[36] "All kinds of public loans," observes M. Say, "are attended with the inconvenience of withdrawing capital, or portions of capital, from productive employments, to devote them to consumption; and when they take place in a country, _the Government of which does not inspire much confidence_, they have the further inconvenience of raising the interest of capital. Who would lend at 5 per cent. per annum to agriculture, to manufacturers, and to commerce, when a borrower may be found ready to pay an interest of 7 or 8 per cent.? That sort of income, which is called profit of stock, would rise then at the expense of the consumer. Consumption would be reduced by the rise in the price of produce; and the other productive services would be less in demand, less well paid. The whole nation, capitalists excepted, would be the sufferers from such a state of things." To the question: "who would lend money to farmers, manufacturers, and merchants, at 5 per cent. per annum, when another borrower having little credit, would give 7 or 8?" I reply, that every prudent and reasonable man would. Because the rate of interest is 7 or 8 per cent. there where the lender runs extraordinary risk, is this any reason that it should be equally high in those places where they are secured from such risks? M.
Say allows, that the rate of interest depends on the rate of profits; but it does not therefore follow, that the rate of profits depends on the rate of interest. One is the cause, the other the effect, and it is impossible for any circumstances to make them change places.
[37] In another place he says, that "whatever extension of the foreign market can be occasioned by the bounty, must, in every particular year, be altogether at the expense of the home market; as every bushel of corn which is exported by means of the bounty, and which would not have been exported without the bounty, would have remained in the home market to increase the consumption, and to lower the price of that commodity. The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and, secondly, the tax which arises from the advanced price of the commodity in the home market, and which, as the whole body of the people are purchasers of corn, must in this particular commodity be paid by the whole body of the people. In this particular commodity, therefore, this second tax is by much the heaviest of the two." "For every five shillings, therefore, which they contribute to the payment of the first tax, they must contribute six pounds four shillings to the payment of the second." "The extraordinary exportation of corn, therefore, occasioned by the bounty, not only in every particular year diminishes the home, just as much as it extends the foreign market and consumption, but, by restraining the population and industry of the country, its final tendency is to stunt and restrain the gradual extension of the home market, and thereby, in the long run, rather to diminish than to augment the whole market and consumption of corn."
[38] The same opinion is held by M. Say. Vol. ii. p. 335.
[39] See Chap. on Rent.
[40] M. Say supposes the advantage of the manufacturers at home to be more than temporary. "A Government which absolutely prohibits the importation of certain foreign goods, establishes a monopoly _in favour of those_ who produce such commodities at home, _against those_ who consume them; in other words, those at home who produce them having the exclusive privilege of selling them, may elevate their price above the natural price; and the consumers at home, not being able to obtain them elsewhere, are obliged to purchase them at a higher price." Vol. i. p. 201.
But how can they permanently support the market price of their goods above the natural price, when every one of their fellow citizens is free to enter into the trade? they are guaranteed against foreign, but not against home competition. The real evil arising to the country from such monopolies, if they can be called by that name, lies, not in raising the market price of such goods, but in raising their real and natural price. By increasing the cost of production, a portion of the labour of the country is less productively employed.
[41] Are not the following passages contradictory to the one above quoted? "Besides, that home trade, though less noticed, (because it is in a variety of hands) is the most considerable, it is also the most profitable. The commodities exchanged in that trade are necessarily the productions of the same country." Vol. i. p. 84.
"The English Government has not observed, that the most profitable sales are those which a country makes to itself, because they cannot take place, without two values being produced by the nation; the value which is sold, and the value with which the purchase is made." Vol. i. p. 221.
I shall, in the 24th chapter, examine the soundness of this opinion.
[42] See page 198.
[43] M. Say is of the same opinion with Adam Smith: "The most productive employment of capital, for the country in general, after that on the land, is that of manufactures and of home trade; because it puts in activity an industry of which the profits are gained in the country, while those capitals which are employed in foreign commerce, make the industry and lands of all countries to be productive, without distinction.
"The employment of capital, the least favourable to a nation, is that of carrying the produce of one foreign country to another." _Say_, vol. ii. p. 120.
[44] "It is fortunate that the natural course of things draws capital, not to those employments where the greatest profits are made, but to those where their operation is most profitable to the community."--Vol. ii. p. 122. M. Say has not told us what those employments are, which, while they are the most profitable to the individual, are not the most profitable to the state. If countries with limited capitals, but with abundance of fertile land, do not early engage in foreign trade, the reason is, because it is less profitable to individuals, and therefore also less profitable to the state.
[45] "The use of gold and silver then establishes in every place a certain necessity for these commodities; and when the country possesses the quantity necessary to satisfy this want, all that is further imported, not being in demand, is unfruitful in value, and of no use to its owners."--_Say_, vol. i. p. 187.
In page 196, M. Say says, that supposing a country to require 1000 carriages, and to be possessed of 1500--all above 1000 would be useless; and thence he infers, that if it possesses more money than is _necessary_, the overplus will not be employed.
