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Title: Principles of Political Economy, Vol. 2

Author: Wilhelm Roscher

Translator: John J. Lalor

Release date: January 23, 2012 [eBook #38655]
Most recently updated: January 8, 2021

Language: English

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*** START OF THE PROJECT GUTENBERG EBOOK
PRINCIPLES OF POLITICAL ECONOMY, VOL. 2 ***

PRINCIPLES

OF

POLITICAL ECONOMY
BY

WILLIAM ROSCHER,
PROFESSOR OF POLITICAL ECONOMY AT THE UNIVERSITY
OF LEIPZIG, CORRESPONDING MEMBER OF THE INSTITUTE
OF FRANCE, PRIVY COUNSELLOR TO HIS MAJESTY, THE KING
OF SAXONY.

FROM THE THIRTEENTH (1877) GERMAN EDITION.

WITH ADDITIONAL CHAPTERS, FURNISHED BY THE AUTHOR,
FOR THIS FIRST ENGLISH AND AMERICAN EDITION, ON

PAPER MONEY, INTERNATIONAL TRADE,
AND THE PROTECTIVE SYSTEM;

AND A PRELIMINARY

ESSAY ON THE HISTORICAL METHOD IN POLITICAL
ECONOMY
(From the French)

By L. WOLOWSKI,

THE WHOLE TRANSLATED BY

JOHN J. LALOR, A. M.

VOL. II.

NEW YORK:

HENRY HOLT & CO.

1878.

Entered according to Act of Congress, in the year eighteen hundred
and seventy-eight,
By CALLAGHAN & CO.,
In the office of the Librarian of Congress, at Washington, D. C.

DAVID ATWOOD, STEREOTYPER AND PRINTER, MADISON,
WIS.

TO

WILLIAM H. GAYLORD, Esq.,

COUNSELOR AT LAW,
OF CLEVELAND, OHIO,

TO WHOSE BROTHERLY CARE IT IS LARGELY DUE THAT I
LIVED TO TRANSLATE THEM,

THESE VOLUMES

ARE AFFECTIONATELY INSCRIBED.

BOOK III.

DISTRIBUTION OF GOODS.

CHAPTER 1.

INCOME IN GENERAL.

SECTION CXLIV.
RECEIPTS.—INCOME.—PRODUCE.

The idea covered by the word receipts (Einnahme) embraces all the
new additions successively made to one's resources within a given
period of time.[144-1] Income, on the other hand, embraces only such
receipts as are the results of economic activity. (See §§ 2, 11.)
Produce (Ertrag, produit) is income, but not from the point of view
of the person or subject engaged in a business of any kind, but from
that of the business itself, or of the object with which the business is
concerned, and on which it, so to speak, acts.
Income is made up of products, the results of labor and of the
employment and use of resources. These products, the producer may
either consume himself or exchange against other products, to
satisfy a more urgent want.[144-2] Hence, spite of the frequency with
which we hear such expressions as these: "the laborer eats the bread
of his employer;" "the capitalist lives by the sweat of the brow of
labor;" or, again, a manufacturer or business man "lives from the
income of his customers,"[144-3] they are entirely unwarranted. No

man who manages his own affairs well, or those of a household,
lives on the capital or income of another man; but every one lives
on his own income, by the things he has himself produced; although
with every further development of the division of labor, it becomes
rarer that any one puts the finishing stroke to his own products, and
can satisfy himself by their immediate consumption alone. Hence
we should call nothing diverted or derived income except that which
has been gratuitously obtained from another.[144-4]
[144-1] Including of course, gifts, inheritances, lottery prizes, etc.
[144-2] Thus the original income of the peasant consists in his corn,
of the miller in his flour, of the baker in his bread, of the shoemaker
in his shoes. The money which circulates among all these and the
purchaser, is only the means of exchanging that part of their products
which they cannot themselves use, for other goods. Money, on the
other hand, was the original income of the producers of the gold or
silver it contains. Compare Mirabeau, Philosophie rurale, 1763, ch.
3. Adam Smith, II, ch. 2. But especially, see J. B. Say, Traité II, ch. 1,
5; and Sismondi, N. P., I, 90, 376, in which it is correctly said, that
the quality which constitutes anything capital or income does not
inhere in the thing itself, but depends on the person. Compare,
however, I, 148; Hermann, Staatsw. Untersuch. 297 ff., 33 seq.
[144-3] A fundamental thought in St. Chamans, Du Système d'Impôt,
1820. Nouvel Essai sur la Richesse des Nations, 1824.
[144-4] Thus, for instance, the support given by the head of a family
to the members thereof; also gifts, alms, thefts. Even A. L. Schlözer,
St. A., II, 487, will allow that no one "eats the bread of another," but
the person who has received it from the latter by way of favor and
for nothing. In the case of a rented house, there is only an exchange
of objects of income. The person to whom it is rented gives up a
portion of his, and the renting party the use of his house. Similarly, in
the case of personal services. Writers who maintain that only certain
kinds of useful labor are productive, must of course extend the limits

of diverted income much farther. See Lotz, Handbuch, III, § 133;
Rau, Lehrbuch, I, §§ 248, 251. Cantillon thinks that if no landowner
spent more than his income, it would be scarcely possible for any
one else to grow rich. (Nature du Commerce, 75.) According to
Stein, Lehrbuch, 347, every one gets his income from the income of
other people!

SECTION CXLV.
INCOME.—GROSS, FREE AND NET.

In all income, we may distinguish a gross amount, a net amount and
a free amount.[145-1] The gross income of a year, for instance,
consists of all the goods which have been newly produced within
that time. The net[145-2] income is that portion of the former which
remains after deducting the cost of production (§ 106), and which
may therefore be consumed without diminishing the original
resources. Only the new values incorporated in the new
commodities make up the net income. Evidently, a great portion of
what is considered in one business the cost of production is net
income in a great many others; as for instance, what the person
engaged in one enterprise in production has paid out in wages and
interest on capital. By means of this outlay, a portion of his
circulating capital is drawn by others as income, and, on the other
hand, a portion of their original income is turned into a portion of
his circulating capital.[145-3] Free income, I call that portion of net
income which remains available to the producer after his
indispensable wants have been satisfied.
An accurate kind of book-keeping which keeps these three elements
of income separate is more generally practicable[TN 1] as civilization
advances. We might call it the economic balance. Where commerce
is very thriving it is even customary to provide by law that those

classes who need it especially should have this species of book-
keeping. People in a lower stage of cultivation, with their poetical
nature, are unfriendly to such calculations.[145-4] [145-5] And where
natural-economy (Naturalwirtschaft) or barter prevails, a book-
keeping of this kind of any accuracy is scarcely practicable. The
ratio which net income bears to gross income is a very important
element to enable us to judge of the advantageousness of any
method of production. If every producer should succeed in
consequence of keeping his books in this manner, in determining
exactly the cost to him of each of his products, this would be an
economic progress similar to that of general spread of good
chemical knowledge in the arts. On the amount of free income, on
the other hand, depends all the higher enjoyment of life, all rational
beneficence, and the progressive enrichment of mankind.[145-6]
[145-1] Similarly in Sismondi, N. P., II, 330, and Rau, Lehrbuch, I, §
71, a.
[145-2] Called by Hermann, loc. cit., simply income.
[145-3] This truth J. B. Say has exaggerated to the extent of claiming
that gross and net income are one and the same so far as entire
nations are concerned. (Traité, II, ch. 5; Cours pratique, III, 14; IV,
74.) But the gross profit of the entire production of any one year is
much greater than the simultaneous net income of all the individuals
engaged in it. This is accounted for by the fact that in such
production an amount of circulating capital is invested which was
saved from the net profit of previous economic times. Compare
Storch, Nationaleinkommen, 90 ff. Kermann, loc. cit., 323 ff.
[145-4] In the East, a valuation by one's self of his property is
considered a guilty kind of pride, usually punished by the loss of
one's possessions. (Burckhardt, Travels in Arabia, I, 72 ff.) See
Samuel, 24, on the census made by David. The Egyptians, however,
as may be inferred from their monuments, must have very early and
very extensively felt the want of some kind of book-keeping such as

