Various
Blackwood's Edinburgh Magazine, Vol. 64 No. 396 October 1848
We now continue our quotation.
"There is room in the world, no doubt, and even in old countries, for an immense increase of population, supposing the arts of life to go on improving and capital to increase. But, although it may be innocuous, I confess I see very little reason for desiring it. The density of population necessary to enable mankind to obtain, in the greatest degree, all the advantages both of co-operation and of social intercourse, has, in all the more populous countries, been attained. A population may be too crowded, though all be amply supplied with food and raiment. It is not good for man to be kept perforce at all times in the presence of his species. A world from which solitude is extirpated is a very poor ideal. Solitude, in the sense of being often alone, is essential to any depth of meditation or of character; and solitude, in the presence of natural beauty and grandeur, is the cradle of thoughts and aspirations which are not only good for the individual, but which society could ill do without. Nor is there much satisfaction in contemplating the world, with nothing left to the spontaneous activity of nature – with every rood of land brought into cultivation which is capable of growing food for human beings – every flowery waste or natural pasture ploughed up – all quadrupeds or birds, which are not domesticated for man's use, exterminated as his rivals for food – every hedgerow or superfluous tree rooted out, and scarcely a place left where a shrub or flower could grow, without being eradicated as a weed in the name of improved agriculture. If the earth must lose that great portion of its pleasantness which it owes to things that the unlimited increase of wealth and population would extirpate from it, for the mere purpose of enabling it to support a larger, but not a better or a happier population, I sincerely hope, for the sake of posterity, that they will be content to be stationary long before necessity compels them to it.
"It is scarcely necessary to remark, that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the Art of Living, and much more likelihood of its being improved, when minds ceased to be engrossed by the art of getting on. Even the industrial arts might be as earnestly and as successfully cultivated, with this sole difference – that, instead of serving no purpose but the increase of wealth, industrial improvements would produce their legitimate effect, that of abridging labour. Hitherto it is questionable if all the mechanical inventions yet made have lightened the daily toil of any human being. They have enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make large fortunes. They have increased the comforts of the middle classes; but they have not yet begun to effect those great changes in human destiny which it is in their nature and in their futurity to accomplish. Only when, in addition to just institutions, the increase of mankind shall be under the deliberate guidance of a judicious foresight, can the conquests made from the powers of nature, by the intellect and energy of scientific discoverers, become the common property of the species, and the means of improving and elevating the universal lot." – (Vol. ii. p. 311.)
These are not the times when truth is to be withheld because it is disagreeable. There is a morality connected with wealth, its uses and abuses, not enough taught, certainly not enough understood. The rich man, who will not learn that there is a duty inseparable from his riches, is no better fitted for the times that are coming down upon us, than the poor man who has not learned that patience is a duty peculiarly imposed upon him, and that the ruin of others, and the general panic which his violence may create, will inevitably add to the hardships and privations he already has to endure. If society demands of the poor man that he endure these evils of his lot, rather than desperately bring down ruin upon all, himself included; surely society must also demand of the rich man that he make the best use possible of his wealth, so that his weaker brother be not driven to madness and despair. It demands of him that he exert himself manfully for that safety of the whole in which he has so much more evident an interest. For, be it known – prescribe whatever remedies you will, political, moral, or religious – that it is by securing a certain indispensable amount of wellbeing to the multitude of mankind that the only security can be found for the social fabric, for life, and property, and civilisation. If men are allowed to sink into a wretchedness that savours of despair, it is in vain that you show them the ruins of the nation, and themselves involved in those ruins. What interest have they any longer in the preservation of your boasted state of civilisation? What to them how soon it be all a ruin? You have lost all hold of them as reasonable beings. As well preach to the winds as to men thoroughly and bitterly discontented. Those, therefore, to whom wealth, or station, or intelligence, has given power of any kind, must do their utmost to prevent large masses of mankind from sinking into this condition. If they will not learn this duty from the Christian teaching of their church, they must learn it from the stern exposition of the economist and the politician.
