Principles Of Political Economy
by William Roscher
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Section LXXI.

Disadvantages Of Slavery.

Slavery promotes the division of labor only in the very beginning. The more dependent the slave is, the worse he works. Whatever he spoils or allows to go to waste injures only his master. Hence it is that slave-husbandry is only one degree removed from what the Germans call _Raubbau_, and which means, as nearly as we can translate it, the most thoughtless and wasteful management possible.(414) Whatever he consumes is simply so much gain to himself. Industry and skill are injurious to him, because, if remarkable for these qualities, his master exacts more work from him and is more adverse to setting him at liberty. Instead of the numberless incentives of the free workman: care for the future, for his family, honor and comfort, the slave is generally moved by one—the fear of ill-treatment, and to this he gradually becomes insensible.(415) The division of labor demanded by manufactures, and which is to be found for the most part only where each person is at liberty to choose his own avocation, is scarcely supposable where slavery, in the strict sense of the word, prevails. The same is true of the spirit of invention and improvement.(416) And even where the milder _glebae _ adscriptio_ obtains, the division of labor is much hindered. Hence, competent judges all agree on the badness of slave labor;(417) which, as for instance in the United States, was used only where the slaves were crowded together in large numbers and could therefore be easily superintended. And not only are the slaves themselves indolent, but their masters as well; more particularly in slave countries where all labor is considered disgraceful. What must be the national husbandry of a people, one half of whom refuse to do anything that is right and proper, through malice, and the other half through pride! As soon as, on account of increased population and consequent increased consumption, this enormous waste of force can be endured no longer, free workmen become more profitable, not only to themselves and to the whole community, but to the greater number of the individuals who compose it.(418) On the Bernstoff estates the quantity of rye harvested before and after emancipation was as 3:8-⅓; of barley-corn as 4:9-⅓; of oat-grain as 2-⅔:8.(419)

The owners of serfs, especially, are apt to be very wasteful of their labor, because they imagine that they obtain it gratis. Tucker has made a curious calculation tending to show that when civilization reaches a certain point, the master's self-interest leads to emancipation. In Russia, where there are seventy-five persons to the English square mile, it seemed to him that serfdom was still a good economic speculation. In western Europe, where there were one hundred and ten persons to the square mile, freedom, in all relations of master and servant, he considered more advantageous to all parties. Emancipation began in England in the fourteenth century, when that country had a population of forty to the square mile, and was completed in the seventeenth, when the population was ninety-two to the square mile.(420) Tucker concludes, that the turning point comes, when the population is relatively to the number of square miles as 66:1.(421) Such a calculation cannot, of course, be universally true. The free workman can usually command a much larger portion of the sum total of economic profits than can the slave or serf, who must be satisfied with the minimum necessary to support life.(422) Hence, free labor is more profitable to masters only when production in general is so much enhanced thereby that a greater quantity of goods falls to their share also. But this will always be the case where workmen are capable of development.(423)

Section LXXII.

Effect Of An Advance In Civilization On Slavery.

At the same time, the same degree of servitude becomes more and more oppressive to the bondman as civilization advances. The greater his intellectual progress, the more does he feel the want of liberty, and the more keenly he experiences the degradation of his condition. The development of luxury digs a gulf between master and servant which grows wider every day. ( 227 ff.) As commerce extends, it becomes more profitable for the master to exact excessive work from his slave. In the West Indies, it was a problem which every slaveholder solved for himself, whether, by immoderately increased production, which cost the lives of many slaves, the gain in sugar was greater than the loss occasioned by the consequent death of the negroes.(424) When, with the advance of civilization, the state guarantees to all more certain protection of their rights than they enjoyed in a less advanced stage of social improvement, the last check on masters, the fear of the vengeance of their slaves, is removed.(425) Demoralization naturally increases in the same proportion; and that of the master as well as that of his servants.(426)

Section LXXIII.

The Same Subject Continued.

This explains why it is that, in all countries, the power of the state, in a period of transition towards a higher civilization, has endeavored to render slavery milder. Great credit is due the Church in this regard. It soon extinguished slavery entirely in Scandinavia,(427) and in portions of Europe it abolished at least the sale of prisoners to foreign countries.(428) The Concilium Agatheuse, in the year 506, decreed that serfs should not be killed by their masters at pleasure,(429) but that they should be brought before a tribunal of justice. (The manorial tribunals of more recent times.) Moreover, the numberless holidays of the church operated greatly in favor of the bondmen. Pope Alexander III. recommended their gradual emancipation.(430) One of the principal steps in the way of progress was made when they could no longer be sold singly, but only with the village or on the estate to which they belonged.(431) The feudal aristocracy improved the condition of the bondmen by reducing a great number of freemen to their level.(432) This could not be effected without a real amelioration of slavery; and, later, when the feudal aristocracy declined, the older serfs were, with those who had been formerly free, raised from their abject condition. The sense of chivalry would not permit a lord to be served by a bondman. The old adage "the serf lives to serve and serves to live," by degrees, lost its force. Serfs were required to perform certain tasks on the lands of their master and to pay him a certain quantity of the produce of their own. Heriots (mortuarium), which became usual from the 8th century (J. Grimm), may be considered evidence that even bondmen were permitted to acquire and hold property in their own right. Thus was one of the chief disadvantages of slavery, in an economic sense, removed.(433) It may be affirmed, as characteristic of the aristocracy of feudal times, that they treated those, who like the serfs were entirely at their mercy, with much more consideration than those who were free, and, although dependent on them, had certain rights guaranteed by contract. The absolute monarchy found in nearly all nations, at the opening of modern times, was forced by its struggle with the mediaeval aristocracy to favor the emancipation of the serfs and of the lower classes. Even in Russia, Iwan III. (1462-1505) seems to have restored to the peasantry the right of migration, of which they had been deprived by the invasion of the Mongols, nor did they lose it again until the great troubles at the beginning of the seventeenth century, which gave the ruling power to the nobility.(434)

Where civilization has reached its highest development, the irresistible power of public opinion, governed by the ideas of the universal brotherhood of man and of democratic equality, causes the abolition of all irredeemable and of all hereditary relations of servitude.(435)(436)(437)

Section LXXIV.

The Same Subject Continued.

It cannot be doubted, that an entirely direct leap from complete servitude to complete freedom may be attended by many evils. No man is "born free,"(438) but only with a faculty for freedom; but this faculty must be developed. The knowledge and respect for law, and the self-control, which are the conditions and limits of freedom, are never acquired without labor, seldom without the making of grave mistakes, and never except through the practice of them. As a rule, both parties, masters as well as servants, would like to get rid immediately of all the inconveniences of the former condition and yet continue to enjoy its advantages. The servant, for instance, will now yield no more the specific obedience of former times, but demands still specific mildness from the land-owner, or loaner of capital, his former master. It is inevitable that there should be complaints on both sides.(439) But in the higher stages of economic culture, the relation of paternal protection and childlike obedience between the different classes of the people, which, even in medieval times, never obtained in all its purity, is certainly unrecallable. Hence it is, that all hope of a better condition of things is based only on this, that the lower classes may as soon as possible attain to true independence.(440)

Section LXXV.

The Same Subject Continued.

Even in antiquity, the principal nations of the world could not keep the humanizing influence of civilization from making itself felt on their slaves. And if they did not go so far as to bring about the total abolition of slavery, it is unhesitatingly to be attributed to their religious inferiority.(441) In Athens, during the Peloponnesian war, it was almost impossible to distinguish the slaves from the poorer freemen by their looks or dress. Their treatment was mild in proportion as desertion was easier by reason of the smallness of the state or the frequency of war. It was forbidden to beat them; and only a court of justice could punish them with death.(442) Emancipation, in individual cases, was very frequent, and the names of Agoratos and of the law-reviser Nicomachos show how great a part an emancipated slave might play in the nation.(443) The helot system of the Lacedemonians preserved much longer a great deal more of medieval barbarism; but even here, we may infer from the frequent uprisings and emancipations of the helots, from their services in war etc., that their lot was made less hard than it had been.(444)

Among the Romans, with whom war and conquest were so long considered(445) the principal means of acquisition, slavery was relatively very hard.(446) But, later, there came to be several different grades of slavery (servi ordinarii and mediastini etc.); and in slavery, every gradation denotes some amelioration of condition.(447) The slave obtained the right to possess resources of his own (peculium).(448) In addition to this, emancipation became much more frequent in the later republic; so much so, that Augustus considered it necessary to pass laws taxing frivolous emancipation. (L. Aelia Sentia and Furia.)(449) Where men like Terence, Roscius, Tiro, Phaedrus and the father of Horace rose from the condition of slavery, the treatment of slaves cannot have been entirely brutalizing.(450) Under the emperors who oppressed the free citizens, legislation was directed more than ever towards the protection of the slaves.(451) Instead of permanent slavery, a condition of things was introduced and became more general every day, one in which the bondman might contract a legal marriage, have property of his own, and in which he was protected against an arbitrary increase of the quota he had to pay his master, whether in money or produce, although he still remained bound to the land. This class was formed not only of the originarii, or those born into it, but also of a large number of impoverished freemen, barbarian prisoners of war etc.(452)(453)

Section LXXVI. (Appendix To Chapter IV.)