we have mentioned. A very accurate sort of book-keeping among the
more highly[TN 2] cultured Romans, with a daily memorandum and a
monthly book with entries from the former (adversaria-tabula
expensi et accepti). Compare Cicero, pro Roscio, com. 2, 3; pro
Cluent, 30; Verr., II, 1, 23, 36. The Latin putare, from putus, pure,
means: to make an account clear, and therefore corresponds to the
American provincialism, "I reckon," i. e., I believe; and is a
remarkable proof of a rigid method of keeping accounts. The Italian,
or so-called double-entry method of book-keeping, which gives the
most accurate information on the profit from every separate branch
of business, became usual among the nations of modern Europe
whose civilization was the first to ripen, about the end of the
fifteenth century. Its invention is ascribed to the monk Luca Paciolo
di Borgo S. Sepolcro.
In England, this kind of book-keeping is very gradually coming into
use even among farmers, while Simond, Voyage en Angleterre, 2 ed.,
II, 64, Dunoyer, Liberté du Travail, VIII, 5, say, "it would in France
be considered as ridiculous as the book-keeping of an apple vendor."
In Germany, there have been for some time past, manufactories of
commercial books. Besides, the remarkable difference brought out
by the income tax in England between the exact statements made by
large manufacturers, etc., and by those engaged in industry on a
medium or small scale, bears evidence of the better way in which the
former keep their accounts, the cause and effect of their better
business in general. Compare Knies, in the Tübing. Zeitschr., 1854,
513. On the best mode of determining income, see Cazaux, Eléments
d'Économie publique et privée, Livre, II. It is especially necessary to
keep an account of the increase or diminution, even when accidental,
of the value of the fixed capital employed.
[145-5] The Code de Commerce, I, art. 8, requires that every
merchant should keep a journal, paged and approved by the
authorities, showing the receipts and disbursements of each day, on
whatever account, and also the monthly expenditures of his family.
Besides, he is required to make a yearly inventory of his debits and
credits, subscribe to it and preserve it. That such books were

excellent judicial evidence may be shown by Italian statutes of the
fourteenth century. (Martens, Ursprung des Wechschrechts, 23.)
Those of Germany even in 1449. (Hirsch, Danziger
Handelsgeschichte, 232.)
[145-6] Importance of the so-called "transferring to credit," where a
business man considers his business as an independent entity and as
distinct from himself.

SECTION CXLVI.
NATIONAL INCOME.—ITS STATISTICAL IMPORTANCE.

Among the most important[146-1] but also the most difficult objects
of statistics, that book-keeping of nations, is national income. In
estimating it, we may take our starting point from the goods which
are elements of income, or from the persons who receive them as
income.[146-2]
In the former case the gross national income consists:
A. Of the raw material newly obtained in the country.
B. Of imports from foreign countries, including that which is
secured by piracy, as war-booty, contributions, etc.
C. The increase of values which industry[146-3] and commerce add to
the first two classes up to the time of their final consumption.
D. Services in the narrower sense and the produce (Nutzungen) of
capital in use.
All these several elements, estimated at their average price in
money, which supposes that all purchases, especially those under
the head D, are made voluntarily[146-4] and at their natural price.

To find the national net income, we must deduct the following
items:
A. All the material employed in production which yields no
immediate satisfaction to any personal want.[146-5]
B. The exports which pay for the imports.
C. The wear and tear of productive capital and capital in use.
In the second case the net national income is to be calculated from
the following items:
A. From the net income of all independent private businesses etc.
[146-6]

B. From the net income of the state, of municipalities, corporations
and institutions, derived from their own resources.
C. Under the former heads must be taken into the account such parts
of property as have been immediately consumed and enjoyed.[146-7]
D. Interest on debt must be added only on the side of the creditor,
and deducted from the income of the debtor; otherwise, error dupli.
This does not apply to taxes or church dues because the subjects of
a good state and members of a good church purchase thereby things
which are really new and of at least equal value to the outlay.
Besides, in both instances, it is necessary to calculate the number of
men who live from the national income, the average amount of their
indispensable wants, and the average price in money of the same, in
order to determine the free national income by deducting the sum
total of these average wants, estimated at this average price.[146-8]
[146-9]

[146-1] Not only to compare the happiness and power of different
nations with one another, but also for purposes of taxation, the
profitableness and innocuousness[TN 3] of which suppose the most
perfect adaptation to the income of the whole people.
[146-2] The former, in Rau, Lehrbuch, I, § 247; the latter in
Hermann, 308 ff. The former mode of calculation gives us a means
of judging of the comfort of the people, their control of natural
forces, etc.; the second, of the relation of classes among the people.
(v. Mangoldt, Grundriss, 99. V. W. L., 316 ff.) Each member of the
nation produces his income only in the whole of the nation's
economy. Hence Held, Die Einkommensteuer, 1872, 70, 77, would,
but indeed only under very abstract fictions, construct private income
from the national, and not vice versa.
[146-3] On the average degree of this increase of values in different
industries, see Chaptal, De l'Industrie française, II, passim. Bolz,
Gewerbekalender für, 1833, 111. No such scale can be lastingly
valid, because, for instance, almost all technic progress decreases the
appreciation of values through industry, and every advance made by
luxury raises the claims to refined quality etc. See Hildebrand,
Jahrbücher für Nat-Oek., 1863, 248 ff.
[146-4] Many items in Class D evade all calculation. Thus, for
instance, the numberless cases of personal services which are
enjoyed only by the doer himself; also the greater number of
products (Nutzungen=usufruct) of capital in use for the consumption
of the owner himself. (Latent income.) Only, it may be, in the case of
dwelling houses, equipages, etc., that the consumption by use can be
estimated in accordance with the analogy of similarly rented goods.
[146-5] The principal materials consumed in manufactures are of
course not to be deducted here, because the increase in their value
was taken into account above.
[146-6] When an artist who earns $10,000 per annum appears in a
country, the gross national income increases in a way similar to that
in which it increases when a new commodity is found which would

have a yearly increase of value equal to $10,000 over and above that
of the raw material. Cost of production in the case of such a virtuoso
is scarcely to be alluded to. Nearly his entire income, with the
exception of his traveling expenses, etc., is net, and the greater
portion of it free. An income tax would affect his hearers after as it
did before, and in his income, find a completely new object. Per
contra, see Saggi economici, I, 176 f.
[146-7] For purposes of taxation, where a relative valuation is more
the question than an absolute one, it would be sufficient to assume
that every household consumed clothing, utensils, etc., in proportion
to the rest of their income. Hence, these items might, unhesitatingly,
be omitted altogether.
[146-8] Mathematically demonstrated by Fuoco, Saggi economici,
II, 102 ff.
[146-9] The gross income of British Europe is estimated by Pebrer,
Histoire financière et statistique générale de l'Empire Br., 1834, II,
90, at £514,823,059, viz.: agriculture, £246,600,000; mining,
21,400,000; manufactures, after deduction made of the raw material,
£148,050,000; internal and coast trade, £51,975,060; foreign
commerce and navigation, £34,398,059; banking, £4,500,000;
interest from foreign countries, £4,500,000. By Moreau de Jonnés,
Statist de la Gr. Br., 1837, I, 312, it is estimated at 18,000,000,000
francs, from which, however, the raw material used in industry is not
deducted. The net income of Great Britain was estimated by Pitt, in
1799, at £135,000,000, of which £25,000,000 were received by
landowners for rent, £25,000,000 by farmers, £5,000,000 were tithes,
£3,000,000 from forests, canals, and mines, £6,000,000 from houses,
£15,000,000 from state funds, £12,000,000 from foreign commerce,
£28,000,000 from inland commerce and manufactures, £3,000,000
from fine arts, £80,000,000 from Scotland, £5,000,000 from foreign
countries. (Gentz, Histor. Journ., 1799, I, 183 ff.) Lowe, England in
its present Situation, 1822, p. 246, speaks of 255,000,000. About
1860, the incomes subject to taxation alone, that is, all above £100,
amounted to 335,000,000. The remainder was certainly worth one-

half of this. (Statist. Journ., 1864, 121.) Baxter, in 1867, assumed it
to be £825,000,000. Compare L. Levi, on Taxation, 6.
In France, about forty years ago, according to Chaptal, Doudeauville,
Balbi and others, about 6,500,000,000 francs gross national income
could be counted on. Schnitzler speaks of 7,000,000,000 francs
(Creation de la Richesse en France, 1842, I, 392), after deduction
made of the raw material of manufacture. According to Wolowski,
Statistique de la Fr., 1847, it was more than 12,000,000,000 francs.
M. Chevalier, Revue des deux Mondes, March 15, 1848, has it
10,000,000,000 at most. In these four estimates, only material
products are taken into account. Ch. Dupin thinks the income per
capita was, in 1730, = 108 francs; in 1780, = 169; in 1830, = 269.
Cazeaux, Eléments, 163, estimated the net national income, in 1825,
at 5,000,000,000 francs; Cochut, in 1861, at 16,000,000,000. (Revue
des deux Mondes, XXXVII, 703.)
In Spain, Borrego, Nationalreichthum, etc. Spaniens, 1834, 33,
estimated the income from agriculture at 2,284,000,000 francs; from
industry, etc., 361,000,000; commerce, 124,000,000; from houses,
186,000,000; canals, streets etc., 8,500,000; personal services,
75,000,000; money in circulation (probably loaned capital),
85,000,000.
In the United States, in 1840, the national income was estimated at
over $1,063,000,000; from agriculture, over $654,000,000; from
manufactures, nearly $240,000,000; commerce, almost $80,000,000;
mining, over $42,000,000; from lumber (Wäldern), almost
$17,000,000; and from the fisheries, almost $12,000,000. The per
capita amount of income was $62. It was largest in Rhode Island—
$110; in Massachusetts it was $103; in Louisiana, $99; and in Iowa,
smallest, $27; in Michigan, it was $33. Compare Tucker, Progress of
the United States, 195 ff. The census of 1860 assumes the national
wealth, slaves not included, at $14,183,000,000, that is $451 per
capita, with a per capita annual income of $112. According to
Czörnig, the gross income of Austria, from agriculture, the chase and
fisheries, in 1861, was 2,119,000,000 florins; from mining,

