is:
EXPENSES OFConsumption Purpose.a laborer's family incomfortable circumstances.family of themiddle class.a well-to-dofamily.In Belgium.per cent.In Saxony.per cent.In Saxony.per cent.In Saxony.per cent.Food,61 ⎫62 ⎫55 ⎫50 ⎫Clothing,15 ⎪16 ⎪18 ⎪18 ⎪Shelter,10 ⎬ 9512 ⎬ 9512 ⎬ 9012 ⎬ 85Heating and lighting,05 ⎪05 ⎭05 ⎭05 ⎭Utensils and tools,04 ⎭Education, instruction,02 ⎫02 ⎫3.5 ⎫5.5 ⎫Public security,01 ⎪01 ⎪2.5⎪3.5⎪Sanitary purposes01 ⎬ 501 ⎬ 52.0⎬ 103.0⎬ 15Personal services,01 ⎭01 ⎭2.5 ⎭3.5 ⎭
HenceEngelthinks that when the articles of food, clothing, shelter, heating and lighting have become dearer by 50 per cent., and other wants have not, and it is desired to proportionately increase the salaries of officials, salaries of 300, 600 and 1,000 thalers should be raised to 427.5, 800 and 1,275 thalers respectively. (Preuss. Statist. Zeitschr., 1875.)E. Herrmann, Pricipien der Wirthsch., 106, estimates that in all Europe, 45.6 of all consumption is for food, 13.2 for clothing, 5.7 for shelter, 4.6 for furnishing, 5.3 for heating and lighting, 2.6 for tools and utensils, 13.3 for public security, 6.6 for purposes of recreation. CompareLeplay, Les Ouvriers Européens, 1855, andv. Prittwitz, Kunst reich zu werden, 487 ff. The expenses for shelter, service and sociability are specially apt to increase with an increase of income.
[214-8]The necessity of an equilibrium between production and consumption was pretty clear to many of the older political economists. Thus, for instance,Pettycalls the coarse absence of the feeling of higher wants among the Irish the chief cause of their idleness and poverty. SimilarlyTemple, Observations on the N. Provinces, ch. 6, in which Ireland and Holland are compared in this relation.North, Discourses upon Trade, 14 seq.; Potscr.Roscher, Zur Geschichte der english. Volswirthschaftslehre, 83, 91, 127 ff.Becher, polit. Discurs., 1668, 17 ff., was of opinion that the principal cause keeping the three great estates together, the very soul of their connection, was consumption. Hence the peasant lived from the tradesman, and the tradesman from the merchant. (Boisguillebert, Détail de la France, I, 4, II, 9, 21.) According toBerkeley, Querist, No. 20, 107, the awakening of wants is the most probable way to lead a people to industry. And soHume, loc. cit.,Forbonnais, Eléments du Commerce, I, 364. The Physiocrates were in favor of active consumption. ThusQuesnay, Maximes générales, 21 seq.;Letrosne, De l'Interêt social, I, 12.La reproduction et la consommation sont réciproquement[TN 43]la mesure l'une de l'autre.Some of them considered consumption even as the chief thing (Mirabeau, Philosophie rurale, ch. 1), which could never be too great. Further,Verri, Meditazioni, I, 1-4.Büsch, Geldumlauf, III, 11 ff.
