The principles of political economy applied to the condition, the resources, and the institutions of the American people

Front matter

Qass_A_LM-Si_!L Book ■ P )7.

Septembee, 185 6.

A LIST OF BOOKS

Preface

"Political Economy," says Mr. Samuel Laing, "is not a universal science, of whicli the principles are applicable to all men under all circumstances, and equally good and true for all nations ; but every country has a Political Economy of its own, suitable to its own physical circumstances of position on the globe, climate, soil, products, and to the habits, character, and idiosyncrasy of its inhabitants, formed or modified by such physical circumstances."

I am not prepared to accept this remark in all its generality, for if it were true, it would follow, not only that Political Economy is not a universal science, but that it is no science at all, inasmuch as universal applicability, as Mr. Laing himself observes, is " the distinguishing characteristic and test of every branch of knowledge that claims the dignity of real science." But the habits and dispositions of men, as manifested in the pursuit of wealth, may be reduced to general principles, and thus become subjects of legitimate scientific classification and inquiry, just as much as those other habits and dispositions which are manifested in the constitution and conduct of organized society, and which, when generalized and classified, become the science of Politics. There is a general science of Human Nature, of which the special sciences of Ethics, Psychology, Esthetics, Politics, and Political Economy are so many departments, all founded upon the essential unity of the human mind and character, and the consequent similarity of its manifestations under similar circumstances. These sciences may be studied either inductively or deductively ; that is, either by observing the phenomena, — the conduct of men under given circumstances, — and tracing these up to their causes.

VI PREFACE.

— the motives in which they must have originated ; or by assuming the motives from our general knowledge of human nature, and tracing these down to the outward conduct which they cause and govern. In this sense, then, there is a universal science of Political Economy, equally applicable, not only to France, England, and America, but to China, Tartary, and New Holland, — to all nations under the sun.

But it must be admitted that these universal principles are comparatively few and unimportant, often being little more than truisms ; and if the science were limited to them, it would be of rather narrow compass and limited utility. Political Economy, as it is commonly understood, embraces a great number of corollai-ies and deductions from these principles, and of applications of them to the analysis and explanation of complex social and commercial phenomena. It is thus that the science, or rather any particular system of it, becomes obnoxious to Mr. Laing's censure ; having been suggested by the peculiar circumstances and condition of one country, relating almost exclusively to the experience of one nation, and deriving, in truth, most of its utility for them from this very fact, it is at least partially inapplicable and unsound in every other case. The Political Economy of England is even more peculiar and characteristic than her civil polity and social organization ; it is conformed to that polity and organization, and it is also adapted to the physical condition and industrial pursuits of an insular people. As circumstances vary from age to age, as well as between different countries, it is continually necessary to review and modify the leading doctrines of the science, so as to preserve their conformity to the habits and the institutions of the people. If Adam Smith were living in our own day, it may be doubted whether he would be the uncompromising advocate that he was, of the principles of Free Trade. He flourished at a tune when the system of monopolies and restraints was in full action and vigor ; when nothing had been done to limit or reform the colonial system, the guilds of trade, the East India Company, the Universities, or the abuses of municipal corporations. It was natural that he should utter an earnest protest against these odious restrictions and monopolies, and carry his argument against them too far, by neglecting to mention the exceptions and limitations to which his own principles were liable.

I have endeavored in this work to lay the foundations at least, leaving it for others to raise the superstructure, of an American system of Po-

PREFACE. Vll

litical Economy, and for this purpose, have subjected to a rigorous examination the leading doctrines of the science as taught by English writers, in order not only to test their general soundness and applicability to the condition and the institutions of the American people, but to trace out and analyze the peculiar circumstances which first suggested them. Among these doctrines may be enumerated those of Adam Smith upon free trade, of Malthus upon population, of Ricardo upon rent and profits, of Torrens and Loyd upon the currency, and of McCulloch upon the laws of inheritance. It is not the hglit of American experience alone which has induced me to modify or reject these theories ; I have attempted to show that they are indefensible even upon the principles of those who continue to support them, and to this end, have fortified my reasoning by frequent citations from English and French authorities.