41,000,000; from the industries, 1,200,000,000. In Prussia, the net
national income, not including the revenue from state property, nor
the income of the royal household, seems, from the returns of the
income and class tax, to have been about 2,458,000,000 thalers, in
1874. Engel, Preuss. Statist. Ztschr., 1875, 133. The majority of the
above estimates are obviously unreliable.

SECTION CXLVII.
NATIONAL INCOME.—ITS STATISTICAL IMPORTANCE.
(CONTINUED.)

The question frequently discussed, whether it is more advantageous
to increase the gross income or the net income[147-1] of a people,
may be readily answered with the assistance of our tripartite
division. Since economic production has no other object than the
satisfaction of human wants, the mere increase of the gross income
of a people is a matter of indifference. An increase of the net income
puts a people in a condition to increase either their numbers or their
enjoyments. (See §§ 163 and 239.) The most desirable condition is
where both these results are produced. It is fortunate for a people
when the free income of the nation increases by reason of the
absolute or relative decrease of the cost of production, which adds
nothing to enjoyment. But it is politically and morally to be
lamented when it increases at the expense of the satisfaction of
man's necessary wants, especially if the majority of the people deny
themselves in this respect to produce that end. Sir Thomas More
called the sheep of his time, to make place for which so many farm
houses were razed to the ground, ravenous beasts, which devoured
men and laid waste city and country.[147-2]
[147-1] The greater number of writers, at bottom, understand by this
question only whether greater efforts should be made to increase the

wages of the lower classes or the rent and rate of interest on capital
paid to the higher. (Schmoller, in the Tüb. Zeitschrift, 1863, 22.)
[147-2] The difference between gross and net income was introduced
into the science principally by the Physiocrates. Vauban (1707) had
no conception of it, and thirty years later a French minister, in his
instructions concerning the levy of the vingtièmes, dimly seeing that
the aggregate amount of the harvest was not clear gain, ordered, to
obtain the latter, that the cost of reaping and threshing should be
deducted. (Dupont, Correspondence of J. B. Say, 404, éd. Daire.) By
produit net, Quesnay means the excess of original production over its
cost, considered from the personal point of view of the individual
landowner. This excess, it is claimed, can alone increase the national
wealth and alone support the "steril" class.
The political and military bearing of this very clearly recognized.
(102 ff., éd Daire.) Hence Quesnay, favors it in every way; by large
farming instead of small, by stock raising on a large scale,
supplanting home labor by cheaper foreign labor, by machinery and
the employment of manual labor, etc.; 91 ff., 200 ff., 274 ff. The
elder Mirabeau teaches even that the goodness of a government or of
a constitution, and even national morality may be inferred from the
amount of the produit net. (Ph. rurale, ch. 5.) Stewart, Principles, I,
ch. 20. Adam Smith gives greater prominence to the gross income,
and grades the principal branches of national labor according as they
increase the gross product of the nation's economy. (II, chs. 1, 5.)
Similarly, J. B. Say, Traité, ch. 8, § 3; Lauderdale, Inquiry, 142.
Ricardo thoroughly reacts against this view, and considers it a matter
of indifference whether a net product (interest on capital and rent) of
a given amount be obtained by the labor of five or seven million
other men, so long as only five million can live on it. (Principles, ch.
26.) Similarly Ganilh, Systèmes, I, 218 ff.; Théorie, II, 96.
Controverted by Malthus, Principles, II, § 6. Buquoy, Theorie der
Nat. Wirthsch., 1815, 310 ff. Sismondi has ridiculed this predilection
for the net product which in Ricardo corresponds with what the
Germans call free product (freien Ertrage), and which, contrary to

Ricardo's own opinion, he calls Ricardo's ideal, saying that according
to him, nothing more was to be desired but that "the king should
remain alone on the island and, by turning a crank forever, do all the
work of England through the instrumentality of automata." (N. P., II,
330 ff.) An entire people should value only gross product. (I, 183.) In
his Etudes, Essai, II: Du Revenu Social, Sismondi distinguishes as
elements of the gross national income: a, pure capital, the return of
outlay; b, that which is at once both capital and income, and serves
as family support (capital as a necessarily remaining supply, income
as the product of the preceding year); c, net income, the excess of
production over consumption.
The Socialists of our day would prefer to see the whole net income
of a people employed in the satisfaction of the necessary wants of an
ever increasing population. By this procedure, as a natural
consequence, we should witness first the curtailing of the taxing
power, of the funds for the satisfaction of the more refined wants and
of the saving of capital, nor would it be long before even the existing
generation would experience the bitterness of this "living from hand
to mouth." After a time, even the possibility of progress and even of
mere increase of population would cease.
Hermann, Staatsw. Untersuch., 297 ff., has better than almost any
one else developed the theory of income, and he lays most stress on
the satisfaction of wants as the chief aim of public economy.
Kröncke, Das Steuerwesen, 1804, 381 ff.; Grundsätze einer
gerechten Besteuerung, 1819, 93 f., may be considered the
predecessor who prepared the way for him. Compare the profound
work of Bernhardi, Versuch einer Kritik der Gründe die für grosses
und kleines Grundeigenthum angeführt werden, St. Petersburg, 1848.
Many controversies on this subject may be closed by a more accurate
understanding as to terms. Thus, for instance, when Rau, Handbuch,
embraces in the cost of production the necessary maintenance of
material-workmen, and of those engaged in the labor of commerce;
or when Jacob, Staatswissenschaft, § 496, and Storch, Einkommen,
116 ff., even the necessary support of every class useful to society,

their valuation of the gross national income is in only apparent
conflict with our doctrine on the subject.

SECTION CXLVIII.
THE TWO PHASES OF INCOME.

In every income which has anything to do with other incomes, it is
necessary to distinguish its immediately productive side, and its
profit or acquisition side. It is necessary, in the first place, that all
the products made by private parties should, so to speak, be put into
the common treasury of the national economy, and that each should
thence draw his own private revenue. Justice requires that there
should be a perfect correlation between the two; that each should
enjoy precisely the quota of the national income to the production of
which his person or his property contributed. A just appreciation of
the relative productive power of the divers branches of labor
constitutes one of the chief bulwarks against the inroads of
destructive socialistic theories. The person who calls a good doctor
or a good judge unproductive should, to be consistent, call those
who by their greater intelligence are fitted to superintend
agricultural and industrial enterprises unproductive, also, as is done
by the coarser socialists with their apotheosis of mere manual labor.
Unfortunately, such a settlement as is above contemplated among
the different factors of production, whose owners are desirous to
divide the common product among them, is possible only where the
factors of production are either of the same kind, or can be reduced
to a common denominator.[148-1] But if justice pure and simple were
meted out, no man could subsist. Love or charity must supplement
justice in order to assist those (and especially such as without any
fault of theirs) who are not able to produce anything, or enough to
supply those wants, for instance, children and the poor.