The Domestic Servant System.

In most countries the servant system developed itself gradually out of serfdom, or of some condition of tutelage analogous thereto. This is seen most clearly in the long continuance of forced service, by which the subjects of the lord of the fee were compelled to allow their children to remain in the court of the lord as servants, either without any remuneration whatever, or for very low wages fixed by long continued custom.(454) Here, also, belongs the right of correction, so generally accorded to masters in former times. In the higher stages of civilization, the whole relation is wont to be resolved more and more into freedom of competition; and this process is wont to take place earliest and most strikingly in the cities. Where vast numbers of men are brought together, demand and supply of services meet most easily. The nearer in the course of this development the servant system approaches to piece-wages and day-wages, the shorter does the customary (presumptive) duration of the contract last,(455) the more voluntary is the period of leave-taking by both parties;(456) the more does the entire relation tend to be limited to single acts of service agreed upon in advance ( 39), and the more frequently do both parties endeavor to supply the place of the domestic servants by workmen who receive wages and live outside of the family.(457) The extreme of this direction at present is the servant-institutes in cities, the more movable and more democratic character of which finds expression in this, that they have extended the use of personal services to a lower circle of consumers than could previously have thought of employing them. In English agriculture this transition was completed mainly in the third decade of this century. The change was unquestionably favorable to the improvement of the art of agriculture, but it was frequently damaging to the social relation existing between the rich and the poor in the country.(458) In Germany, the sale of the public domains, conscription and Landwehr duty have operated in this direction.(459) Hence it is, for instance, that in Prussia, the servants, in 1816, were 15.18 per cent. of the entire male population over 14 years of age, and 17.84 per cent. of the entire female population over 14 years of age. In 1861, on the other hand, there were only 11.88 and 12.93 per cent., respectively, while the number of day laborers and workmen, in the same time, increased from 16.29 per cent. males, and 10.87 per cent. females, to 20.95 and 16.65 per cent., respectively.(460) In most civilized countries, the grade of society from which servants are recruited grows lower and lower as the spirit of independence extends to the deeper strata of humanity.(461)

The servant class may continue a long time yet to be a school of development for those of the lower classes, who, ripe in body, are not intellectually independent; just as the duty of bearing arms has been a school of improvement for all male youth. Life-long servants are as seldom to be desired as life-long soldiers.

In most places, the long transition period from complete bondage to free competition was governed by a police system of wardship, which was very unfavorable to the servant class. Such especially was the provision that all young people of the lower classes, who could not expressly show that they were employed under the paternal roof or at some trade, should be compelled to seek some outside or inland work;(462) such also was the strict prohibition of "usurious" wage-claims, and the "decoying" of servants from their masters.(463) Besides, a great many provisions relating to servants, and based on views belonging to an older economic condition, were intended to throw obstacles in the way of farm hands and country servants(464) becoming servants in towns; and, on the other hand, to facilitate the speedy abandonment of service in all cases in which the servant desired to marry.(465) All these preferences in favor of one class of contractors, and at the cost of another, are radically opposed to the modern political spirit. The laws relating to servants are wont, in our day, to have but one object, the prevention, by registration with the police, of fraud and breach of contract, and of all strife and litigation by the legally formulating of the conditions which are very frequently tacitly understood.

The ideal of the relation of master and servant is attained when it is considered by both as a part of the life of a Christian family.(466) Hence, benevolence on the one side and devotedness on the other, fidelity on both sides, disinterested care for the present and future interests each of the other tanquam sua; and especially for each other's eternal future. Whether this state of mutual feeling is best furthered by the patriarchal system, by a police system, or by free competition, it is scarcely possible to say. It may, however, be affirmed that it depends upon a mutual and continued denial of self not easy to attain. Where it really prevails, all the advantages of the piece-work system are obtained in a worthy and organic manner, and without its atomistic drawbacks.(467)

Chapter V.

Community Of Goods And Private Property. Capital—Property.

Section LXXVII.

Capital.—Importance Of Private Property.

As human labor can attain its full development, only on the supposition that personal freedom is allowed to develop to its full economic importance and dimensions, so capital can develop its full productive power only on the supposition of the existence of the freedom of personal property. Who would save anything, that is, give up present enjoyment, if he were not certain of future enjoyment?(468) The legitimacy of private property has, since the time of Locke,(469) been based, by the greater number of political economists, on the right inherent in every workman, either to consume or to save the product of his labor. But it should not be forgotten here that, at least in the higher stages of the economy of a nation, scarcely any work or saving is possible without the cooeperation of society. And society must be conceived not only as the sum-total of the now living individuals that compose it, but in its entire past, present and future, and also as being led and borne onward by eternal ideas and wants.(470)

Section LXXVIII.

Socialism And Communism.

In opposition to this, the idea of a community of goods has found favor, especially in times when the four following conditions met:(471)

A. A well-defined, confrontation of rich and-poor. So long as there is a middle class of considerable numbers between them, the two extremes are kept, by its moral force, from coming into collision. There is no greater preservative against envy of the superior classes and contempt for the inferior, than the gradual and unbroken fading of one class of society into another. Sperate miseri, cavete felices! In such a state of social organization, we find the utmost and freshest productive activity at every round of the great ladder. Those at the bottom are straining every nerve to rise, and those higher up, not to fall below. But where the rich and the poor are separated by an abyss which there is no hope of ever crossing, how pride on the one side and envy on the other rage! and especially in the foci of industry, the great cities, where the deepest misery is found side by side with the most brazen-faced luxury, and where the wretched themselves conscious of their numbers, mutually excite their own bad passions. It cannot, unfortunately, be denied, that when a nation has attained the acme of its development, we find a multitude of tendencies prevailing to make the rich richer and the poor, at least relatively poorer, and thus to diminish the numbers of the middle class from both sides; unless, indeed, remedial influences are brought to bear and to operate in a contrary direction.(472)

B. A high degree of the division of labor, by which, on the one hand, the mutual dependence of man on man grows ever greater, but by which, at the same time, the eye of the uncultured man becomes less and less able to perceive the connection existing between merit and reward, or service and remuneration. Let us betake ourselves in imagination to Crusoe's island. There, when one man, after the labor of many months, has hollowed out a tree into a canoe, with no tools but an animal's tooth, it does not occur to another who, in the meantime was, it may be, sleeping on his bear-skin, to contest the right of the former to the fruit of his labor. How different this from the condition of things where civilization is advanced, as it is in our day; where the banker, by a single stroke of his pen, seems to earn a thousand times more than a day-laborer in a week; where, in the case of those who loan money on interest, their debtors too frequently forget how laborious was the process of acquiring the loaned capital by the possessors, or their predecessors in ownership. More especially, we have, in times of "over-population," whole masses of honest men asking not alms, but only work, an opportunity to earn their bread, and yet on the verge of starvation.(473)

C. A violent shaking or perplexing of public opinion in its relation to the feeling of Right, by revolutions, especially when they follow rapidly one on the heels of another, and take opposite directions. On such occasions, both parties have generally prostituted themselves for the sake of the favor of the masses; and the latter have become conscious of the changes which the force of their arms may effect. In this way, it is impossible that until order is again entirely established, the reins of power should not be slackened in many ways at the demands of the multitude. In this way, too, they are stirred up to the making of pretentious claims which it is afterwards very difficult to silence. In every long and far-reaching revolution, whether undertaken in the interest of the crown, the nobility or the middle classes, we find, side by side with the seed it intended to sow, the tares of communism sprout up.

D. Pretensions of the lower classes in consequence of a democratic constitution. Communism is the logically not inconsistent exaggeration of the principle of equality. Men who always hear themselves designated as "the sovereign people," and their welfare as the supreme law of the state, are more apt than others to feel more keenly the distance which separates their own misery from the superabundance of others. And, indeed, to what an extent our physical wants are determined by our intellectual mould! The Greenlander feels comfortable in his mud hut, with his oil-jug. An Englishman in the same condition would despair.(474)(475)

Section LXXIX.

Socialism And Communism. (Continued.)

What has just been said will serve to explain why, in the following four periods of the world's history, socialistic and communistic ideas have been most widespread: among the ancients at the time of the decline of Greece,(476) and in that of the degeneration of the Roman Republic;(477) among the moderns in the age of the Reformation,(478) and again, in our own day.(479)

Section LXXX.

