Consumption of Wealth. of production can never be a means of overloading the market. Too much of one commodity may occasionally be produced; but it is quite impossible that there can be too great a supply of every species of commodities. For every excess there must be a corresponding deficiency. The fault is not in producing too much, but in producing commodities which do not suit the tastes of those with whom we wish to exchange them, or which we cannot ourselves consume. If we attend to these two grand requisites, we may increase the power of production a thousand or a million of times, and we shall be as free of all excess as if we diminished it in the same proportion. Unproductive consumption is not, therefore, necessary to prevent the overloading of the market; and to maintain that it contributes to increase national wealth in any other way, is really just the same thing as to maintain that wealth would be increased by throwing a portion of it into the sea or the fire.* if it include population, so that wages and profits continue to bear to each other the same ratio, there cannot, in the natural course of things, be such a state as a general glut; for if all the elements of which society consist, continue to bear to each other the same proportion, no derangement can take place. But in this, as in other cases, the wise provisions of nature are defeated by the being for whose benefit they are intended: a state of war is a state contrary to nature, and hostile to national prosperity; it disturbs the natural proportions that subsist between the production and consumption of society. War, by turning citizens into soldiers, turns producers into consumers, and hence its temporary stimulus upon markets and prices. After a time, however, this excitement ceases, and production is, by degrees, accommodated to the demand of these surplus consumers. A return to peace reverses this order of things; by converting soldiers into labourers it turns consumers into producers, and brings on, consequently, a general glut and stagnation of trade. That such a state is possible, of a general stagnation in which all are the sufferers, and that it is consequent upon the change from war to peace, no one will deny who has attended to the general state both of Europe and America, since the late war. Years of languishment and wild speculation have been found to be an after tax, which a country must pay for "that game, which, if subjects were wise, kings should not play at." War is in itself a state so hostile to the best interests of society as to leave, as it were, an entail of curses behind it. A general glut, therefore, while it may be considered as inconsistent with the principles of the science, which presupposes a state of peace, is yet liable to exist wherever a sudden and general change takes place in the ratio of production and consumption, increasing the former and diminishing the latter, which is always the case on a return from war to peace. As to the remedy for such a state of distress, it must be found, not in legislative provisions or unproductive consumption, but in individual industry and economy; which will restore to a healthy state in the shortest time possible, consistent with the nature of the disease, the deranged functions of the body politic.-E. *M. Say was the first who showed, in a satisfactory manner, that effective demand depends upon production. (See his chapter De Debouchés.) But the principles from which his conclusions are drawn had been stated so early as 1752, in a tract of Dean Tucker's, entitled Queries on the late Naturalization Bill. As this tract is now become of rare occurrence, we shall subjoin the queries referred to. "Whether it is possible, in the nature of things, for ALL trades and professions to be overstocked? And whether, if you were to remove any proportional number from each calling, the remainder would not have the same grounds of complaint they had before? "Whether, in fact, any tradesman thinks there are too many of other occupations to become his customers; though narrow selfish views lead him to wish there were fewer of his own trade? tion of Montesquieu has said, and the same sentiment has been ex- Consump pressed in a thousand different shapes, "Si les riches ne depen- Wealth. sent pas beaucoup les pauvres mourront de faim."* (Liv. VII. Error of chap. 4.) Montesquieu was betrayed into this error, from his Montesquieu. being unacquainted with the nature and functions of capital. The profusion of the rich, far from being of any advantage to the poor, is really one of the greatest calamities that can befal them. It is impossible that the demand for labour can be increased without an increase of capital. When the parsimonious principle predominates, capital increases, and as capital increases, the demand for labour is increased, the existing inhabitants are better provided for, and their numbers are increased; on the contrary, wherever profusion and wasteful expenditure predominates, capital is diminished, the inhabitants are daily worse and worse provided for, and idleness, pauperism, and disease prevail. Besides, it must be remembered, that what is annually saved, is as regularly consumed as what is annually spent. The only difference is, that it is consumed in a different manner-consumed by those who render a greater value in return, instead of being consumed by such as render no real value whatever.t "By what a frugal man annually saves," says Dr. Smith, "he not only affords maintenance to an additional number of labourers for that or the ensuing year, but, like the founder of a public workhouse, he establishes, as it were, a perpetual fund for the maintenance of an equal number in all time to come. The perpetual allotment and destination of this fund, indeed, is not always guarded by any positive law, by any trust-right, or deed of mortmain. It is always guarded, however, by a very powerful principle, the plain and evident interest of every individual to whom any share of it shall ever belong. No part of it can afterward