As the net national income, following the three great factors of all
economic production, is divided into three great branches, rent,
wages and interest on capital, the net income from any private
business may be reduced to one or more of these branches.[148-2] The
three great branches of income may be considered with advantage
from a great many different points of view. We may inquire in the
case of each of them: concerning its absolute magnitude, its relation
to the aggregate national income, to the magnitude of the factor of
production, of which it constitutes the remuneration; by what
number of men it is shared, and what number of wants it satisfies.
[148-3]
Lastly, the difference between the amount stipulated for, and
the original amount of both rent and wages, as well as the interest of
capital, is of special importance. The former consists in the price
paid by the borrower for the use of the factor of production to the
owner; the latter in the immediate products which the employment
of the same productive power brings on one's own account.
Evidently, the original amount is, in the long run, the chief element
in the determination of the stipulated amount. While the former
depends more on the deeper and more durably effective elements of
price, especially the cost of production, the value in use and the
paying capacity of purchasers; the latter is conditioned more by the
superficial variations of supply and demand, and even by custom.
For our purposes, the former is by far the more important, but, at the
same time, by far the more difficult to perceive.
[148-1] This is possible between labor and capital, at least in so far
as a comparison can be instituted between the sacrifice of human rest
there is in labor and the sacrifice of enjoyment in the building up of
capital. But the person who introduces an entirely unimproved piece
of land into the service of production, stands to the laborer as well as
to the capitalist in a relation which is entirely incomparable with any
other. (See § 156.) The doctrine of former agriculturists, that one-half
of the harvest was to be ascribed to the soil and the other to the

manure, would not suffice here, even if it were correct. Compare
Fraas, Gesch. der Landbau- und Forstwissenschaft, 257. But in the
production of a calf, the coöperation of a bull and cow are necessary.
Yet no one is in condition to determine what portion of the calf is to
be accounted as belonging to either. If the bull and cow belong to
different owners, the relation of supply and demand, and the deeper
causes that determine them, decide in what proportion the value of
the calf is to be divided among them.
[148-2] Among the greatest services rendered by Adam Smith is, his
complete demonstration, that any income may be resolved into one
or more of the three great branches of the national income. (I, ch. 6.)
[148-3] Ricardo has not unfrequently bewildered uncritical readers,
by his habit—in which he is by no means always consistent—of
using the expressions higher and lower wages, higher and lower
profit of capital, to designate not the absolute greatness of these
branches of income, either in money or in the wants of life, nor their
greatness from a personal point of view, but only their relative
greatness as compared with the aggregate income, the measure of the
quota of the aggregate product which is divided among workmen,
capitalists, etc. And yet, in the case of most economic questions, this
is without doubt the less interesting side. Compare the polemic of R.
Jones, On the Distribution of Wealth, 1831, I, 288 ff.; Senior,
Outlines, 142 seq.; Carey, On the Rate of Wages, 1834, 24. Thus,
according to Ricardo, the increase of one branch is possible only at
the expense of another, while in the case of flourishing nations, the
three branches increase absolutely and together. Ricardo, himself,
was by no means unacquainted with this, as may be seen from
Baumstark's German translation of his work, pp. 37, 108 ff.

CHAPTER II.

THE RENT OF LAND.

SECTION CXLIX.
THEORY OF RENT.

Rent is that portion of the regular net product of a piece of land
which remains after deducting the wages of labor and the interest on
the capital usual in the country, incorporated into it.[149-1] Hence it is
the price paid for the using of the land itself, or for what Ricardo
calls the original inexhaustible forces of the soil which are capable
of being appropriated.[149-2] This price also depends, of course, on
the relation between demand and supply; the demand in turn, on the
wants and means of payment of buyers, but the supply by no means
on cost of production, which, from the definitions above given, is
here unthinkable. However, land has this in common with other
means of production, that its price is mainly determined by that of
its products.
[149-1] According to von Thünen, Der isolirte Staat. in Beziehung
auf Landwirthschaft und Nat. Oek, 1850, I, 14: "what remains of the
revenue of an estate after deducting the interest on all the objects of
value which may be separated from the soil." According to Whately,
it is surplus profit. The expression "regular product" supposes,
among other things, an average skillfulness of the economic
individual. Thus, for instance, the farm-rent of a piece of land
generally includes besides the real rent of the land, interest on much
capital which is more or less firmly fixed in the soil. The importance
of the latter may be approximately determined from the fact that in
the electorate of Hesse, for instance, the value of all meadow lands,
woods, and agricultural lands is estimated at from 205 to 206
millions of thalers, and the value of all the houses at 100 millions.
(Hildebrand, Statist. Mittheil. über die volkswirthschaftlichen
Zustände Kurhessens, 1852, 37.) In the English income tax of 1843,

the annual value of all lands in Great Britain was estimated at over
45 millions sterling, that of all houses at over 38 millions. However
the farm-rent of a piece of land does not by any means always
embrace the entire rent. A part of the rent is paid to the state in the
form of taxes, and another portion to the payment of tithes. Short
leasehold terms, frequent land sales, the comparatively great
difficulty of disengaging capital invested in the cultivation of land,
the union of landed proprietor, capitalist and laborer in one person
easily obscure the law of rent.
[149-2] The stores of immediate plant food in a piece of land, of
minerals in a mine, of salt in a salt mine, etc., are subject to the law
of rent only in so far as they may be considered inexhaustible; that is,
they are not, strictly speaking, subject to it. Our definition applies all
the more to the capacity for cultivation, and of support or bearing
capacity mentioned in § 35; and hence it is easier to follow the law
of rent in the case of land used for building purposes than for
agriculture. When v. Mangoldt claims that the exhaustibility or
inexhaustibility of the soil has nothing to do with rent so long as it
flows evenly (so lange sie eben fliesst) he is in harmony with his
own general conception of rarity-premiums (Seltenheitsprämien).

SECTION CL.
THEORY OF RENT.
(CONTINUED.)

Agricultural products of equal quantity and quality are produced on
pieces of land of unequal fertility, even when the same amount of
skill is displayed by the husbandman, with very different outlays of
capital and labor.[150-1] And yet the price of these products in the
same market is uniformly the same. This price must, on the
supposition of free and intelligent competition, be, in the long run,
at least high enough to cover the cost of production on even the
worst soil (the margin of cultivation according to Fawcett), which

must be brought under cultivation in order to satisfy the aggregate
want. (See § 110.) This worst land need yield no rent.[150-2] The
better land which, with an equal outlay of labor and capital,
produces a greater yield, furnishes an excess over the cost of
production.[150-3] This excess is rent, which, as a rule, is obviously
higher in proportion as the difference in fertility between the worst
and the better land is greater. The person who cultivates the land of
a stranger may unhesitatingly turn this rent over to the owner; since,
notwithstanding his so doing, all that he has himself contributed to
production in labor and capital of his own, returns to him entire in
the product.[150-4]
According to § 34, a continual increase in the amount of labor and
capital lavished on the fertilization of land, agricultural science
remaining the same, leads, sooner or later to this, that every new
addition of capital or labor becomes relatively less remunerative
than the preceding.[150-5] The worse the land is, the sooner is this
point reached. Hence, it necessarily happens that, with an increase
in the aggregate want of agricultural products, greater and greater
amounts of labor and capital are employed in the further fertilization
of land, and that there comes to be a greater difference between the
fertility of the worst and better lands, in consequence of which the
rent of the latter rises.[150-6]
[150-1] Flotow, Anleitung zur Abschätzung der Grundstücke nach
Klassen, 1820, 50 ff., estimates the cost of production of a scheffel of
rye on land of the first class, at scarcely 1½ thalers; on land of the
tenth class, at 3 thalers. In Hanover, it is estimated that about 60 per
cent. of the land devoted to gardening and agricultural products
produces only from 2 to 4 times the quantity of seed sown; over 35
per cent. from 5 to 8 times, and 4.5 per cent. from 9 to 12 times.
(Marcard, Zur Beurtheilung des Nat. Wohlstandes im Königreich
Hanover, Tab. 3.) In Prussia, the rates of net produce adopted by the
central commission in 1862 vary from 3 to 420 silver groschens per

morgen, in the case of agricultural land; from 6 to 420 in the case of
meadow land; in the case of pasturage, from 1 to 360. (v. Viebahn,
Statist. des Zollvereins, II, 966.) In England, parliamentary
investigations (1821) have shown that the best land produces from
32 to 40, and the worst from 8 to 12 bushels per acre of wheat.
(Edinburgh Review, XL, 21.) As to the influence of the elevation of
land, the royal Saxon commission for the assessment of the value of
land, estimated that the net product of an acre of land at a height
above the level of the sea,
In the case of 2d class land— In the case of 11th class land—
feet, per cent. per cent. of the gross yield.
Of 500 55 42.9
Of 800 52½ 39½
Of 1600 48 34
Of 2400 43.8 26
[150-2] The English are very fond of assuming that the worst land
for the time being under cultivation pays no rent. (Ricardo,
Principles, II, 2.) This fact is frequently obscured by the aggregation
into one economic whole of land that pays no rent and land that is
able to pay rent. (John Stuart Mill, Principles, II, ch. 16, § 3.) True it
is that there is a great deal of land which cannot be farmed out, but
which can be used only by its owners. Compare Salfeld, in the
Landwirthsch. Centralb., 1871, II, 182 ff. On land near Wetzlar
which, notwithstanding the high price of land in the neighborhood,
could not be farmed out at auction, because no one was desirous to
lease it, and which was therefore turned over to the highest bidder for
the preceding piece, see Stöckhardt, Zeitschr. für deutsche
Landwirthe, 1861, 237. Where, however, all the land has its own
proprietors, the competition of farmers may easily produce a rent for
the worst land. It is a matter of complete indifference to the theory of
rent, whether the worst land when possessed only by right of
occupation or used as pasturage for cattle previous to its cultivation,
had value or not. Compare Nebenius, Oeff. Credit, I, 29; Hermann,
Staatswirthsch. Unters., 170 seq.