Socialism And Communism. (Continued.)

We thus see, that the attempts made by socialism and communism are, by no means, phenomena unheard of in the past, and peculiar to modern times, as the blind adherents and opponents of them would have us believe. They are rather diseases of the body social, which have affected every highly civilized nation at certain periods of its existence. If the body be too weak to react healthily and curatively ( 84), the evil is very apt to lead to the decline of all true freedom and order. The communist, viewing all other things, especially the organization of the state, only as instruments to supply his material and absolute wants, considers the liberal either as a fool who is ever pursuing the phantoms of the brain, or as a knave who covers his own selfishness under the mask of the public welfare.(480) Hence the adherents of communism are satisfied with any form of government which seems to offer them most, and this a ruthless despotism can do, at least, for the moment. And, although they are ever ready for any revolution in the form of government, and easily to be won over to it, they are most readily captivated by a despotic revolution. On the other hand, when communism seriously threatens all that constitutes the wealth of a people, the owners of that wealth are compelled to fly to any refuge which holds out the promise to protect them from it, although by seeking that same refuge they may destroy their own political freedom.(481) The Achean league, which under the leadership of Aratos, the "enemy of tyrants," had come into existence, promising so much hope, beheld itself later, and mainly through fear of the contagious effects of Spartan socialism under Cleomenes, compelled to unite with the Macedonians, that is, to give themselves up entirely. ( 204).

Section LXXXI.

Community Of Goods.

We now, for the present, turn our gaze from the frightful revolution, destructive of all civilization, which would necessarily precede the establishment of a community of goods,(482) and inquire what would be the consequences. Among angels ("gods and sons of gods" of Plato) and mere animals, a community of goods might, perhaps, exist without producing injury. And so, too, it might exist among men bound one to the other by the bonds of the truest love. The life of every model family is accompanied by a species of community of goods.(483) But in more extensive social organizations, this love is never found except as an element of the most exalted religious enthusiasm, which, as a rule, is of very short duration; of which the Acts of the Apostles (II, 44 ff, 32 ff, V, I, II) affords us the best known and most beautiful example.(484)

Where this love does not exist, each participant in the community of goods will, as a rule, seek to do the least and enjoy the most possible.(485) In a society of one hundred thousand members, each individual would be interested in the results of its aggregate frugality only indirectly, and only to the extent of a one-hundred thousandth part of the whole; that is, practically, not at all.(486) Individual selfishness would expend itself entirely on the division of what the whole community produced. It would, consequently, and almost always be detrimental to the whole, and to the other individuals of the society; whereas, at present, it does so only in exceptional cases. When Louis Blanc, as Mably had before him, recommended that the point d' honneur should take the place of the interet personnel, as a spur to production, and a check on consumption, and cited the army as an illustration of its workings, he forgot, among other things, the thirty cases in which the code militaire pronounces sentence of death on the violators of its provisions. And, as a matter of fact, the Muenster Anabaptists could not help punishing with death every transgression of their communistic precepts.(487) If, in a community in which the principles of communism were rigorously carried out, all the burthens and enjoyments of life were equal, and equally divided according to the ideas of the crowd, men like Thaer, Arkwright, and others of their class, who now provide bread for hundreds of thousands from their studies and laboratories, would then be able, at most, with a rake and shovel, to provide food for three or four. The division of labor, with its infinite amount of productive force, would, for the most part, cease. Nor would the consequence be that the humbler classes would be freed from work of a coarse, mechanical, unintellectual and severe nature; but that the higher classes would be dragged down to engage in it likewise. And what an increase there would be in the number of consumers at the same time! Every man would, with a light heart, follow the most imperious of human impulses if the whole community were to educate his children. But we have seen that a community of goods is desired most urgently in times of over-population. Hence, here it would make the evil greater yet, by increasing consumption and diminishing production.

Where there are now one thousand wealthy persons, and one hundred thousand proletarians, there would be, after one generation, no one wealthy and two hundred thousand proletarians. Misery and want would be universal.(488) For the purpose of giving the crowd a very agreeable,(489) but rather short-lived period of pleasure, a period simply of transition, almost all that constitutes the wealth of a nation, all the higher goods of life, would have to be cast to the waves, and henceforth all men would have to content themselves with the gratifications afforded by potatoes, brandy and the pleasures of the most sensual of appetites. And then, the equal education of all, demanded by the communists, would have no result but this, that no one would acquire a higher scientific training.(490) But, after all, there lurks concealed in communism much more of envy than is generally supposed.

Section LXXXII.

The Organization Of Labor.

Most theoretical adherents of the doctrine of a community of goods, feeling(491) more or less the weight of the above objections, have supplemented it with the idea of an organization of labor(492) or the centralized superintendence of all production and consumption, either by the government already existing, or by one to be created anew. Such a government would be, of course, a despotism such as the world has scarcely yet seen, a Caesaro-Papacy, usurping both the place and power of Father of the universal Family.(493) But the evils mentioned above would be entailed none the less. Every incentive which now moves man to industry or frugality would disappear, and nothing remain but universal philanthrophy; or, if you will, but patriotism, virtues which are not wanting even now. Even guardianship of the government newly created would be carried on in a very loose manner; for it would be exercised without any feeling of personal interest, even in the most favorable case supposable. It is well known and easily understood, that state industries are never engaged in, in the long run, with the same zeal, nor crowned with the same success, as competing private industries. It is well known, too, how intimate the connection is between the political freedom of a people and their economic production; that, for instance, England's greater wealth, as compared with that of Turkey, depends, most largely, on the freedom that obtains in the former country and the servitude that prevails in the latter.(494) And we may inquire just here, what the result would be, if the despotism of government should go ten times farther that it has ever gone in Turkey, when, moreover, the despot who led the state, was not an individual with his few officials, but the whole crowd, with its million eyes and million hands. It would, practically, be to give every producer an escort of a policeman and a revenue agent, as if he were a prisoner.

And where would be the gain? A division of wealth which would seem unjust to many would exist now as well as before, because the idle and the unskillful would receive the same reward as the most industrious and skillful.(495) The opposition of one class of society to another, so much complained of, would continue. The only difference would be, that whereas, it now comes from the weak, it would then come from the strong.(496) Compulsory association is certainly more prolific in strife and crime than is a state of society in which everybody manages his own affairs.

A journey on foot, in company with others, is allowed, on all hands, to be a very good test of friendship. But, a community of goods would, in the strictest sense of the word, be a journey on foot through the whole of life with numberless "friends." Here, every one would believe himself entitled to possess whatever pleased him. And, who would decide; since so many communists preach the dissolution and extinction of all government, and the reign of anarchy? Besides, there can be no doubt, that the difference of human talents and human wants, would soon, spite of every law, lead to a difference in property again. Hence, that first revolution would have to be repeated from time to time—a real Sisyphus labor! No sooner have the bees produced anything, than the drones come, and divide anew!

Section LXXXIII.

The Organization Of Labor. (Continued.)

Experience, however, teaches us, that, in all the lower stages of civilization, a community of goods exists to a greater or lesser extent.(497) The institution of private property has been more fully evolved out of this condition of things, only in proportion as well-being and culture have been developed as cause and effect of such well-being. Thus, among most nations of hunters and fishermen, the idea of private property was unknown when these nations were first discovered. This is, indeed, very natural. Their chief spring of production flows as if of itself, apparently inexhaustible; and the hunter can hardly think of such a thing as saving any of his booty.(498) And, among nomadic nations, the land is a great meadow held in common; and the industry of plunder is considered, as it is in all inferior stages of civilization, especially honorable.(499) The conquistadores of Peru found there something very like a community of goods, under the despotic guardianship of the state, viz.: a yearly division of all lands among the people, in proportion to their rank; the cultivation of these lands in common, under the superintendence of the state, and to the sound of music. But, at the stage of civilization that Peru was then in, land is about the only resource possessed. The results were the usual ones. A country like Peru, with only one city, no beasts of burthen, no plows, no trades and no commerce, cannot possibly be rich.(500) That the constitution of Lycurgus established a sort of community of goods among the Spartans, is well known. I need only recall the public education, the meals in common, the authorization of stealing,(501) the prohibition of trade, of the precious metals and fine furniture, the equal division of property and the inalienable character of the land(502) etc. With such laws, Sparta could neither be, nor desire to become, wealthy. Of all Greek states of any historical importance, it preserved longest the economic peculiarities belonging to a low stage of civilization. Among most modern nations, the fundamental idea of their land laws, which had their origin in the middle ages, is, that each family is only the usufructuary, and that the community is the sovereign proprietor of the soil. This community of landed possession finds expression, among other things, in the vast extent of communal woods and pasturages, in the varied intersecting of parcels of land one by the other, which, indeed, change proprietors from time to time, and in the common working of the land, carried as far as possible etc.(503) In all medieval times,(504) not only the individual is considered an owner of the land, but, over and above him, the family. At the same time, we are wont to find existing an amount of mortmain property in the hands of corporations, monastery lands, crown lands and domains of very great importance.(505) All these institutions have declined in number and shown a disposition to disappear, in proportion as national husbandry or economy has grown more productive.