Political economists have some of them wasted much time, and produced no little ennui, by unprofitable discussions on the definition of terms. These Mr Mill wisely spares us: an accurate writer, by a cautious use of ordinary expressions, will make his meaning more evident and precise than he will be able to do by any laboured definitions, or the introduction of purely technical terms. Such have been the discussions on the strict limits of the science of political economy, and the propriety of the title it has so long borne; whether intellectual efforts shall be classed amongst productive or unproductive labour, and the precise and invariable meaning to be given to such terms as wealth, value, and the like. These will generally be found to be unprofitable controversies, tending more to confusion of ideas than to precision of language. Let a writer think steadily and clearly upon his subject, and ordinary language will be faithful to him; distinctions between the several meanings of the same term will be made as they are wanted. He who begins by making such distinctions is only laying a snare for his own feet; he will hamper himself and perplex his reader. And with regard especially to the range of topics which an author thinks fit to embrace in his treatise upon this science, surely he may permit himself some liberty of choice, without resolving to mete out new boundaries to which all who follow him are to conform. If M. Dunoyer, for instance, in his able and, in many respects, valuable work, De la Liberté du Travail, chooses to write a treatise which embraces in fact the whole of human life, all the energies and activities of man, mental as well as physical, he could surely have done this without assailing old distinctions and old titles with so needless a violence. Of what avail to call in the etymologist at this time of day, to determine the meaning, or criticise the application of so familiar a term as political economy?5
But there is another class of discussions which, although to the general reader, who is mostly an impatient one, they will appear at first sight to be of a purely technical character, must not be so hastily dismissed. These will be often found to have a direct bearing on the most important questions that can occupy the mind of the statesman. They are in fact explanatory of that great machine, a commercial society, upon which he has to practise – which he has to keep in order, or to learn to leave alone – and therefore as necessary a branch of knowledge to him as anatomy or physiology to one who undertakes to medicine the body. Such are some of the intricate discussions which concern the nature of capital– a subject to which we shall in the first place and at once turn our attention. It is a subject which Mr Mill has treated throughout in a most masterly manner. We may safely say, that there is now no other work to which a student could be properly directed for obtaining a complete insight into all the intricacies of this great branch of political economy. The exposition lies scattered, indeed, through the two volumes; he must read the entire work to obtain it. This scattering of the several parts of a subject is inevitable in treating such a science as political economy, where every topic has to be discussed in relation to every other topic. We do not think that Mr Mill has been particularly happy in his arrangement of topics, but, aware as we are of the extreme difficulty, under such circumstances, of making any arrangement at all, we forbear from any criticism. A man must write himself out the best way he can; and the reader, after obtaining all the materials put at his disposition, may pack them up in what bundles may best suit his own convenience.
We must premise that on this subject – the nature and employment of capital – there appears to be in one part of Mr Mill's exposition – not an error – but a temporary forgetfulness of an old and familiar truth, which ought to have found its place there. Its very familiarity has occasioned it to be overlooked, in the keen inquiry after truth of a more recondite nature. The part which the economists call "unproductive consumption," the self-indulgent luxurious expenditure of the rich – the part this plays in a system of society based on individual effort and individual possession, is not fully stated.
He who spends his money, and lives to do little else, however idle he may be himself, has always had the consolation that he was, at least, setting other people to work. Mr Mill seems to deny him utterly this species of consolation; for in contending against a statement, made by political economists as well as others, that unproductive consumption is necessary, in a strictly economical sense, to the employment of the workmen, and as the indispensable relative to productive consumption, or capital spent in industrial pursuits, he has overlooked that moral necessity there is, in the present system of things, that there should be those who spend to enjoy, as well as those who lay out their money for profit. "What supports and employs productive labour," says Mr Mill, (Vol. i. p. 97,) "is the capital expended in setting it to work, and not the demand of purchases for the produce of the labour when completed. Demand for commodities is not demand for labour. The demand for commodities determines in what particular branch of production the labour and capital shall be employed; it determines the direction of the labour, but not the more or less of the labour itself, or of the maintenance and payment of the labour. That depends on the amount of the capital, or other funds directly devoted to the sustenance and remuneration of labour." Now, without a doubt, the man who purchases an article of luxury when it is manufactured, does not employ labour in the same sense as the manufacturer, who spends his wealth in supporting the artisan, and finding him the requisites of his art, and who, after selling the products of this industry, continues to spend the capital returned to him, together with the profit he has made, in the further sustenance of workmen. But it has been always understood, and the truth appears to be almost too trite to insist on, that unless the unproductive consumer were there to purchase, the capitalist would have had no motive to employ his wealth in this manner; and, what is of equal importance to bear in mind, unless the capitalist also calculated on being, some future day, an unproductive consumer himself, he would have no motive, by saving and toiling, to increase his wealth.