[150-3] The analogous gradation in mining may make this clearer.
[150-4] Ricardo illustrated this by the following example. An
uncultivated tract of country is settled by a small colony. As long as
there is here an excess of land of the best quality, and everyone may
take possession of it without paying anything therefor, no rent of the
land which is merely occupied is possible. But if all the first class
land is under cultivation—land which perhaps with the employment
of a small amount of capital yields 5 quarters an acre per annum; and
the increasing population necessitates the cultivation of land of the
second class, which with the same outlay of capital yields only 4
quarters an acre per annum, there arises a rent of 1 quarter an acre
per annum for land of the first class. For the price, 4 quarters is now
high enough to cover the cost of production per acre, and it must be a
matter of complete indifference (complete indifference?) to a new
comer whether he obtains 5 quarters from land of the first class as a
farmer and pays out 1 quarter, or whether he harvests 4 quarters from
second class land as proprietor. If there is a further increase of
population, so that land of the third class also, which yields only 3
quarters per acre per annum, must be brought under cultivation, the
price of corn rises again because the cost of production has now to be
covered by three quarters. Land of the first class now pays a rent of 2
quarters and second class land of 1 quarter. (Ch. 2.)
[150-5] von Thünen, der isolirte Staat, II, I, 179, estimates that a bed
of manure 1/3 of an inch thick on an acre of ground, increases the
production by ½; that a second ½ inch of manure increases the yield
only by a + of 5/8 corn; the third of ¼ corn, etc. Geyer is of opinion
that, in Saxony, land of the average quality will yield a gross product
of 60 thalers per acre, and 14 thalers net product per acre, in case it is
managed with the greatest intelligence and the employment of a
large amount of capital; when managed in a very ordinary way, it
would yield 20 thalers gross, and 7½ thalers net product. Thünen
gives the following formula determining when it is more
advantageous to cultivate the old land with more intensiveness
(higher farming) than to begin the cultivation of new: As long as p -
aq is less than √ap, so long is an increase of the outlay of capital on

the same land more profitable than the cultivation of new land, and
vice versa. Here p = aggregate product obtained by a workman in a
year from the amount of capital used by him; a = sum of his
necessary yearly wants; a = the interest per annum of a capital = p; q
= the amount of capital given to assist the individual workman.
[150-6] Ricardo had, in every case in which outlay of capital and
labor of different degrees of productiveness had to be used on the
same land, to suppose a price of the products = the cost of the least
productive outlay. See the tables in Ricardo's work, On the Influence
of a low Price of Corn on the Profits of Stock, 1815, 14 seq.
Schmoller, on the other hand, rightly applies the principle of united
costs of production in as far as the usual amount of profit of the
producer is added to the cost of the commodity with the highest cost
of production. Mittheilungen des Landwirthsch. Instituts zu Halle,
1865, 128. Compare supra, §§ 106, 110.

SECTION CLI.
THEORY OF RENT.—LAND FAVORABLY SITUATED.

The favorable situation of a piece of land operates, in almost every
politico-economical respect, in the same manner as its fertility.[151-1]
If a market, to be fully supplied, needs to be fed from a circuit of ten
miles, the price must be sufficient to make good not only the other
cost of production but the freight over ten miles. Here, therefore, all
producers living nearer to the market, who have to make a smaller
outlay for transportation and yet obtain the same market price for
their produce, make a profit exactly corresponding to the advantage
of their situation.[151-2]
The situation of individual pieces of land relatively to farm
buildings, etc., operates in a similar way.[151-3]

[151-1] L'éloignement équivaut à la stérilité. (J. B. Say.) If we
imagine with A. Walker an entirely uncultivated country, equally
fertile in every part, settled only on the coast, and divided into shares
of equal breadth, equally accessible at all points, so that every settler
has unlimited space to extend his possessions from the coast into the
interior, the shares situated in the middle of the coast strip would be
most eagerly sought after; since in its vicinity, prospectively, all the
institutions of the country would come together. The colonist,
therefore, who should obtain that share as his, would,
unquestionably, be in a condition to pay a price for this preference,
that is a rent. (Science of Wealth, 296.)
[151-2] It is a consequence both of their difference of situation and
of their fertility that in the Himalaya the farmers low down on the
sides pay 50 per cent. of the gross product as farm-rent, and higher
up, 20 per cent. less. (Ritter, Erdkunde, III, 878.) Both influences
may be traced most accurately in East Friesland, and in similar
places: marsh land, sandy land, heath land, and high moorland.
Its situation influences especially the money rent of land, and its
quality the amount of produce. (McCulloch, Principles, III, 5.)
[151-3] We need only mention the hauling of the crops and of
manure. According to the instructions of the royal Saxon
commission, above mentioned, the cost is assumed to be 10 per cent.
higher for a distance of 250 rods, and 20 per cent. higher for a
distance of 500 rods.

SECTION CLII.
THE THEORY OF RENT.
(CONTINUED.)

From what we have said, it follows that the rent of the land of a
country is equal at least to the sum of all the differences between the
product of the least productive portions of capital which have been

necessarily laid out in the cultivation of the soil and the product of
the other portions more productively laid out by other husbandmen.
It may rise higher than this on account of a coalition among
landowners or immoderate competition among farmers, who may
thereby be forced to surrender a portion of their wages and interest
on capital to the former; but it can never lastingly fall below this
amount. If the landowners themselves were to surrender all claim to
rent, the price of agricultural products would not sink if the market
was kept fully supplied; and the excess obtained from the better
land over and above the cost of production would go, but only in the
nature of a gift, to the farmers, corn dealers and individual
consumers.[152-1] Normal rent is not to be explained by any
mysterious or peculiar productiveness[152-2] of the land that yields it,
but on the contrary, by the fact that even material forces
unexhaustible in themselves, but which can be productive only in
combination with given parcels of land, uniformly oppose even
successively greater difficulties to every successive and additional
improvement.[152-3]
Moreover, the capital which becomes a part of the land to such an
extent that it cannot be separated from it, and perhaps not even
distinguished from it at sight, such for instance as has been laid out
for purposes of drainage or in the purchase of material intended to
modify the nature of the soil, partakes of the character of the land
itself, and its yield obeys the laws of rent. How frequently it
happens that such improvements made by the farmer without the
least assistance from the owner of the land permanently contribute
to an increase of the rent. (§ 181.)[152-4]
[152-1] Compare J. Anderson, An Inquiry into the Nature of the
Corn Laws, 1777. Extracts from the same in the Edinburgh Review,
LIV, 91 ff. On the other hand, Buchanan, on Adam Smith, IV, 134,
thinks that rent arises exclusively from the monopoly of the owners,

and that without it the price of corn would be lower. It is certain,
however, that if the land of a country be considered as one great
piece of property, and under one great system of husbandry, the
products of the soil might be offered permanently at a price
corresponding to the average cost of production, on the better and
worse pieces of land. (Umpfenback, N. Oek., 191.)
[152-2] Malthus, On the Policy of restricting the Importation of
foreign Corn, 1815. Additions, 1817, to the Essay on the Principle of
Population, III, ch. 8-12; Principles, 217 ff.
[152-3] Ricardo says that if air, water, elasticity and steam were of
different qualities, and might be made objects of exclusive
possession; and that if each kind could be had only in a moderate
supply, they would, like land, produce a rent, according as they were
brought into use, one kind after another. In the class of natural forces,
also, the possession of a secret of production or of inimitable skill, or
a legal right to its exclusive use, may produce something similar to
rent. (Senior, Outlines, 91.) Hermann, Staatswirthsch. Unters., 163
ff., had already laid the foundation of this doctrine, and earlier yet,
Canard, 17 seq., and Hufeland. I, 303 ff. See supra, § 120. Hence v.
Mangoldt uses the word rent to designate all rarity-premiums. John
Stuart Mill, III, ch. 5, 4. Schäffle speaks of the universal existence of
a surplus; that is, of the factor of rent (Nat. Oek., I, Aufl., 140 ff.),
and has recently developed this into a theory thoroughly systematic
and detailed. (Nationalökonomische Theorie der ausschliessenden
Absatzverhältnisse, 1867.)
According to him, rent is "the premium paid for the most economic
course taken in the interest of society in general;" and hence he finds
rent as much in superior labor and in a very advantageous outlay of
capital. Yet he grants, that "exclusive custom (Kundschaft) on the
basis of natural advantages occurs only in the case of land-rent."
(59.) And even granting that he is right, that no rent is by itself
forever secure (74 seq.), and that much rent is a premium paid for a
search after and the appropriation of the best land, divination of the
best situations, etc. (60 ff., 74 ff.), there still remains the great