Section LXXXIV.

The Organization Of Labor. (Continued.)

To this tendency we find, indeed, another, and a no less powerful one, opposed. Everywhere as civilization advances, the sphere of action of the state grows larger, and the ends it serves more numerous.

In its origin, government was established to preserve only the external security of its subjects. By degrees, it comes to look after their internal legal security, by enforcing internal peace, prohibiting revenge for bloodshed etc. It next extends its care to the well-being, the culture, and even to the comfort of the people. But the claims of the state must grow in the same proportion as the service it renders. While Lowe, in 1822, estimated the yearly net income of the British people at L251,000,000; the government expenses,(506) in 1813 and 1814, averaged L106,000,000, and these sums were voluntarily devoted to public purposes by parliament. And so, between 1685 and 1841, the population of England more than trebled its numbers, But, in the same period of time, the outlay of the state increased forty fold. (Macaulay.) Simultaneously with this development of things, it becomes more and more usual by the exercise of the power of eminent domain and others like it, to sacrifice private rights, acquired by the very best of titles, to the preponderating common good. We may allude, further, to the duty, universally imposed in modern times, of performing military service, to the national systems of public instruction in so many countries; to the large number of societies, joint-stock companies, popular holidays; but particularly to the associations for insurance of every description. And so it may, indeed, be claimed that we have come nearer to a community of goods than could have been dreamed of a hundred years ago.(507) And yet, these are, for the most part, institutions in which we find reflected the peculiar strength and solidity of our age. Whoever wishes to compare the power of one people with that of another, must take into account not only the elements which constitute their intellectual and physical force, but especially their inclination to permit these elements to cooeperate for public purposes.(508)

We may now inquire: At what point does this increasing community cease to be a gain? This is as easily determined generally, as it is difficult to say what the limit to it is in particular instances. Progress in the direction of a community of interests of this nature is beneficial, only so long but certainly as long as it corresponds with the feeling entertained by the community, that they have interests in common. Hence it is, that such a noble kind of communism reigns in art and literature, one which causes the stronger to willingly labor for the weaker, and with the greatest success.(509) And so, too, the christian care of the poor, even were it carried to the height of the Gospel counsels (Luke, 3:11), would be no direct obstacle in the way of the development of a nation's public economy, provided it were given, and accepted, only as christian benevolence. Every approximation towards a community of goods should be effected by the love of the rich for the poor, not by the hatred of the poor for the rich. If all men were true Christians, a community of goods might exist without danger. But then, also, the institution of private property would have no dark side to it. Every employer would give his workmen the highest wages possible, and demand in return only the smallest possible sacrifice.(510)(511)

Section LXXXV.

The Right Of Inheritance.

The right of inheritance to resources has its origin in a combination of the idea of the family with the idea of property. And, indeed, this combination of ideas is a very natural one. The larger portion of mankind consider the pleasures of the family as the highest attainable, and endeavor, whenever their economic means make it at all possible, to secure them. At the same time, the selfishness of most men is not confined to their own persons, but extends also to their posterity. Hence it is that bed and board, eonnubium and commercium, have, from time immemorial, been considered correlative ideas; and, to all the more logical socialists, a community of wives (or celibacy)(512) is as dear as a community of goods.(513) ( 245.) And in practice, the greater number of nations of hunters, who, according to our conceptions, have no knowledge of a real family and no knowledge of property, have a custom of burying with the dead the things they used, to kill their cattle etc., or to deprive minor children of their inheritance.(514)

Section LXXXVI.

Economic Utility Of The Right Of Inheritance.

The certainty, that the material welfare of their children depends, in great part, on their industry and frugality, is one of the most powerful incentives to good, in the case of most men. And this is the basis of the economic utility of the family right of inheritance.(515) There is scarcely any other institution which opposes over-population with such efficiency, for the reason, that the obstacle placed in its way here is placed very directly, at the point where it can make itself felt most, viz.: in the life of the family itself. The weaker the family feeling, the less does the abolition of the right of inheritance interfere with the economic interests of a nation. Hence, for instance, it is, that taxes imposed upon legacies, bequests, testamentary gifts etc., are less objectionable in proportion as they affect only those in the more remote degrees of relationship in which inheritance is something merely accidental. While, when a nation is yet in the intermediate stages of civilization, the family right of inheritance seems to be very strong, especially as regards landed property, a consequence of the fact, that a superior kind of title to such property is recognized to exist in the family; at a period, when individualism becomes more developed, the liberty of devise by will is wont to prevail more and more.(516) Then the right of inheritance becomes, so to speak, a more elevated species of personal property, a prolongation of the same beyond the grave. Should testamentary freedom be too much hampered, selfishness would manifest itself in a way much more detrimental to economic interests, viz.: in the consumption of wealth, during the lifetime of its owner. Every man would be but a life annuitant of his own property.

But, at the same time, in periods of moral decline, complete freedom may degenerate so as to produce evils equally great. The wealthy Boeotians, in the later days of Hellenic history, were wont to form themselves into dissolute drinking companies; and not only the childless, but even fathers of families made over their property to these companies, limiting their offspring to a portion which it was made their duty to let them have. It was so in Rome, also, in Cicero's time, when every acquaintance of standing took it very ill if not remembered in the will of the testator, and where Octavian, for instance, in the last twenty years of his reign, received about 70,000,000 thalers through legacies left him by his "friends."(517) Here, the repeal of the law making it obligatory on testators to leave a certain proportion of their wealth to their children would remove the last safe-guard of their material welfare.(518)

Section LXXXVII.

Landed Property.

As land, in its uncultivated state, has neither been produced by man, nor can be entirely consumed by him, the above demonstration of the necessity of private property cannot without any more ado, be extended to land.(519) Hence, individual property in land is everywhere much more recent than individual property in capital.(520)

But a certain expenditure of capital and labor is necessary that land may be used productively, and, in most instances, this employment of capital and labor is of long duration, irrevocable in the very nature of things, and one the fruits of which can be reaped only after some time has elapsed. Now, this cooperation of capital and labor is such, that no one would undertake to employ them in the cultivation of the land, had he not the strongest assurance of possessing it. Hence, agriculture in its most rudimentary stage supposes ownership of the land, at least from the time that it is "tickled with the hoe," until it "smiles with the harvest;" or, to express it more accurately, all the time intervening between the work of the plow and the labor of the sickle. The more, afterwards, population and civilization increase, the more products must be wrung from the soil. But this can be accomplished only by means of its more intensive cultivation (higher farming), by lavishing a greater amount of capital and labor on it, and, as a rule, by extending the circle of agricultural operations by means of combinations more and more artificial. Hence, the progress of civilization demands an ever increasing fixity, and a more pronounced shaping of landed property (the specification of jurists), in the interests of all who share in this progress, and even of those who own no landed property themselves. Were there no property in land, every one would find it more difficult and laborious to gratify his want of agricultural products;(521) and the products themselves would be of an inferior kind.

Thus, for instance, in Camargo, the lackmus was formerly prepared from plants to be had "free" in the woods. It was then, however, much dearer than it is now that the plants are artificially raised on landed property.(522) It is otherwise with the fisheries. The appropriation of rivers or seas would not tend to increase the abundance of their products, and hence this appropriation is, on the whole, rare.(523)


Landed Property. (Continued.)

Whenever this admixture of capital and labor with land has taken place to no great extent, private property in land is not found developed in any degree. Thus, there are even now many half-civilized countries in which the land is forfeited because not tilled for many years, and where it may be occupied by the first person who will cultivate it.(524) In Europe, common possession of forests and pasture lands asserted itself much longer than that of arable land, because, in the case of the former, labor and capital play a much less important part in the management of them. And yet, even in the case of arable land etc., and, in the highest stages of civilization, the property-quality is yet less developed than the property-quality of capital. How seldom do we find fidei commissa of capital, or capital juridically tied up. We find that the law of all ancient nations drew a marked distinction between moveable and immoveable property, and that the power of disposing of the former by sale, pledge, in dowry, partition etc., was a much freer one. And even now, the police power which may be exercised over moveable property is much more restricted than that over houses and land.(525) The justice of the exclusive right of possession to what one has earned and saved is obvious to every one. On the other hand, the appropriation of "original and indestructible natural forces" has its basis not so much in justice as in the general good; and the state has always considered itself entitled to attach to the "monopoly of land," which it accorded to the first possessor, all kinds of limitations and conditions in the interest of the common good, and sometimes to consider private property in land in the light of a semi-public function.(526) I may instance the feudal principles of the latter portion of the middle ages, which are so far removed from our ideas of private property in land; and yet, of which many echoes are heard, even in our day, and are not without their influence in practice. Thus, further, for instance, even in England, the greater number of the poor-rates, of taxes for the support of the established church, the maintenance of public highways etc., are heaped upon the rent of land. Many socialists have proposed to make the state the sole proprietor of the soil,(527) sometimes adding the condition, that the previous private owners should be compensated in capital, when it would be at least supposable that private capital might be enticed to cultivate it, if long and sure leases of it were made. This would be a "good" demesne-husbandry, extending over the entire country. We need only glance at those kingdoms in which something analogous is to be found, especially the despotisms of the east,(528) to divine that such a system does not suffice to insure the real productiveness of a nation's economy.(529)

Chapter VI.