The necessity for a certain amount of unproductive consumption is not a necessity in the nature of things. All men might, if they chose, be saving, might spend upon themselves only what is needful for comfort, and set apart the residue of their funds for the employment of labour, not, of course, in the production of articles of luxury, for which there would be no purchasers, but for such articles as the labourers themselves, now paid from such ample stores, might be consumers of. The social machine might still go on under such a regime, and much to the benefit of the labourer. The capitalists would find their profits diminishing, it is true – they would be more rapidly approaching that minimum of profit, that stationary state, of which we shall by-and-by have to speak; but this diminution of profits must, at all events, sooner or later, take place, and depends ultimately, as we shall have occasion to show, on higher laws, over which man has no control. Men might, if they chose, be all saving, and all convert superfluous wealth into capital; but need we add, men would never choose any such thing. There is no necessity in the nature of things, but there is a necessity in the moral nature of man for a certain portion of this unproductive consumption. The good of others is not a motive sufficiently strong to stimulate a man to any of the steady pursuits of industry. When, therefore, his real wants are satisfied, it must be the gratification of fictitious wants that induces him to toil and accumulate, or to part with any thing he has, by way of barter or exchange. From the time when the rude possessor of the soil consents to surrender a portion of his surplus produce for some trinket or piece of gaudy apparel, to the present epoch, when men consent to live frugally and toil hard during the first period of life, in order that they or their children may afterwards live idly, luxuriously, and ostentatiously, this same unproductive expenditure has performed the part of essential stimulant to human industry. It is not enough, therefore, to say, that it gives the direction to a certain portion of labour: it affords the stimulant that converts idleness into industry, and saving into capital. A very much more dignified being would man undoubtedly be, if desire for the general good could replace, as a motive of industry, a selfish desire, which is often no better than what we ridicule in the savage when he manifests a most disproportionate anxiety, as it seems to us, for the possession of glass beads, or a piece of painted calico. But to this point in the cultivation of human reason we have, at all events, not yet arrived. And let this be always borne in mind – in order that the class of society designated as unproductive consumers may not fall into unmerited odium – that others, who are using their wealth in the direct and profitable employment of labour, are themselves desirous, above all things, of taking their place in the class of unproductive consumers, and are working for that very end.
"Every one can see," writes Mr Mill, "that if a benevolent government possessed all the food, and all the implements and materials of the community, it could exact productive labour from all to whom it allowed a share in the food, and could be in no danger of wanting a field for the employment of this productive labour, since, as long as there was a single want unsaturated (which material objects could supply) of any one individual, the labour of the community could be turned to the production of something capable of satisfying that want. Now, the individual possessors of capital, when they add to it by fresh accumulations, are doing precisely the same thing which we suppose to be done by our benevolent government." – (Vol. i. p. 83.) Certainly the individual capitalists could do the same as the benevolent government, if they had its benevolence. If there are any political economists who teach otherwise, we hold them in error. We wish only to add to the statement the old moral truth long ago recognised, before political economy had a distinct place or name in the world, that as man is constituted, or rather, as he has hitherto demeaned himself, (for who knows what moral as well as other reformations may take place? – the civilised man, such as we have him at this day, postponing habitually the present enjoyment to the future, is a creature of cultivation; and who can tell but that advanced cultivation may make of man a being habitually acting for the general good, in which general good he finds his own particular interest sufficiently represented and provided for?) – that, as man has hitherto acted, this same unproductive selfish expenditure is indispensable as the motive to set that industry to work, which ultimately distributes the real necessaries and rational comforts of life to so many thousands.