be employed to maintain any but productive hands, without an evident loss to the person who thus perverts it from its proper destination." (Wealth of Nations, II. p. 14.) We have already stated the impossibility of laying down any general rules on the subject of individual consumption. What the public is really interested in is, that it should never be carried on for the absurd purpose of occasioning a demand for the products of industry, and that it should be less than the reproduction; or, in other words, that the capital of the country should be kept constantly on the increase. But there is no instance of any people having ever missed an opportunity to save and accumulate. And in all tolerably well governed countries "If a particular trade be at any time overstocked, will not the disease cure itself? That is, will not some persons take to other trades, and fewer young people be bred up to that which is least profitable? And whether any other remedy but this is not, in fact, curing one transient disorder by bringing on many which are dangerous, and will grow inveterate? "WHETHER IT IS NOT AN INFALLIBLE MAXIM, THAT ONE MAN'S LABOUR CREATES EMPLOYMENT FOR ANOTHER? (p. 13.) For a further demonstration of the same principle, see Mr. Mills's Commerce Defended, p. 80. *“The economy of the rich starves the poor."-E. † For a further and very able discussion of the opinion of Montesquieu, see the 7th chapter of the Commentaire sur l'Esprit des Loix of M. Destutt-Tracy, and Tom. IV. p. 383, of the Elemens d' Ideologie of the same author. Consumption of Wealth. Consump the principle of accumulation in individuals has always had a marked ascendancy over the principle of expense, and the national capital, and, consequently, the riches of the country, have been constantly augmented. But this is seldom the case with the consumption carried on tion of Go- by goverments and their servants.* Individuals are fully sensible vernment. * With the sound principles maintained by our author, it is to be regretted that he had not somewhat enlarged on the subject of the consumption of government, which forms one of the most ample and practically important divisions of the science, embracing all questions relating to the nature and influence of government expenditure, and the sources whence it is be derived with the least injury to the interests of the community. An outline of these may serve to excite inquiry on the part of the student and direct him to further sources of information. The fundamental principle upon which this subject rests is that the expenditure of government is unproductive, except in so far as the security and happiness of society is the result. What government really consumes, is not the money which it takes from the community, for that is returned-nor the provisions and equipments it demands, for they are paid for-but it consists in the time, talents, and personal services of those whom it employs, and who otherwise would furnish to society an equivalent for their support. The means by which governments have met this expenditure, have varied with the progress of society. 1. In ancient times by the accumulation of treasure. This mode was doubly injurious. First, by withdrawing from society a portion of its productive capital-and secondly, in rendering government tyrannical, by ma king them independent of the public purse. 2. By taxes. In this improved mode of supplying the needs of government, money is taken only when needed, and consequently has this advantage of leaving capital productively employed until it is wanted. The definition of a tax, is the portion of income which a man pays in return for the protection of government. If it goes beyond income and trenches upon principal, it is fatal to accumulation, and reacts to its own diminution. If levied upon capital, it is unjust-a case exemplified in taxes upon wild lands-a capital unproductive, not through the will of the holder, but of necessity. The nature of a tax, is, that it is withdrawn from society without equivalent. The money returns, but it is in exchange for a second value. See Hamilton on The National Debt of Great Britain. Say, Vol. II. Note, p. 201. The object of a tax, is solely the support of government, its influence on national properity being always injurious. The subject of taxation is, however disguised, the income of individuals, the commodity on which it is imposed, being but an equitable mode of assessing them. The form of a tax, may be either direct or indirect-direct when imposed on the individual-indirect when levied on the commodity. A direct tax is more certain in its returns, but more invidious in its operation. An indirect tax is comparatively voluntary, but doubtful in its returns. Say, Vol. II. p. 265. Ricardo, ch. 8, 9, &c. The effect of taxation, when light, is a drawback-when heavy, is a curse, being equivalent to a sterile soil, or a bad harvest, or any other calamity which adds to the costs of production. For the definite influence it exerts, according as it is imposed on raw produce, rent, profits, or wages, see Ricardo as above; Mills, ch. 4, sect. 5, 6, &c.; Adam Smith, Book IV. ch. 2, part 2. Among the criteria which may be adopted for testing the comparative preference that should be given in a choice among various taxes, the following may be mentioned. 1. The lowest in amount is to be preferred-this arises from its very nature, which is unproductive expenditure. 2. The cheapest in collecting, for what is so spent, is utterly lost, both to individuals and to the public. As an illustration of a tax unfavourable tion of of the value of the articles they expend. In the vast majority Consumpof instances, they are the direct result of their industry, perse- Wealth. verance, and economy; and they will not consume them, unless to obtain an equivalent advantage. But such is not the situation upon this principle, may be mentioned, the ordinary road tax of our state as worked out by the individuals assessed. What society pays, is the value of so many good day's labour-what society receives, is the loitering work of unpaid workmen; the difference between them is, in this tax, the cost of levying. 