Section LXXXIX.

Credit In General.

Credit(530) is the power of disposition over the goods of another,(531) voluntarily granted in consideration of the mere promise of the counter-value.(532) As Franklin says: A good pay is master of another man's purse. Hence, it is evident that whoever would obtain credit must be believed to possess the ability as well as the intention to fulfill his promise. Where this belief is based simply on the opinion entertained of the person of the debtor, we speak of personal credit,(533) in contradistinction especially to the credit based on bailment, pledge, hypothecation etc. The longer the time between the making of the promise and the period fixed for its fulfillment, the less certain is the latter, where the security is simply the person of the debtor. It is chiefly in very uncivilized nations and also in nations in their decrepitude, and during periods of anarchy, and in despotisms, that personal security stands higher than any other. The same is true, though for other reasons, in very energetic civilized nations, where the people put a high estimate on the element of labor in their economy, among whose members legal security is, indeed, found, but where the peculiar sensitiveness of speculation would be too much hampered by the more sluggish nature of other credits; as, for instance, in North America, and even in ancient Rome. Civilized nations that have reached the stationary economic state, on this account much prefer the greater security and the absence of care which accompany non-personal credit.(534) In estimating the ability of the debtor to meet his promise, we must take into account, especially, the disposable character of his resources; otherwise it would be impossible to understand why the merchant may so frequently obtain a loan on his stock equal to its whole value, while the owner of land can place it as security only to the extent of half its value.

Credit, on the whole, grows in importance with an advance in civilization, and this is true especially of credit intended for productive purposes. This is a consequence of the greater division of labor which causes unfinished products to be put on the market more and more frequently,—products which come to have a value only after some time, but which, when that time has elapsed, have present value. And, indeed, as the world advances and civilization grows, it becomes much easier to forecast the future with certainty. The future, also, then becomes more a source of solicitude, and fixed capital, as a consequence, plays a part which grows daily more important. The limit to the development of credit is this: it is safe only when the debtor invests his borrowed goods in the production of, to say the least, their equivalent. This is why the personality of the state, clothed with immortality and with a formally boundless power of taxation, is so often seduced into engaging in transactions of credit which are never self-discharged.(535) The social diseases of panics and of extravagant enterprises stand in the same relation to credit that unbelief and superstition do to true religion.(536) (Schaeffle.)

Section XC.

Credit—Effects Of Credit.

As regards the effects of credit, we may remark, that it is as powerless directly to produce new capital as is the division of labor to produce new workmen. To every credit of the creditor corresponds a debit of the debtor. As Turgot said: Tout credit est un emprunt.(537)(538)(539) But, on the other hand, credit facilitates the transmission of the elements of production, especially of capital, from one hand to another.(540) When, therefore, the debtor employs the capital that he has borrowed, more productively than the creditor would have done, the whole country is a gainer; as it is a loser, on the contrary, when a person engaged in industry advances to the idler, the frugal man to the spendthrift, the solid man to the wild speculator. In declining nations, where every new development hastens decay, the latter alternative may be the prevailing one; and, especially here, may the usurious giving of credit by the shrewd to the simple lead to ruinous debtor-slavery. Among a vigorous and energetic people, the former is apt to govern, as it is only by the productive employment of the loans made that they are permanently enabled to pay interest. Here credit is an invaluable means, not only of putting idle capital in motion, and of making active capital still more active, but especially of concentrating capital, by which it may gain as much in productive power as labor does by the cooeperation of labor. This is effected, very frequently, by means of joint-stock companies, the principle of which recommends them especially in enterprises where stationary capital is required rather than circulating capital, and where capital generally plays a greater part than labor; and where this labor can be subjected to provisions which may be accurately laid down beforehand; as, for instance, in the case of docks, insurance companies, banks,(541) etc. Banks, then, become real reservoirs of capital, provided they are properly and judiciously established and managed; real reservoirs which receive in one place the capital which is superfluous elsewhere, in order to supply some other place with that which is necessary to it. The more confidence increases, the more are even the smallest driblets of capital awakened from their slumbers, and made active and productive. It is only by means of credit that the help of foreign capital can be obtained for home production. Indeed, credit, considered as an exchange of probable future goods against actually existing goods, is one of the principal functions of the temporal solidarity of the economy of nations. (Schaeffle.) Without credit, there would be very little place for speculation proper.

We may see how the possibility of giving and receiving credit promotes wealth, by contemplating the poorer classes, whose poverty, both as cause and effect, is very closely related to the absence of credit. And here we have a suggestion of the reverse to the bright side of the picture of credit, analogous to that mentioned in 62 of the cooeperation of labor, viz.: that it tends to intensify inequality among men. The man who is distinguished by the amount of his wealth, or by his position is naturally known to a much wider circle than others are. From which it follows, that he may, by the way of credit, increase his power, already so much greater in the economic world, by a much larger multiplier.(542) Hence, it need not surprise us, that the great obtain credit from those in a lower position, at least as frequently as they give them credit in turn.

On the side of the creditor, the possibility of making loans is a powerful incentive to frugality. Were there no credit, those who were not in a condition to employ their capital productively would make savings only within very narrow limits.(543)

Section XCI.

Debtor Laws.

Private credit is always conditioned, and in a great many ways, by the situation of the whole nation's business; in other words, by their politico-economical situation. It is especially in the higher stages of civilization, that one bankrupt may easily drag numberless others down with him; and where the laws are bad or powerless, not even the wealthiest man can predicate his own solvency for any length of time in advance. One of the most important conditions of credit is the certainty that, if the debtor's good will to meet his obligations should fail, it shall be supplied by the compulsory process of the courts. Hence, the importance of a judicial procedure, at once impartial, enlightened, prompt and cheap.(544) The more vigorous the laws relating to debt are in preventing dishonesty on the part of the debtor, the more advantageous are they to honorable and honest debtors. Adam Smith has rightly said, that in countries in which creditors are not completely protected by the courts, the honorable man who borrows money is in the same condition as the notoriously dishonest man or the spendthrift, in better governed countries. He finds it more difficult to borrow and is obliged to pay a higher rate of interest.(545) Rigorous debtor laws, on the other hand, diminish in the whole nation the amount of "bad debts," that is, a not insignificant portion of the cost of production. They, at the same time, promote, as far as it is in the power of laws to do it, national honor and the mutual confidence of man in man. The excellence of their debtor laws, in their most flourishing period, was one of the principal elements which contributed to make Athens and Rome of such importance in the history of the world.(546)

Section XCII.

History Of Credit Laws.

In the history of laws relating to credit, we may distinguish, in a great many countries, three stages of development.

A. The laws, in the first stage, are very severe. In the Germanic middle age the insolvent was disgraced. He became the slave of his creditor (zu Hand und Halfter), who might imprison him, fetter him (stoecken und bloecken), and probably kill him. A Norwegian law allowed the creditor, when his debtor would not work and his friends would not ransom him, to take him before the court, and "to lop off from his body what part he will, above or below."(547) To judge of these provisions correctly, it is necessary to bear in mind the many ways in which family resources were at this time bound and tied up, and not forget "the power of defiance in these iron natures."(548) (Niebuhr.)

B. The canon law introduced milder principles. Gregory the Great had already prohibited the holding on to the body of the debtor.(549) On this account, during the latter portion of the middle ages, it was customary to stipulate by contract that the provisions of the ancient law should govern in this matter, to submit to imprisonment etc.(550) The influence of the Roman law made it gradually more usual, in the case of insolvent debtors, to demand no more from them than the assignment of their property for the benefit of their creditors. This, however, led to numerous frauds; and these became more frequent in proportion as the laws governing the property of parties while the marriage relation existed between them, and as executions against landed property etc. were defective.

