Capital not Represented by Commodities.

63

were low, showing an abundance of goods as well as money. In truth, it is the deficiency of employment which causes the abundance of capital, which does not now, and obviously did not for the many months or years that employment was in excess of capital, limit and regulate employment.

The national debt is a claim for services from the people. It is a burden on living industry. It is the result of waste and extravagance in the government, and of saving in the individuals who lent it their funds. Every farthing of it is capital in the sense of saving or accumulation, and accordingly the late Lord Lauderdale strenuously insisted that it is national wealth; but no one dreams that a stock of commodities exists in the land equal at once to the national debt, and to all the capital actively employed in production. What is true of the national debt is true of all paper securities, which entitle a man at any time to a corresponding share of the national wealth, and which can be bought and sold in the public market. Fictitious or accommodation paper ever bears a very small proportion to the whole sum of securities which entitle their holders to claim services from others when they need them; and to suppose that there are always commodities in existence equal to all these securities ready to liquidate them, is a palpable error. In fact, the very circumstance which entitles one man to a reward for saving is, that the thing saved has been consumed by some other. All capital is used or consumed. As acknowledged claims for services which may extend through centuries (as the interest of the national debt, some of which was contracted nearly two hundred years ago, is paid year after year) or transformed into money, or invested in securities almost everywhere negotiable, capital may be valid in Hindostan or Russia, as well as in England. In this sense the claims of capital are perfectly sound and perfectly comprehensible; but as representing existing commodities, though saved or possessed in the form of securities for the very purpose of deriving an income from them, they are incomprehensible.

Mr. J. S. Mill, one of the most strenuous advocates for the English view, that capital is a stock of commodities by which industry is limited, says-that labourers are always subsisted on capital, that they are not fed on this year's harvest, but on the last year's-not by the work they have in hand, but by the work previously executed. It ought, however, to be remembered that the grain which is to be our food is not made ready for consump tion till within a few hours, or a few days, of being consumed, except in the case of ship biscuit and meats prepared for a long voyage, and requires some kind of labour before it can be consumed. Converted into bread or beer, corn is only ready for the

consumer when delivered at the baker's counter or drawn from the publican's tap. Many great and successive labours must be performed between the harvest and consumption. To preserve the corn from mice or weevils requires continual toil. It must be thrashed, malted, ground, sifted, mashed, mixed with other things, baked or brewed, before it can be used. In the meantime, a whole year is not required to rear all kinds of animals, such as pigs, rabbits, calves, and lambs; vegetables grow in a few days or weeks, and fish, of which the store is indefinitely large, is always at hand prepared by nature, though to catch fish requires some preliminary labour, and all these serve for the sustenance of man as well as grain. The daily produce of the fisherman or the gardener is exchanged for small portions of the yearly produce of the farmer. It is, therefore, an error to assume that present labour is always subsisted by the produce of past labour, except past for a very short period, ever past for the individual, but never past for the whole society, which is always sustained by existing labour, divided and diversified, one species being the real limitation of the demand for some other, and consequently the limit of employment. In the language of the French economist, services are continually rewarding services, and the more the services are diversified and the more any one species is performed when services are freely exchanged for services, the greater is the demand for another. Thus employment depends at all times less on a stock of commodities than on division of labour and freedom of exchange. Mutuality of services is a more harmonious social explanation of the phenomena than the antagonistic limitation of labour by capital.

With respect to the reward of capital or interest, about which there have been serious and long discussions in France, and discussions protracted over as long a period though not so fierce in England, M. Bastiat is very decided, and fights the battle manfully against Proudhon and other assailants of capitalists. It would be quite enough to say on the subject that in all countries and at all times interest has been freely and voluntarily paid for the use of capital to justify the practice, had it not been questioned; but since it has been questioned, we must refer briefly to what M. Bastiat has said in its defence. Capital is the product of labour. A sack of wheat,' he says, 'is a sack of wheat, whether sold for consumption or bought to be used as capital. But as capital the proprietor denies himself the enjoyment of consuming it, and enables some other person to have this satisfaction. By postponing his own enjoyment he renders a service to another, and service for service, for this he is justly paid. This reserved service is represented, not by the wheat which is consumed, but

Advantages of Capital.

65

by money, securities, and every kind of paper currency, so that he has the means of availing himself of services whenever and almost wherever he pleases—one of the most extraordinary facts in the science. He can cede his claim to another on condition that an equal service, or the representative of an equal service at a time fixed, with a remuneration settled by the parties to the bargain, be returned to him for postponing his own enjoyment for the advantage of the other. These titles to services can be continually exchanged, and the enjoyment indefinitely postponed, till the services rendered in one century may not be liquidated till another. Thus one generation benefited by the services of preceding generations acquits itself of its obligations. Much of what is now paid by labour is the reward of services rendered in times past. The labour of one generation is mingled with the labour of other generations, and all who concur in the work should share the reward.