Having, in justice to the class of unproductive consumers, brought out this homely truth, which, in the scientific exposition of Mr Mill, seemed in danger of being overlooked, we proceed to a branch of the subject which, if it appears at first of a very technical and abstruse description, is yet capable of very important applications. One of the most striking facts relating to the nature of capital is the tendency of profits, in wealthy and populous countries, to diminish as the amount of capital increases – a tendency to arrive at a certain minimum beyond which there would be no motive for saving, and little possibility of accumulating. This tendency Mr Mill explains as being the result, not of what has been somewhat vaguely called the competition of capital, over-production, or general glut in the market, but, in reality, of the physical laws of nature – of the simple fact that the products of the soil cannot be indefinitely multiplied. Manufacturing industry must be ultimately limited by the supply of the raw material it fashions, which is furnished by the soil, and the supply of food for the artisan, furnished also by the soil; it therefore is subjected, as well as agricultural industry, to the limits which have been set to the productiveness of the earth. Now, without seeking for any definite ratio, such as might be expressed in numbers, between the labour and ingenuity of man and the products of the soil, it may be stated as a simple fact, which admits of no dispute, that after the land has been fairly cultivated, additional labour and additional cost yield but a small proportionate return.
"The limitation to production from the properties of the soil," writes our author, "is not like the obstacle opposed by a wall, which stands immovable in one particular spot, and offers no hindrance to motion, short of stopping it entirely. We may rather compare it to a highly elastic and extensible band, which is hardly ever so violently stretched that it could not possibly be stretched any more; yet the pressure of which is felt long before the final limit is reached, and felt more severely the nearer that limit is approached.
"After a certain, and not very advanced stage in the progress of agriculture – as soon, in fact, as men have applied themselves to cultivation with any energy, and have brought to it any tolerable tools – from that time it is the law of production from the land, that, in any given state of agricultural skill and knowledge, by increasing the labour the produce is not increased in an equal degree; doubling the labour does not double the produce; or, to express the same thing in other words, every increase of produce is obtained by a more than proportional increase in the application of labour to the land.
"This general law of agricultural industry is the most important proposition in political economy. Were the law different, nearly all the phenomena of the production and distribution of wealth would be other than they are. The most fundamental errors, which still prevail on our subject, result from not perceiving this law at work underneath the more superficial agencies on which attention fixes itself; but mistaking these agencies for the ultimate causes of effects of which they may influence the form and mode, but of which it alone determines the essence." – (Vol. i. p. 212.)
It is to this physical law, underlying, as it were, the commercial and industrial energies of man, that we must finally attribute that gradual diminution of profits, observable in advanced and opulent countries. This is popularly attributed, we believe, and has been assigned, by some political economists, to over-production; to a general glut of the market, or, in other words, a preponderance of supply over demand. Over-production in this or that article may very easily, for a time, take place; but general over-production, a general over-balance in the supply, and deficiency in the demand, may be demonstrated to be impossible.
The simple but convincing argument against a general glut or over-balance between supply and demand, which we believe Mr Mill senior first originated, is this, – that as each producer produces in order to part with his produce – in order, in fact, to exchange, to purchase, he must necessarily bring into the market a demand equivalent to the supply he furnishes. "All sellers," as our present author expresses it, "are ex vi termini buyers. Could we suddenly double the productive powers of the country, we should double the supply of commodities in every market; but we should, by the same stroke, double the purchasing power. Every body would bring a double demand as well as supply; every body would be able to buy twice as much, because every one would have twice as much to offer in exchange." – (Vol. ii. p. 91.) Of certain articles, there may, of course, be a superfluity; of certain others a deficiency; but such a thing as a general over-balance between supply and demand cannot take place.
The argument, if it laid claim to a sort of mathematical precision, might be open to an ingenious cavil. The exchange of commodities, it might be said, is effected through the instrumentality of money; now, it is one of the peculiar advantages of money that it enables the vender to sell at one time and purchase at another; it gives him a command over future markets; it enables him to postpone indefinitely one half of the operation of barter. Men who come into a market, wishing to dispose of their commodities now, but not intending to select what commodity they shall take in exchange, till some future time, postponing indefinitely the other half of the operation of barter, and seeking only for money, for that token which will give them or their children a claim on subsequent markets – do not bring with them a demand equivalent to their supply.