The moderns have frequently inequitably neglected the doctrine of consumption. Thus it appears to be a very characteristic fact that inAdam Smith'sgreat book, there is no division bearing the title "consumption," and in the Basel edition of 1801, that word does not occur in the index.Drozsays that in reading the works of certain of his followers, one might think that products were not made for the sake of man, but man for their sake. But, on the other hand, there came a strong reaction withLauderdale, Inquiry, ch. 5;Sismondi, N. Principes, L., II, passim;Ganilh, Dictionnaire Analytique, 93 ff., 159 ff.; but especially, and with important scientific discoveries,Malthus, Principles, B. II.St. Chamans, Nouvel Essai sur la Richesse des Nations, 1824, is an exaggerated caricature[TN 44]of the theory of consumption. For instance, he resolves the income of individuals into foreign demand or the demand of strangers (29); considers the first condition of public credit to lie in the making of outlay (32); and even calls entirely idle consumers productive, for the reason that they elevate by their demand autilité possible, to the dignity of autilité réelle(286 ff.) The view advocated by Mirabeau, and referred to above, again represented byE. Solly, Considerations on Political Economy, 1814, and byWeishaupt, Ueb. die Staatsausgaben und Auflagen, 1819. And so according toCarey, Principles, ch. 35, § 6, the real difficulty does not lie in production, but in finding a purchaser for the products. But he overlooks the fact here that only the possessor of other products can appear as a purchaser. From another side, most socialists think almost exclusively of the wants of men, and scarcely consider it worth their while to pay any attention to the means of satisfying them.
SECTION CCXV.
NECESSITY OF THE PROPER SIMULTANEOUS DEVELOPMENT OF PRODUCTION AND CONSUMPTION.
Hence, one of the most essential conditions of a prosperous national economy is that the development of consumptionshould keep equal pace with that of production, and supply with demand.[215-1]The growth of a nation's economy naturallydepends on this: that production should always be, so to speak, one step in advance of consumption, just as the organism of the animal body grows from the fact that the secretions always amount to something less than the amount of additional nutrition. A preponderance of secretions would here be disease; but so would be a too great preponderance of nutrition. Now, the politico-economical disease which is produced by the lagging behind of consumption and by the supply being much in advance of the demand, is called a commercial (market) crisis. Its immediate consequence is, that for a great many commodities produced, no purchasers can be found. The effect of this is naturally to lower prices. The profit of capital and wages diminish. A transition into another branch of production, not overcrowded, is either not possible at all or is attended with care, great difficulties and loss. It is very seldom that all these disadvantages are confined to the one branch in which the disease had its original seat. For, since the resources of the one class of producers have diminished, they cannot purchase as much from others as usual. The most distant members of the politico-economic body may be thereby affected.[215-2]
[215-1]Boisguillebertlays the greatest weight on the harmony of the different branches of commerce.L'équilibre l'unique conservateur de l'opulence générale; this depends on there being always as many sales as purchases. The moment one link in the great chain suffers, all the others sympathise. Hence he opposes all taxation of commodities which would destroy this harmony. (Nature des Richesses, ch. 4, 5, 6; Factum de la France, ch. 4; Tr. des Grains I, 1.)CanardPrincipes d'E. politique, ch. 6, compares the relation between production and consumption in national economy with that between arteries and veins in the animal body. On the other hand,Sismondi, N. Principes I, 381, describes the bewilderment and want which are wont to arise when one wheel of the great politico-economical machine turns round more rapidly than the others.
[215-2]Thus, for instance, an occasional stagnation of the cotton factories of Lancashire has frequently the effect of "making all England seem like a sick man twisting and turning on his bed of pain." (L. Faucher.)
SECTION CCXVI.
COMMERCIAL CRISES IN GENERAL.—A GENERAL GLUT.