difference between rent and the extra income from labor and capital;
that here the very transitory nature of the substratum, or basis, and
the personal merit of the recipient, is the rule, while in the former
case it is a rare exception. Willingly, therefore, as I recognize the
possibility and fruitfulness of Schäffle's way of conceiving this
subject (the latter, especially, for monographic purposes), I prefer, so
far as the entire system is concerned, the keeping apart of the three
branches of income corresponding to the three factors of production
as has been usual since Adam Smith's time.
[152-4] John Stuart Mill, ch. 16, § 5. An example in Fawcett,
Manual, 149 seq. This explains many objections to Ricardo's laws,
which are the result of misconception. Thus, for instance, in
Schmalz, Staatswirthschaftslehre, I, 81, Quarterly Review, XXXVI,
412 ff. Bastiat, Harmonies économiques, ch. 9, where rent is
considered the interest on the capital laid out in bringing land under
cultivation and improving it. If, however, we imagine an island to
emerge suddenly from the waves in the vicinity of Naples, in
consequence of an earthquake, no one can doubt that its land would
sell at a very high rate and pay a very good rent. And yet no capital
or labor has been laid out on it. A similar lesson is taught by the fact,
that, in Scotland, rocks which are covered twice a day by the waves
are leased for the sake of the sea-weed left on them. (Adam Smith,
Wealth of Nations, I, ch. 11.) Also by the fact, that in Poulopinang, a
cavity in which many edible swallows' nests are found, pays £500 a
year rent. (Geogr. Ephemeriden, Oct., 1805, 134.) However, Bastiat,
abstractly speaking, is right when he says, that every one by the
importation of agricultural products from quarters which pay no rent,
and still more by emigrating thither, may deprive the owners of land
of the tribute imminent in rent.
But how would it be if the cost of transportation and emigration
amounted to more than the rent? The case theoretically so important,
in which all the land in the world is supposed to have been
appropriated as private property, this writer, generally so lucid, treats
in a surprisingly blind way (275 ff). It is remarkable that A. Walker,
Science of Wealth, spite of his prejudices in favor of Bastiat's

doctrines on the gratuitous nature of all natural forces, nevertheless
follows, essentially, Ricardo's theory of rent, 294 ff.
A much more vulgar error yet is, that rent is the result of the capacity
of the capital employed in the purchase of the land to produce some
interest Thus Hamilton, Reports to the Congress on the Manufactures
of the United States, 1793, and Canard, Principes, sec. 5. Per contra,
compare Turgot's view, supra, § 42, note 1. Even Locke,
Considerations on the Lowering of Interest, Works, II, 17 ff.,
maintained the closest parallel between rent and interest to be
possible, with this difference only, that money was all of a kind but
pieces of land of different degrees of fertility. Similarly Sir D. North,
Discourse upon Trade, 1791, with his parallel of landlord and
stocklord.

SECTION CLIII.
THEORY OF RENT.
(CONTINUED.)

Ricardo says that rent can never, not even in the slightest degree,
constitute an element in the price of corn. This is certainly not a
very happy way of expressing the truth, that a high rent is not the
cause, but the effect, of a relatively high price of corn.[153-1] Ricardo
would have been nearer right had he said that rent was not a
component part of the price of every portion of the supply of corn
brought to market.
Is rent an addition to national income? Ricardo (ch. 31) answers this
question in the negative, and says that it takes from the consumers
what it gives to the owners of the land, and that it increases only the
value in exchange of the national wealth. [153-2] It is evident that as
thus stated, the question is not properly put. Neither interest on
capital nor wages are any addition to a nation's income, but, like

rent, only forms of trade, by means of which that income is
distributed among the individuals constituting the nation. (§ 201.)
The special kind of product obtained from a piece of land influences
its rent only in so far as the growth of that kind of product is
exclusively confined either by nature, privilege or prejudice to
certain land.[153-3] Adam Smith is of opinion that the rent of
agricultural land is ordinarily (!) one-third of the gross product; that
of coal mines, from one tenth to a maximum of one-fifth; of good
lead and tin mines, one sixth (with the dues paid the state of twenty-
one and two-thirds per cent.); of Peruvian silver mines, scarcely
one-tenth; of gold mines, one-twentieth. And he thinks that rent
grows less certain for every succeeding article. [153-4]
So far as this is based on facts, it may be explained as follows: The
greater capacity an article has for transportation from one place to
another, the less important is advantage of situation, which is
generally one of the chief elements of rent. The more indispensable
the commodity is, the more readily is the consumer induced to pay a
price for it greater than the cost of production; that is, to pay a rent.
This again is enhanced by the difficulty of the preservation of the
commodity. Lastly, the more it is a mere product of nature,[153-5] the
more difficult it is to simultaneously employ several portions of
capital of different grades of productiveness in its production.
[153-1] To be met with in this form even in Adam Smith, Wealth of
Nations, I, ch. 11, pr. John Stuart Mill, Principles II, ch. 16, § 6, thus
states the matter: "Whoever cultivates land, paying a rent for it, gets
in return for his rent an instrument of superior power to other
instruments of the same kind for which no rent is paid. The
superiority of the instrument is in exact proportion to the rent paid
for it." According to v. Jacob, Grundsätze der Nat. Oek., I, 187, rent
constitutes a much larger portion of the price of commodities than is
generally supposed, in as much as wages depend so largely on the

price of the means of subsistence. Per contra, Baudrillart, Manuel,
391 ff., who maintains that rent is practically insignificant.
[153-2] Similarly Buchanan, loc. cit., and Sismondi, Richesse
commerciale, I, 49. Compare contra, Malthus, Inquiry into the
Nature and Progress of Rent, 15. I would call attention en passant to
the absurdity that there may be an increase in the value in exchange
of a nation's entire resources without any increase in its value in use.
(Supra, § 8.)
[153-3] Thus Adam Smith remarks that corn fields and rice fields pay
very different rents, because it is not always possible to convert one
into the other. (Wealth of Nat., I, ch. 11, 1.) Compare the tabular
statistical view of the rent of land used for vineyards, gardens,
meadows, pasturages, wood and farming purposes, in Rau,
Lehrbuch, I, § 218. For a general theory of the rent of wooded land,
see Hermann, Staatsw. Unters., 177 ff.; of vineyards, 181 seq.
[153-4] Adam Smith, Wealth of Nat., I, ch. 11, 3.
[153-5] It is hereby rendered akin to those low stages of civilization
in which no rent is paid.

SECTION CLIV.
THEORY OF RENT.
(CONTINUED.)

As the purchase of a piece of land[154-1] is no more and no less than
its exchange against a portion of capital in the shape of money,[154-2]
its purchase price depends generally on the amount it will rent for as
compared with the interest on the capital to be given in exchange for
it. The rate of interest remaining the same, it rises and falls with its
rent. And vice versa, the rent remaining the same it rises and falls
inversely as the rate of interest.[154-3] A rise in the price of land is not
always a proof of the growing wealth of a people. It may proceed

from a depreciation of the value of money, or from a decrease of the
rate of interest caused by a decline in the number of loans which can
be advantageously placed.
It is frequently said, that the price paid for land is greater than the
money-capital which yields an equal revenue.[154-4] This, abstraction
made of proletarian distress prices for small parcels of land and of
the political and social privileges of landowners, is accounted for by
the assumed greater security of the latter,[154-5] which, however,
fares ill enough in war times, and times of political disturbance. The
fact itself is found to exist, I think, only in economically progressive
times, when confidence prevails, and it is based on the pretty certain
prospect that the rate of interest will decline, while rents will rise.
[154-6]