The answer to the objection lets us more fully into the real facts of the case. Those only who wished to sell their produce in order to hoard, would fall under the description of men who bring a present supply into the market, postponing indefinitely their demand. But the producer is almost always a man desirous of increasing his wealth – he does not hoard; he immediately lays out his capital in some productive manner, in the purchase of food for labourers, and of the raw materials of industry. But these articles, it happens, cannot be supplied to him with the increasing abundance he demands; and thus we fall back upon the ultimate law to which we have alluded. The manufacturer finds, that every additional demand he makes for these is supplied at a greater cost. What has limited the profits of the agricultural capitalist limits his profits also. He cannot sell his goods at the accustomed advantage. He exclaims that there is a glut in the market. What he takes for a glut is a deficiency. It is quite natural and permissible, however, that this phenomenon of the diminution of profits should be spoken of as the result of a superabundance of capital, provided only it be understood why the later accumulations of capital fail to bring the same return as the earlier.
A simple law of nature, therefore, is the true cause of this commercial phenomenon. Countries, after a certain progress in the career of wealth, must cease to accumulate; – the diminished profit on capital affording no longer any motive for frugality and toil; – and they arrive at what may be called the stationary state. "When a country," says Mr Mill, "has long possessed a large production, and a large net income to make savings from, and when, therefore, the means have long existed of making a great annual addition to capital, (the country not having, like America, a large reserve of fertile land still unused,) it is one of the characteristics of such a country, that the rate of profit is habitually within, as it were, a hand's breadth of the minimum, and the country, therefore, on the very verge of the stationary state. By this, I do not mean that this state is likely, in any of the great countries of Europe, to be soon actually reached, or that capital does not still yield a profit considerably greater than what is barely sufficient to induce the people of these countries to save and accumulate. My meaning is, that it would require but a short time to reduce profits to the minimum, if capital continued to increase at its present rate, and no circumstances having a tendency to raise the rate of profit occurred in the mean time." – (Vol. ii. p. 287.)
Mr Mill then states what are the counteracting circumstances which arrest this downward tendency of profits. He mentions the waste of capital in periods of over-trading and rash speculation, the expenditure of an unproductive kind, and the perpetual overflow of capital into colonies and foreign countries, to seek higher profits than can be obtained at home. This last has a twofold operation. "In the first place, it does what a fire, or an inundation, or a commercial crisis, would have done, – it carries off a part of the increase of capital from which the reduction of profits proceeds. Secondly, the capital so carried off is not lost, but is chiefly employed either in founding colonies, which become large exporters of cheap agricultural produce, or in extending, and perhaps improving, the agriculture of older communities. It is to the emigration of English capital that we have chiefly to look for keeping up a supply of cheap food and cheap materials of clothing, proportional to the increase of our population; thus enabling an increasing capital to find employment in the country, without reduction of profit, in producing manufactured articles with which to pay for this supply of raw produce. Thus, the exportation of capital is an agent of great efficacy in extending the field of employment for that which remains; and it may be said truly that, up to a certain point, the more capital we send away, the more we shall possess and be able to retain at home." – (Vol. ii. p. 297.)
This last observation we have quoted is well deserving of attention. It is an instance of what we mentioned in the outset, of the science correcting as it advances its own errors. What follows is a still more striking instance, and still more worthy of attention. It occurs in the chapter entitled, —Consequences of the tendency of profits to a minimum. To such observations we have wished to draw the especial attention of our readers, but could not do so till the previous exposition had been gone through.
"The theory of the effect of accumulation on profits, laid down in the preceding chapter, materially alters many of the practical conclusions which might otherwise be supposed to follow from the general principles of political economy, and which were, indeed, long admitted as true by the highest authorities on the subject.
"It must greatly abate, or, rather, altogether destroy, in countries where profits are low, the immense importance which used to be attached, by political economists, to the effects which an event or a measure of government might have in adding to, or subtracting from, the capital of the country. We have now seen that the lowness of profits is a proof that the spirit of accumulation is so active, and that the increase of capital has proceeded at so rapid a rate, as to outstrip the two counter agencies, improvements in production, and increased supply of cheap necessaries from abroad: and that unless a considerable portion of the annual increase of capital were either periodically destroyed, or exported for foreign investment, the country would speedily attain the point at which further accumulation would cease, or at least spontaneously slacken, so as no longer to overpass the march of invention in the arts which produce the necessaries of life. In such a state of things as this, a sudden addition to the capital of the country, unaccompanied by any increase of productive power, would be but of transitory duration; since, by depressing profits and interest, it would rather diminish, by a corresponding amount, the savings which would be made from income in the year or two following, or it would cause an equivalent amount to be sent abroad, or to be wasted in rash speculations. Neither, on the other hand, would a sudden abstraction of capital, unless of inordinate amount, have any real effect in impoverishing the country. After a few months or years there would exist in the country just as much capital as if none had been taken away. The abstraction, by raising profits and interest, would give a fresh stimulus to the accumulative principle, which would speedily fill up the vacuum. Probably, indeed, the only effect that would ensue, would be that, for some time afterwards, less capital would be exported, and less thrown away in hazardous speculation.