The greater number of such crises are doubtless special; that is, it is only in some branches of trade that supply outweighs demand. Most theorists deny the possibility of a general glut, although many practitioners stubbornly maintain it.[216-1]J. B. Say relies upon the principle that in the sale of products, as contradistinguished from gifts, inheritances, etc., payment can always be made only in other products. If, therefore, in one branch there be so much supplied that the price declines; as a matter of course, the commodity wanted in exchange will command all the more, and, therefore, have a better vent. In the years 1812 and 1813, for instance, it was almost impossible to find a market for dry goods and other similar products. Merchants everywhere complained that nothing could be sold. At the same time, however, corn, meat and colonial products were very dear, and, therefore, paid a large profit to those who supplied them.[216-2]Every producer who wants to sell anything brings a demand into the market exactly corresponding to his supply. (J. Mill.) Every seller isex vi terminialso a buyer; if, therefore production is doubled, purchasing power is also doubled. (J. S. Mill.) Supply and demand are in the last analysis, really, only two different sides of oneand the same transaction. And as long as we see men badly fed, badly clothed, etc., so long, strictly speaking, shall we be scarcely able to say that too much food or too much clothing has been produced.[216-3]
[216-1]When those engaged in industrial pursuits speak of a lasting and ever-growing over-production, they have generally no other reason for their complaints than the declining of the rate of interest and of the undertaker's profit which always accompany an advance in civilization. CompareJ. S. Mill, Principles, III, ch. 14, 4. However, the same author, I, 403, admits the possibility of something similar to a general over-production.
[216-2]Say'scelebrated Théorie des Débouchés, called by McCulloch his chief merit, Traité, I, ch. 15. At about the same time the same theory was developed byJ. Mill, Commerce defended, 1808.Ricardo'sexpress adhesion, Principles, ch. 21. Important germs of the theory may be traced much farther back:Mélon, Essai politique sur le Commerce, 1734, ch. 2;Tucker, On the Naturalization Bill, 13; Sketch of the Advance and Decline of Nations, 1795, 182.
[216-3]Precisely the same commercial crisis, that of 1817 seq., which more than anything else ledSismondito the conclusion that too much had been produced in all branches of trade, may most readily be reduced toSay'stheory.
There was then a complaint, not only in Europe but also in America, Hindoostan, South Africa and Australia, of the unsaleableness of goods, overfull stores, etc.; but this, when more closely examined, was found to be true only of manufactured articles and raw material, of clothing and objects of luxury; while the coarser means of subsistence found an excellent market, and were sold even at the highest prices. Hence, in this case, there was by no means any such thing as over-production. The trouble was that in the cultivation of corn and other similar products, too little was produced. There was a bad harvest even in 1816.
The most important authorities in favor of the possibility of a general glut areSismondi, N. Principes, IV, ch. 4, and in the Revue encyclopédique, Mai, 1824: Sur la Balance des Consommations avec les Productions. Opposed by Say in the same periodical (Juilliet, 1824); where the controversy was afterwards reopened in June and July, 1827, bySismondiandDunoyer. Compare Etudes, vol. I;Ganilh, Théorie, II, 348 ff.;Malthus, Principles, II, ch. 1, 8. CompareRau,Malthusand Say, über die Ursachen der jetzigen Handelsstockung, 1821.Malthus'views were surpassed byChalmers, On Political Economy in Connexion with the moral State of Society, 1832. But evenMalthushimself in his Definitions, ch. 10, No. 55, later, so defined a "general glut" that there could be no longer question of his holding to its universality. For an impartial criticism, see especiallyHermann, Staatsw. Untersuchungen, 251, andM. Chevalier, Cours, 1, Leçon, 3.
SECTION CCXVII.
COMMERCIAL CRISES IN GENERAL.
All these allegations are undoubtedly true, in so far as the whole world is considered one great economic system, and the aggregate of all goods, including the medium of circulation, is borne in mind. The consolation which might otherwise lie herein is made indeed to some extent unrealizable by these conditions. It must not be forgotten in practice that men areactuated by other motives than that of consuming as much as possible.[217-1]As men are constituted, the full consciousness of this possibility is not always found in connection with the mere power to do, to say nothing of the will to do.[217-2]There are, everywhere, certain consumption-customs corresponding with the distribution of the national income. Every great and sudden change in the latter is therefore wont to produce a great glut of the market.[217-3]The party who in such case wins, is not wont to extend his consumption as rapidly as the loser has to curtail his; partly for the reason that the formercannot calculate his profit as accurately as the latter can his loss.[217-4]
Thus laws, the barriers interposed by tariffs, etc., may hinder the too-much of one country to flow over into the too-little of another. England, for instance might be suffering from a flood of manufactured articles and the United States from an oppressive depreciation in the value of raw material; but the tariff-laws places a hermetic dike between want on one side and superfluity on the other. Strong national antipathies and great differences of taste stubbornly adhered to may produce similar effects; for instance between the Chinese and Europeans. Even separation in space, especially when added to by badness of the means of transportation may be a sufficient hinderance especially when transportation makes commodities so dear that parties do not care to exchange. In such cases, it is certainly imaginable that there should be at once a want of proper vent or demand for all commodities; provided, we look upon each individual class of commodities the world over as one whole, and admit the exception that in individual places, certain parts of the whole more readily find a market because of the general crisis.
