Valuables fall naturally and exactly into three classes, Commodities, Services, and Credits. The reasons are obvious at first glance, why articles falling in the first class occupied the thoughts and the efforts of men almost exclusively for the first thousand years of recorded history. Commodities appealed to the senses of men: they are visible, tangible, weighable. Some form of personal slavery existed everywhere, and largely withdrew attention from personal services bought and sold; and there was not apparently sufficient personal confidence between man and man in the earlier ages to allow much development of credits, whose ground is personal trust and whose sphere is future time. Commodities, on the other hand, fitted by the efforts of some men to satisfy the immediate wants of other men, all ready for delivery, to be exchanged against other commodities similarly fitted and at hand, took the field apparently in the earliest ages of recorded Time, gradually became very large in volume, opened new routes of travel and transportation, and served to connect in a rough and ready way neighboring tribes and even neighboring nations.

Commodities are the class of Valuables comprising material things, organic and inorganic, fitted by human efforts to satisfy human desires. Cattle were probably among the first things to become valuable, that is, salable; and it is certain, that they became very early in many quarters of the world a sort of Money or standard of comparison among other things exchangeable, and indeed they continue to be such in some quarters to this day. Near the middle of the sixth book of the Iliad occur these lines:—

Gold and silver also became valuable in the ordinary way in very early times, and later became Money or a medium in exchanging other things; and much later other metals came into use as commodities and then too as money; for the Latin word for money, pecunia, derived from pecus, cattle, seems to imply some original equivalence in value between the bronze stamped with the image of cattle and the cattle themselves. Parcels of land subdued and improved by human hands were probably bought and sold in some portions of the world as early as anything was,—at any rate very early. Land-parcels are a commodity under the definition. Another passage from Homer, towards the end of the seventh book of the Iliad, displays some of the commodities in common use during the heroic age in Greece:—

The earliest detailed record of a commercial transaction in commodities, is the purchase by Abraham of the field and cave in Hebron, more than 2000 years before Christ. It is narrated at length in Genesis xxiii. Long before this purchase, however, it is said of Abraham that he "went up out of Egypt very rich in cattle, in silver, and in gold." This formal sale to him in Hebron of the field and cave of Machpelah is in all its parts instructive to us, and full of signs of the drift of those times. It was "in the audience of the sons of Heth, before all that went in at the gate of his city, that the field and the cave were made sure unto him for a possession. And Abraham weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." In the lack of written and recorded deeds to land-parcels, as we have them now, the sale of them was "made sure" before the faces of living men, who would tell the truth and pass on the word. The market-place in those days was "at the gate of the city," where the judges also used to hold their courts, the place most frequented of all, and sales were made "before all that went in" thither; "in the audience of the sons of Heth" was the silver weighed out, and the field made sure in exchange. Then there were "merchants" as a class; silver passed by weight rather than by tale, although it had already passed beyond a mere commodity and had become money, "current money with the merchant"; and even at this day the Bank of England takes in and pays out gold and silver by balance rather than by count, though they be in coined money: it is the more accurate method.

The author of the book of Job, believed to be of great antiquity, and certainly true to nature and to fact in its essential parts, knew very well the modes in which the ancient mines were wrought, and the worth of the commodities extracted:—

The prophet Ezekiel, who wrote in the sixth century before Christ, incidentally described in his chapter xxvii the commerce in commodities, that then centered in the city of Tyre on the eastern Mediterranean. "All the ships of the sea with their mariners were in thee to traffic in thy merchandise: many islands were at hand to thee for trade: with silver, iron, tin, and lead, they traded in thy fairs: they brought thee for payment horns of ivory and ebony-wood." Among the commodities besides these exchanged in that market, are mentioned by the prophet horses and mules and lambs and rams and goats, wine of Helbon and white wool, fine linen and embroidered work, and riding cloths and mantles of blue and chests of damask and thread, wheat and pastry and syrup and oil and balm, precious spices and cassia and sweet reed, and gold and carbuncles and corals and rubies. These old Phoenicians of Tyre colonized Carthage, and thus bore a vast trade in commodities to the West, going overland into the heart of Africa for dates and salt and gold-dust and slaves, and by sea through the Pillars of Hercules northward to the British Isles for the sake of the trade in tin.

The amount of transactions in commodities, the first class of Valuables, has been constantly increasing, under natural impulses which we shall have shortly to describe, from the dawn of authentic History down to the present moment; and figures are baffled in expressing to our minds the sum of these transactions even in a single country, still more their aggregate in the commercial world. The foreign trade of every country is almost exclusively in commodities, and is only a small fraction of its domestic trade in the same; and so, when we remember that the foreign trade of the United States, for example, under a commercial system designed and adapted to curtail such trade, amounted in 1889 to about $1,600,000,000, and the foreign trade by Great Britain the same year to about 4,000,000,000, we gain a glimpse, we touch as it were the hem of the garment, of the gigantic traffic of the world in commodities alone.

The Production of Commodities is the getting them ready to sell and the selling them.

1. We must look first at the Requisites of such production. They are three, Natural Agents, Human Efforts, Reserved Capital. The following lines of Whittier touch incidentally on these three requisites, and may serve us as a general introduction to them:—

Natural Agents include not only "Nature's sun and showers," but also all the forces and fertilities and materials of free Nature, that men may and do avail themselves of in preparing commodities to exchange with the commodities of other men. Of higher rank in Production than these natural agencies are the Efforts of men in molding them so as to answer other men's Desires, of which efforts the "toiling hands" of the poet are a symbol. They include also the inventive brains and eloquent tongues and the skilful manipulations of every name. The poet's "ship" is an instance of capital, which is always a result of previous toil reserved to help on some future sales. These three elements, Nature, Labor, Capital, conspire in all production of commodities. Nature comes first with her free forces and materials; and then present toil aided by the results of past toil in the form of capital does all the rest in getting commodities ready to sell and selling them. Let us now note each of these three a little more closely.

(a) Natural Agents. The most important point about these is, that they are the free gifts of God, and continue so throughout the complications and transformations wrought on them and through them by Labor and Capital, until the material commodity of whatever kind is finally sold, and so passes out of the purview of our Science. Many of the gifts of God, like the air we breathe and the light in which we recreate ourselves and the water of refreshment drunk from spring or brook, do not connect themselves in any way with commodities bought and sold, and nobody ever thinks of them as salable at all; but it has seemed and still seems to many, as if the natural fertility in a land-parcel, the water-fall along the course of river or stream, the timber-growth which the hand of man planted not, the deposit of gold or coal in the bowels of the earth, and other such-like cases in which natural gifts do connect themselves with human services and then are sold, lifted the Value of the things sold above the point to which the mere human efforts, whether past or present, would raise it. In point of fact, this seeming is not a reality, as will fully appear in the sequel. God is a Giver, and never a Seller; and he has arranged it so in his great world of gifts, that, however much shrewd men may try to monopolize these gifts and then dole them out to other men for pay, they are always practically thwarted in the attempt. God himself never takes pay for anything, and has never authorized anybody to take pay in his behalf; and when this role of Seller of free gifts, which have cost him nothing and which he has not improved, is taken up by any one, he is shortly crowded off the stage in shame by other actors true to Nature.

This is the place for a grand induction. When we study in detail the free gifts of God to this world and its inhabitants, we find they come and keep coming in great classes. This is one of the uniformities of Nature, on whose solid ground men tread and stride in safe inductive reasoning. Can a farmer get pay in the price of his grain for the original fertility of his field, which neither he nor his fathers nor his neighbors have bettered or made more available? Doubtless he would be glad to do so, doubtless he would do so, were it not for the primary fact, that such fertilities as his are in a class of fields, that other men in more or less proximity to him raise grain on other fields, whose original fertility is equal to that in his field; and some of these other men in common competition with the rest as sellers will be willing to part with their grain for a price which will be a fair equivalent for the onerous human services rendered in getting their grain ready to sell and selling it; and the free action of these men as sellers will tend to fix a general market-rate for grain then and there, at which rate all must sell whether they will or nill; and where now is the effect on price of God's free gift? It is still free.

Here is a fine water-fall on the bounding river, the banks are low at this point, just the place for mill and factory, the weight of God's free water will turn the wheels, a hamlet will grow up around them—perhaps a city,—can the riparian owner charge a fancy price for site of dam and mill? He might under some circumstances; but the same river doubtless, above, below, rolling over similar geological strata, leaps and falls at other points also; there are other owners of mill-privileges within hail; besides, there are other streams and tributaries in the region round about; and water has a knack of dropping to the lower levels. God's gifts are broad in classes; competition naturally has free play; natural agents are an essential factor in commodities; so and more so are human efforts; but Values tend perpetually and powerfully under natural competition between men as sellers to proportion themselves to the onerous human efforts involved, and to eliminate completely from all influence on themselves the broad and bountiful gifts of Providence.

What has been observed to be true in respect to two or three or more of the classes of God's free gifts to men, or in men, may almost certainly be inferred to be true of all such classes. Therefore, inductively, such free gifts have no effect on Values to lift them, their influence being eliminated by human competition. Of course, if there be unique cases of remarkable gifts, falling in no class, subject consequently to no competition, one cannot say confidently that the free element in conjunction with the onerous element may not make the return-service greater than it would be otherwise. It may, or it may not, make it greater. There is no living principle at work in such cases, that makes it certain, that the return-service will not be greater. Still, unique cases, if they exist, are of little or no consequence in Economics. They are most remarkably few, at all events. Where come in the solitary gifts, that may later be connected with Valuables, on the round earth as God fashioned it? Gold, silver, diamonds, copper, coal, tin, amber, spice-shrubs, chinchona-trees, and all such things, have been scattered too widely and liberally for individuals to monopolize them, or even combinations of men unless they be assisted by law. Where even are the unique cases of God-given talent or genius in men themselves, such as may become connected with Valuables of the second class? Daniel Webster had his competitors in the Court-room and in the Senate, Ben Jonson did not let Shakspeare have it all his own way on the stage, and even "Milton's starry splendor" did not make Paradise Lost sell well.

We must just note here in passing the supreme importance in an economical point of view of untrammelled competition in the sale of commodities. It is the divinely-appointed means, and the only possible means, of preventing wide-spread injustice through Monopoly. Nothing else in the world can be made effective to estop men from robbing their fellow-men through exchanges artificially restricted; from charging more in the market for their wares than a just compensation for their own efforts; from enriching themselves by impoverishing their neighbors; from worsening the quality of their wares offered for sale; and from relying upon the artificial restrictions put on their competitors, rather than on their own skill and enterprise and the goodness of their goods, for a market. The Common Law of England holds monopolies to be illegal, and the reasons given (11 Coke, 84) are, first, because the price of the commodity will be raised; second, because the quality of the commodity will not be so good and merchantable as it was before; and third, because they are apt to throw many working people out of employment. It is nothing less than a crime against Civilization, than a sin against the clear ordinance of God, than an artificial obstruction to individual and national Progress, to put up bars and barriers by law for the purpose of cutting off competition, whether domestic or foreign, either by putting disabilities in the path of any or through monopoly tariff-taxes, in the buying and selling of useful commodities anywhere.

(b) Human Efforts. Every way unlike the free forces and materials of Nature, indispensable as these are in the production of commodities, is the second requisite in such productions, namely, the onerous efforts of men. Persons are very different from things, from powers, from lifeless materials. Persons act from motives only. Minds lie back of bodily exertions, impelling and guiding them. Such efforts as are needful to mold materials into commodities are only put forth in view of, and for the sake of, a remunerative return; and only rational beings, acting under motives whose goal is in the future, capable of foresight and of adapting means to ends, can put forth such efforts. No degree of training can make even the most intelligent animals capable in any degree of that kind of exertion, which we call Labor; and there is no improvement whatever in the methods of animals in reaching their instinctive ends,—the beaver builds his dam and the bee gathers and deposits the honey exactly as bees and beavers did ages ago.

In the strictest sense, accordingly, there is no such thing as physical labor, because the mental must coÖperate with the physical even in the lowest forms of human exertion; and in the same sense there can be no such thing as exclusively mental labor, for the bodily powers conspire more or less in the highest intellectual efforts that are ever sold. Nevertheless, both the phrases, physical labor and mental labor, are convenient and not harmful, whenever on the one side the bodily powers seem to be predominant in the effort, and on the other the intellectual.

It is now to be noticed, that all that men can do, when they labor physically, is to move something. When a man works with his hands or his feet or his whole body, all that he does or can do, is to begin a series of motions or resistances to motion, for this good reason, human muscles in their very structure are capable only of starting motion and stopping motion. All the marvellous results of physical effort in all the world have flowed from so simple a matter as the contraction and expansion of muscle; and the world of materials is so cunningly constructed, that, when these are moved into right position by human hands, or by some form of capital itself the result of previous human handling, the free powers of Nature do all the rest, and valuable commodities are the good outcome. For one example, when the woodman fells a tree for sale, he brings a series of motions (labor) to bear upon the trunk, by means of his sharp axe (capital), and then the power of gravitation (nature) seizes the tree and brings it crashing to the earth. For a second illustration, wool and cotton have by nature a certain tenacity of fibre, and what is more to the point, a certain kinkiness of fibre easily interlinking one with another indefinitely in length; men move these separate fibres in certain relations to each other by an instrument (capital) called a spindle, and the result is thread; then other men move these threads into relations with each other by means of an implement (capital) called a shuttle, and the outcome is a web of cloth; lastly, the tailor moves his shears through the cloth, and then his needles, and the issue is a coat, a commodity, the valuable for which all these processes were gone through with, and by the sale of which all the onerous factors therein are compensated.

Now, since human muscles are soon wearied in action, and since motion is the only thing required of men in the production of commodities, they naturally look around for outside help in this matter; and the first help they lighted on for moving things was the domestic animals, the ox and ass and horse, doubtless domesticated in the very beginnings of society; and as these can be used in so many different places, and for such a variety of purposes, and are so cheaply reared, they are exceedingly useful as a motive power, and will probably never be superseded as such. Inanimate auxiliaries in moving things into right position for the production of commodities, such as the water-wheel and wind-mill, were undoubtedly brought into use much later; and much later still, steam and electricity and other more subtle and recondite natural agents. All of these helps, whether animate or inanimate, do but cause simple motions of the same kind as those caused by the human hand. The most ponderous engine merely reduplicates that which the arm of a child is capable of; while in point of delicacy and firmness of touch, perhaps no machinery can subdivide and apply this motion so skilfully as the human fingers can. It is said that some of the lace made wholly by hand is finer and more delicate than any yet woven by machinery, although the introduction of machinery into lace-making has cheapened lace products in general to a small fraction of their former cost.

What we commonly call "Power," then, by whatever instrumentality furnished, is simple auxiliary motion, additional to that of physical human Labor. Commodities are produced in unlimited quantity and variety by such labor, assisted by the free forces of nature applied by means of animals and implements, which are capital. But such labor is irksome as well as wearisome, and is never expended except in view of a reward, which is secured only from the sale of the finished commodity.

(c) Reserved Capital. We must examine the nature of Capital with care, and follow its varied forms without confusion, because it is the only other factor besides labor in the production of commodities, that has to be paid for out of their sale.

Simplest cases are always the best in economical discussions. Let us take for illustration a recently observed case from the gold hills of North Carolina. All the methods are strongly primitive, but all the elements of production are present. A negro woman is the laborer, the bits of gold scattered in the soil are the free gift of nature, a bored log to divert the water from the mountain stream, and a tin pan in which to gather and wash the sand and gravel, are two crude forms of capital; free gravitation also brings the water through the log, and free gravity carries down the particles of gold to the bottom of the washing-pan, and many other agencies of free nature coÖperate in this very simple case of production; and besides the log and the pan, there are doubtless some other forms of capital, at least the whittled plug to stop at need the flow of water through the log. The chief factor in these processes of production is still the laborer, the motions of her hands in stirring the sand and picking out the precious bits at the bottom of the pan are the chief motions, the labor is both physical and mental,—no animal could be trained to adopt means to ends like this negro woman.

It is her capital that now engages our attention. Any Valuable outside of man himself reserved to assist in the production of further valuables is Capital. The idea of growth and increase inheres in the very word, which is derived from the Latin noun, caput, a head, a source, and gives intimation in its etymology of its scientific meaning. The word, caput, is often used in classical Latin for a sum of money put out at interest, and its derivative, capitale, is also used in the same sense, at least in mediÆval Latin; and from this form of the word have come into English not only Capital, but also by corruption Cattle and Chattels. Flocks and herds were at one time the principal riches of our Saxon ancestors, and also the principal means of increasing their riches, and in process of time the same root-word came to be spelled differently as applied to animate or inanimate things of value; while the notion implied in the Latin caput, and in the English source, came along in all three of these words; and hence the careful definition of Capital above given.