"In the first place, then, this view of things greatly weakens, in a wealthy and industrious country, the force of the economical argument against the expenditure of public money for really valuable, even though industrially unproductive purposes. If for any great object of justice or philanthropic policy, such as the industrial regeneration of Ireland, or a comprehensive measure of colonisation or of public education, it were proposed to raise a large sum by way of loan, politicians need not demur to the abstraction of so much capital, as tending to dry up the permanent sources of the country's wealth, and diminish the fund which supplies the subsistence of the labouring population. The utmost expense which could be requisite for any of these purposes, would not, in all probability, deprive one labourer of employment, or diminish the next year's production by one ell of cloth or one bushel of grain. In poor countries the capital of the country requires the legislator's sedulous care; he is bound to be most cautious in encroaching upon it, and should favour to the utmost its accumulation at home, and its introduction from abroad. But in rich, populous, and highly cultivated countries, it is not capital which is the deficient element, but fertile land; and what the legislator should desire and promote, is not a greater aggregate saving, but a greater return to saving, either by improved cultivation, or by access to the produce of more fertile lands in other parts of the globe. In such countries, the government may take any moderate portion of the capital of the country and convert it into revenue, without affecting the national wealth; the whole being rather drawn from that portion of the annual saving which would otherwise be sent abroad, or being substracted from the unproductive expenditure of individuals for the next year or two, since every million sent makes room for another million to be saved, before reaching the overflowing point. When the object in view is worth the sacrifice of such an amount of the expenditure that furnishes the daily enjoyment of the people, the only well grounded economical objection against taking the necessary funds directly from the capital, consists of the inconveniences attending the process of raising a revenue, by taxation, to pay the interest of a debt.
"The same considerations enable us to throw aside, as unworthy of regard, one of the common arguments against emigration as a means of relief for the labouring class. Emigration, it is said, can do no good to the labourers, if, in order to defray the cost, as much must be taken away from the capital of the country as from its population. That any thing like this proportion could require to be abstracted from capital for the purpose even of the most extensive colonisation, few, I should think, would now assert; but even on that untenable supposition, it is an error to suppose that no benefit could be conferred on the labouring class. If one-tenth of the labouring people of England were transferred to the colonies, and along with them one-tenth of the circulating capital of the country, either wages, or profits, or both, would be greatly benefited by the diminished pressure of capital and population upon the fertility of the land. There would be a reduced demand for food; the inferior arable lands would be thrown out of cultivation, and would become pasture; the superior would be cultivated less highly, but with a greater proportional return; food would be lowered in price, and, though money wages would not rise, every labourer would be considerably improved in circumstances – an improvement which, if no increased stimulus to population and fall of wages ensued, would be permanent; while, if there did, profits would rise, and accumulation start forward so as to repair the loss of capital. The landlords alone would sustain some loss of income; and even they, only if colonisation went to the length of actually diminishing capital and population, but not if it merely carried off the annual increase." – (Vol. ii. p. 999.)
Does not all this place the condition of England in a very striking aspect before us? We have a country here so wealthy, so nearly approaching that state where its accessions of capital can no longer be profitably employed, that it wastes its funds in ruinous speculations, building perhaps useless factories – and, if useless, how mischievous! – that it sends its money abroad to construct foreign railways, or throws it away upon South American republics. Yet the people of this country is degraded and brutalised for want of education, and it is threatened with political convulsions for want of a good system of emigration; and you call for education, and you call for colonisation, and the only obstacle that is opposed to you is – the want of money! Shame upon England, if this be so! With all her knowledge and civilisation, she will go down to ruin, rather than give, in the shape of taxes, for the most necessary as well as philanthropic purposes, that wealth which she can fling abroad or waste at home with the most reckless prodigality.