3. Which falls on luxuries rather than on necessaries-the former raises the price of the article alone, on which it is laid-the latter, operating through the wages of labour, either raises the price of all commodities, or lowers the profits of all capital. 4. Which are most favourable to good morals. Among the instances of the reverse, may be mentioned lotteries; a tax which, although voluntarily paid, is yet most injurious in its results. Under the new constitution of our state, they are for ever excluded, and justly, since they offend against every principle of a wise tax. Their continuance, however, in other parts of our country, justifies a few words in explanation of their nature and influence. . A lottery is a tax which is expensive in collecting-of what society pays, not one fiftieth goes into the treasury. All the time that is wasted, and money that is squandered, and vicious habits that are formed, by the deluded adventurers in this licenced gambling, is to be added as part of the expense of collecting in addition to the direct costs. This It is a tax which falls principally on the poor and necessitous. class of society is most allured by the prospect of gain without labour, and least able to judge of the delusiveness of the scheme. They, therefore, are the largest contributors. It is a tax which is based upon the passions and vices of man-is a direct bounty upon gambling-an indirect one upon idleness, and teaches to all a lesson most fatal to individual success, and most injurious to national wealth-that of looking to fortune for bettering the condition, instead of industry and economy. On this subject, see Say, Book III. ch. 8. Ricardo, for a modified defence of the influence of taxation, Principles, &c. ch. 8. Wealth of Nations, Book V. ch. 2. The third and latest method of supplying the exigencies of government, is by means of voluntary loans. In which government is the borrower, monied men the lenders, and society the payers. The advantages attending this mode of meeting public exigencies, arise from the facility, rapidity, and certainty with which large sums can be rais-. ed in a moment of exigency. The disadvantages, or rather the dangers to be dreaded from them, flow from these same causes. A loan is an operation in which no man feels his rights invaded; hence it removes from the expenditure of government that wholesome check of public feeling, which operates upon it when its means are drawn from taxation. The nature, history, and operation of government loans, constitute a large and important branch of this science. A public loan, in its nature, is a tax, like all other revenue of government. It is not recognized as such, because it is not presently paid; third persons, that is, the capitalists of society coming forward in the mean time to advance the amount, until it shall be convenient for the community to pay it, and receiving in the mean time a certain interest, which in the form of a tax, is immediately levied upon society. The operation of a loan, is for a time, to diffuse that air of wealth and prosperity which always arises from increased expenditure; its permanent effect is to cripple the energies of the nation. A certain portion of its capital hitherto productive in the hands of individuals, has been unproductively consumed by the government, and posterity is burthened with the repayment of it to those who originally advanced it, or to those who have chosen to stand in their places. In the older governments of Europe, the repayment of the principal is generally abandoned, and the interest payable forms a permanent annual Consumption of Wealth. of governments. They consume the produce of the labour of pos addition to the ordinary taxes...It would seem at first sight to make a very material difference whether the loan is to be repaid or not, but in truth, so far as regards the general progress of national wealth, it is a matter of perfect indifference. The original capital that government expended, has been altogether consumed, and can never by any process be replaced; future economy may provide a substitute, but the original values, like food consumed, have been utterly destroyed. If it is ever paid, society pays it out of the capital or income of individuals, and the only change it produces is this-while it remains unpaid, the community at large hold and employ the principal, the stockholders receive and employ the interest-when paid, the principal itself is transferred to the stockholders, and seeks a new investment. According to this view of the subject, the various provisions adopted for · the purpose of repayment, under the title of sinking funds are nugatory, or rather injurious, since they burthen society with the further expenses incidental on this mock form of payment. These views will be found in Hamilton on "The National Debt of Great Britain." Lowe's Present State of England. See also, Review of Hamilton in the Edinburgh Review, No. 48, art. 3;.of Boyd on. Finance, No. 50, art. 13, No. 78, art. 1; and in the Quarterly Review, National Debt, Vol. XII. p. 431, No. 53, art. 11, No. 62, art. 2; Ravenstone on the Funding System. Of our own country, the public debt though the same in principle with that of England, is yet so different both in amount and in proportion to our means of repayment, as to remove from it much of the reasoning of the writers referred to. For its detailed history, see Seybert's Statistics, chapter Public Debt. The outline.of it is as follows: Originating in the debts contracted by Congress during the Expenses of the war of 1812, raised it in 1816, to $75,169,974 123,016,375. 91,294,416 This debt, though larger in amount, is much lighter in reality, that is, in proportion to the population and resources of the country now, than it was in 1791. In 1791, it gave to every inhabitant the sum of. - $23 25 11 28 Being reduced, compared with our means, to less than one half. |