It has been observed in Belgium, that the medium farm rent of land,
in quarters remarkable for any economic peculiarity whatever, pays
an interest lower, as compared with the purchase money, in
proportion as the country about is more thickly populated, and as its
husbandry is carried on by farmers instead of by owners.[154-7] This
phenomenon is doubtless correlated with these others, that the
conditions just named are pretty regularly attendant on a high state
of civilization, and that advanced civilization is attended uniformly
by a decline in the rate of interest. (175).[154-8]
[154-1] In every day language, people say of a man who has
purchased a piece of land, that he "put" as much capital as is equal to
the purchase price "into his land;" or "laid out on it" as much. But
this mode of expression is as inaccurate as is this other: "the sun is
rising," or "the sun has gone down."
[154-2] Macleod, who is not fond of the natural mode of expression,
maintains that the purchase price of a piece of land is equal to the

discounted value of the sum of the values of all the future products to
be obtained from the land. (Elements, 75.)
[154-3] C:i::L:r in which C = the capital, i = its interest, L = the piece
of land, and r = its rent.
[154-4] There are traces to be found of the fact among the ancient
Greeks, that the farm-rent of landed estates paid a smaller interest on
the purchase money than was otherwise usual in the country. Isaeus
de Hagn., 42; Salmasius, De Modo Usur., 848.
[154-5] Thus even North and Locke, loc. cit.; Cantillon, Nature du
Commerce, 294.
[154-6] Compare List, Werke II, 173. In Belgium, farm-rent per
hectare was, in 1830 = 57.25 francs, in 1835 = 62.78, in 1840 =
70.44, in 1846 = 74.50, on an average. This was at the rate of from
2.62 to 2.80, or an average of 2.67 per cent. on the purchase money.
If to this we add the increase in the rise of land between 1830 and
1846, divided by 16, the yearly revenue rises from 2.67 to 3.91 per
cent., that is pretty nearly the rate of interest on hypothecation, and is
higher or lower in the different provinces, as the former is higher or
lower. (Heuschling, Résumé du Récensement général de 1846, 89.)
In France, land paid but from 2 to 3 per cent. on the purchase money;
but both rents and the price of land have doubled between 1794 and
1844. (Journal des Econ., IX, 208.)
[154-7] Moreover, whole countries may, because of their great
natural advantages, possess, so far as the commerce of the entire
world is concerned, something analogous[TN 4] to rent. Thus, for
instance, North America, although here, this world-rent finds
expression in the national height of the wages of labor and of the rate
of interest, (v. Bernhardi, Versuch einer Kritik der Gründe welche für
grosses und kleines Grundeigenthum angeführt werden, 1848, 294.)
[154-8] Writers as old as Culpeper, A Tract against the high Rate of
Usurie, 1623, and Sir J. Child, Discourse of Trade, p. 22 of the
French translation, observed the connection existing between a low

rate of interest, national wealth and a flourishing state of commerce
on the one hand, and a high price of the necessaries of life and of
land in the other. Sir W. Petty would estimate the rent of land as
follows: If a calf pasturing in an open meadow gains as much flesh
in a given time as is equal to the cost of the food of 50 men for a day,
and a workman, on the same land, in the same time, produces food
for 60 men, the rent of the land must be 50, and the rate of wages 10.
(Political Anatomy of Ireland, 62 seq.; compare 54.) Besides, he
accounts for the height of rents by the density of the population
exclusively, and he would prefer to see both increase ad infinitum.
(Several Essays on Political Arithmetic, 147 ff.)
The germs of the Ricardo law of rent, in Boisguillebert: the price of
corn determines how far the cultivation may be extended; by
manuring the land, as much corn as desired may be obtained,
provided the cost of production is covered. (Traité des Grains, II, ch.
2 ff.) There is a foreshowing of the same law in the Physiocratic
view that only in the production of raw material is there a real excess
over and above the cost—produit net. Compare Quesnay, Probl.,
économique, 177 ff. Sur les travaux des artisans. (Daire.) Auxiron,
Principes de tout Gouvernement, 1776, I, 126. Adam Smith came
very near to the true principle in the case of coal mines, but was
hindered reaching it in other cases by the false assumption that
certain kinds of agricultural production always yield a rent, while
others do so only under certain circumstances. Besides he always
considered the interest of capital fixed in the soil; buildings, for
instance, as part of the rent. (Wealth of Nat., I, ch. 11.) Compare
Hume's Letter to Adam Smith; Burton's Life and Correspondence of
Hume, II, 486; von Thünen, Isolirter Staat., I, 15 ff.
The most immediate predecessors of Ricardo, Principles, 2, 3, 24,
31, are Anderson (§ 152); West, Essay on the Application of Capital
to Land, 1815, and Malthus, Inquiry into the Nature and Progress of
Rent, 1815. See § 152. It is wonderful how a theory which, in 1777,
remained almost untouched, was in 1815 etc., attacked and defended
with the greatest zeal, because it then affected the differences
between the moneyed and landed interest. Yet Ricardo did not take

into account at all the rent-creating influence of the situation of land
in relation to the market, as well as to the "farm-office" (dem
Wirthschaftshofe). The influence of the system of husbandry on rent,
first thoroughly treated by von Thünen, loc. cit. What has recently
been urged against Ricardo by, for instance, J. B. Say, Traité, II, ch.
9; Sismondi, N. P., III, ch. 12; Jones, Essay on the Distribution of
Wealth, 1831 (see Edinburg Review, LIV), bears evidence either of a
misunderstanding of the great thinker, or else contains only
modifications of some individual abstract propositions of his, stated
perhaps too strictly. In judging Ricardo, it must not be forgotten, that
it was not his intention to write a text-book on the science of
Political Economy, but only to communicate to those versed in it the
result of his researches, in as brief a manner as possible. Hence he
writes so frequently making certain assumptions; and his words are
to be extended to other cases only after due consideration, or rather
re-written to suit the changed case.
Baumstark very correctly says: "Rent rises, not because new capital
has been invested, but when the circumstances of trade make a new
addition to capital possible." (Volkswirthschaftliche Erläuterungen
über Ricardo's System, 1838, 567.) Fuoco's Nuova Teoria della
Rendita, Saggi economici, No. 1, is nothing but an Italian version of
the doctrines of Malthus and Ricardo. The greater number of anti-
Ricardo theories of rent have originated from the rapid and
apparently unlimited growth of national husbandry in recent times.
Thus it is a fundamental thought in Rodbertus, Sociale Briefe, 1851,
No. 3, that an increase of the price of corn need not attend an
increase of population, either uniformly or necessarily. According to
Carey, The Past, the Present and the Future, ch. 1, 1848, the most
fertile land is last brought under cultivation, because it is covered
with swamps, forests, etc.; and because it offers greater resistance to
the work of the agriculturist, by reason of its luxurious vegetation.
The more elevated lands are first cultivated which present fewer
obstacles to cultivation on account of their dryness, their thinner
crust, etc. Carey generalizes this and thinks he has reversed the
Ricardo law of rent! He overlooks entirely that Ricardo speaks only

of the original powers of the soil. Now a swampy land which must
be dried at the expense of a great deal of labor, possesses less of
these original powers than a sandy soil which may be sown
immediately. See Carey, Essay on the Rate of Wages, 232 ff., and the
lengthy exposition of the same doctrine rank with inexact natural
science and unhistorical history in the same author's Principles of
Social Science, 1858, vol. I.
There is this much truth, however, in Carey's error that, with
increasing economic progress, the superiority not only of situation,
relatively to the market, but also of natural fertility, may of itself go
over to other lands. Thus, for instance, the ancient Slaves used clay
soil everywhere as pasturage, and cultivated the sandy soil, because
their pick-axes could overcome the resistance only of the latter.
Langethal, Geschicte der deutschen Landw., II, 66; Waitz, Schlesw.
Holstein, Gesch., I, 17. Similarly in Australia: Hearne, Plutology,
1864. Compare, Roscher, Nationalökonomik des Ackerbaues, § 34.
The word fertility should not be taken too exclusively in its present
agricultural sense. In a lower stage of civilization, the facility of
military defense or the ut fons, ut nemus placuit—Tacit., Germ., 16
—may have more weight.
The chief difference in the theories of rent consists in this: whether
rent is considered a result of production or only of distribution, and
an equalization of gain. Compare Behrens, Krit. Dogmengeschichte
der Grundrente, 1868, 48.

SECTION CLV.
HISTORY OF RENT.