It makes no difference whether the colored woman bored her own log by means of an item of capital already existing, namely, an auger, or hired another person to bore it for her, or bought the log already perforated, it is an article of Capital, a valuable kept to increase future valuables; she might doubtless sell it for something to a new-comer wishing to operate other sand in the neighborhood, but she keeps it to help herself gather more gold for ultimate sale, she practises what we call in Economics abstinence and must have her reward for this in the form of profits from the ultimate sale of her commodity, gold, as well as a reward for her labor in the form of wages from the same source. As one person furnishes both the labor and capital in this case, there is no actual division of the gross return into wages and profits, as there always must be when separate parties furnish the two essential factors, both of which must be remunerated by the sale of the commodity. What is thus true of the log, is equally true of the tin-pan, and even of the plug also, if it be capable of repeated use and cost something of labor and the help of a previous item of capital, namely, the jack-knife. Our negro woman of the South is a small capitalist as well as a rude laborer, and practises abstinence as well as puts forth exertion, and consequently is entitled to receive profits as well as wages in the return she gets for her gold-dust when she sells it.

We are now beginning to see what the nature of Capital is, and what the motives are for employing it. In the production of commodities Capital is always something that makes easier to the producers the getting ready to sell and the selling of future commodities. The capital always spares more or less of onerous and irksome human exertion. It always mediates between some free force of Nature and some otherwise more onerous effort of men. The sole motive to employ capital in any one or in all of its multitudinous forms from the simplest to the most complex is to throw off upon the ever-willing shoulders of Nature some part of the irksome effort that would otherwise come to the easily-wearied muscles of men. Nature is "good," to use a commercial term, for all she can be made to carry of men's work, through implements devised and machinery contrived to apply, to commodities in every stage of their transformation and transportation till the last, the ever-present potencies of this physical world. These potencies cost nothing. The implements and machinery cost much in present labor and previously created capital. The ultimate sale of commodities must make return for all the forms of capital employed in their production, in the shape of Profits, the reward of abstinence; and for all the forms of direct labor employed in their production, in the shape of Wages, the reward of personal effort.

The beaver gnaws down the tree with his teeth from generation to generation in precisely the same manner; but man is a being more nobly endowed than the beaver, and no sooner had he occasion to fell trees, than something of the nature of an axe suggested itself to his ingenuity. It is true, that his earliest attempts at axe-making were probably of the rudest sort, but just as soon as anything was devised, whether of flint or shell or metal, that rendered easier the felling of a tree, Capital made a beginning along that line of obstacles. Our chief interest in studying the implements of the successive so-called Ages of Stone and Bronze and Iron, is to witness the increasing degrees of ingenuity displayed by those pre-historic men. Among the more gifted races, progress in this direction was perhaps more rapid than we are wont to think it was, since Tubal-Cain, the first artificer of record, is said to have "hammered all kinds of implements out of copper and iron" (Gen. iv, 22). Lucretius, writing in the century before the Christian era, put down the following lines in vigorous Latin, as translated by Mason Good:—

We are at no loss, then, to explain the origin of Capital and its motives. Tools are invented and employed for no other reason than this, that, by means of their help, the human efforts are lessened relatively to the given satisfactions. Since it requires tools to make tools, the progress of this branch of capital must have been relatively slow at first; but, since every advance in mechanical contrivance makes still further advances easier, there is a natural tendency, which facts abundantly exemplify, to a more and more rapid progression in the number and perfection of all implements of production. The same motive that impelled to the first invention, has impelled to the whole series of inventions since, and will constantly impel to further inventions till the end of time. Every step of this progress gives birth to a larger and still larger proportion of satisfactions relatively to efforts; marks an increasing control on the part of man over the powers of Nature; and gives promise for the time to come of greater advantages still in both of these directions. The powers of Nature, such as those which make the grain grow, bring the tree down, turn the water-wheel, impel the locomotive, and send the message round the world, all stand ready to slave in the service of man; but in order to make their aid available for human purposes, there must be a plough, an axe, a wheel, an engine, an electric machine; and it is because capital brings gratuitous natural forces into service, and the more so as capital progresses, that the Value of those commodities produced by the aid of capital tends constantly to decline as compared with those commodities, in the production of which capital conspires less.

It is already plain, that the class, Capital, is a smaller and a peculiar sub-class under the great class, Valuables; nothing can become Capital until it first become a Valuable, and then be capitalized by a distinct act or intention on the part of the owner to reserve it in his own hands as an aid in further production, or transfer it to other hands to be so used, he meanwhile receiving profits as the reward of his abstinence; only a transferable valuable, accordingly, can become Capital in any case, that is to say, it must be either a Commodity or a Credit, since personal services, though they may be sold, cannot be put over into the hands of another to be used in production, and therefore cannot become Capital in any case; and the chief peculiarity of this sub-class, Capital, is, unlike the three great classes of Valuables, each of which is utterly distinct from the other two, so that a Commodity can never become a Credit or a personal Service either of the others, that Capital as a class has extremely flexible limits, and consequently certain Commodities and Credits may easily enough be Capital to-day, and fall back to-morrow into their respective classes of mere Valuables and the next day come out from the class Non-Capital into the class Capital again. The same commodities and credits may be capital at one time, and non-capital at another, though they must be valuable all the time, or cease to be commodities and credits. When it is said that a young man's talents and skill are his "capital," the word of course is used in a metaphorical sense, and the meaning is, that skill and talents are like capital in some respects. Popular language is not scientific.

Cicero wrote long ago: "Optimum et in privatis familiis et in republica vectigal est parsimonia." Abstinence is the best means of revenue as well in private families as in the State. The source of Capital in a distinct act of will saving or sparing from present use (parsimonia) a valuable commodity or credit, and the quick nature of Capital as adding to itself (vectigal) in profits, are both brought out in this Latin maxim, which is rather an expression of an old and ingrained Roman sentiment than anything original with Cicero. It is the very nature as well as the very name of "Capital" to increase itself by rapid increments. It is as well the Stream as the Source. For example, any sum of money soon doubles itself when put out at compound interest, because the original sum increases day and night until it be repaid. It is of the essence of every form of Capital to make growth, because its sole purpose as such is to become an aid to future and further production. A trowel in the hands of a mason, which is capital, pays for itself every day he works with it, and perhaps every hour of the day, in the increased production wrought by means of it. The wheel, which free water turns, though a costly implement, repays that cost a hundred fold in the additional bushels of wheat turned into flour through its aid as capital. So of all implements. So of all machinery. So of all means of transportation: ships, canals, railroads.

There was a strange prejudice in ancient and mediÆval times against this natural increase of capital out of its own bowels, as it were, owing probably to this dictum of Aristotle: "For usury is most reasonably detested, as the increase of our fortune arises from the money itself, and not by employing it for the purpose for which it was intended." In 1360, a French bishop, Nicole Oresme, repeats the error of Aristotle under the same rhetorical image: "It is monstrous and contrary to Nature that a barren stock should give birth, that a thing sterile in its whole being should fructify and be multiplied from itself, and such a thing is money." Even Shakspeare catches up the old figure: "Is your gold and silver ewes and rams?" Shylock answers: "I cannot tell; I make it breed as fast." In the light of the three requisites of Production, in the light of the purpose and wisdom of God in arranging the active forces of this world, the prejudice in question disappears, and intelligence rejoices in the ever-increasing use of Capital as the handmaid of Labor, in the quick and sure reward of him who practises abstinence, in the production of commodities constantly made easier and cheaper in all directions, in a scale of comforts for the masses of men assuredly rising, in a divinely appointed force lifting like Christianity itself upon the otherwise sagging condition of mankind.

Capital assumes but two economical forms, namely, Circulating Capital and Fixed Capital. Circulating Capital is all those capitalized products, whether commodities or credits, the returns for the sale or use of which are derived at once and once for all. All circulating capital will be found in one or other of the following sub-forms: (1) raw materials; (2) wages paid out in view of an ultimate profit; (3) completed products on hand for sale; and (4) products bought and held for the sake of resale. The crucial test of circulating capital is the question, Are the returns to be secured by the single use or single transfer of that particular product? Tools, for example, in the hands of him who has manufactured them for sale is circulating capital. Fixed Capital is all those capitalized products, which are purchased or held with a view of deriving an income from their delayed and repeated use. All fixed capital will probably be found in one or other of the sub-forms following: (1) tools and machinery in use; (2) buildings used for productive purposes; (3) permanent improvements in land parcels; (4) investments in aid of locomotion and transportation; (5) products rented or retained for that purpose; and (6) the national money considered as a whole.

2. We will next look at the essential Conditions of the production of Commodities. These are also three, as are the Requisites, namely, Association, Invention, Freedom. More or less will men make and sell to one another commodities in any state of society, in which there is permitted any considerable degree of association of men with men locally or commercially, in which is encouraged in any way the universal spirit of invention or the desire to get hard things done easier, and in which some degree of liberty of action and security of property and equality of privileges is guaranteed; but it is very plain, that the production of commodities will increase in all directions and become the greatest in that age and country when and where are allowed the closest ties of human association both in place and in commerce, the freest scope and largest rewards of inventive genius, and the highest possible degree of liberty and security and equality of rights. Let us illustrate from a state of things in the southern half of the United States during the first half of the nineteenth century. For the most part the land owners lived on isolated plantations widely separate from one another, these plantations were cultivated by gangs of slaves, a system that tends to bring all manual labor into contempt, the poor whites scattered in hamlets felt themselves above the slaves and beneath the masters, intercourse between the three classes was little, opportunity to better essentially their condition was denied to all three alike, there were but few cities sprinkled over the vast territory and these relatively small, the only commodity produced on a large scale was raw cotton, the simple device for ginning this had been invented in the decade preceding by a college boy from Connecticut, the agricultural implements were of the rudest kind, even the coarse shoes for the slaves were bought at the North;—in short, the degree of association and invention and freedom was each so low, that the production of commodities was exceedingly small, even as compared with what that production became in one quarter of a century after the abolition of slavery.

(a) Association. If we may continue for purpose of illustration our childhood trust in the story of De Foe, Robinson Crusoe came to lead a very tolerable life upon his desolate island by means of his own industry directed so as to satisfy his own wants by his own efforts. He did everything for himself, and had no opportunity to buy anything or sell anything. The whole course of such an isolated life could never develop the idea of Value, would require no such word as Commodities or suggest their production, and such a man while solitary upon his island could not possess Property in the true sense of that word. Association is the first main condition of Production, because of the natural obstacles interposed between the isolated man and the supply of his various wants. If any one man try to surmount a considerable number of these natural obstacles, he must miserably fail, because his powers are not adequate to the task; and hence it follows, that, in a state of isolation, men's wants exceed their powers; but now let the same man devote himself to overcome a single class of obstacles, for instance, those in the way of procuring suitable clothing, and his powers are adequate to this, he soon acquires skill in it, he learns to avail himself of the free help of Nature and the facilitating processes of art, he is able to realize large products along his line, and is now ready to offer his surplus in exchange with other men, who meanwhile have been giving themselves each to another class of obstacles, have concentrated efforts and skill upon them, have succeeded by the help of Nature and art in surmounting them, and are now ready to offer their surplus commodities in exchange for others; and, the exchanges beginning to be made in all directions, men find that they thus obtain vastly greater satisfactions for their various desires than they could possibly get by direct efforts: so that we may even say, that, in a state of society through association, men's powers tend to overtake their wants.

Without association with his fellow-men, there is no creature so helpless, so unable to reach his true end, as is man; and therefore it is, that the impulse to association is one of the strongest of our natural impulses. Men come together, as it were by instinct, into society; and, thus associating themselves together, it is soon discovered, not only that there are various desires in the different members of the community, which are now readily met by coÖperation and mutual exchange, but also that there are very different powers in the different individuals in relation to those obstacles which are to be surmounted. The tastes and aptitudes of different men are very diverse. There is a great diversity in natural gifts. One man has physical strength, another mechanical ingenuity, a third a philosophical turn, and a fourth a bent and genius for traffic. Now, then, Nature speaks in as loud a voice as she can utter, in favor of such a degree of association and exchange as shall allow a free development of these varying capacities, while they work upon the obstacles to the gratification of men's wants, which lie appropriately opposite to them.

Men must come together either locally or commercially, must learn each other's wants, must compare with each other powers and tastes and opportunities, must come to have some confidence in each other, and then they will begin by rendering mutual services back and forth to experience the better satisfactions and the new strength that exchanges bring. Whatever improves the character of men, and thus leads to greater confidence among them, will enlarge their commerce, and knit closer and wider ties of association and production. Neighborhood associations and productions soon create a surplus to be exchanged for something else with other neighborhoods; parts of single nations however remote from each other find a relative diversity of advantage and an increasing profit in connecting themselves by the ties of trade; and the separate nations learn, though late, that they are only one great family for the grand ends of production and progress. Even within the single nation, there is a strong tendency for particular trades to localize themselves in one spot, as for instance, the manufacture of skin gloves has centered itself for the United States in Gloversville, N. Y.; and so in the great cities that are centres of distribution, for example, the wholesale grocers of St. Paul are on one street, the dry goods houses of Boston are in close proximity, and the booksellers of New York are tending towards each other in place.

Now, this broad association as between persons and nations, instead of detracting at all from the individuality and power of each, is the very thing that brings out the individuality and intensifies the power of each; because it is only thus that full scope is given to the exercise and development of each peculiar power whether of the individual or the nation. Hence the strong tendency everywhere visible in the world of commerce towards Specialties: the old single trades and vocations and professions are constantly breaking themselves up into parts, and each man is taking up that for which he is naturally best fitted and has specially trained himself, and all to the great advantage of individuality and personal power and progress. Mr. Carey is certainly right in his principle (much insisted on in all his books), that the degree of individuality depends on the degree of association, each advancing hand in hand with the other; and he is as certainly wrong in lacking confidence in the natural forces at work tending to the highest degree of association and consequently to the highest degree of individuality. These forces are immensely strong. Men come together as it were by instinct, being conscious of individual feebleness; personal interest is soon seen to follow the bent of social attraction; a just sense of personal dignity and importance in being a substantive part in the ongoings of society enormously strengthens the impulse to association and individuality; the progress of each and all in achievement and elevation still further knits the ties of union; and lastly, a strong feeling of social justice, of what is due to others as well as to one's self,—that every man has an inalienable right to his full opportunity and all that that implies, to buy and sell and get gain, to life and liberty and the pursuit of happiness. When motives and powers and potencies such as these, proven to be universal by broad and constant inductions, fail as economical forces to secure association and individuality, then it will be time to look around with Mr. Carey for some inferior and factitious force.

(b) Invention. This is the second main condition in the production of commodities; because production is processes, getting something ready to sell and selling it; and Nature stands ever ready with her free agencies to facilitate these processes, just so far as the inventive brain of man can contrive to unite the two. Invention is the marriage of a gratuitous force to an onerous process, and the fruit of that union is an easier way and multiplied utilities. There are some in every considerable community, and more in every community enlarged by the natural association but just now described, who have the knack of contrivance, who find their joy in finding a new power in Nature or some new application of an old power; were it not for unhindered association and free exchange, the individuality of these would be effectually repressed, and they would have to drudge for their daily bread; but the importance of inventors is well understood in every progressive community, and under advanced exchanges their livelihood is guaranteed by those who hope to profit by its results while their work is maturing; and Production rejoices and grows strong and throws out unnumbered hands to make instant use of the new power and the easier processes, in order to multiply commodities in number and variety.

As an illustration of all this, the reader will be interested in a brief account of the series of Inventions made in Great Britain during the last third of the eighteenth century, in consequence of which the Cotton Industry was established in that country in such preËminence as has to this day baffled the attempts of all other countries even to approximate it.

We catch our first glimpse of Cotton in the pages of Herodotus, who wrote more than 400 years B.C. in relation to India as follows: "There are trees, which grow wild there, the fruit whereof is a wool exceeding in beauty and goodness that of sheep. The natives make their clothes of this tree-wool." This passage is interesting, as showing that the first comparison of cotton with wool exhibited their resemblance in whiteness and in kinkiness, which latter quality enables them both to be spun into yarn; as showing also, that the Hindoos very early both spun and wove cotton, and then made it into clothes; and as showing lastly, the appropriateness of the original name given to cotton in Europe, namely, "tree-wool," a name by which the Germans still designate it (Baumwolle). If the extreme East furnishes the first notice of cotton, the extreme West follows it next in order. When the Spaniards discovered Central and Southern America in the first quarter of the sixteenth century, they reported that they found the Mexicans clothed in cotton cloth.

But wool was the staple of England. Parliament and people were jealous of cotton, lest it might prove a rival to wool, and actually prohibited the introduction of printed calicoes (so called from Calicut in India whence they were exported). The taste, however, for calicoes increased in spite of the prohibition, which was afterwards intermitted for a revenue duty on plain cotton, which was then rudely printed on blocks in London, Manchester, and elsewhere; but the prohibition of Parliament against wearing printed calicoes was first repealed in 1736. Fifteen years later the United Kingdom imported only 2,976,610 lbs. of raw cotton, and exported only £45,986 of cotton goods; in one century the import of cotton became 500 times larger than that, and the export of cottons 1300 times larger than that; and this prodigious result was due mainly to three or four inventions occurring within short times of each other, by means of which the free forces of nature took the place of the onerous efforts of men.