The work was not designed to be wholly controversial and original ; besides suggesting the doctrines which are to take the place of those which have been rejected, it was intended to contain a summary of what is most valuable in other treatises upon the subject, so as to form a convenient text-book of instruction in American colleges. Most teachers will probably accept the conclusion which I have formed, after many years' experience, that it is a wearisome and hopeless' task to attempt to instruct a class of pupils from any of the English or French treatises upon the science. This volume contains the substance of a course of lectures upon Political Economy, first delivered before the Lowell Institute in Boston five years ago, and afterwards repeated, with many changes and additions, before successive classes in college. It also comprises all that was deemed worthy of preservation in a series of articles upon various topics in the science, wliich have been published during the last ten years in the North American Eeview. I have not deemed it necessary to rewrite what was at first carefully prepared for publication, when time and further reflection had not suggested any change of doctrine, or any material improvements in illustration or phraseology.

The nature of the subject has compelled me to make a kind of comparative survey of the workings and results of the social and political institutions of England and America. It is hoped that the results of this comparison, as here presented, will, not seem to have been suggested by national prejudice, or to be unduly tinctured with national self-esteem.

VIU PREFACE.

Most of what is valuable in our civil polity has come to us by inheritance from our English ancestors, and is still the common property of the two nations ; the trial by jury, the writ of habeas corpus, the leading forms of representative government, are still the common safeguards of English and American freedom, and the great principles of the Enghsh Common Law are still authoritative in our courts. Loyalty to the State and the Union talves the place with us of loyalty to the Crown. "We have only cast off the aristocratic and monarchical appendages of these institutions, to make room for democratic ones, — a change far less important in a political than a social aspect. Whatever there is peculiar in the forms of society, the organization of industry, and the habits and dispositions of our people, which can be directly traced to this alteration, has been the subject of frequent and sharp criticism, not only by British travellers, but by British economists and statesmen. Thus, Mr. J. S. Mill, unquestionably the ablest living writer upon Political Economy and the Logic of the Liductive Sciences, and one who, from his connection with the followers of Bentham and the Radical party, might be supposed to view with some favor the workings of republican institutions, cannot speak in any more flattering terms than these of the inhabitants of the Northern and Middle States of America : " They have the six points of Chartism, and they have no poverty ; and all that these advantages do for them is, that the life of the whole of one sex is devoted to dollai'-hunting, and of the other to breeding dollar-hunters." And the tone of McCuUoch, Tooke, and other Enghsh economists, in reference to the people of this country, is not a whit more complimentary.* Not at

* Yet Englishmen wonder and complain that the sympathies of Americans are not with them and their allies in their present contest with Russia, — a contest which, as it involves no principles of natural or popular rights, but is solely a struggle between rival governments for a preponderance of power in the Black Sea, is certainly regarded by the generality of our countrymen with unaffected indifference. The question whether Napoleon the Third has any better claim to the esteem of the people of the United States than he had to that of Englishmen only three years ago, is, perhaps, not worth discussing. But if England and America are ever to be joined in a natural alliance of spontaneous amity and mutual regard, a more conciliatory manner must be adopted by those who assume to speak the opinions of the middle and the upper classes in the former country. Disregard, if you will, all those manifestations of popular sentiment here which may be imputed to electioneering manoeuvres : there still remains in the minds of the educated and reflecting portion of our peo-

PREFACE. • all in the spirit of retaliation, but in that of self-defence, as weU as for the more perfect elucidation of the principles of the science, I have com pared the effects of aristocratic with those of democratic institutions upon the development of national enterprise, the growth of opulence the security of property, the popular feehng of uneasiness or content, and the general well-being of the people in Great Britain and the United States Too much stress is habitually laid by English economists upon the natural advantages which our countrymen are supposed to possess, especially an the broad expanse of fertile territory which still remains open for settlement by them. But surely we cannot claim superiority in this respect over England, whose colonial dominion comprises Nova Scotia and Canada, a large portion of the East and the West Indies, the southern part of Africa, and the whole of New Zealand and Australia. Besides I have attempted to show that the causes of the increase of capital are moral rather than physical, and that there is a drawback, as well as an advantage, in the abundance and cheapness of land, which incite the people to leave behind them all the means and appliances of civihzation, and to become squatters and backwoodsmen in the wilderness.