C. Hence, in more highly civilized times, there has been a return to the severity of earlier ages. Persons engaged in commerce, especially those whose capital is so volatile, and to whom time is a thing so precious, can scarcely dispense willingly with personal imprisonment for debt. Hence, legislation on bills of exchange, sanctioned especially by imprisonment of the person, plays a very important part in the commercial cities of the seventeenth century, as it did, naturally, much earlier in Italy and the Netherlands.(551) Modern laws in many cases punish the bankrupt whenever an examination of his books, kept after approved methods, does not demonstrate his innocence.(552) The great facility of fraudulent bankruptcy, where commerce has attained a high degree of development and complication; the absence of honor shown in engaging in speculation for one's own gain with a stranger's capital, and without the real owner's knowledge; the comparatively small number of blameless and irreproachable bankruptcies,(553) certainly justify these provisions.(554)(555)

Section XCIII.

Means Of Promoting Credit.

One of the most efficient means of promoting credit consists in legislation intended to dry up the source of bad debts, by placing obstacles in the way of reckless or usurious credits for objects of luxury or pleasure, to bad customers.(556) But the application of these laws should be clear and simple as to their matter, and require no inquiries, relating to the person, impracticable for a business man to make.(557) Thus, for instance, a short period of limitation established by statute in the matter of advances made for ordinary money-claims is a beneficial restraint, as well on the creditor as on the debtor, since it prevents the accumulation of a multitude of small debts which almost imperceptibly but at the same time irresistibly overpower the debtor under their weight.(558) Another efficient means is associations of business men to circulate lists of bad debtors, and to prosecute their own demands in common.(559) On the other hand, experience has shown that imprisonment for debt, as a means of enforcing a creditor's claim, where the amount of the debt is very small and such as only very poor debtors are apt to incur, is of little service. It is even injurious, because a great many sellers would rely on that means of compelling payment in the future instead of demanding it immediately, as they should do in the interest both of themselves and of their customers. As a rule, it is only rich creditors who can resort to it with success, a class who compel payment through this means by wringing it from the debtor's relations more frequently than from the debtor himself. The working out of debts in correctional institutions seems, for the same reasons, to fail of its object, since even well governed institutions scarcely cover their current expenses from the income derived from this source.(560) The inequitable character of imprisonment for debt lies in this, that it punishes the unfortunate debtor as severely as it does the malicious one. It must be clearly distinguished from the imprisonment recognized by the courts as a punishment for reckless or fraudulent bankruptcy.(561) We must pass a judgment similar to that on the imprisonment of the person of the debtor on the seizure of his wages not yet due, so far, at least, as an amount absolutely necessary to save himself and family from want, is not excepted. The prohibition of such seizure, beyond this, would amount to a declaration that all workmen without capital, even the best, should be considered unworthy of credit.(562) We may also include in this category such laws as except from execution the necessary tools of a tradesman, since to deprive him of them would be to prevent his employing even his labor to satisfy(563) his creditors' claims.

Section XCIV.

Letters Of Respite (Specialmoratorien).

Special letters of respite (Specialmoratorien) are a suspension of the laws relating to debt, made in favor of an individual. (Quinquennalia.) They were intended to protect not only the debtor, but also the aggregate of creditors against the short-sighted severity of one of their number. They were wont to be given especially when the debtor showed that immediate execution would not only have the effect of ruining himself, but of sending his creditors away empty handed; while, if time were given him, he would be able to satisfy every one.(564) But the granting of such letters has, in recent times, been prohibited(565) in nearly all countries as arbitrary, and as a species of cabinet-justice. Nor should the granting of them be compared with the pardoning power. In the case of a pardon, the offended State forgives. In this case it sacrifices the unquestionable right of one party to the very doubtful advantage of another. Where such letters are granted in great numbers, credit cannot fail to suffer. "Quinquinnellen gehoeren in die Hollen!"

Yet in troublous times, when a great many debtors are insolvent at the same time, the question of modifying the laws relating to debt, temporarily, has been mooted. It has been urged on such occasions, that it would be a matter of enormous difficulty to treat, lege artis, thousands as bankrupts at once; that thousands of businesses would have to be closed, their stocks cast upon the market at mock prices, and their employees thrown out of employment. But, if certain privileges were to be accorded to all who should declare themselves unable to meet their obligations before a certain day, it would be known, at least, that the others were in a solid condition; and this would have the effect to strengthen the credit which had been before universally shaken. We must, however, leaving all cases of abuse out of the question, remember, that a really unrightful favor, granted to the debtor, may possibly entail the ruin of his creditor. Besides, the uncertainty of the law would have a much worse effect on credit than uncertainty as to the personal status of individuals.(566) Where, as is the case generally in inferior stages of civilization, debtors and creditors form two distinct classes, the question of right is not, indeed, changed, but there is a solid basis afforded for the political admeasurement of opposing interests. In another work I have shown how, after great wars, land owners, who became involved in debt, have been protected against capitalists. (See Roscher, Nationaloekonomik des Ackerbaues, 137, ff.)(567)(568)

Book II.


Chapter I.

Circulation In General.

Section XCV.

Meaning Of The Circulation Of Goods.

The more highly developed the division of labor is, the more frequent and necessary do exchanges become. While the hermit engaged in production thinks only of his own wants, and the mere housekeeper of the wants of his household, the man who is part of a nation and who plays a part in its general economy, must bear in mind the MARKET in which goods of one kind are exchanged against goods of other kinds. The greater, more various and more changeable the conditions of this market are, the greater are the intellectual faculties demanded to engage in it successfully, and to the advantage of everybody concerned in it.(569) Goods intended to be exchanged are called commodities. By the circulation of commodities is meant their going over from one owner to another.(570) Among the principal causes of circulation, we may mention the difference in the nature and civilization of countries and peoples, the distinction between city and country, the division of people into classes etc.(571) The rapidity of circulation depends, on the one hand, on the quantity of commodities, and on the other, on the degree to which the division of labor has been carried. In both respects it is, therefore, an important indication of the wealth of the nation, and of the world.

Different commodities have very different degrees of capacity for circulation (Circulationsfaehigkeit), that is, of certainty of finding purchasers, and of facility of seeking purchasers. The smaller, compared with its value, the volume and weight of a commodity are; the longer and more conveniently it can be stored away; the more invariable and well-known are its value in use and value in exchange: the more readily does it go from one place to another, the more easily is it transmitted from one period of time to another and from the possession of one person into the possession of another. Thus, for instance, the precious metals circulate more rapidly than industrial products; these in turn more than raw material,(572) and immovable property circulates least rapidly of all. An improvement in the means of transportation naturally increases the capacity of circulation of the entire wealth of a people, and especially of those commodities which were not before transferable as well as of those of which the cost of transportation constituted a peculiarly large component part of the price.(573) The greater the capacity for circulation of any kind of goods, the greater is the power of control of its owner in the world of trade. If we compare two men, each of whom possesses a million of dollars, but one of whom has that million in money and the other in land, we shall find that the former is able, for present purposes, such as loaning to the state in case of need, aiding a conspiracy etc., to command resources much more readily and effectively than the latter. Under the ordinary circumstances of a nation's economy, we find that the owner of money is very seldom in want of bread, fuel or clothing, whereas very many owners of other property may be in want of money.(574) True, resources which may, so to speak, take the offensive most energetically, offer less resistance to unforeseen misfortune. The possessor of such resources is in a condition to lose his all on the turn of a single die. As civilization advances, the circulating capacity of a nation's wealth increases.(575)

Section XCVI.

Rapidity Of Circulation.

With an advance in a people's public economy, we find an increased rapidity of circulation connected, both as cause and effect. Every improvement, every thing which shortens the process of production, must facilitate and accelerate the circulation of commodities. And so, the perfecting of the means of transport of commodities, of the media of exchange and of credit, an increase in the number of middlemen who make it their business to purchase in order to sell again. On the other hand, the more rapid the circulation of wealth, the more can it promote production. The more rapidly, for instance, the manufacturer of cloth exchanges his wares for money, the more rapidly may he employ the money in the purchase of new tools and the hiring of new labor; and the sooner may he appear in the market with new cloth. It is here precisely as it is in agriculture, which is more productive where the seed returns several times in a year (several crops(576)) to the hand of the peasant than it is where this happens only once. The nearer the members of the commercial organism are to one another, the more rapid is circulation wont to be. Hence, it is more rapid in industry than in agriculture; in retail trade than in wholesale; in large cities than in the country; among a dense population than among a sparse population.

The regularity of circulation increases with economic culture. Its concentration at large terminal points, its interruption by bad seasons of the year, belong to the lower stages of the political economy of a people; although bad harvests, floods, wars, revolutions etc. may, at any time, lead to a sluggishness or to an arrest of circulation.

Section XCVII.

Freedom Of Competition.