John Hargreaves, a poor weaver in the neighborhood of Blackburn in Lancashire, was returning home from a long walk, in which he had been purchasing a further supply of yarn for his own loom. Spinning at that time only admitted of one thread spun at a time by one pair of hands, one of which turned the wheel and thus made the single spindle rapidly revolve, and the other hand pulled gently upon the "roving" attached to the spindle and thus drew it out to the requisite tenuity twisted into yarn. The "carding," then effected by rude instruments called hand-cards, by means of which the fibres of the cotton were disentangled and straightened and laid parallel with each other; and the "roving," a process by which the short fleecy rolls stripped off the hand-cards were applied to the spindle and made into thick threads only slightly twisted, were the two preparatory operations for the spinning. All these operations were slow and clumsy, and the consequent expensiveness of the yarn formed a great obstacle to the establishment of the cotton manufacture in England. The improvements made in the loom of that period by Kay, father and son, had shortly before doubled the power of each weaver, and the spinners could not keep up in furnishing material to the weavers.

As Hargreaves entered his cottage from this excursion to get yarn to keep his loom agoing, his wife, Jenny, accidentally upset the spindle, which, as was her wont, she was diligently using. Her husband noticed that the spindle, which was now thrown into an upright position, continued to revolve just as when horizontal, and that the thread was still spinning in his wife's hands. The idea immediately occurred to him, that it might be possible to connect a considerable number of upright spindles with the revolutions of one wheel, and thus multiply the power of each spinster. "He contrived a frame in one part of which he placed eight rovings in a row, and in another part a row of eight spindles. The rovings, when extended to the spindles, passed between two horizontal bars of wood, forming a clasp which opened and shut somewhat like a parallel ruler. When pressed together this clasp held the threads fast; a certain portion of roving being extended from the spindles to the wooden clasp, the clasp was closed, and was then drawn along the horizontal frame to a considerable distance from the spindles, by which the threads were lengthened out and reduced to the proper tenuity; this was done with the spinner's left hand, and his right hand at the same time turned a wheel which caused the spindles to revolve rapidly, and thus the roving was spun into yarn. By returning the clasp to its first situation and letting down a piercer wire the yarn was wound upon the spindle."

The powers of Hargreaves' machine soon became known among his ignorant neighbors, notwithstanding his strenuous efforts to keep his admirable invention a secret, and these neighbors naturally enough concluded that a contrivance, which enabled one spinster to do the work of eight, would throw many people out of employment. A mob broke into his house and destroyed his machine. Hargreaves retired in disgust to Nottingham, where by means of the friendly assistance of one other person he was enabled to take out a patent for his invention, which he called in compliment to his industrious wife the "Spinning-Jenny." This invention gave a new impulse to the cotton manufacture, but had it been unaccompanied by other improvements, no purely cotton goods could have been made in England; because the yarn spun by the new jenny, like that previously spun by hand, was not fine enough nor hard enough to be used as warp, and linen or woollen threads had consequently to be employed for that purpose.

In the very year, however, in which John Hargreaves, the poor weaver, migrated to Nottingham, Richard Arkwright, a poor barber's assistant, took out a patent for his still more celebrated machine for spinning by rollers. In one respect Arkwright was much worse off than Hargreaves: the latter had a helpmate meet for him, the former had a wife who is said to have destroyed the models her husband had made and to have opposed him in every step of his career. But Arkwright was not deterred from his life pursuit by the poverty of his circumstances or the scandalous conduct of his wife. After many years of intense and opposed devotion to the possible application of a simple principle he had conceived in his mind, namely, that of spinning by means of rollers revolving at varying rates of rapidity, he succeeded in contriving and patenting his memorable machine, which, more than any other one invention, localized and concentrated in England the gigantic cotton-industry of the world. Arkwright's idea and achievement was to pass the coarse thread drawn out from the rovings over two pairs of rollers in succession, the first of which revolving slowly fined the thread down evenly and gradually, and then this thread was passed over a second pair of rollers turning with a high velocity and drawing out the line into any requisite tenuity. Thus a cotton thread was spun capable of being used as warp. Cotton cloth as such could now be manufactured in England.

From the circumstance that the mill, at which Arkwright's machinery was first erected, was driven by water power, the machine received the inappropriate name of the "water-frame"; and the thread spun on these rollers was commonly called the "water-twist." The old mode of carding the cotton by hand now furnished the "rovings" too slowly to meet the wants of the new spinning-jenny and the new water-frame; and these great inventions would consequently have proven comparatively useless, had not a more efficient and rapid process of carding the cotton superseded just at the right time the old system of hand-carding. Lewis Paul introduced revolving cylinders for carding the raw cotton into rovings preparatory to spinning, in partial imitation perhaps of Arkwright's principle of spinning the rovings by the rotatory motion of rollers. Paul's machine consisted "of a horizontal cylinder, covered in its whole circumference with parallel rows of cards with intervening spaces, and turned by a handle. Under the cylinder was a concave frame, lined internally with cards exactly fitting the lower half of the cylinder, so that when the handle was turned, the cards of the cylinder and of the concave frame worked against each other and carded the wool. The cardings were of course only of the length of the cylinder, but an ingenious apparatus was attached for making them into a perpetual carding. Each length was placed on a flat broad riband, which was extended between two short cylinders, and which wound upon one cylinder as it unwound from the other."

While the foregoing series of inventions placed an almost unlimited supply of cotton yarn at the disposal of the weaver, the machinery as yet introduced was still incapable of providing yarn fit for the finest grades of cotton cloth. The "water-frame" indeed spun abundant twist for warps, but it could not furnish the finest qualities of yarn, because these were too tenuous to bear safely the pull of the rollers while they wound themselves on the bobbin. Samuel Crompton, a young weaver living near Bolton, possessed the ingenuity needful to remove this difficulty. He succeeded in combining in one machine, which from its nature is happily called the "mule," the several excellences of Hargreaves' spinning-jenny and Arkwright's water-frame. Copying after the latter, the mule has a system of rollers to reduce the roving; copying after the former it has spindles without bobbins to give the twist; and the thread is stretched and spun at the same time by the spindles after the rollers have ceased to give out the rove. "The distinguishing feature of the mule is that the spindles, instead of being stationary, as in both the other machines, are placed on a movable carriage which is wheeled out to the distance of fifty-four or fifty-six inches from the roller beam, in order to stretch and twist the thread, and wheeled in again to wind it on the spindles. In the jenny, the clasp which held the rovings was drawn back by the hand from the spindles; in the mule, on the contrary, the spindles recede from the clasp, or from the roller-beam which acts as a clasp. The rollers of the mule draw out the roving much less than those of the water-frame, and they act like the clasp of the jenny by stopping and holding fast the rove, after a certain quantity has been given out, whilst the spindles continue to recede for a short distance farther, so that the draught of the thread is in part made by the receding of the spindles. By this arrangement, comprising the advantages both of the roller and the spindles, the thread is stretched now gently and equably, and a much finer quality of yarn can therefore be produced."

The ingenuity of Hargreaves, Arkwright, and Crompton had been exercised to provide the weaver with yarn, and had now indeed provided him with more yarn than he could use; the spinster had beaten the weaver, just as the weaver had previously beaten the spinster; and the making of cotton cloth seemed likely to continue sluggish, because the yarn could not be woven any faster than a skilled workman could weave it with Kay's improved fly-shuttle. In the summer of 1784, a Kentish clergyman named Edmund Cartwright, being in conversation with some Manchester gentlemen, one of whom observed that, "as soon as Arkwright's patent expired so many mills would be erected and so much cotton spun that hands would never be found to weave it," replied, "Arkwright must then set his wits to work to invent a weaving-mill." Notwithstanding the unanimous opinion expressed by the Manchester gentlemen, that such a weaving-machine was wholly impracticable, the clergyman himself within three years had invented and brought into successful operation the "power-loom." Subsequent inventors improved the idea which Cartwright originated, and before 1834 there were not less than 100,000 power-looms at work in Great Britain alone.[3]

Substantially the same machinery invented for carding and spinning and weaving cotton was very shortly and successfully applied to the carding and spinning and weaving of wool, because the wisdom of Nature imparted to them both the same sort of tenacity of fibre, the same capacity in that fibre to be spun into a thread of indefinite length by means of the little loops or kinks easily interlocking contiguous fibres into a single thread, which two obvious resemblances gave an identical name to the animal and vegetable products otherwise so different from each other.

The spirit of Invention, one of the chief conditions in the production of material commodities, thus simply illustrated along the line of a single manufacture, may serve us for a sample of similar improvements taken and taking place in scores upon scores of other lines of effort and production. The principle is the same in all cases past and present and still to come, namely this, to throw the strain from the mind and muscles of men upon the forces and agencies of free Nature, with which the world around us is crowded in our behalf, and which are waiting to slave in the service of mankind without rest and without fatigue,—without money and without price.

(c) Freedom. By far the most important of all the conditions, under which the production of material commodities goes broadly forward, is liberty of action on the part of the individual; because, wherever such liberty is conceded, association and invention and all other needful conditions follow right along by laws of natural sequence. By liberty of individual action is meant the practical right of every man to employ his own efforts for the satisfaction of his own wants in his own way, whether directly or through exchange. Each man's right of individual freedom is limited of course by every other man's right to equal freedom, which the first man is not at liberty to infringe; and also, in certain few and limited respects, by what is sometimes called the "general good," the judge of the application of which must be the government under which the man lives. With these limitations, which are few in number and never serious in degree when rightly applied, and which limit in common all other rights whatsoever, the right of every man to buy and sell and get gain is just as fully a right as the right of breathing. It stands on the same impregnable ground. It is a natural and self-evident and inalienable right, with which each man has been endowed by his Creator, to put forth efforts for his own well-being and for those dependent upon him, either directly or by means of efforts exchanged with other men equally free; and he is a slave in spirit and position, who tamely submits to have his own rights of buying and selling curtailed, or to stand by and see the rights of his fellow-citizens similarly curtailed, unless such act of interference and curtailment on the part of his Government be justified by a solid proof that some other public or private rights, which are at least as well based as his own, would be endangered by the exercise of his own.

In what cases may a Government properly step in to regulate or prohibit the buying and selling of its citizens? Hundreds of inductions extending through hundreds of years have been carefully and logically conducted in order to reach a just and comprehensive answer to this question; and in all probability the cases have been inductively ascertained for all time, and they are these: such buying and selling may be controlled and prohibited, as are proven to be contrary (1) to the public Morals, (2) to the public Health, (3) to the public Revenue. All other buying and selling may be safely assumed to be both profitable to the parties to it, and also useful to the Commonwealth in general; and any interference with it by public authority is a high-handed infringement of natural rights, a blow aimed at the life and source of property. These wrongful strokes at private rights, this restriction on the freedom of individuals to exchange products for their own welfare, is now mostly confined in civilized countries to the region of Taxation. Within this region the wrongs are still frightful. Judge Cooley, in his "Principles of Constitutional Law," states the matter as follows: "Constitutionally a tax can have no other basis than the raising of revenue for public purposes; and whatever governmental action has not this basis is tyrannical and unlawful. A tax on imports, therefore, the purpose of which is not to raise a revenue, but to discourage and indirectly prohibit some particular import for the sake of some home manufacturer, may well be questioned as being merely colorable, and therefore not warranted by constitutional principle."

Formerly, governments interfered almost beyond belief with the freedom of their people in all industrial and commercial action; dictating what should and what should not be grown and manufactured, what should and what should not be exported and imported; decreeing by proclamation or enacting by statute, the number of apprentices each artisan might employ, and the years during which these must serve as such, and the conditions under which they might then work as journeymen; the materials to be used in woven fabrics, and even the widths and other minor features of such fabrics, were prescribed in the foremost of the European nations; in the reign of St. Louis of France, a "Book of Trades" was issued under royal authority and is still extant, which organizes minutely and subjects to cumbersome rules more than one hundred separate industries as then practised; England was the country of the great trading "Companies," and of all of these the same may be said as Adam Smith said of the Turkey Company formed in 1579, namely, it was "a strict and oppressive monopoly"; among others there were the African Company established in 1530, the Russia Company beginning its operations in 1553, the East India Company chartered on the very last day of the seventeenth century and going out of existence in our own time, and the Hudson's Bay Company, chartered in 1670 and so having the sole control in trade of a region forty times larger than all England; while the colonial system prevailing for two centuries in all the countries of Western Europe regulated the commerce and controlled the manufactures in the colonies with a single eye to the benefits of the mother country, as those were conceived of under the wretched Mercantile system.

Happily, since governments have become more enlightened than formerly, they are perceiving for the most part that they have not the least right to interfere in those ways or in any ways with the natural right of their people to make and grow freely all material commodities, and to buy and sell these freely in the best markets wherever these markets are to be found; and they are also perceiving, that by such interference incalculable losses of property and indefinite retardations of progress are caused to their people, as well as weakness to themselves as governments through a more difficult gathering of taxes and a harder maintenance of prestige and power.

The only motive to a mutual exchange of services, whether in one or in all of their three kinds, that is to say, to a free production of commodities and services and credits, is always and everywhere the mutual benefit of the two parties exchanging. After all the processes have been gone through with and the exchanges are consummated, all the parties are richer than before, that is, they have more satisfactions, otherwise the processes and exchanges would instantly cease. Therefore, a universally free production benefits everybody, and harms nobody. Moreover, under a system of free production, every man is allowed under the stimulus of self-interest to work away at those obstacles to the gratification of human desires which he feels himself best able to overcome, to follow the bent of his own mind, and to avail himself of all those free helps in his peculiar work which Nature offers to him. Under these circumstances, obstacles give way in all directions; the amount of material products produced is vastly augmented, the number and variety and excellence of personal services proffered are indefinitely increased, and credits compelling the Future to pay tribute to production are multiplied; the diversified and rapidly increasing desires of all persons in such a community are readily met through profitable exchanges; while all peculiar facilities natural and acquired are taken immediate advantage of, the diversities of relative advantage in production become marked in all directions, and a new day of industrial and commercial prosperity is ushered in. Because under freedom all men are sure to dispose of their industrial efforts to the best advantage, they have the strongest possible motives to put them forth; since they can purchase with them what they will and when they will, and where they will. Thus freedom leads to extended association, and also to the invention of machinery and all labor-saving appliances.

3. We are now in position to understand thoroughly the ultimate Grounds of the production of material commodities. We have seen, that these commodities have been multiplying in number and variety and excellence ever since the beginnings of history, that they are everywhere multiplying now at a rate hitherto unprecedented and undreamed of, and that improved and improving methods of transportation by land and sea are now carrying these back and forth to the ends of the earth. What is the principle, under which these things have been done, are now being done, and are certain to be done in the time to come?

The physical and moral obstacles, that Nature has interposed to the gratification of the multitudinous and constantly increasing desires of men, are so great in all directions, that the powers of the individual man are utterly unable to surmount any considerable number of them; while at the same time, the physical and moral powers, adapted under sufficient motives to overcome these obstacles, are very diverse in the different individuals of mankind. Not only is there a surprising diversity in original gifts, but also the powers acquired by gradual concentration of personal effort upon one set of obstacles become exceedingly diverse, as does moreover familiarity in the use of the gratuitous forces of nature which lend their aid towards overcoming these particular obstacles. As the result of one or two or all of these, one man naturally comes to have a vast advantage over others in his particular branch of business, whatever that may be; each of these others by precisely the same means comes to have a legitimate advantage over the first in his own branch of effort, whatever that may be; and if, as always happens practically, the first has desires which the varied efforts of the others can satisfy, and they too desires which his efforts can satisfy, nothing more is necessary to profitable exchanges between them than this diversity of relative advantage at different points.

It is solely because a given effort irksome in itself put forth for another person, in view of and for the sake of a return-service from him, realizes more of satisfaction to both parties than when put forth for one's self directly, that commercial exchanges ever take place among men. The sole ground of these, the principle underlying them everywhere, is Diversity of Advantage between different Men and between different Nations in different respects. All exchanges whatsoever depend on diversity of relative advantage in the production of commodities or services or credits as between the persons exchanging; and this diversity of relative advantage exists by God's appointment primarily among individual men as such, and only secondarily on the ground of the varied soil and climate and position and natural gifts of different parts of the earth. Reserving these secondary considerations, which are quite secondary in importance also, to a later detailed discussion, it is very clear and of central consequence in our science that a diversity of relative advantage in different things displays itself as between the individuals of every community and country large and small. There is no hamlet in any land in which one man has not an advantage over his neighbors in the making of clothes, another in the making and setting of horse-shoes, a third in the building of houses, a fourth in the curing of diseases, and another in the keeping a school; while each of those neighbors has undoubtedly some advantage or other over each of these in some trade or means of livelihood. As a natural result of this diversity any two of these villagers may profitably exchange their respective efforts with each other, provided of course each has a desire for the product of the other, to the manifest lessening of the effort of each relatively to the satisfaction of each, and the more so as the relative superiority of each to the other in his own trade is the greater.