Though I have had frequent occasion to controvert the opinions of Enghsh economists, it is little to say that this work could not have been written without the aid which their writings have afforded, and that I have often borrowed from one or two of them facts and arguments which have served to confute the theories of the others. The authority of Adam Smith, Malthus, and Ricardo seems to be waning even in England; a new school has sprung up in opposition to them, whose opinions on many important points are visibly gaining ground, and have already begun to affect the legislation of the kingdom. Among these dissentients may be reckoned the eminent traveller and social economist, Mr Samuel Laing, and the ingenious and well-informed author of "Over-population and its Eemedy," Mr. W. T.Thornton; while Mr Tooke the author of an admirable " History of Prices," and Mr. FuUarton, have'

pie who are naturally cordial well-wishers to England, a strong feeling of surprise rTrr r " ? 'r''^' ^"' '°™^°^^^"^ "°^ habituan/assu^rd ahou e ! 1 e E^r^^^^^^^^^^^ r"" '' *'" ^"'^^^°'=^^ J°""^^ -'^^^^' -- -ore than ster and Ashburton, can never entirely eradicate.

X PREFACE.

successfully established, in opposition to the paradoxes of Eicardo and his followers, a rational theory of the currency. Mr. J. S. Mill, an avowed iconoclast and reformer, has followed or preceded these writers on some of their points of dissent from the old school, and has incorporated into his work some very bold speculations respecting the laws of inheritance and the distribution of property ; but in other respects, he has followed very closely in the footsteps of Malthus and Ricardo. From the writings of all whom I have mentioned by name, and of several others, I have derived valuable aid and instruction.

Throughout the work, I have had in view the wants of learners, and have tried to incorporate into it such elementary information about banking operations, the system of disposing of the pubUc lands, the nature of bills of exchange, the functions of the currency, the supply of the precious metals, and the course of trade both at home and with foreign countries, as might be useful not on\j to classes in college, but to other young men, who, with less preparatory training, are about to enter the mercantile profession.

Cambeidge, December 28, 1855.

CHAPTER I, Definition of Wealth

The science of wealth founded on the laws of human nature

Articles of wealth are quickly consumed

Wealth must be perpetually renewed .

"■ Folly of asking for an equal distribution of wealth

How a country recovers from devastation .

Wealth changes, property may be permanent .

The transformations of wealth illustrated .

Operation of the Savings' Banks in Massachusetts

Wealth is not locked up in Banks . .

But is kept in constant activity and change

Chapter II

The Aims, the Limitations, and the Advantages of the Study of Political Economy: the "Laissez-faire," or

" Let-alone " Principle

There are general laws that constitute a theory of wealth

Political Economy not the art of money-making

How far it is a deductive science .....

Legislation affected by one theory or another of wealth

Errors in reducing the principles of this science to practice

Importance of the study of social economy .

Necessity of teaching the doctrines of this science .

Dignity and utility of the science of wealth

Selfishness and cupidity made to minister to the public good

As in the dally supply of a great city with provisions .

The laissez-faire principle founded on this truth

Limitations of this principle

Restrictions necessary to secure freedom of action to all . The protective policy removes obstacles and restraints

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Xll

CONTENTS.

What constitutes national independence . . . . ' . 26

Divine wisdom and beneficence manifested in economical laws . .27

CHAPTER III. How Wealth is created, and what constitutes Exchangeable Value 28

Certificates of ownership distinguished from articles of wealth . . 28

Human labor the only source of wealth 29

Extensive cooperation necessary ....... 30

How this cooperation is obtained . 31

Two elements of exchangeable value 32

- Value and utility defined ........ 33

The paradox of the creation of value ....... 34

Value cannot exist without difiiculty of attainment .... 35

Distinction between natural and artificial wealth . . . .36

Small earnings of scientific and literary men . . . . . 37

Ideas cannot be appropriated ........ 38

■ Production defined ......... 39

Three departments of industry 40

Two classes of commodities that constitute wealth .... 40

CHAPTER IV. The Measure op Value, and the Distribution of Wealth

among the cooperating producers of it . . . .41

Definition and measure of labor . . . . . . . 41

Two Hmitations of this general law ....... 42

Exchangeable value transformed into natural wealth ... 43

Exceptions caused by accidents and monopoUes 44

Attempts to obtain wealth without labor ; lotteries .... 45

How the value produced is distributed . . . . . .46

Competition modified by custom . . . . . . . 47

How the inferior tenants in England were dispossessed . . .48 The Scotch Highlanders owned the soU in cormnon property . . 49 Eviction of the Highland tenantry ....... 50

Tenant right in Ireland ; other efiects of custom . . . . 51

Competition distributes values with perfect fairness . . . .52

Mutual dependence of agriculture, commerce, and manufactures . 53 UtiUty of commerce .......... 54