Lastly, the mere introduction of trade by money destroys as it were the use of the whole abstract theory.[217-5]So long as original barter prevailed, supply and demand met face to face. But by the intervention of money, the seller is placed in a condition to purchase only after a time, that is, to postpone the otherhalf of the exchange-transaction as he wishes. Hence it follows that supply does not necessarily produce a corresponding demand in the real market. And thus a general crisis may be produced, especially by a sudden diminution of the medium of circulation.[217-6]And so, many very abundant harvests, which have produced a great decline in the value of raw material, and no less so a too large fixation of capital which stops before its completion,[217-7]may lead to general over-production. In a word, production does not always carry with itself the guaranty that it shall find a proper market, but only when it is developed in all directions, where it is progressive and in harmony with the whole national economy.To use Michel Chevalier's expression, the saliant angles of the one-half must correspond to the re-entrant angles of the other, or confusion will reign everywhere. Even in individual industrial enterprises, the proper combination of the different kinds of labor employed in them is an indispensable condition of success. Let us suppose a factory in which there are separate workmen occupied with nothing but the manufacture of ramrods. If these now exceed the proper limits of their production and have manufactured perhaps ten times as many ramrods as can be used in a year, can their colleagues, employed in the making of the locks or butt-ends[TN 45]of the gun, profit by their outlay? Scarcely. There will be a stagnation of the entire business, because part of its capital is paralyzed, and all the workmen will suffer damage.[217-8][217-9]
[217-1]AsFerguson, History of Civil Society, says, the person who thinks that all violent passions are produced by the influence of gain or loss, err as greatly as the spectators of Othello's wrath who should attribute it to the loss of the handkerchief.
[217-2]If all the rich were suddenly to become misers, live on bread and water, and go about in the coarsest clothing, etc., it would not be long before all commodities, the circulating medium excepted, would feel the want of a proper market—all, including even the most necessary means of subsistence, because a multitude of former consumers, having no employment, would be obliged to discontinue their demand. Over-production would be greater yet if a great and general improvement in the industrial arts or in the art of agriculture had gone before. Compare,LauderdaleInquiry, 88. This author calls attention to the fact that a market in which the middle class prevails must put branches of production in operation very different from those put in operation where there are only a few over-rich people, and numberless utterly poor ones: England, the United States—the East Indies, and France before the Revolution. (Ch. 5, especially p. 358.)
[217-3]If England, for instance, became bankrupt as a nation, the country would not therefore become richer or poorer. The national creditors would lose about £28,000,000 per annum, but the taxpayers would save that sum every year. Now, of the former, there are not 300,000 families; of the latter there are at least 5,000,000. Hence, the loss would there amount to £100 a family per annum, and the gain here to not £6 per family. We may therefore assume with certainty that the two items would not balance each other as to consumption. The creditors of the nation, a numerous, and hitherto a largely consuming class, now impoverished, would be obliged to curtail their demand for commodities of every kind to a frightful extent; while a great many taxpayers would not feel justified in basing an immediate increase of their demand on so small a saving. Other revolutions, more political in character, may operate in the same direction by despoiling a brilliant court, a luxurious nobility or numerous official classes of their former income.