This point will repay some pains in minute illustration. If the blacksmith can make and set horse-shoes only a trifle better than the tailor could do this if he tried, and the tailor can make coats only a little better than the blacksmith could make one if he chose, there will be but a slight benefit to each in their changing works with one another. For the sake of definiteness, let us say, that the tailor's capacity for making coats is 6, and his capacity in making and setting horse-shoes is 5; and also that the blacksmith's capacity for shoeing horses is 6, and his ability in making coats is 5. Each has a relative superiority to the other of 1 in his own trade; and if they exchange efforts, as they probably would under these circumstances, there is only an advantage of 2 to be divided between them.

Now let us suppose (what might easily become a fact), that the tailor by exclusive and augmented attention to the conditions of his own craft carries up his capacity for making coats to 15, the blacksmith's efficiency in both the trades remaining the same as before. There will now be an increased motive to both the artisans for exchanging products with one another, and a larger gain to each than before as the result of such exchange. The diversity of relative advantage as between the two has now gone up from 2 to 11. The tailor can now make a coat much better and quicker than before; and though the blacksmith owing to his inertness can neither make nor set horse-shoes any better than before, still less make coats any better, he will after all by still trading with the tailor reap a part of the benefit of the latter's increased efficiency in making coats; the new coat is at once better and costs less than the previous one; the tailor is still less inclined than before to leave his new and greater advantage over the blacksmith to set himself to shoeing his own horse; even on the old terms the blacksmith can do that 1 better than he himself can, and rather than forego the trade he will naturally offer the blacksmith somewhat better terms than before, or in other words will feel impelled to share with the blacksmith a part of the proceeds and rewards of his own now superior skill and diligence. The trade began on the sole basis of a relative diversity of advantage as between the two mechanics, each in his own craft; this relative diversity, without which no exchange ever takes place between any two persons, has now gone up as between these two from 2 units of advantage to 11 units of advantage; how will these 11 units be divided in this case? Nobody can tell exactly how they will be divided. Two things about it, however, are certain at least in their tendencies and potencies. The blacksmith is sure to get some part of the extra fruit of his neighbor's new push and spirit, while the tailor is sure to get as his own reward by much the larger part of the whole blessed 11.

We must by no means omit to notice the logical inference from this instance, nor fail to make the proper inductive generalization from a sufficient number of similar instances. It is this: no man can make any essential improvement in any of the methods of producing material commodities, without at the same time benefiting other people as well as himself. Under natural law, which is no respecter of persons, he can by no possibility selfishly take to himself the entire fruits of his own growing skill and vigor. The only way in which he can gather in at all the fruits of these is to sell their proceeds in the open market. To broaden his own market for now better and more abundant goods he must offer them to everybody on somewhat better terms than formerly—and the better the terms the broader the market—and he can well afford to do this, because the goods now cost him less of irksome human effort. Every improvement in the production of commodities is precisely of that complexion. The issue of every invention, of every improved process of every kind, is, so far forth, a cheaper product. And this public gain follows, must follow, individual enterprise at single points, even when the great mass of exchangers remain at the old stage of sluggishness. Whatever increases at one point even, and a fortiori at two points, the diversity of relative advantage as between any two exchangers, is of benefit to them both, and the greater this relative diversity becomes the greater the benefit to both.

Now let us see how the matter stands, when tailor and blacksmith at the same time feel and obey the impulses to a more skilled and vigorous artisan life. Suppose the blacksmith too carries up his efficiency in his own trade to 15, just as the tailor has done, the potency of each in the trick of the other remaining as before at 5; under these circumstances when the two come to trade with each other, each has a relative superiority over the other of 10, and there is an advantage of 20 points to be divided between the two; the trade is now ten times more profitable to each than it was at the outset, when there was only an aggregate of 2 units for the division between two parties; and accordingly the motive to an exchange and the gain of an exchange as between tailor and blacksmith are ten times greater than they were before. Therefore we lay down the principle, as inductively ascertained and as universally applicable to all exchanges, that the greater the relative superiority at different points as between the parties exchanging, the more beneficial and profitable do the exchanges become to all the participators in them. If this principle be just, and we may well flatter ourselves that it will be found to be just, it follows, that every man who has anything to buy or sell, is directly interested in the highest success of his fellow-exchangers, that every trade finds its own advantage in the success of all other trades, and that all discoveries and inventions by which Nature is made to pay tribute to art is, restrictions apart, so much clear gain to the world at large. In the light of sound and broad principles, what David Hume called the "Jealousy of Trade" is simply silly.

The mainspring that impels all buyers and sellers to quicken their movements and to improve their methods and thus and otherwise to cheapen their costs of production, is the natural press of competition. Somebody else is offering this product, or will offer it, for less than we are now selling it for, and we must contrive some way by shortened times or cheaper processes or a quicker zeal not to be beaten in this market-race, is the silent argument ever making itself felt on the mind and hand of the producer. Such natural action always increases the general diversity of relative advantage as among buyers and sellers.

But, on the other hand, whatever lessens or threatens to lessen this natural and most beneficial stress of competition among producers of similar commodities at home or abroad, necessarily lessens the motive on the part of these producers to excellence of quality in their goods and to cheapness of their cost, because it makes less the diversity of relative advantage as between these producers and those producers of other commodities against which the first exchange. The units of advantage that would otherwise be divided between the exchangers are diminished; the motives to trade and the rewards of trade are thus lessened to each pair of parties subject to such diminution of competition, and consequently to the community, or nation, or family of nations, as a whole; and accordingly this is the precise place for us to look into the nature and effects of Monopoly, so called, and to perceive once for all, that Monopoly is the enemy of mankind.

Monopoly is a word derived from two Greek words, which mean when combined selling alone, that is, the privilege of selling one's commodity free from the competition to which it is naturally subject by other sellers than the privileged one. Monopoly is thus artificial restraint imposed on some buyers and sellers for the supposed benefit of other buyers and sellers. It is wholly unnatural. It is usually enjoyed under the forms of law. Its beneficiaries commonly cajole or extort from Government by hook or by crook the exclusive privilege of selling certain commodities in a designated market. Their motive is purely selfish: it is simply and solely to get for themselves a return-service artificially enhanced by selling commodities in a legally restricted market. The effect in the first instance usually corresponds to their expectations. The public are at their mercy so far as the designated commodities are concerned.

The general story of monopolies is a dreary stretch of record of human greed and wrong on the one hand, and of wide-spread poverty and suffering and slowly-gathering resistance on the other. We will look at only two instances at present in the long account, premising that, the motives of greed and grab are the same in all instances, and the results of wrong and hate on the part of those oppressed by them are the same also in all instances. Let Macaulay (I, 40) tell us something of the first instance selected for illustration. "But at length the Queen took upon herself to grant patents of monopoly by scores. There was scarcely a family in the realm which did not feel itself aggrieved by the oppression and extortion which this abuse naturally caused. Iron, oil, vinegar, coal, saltpetre, lead, starch, yarn, skins, leather, glass, could be bought only at exorbitant prices. The House of Commons met in an angry mood. It was in vain that a courtly minority blamed the Speaker for suffering the acts of the Queen's Highness to be called in question. The language of the discontented party was high and menacing, and was echoed by the voice of the whole nation. The coach of the chief Minister of the Crown was surrounded by an indignant populace, who cursed the monopolies, and exclaimed that the prerogative should not be suffered to touch the old liberties of England. There seemed for a moment to be some danger that the long and glorious reign of Elisabeth would have a shameful and disastrous end. She, however, with admirable judgment and temper, declined the contest, put herself at the head of the reforming party, redressed the grievance, thanked the Commons in touching and dignified language for their tender care of the general weal, brought back to herself the hearts of the people, and left to her successors a memorable example of the way in which it behooves a ruler to deal with public movements which he has not the means of resisting."

Perhaps some one of my readers may suggest, that these are the words of a Whig-Liberal, and may thus exaggerate the cause of the people as against the monopolists. Well, then, let us hear the words of a high Tory-Loyalist, the historian Hume (IV, 335, 350), in relation to the same monopolies. "The active reign of Elizabeth had enabled many persons to distinguish themselves in civil and military employments; and the Queen, who was not able from her revenue to give them any rewards proportioned to their services, had made use of an expedient which had been employed by her predecessors, but which had never been carried to such an extreme as under her administration. She granted her servants and courtiers patents for monopolies; and those patents they sold to others, who were thereby enabled to raise commodities to what price they pleased, and who put invincible restraints upon all commerce, industry, and emulation in the arts. It is astonishing to consider the number and the importance of those commodities which were thus assigned over to patentees. Currants, salt, iron, powder, cards, calf-skins, felts, pouldavies, ox-skin-bones, train oil, lists of cloth, potashes, anise-seeds, vinegar, seacoals, steel, aquavitÆ, brushes, pots, bottles, saltpetre, lead, accidences, oil, calamine stone, oil of blubber, glasses, paper, starch, tin, sulphur, new drapery, dried pilchards, transportation of iron ordnance, of beer, of horn, of leather, importation of Spanish wool, of Irish yarn; these are but a part of the commodities which had been appropriated to monopolists. These monopolists were so exorbitant in their demands, that in some places they raised the price of salt from sixteen pence a bushel to fourteen or fifteen shillings. Such high profits naturally begat intruders upon their commerce; and in order to secure themselves against encroachments, the patentees were armed with high and arbitrary powers from the Council, by which they were enabled to oppress the people at pleasure, and to exact money from such as they thought proper to accuse of interfering with their patent. The patentees of saltpetre, having the power of entering into every house, and of committing what havoc they pleased in stables, cellars, or wherever they expected saltpetre might be gathered, commonly extorted money from those who desired to free themselves from this damage or trouble. And while all domestic intercourse was restrained, lest any scope should remain for industry, almost every species of foreign commerce was confined to exclusive Companies, who bought and sold at any price that they themselves thought proper to offer or exact."

"The Government of England during that age, however different in other particulars, bore in this respect some resemblance to that of Turkey at present: the Sovereign possessed every power, except that of imposing taxes; and in both countries, this limitation, unsupported by other privileges, appears rather prejudicial to the people. In Turkey, it obliges the Sultan to permit the extortion of the pashas and governors of provinces, from whom he afterwards squeezes presents and takes forfeitures: in England, it engaged the Queen to erect monopolies, and grant patents for exclusive trade; an invention so pernicious, that had she gone on during a tract of years at her own rate, England, the seat of riches, and arts, and commerce, would have contained at present as little industry as Morocco or the coast of Barbary."

But, some one will say, Hume and Macaulay are historians, writing long after these events took place, and may likely have been too favorable in their judgment to freedom of trade domestic and foreign. It is indeed true, that both of them were firmly convinced that freedom of trade is an inalienable right as well as an unspeakable blessing to all men everywhere. So, then, let us go back to contemporaries. Let us hear the eye and ear witnesses of the grievances complained of in 1601. Robert Cecil was then prime minister of Queen Elizabeth. He and his father had had more to do in granting the monopolies than any other persons in the realm except the Queen. Said he from his place in the Commons on the 25th of November: "I say, therefore, there shall be a proclamation general throughout the realm, to notify Her Majesty's resolution in this behalf. And because you may eat your meat more savory than you have done, every man shall have salt as good and cheap as he can buy it or make, freely without danger of that patent which shall be presently revoked. The same benefit shall they have which have cold stomachs, both for aqua vitÆ and aqua composita and the like. And they that have weak stomachs, for their satisfaction, shall have vinegar and alegar, and the like, set at liberty. Train oil shall go the same way; oil of blubber shall march in equal rank; brushes and bottles endure the like judgment. Those that desire to go sprucely in their ruffs, may at less charge than accustomed obtain their wish; for the patent for starch, which hath so much been prosecuted, shall now be repealed. The patents for calf-skins and felts, for leather, for cards, for glass, shall also be suspended, and left to the law."

Five days later one hundred and forty members of the House were formally received by Elizabeth in person, the Speaker having been instructed to convey their thanks to her majesty; and, after the Speaker's address, he with the rest knelt down, and the Queen gave her answer as follows: "Mr. Speaker, you give me thanks, but I doubt me, I have more cause to thank you all, than you me: for had I not received a knowledge from you, I might have fallen into the lap of an error, only for lack of true information. Since I was queen, yet never did I put my pen to any grant, but that upon pretext and semblance made unto me that it was both good and beneficial to the subjects in general, though a private profit to some of my ancient servants who had deserved well; but the contrary being found by experience, I am exceeding beholding to such subjects as would move the same at first. I have ever used to set the last judgment-day before mine eyes, and so to rule as I shall be judged to answer before a higher judge. To whose judgment-seat I do appeal, that never thought was cherished in my heart that tended not to my people's good. And now if my kingly bounty hath been abused, and my grants turned to the hurt of my people, contrary to my will and meaning; or if any in authority under me have neglected or prevented what I have committed to them, I hope God will not lay their culps and offences to my charge. Though you have had, and may have, many princes more mighty and wise, sitting in this seat, yet you never had, or shall have, any that will be more careful and loving."[4]

These were the last words of Elizabeth to the Commons of England. She died in a little more than a year. In a little less than a year before the death of her successor, the famous Act of Parliament of 1624 declares, that all monopolies, grants, letters patent for the sole buying, selling, and making of goods and manufactures, shall be thereafter wholly null and void. Though this Act, and many others, was violated more or less in the next reign, it effectually secured in the long run the freedom of industry in England; and in the opinion of excellent authorities, has done more to excite the spirit of invention and industry, and to accelerate the progress of commerce in that country, than any other law on the statute book.

Our second instance of Monopolies shall be drawn from the state of things in the United States in this year of Grace, 1890. The monopolies of to-day are secured by means of an instrument called a Tariff, which, later on in these pages, will be fully discussed in its history, inmost nature, and invariable effects. Here it will suffice to say, that a tariff is nothing in the world but a combination of Taxes, which taxes the people of the country, on which the tariff is imposed, are obliged to pay in one form or another. The only word ever uttered by a tariff, the only word a tariff from its own nature can utter, is, Thou shalt pay! The ostensible reason for levying these taxes is the constitutional one of getting money into the national Treasury,—"to pay the debts and provide for the common defence and general welfare of the United States"; but the real purpose of laying these tariff-taxes at present is only secondarily and remotely the ostensible and constitutional one; because, on the authority of Professor Taussig of Harvard University, there is not a single one of over 4000 items of taxes in this tariff, that is designed primarily to get money into the treasury from the pockets of the people, but every one of them is designed more or less and more rather than less to raise the price of domestic goods to our own people artificially by keeping out of the country by means of these taxes on them the foreign goods, which would otherwise come into a profit. In other words, there is no purely revenue-tax in our immense tariff at present, but every item in the enormous list is a so-called and mis-called "protective"-tax.

By this shutting off from domestic goods the natural competition of corresponding foreign goods by means of such tariff-taxes, a monopoly is created at the instance and for the sole benefit of certain classes of privileged home-producers. They can sell alone (monopoly) just so far as other sellers are kept out by these heavy taxes. The goal of all their striving is to get an artificially-enhanced price for their own products at the cost of their countrymen by means of a market restricted to themselves through obstacles excluding foreign sellers. The end proposed by these shrewd manipulators is realized in fact. Domestic prices are lifted on so-called "protected" goods. This is the first effect of the monopoly. It has often been alleged, and with great vehemence by the late Horace Greely, that competition among the domestic producers of such wares will lower their price again to the natural point; but if this is so, what motive have the individual producers to work so assiduously in elections and lobbyings to get on and keep on these tariff-taxes? Again, Mr. Greely, and all others of like association, forgets the admirable generalization of Robert Stephenson,—"Where combination is possible, competition is impossible." Combination among producers to keep up prices is always possible in a market restricted by law. This has been proven on a large scale in the United States during each of the past thirty years: combinations among coal operators to keep up the prices of "protected" coal by restricting the annual output of their collieries; combinations among carpet and other woollen manufacturers to maintain high prices of their fabrics by restricting their workmen to certain hours per day or to certain months per year; have been among the commonest of industrial events in all this interval. Within a very few years past there has come into almost universal vogue among these monopolists a new kind of combination called "Trusts,"—again abusing a good word by making it cover an abominable purpose,—which are probably illegal at Common Law, which only become possible under monstrously unjust tariff laws, and which work wide-spread wrong among the masses of the people.

A second effect of this monopoly (as of all monopolies) is to worsen the quality of the goods sold in an artificially restricted market. The historian Gibbon noticed this fact more than a century ago, and said: "The spirit of monopolists is narrow, lazy and oppressive. Their work is more costly and less productive than that of independent artists; and the new improvements so eagerly grasped by the competition of freedom, are admitted by them with slow and sullen reluctance." Alfred Lapoint, United States consul in Peru, warned the State Department at Washington in 1883 of this poor quality of our manufactures, which were then trying to find a South American market. He wrote: "It is my duty to indicate that great carelessness prevails with our manufacturers; for instance, I was called upon to purchase in the United States a steam pump and boiler, which I ordered from one of the most famed manufacturers, and when it arrived, not alone was the boiler inadequate for the pump, but actually after two months' work the upper tube sheet split in three parts, a proof of its bad quality and construction." As men are, a natural competition among buyers and sellers is just as needful to keep up the quality of goods as to keep down their price. Good quality always costs more of effort and skill and capital than bad quality: why should producers continue to furnish good quality to a market from which a free competition in good qualities is excluded by law? Every tendency of human nature, as well as every relevant fact in history, attests, that poor wares at high rates invariably attends upon tariff-monopolies. Shoddy takes the place of wool. Cheaper crowds out better material. Skilled workmanship is displaced by unskilled. Processes of manufacture are hastened in time, and left incomplete to the damage of the goods in order to save capital. Monopoly is always and everywhere the foe of excellence.