But it is especially the freedom of circulation that increases with an advance in civilization, and this advance, like the two preceding, first affects the home or inland circulation. Freedom of competition, the freedom of commerce and industry, technical expressions used to designate freedom in general in the domain of a nation's economy, is the natural conclusion drawn from the principles of individual independence and of private property. Hence its development is as slow as the development of these, and attains its full growth only in highly cultivated nations, their colonies and dependencies. In very low stages of economic development, the circulation of goods is hampered by the absence of legal security; later, by privileges accorded to a great number of families, corporate bodies, municipalities, classes, etc., and later yet by the mighty guardianship which the state exercises by its power of legislation and even of education.(577) Each one of these epochs constitutes the end of the preceding one, and is milder than it was. Finally comes the period of complete freedom, when every man is permitted to manage his own affairs even with injury to himself, provided the injury is confined to himself.

The later times of the Roman Empire are the best illustration of how, with the decline of the conditions which must precede freedom of competition, that freedom itself decays.(578)

Freedom of competition unchains all economic forces, good and bad. Hence, when the former preponderate, it hastens the time of a people's grandeur, as it does their decline where the latter gain the upper hand.(579) We may say of economic freedom what may be said of all other freedom, that the removal of external constraint can be justified and produces the greater good of the greater number only where a stern empire over self takes its place. Without this it would not prevent or avoid idleness, usury or over-population. Freedom must not be simply negative. It must be positive. If on account of the immaturity or over-maturity of a people, there be no sturdy middle class among them, unlimited competition may become what Bazard calls a general sauve-qui-peut (let the devil take the hindmost); what Fourier designates as a morcellement industriel, and a fraude commerciale; what M. Chevalier denominated "a battle-field on which the little are devoured by the big;" and in such case, as Bodz-Reymond says, the word competition, meaning simply that each one is permitted to run in whatever direction he may see a door open to him, is but another and a new expression for vagabondizing. But here the evil does not lie in too great competition, but in this, that on one side there is too little competition.(580) The opposing principle of competition is always monopoly, that is, as John Stuart Mill says, the taxation of industry in the interest of indolence and even rapacity; and protection against competition is synonymous with a dispensation from the necessity to be as industrious and clever as other people.

A protection of this nature, sufficiently effective to attain its end, would not fail to arrest the efforts of those who had accomplished something, and even to turn them backward. That freedom of competition is a species of declaration of war,(581) among men considered as producers, is certain; but, at the same time, it makes all men considered as consumers members of one society, in which all the members are equally interested, a fact too much overlooked by socialists.(582) It is the means especially by which the greatest and ever increasing portion of the forces of nature are raised to the character of the free and common property of the human race.(583) "Man is not the favorite of nature in the sense that nature has done everything for him, but in the sense that it has endowed him with the ability to do everything for himself. The right of freedom of competition may, therefore, be considered both the protection and the image of this provision of nature." (Zachariae.)(584)

The person, therefore, who claims or asserts an exception from the rule of free competition, has to prove his position in every individual case, since the burthen of proof is on him. But the duty of interference on the part of the state is positively pointed out where any interest common to the whole people is not in a condition to assert itself; and negatively, when the custom which hitherto had prevented an undoubted abuse has grown too weak to continue to perform that service. In both regards I would call attention to the protection of factory children against the concurrent selfishness of their parents and masters.(585)(586) Supra, 39.

Section XCVIII.

How Goods Are Paid For.—The Rent For Goods.

Payment for goods ( 1 ff.) of any kind can be made only in other goods.(587)(588) Hence, the greater, more varied, and the better adapted to satisfy wants, production is, the more readily does any product find a remunerative market; more readily in England, for instance, in spite, or rather, because of, the great competition there, than in Greenland or Madagascar. From this it follows that, as a rule, a person is in a better condition to purchase more goods in proportion as he has produced more himself. According to official accounts, the average value of a harvest of wheat and potatoes in Prussia was formerly 332,500,000 thalers. In the year 1850, however, it was only 262,000,000 thalers. As a matter of course, the country people in that year could not purchase from the cities as much as in ordinary years, by a difference of 70,000,000 thalers. This illustrates how every class of people, who live by finding a free market for their products, are interested in the prosperity of all other classes. As Bastiat says: "All legitimate interests are harmonious." The more flourishing a city, the better off are the towns around it, which furnish it with provisions; and the richer these towns, the more flourishing is the industry of the city which ministers to their wants.(589) It is important that this fact should be borne steadily in mind, especially in times of advanced civilization, when the feeling that we all have interests in common, is too apt to grow dormant. Nothing can better serve to awaken it again when it has become so. A nation, says Louis Blanc, in which one portion of the people is oppressed by another, is like a man wounded in the leg. The healthy limb is prevented by the sick one from performing its functions.(590)

Section XCIX.

Freedom Of Competition And International Trade.

Does the same rule apply to the commercial intercourse of nations? Where the feeling that all mankind constitute one vast family is stronger than that of their political and religious diversity; where the sense of right and the love of peace have extinguished every dangerous spark of ambition for empire and all warlike jealousy; where, especially, their economic interests are rightly understood on both sides, a real conflict between the interests of two nations must always be a phenomenon of rare occurrence, and an exception to the general rule, which should not be admitted until it has been clearly demonstrated to exist.(591) Highly cultivated nations generally look upon the first steps in the civilization of a foreign people with a more favorable eye than they do on the subsequent progress which brings such nations nearer to themselves.(592) Yet the realization of the above mentioned conditions on all sides is something so improbable, unpatriotic "philanthropy" something so suspicious,(593) the greater number of mankind so incapable of development except under the limitations of nationality, that I should observe the total disappearance of national jealousies only with solicitude. Nothing so much contributed to the Macedonian and Roman conquests as the cosmopolitanism of the later Greek philosophers.(594)

As all commerce is based on the mutual dependence of the contracting parties, we need not be surprised to find international commerce so dependent. But this dependence need not, by any means, be equally great on both sides. Rather is the individual or the nation which stands in most urgent need of foreign goods or products the most dependent. Hence, it seems that, in the commercial intercourse between an agricultural and an industrial people, in which the former furnish food and the raw material of manufactures, and the latter manufactured articles, the latter are the more dependent. In case of war, for instance, it is much easier to dispense for a long time with manufactured articles than with most articles of food.(595) However, this condition of things is very much modified, for the better, by all those circumstances on which the dominant active commerce of a nation depends. It is, for instance, much easier for the English, on account of their greater familiarity with, and knowledge of the laws and nature of commerce, on account of their business connections, their capital, credit and means of transportation, but more particularly on account of the greater capacity of circulation of their national resources, to find a new market in the stead of one that has been closed to them, than it is for the Russians with their much more immoveable system of public economy.(596) It is true, however, that an effective blockade, which excluded both of these nations from all the markets of the world, would be much more injurious to England than to Russia.

Chapter II.


Section C.

Prices In General.

The price of a commodity is its value in exchange expressed in the quantum of some other definite commodity, against which it is exchanged or to be exchanged. Hence, it is possible for any commodity to have as many different prices as there are other kinds of commodities with which it may be compared.(597) But whenever price is spoken of, we think only of a comparison of the commodity whose value is to be estimated, with the commodity which, at that time and place, is most current and has the greatest capacity for circulation. (Money.)(598) When two commodities have changed their price-relation to each other, it is not possible, from the simple fact of such change of relation, to determine on which side the change has taken place. If we find that a commodity A stands to all other commodities, C, D, E etc., in the same relation as to price as before, while commodity B, compared with the same, has changed its place in the scale of prices, we may infer that B, and not A, has left its former position.(599)

The words costly and dear, as contradistinguished from common and cheap, both indicate a high price. We, however, call a commodity costly whose price, compared with that of other similar commodities, is high. On the other hand, we call a commodity dear when we compare it with itself, and with its own average price in other places and at other times.(600)

In individual cases, the price of a commodity is determined most usually, and at the same time most superficially, by custom; people ask and pay for a commodity what others have asked and paid for it. If we go deeper and inquire what originated this customary price and may continually change it, we come to the struggle of interests between buyers and sellers. And if science would analyze the ultimate elements of the incentives to this struggle and the forces engaged in it, it is necessary that it should keep in view the entire economy of the nation, and even all national life.

Section CI.

Effect Of The Struggle Of Opposing Interests On Price.