[217-4]The above truth has been exaggerated by Malthus and his school into the principle that a numerous class of "unproductive consumers," who consume more than they produce, is indispensable to a flourishing national economy. From this point of view, the magnitude of England's debt especially has been made a subject of congratulation. CompareMalthus, Principles, II, ch. 1, 9. SimilarlyOrtes, E. N., III, 17, to whom even theimpostori mezzaniandladriseem to be a kind of necessity. (III, 23.)Chalmers, Political Economy, III ff. If it was only question of consumption here, all that would be needed would be to throw away the commodities produced in excess. Those writers forget that a consumer, to be desirable, should be able to offer counter-values.
[217-5]Malthus, Principles, II, ch. 1, 3.
[217-6]Let us suppose a country which has been used to effecting all its exchanges by means of $100,000,000. All prices have been fixed, or have regulated themselves accordingly. Let us now suppose that there has been a sudden exportation of $10,000,000, and under such circumstances as to delay the rapid filling up of the gap thus created. In the long run, the demand of a country for a circulation may be satisfied just as well with $90,000,000 as with $100,000,000; only it is necessary in the first instance that the circulation should be accelerated or that the price of money should rise 10 per cent. But neither of these accommodations is possible immediately. In the beginning, sellers will refuse to part with their goods 10 per cent. cheaper than they have been wont to. But so long as those engaged in commercial transactions have not become completely conscious of the revolution which has taken place in prices, and do not act accordingly, there is evidently a certain ebb in the channels of trade, and simultaneously in all. Demand and supply are kept apart from each other by the intervention of a generally prevailing error concerning the real price of the medium of circulation, and there must be, although only temporarily, buyers wanted by every seller, except the seller of money. In a country with a paper circulation, every great depreciation of the value of the paper money not produced by a corresponding increase of the same, may produce such results.Sayis wrong when he says that a want of instruments of exchange may be always remedied immediately and without difficulty.
[217-7]Suppose a people, the country population of which produce annually $100,000,000 in corn over and above their own requirements, and thus open a market for those engaged in industrial pursuits to the extent of $100,000,000. And suppose that in consequence of three plentiful harvests, and because of an inability to export, the market should grow to be over-full, to such an extent that the much greater stores of corn have now (§ 5, 103) a much smaller value in exchange than usual. The latter may have declined to $70,000,000. Hence the country people now can buy from the cities only $70,000,000 of city wares. The cities, therefore, suffer from over-production. That people dispensing with the use of money should establish an immediate trade between wheat and manufactured articles, in which case the latter would exchange against a large quantity of the former, is not practicable, because no one can extend his consumption of corn beyond the capacity of his stomach, and the storage of wheat with the intention of selling it when the price advances is attended with the greatest difficulties.
[217-8]If, for instance, there are too many railroads in process of construction, all other commodities may in consequence lose in demand, and when the further construction begins to be arrested on account of a superfluity of roads, the new rail factories, etc. are involved in the crisis.
[217-9]On the special pathology and therapeutics of this economic disease, compareRoscher, Die Productionskrisen, mit besonderer Rücksicht auf die letzen Jahrzente in the Gegenwart, Brockhaus, 1849, Bd., III, 721 ff., and his Ansichten der Volkswirthschaft, 1861, 279 ff.
SECTION CCXVIII
PRODIGALITY AND FRUGALITY.
Prodigality is less odious than avarice, less irreconcilable with certain virtues, but incomparably more detrimental to a nation's economy. The miser's treasures, even when they have been buried, may be employed productively, at least,after his death; but prodigalitydestroysresources. So, too, avarice is a repulsive vice, extravagance a seductive one. The practice of frugality[218-1]in every day life is as far removed from one extreme as the other. It is the "daughter of wisdom, the sister of temperance and the mother of freedom." Only with its assistance can liberality be true, lasting and successful. It is, in short, reason and virtue in their application to consumption.[218-2][218-3]