A third effect of tariff-monopoly is to prevent the sale abroad of domestic goods to the same extent and amount as foreign wares are kept out by these monopoly-taxes. This vital and fundamental result is almost always overlooked. If a man or a nation refuse to buy of a proffered customer, they cannot by any possibility sell to him; because buying and selling are reciprocal and synchronous; because it takes two to make a bargain; because material commodities, for the most part, ultimately, exchange against each other; and because the only motive a foreigner ever has to bring his goods hither, is to take in exchange for them our domestic goods at a profit, and carry these hence. To forbid entrance to foreign goods is to forbid exit to domestic goods. Monopoly-tariff-taxes, therefore, so far forth, destroy the market for home products, without creating or tending to create, any other market for them. Such taxes, accordingly, cause a dead loss all around,—to the foreign producer who wants to buy our products with his own, to the home producer who wants to sell his own products against those, and even to the government also as a tax-collector, which can get no revenue on foreign goods excluded by monopoly-taxes.

There is a final and deeper point of view, from which all such monopolies are wholly condemnable. They lessen of necessity,—from their own nature and inexorable operation,—the diversity of relative advantage as between exchangers, on which diversity, as we have now seen, the whole fact and gain of exchanges depend. Taxes on raw materials, for example, whether actually paid on them or used to enhance the price of other corresponding materials as in the tariff-taxes, increase the costs of all products into which such taxed materials enter, and so restrict the market of the home-producer by lessening his relative advantage as compared with the relative advantage of the foreigner over him. He cannot sell so well, perhaps cannot sell at all, his cost-enhanced products. Monopoly-taxes on industrial processes of any kind, on the means of transportation, have similar effects on the cost of products; and of course, similar effects in lessening Diversity, in restricting markets, and in destroying the life of Trade.

Before quitting this subject, it may be well for us briefly to classify Monopolies.

(a) Patent Rights. In the great parliamentary Statute of 21 James I, which declared the exclusive privileges to use any and to sell any merchandise to be contrary to the ancient and fundamental laws of the realm, and all grants and dispensations for such monopolies to be of none effect, two exceptions had been made; the first, in favor of Patents for fourteen years to the true and first inventors of new manufactures within the realm; and the second, in favor of the grants by Act of Parliament to any Company for the enlargement of foreign Trade, of which the East India Company chartered on the last day of the last year of the sixteenth century became the most famous and the longest-lived. Open letters or letters patent, as they were called, giving to inventors exclusive authority to vend for a limited time any chattel or article of commerce, of which a model could be made showing the point and application of what was claimed to be new; and Copyrights, which grant an exclusive property also for a limited time to authors and discoverers of something new and useful, of which a model cannot be made, or, as it is phrased in the Constitution of the United States, "the exclusive right to their respective writings and discoveries"; are a part of the results among all English-speaking peoples of the two exceptions in this famous and beneficent Act of Parliament.

In the United States a patent lasts for 17 years, and is not reissued except by a special act of Congress; a copyright lasts for 28 years, and may be renewed by the author, his widow, or children, for 14 years longer. In the constitution of the new German Empire of 1871, this protection of intellectual property (der Schutz des geistigen Eigenthums) is expressly included in the matters which are to be dealt with by the Reichstag or imperial parliament.

Now while patents and copyrights are a monopoly under the definition, they are quite distinct in their purpose and spirit from the monopolies already described. On the whole, Society does well in trying to protect, by law, inventors and thinkers in the sole use and benefit of their respective products for a brief and specified time. There are large difficulties in the way of reaching this end practically, as is proven by the endless and expensive lawsuits in such cases, but the postulate on which it is attempted is sound, namely, that otherwise citizens would have less motive to think and to invent; since in that case only the public-spirited and the rich could or would devote themselves to an important branch of the public progress. A patent or copyright is merely a return service which Society renders for a service received. It violates no man's right of property, as an ordinary monopoly does, but on the other hand is a provision to protect for a time a new right of property created by the thought and efforts of a deserving class of men. The phrase, "intellectual property," used above in translating from the German, is not well chosen, since we have amply learned that anything is property that can be bought and sold, that simple rights of many kinds are constantly on sale in the market, and consequently that patents and copyrights are at once proper and property because they are a technical return-service for other services ready to be rendered to the community.

(b) Revenue Rights. Once at a court ball, Napoleon the First noticed a lady very richly dressed and wearing splendid diamonds, and on asking for her name, ascertained that she was the wife of a tobacco manufacturer of Paris; whereupon it occurred immediately to the quick mind of the French ruler, that the State might just as well have those great profits as an individual; and the sale of tobacco in all its forms became accordingly a State monopoly in the interest of taxation, and so it has continued to this day, and yields now about 400,000,000 francs a year. Other nations have adopted to some small extent this mode of indirect taxation of their people. By legally cutting off the competition of all private dealers in the taxed article, and by preventing to the utmost of their power its being smuggled into the country, Governments are enabled to sell the article at a price enhanced artificially by the monopoly; but all that the people are made to pay extra under the monopoly, saving the costs of maintaining it, goes directly into the treasury of the State; and, so far forth, becomes an unobjectionable mode of taxation. Under all forms of taxation, the aim should clearly be, that the Treasury receive all that the People are made to pay, except the cost of an economical collection.

(c) Tariff Monopolies. The United States has never undertaken, like France and Germany, to vend directly and exclusively an article taxed by themselves for the sole purpose of revenue; but unfortunately they have undertaken and still maintain (1890) monopolies a thousand times more unjust and objectionable than any such revenue-monopoly can be; they have laid distinct tariff-taxes upon thousands of foreign articles, not with the design of getting revenue from them, but with an avowed and realized design of preventing revenue by means of these taxes, since they have made the taxes so high and onerous as to be in many cases absolutely prohibitory of the entry of the goods, and in all cases more or less prohibitory of such entry. Revenue can only be gotten on goods that come in, while the very intent and result of these taxes is to shut the foreign goods out on which they are levied, so as to give certain domestic producers (who have themselves secured this legislation) the monopoly of the home market in these goods.

This is the very core of public wrong-doing. This is the worst form of monopoly that ever existed in a civilized country. Queen Elizabeth's monopolies, which so roused the ire of the Parliament of 1601, were nothing in enormity as compared with these tariff-taxes. Civilization long ago sloughed off such direct grants of personal privilege as were forbidden forever by the Act of 1624, and accordingly there is no need of mentioning these in the present classification. Tariff-taxes for other ends than pure revenue are the worst monopolies in existence, because (1) they compel the people to pay under ostensible taxes many times more than the Treasury gets from them in actual revenue; (2) they are wholly deceptive in their terms, and their operation is clothed in disguises difficult to strip off; (3) they are always put on at the instance and under the pressure of the man (or men) who expects thereby to raise the price of his own wares at the expense of his countrymen; (4) they create under legal forms however unconstitutional privileged classes in the community; (5) their first effect is invariably to make the rich richer and the poor poorer; (6) their ultimate effect is to impoverish the privileged classes themselves by taking away from them the natural spur of competition and self-dependence, in consequence of which their own goods become poor, and their zeal flags, and they come to lean still more heavily on monopoly-supports; (7) they destroy the market for domestic goods to precisely the same extent as they cut off the market for foreign goods, and (8) their whole retinue of evils is wrapped up in the great fact, that the Diversity of Relative Advantage is thereby diminished both as among domestic producers of commodities and as between foreign and domestic producers.

The expression, "natural monopoly," is sometimes used of those, who, under freedom, and using to the utmost their natural gifts and acquired skill, have distanced all local competitors, and may be said to control the market in their own interest, furnishing the best goods at the cheapest rates. This is in no proper sense of the term a "monopoly." Production has no complaint to make of any such pre-eminence in excellence and opportunity. It harms nobody and benefits everybody. Exchange rejoices over every man and woman and child, who so puts his head and heart and hand into his own peculiar product as to outstrip all others in that one line in point of ease and excellence, and so be able to offer a service at once better and cheaper than any one else can offer it then and there; and when all men and women and children, so far as they are employed commercially, come to possess a "natural monopoly" each in his own specialty, then Exchanges become as profitable and progressive as possible then and there, because the ever-blessed diversity of relative advantage has its utmost limit.

4. We come now to consider the natural Limits, if any such there be, to the Production of material commodities. This point has been much discussed. For example, Dr. Chalmers, a Scotch clergyman of great intelligence, profoundly moved by the condition of the poor in Glasgow, published in 1822 an interesting but not over-sound treatise entitled "Political Economy," in which the proposition is maintained, that the universal market is strictly limited, and therefore that, were it not for the unproductive consumption of the rich and luxurious, and the equally unproductive consumption of national wars, there would soon be a general glut of material commodities, and consequently Production would have to cease for the lack of a vent for its products. Pretty soon we shall be able to detect the enormous fallacy in this proposition. On the other hand, in 1803, Jean-Baptiste Say, a very competent French economist, in chapter xv of his well-known treatise, fully developed this very important proposition, if true, namely, that production may go on indefinitely in all directions without ever a fear of reaching a general glut of products.

What is a market? What is a limited market? What is an illimitable market? A market, as we have already seen in substance, is nothing in the world but certain persons somewhere with return-services in their hands desirous to part with these in order to get, that is, to buy, some other services offered in exchange. Each set of services is equally a market in relation to the other set. A market is always persons having something in their hands to sell. Buyers and sellers are equally a market in relation to each other. Whenever anybody goes forth to buy, he must of course take with him something with which to pay for what he wants to buy, that is to say, he must become a seller the very instant he becomes a buyer; and whenever anybody wants to sell something, he must of course want something already in the hands of somebody else, in which to take his pay, that is, he becomes a buyer the moment he becomes a seller. This helps us to see perfectly what a market is. Defined in the terms of persons, a market is two men, each glad to get the product of the other, and to render in return his own product; defined in the terms of things, a market for products is products in market.

Now, what can limit the universal market for material products? Clearly, it can only be limited either in the element of Desires or in the element of Return-Services. But the desires of all men, even of one man, which the efforts of other men may satisfy, have never yet come to a stand-still. Who ever heard of even one man, who was in possession of all the products of all kinds, that he wanted? Even if there were one such man somewhere, there are millions upon millions of other men, whose desires for products such as the efforts of other men can furnish are unlimited in number and infinite in degree. It is not possible, therefore, that there should be a lack of human desires anywhere, that could put any bound to the production of commodities or hinder in the least its ever-swelling march.

If only two things can limit the universal market, and if there never has been and never can be any lack on the part of some men of Desires which the efforts of other men can satisfy through exchange, can there ever be any lack in the second element of a market, namely, in Return-services? It is not meant to be asserted, that there are not definite limitations at any one time or place, or in the whole world at any given period, in the capacities of men then and there to produce material commodities, with their knowledge of things and powers of invention; but what is meant to be asserted is this, that wherever Production is most busy and universal in response to the desires of some men somewhere, there will be the greatest plenty of return-services, with which to pay for the services of these "some men somewhere" offered in response to the desires of the first set of producers. Therefore, no general glut of products is possible to occur. The more and the more kinds of commodities produced anywhere, the better market that for the more and the more kinds of commodities produced somewhere else. The nearer Industry may seem to be about to come to the goal of a limit, the farther off from that goal it is in reality. The aggregate of human industrial powers has indeed a potential limit at any one moment, but the knowledge of things and the power of invention and the means of transportation are enlarging every moment of time; so that, that potential limit never can become an actual limitation. Human industry will go on enlarging and diversifying itself so long as the world shall stand.

Let us put this vastly important argument in other and briefer words: the Desires of men which the Efforts of other men can satisfy through exchange are unlimited in number and indefinite in degree; and therefore, mutual industrial efforts can continue to be put forth in exchange, until these unlimited and indefinite desires of all men are all met,—a goal which clearly never can be reached.

This proposition demolishes at a stroke the fallacy, that pervades Dr. Chalmers' book but just now alluded to; and, what is more to the present point, demolishes equally fallacies current and prevalent in the United States at this hour. What our national industries need and all they need, what they always needed and all they ever will need, is a quick market for their products; products in market is the only market for products; but the United States for 30 years past has been putting vast obstacles in the shape of formidable taxation in the way of the presence of products from abroad in our domestic market, and consequently and inexorably the market for domestic products has been lost in foreign countries, to the immense and irreparable damage of domestic producers as well as to the foreign producers themselves.

No general glut of exchangeable products is possible to take place in this world under natural liberty and just law, because under these the diversity of relative advantage and consequently the profitableness of commercial exchanges is all the time widening everywhere, tending to bring the whole earth into a commercial and blessed union.

On the other hand, while a general glut of products is impossible to occur under a decent freedom, a partial glut in respect to certain commodities in certain places is very common. Through want of foresight as to a prospective demand, or miscalculation as to its probable amount, particular services are sometimes offered in too great abundance or of a kind not now adapted to the chosen market, and in respect to these the market may truly be said to be glutted. This frequently happens with editions of books; more copies are printed than can be sold at paying prices. Also, when the fashion changes, which is after all less capricious than is commonly supposed, the goods that were fashionable but are so no longer, are very apt to be somewhere in excess of the demand for them. Nothing can then hinder a partial or total loss in their value in the hands of their last holders. Precautions, however, may well be taken to avoid losses of this character, through the cultivation of foresight, and by studying as accurately as possible the nature of human desires and the not altogether irregular changes that have been observed to take place in them. This constitutes the art of mercantile sagacity; and the most successful producers in all the departments of exchange are those who best develop this attainable sagacity, who adapt their particular services closest to the existing and to the coming demands; who, to excellence in the substance of their products, add taste and attractiveness to their form; and who, as the result of this, tend rather to lead the fashions of the many than to follow in their wake. It cannot be wrong to repeat here in substance, what has indeed been said already in another connection, that Production as a general rule is no dead level of monotonous exertion,—no going forth and coming back on precisely the same track,—since its sphere is Life with all its wants and Man with all his desires; since there is scope and verge enough for the development of ingenious minds in almost all of its departments; and since its ultimate goal is beyond the ken of man.

5. We must now study with considerable pains the ultimate facts and the essential functions of Lands in connection with the Production of material commodities. This has always been the most vexed question in our Science; but it is approaching, even if it has not already reached, a satisfactory and final solution. The present writer believes that his own studies and researches have thrown some original and important light upon the perplexing problem of the Value of lands and of their produce. His present readers are surely entitled to his clearest possible presentation of all the facts and principles of this radical question.

The French "physiocrats" of a hundred years ago, founders of the first School in Political Economy, excellent men for the most part as well as good economists in general, thought, that lands were property in a peculiar and eminent sense, that they were the ultimate source of all values but their own, and that consequently lands should bear the weight of the national taxes. English economists, constituting with their followers in other countries the second School in our Science, while not going to the length of the physiocrats, still maintained that the value of lands and of the produce of lands were distinct in important respects from all other values whatever. In our own time and country, Henry George, though belonging for the most part to the third economic School, is a great stickler for a single tax on lands in lieu of all other taxes. We must, then, concentrate all the lights we can gather on these points of dispute and difficulty.

(a) The presumption in science is always against the existence of a few outlying cases, whenever the induction has been long and carefully conducted by many persons, and the generalization appears on all other grounds to be sound and comprehensive. All induction proceeds upon the premise, that Nature is uniform in those essential resemblances that constitute a class of things in science. Nature has so often justified confidence in her essential resemblances even under the greatest differences in external circumstance and apparent diversity, that the presumption becomes immensely strong in her favor, whenever a generalization patiently gathered from many particulars seems to cover the whole ground concerned except a few obstinate-looking items, that have not yet been closely studied. Two to one these items also will presently fall into their predestined place. We have already seen abundant grounds for believing, that Values arise from human services rendered and received: is it at all likely, considering the nature of scientific generalization and the history of all the more advanced sciences, that in Political Economy, lands and their produce should be found to constitute an outlying exception to the law of all other valuable things?

(b) There is one vital distinction to be made at the outset and held to throughout the discussion, namely, that, between all lands as a physical thing, which God made and gave to all men in common without any effort of their own, and some lands now as a valuable thing, in all probability made such through the action of human desires and human efforts brought to bear upon what was merely physical but what has now become valuable. The failure to distinguish between lands as such and valuable lands as such, has always wrought confusion and mischief in the land problem. The two things are utterly different and incommensurable. There are vast stretches of lands on the surface of the earth, to which no value ever attached or ever will attach. They are lands, and that is all. Political Economy has nothing to say of them, and nothing to do with them. Because they are never bought or sold, because they never give birth to "produce," they lie wholly outside the field of Value. Then there are immense areas of lands now valuable, that were once as valueless as the first class. With these Political Economy has a great deal to do, and also with the way in which they passed from valueless to valuable. Then there is a third class of lands, that have not yet been studied as they ought and till recently have not been studied at all, namely, those known to have been valuable at one time, but which have now lost their value either wholly or in large measure. There are such lands as these in every State of our Union, and in every civilized country beneath the sun; and Political Economy has already learned something, and is destined to learn much more, about the processes by which lands pass from out the first great class into the second, and from the second into the third. Valueless, Valuable, Unvalued,—these three words describe to the economist all the lands of the world.