A great portion of such services is devoted to the invention and manufacture of tools, implements, and other species of fixed capital, of which the common principle is that they press into the service of man the gratuitous services of nature. The more they are invented and used the greater is the quantity of wealth obtained by an equal quantity of labour. Much of the saving which after-generations requite is vested in useful implements and tools, and useful reproduction; but with this much waste by governments has been mingled, imposing onerous payments on posterity. This has obscured the public view, and brought into question the just reward of some of the most valuable services that man renders to man. It is a consequence of the principle common to all implements and tools, that they press into th service of man the gratuitous services of nature, which have no value in exchange, and consequently the relative share of the total produce, which goes to the owners, makers, and users of tools, machines, and implements as these are improved, diminishes, though their absolute share increases. On the contrary, the share of the labourer, or the rest of the community, increases both absolutely and relatively. This M. Bastiat illustrates by figures:Total Produce. Share of Capital. Share of Labour.

First Period.

1000

2000

3000

4000

500

800

1050

1200

500

1200

1950

2800

Every substitution of improved implements, tools, and machines, for those before in use, is followed by an increase of general welfare. It obtains for man more of the gratuitous

services of nature; this is an inflexible law of capital, which is thus a powerful means of promoting civilization and equality amongst men. We cannot, advert to all the steps by which the demonstration is reached, and must refer the reader for the numerous details to the Harmonies Economiques.

Consistently with this view all services accumulated and incorporated in implements susceptible of successive improvement are liable to become relatively deteriorated. Machinery is continually superseded by improved machinery. In the exchange of present labour against anterior labour, the advantage is on the side of present labour. By dint of greater skill the labour of every succeeding generation becomes increasingly productive; and there is, consequently, a perpetual tendency to a reduction in the utility of past services compared to present services. In other words, there is a natural cause for the continual reduction in the rate of interest or payment for past services. There is a continual renewal of services, which succeeding generations must requite, and also a continual release from payments for past services. The fact of a continual fall of profit or the rate of interest, as the rule, is much better explained by M. Bastiat's theory than by the theory that labour on land becomes less and less productive, the great foundation of the peculiar doctrines of Malthus and Ricardo. By every successive improvement which accompanies an increase of population, not only in agricultural industry but in the industry which supplies the agriculturist with tools, clothing, and articles of consumption, their doctrines are contradicted.

Of credit except merely as the loan of capital, with or without interest, which, of late years, has occasioned much discussion in France, M. Bastiat says very little. He does not speak of it as a means of promoting production, and yet on his theory, as future service is the proper payment of past service, a promise to render it may be looked on as equivalent to present payment, and may, as we know it does, stimulate present services. Perhaps confidence, on which credit is founded, can only be fully appreciated in a community in which commerce extensively prevails,-another example of the fact that economical theories are necessarily modified by the actual peculiarities of nations. English writers say a great deal about credit, paper-money, banks, foreign exchanges, international trade, the relative importance of different securities, and other topics closely connected with commerce. M. Bastiat says very little of them, or totally neglects them. His works are much less taken up with historical and economical details than those of his English fellow-labourers, and much more with controversies about the general principles of society.

Distribution dependent on Property.

67

In the natural system perfect freedom of exchange is deduced from the right of property, which government, by common consent, is constituted to defend. The importance of this right, and all its consequences over the distribution of wealth, cannot for one moment be doubted; and the Physiocrats accordingly made it the basis of their system. Smith was content silently to adopt and follow the distribution of produce, and the right of property current in his time, and discourse on the relations of rent, profit, and wages as they existed, without going deeper. His successors, however, have found it necessary to adopt a different course, and, in imitation of the Physiocrats, to treat of the right of property as the basis of distribution. Accordingly Mr. M'Culloch says:

"The necessity for establishing the right of property is so very obvious and urgent that it must have been all but coeval with the formation of societies. All have been impressed with the reasonableness of the maxim, which teaches that products acquired by the labour of a man's body and the work of his hands, should be considered exclusively his own.' 'It is obvious,' he continues, after a long historical notice of the right, from what has now been stated, that the law of the land is not as Dr. Paley has affirmed, the real foundation of the right of property. It rests on a more remote and a more solid basis, it grows out of the circumstances under which man is placed.' 'Whether there be or not a principle inherent in man that at once suggests to every individual not to interfere with what has been produced or appropriated by another, Mr. M'Culloch does not undertake to decide.'*

He does not adopt the positive assertion of the French as to this right, which makes it, like the right of life, be instinctively respected, but ascribes its origin to a perception of its expediency. He has, however, a much more just notion of its importance to the science than Smith had, and also says:

'But it must not be imagined that the security of property is violated only when a man is deprived of the power of peaceably enjoying the fruits of his industry; it is also violated, and perhaps in a still more glaring and unjustifiable manner, when he is prevented from using the powers given him by nature in any way not injurious to others, he considers most beneficial to himself. Of all the species of property which a man possesses, the faculties of his mind and powers of his body are most particularly his own. He should, therefore, be permitted to enjoy, that is, to use or exert these powers at his discretion. And hence this right is as much infringed upon when a man is interdicted from engaging in a particular branch of business, as when he is unjustly deprived of the property he has produced or accumulated. All monopolies which give to a few individuals the power of * Principles of Political Economy, Part I. chap. 2.