No where in the public economy of a people are the workings of self-interest so apparent as in the determination of prices. When the price of a commodity is once fixed by the conflict of opposing interests,(601) the self-seeking of every individual dictates that he should thereby gain as much as possible of the goods of others, and lose as little as possible of his own. In this struggle, the victory is generally to the stronger, and the price is higher or lower, according to the superiority of the buyer or seller.(602) But who, in such case, is the stronger? Political or physical superiority can turn the balance one way or another only in very barbarous times, and especially in times when legal security is small.(603) As a rule, it is the party in whom the desire of holding on to his own commodities is strongest, and who is least moved by the want of the wares of others. As in every conflict, confidence in self, sometimes even unbounded confidence in self, is an important element of success. A party to a contract of sale or barter, who considers his immediate position decidedly stronger than that of the other party, will scarcely depart from his demands. Hence it is, that in exchange, one party so frequently holds back until the other has expressed his terms.(604) How different is the price of the same pieces of land which a new railroad enterprise is compelled to pay and the prices it would get for them, from the adjoining owners, in case of the dissolution of the company.

But the struggle to raise prices or to lower them, which is always going on, undergoes modifications of every description among all really commercial nations, partly through the influence of the public conscience, which brands as inhuman and blameworthy the spoilation of the opposing party by acts which the laws do not reach. And this consideration by the public conscience is all the more severe in proportion as real competition in the article sold is wanting.(605) But the chief modification in this struggle is produced by the fact, that where civilization has advanced farthest, every commodity is offered for sale by a great many and wanted by a great many.(606) As soon as several seek the same object, there naturally results a rivalry among them, which induces each to attain the desired end, even by the making of greater sacrifices than others. The greater the supply of a commodity is, as compared with the demand for it, the lower is its price; the greater the demand as compared with the supply, the higher it is. And, indeed, there is question here, not only of the mass of things supplied or demanded, but also of the intensity of the supply and demand.(607)

If the exchange-force of both contractants be equal, or, in other words, if both, with equal knowledge, are interested in the completion of the exchange, there results from this attitude of the parties toward each other, what is called an equitable, or average price, in which both meet with their deserts. Here each is a gainer, since each has parted with the commodity which was less necessary to him, and received in exchange the commodity which was more necessary to him. Looked at, however, from the stand-point, not simply of a nation's but of the world's economy, the value given and the value received are equal.(608)(609)

As a rule, the price-relation of two commodities is determined by this relation of demand and supply,—by the desire to possess and the difficulty of obtaining them. We must, therefore, examine on what deeper relations supply and demand themselves depend.(610) In the case of the purchaser, the value in use of the commodity and his own ability to pay constitute the maximum limit of its price, which price may, however, be modified by the cost of producing it(611) elsewhere or at another time. In the case of the seller, the cost of production is the minimum limit, which may, however, be extended by the cost of procuring the commodity by the purchaser at another time or place.(612)

Section CII.


The purchaser in his demand is wont to consider principally the value in use of a commodity, according as it, in a higher or lower degree, ministers to a necessary want, to a decency or to a luxury. The difference of opinion as to which of these categories any given want belongs depends not only on the nature of the country and the customs of its people, but, for the most part, also, on the prejudices of class and on personal individuality.(613) A reasonable man will employ only the surplus of the first class in the satisfaction of wants of the second, and again only the surplus of the second in the satisfaction of wants of the third.(614)

If the value in use of a commodity rises or falls, and surrounding circumstances remain unchanged, its price also rises or falls.(615)(616)

Section CIII.

Demand.—Indispensable Goods.

When the supply of articles of luxury diminishes, the price of them, it is true, rises. But as now there is a number of purchasers no longer able to pay for them, the demand for them also decreases, and their price, as a consequence, rises in a less degree than might be inferred from the amount and condition of the supply merely. And so, on the other hand, an increase of the supply which lowers the price is wont, in the case of pleasures capable of a wide extension, such as are ministered to by fine roots, vegetables, etc., to produce an increase of the demand, and this operates to arrest the falling price.

It is quite otherwise, in the case of indispensable goods, as for instance, wheat. When there is a want of such an article, men prefer to dispense with all other articles, to some extent, rather than to practice frugality in bread; and all the more, as bread is not so much used as consumed rapidly, while clothes and metallic articles last a long time. And even after an over-abundant harvest, leaving voluntary waste out of the question, consumption is increased by a finer separating of the flour, an increase in the amount of corn fed to cattle, and the distillation of spirits. Hence, demand and supply by no means run in parallel lines at every moment; and indispensable articles tend to greater perturbations in price than those which can be dispensed with.(617)(618) The price of grain, especially, varies in a ratio very different from the inverse ratio of the amount of the harvest;(619) although a formula therefor expressed in figures, like that of Gregory King, can never be applicable universally.(620) Farmers must everywhere and always withhold a certain amount of their harvest for seed, for home use etc., from the market. Only absolute necessity can induce them to draw on the quantity thus laid by. But the ratio of this part to the whole is very different in different countries.(621) In the higher stages of civilization, where payment in money has taken the place of payment in produce, and all other kinds of payment, and where the cultivator of the ground pays the wages of his laborers almost exclusively in money, so that they, like all others, purchase what bread they require in the market; a given deficit in the harvest must be spread over a much larger market supply; and prices, therefore, remain much less affected than in the lower stages of civilization.(622) And so, it is clear that a like bad harvest must affect prices very differently, if there be a large importation or exportation of the means of subsistence, and if several bad harvests, or several harvests yielding more than the average have preceded.

In another respect yet, the price of indispensable commodities is very sensitive, because here the mere fear of a future want of them has a far deeper and wider influence, than has the fear of want of articles of luxury. No matter how good the wheat crop may have been, if the weather afterwards interferes with its harvesting, the price of wheat, in countries in which the spirit of speculation is on the alert, will certainly rise, because the prospect of the future crop then becomes somewhat doubtful.(623)

Section CIV.

Influence Of Purchaser's Solvability On Prices.

The purchaser, besides the value in use of the goods he desires to buy, considers his own solvability (Zahlungsfaehigkeit = ability to pay). It is only solvent demand which can influence prices.(624) For instance, among a people made up almost entirely of proletarians, there will be a great many cases of starvation and death after a bad harvest, but the price of corn will undergo only a slight increase.(625) But where the greater number of inhabitants own property, and where the wealthy come to the help of the poorer classes by means of poor-rates and acts of benevolence, it is scarcely possible to assign limits to the increase of the price of corn. By a necessary connection, when indispensable articles grow dear, the demand for articles that can be dispensed with generally decreases, and vice versa.(626) Every merchant, engaged in an extensive business, is interested in knowing in advance the results of the corn crop. The higher the price of a commodity rises, the narrower, of course, grows the circle of those who can pay for it.(627)(628)

Section CV.


In the case of isolated chance exchanges, the seller, too, takes into consideration, first of all, value in use, and compares the satisfaction which the commodity to be parted with and that to be received are able to afford. It is true that in making this estimate, he is subject in the highest degree to error and deception.(629) In the well ordered trade of a nation whose economy is highly developed, the seller, who had this very trade in view in his production, is wont to consider almost exclusively the value in exchange of his commodity.

Section CVI.

The Cost Of Production.

As no one is willing to lose anything, every seller will consider what his goods have cost him, and the cost of producing or procuring them as the minimum price to be asked for them.(630) At the same time, the idea covered by the expression cost of production, although it always embraces whatever disappears from the resources of the producer to enter into production, varies very much according as it is considered from the point of view of the individual's, the nation's or the world's economy.

An individual who pays taxes to his government, and who has rented land and employed labor and capital to engage in production, must indeed, besides the capital he has used in such production, call all his outlay in interest, wages, rent, and taxes, by the name of cost of production;(631) since, unless they all come back to him in the price of the commodity, the entire enterprise can only injure him.(632) He will, of course, add an equitable profit to remunerate him for his enterprise, since without such profit, he would not be able to live or produce; or else, he would be compelled to consume his capital. The moment the current rates of taxation, interest, wages and rent change in a country, the cost of production is also changed in the case of the individual engaged in production, however unaltered the technic process may remain.(633) But taking the nation, or all mankind into consideration, we must not lose sight of the fact that these three great sources of income, as well as taxation, are not, rightly speaking, sources from which income flows, but rather channels through which the aggregate income of the nation or the world is distributed among individuals.(634) Hence the wages of labor, for instance, which afford the means of living to the greater part of the population, cannot possibly be looked upon simply as a factor in economic production. The people considered in their entirety have the soil gratis. All saving made from rent, interest on capital, or wages, is nothing but a change of the proportion in which the results of production were distributed hitherto among cooeperators in production. Such a change may be either advantageous or the reverse; but it is not a diminution of the amount of sacrifice which the people in general must make for purposes of production. Hence, in a politico-economical sense, to the cost of production, belongs only the capital necessarily expended in production, and which has disappeared as a part of the nation's resources, abstraction made of the personal sacrifices in behalf of production.(635) The value of the circulating capital which in the process is entirely used up, must, of course, be entirely restored in the price, that of the fixed capital used only to the extent that it has been used.(636)

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