(c) If we may trust the simple record in Genesis, the whole earth was given of God to the whole race, under the direction that they "replenish and subdue it." All the lands were then certainly valueless, although some of them were doubtless possessed of Utility, that is, a capacity to gratify human desires through a direct appropriation, which is a very different thing from Value, which last is the rendering and receiving of equivalents as between two persons. It seems very plain, that under this word, "Subdue," and under the human services implied in that, came in the first idea of ownership in land. When a family or tribe commenced the work of subjugation upon a piece of land, when they enclosed it, settled on it, tilled it, in any way whatever improved it by their own toil, then could first the idea of ownership dawn upon their minds, then first began that land to be capable of value, since now that family might reasonably say to another, If you want this field, you must give us an equivalent for what we have expended on it to improve it. If the transfer took place, what was it that was sold? What was it that was paid for by the party of the second part? It could not be the inherent quality of the soil, it could not be anything that the first family had gratuitously entered upon, because similar free land with all its inherent qualities lay open to occupation on every hand, and the second family would surely say, For as much effort as you have put upon your land to better it, we can make other free land as good as yours, consequently we can give you no more at the most than a fair equivalent for your efforts already expended. If the parcel were sold, therefore, the value of it must have been determined, not by the gratuitous elements involved but the onerous elements involved. The physical thing, land, which cost nothing, has now become the valuable thing, land, through a series of human efforts expended of such kind as call out human desires for the results reached, and justify the rendering of return-services for them; and that which the buyer pays for is never the free old but always the onerous new; new utilities, that cost something, have been added to and intermixed with old utilities, that cost nothing; and solely in consequence of this expenditure of efforts on the part of some men, answering to the desires and calling out the efforts of other men, do parcels of land pass out from the first great class into the second great class. So far as it can be gathered from the nature of the case, and from the known steps of past experience, this is the simple and rational process by which valueless lands become valuable, and less valuable become more valuable lands.

(d) This line of proof, strong in itself, is strengthened by observing how land-parcels gradually and practically pass out from the second into the third class of lands,—from the Valuable into the Unvalued. As it is only human Efforts wisely bestowed upon valueless lands or in some connection with them, that ever make these valuable, so it is, that these Efforts intermitted for a time, or less wisely bestowed, or reckoned less in harmony with the present and prospective desires of other men, invariably cause a loss of value in valuable lands; and, if such neglect or unwisdom of effort continue long enough, nothing is more certain, than that lands so treated will lose their value altogether, nobody will give anything for them, they will drop out from the second class into the third by the same path (only in inverse order), by which they crept at first from valueless to valuable. Under the writer's own observation in different parts of New England, whole tiers of farms once valuable and productive have lost that character either wholly or for the most part, taxes can no longer be collected from them, nobody will really give anything for them in exchange, they are abandoned of their former owners, they are left to lie waste or to grow up into forest again. It follows from all this beyond a doubt, and the logical issue is one of vast consequence to mankind, that Value is no attribute of matter, no inherent quality of lands as such wherever situated, but it comes and goes, it is a relation of mutual purchase between human services rendered and received.

(e) Land-parcels becoming valuable in the way but just now indicated, and so long as they continue valuable, that is, salable, are technically Commodities, according to our triple division of all Valuables. They belong in this grand division, that we are specially studying in this chapter, for the same reason as a horse does or a steam-engine does. Men did not originally make the land as a congeries of matter, neither do men make horses, nor do they make the iron ore out of which most parts of the steam-engine is made; but men do modify bits of the land as God made it, they subdue it, they improve it in manifold ways, they make it desirable in the eyes of other men, and thus or otherwise they come into possession of it, gain for themselves a right to sell it, prepare it to be sold and sell it, on the same principle as men raise and break and train horses and prepare them to be sold and sell them, and just as men by many processes transform the iron ore into a steam-engine and sell that. Ricardo, in his famous doctrine of Rent, says a good deal about "the original and indestructible powers of the soil"; but as a matter of fact, there are no such powers, since the elements and properties that constitute land are all the time changing under chemical and other action; and even if there were such powers, it would still be impossible to separate what God did for the land from what men have done in order to fit it to be sold; and what men have ever been authorized to take pay from other men for what God did in the creation of the world? The simple truth is, that Value is never of God's creation but only of men's exertion. There never was any land anywhere fit for cultivation and sale without more or less expenditure of human labor and reserved capital upon it; and the "powers" of the land, whatever they are, instead of being "indestructible," are in a constant process of wearing out, and require a constant application of labor and capital to keep up their fertility. Valuable pieces of land, accordingly, like all other commodities, derive their utility partly from the free contribution of Nature, and partly from the onerous contribution of men; but, on the other hand, they derive their value, whether the value be then increasing or diminishing, wholly from human desires and corresponding efforts.

(f) It is but a step from this impregnable position to another, namely, that Henry George is wholly wrong in his view, that there is Value in lands as God made them and gave them to men in common; and consequently, wholly wrong in his doctrine, that a single tax on land values would be just and equal to land owners, and might well be made to take the place of all other taxes on all other persons. He says: "If we are all here by the equal permission of the Creator, we are all here with an equal title to the enjoyments of his bounty." What bounty? If he means the original utility which God put into all lands in common, and which certain men have done nothing to better, there is nobody to dispute his proposition. But he does not mean that, because there is nothing of any significance that could come out of that. What he means is, that it is God and not man who makes lands valuable. He makes no distinction between Utility and Value in lands. He lumps the two together in one, and calls the aggregate the Creator's "bounty." He goes on to say: "There is on earth no power which can rightfully make a grant of exclusive ownership in land." Well! Is there any power on earth which can rightfully deny to any man or family the proprietorship of his own exclusive efforts, nobody's else rights being infringed thereby? Or can deny to him or them the results of such efforts, however embodied? When valueless lands are made valuable by human efforts expended to that end, does not the "value" belong to those who made it? When valuable lands have been made more valuable than they were by the efforts and foresight of their owners, the rights of others untouched, does not the "increment" belong to those who have created it? The truth is, if Henry George's powers of radical analysis had been at all equal to his remarkable power of rhetorical presentation, the world would never have been treated to his popular and imposing land-fallacies. Prudhon's "Property is theft," and George's "Single tax on land," rest on the same basis of socialism.

(g) All valuable land-parcels are material Commodities, made to be such by onerous human efforts of some sort expended upon or in some connection with the free Utilities furnished by Nature; the utilities are one thing in origin and function, and the values are a very different thing both in origin and function; and the present point is, that nearly all valuable lands everywhere are Capital also, that is to say, products reserved to aid in a further and future production. Capital is a relatively small class under the immensely large class Values. Capital is by no means coincident with Commodities, since vast lines of the latter are consumed with no reference to a further production by means of their use. But capital is always either commodities or claims, and valuable bits of land are always commodities and nearly always capital; because all tillage and pasture lands, all forests grown for wood and timber, and lands of all sorts rented or held for resale at a higher price, are capital under the definition, are "products reserved as an aid to further production." The peculiarity of all farming lands is this, they are themselves commodities, in whose creation God's free gifts and men's onerous labors have conspired; and they are held in reserve by their owners as capital, for the sake of producing by their means with the help of more of God's free gifts further valuable commodities, such as grain, and fruit and timber. Farms in their highest reach of previous culture still need for crops the sun and the rain. Indeed the sun is the most useful and powerful force in the world. Oh! how it warms and lifts and quickens! Give it and the rain and the dew but a fair chance on lands properly prepared for them, and endless fields blossom like the rose and are white to the harvest!

Agriculture always has been and always will be the vocation of the masses of mankind. Under a fair freedom, and a decent law, and a reasonable industry, Agriculture is always profitable; because it is natural, that is, designed by God for the welfare of mankind; because it lies at the basis of all other industries,—most of the food of mankind, most of the raw material of all manufactures, most of the subject-matter of all national and international commerce,—come out of the farms of the world; because it has been ordered so in the nature of things, that, under a tolerable freedom, a given amount of agricultural products tends constantly to buy, that is, to pay for, more and more of almost all kinds of manufactured products, for a reason to be explained shortly, thus tending strongly to uplift the farming masses in a scale of comforts; and because there is no other main line of human activities so constantly and so prodigiously and so gratuitously assisted by Natural Agents as is Agriculture. As Milton has profoundly expressed it in the "Hymn to the Nativity," the Sun is indeed to Mother Earth "her lusty paramour." But at this very time of writing a wail is coming up in ever deepening tones from Italy and France and Germany and Russia and especially the United States, that a colossal blunder in legislation common to all these countries now, say rather a colossal crime of the powerful few against the humble many, in the shape of tariff-monopolies, neutralizes in large part these natural advantages of agriculture, makes farming unprofitable and farmers unable to pay their taxes, diverts young men in increasing numbers from the farms to the towns, plasters the lands over with mortgages, shuts out from their natural markets the products of the land, thus depressing their price, and shuts off from farmers by outrageous taxes their natural supplies, thus augmenting their price. Farmers in all these countries are revolving between the upper and the nether millstones. Count Giusso, ex-Mayor of Naples, and now a deputy from that city, has just made a speech in the Italian Parliament, which sets forth in strong terms the great depression in Agriculture, and the critical condition of the public finances, brought about by the new policy of protectionism there. He says: "The Utopian idea of creating an industrial Italy on the ruins of an agricultural Italy, has been a colossal error big with disastrous results. We have preferred the shop to the land; we have preferred the coal we do not possess to our Italian sun; we have preferred the motive force of steam to the most powerful motive force in the universe, the sun; and we are naturally suffering the sad consequences." Exports increased in Italy in 1888 by $24,000,000, and imports by $42,000,000; and the Count quotes the cry coming up from one end of the Peninsula to the other: "Give us the means of selling our products, and we will pay the taxes." England is the only considerable country in the world, whose customs-revenue increased in the fiscal year 1888-89 over the year before; this English increase was over 5 per centum, which means an increase both in imports and exports, whose movements are almost absolutely free so far as England is concerned; while in all the countries mentioned above, which are under a different system in that respect, there was a deficit of revenue from tariff-taxes as compared with the year before, and a decrease in both exports and imports.

(h) If nearly all bits of valuable lands be capital, as we have just seen strong grounds for believing, then it follows of course, that the Rent of leased lands whether for buildings or harvests is the same in nature with the Interest on money loaned, and is the measure of the service rendered by the owners to the actual users of the Capital. This proposition, seen in its radical proofs and in its logical corollaries, takes the very life out of Henry George's land-theories, and out of the popular remedies thereto annexed. The writer firmly believes also, that this proposition in the grounds of it and in the inferences from it might have been used by Mr. Gladstone and his followers with telling effect in the animated discussions of the Irish land-question in the British Parliament during the decade 1880-90. In the debates on the Irish Land Bill passed in 1881, the representatives of the land-owners in Ireland held to their right to take all the rent they could extort by the help of the law; on the other hand the representatives of the Irish rent-payers held to their right as cultivators and maintainers to withhold rent in large part or altogether; and Mr. Gladstone, as representative of the nation, while insisting on the right of the owners to certain rents, insisted equally on the right of the cultivators to certain important privileges in the soil. Our present proposition with those that spring out of it, though it was not used by Gladstone, as it might well have been to smooth his pathway through the roughness of that legislation, yet justifies at one and the same time the discontent of the Irish rent-payer, the claim of the Irish land-holder to an assured rent of some sort, and the fundamental principle of the Irish Land Bill of 1881. That bill gives a certain modified ownership and control to the actual cultivators and maintainers of the soil. That is right.

The principle of land-values herewith enunciated, their uprise and increase and frequent decay also in all land-parcels, justifies completely the concessions to tenants in that bill; while the old and still commonly accepted English principles of land, and the false yet famous doctrine of Rent promulgated by Ricardo at the beginning of the century, are wholly against Gladstone and his concessions in that bill. Let us now see whither simple analysis and logical processes will quickly bring us in this whole matter. Valuable land was once valueless, and always remained so, until, by virtue of human efforts expended upon it or in some direct connection with it, coupled with the desires of certain other men for that land or its produce, accompanied with a readiness on the part of these men to render some equivalent for it or its use, first imparted value to that particular patch; moreover, it has been found in practice ten thousand times, just as one would expect, knowing the origin of value in general, that, unless human efforts are further and constantly expended on or in connection with that piece, and unless desires of other men continue to turn towards it in the way of exchange, its value will silently and inevitably escape from it; therefore, whoever has come into possession of that valuable piece of land by purchase or inheritance, and foregoes the use of it in favor of another as a tenant, is morally and commercially entitled to the stipulated return for that use, which is rent; but also, if that other, aside from the current use which is always a wearing-out process, contributes in any way to the continuance and increase of the value and fertility of the land, then and so far he gains rights in the land and becomes a sort of joint owner of it, since what he has done in the way of maintenance and improvement is inextricably mingled with what the other owners or users have done, and is of the same nature with that; and, therefore, the modified ownership of certain tenants recognized in Gladstone's bill is in strict accordance with ultimate justice, as it is also in strict accord with right, that the legal owner should continue to receive a return in the shape of rent for all the fertility and opportunity actually contributed by him, and no more. The discontent of the Irish peasantry has largely come from an instinct or intelligence more unerring than the economics of the land-owners, namely, that they are called on to pay rent for what they themselves have contributed in addition to the rent for what they have received. The true origin of value in land, and the only way in which value in land is kept up, seems to have penetrated deeper into the minds of Irish tenants than into the minds of many British statesmen.

(i) If the bulk of all valuable land-parcels be capital, as it is, then one might expect beforehand to find a law of diminishing returns from such lands, agricultural labor and skill remaining the same; because, all capital is tools made such by the expenditure of human efforts on changeable material, and then by the practice of abstinence, and tools from their very nature are always wearing out. Increase of efforts in connection with any form of capital unimproved by new inventions and uninvigorated by fresh skill, though they may indeed increase the aggregate return, cannot, for the reason just given, secure an increase proportioned to the increase of the efforts. The English writers generally, and Mr. Ricardo in particular, justly lay much stress on this proposition, although they have not taken lands to be capital, and have proven the law of diminishing returns in a different way from ours, and consequently have not set the propositions of land in their best and most ultimate relations. Their method of proving the law, however, is short and conclusive: If by doubling the efforts upon a piece of land, double the produce could be secured, and by quadrupling it, quadruple, and so on, there would be no reason why any man should ever cultivate more than a square acre, or even a square rod. He has a strong motive to confine his culture to a small space, just so long as the amount of produce is in the ratio of the efforts expended, because there is less locomotion of tools and fertilizers and crops. The fact that he extends his culture from one acre to another, and then to distant acres, notwithstanding the inconvenience and expense of transportation, is an irrefragable proof of the proposition in question. Increase of agricultural efforts and expenditures on a given space of land will secure a larger amount of produce, but as a general law, the increased amount will not be proportioned to the increased expenditure.

It is through this law of diminishing returns, that the Creator has secured the gradual occupation, by men, of almost the whole earth. There is a strong and natural tendency to leave the old acres to advance upon new, the old countries to emigrate to new, whenever the returns begin to bear a more unfavorable ratio to the labors bestowed. The farmer will advance from the first to the second acre as soon as he thinks that more produce can be obtained from it by a given amount of efforts than can be gotten by a like expenditure of additional efforts upon the first acre, allowance being made for the increased inconvenience; and so, cultivation has gradually extended itself and men have become dispersed over the whole earth. Other principles leading to dispersion have undoubtedly co-operated, but this is the fundamental one, operative at all times, changing the course of population, and consequently of empire.

(j) It follows from the points already made, that all permanent improvements in agriculture retard the operation of the law of diminishing returns. The recent introduction of the silo, for example, upon the long-used and wearing-out farms of New England promises, if the public law would quit throwing in obstacles, to help restore the fertility of many of them. The discovery of new and more available fertilizers, the invention of better agricultural implements, the light thrown by chemistry upon agriculture, the consequent adoption of better methods of culture and rotation of crops, the more perfect adaptation to the various soils of the kinds of produce sought to be raised from them,—all these and similar improvements tend to increase the ratio of produce to the labor, and to disguise the law just established. The lands that are now under cultivation may be made, under more skilful modes of culture to yield indefinitely more than at present, and the vast still uncultivated lands of the world may come to render an incalculable quantity of food to the world's population; but yet, as improvements are naturally less continuous in this than in most other departments of production, as invention has much less play, as there is less opportunity for the division and co-operation of laborers, as nothing can materially shorten the time during which the fruits of the earth must ripen, it is certain that possible improvements will never override the law of diminishing returns; and, consequently, that the value of agricultural produce tends constantly to rise relatively to manufactured products generally.