[46] Whatever I say of gold coin, is equally applicable to silver coin; but it is not necessary to mention both on every occasion.
[47] "In the transactions of Government with individuals, and in those of individuals between themselves, a piece of money is never received, whatever denomination may be given to it, but at its intrinsic value, increased by the value of the utility which the impression it bears has added to it."--_Say_, vol. i. p. 327.
"Money is so little a mark of value, that if the pieces of money lose a part of their value by friction, from use, or by the knavery of the clippers of money, all goods rise in price in proportion to the alteration which they have experienced; and if Government orders a recoinage, and restores each piece to its legal weight and fineness, goods will fall to their former price; if they have not been exposed to variations from other causes."--_Say_, vol. i. p. 346.
[48] M. Say recommends that the seignorage should vary according to the quantity of business that the mint might be called upon to perform.
"Government should not coin the bullion of individuals except on payment, not only of the expenses, but also of the profits of coining. This profit might be carried to a considerable height, in consequence of the exclusive privilege of coining; but it must vary according to the circumstances of the mint, and the quantity required for circulation." Vol. i. p. 380.
Such a regulation would be extremely pernicious, and would expose us to considerable and unnecessary variation in the bullion value of the currency.
[49] If with the quantity of gold and silver which actually exists, these metals only served for the manufacture of utensils and ornaments, they would be abundant, and would be much cheaper than they are at present; in other words, in exchanging them for any other species of goods, we should be obliged to give proportionally a greater quantity of them. But as a large quantity of these metals is used for money, and as this portion is used for no other purpose, there remains less to be employed in furniture and jewellery; now this scarcity adds to their value.--_Say_, vol. i. p. 316. See also note to p. 78.
[50] An Inquiry into the Nature and Origin of Public Wealth, page 13.
[51] An Inquiry into the Nature and Progress of Rent, p. 15.
[52] See page 124, where I have endeavoured to shew, that whatever facility or difficulty there may be in the production of corn; wages and profits together will be of the same value. When wages rise, it is always at the expense of profits, and when they fall, profits always rise.
[53] Of what increased quantity does Mr. Malthus speak? Who is to produce it? Who can have any motive to produce it, before any demand exists for an additional quantity?
[54] Inquiry, &c. "In all progressive countries, the average price of corn is never higher than what is necessary to continue the average increase of produce." Observations, p. 21.
"In the employment of fresh capital upon the land, to provide for the wants of an increasing population, whether this fresh capital is employed in bringing more land under the plough, or improving land already in cultivation, the main question always depends upon the expected returns of this capital; and no part of the gross profits can be diminished, without diminishing the motive to this mode of employing it. Every diminution of price, not fully and immediately balanced by a proportioned fall in all the necessary expenses of a farm, every tax on the land, every tax on farming stock, every tax on the necessaries of farmers, will tell in the computation; and if, after all these outgoings are allowed for, the price of the produce will not leave a fair remuneration for the capital employed, according to the general rate of profits, and a rent at least equal to the rent of the land in its former state, no sufficient motive can exist to undertake the projected improvement." Observations, p. 22.
[55] See p. 124.
[56] See p. 70, &c.
[57] It is not necessary to state on every occasion, but it must be always understood, that the same effect will be produced by employing different, but equal portions of capital on the land already in cultivation, with different results. Rent is the difference of produce obtained with equal capitals, and with equal labour on the same, or on different qualities of land.
[58] Observations on the Corn Laws, p. 4.
[59] Upon shewing this passage to Mr. Malthus, at the time when these papers were going to the press, he observed, "that in these two instances he had inadvertently used the term _real price_, instead of _cost of production_." It will be seen from what I have already said, that to me it appears, that in these two instances he has used the term _real price_ in its true and just acceptation, and that in the former case only it is incorrectly applied.
[60] Page 40.
[61] Manufactures, indeed, could not fall in any such proportion, because, under the circumstances supposed, there would be a new distribution of the precious metals among the different countries. Our cheap commodities would be exported in exchange for corn and gold, till the accumulation of gold should lower its value, and raise the money price of commodities.
[62] The Grounds of an Opinion, &c. page 36.
[63] Mr. Malthus, in another part of the same work, supposes commodities to vary 25 or 20 per cent. when corn varies 33-1/3.
[64] In Chap. 24. I have observed, that the real resources of a country, and its ability to pay taxes, depend on its net, and not on its gross income.
[65] This is on the supposition that money continued at the same value. In the last note, I have endeavoured to shew that money would not continue of the same value,--that it would fall, from increased importation; a fact which is much more favourable to my argument.
[66] Mr. M'Culloch, in an able publication, has very strongly contended for the justice of making the dividends on the national debt conform to the reduced value of corn. He is in favour of a free trade in corn, but he thinks it should be accompanied by a reduction of interest to the national creditor.
THE END.