(k) The last point to be made under the general topic we are now discussing, is, that the best tenure of lands in the interest of the production of material commodities is the fee simple in the hands of the actual cultivators. This is the old Teutonic holding; but special circumstances in the British Islands have gradually changed these small holdings once cultivated by the hands of their free owners into large estates, the parts of which are leased out at will or for a term of years to tenants or "farmers" as they are there called, who, in turn, being small capitalists, as the land-owners are large capitalists, furnish the stock and hire the laborers and thus become the actual cultivators, and even often sublet parts of their own leased holdings to tenants of the next degree below, who can furnish less stock and can hire fewer laborers. The word "farmer" as used in the United States has a quite different meaning from that it bears in Great Britain; it means here a man cultivating his own fields with his own funds in his own way, and it means there a man cultivating another's fields with his own funds in a way and on terms made a matter of contract between the two; and these two modes of culture are so distinct that they are not likely to lie alongside of each other to any great extent for a very long time in the same country. Since her great Revolution, and under the action of the law requiring the equal partition of every man's landed estate among all his children, France has had for the most part the small holding tilled by the owner's own hands, instead of the great estates of the old rÉgime, the average being about 14 acres to each owner, and nearly one fourth of the entire population being proprietors of land either in town or country; in the United States the plough is guided almost wholly by the man who owns the soil he tills; while in Great Britain the original peasant proprietor has almost entirely disappeared. Each system has its advocates and arguments.

The question at bottom is, whether capital in the form of tillable land is more effective when held in large masses and loaned out to men, who possess small capitals in another form than land, and are willing to apply these for a return upon that land, or when held in small masses and used as capital by the owners themselves, who also own some capital in another form than land and are willing to apply this to their own profit upon their land. We hold, that the latter method is better than the former, both for the maintenance and improvement of the land itself as capital and also for the current production of commodities from it, because, (1) when one owns the farm he works, from the very nature of permanent ownership he takes a greater interest in it, perhaps he has inherited it from his fathers, perhaps he has bought it and paid for it at the hardest, at any rate it is his own, and as all men work from motives and the energy of the work is proportioned to the constant press of the motives, then must the owner of the capital, whose abstinence makes it capital, be under the strongest possible motive at once to improve his capital and also to make the current produce from it as great as possible, since the capital itself and all it yields is his own; moreover, (2) ownership improves the moral character of the cultivators, it tends to make them industrious, thrifty, frugal, independent, hopeful of the future, anxious to give their children better privileges than they themselves had, and it would seem as if the masses of men are educated by nothing so much, at least by nothing more, as and than by the ownership of land, wherever such tenure is possible and easy to the masses; and (3) the outward testimony is abundant from many lands, that the peasant proprietor is a happier and more virtuous man, a more productive and progressive one, than the mere tenant and farm-laborer, while there is much perhaps less conclusive testimony that leased lands are inferior in point of improvements and productiveness to the same lands when cultivated by their owners and to contiguous or at least similar lands still so cultivated.

It is a cognate point yet worthy of separate mention, that a general division of lands into farms only moderately large and approximately equal is most favorable to the largest aggregate production. Such a division takes place of itself wherever the lands are held in fee simple, and the cost of land-transfers is slight, and there are no such obstacles as slavery or primogeniture, as has happened practically in New England and in the Middle and Western States, and as is now happening of its own accord more or less at the South. The Greek writer, Aristotle, quoted some centuries before Christ from "the African," probably some Carthaginian writer on agriculture, the now familiar saying, "the best manure for the land is the foot of the owner." This homely word long attributed to Dr. Franklin, who stole it for his "Poor Richard's Almanack" more than a century ago, is based on the sound principle, that personal supervision to be most effective must be limited in its sphere, and that the best agricultural skill becomes weak when it attempts to exhibit itself on too broad a surface. Because a man can cultivate 100 acres better than any of his neighbors, it does not prove that he will cultivate 50 acres additional to them better than a neighbor of inferior skill, who is the owner of these 50 and no more. When the freeholds are small and nearly equal a wide competition among the farmers comes naturally into play, success is seen to depend upon personal efforts of intelligence and will, and interest and hope become the motives to the most productive cultivation. There is a high pleasure in possession and in self-guided exertion, and an impulse is broadly felt over the whole region to get as much as possible out of the land and at the same time to keep good and ever improve its condition. To protect and advance his own interests, to attend upon the seasons, to watch and wait, to foresee and plan and labor,—all this develops the farmer, and gives him energy and independence; and wherever there is a broad basis of such independent yeomanry to lean back upon, when heavy taxes are to be raised and strong blows of battle are to be struck, the national safety and position are assured.

6. We come now in the last place to consider the Costs of Production of material commodities of all sorts. Valuable patches of land, all prepared for Production in its several kinds, are the most important Commodities in the world, and the largest also in volume of Value. What did it cost "to subdue" the present tillable lands of this country? How much did it cost to get ready for grazing the broad pastures? To make accessible the forests that yield the timber? To open up the mines also and bring them into "touch" with the population? These questions are of great consequence, not that the actual past cost of any class of these more permanent "commodities" in the commercial world will be any safe guide to their present value, since cheaper and cheaper means of subduing the rugged forms of Nature are all the while coming into play, and all things that did cost more once tend pitilessly to fall to what similar things cost now; and since also it is never "efforts" alone that determine the value of anything, but efforts in conjunction with the "desires" of other men. Still, the amount of efforts expended at any given time upon these more stable commodities to make them productive, that is, their cost of production, is always gauged in general by an estimate of what the "desires" for them will be when completed; and this makes their cost of production a sort of loose measure of their value at the time. The main reason, however, why the cost of production of these primal commodities, namely, valuable land-patches, whatever may be expected to be produced from them afterwards, is so important, is, that as a general rule, the less the cost of any commodity meeting a universal want the wider and surer is its market. The larger the circle of the buyers of anything the more certain its sale; because, the world over, the men of small incomes are manifold larger in number than the men of large incomes. Society is like a pyramid: the lowest course of masonry is the longest and widest,—has the most stones or bricks in it,—and ever fewer towards the top.

If we reckon valuable lands as the primary commodities, then the secondary commodities will be of two classes, namely, (1) the produce of these valuable lands, whether animal or vegetable or mineral, such as cattle and cereals and coal; and (2) vendible material products obtained by human efforts from non-valuable land and sea, such as furs and fish. This division of material commodities into primary and secondary, and the distinction among secondary commodities according as their source is costly and costless, has never before been drawn in Political Economy; and it is fully believed, that the thoughtful reader and student will pretty soon perceive its advantages in helping clear up one of the most confused and perplexing sections of our Science, namely, that which relates to the causes and measures of Rent. We are now to inquire into the elements of the cost of production of each of these three classes of commodities; and we may find ourselves surprised at the simplicity and certainty of these elements.

1. We will now look into the Cost of Production of valuable land-patches themselves, the first and most important class of commodities. Here, as everywhere else in Valuables, we discover certain free gifts of Nature, without whose presence indeed the value could never come into being, but which are not constituents of the value, because they are gratuitous, given of God, and because the natural competition among buyers and sellers inevitably flings out from all effect on value of the otherwise possible action of these free and bountiful gifts, as have been already fully illustrated in chapter first. No piece of land ever yet had one particle of Value until human efforts of some sort had been expended on it or in some connection with it, for two excellent reasons, first, no man would ever even think of saying to another in reference to such a piece of land "Give me something for it and I will pass it over to you," and second, even if he did think of such an absurdity the other would reply "Why should I give you anything for something to which you have not the least claim, especially as I can take for nothing just such pieces all around here?" It must be remembered, not only that God gave the whole earth to all mankind without distinction, but also that his bountiful hand scattered all peculiar kinds of patches in great number upon each of the Continents. There is a plenty of Utility (gratuitous) in land-parcels just as God made them, but no possibility of Value (onerous) till other hands than His have touched and benefited them.

What, then, are the onerous elements that enter into the value of land-parcels and constitute their Cost of Production? There are only two such elements, namely, Cost of Labor and Cost of Capital. To find out exactly what "Labor" is, and what there is in it entitling and assuring its reward in "Wages," will be the task and perhaps also the pleasure of the next chapter; but it will suffice for the present discussion to say, that Labor is human exertion put forth for the sake of a commercial return. Lands can by no possibility be brought out of a state of nature into a state of value without the expenditure of Labor; and the actual or estimated cost of this labor, accordingly, is the first constituent of the Cost of Production of valuable lands considered as Commodities. Labor, however, can not apply itself to free lands in order to make them valuable without the co-operation of another onerous element, namely, Capital, in some of its many forms. For example, if forest lands are to be made tillable, the trees must first be cut down, and this will require besides the muscular exertion of the laborer something in the way of an axe, which is capital, the result of previous labor reserved to assist in further production: if native prairie is to be subdued to a valuable commodity, something of the nature of a plough must be employed in the process, and horses or a steam engine to propel it, and a plough and horses are capital, and still require fresh labor to make them useful in production. But capital always costs something; and, therefore, the cost of the Capital enters in as a second constituent into the cost of production of Land-Commodities. But these two costs are all. We shall search in vain for any other onerous element in the cost of producing commodities. There are two variables only in the Cost of Production, which itself is the sum of the two subordinate costs.

(a) And now let us analyze first the Cost of Labor in this connection, and then second the Cost of Capital, and we shall soon reach radical and unchangeable ground, and find in the sum of these two an aggregate Cost of Production, and also all of the variables that can ever enter into such Cost. It is plain to reason, that only by Labor non-valuable land-pieces ever did or ever can become valuable. Captain John Smith understood this in 1607 at Jamestown as well as anybody understands it now: there were 48 gentlemen, and only 12 tillers of the soil, among the 105 colonists, who originally landed there: "nothing is to be expected hence," he wrote of the new country, but by "labor:" new supplies of laborers, aided by a wise allotment of land-parcels to each colonist, secured after five years of struggle the lasting fortunes of Virginia: "men fell to building houses and planting corn": the very streets of Jamestown were sown with tobacco; and in fifteen years the colony numbered 5000 souls.

Now the cost of Labor is analyzable into three variables only, namely, (1) the efficiency of the labor; (2) the rate of nominal wages paid; (3) the cost to the employer of that valuable, in which the wages are paid. Let us see: what an employer wants is to get things done; consequently, if an employer hire two men to work for him at the same rate of wages, and if one be twice as efficient a laborer as the other, the cost of the labor of the first is only one half the cost of the labor of the second: therefore, a high rate of wages does not mean a high cost of labor whenever and wherever the laborers are very efficient. As a rule, it is found, that the cost of labor in reference to a given product is the least in those countries, like the United States and Great Britain, in which the rates of nominal wages are the highest; because, it is found also, that a high efficiency of laborers accompanies both as a cause and as an effect high rates of wages.

Secondly, there are striking differences in the rates of nominal wages paid for a day's work in the same general employment in different parts of the same country, and especially in different countries. The agricultural laborer in the west of England, say in Wiltshire, gets about 10s. per week, while in the north of England, say Nottinghamshire, laborers at the same general work get about 16s. per week. Walker in his Wages-Question gathers from the best authorities many such statements as these: "On the Grand Trunk Railway in Canada the French-Canadian laborers received 3s. 6d. a day, while the Englishmen received from 5s. to 6s. a day, but it was found that the English did the greatest amount of work for the money." "In the quarry at Bonnieres, in which Frenchmen, Irishmen, and Englishmen were employed side by side, the Frenchmen received 3, the Irishmen 4, and the Englishmen 6, francs a day; and at those different rates the Englishman was found to be the most advantageous workman of the three." "The statistics of the iron industry in France show, that on the average 42 men are employed to do the same work in smelting pig iron as is done by 25 men on the Tees." "In India, although the cost of daily labor ranges from 4½d. to 6d. a day, mile for mile, the cost of railway work is about the same as in England." Thus it is plain, that a high rate of wages does not import a high cost of labor, but rather the reverse. A vast mass of current fallacies are disposed of in a moment by this truth seen in its grounds. The United States have shown in the past the highest rates of nominal wages in the world, and at the same time have shown the lowest costs of labor to the employers, because as a rule the laborers here have been more efficient than elsewhere. England has the highest rates of wages and the lowest costs of labor in Europe for the same reason. The degree of efficiency shown by different laborers is the second variable in a cost of labor.

Thirdly, if that valuable, whether money or other, in which wages are paid, varies in cost to the employer, then the cost of the labor paid for by that valuable, efficiency of the laborers, and nominal rate of pay remaining the same, will of course be varied thereby. We shall learn hereafter in the chapter under that title, that the value of "Money" is by no means invariable even in one country, just as we have already learned the variable nature of all other values; and, too, wages are not always paid in money, though they are commonly reckoned in the terms of money; and accordingly, the third and last variable in a cost of labor is the cost to the employer of that valuable, whatever it be, in which the wages are paid. Assuming, as we may, that given wages are paid in money, then any country that has for any reason a more abundant money than another may clearly pay higher rates of nominal wages than that other without making its costs of labor any higher than in that. The United States, for example, has usually had a very abundant money (not always of the best kind), which of course has tended to make higher the current prices of all commodities, and this has enabled capitalist-employers to pay higher nominal rates of wages, without at all enhancing relatively the costs of labor, and also without really benefiting the laborers.

(b) We will now analyze second the Cost of Capital in this connection, as the only other element of cost in the Cost of Production of Commodities in general, and particularly now in the cost of making worthless land-pieces valuable so as to be used in further production. Here too we find three variables, no one of which can be safely neglected any more than the other three in the reckoning that has for its object a prospective cost of production. These are, first, the current rate per centum; second, the time for which the capital is advanced; and third, the liability of that form of capital to slow or rapid wearing out. For instance, under the first variable, the rate per centum of capital, if the rate at Amsterdam be 3 and that at New York be 7, if the cost of labor be equal in the two cities, if the time of advance be one year, and if there be no liability of the capital to wear out; then any commodity made at Amsterdam with an outlay of $100 may be sold at a profit for $103, while a similar commodity made at New York with the same outlay cannot be sold for less than $107. All other things being equal, a low rate per centum of capital in any country gives that country an advantage in the markets of the world for selling its commodities over other countries offering similar commodities where the rate is higher, because its cost of their production is less. Of course also such a country can subjugate its wild lands and make them valuable at less cost than the other countries.

To illustrate the operation of the second variable, the time for which the capital is advanced, let the same suppositions be continued, except that the time of advance at New York be extended to four years. Then the commodity may be sold at and from Amsterdam, as before, at $103, but the corresponding commodity at and from New York for not less than $131, so far as mere cost of production determines the prices. This point is also well shown up in the case of wine, which, to reach its perfection, requires to be kept a number of years, for, if it be genuine and ripe, its cost of production has been by so much enhanced by its delay in reaching the market. If the time of advance be long, and the rate per centum high at the same time, the cost of capital from the two causes combined multiplies the cost of the product; and consequently, only countries in which the rates are low can successfully engage in enterprises requiring a large capital to be invested for long periods before returns are realized. One million of Dutch capital at 3% a year, expecting to realize returns only after 20 years, may be remunerated by products selling for $1,806,111; but American capital under like circumstances, except that the rate here is 7%, must have a return of $3,869,685, or lose by the operation.

To illustrate the action of the third and last variable, we must observe, that all forms of capital wear out, but some forms much faster than others, and that this makes a difference in the sinking-funds that must be reserved out of the gross profits of the capital in order to replace the principal whole. This difference will at once affect the cost of capital, and so of production, and so indirectly the ultimate value of the product. Suppose there are two commodities, which we will call A and B, produced in two different establishments, in each of which is invested a capital of $11,000, in one of which is used a machine that costs $1000 and is wholly worn out by one year's use, and in the other a machine costing the same sum, which will last, however, for ten years. Suppose further, that the rate per centum of profit be 10, and the time consumed in completing each of the two products be one year. Now there is a marked difference in the Cost of Capital in the two establishments, and this difference will indirectly but immediately appear in the Value of the respective products. For, to A must be charged not only $1100, the interest on the whole capital at the current rate, but also another $1000, wherewith to replace the machine already worn out by a single year's use. A, accordingly, cannot be sold without loss for less than $2100. B, however, will cost less and can be sold for less at the usual profit. Because, to it must be charged, as before, $1100, current rate of profit on the capital invested, and only $100 (really less than that for an obvious reason) to replace the durable machine after ten years' use. The capitalist, therefore, can sell B for $1200, and make something over the current rate of profit.

Since the cost of capital invariably resolves itself into these three variables, every capitalist in order to become successful as such must give strict attention to all three of these points. To any one who projects the making of valueless into valuable land, or valuable into more valuable land, by the expenditure of capital upon them for that purpose, it becomes a matter of prime importance for him to inquire how long a time the whole process will take, how much he must allow per annum for the cost of all the implements employed, and especially how complete in action and duration are these costly implements. The durability of machinery, whatever the name it bear and whatsoever the work it do, is at once the most significant and the most neglected point in the actual and prospective Production of our time and country; and no condemnation can be too severe upon a policy of public law, such as now prevails, whose whole tendency and actual effect is to worsen the quality and lessen the durability of all commercial implements whatsoever, from the needle to the locomotive. The same abominable public policy increases the cost and decreases the durability of all agricultural implements, like the axe and the plough, designed and adapted to transform valueless and non-productive into valuable and food-producing lands.

2. Now, having fully seen the elements of the cost of reducing land itself from a natural into a valuable and productive form, what next are the elements of the cost of production of those material commodities produced for sale by the aid of these subdued and now productive lands? Commodities so produced constitute the second class in the law of their Cost of Production. And a vastly important class it is. The food of the world, so far as that food is purchased as the product, whether animal or vegetable, of valuable lands; the fuel of the world, so far as that fuel is bought from owned and accessible forests and mines; the clothing of the world, so far as the fabrics come from the cultivated cotton and flax and wool and skins offered for sale; the shelter of the world, so far as the wood and brick and stones and lime are drawn from valuable lands and quarries; and the warehouses and the temples and the theatres of the world, built, as they are, out of the products of costly and rentful lands: these all, and many more like these, constitute a class of commodities immense in their volume, whose cost of production has in it an element peculiar and additional to that of the first class already analyzed, and to that of the third class also soon to be considered.

This peculiar and additional element in the cost of production of these things, class second of commodities, is called rent. Interminable have been and still are, especially in the British Islands, the definitions and discussions upon Rent: they have boxed the compass of economical nomenclature: they have run up and down the entire gamut of possible expression on such a theme. David Ricardo, the Anglo-Jewish Banker, formerly announced, near the beginning of this century, that "Rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil." Two objections lie with fatal weight against this definition and all that is involved in it: first, there are no "indestructible powers of the soil," either "original" or acquired, since the universal verdict of all agriculture has been and still is, that the "powers" of all soils are continually wearing out, and need to be constantly renovated by fertilizers and manipulations of all sorts; and second, even if there were such "original and indestructible powers," it would be impossible to separate them from the additional "powers" acquired by means of the capital expended to bring that land from the state of nature to its present state, and the landlord has had nothing to do with any "powers" of the land except those conferred by his own labor and capital upon it, and can by no possibility put himself into a position where he can enforce any claim of his own for a return from any "original powers" of any land-parcel whatever. The simple truth is, and it illumines the whole subject of agriculture and its products, that the value of land-parcels and also the value of the transient use of them, or Rent, hang wholly on the onerous human efforts involved in them, and not at all on original and gratuitous utilities. Science has only to unfold the plan of God and its actual and beneficent workings. "In the sweat of thy face shalt thou eat bread." All that God furnishes to men in order to get a living and in order even to get rich is Opportunity. The opportunity is ample. The call to a partnership in Effort as between God and men is loud and constant. The world with all its powers, free lands with all their utilities, the change of seasons, the blessed sun and the blessed dew and rain, the constant disintegration of rocks beneath the soil and the gradual clothing with lichens and moss and verdure of the rocks above in preparation for a new soil, and the wonderful chemistry of the vast laboratory of Nature, all work night and day without fee or reward in the service of mankind. But men themselves must not intermit their labor. All values are of their creation and maintenance. If they cease or relax their labor upon land-pieces so only made valuable and rentful, then will the value and the rent begin to slip away inexorably, and no prayers and no regrets will avail to call them back.

Now, then, since commodities of the second class in the cost of their production must respond not only to the current cost of Labor and Capital in bringing them to market, but also something additional in the way of Rent to the past cost of the implement, the land-parcel, without whose contributing agency present results could not be gained; Rent is the Rendering for the present use of a Valuable made such by past Labor and Capital. Land-parcels leased for agriculture; mines and the access to them leased for the production of metals and minerals; and forests whose growth has been permitted by the past abstinence of their owners; all properly yield a rent; because these forms of capital, whose existence is due to past labor and capital, are present contributors to products, whose sale must compensate not only present labor and the use of current capital, but also the use of these more permanent forms of capital long ago created.

A competent authority estimated in 1881, that the land-parcels of the United Kingdom of Great Britain were worth £3,000,000,000; and there were at the same time 6,000,000 of inhabited houses, excluding factories and business premises and tenements renting for £20 and under. Most of these lands and houses are rented by their owners to the actual occupiers on the just principle explained above, inasmuch as the lease-system is the prevailing one in that country. According to the Census of 1880, there were 4,008,907 so-called farms in the United States in that year. Most of these are held in fee simple, and are tilled by their owners; but just so far as land-patches and forests and mines are leased in this country, their products must provide in their price of sale for current rents, as well as current costs of present production. This is just as it should be, and just as it must be, if Capital is to take this form of assisting the processes of future production.

But this form of Capital, as well as all other forms of the same, is perpetually wearing out, that is to say, is gradually losing its power to contribute as at first to the present and future processes of production. This loss is in the very nature of things,—in the very nature of all Capital. The great Father never intended that His children should cease from work. He has ordered all things so, that they cannot cease from work, and continue to live in any comfort and progress. Value, as we have already thoroughly learned, is not a quality that can be put into anything to stay there: it is a recurring relation of mutual services between man and man; and each of these services of the three kinds involves recurring Efforts. Capital is a form of Value; and, consequently, it cannot possibly take on a shape not subject to the law of diminishing returns. This is deductive proof. And precisely the same result is reached by Induction. Men have noticed and recorded the fact at all times, and have made provision for it in their pecuniary calculations, that tools and machinery need to be repaired and then replaced, that the current interest on moneyed capital tends to decline from generation to generation in all progressive countries, and also that lands and other forms of real estate so lose their productive and rental power unless cared for in renovation that men migrate and emigrate in consequence.

How much Rent shall the tenant pay to the landlord for the present use of the latter's old lands? Or in other words, how much shall be added to the going price of the product on account of the diminishing return due for the use of the old landed capital? This is a hard question to answer: probably the hardest question that is ever asked in practical Economics. Mr. Gladstone wrestled with it as complicated with a larger political question in passing the Irish Land Bill of 1881. Another honest athlete, Mr. Parnell, wrestled with it upon the same parliamentary arena. Scores of able and practical statesmen in Great Britain, and elsewhere, have struggled to reach a practical answer to this question; and scores of able and theoretical economists in all countries have striven to reach a theoretical answer to it. Most of these answers have been inharmonious, and many of them contradictory, with each other. The Land Bill of 1881 created a parliamentary Commission, whose duty and authority it was, to visit the Irish counties in person, to gain information in detail, to take sworn testimony of all the parties concerned, and then to lift or lower rents according to their discretion. The discontent of the Irish tenants in general was considerably mollified by the action of this Commission; while the debates and wrangles of the parliamentary session of 1889, and the persistent agitations for Home Rule (an agitation at once political and economical), show that the results of the work of that Commission were not wholly satisfactory.

(a) It is easy enough to see why the solution of this general problem is so extremely difficult. The new is mixed in with the old. The result of the old labor and capital is a productive piece of land; the current labor and capital is expended upon the same piece to make it more productive; the same sort of thing is done now that was done then, and the results of the two are now thoroughly intermixed; there were original free utilities in soil and growths and deposits, but these had and have no value and can never yield rent; the old labor and capital improved the soil by clearing and drainage and fertilizers, and made the growths and deposits more valuable and accessible, so that even the old onerous was more or less transformed into the original gratuitous; and now the new onerous, the fresh cultivation and fertilization and betterments generally, in soils and roads and buildings, are inextricably commingled with former betterments of the same general kind and with the original free gifts of Nature. No wonder the Commission of 1881 found difficulty in determining what was what and which was which! No wonder that Irish tenants on long leases quarrel with their landlords about the betterments, how much is new, how much is old! It is clear, that when the lease is ended, the landlord ought to compensate the tenant for all that portion of the latter's betterments, which is not already worn out; it is equally clear, that the tenant ought to be willing to pay a fair rent for the use of the unexpended betterments of the landlord and his predecessors; while there is room and verge enough for endless disputes between them as to the respective amounts of these, and consequently as to the amounts of rent and of its remissions.

These difficulties and intricacies do not belong to the principles of the Science of buying and selling, which are in the main clear and certain in their action, but are incidents of determining in certain cases what that is, which is bought and sold. Parties in interest in all kinds of buying and selling are sometimes compelled to go to the courts in order to have the Law decide what their respective rights are as buyers and sellers; but this is no fault of Political Economy as a science, or of trading as an art; two men in all cases make their own bargain, according to their own estimate of the respective rendering and receiving of each; if the uncertainties of language, the misconception on the part of one or both of the terms agreed upon, and the misapprehension of some of the circumstances of the case, breed confusion and litigation, all this cannot be justly charged to the science of Political Economy.

Nevertheless, it is into these incidental intricacies and uncertainties, that Henry George's now famous theory of landed rents and the taxation of them, strikes its roots. Instead of building his structure upon firm and open ground, so that thoughtful men can see that his basis is solid and scientific, Mr. George dashes at once into a thicket and lays his foundations with quickness and assurance where all is dark and doubtful, or at best where all is rather incidental than fundamental and demonstrable, and pretty soon displays a superstructure that appears attractive both without and within, through whose airy halls he knows how to conduct to their delight the credulous and discontented, and on whose walls hang plausible pictures calculated to invite and hold the attention of the masses. Let the perfect integrity and rhetorical ability of Mr. George be freely conceded; let it be freely conceded also, that he teaches in his books and lectures a great deal of vastly important industrial truth in a popular way so as to accomplish great good, such, for example, as the imperative need of greater simplicity in taxation, and the indisputable right of the people to their liberty in buying and selling; yet it must at the same time be owned, that he has never yet found out exactly what Value is in general, consequently what are the causes of value in lands, and what are the nature and grounds of Rent. Something more of patient and radical analysis at the outset, and of logical and scientific unfolding afterwards, would have made Henry George one of the chief benefactors of his age.

(b) It is also very easy to see, that the current price of produce, that is, what is gotten in return for the sale of what is gotten out of the land-parcels, must have a dominant influence upon what can be paid as rent for the use of the parcels. Unless the return from the produce be sufficient to reward at current rates the present labor and capital employed upon the parcel, the parcel will not continue to be cultivated at all, otherwise men would act without a motive for action, which they never do; unless, therefore, the price of produce be more than high enough to repay current wages and profits, there will be nothing left for Rent; and, consequently, the amount of the rent that can continue to be paid for lands will be the difference between the going price of what is produced from them and the current expenses of cultivating them. Here, as everywhere else within the domain of Exchange, Competition exerts its beneficent action. If one dealer, or ten, endeavors to put a price upon the produce more than enough to pay current wages and profits with a fair margin for the diminishing rate of rent, there are a plenty of others, dealers in the same grade of produce, who will be content with a fair return for present and past expenditure of labor and capital; and the action of these will effectually debar the others from exorbitant rates. The price of produce, accordingly, under free competition, is the divinely appointed regulator of landed rents. It regulates also, though more indirectly, the current rates of wages and profits in agriculture.

Very different from this is Ricardo's doctrine of Rent. He makes everything turn on the Cost of Production of the Produce, which is Effort, ignoring the ever-varying demands for the produce, which is Desire. His doctrine, too famous and too long received for us to pass by in this connection, though now superannuated, was for substance, this: there are some lands in every country whose produce just repays the expenses of cultivation, and consequently yields no margin for rent; and the cost of production on these rentless and poorest lands under cultivation, will determine the price of the produce; and as there can be but one price in the same market, the produce raised on more fertile land will be sold for the same price, and this price, besides paying the cost of cultivation, will yield a rent rising higher according as the land is more fertile; so that the rent paid on any land is always a measure of the excess of productiveness of that land over the least productive land under paying cultivation; and therefore, an increased demand for food in consequence of increased population, and the higher price resulting, will force cultivation down upon still poorer soils, or compel a higher culture for less remunerative returns on the old soils, according to the law of diminishing returns, which in either case will raise the rents on all the soils above that grade that just repays the expenses of cultivation; so that it is the sole interest of landlords, as such, that population should be dense and food high, their interest being directly antagonistic to that of the other classes of the community.

(c) Finally, in this connection, it is easy enough to see, what were the motives on the part of the landlords, and what were the results on the part of the masses, of Great Britain, in putting on and keeping on the infamous Corn Laws, so-called, which were repealed forever in 1846. The Corn Laws forbade the importation of foreign cereals under heavy pecuniary penalties. The simple purpose of the landlords then governing England was to raise the price of their grain by shutting off Competition of foreigners by means of these prohibitory tariff-taxes. It was Protectionism pure and simple. It was designed to raise the price of bread to the masses of their countrymen, and often did raise it to the point of their starvation. But we have just seen, that the higher the price of the produce, the wider the margin for Rent for the lands that produce it. The Corn Laws of England enriched the landlords at the expense of all other classes and to the starvation of many of the poor. As has been well said, this was the most successful of all the many expedients that have been tried, "to fertilize the rich man's land by the sweat of the poor man's brow." The words of Daniel O'Connell, spoken Sept. 28, 1843, in his parliamentary fight against the high-tariff Corn Laws, were surfeited with truth and righteousness: "But what is the meaning of 'Protection'? It means an additional sixpence for each loaf; that is the Irish of it. If the landlord had not the protection, the loaf would sell for a shilling, but if he has protection, it will sell for one and sixpence. Protection is the English for sixpence; and what is more, it is the English for an extorted sixpence. The real meaning of 'Protection,' therefore, is robbery,—robbery of the poor by the rich."

At the present moment and for twenty-five years past, the public laws of the United States ostensibly relating to Taxes, have had an immense influence upon the value and rents of the agricultural lands of the country to depress them; because these laws have put up nearly or wholly impassable barriers to the coming in of those foreign goods, against which the farmers would naturally and profitably and inevitably have sold their surplus agricultural produce; by destroying the foreign market for farm products, these laws do in effect destroy a large part of the value of the farms of the country, and of what would otherwise be the rentals of a part of them; the Constitution of the country expressly forbids any taxation whatever of Exports, but these laws have precisely the same effect on the value of farm products if they were themselves forbidden to be exported, because those goods for which these would be otherwise exchanged for a profit are forbidden to be imported. A market for products is products in market. Thus these wretched laws lower the price of farm products, and consequently the value of farms and of their rents, and impoverish the farmers who are nearly one-half of the entire population of the country.

While these paragraphs are being written, comes the intelligence of the formation of the "North American Salt Company," whose purpose is in their own language "to unify and systematize the salt interests of the United States and Canada," and to this end "arrangements have been completed for the purchase and control of nearly all the existing salt properties of the North American continent." As this is a fair instance out of some thousands, in which a tariff-tax has the designed effect to lift or lower values which deeply concern the people, let us look at it for a moment. On the average of the past twenty-five years the tariff-tax on salt has in general doubled the cost of that necessary of life to the whole people of the United States. When Canada had no such tax, American makers of it sold salt sometimes to the Canadians 40% less than they would sell it to their own countrymen. On the basis of this United States tariff-tax (it would never have been dreamed of without it) this new company comes forward with a scheme of international monopoly to control in their own interest the price of a prime necessity of life. They propose to issue stock and bonds to the amount of $15,000,000, with which to buy up "the existing salt properties"; and they frankly avow in the prospectus from which we are quoting, that profits of $2,000,000 a year on their capital are justified by the present outlook. Whence are these immense profits to come? Out of the pockets of the masses of the American people bound hand and foot in the meshes of a legal monopoly, which they themselves allow themselves to be ensnared in! In a similar but more outrageous way, are bound up at the present moment in the secret so-called "Trusts" about forty more of the necessaries of life; each one of which, unless it be the "Standard Oil Trust," has its footing in a so-called "protective" tariff-tax, and would collapse instantly on the repeal of that!

It was necessary in order to complete our study of the second class of material commodities, namely, those produced from valuable and rentful lands, to glance in passing at the frequently disturbing effect on these, aside from their cost of production, of sinister laws plausibly imposed upon an unsuspicious people in the interest and at the instance of a privileged few.

3. It only remains in this chapter, devoted to the discussion of material Commodities in their three economic classes, to conclude with a glance at the third class, namely, those material valuables that are obtained from free and unowned sources, such as masts cut in the wilds of America on both oceans two and three hundred years ago, and fish caught on the Banks of Newfoundland, and furs gathered to such profit in the north by the Hudson's Bay Company, and salt evaporated in the tropics by a free sun from old ocean's brine.

These, and all such things as these, have a cost of production determined only by the cost of present labor and capital, and consequently a grade of value determined only by present Demand and Supply, unentangled for the most part by questions of rent and prior claim and taxation and nationality. All these things, accordingly, are relatively cheap, except as the element of Scarcity, and on that account of strong Desire, may sometimes come in to enhance the value. No man can tell the time exactly when French fishermen from the coasts of Brittany ventured over to the Banks of Newfoundland in their frail barks for the abundant cod in those waters, and went back home again at the close of the season freighted with plenty of a free and cheap food for their families and countrymen; or when it was that rude men calling themselves English followed these in their western track for the same general purposes, to become thereby hardy seamen on deeper seas, such as those who gained long afterwards the naval victories of Nelson; and we have all read in the fascinating pages of Irving the ventures and adventures of John Jacob Astor, the attraction of free furs in the Northwest of America, the hazards and the history incident to obtaining them, and the immense profits gained by their sale in the markets of the old world.