In poor nations, and in those in a low stage of civilization,
especially where the population is sparse, rent is wont to be low. In
Turkistan, land is valued according to the capital invested in its
irrigation.[155-1] In the interior of Buenos Ayres, at the beginning of
the nineteenth century, landed estates were paid for in proportion to

the magnitude of the live stock on them, so that it seemed, at least,
as if the land was given for nothing, or simply thrown in with the
purchase. And only a short time since, an English acre in the same
country, fifteen leguas from the capital, was worth from three to
four pence, and at a distance of fifty leguas, only two pence.[155-2] In
Russia, also, not long since, the valuation of landed estates was
made, not in proportion to the superficies, but according to the
number of souls, that is, of male serfs, a remnant suggestive of the
previous situation when no rent was paid.[155-3] Where, in relatively
uncivilized medieval times, instances of the farming out or leasing
of land occur, farm-rents are so small that their payment can only be
considered as a mere recognition of the owner's continuing right of
property.
Under these circumstances, it is natural that great landowners,
especially in the lower stages of civilization, should exert an
especially great influence; and that their low tenants (Hintersassen)
are more dependent in proportion to the want of capital and the
absence of trade. Hence, these are wont to make up for the
smallness of their rent by great honors paid to their landlords, and
great services, especially military service.[155-4] Besides, the lords of
the manor, in almost every medieval period, have used their
influence with the government to cut down the wages of labor by
serfdom and other similar institutions, and the rate of interest on
capital by prohibiting interest, by usury laws, etc.; and thus, in both
ways, to artificially increase their own share of the national income.
[155-1] A. Burnes, Reise nach Bukhara, II, 238.
[155-2] W. Maccann, Two Thousand Miles Ride through the
Argentine Provinces, London, 1853, I, 20; II, 143. Ausland, 1843,
No. 140. Frisian ancient documents in which parcels of land are
described as terræ 20 animalium, 48 animalium, etc. Lacomblet,

Urkundenbuch, I, 27. Kindlinger, Münster Beitr., I, Urkundenbuch,
24.
[155-3] The custom began to be more usual in Russia also to say "so
many dessjatines and the peasantry belonging thereto." This was
especially so in the case of very fertile land, as for instance in Orel.
See v. Haxthausen, Studien, II, 510. Formerly the bank loaned only
250 per soul, afterwards up to 300 R. Bco. (II, 81). Spite of this v.
Haxthausen thinks that rent would be illusory, in Russia, in case
agriculture was carried on with hired workmen. (I, Vorrede, XIII.)
Carey's remark, "every one is familiar with the fact that farms sell
for little more than the value of the improvements," may be true of
the United States (The Past, Present and Future, 60.)
[155-4] This condition of things continued in the highlands of
Scotland until the suppression of the revolt of 1745. The celebrated
Cameron of Lochiel took the field with 800 tenants, although the rent
of the land was scarcely £500. (Senior, Three Lectures on the Rate of
Wages, 45.) "Poor 12,000 pound sterling per annum nearly subverted
the constitution of these kingdoms!" (Pennant.)

SECTION CLVI.
INFLUENCE OF ADVANCING CIVILIZATION ON RENT.

Advancing civilization contributes in three different ways to raise
rents.[156-1] The growth of population necessitates either a more
intensive agriculture (higher farming), or causes it to extend over
less fertile parcels of land, or parcels less advantageously situated.
[156-2] If the growth of population be attended by an increase of

capital, this happens in a still higher degree. The people now
consume, if not more, at least wheat of finer quality, more and better
fed live stock; the consequence of which is, that the demands made
on the land are increased. Lastly, if the population be gradually
concentrated in large cities, this fact also must contribute to raise

rents, because it requires a multitude of costly transportations of
agricultural produce and so increases the cost of production (up to
the time of consumption) on the less advantageously situated land.
[156-3] [156-4]

As most of the symptoms of a higher civilization become apparent
earliest, and in the most striking manner, in large cities, so also a
rise in rents is first felt in them. The building of houses may be
considered as the most intensive of all cultivation of land and that
which is most firmly fixed to the soil.[156-5] Rent has nowhere an
unsurpassable maximum any more than a necessary minimum.
[156-1] Jung, Lehrbuch der Cameralpraxis, 1790, 182, has so little
idea of this that he is of opinion that farm-rent must grow ever
smaller.
[156-2] According to Schmoller, in the Mittheilungen des
landwirthschaftlich. Instituts zu Halle, 1865, 112 seq., the average
farm-rent of the Prussian domains per morgen, and the population to
the square mile, amounted:
District. 1849. 1864. 1849. 1858.
Thalers. Population
per sq. mi.
Königsberg, 0.73 1.16 2076 2298
Gumbinnen, 0.59 0.76 2059 2249
Danzig, 1.02 1.51 2656 2926
Marienwerder, 0.63 1.06 1944 2135
Posen, 0.69 1.07 2789 2857
Bromberg, 0.69 1.10 2116 2322
Stettin, 1.07 1.73 2355 2614
Cöslin, 0.83 1.30 1735 1940
Stralsund, 0.95 1.50 2347 2549
Breslau, 1.19 1.45 4733 5034
Liegnitz, 1.17 1.75 3676 3763
Oppeln, 0.86 1.20 3973 4433

Potsdam, 1.08 1.59 3317 3640
Frankfort, 1.29 2.00 2446 2660
Magdeburg, 2.31 2.98 3290 3508
Werseburg, 2.35 3.03 3934 4270
Erfurt, 2.04 2.55 5621 5735
Münster, .... 2.03 3192 3299
Minden, 2.48 2.62 4841 4808
Compare the review of rents in the states of the Zollverein, in v.
Viehbahn, Statistik, II, 979. It is difficult[TN 5] to compare different
countries with one another in this respect, because it is seldom
certain whether the word rent means exactly the same thing in them.
Besides, it should not be overlooked, how difficult it is to ascertain
what rent, in the strict sense of the term, as used by Ricardo, is.
[156-3] Moreover, the rise of rents, in so far as it depends on the
greater cost of transportation to a growing market, becomes
progressively slower. The concentric circles about that point increase
in a greater ratio than the radii.
[156-4] As to the history of rents in England, a comparison of the
years from 1480 to 1484, with the most recent times, shows that the
amount of rent estimated in money in agricultural districts, where no
very great "improvements" have been made, have increased as 1 to
80-100, while the price of wheat has increased 12-fold and wages
10-fold. (Rogers, in the Statist. Journal, 1864, 77.) According to
Hume, History of England, ch. 33, it seems that rents under Henry
VIII. were only 1/10 of those usually paid in his time, while the price
of commodities was only ¼ of the modern. Davenant, Works, II,
217, 221, estimates the aggregate rent of land, houses and mines, at
the beginning of the seventeenth century, at £6,000,000; about 1698,
at £14,000,000; capitalized respectively at £72,000,000 and
£252,000,000. About 1714, J. Bellers, Proposals for Employing the
Poor, puts it at £15,000,000; about 1726, Erasm. Phillips, State of
the Nation in Respect to Commerce etc., at £20,000,000; about 1771,
A. Young, at £16,000,000; about 1800, Beeke, Observations on the
Income-Tax, at £20,000,000; about 1804, Wakefield, Essay on

Political Economy, at £28,000,000; about 1838, McCulloch, Statist.,
I, 535, at £29,500,000. The poor tax in England and Wales, in 1841,
was on a valuation of £32,655,000. (Porter, Progress, VI, 2, 614);
1864-5, the annual value of lands, £46,403,853 (Stat. Journal, 1869.)
Moreover, the income from houses, railroads, etc. (real property
other than lands), increased very much more than that received from
pieces of farming land; between 1845 and 1864-5, the former by
392.8 per cent., and the latter by 27.9 per cent. (Hildebrand's
Jahrbb., 1869, II, 383 seq.); and the income tax of 1857 on
£47,109,000. There was a still more rapid growth of rent in Scotland.
In 1770, it was only £1,000,000-1,200,000: in 1795, £2,000,000; in
1842, £5,586,000. (McCulloch, I, 576, ff.) In Ireland, about 1776, it
was only $900,000, according to Petty. (Political Anatomy of
Ireland, I, 113.) A. Young assumed it to be £6,000,000 in 1778;
Newenham, View of Ireland, about 1808, £15,000,000. In many parts
of the Rosendale Forest in Lancashire, the land is leased by the ell, at
£121, and even at £131 per acre; i. e., more than the whole forest of
15,300 acres was rented for in the time of James I. In many of the
moorland portions of Lancashire, rent has risen in 150 years, 1,500
and even 3,000 per cent. (Edinburg Rev., 1843, Febr., 223.)
The amount of rents in Prussia, Krug assumed to be in 1804,
50,000,000 thalers, and von Viebahn, Zollverein Statistik, II, 974, in
1862, 116,500,000 thalers. Lavergne assumed the rents of France
after 1850 to be 1,600,000,000 francs (Revue des deux Mondes,
Mars, 1868); and Dutot, Journal des Economistes, Juin, 1870, in
1870, at 2,000,000,000. In Norway, the capitalized value of all the
land was assessed at 13,000,000,000 thalers in specie, in 1665; in
1802, at 25,500,000; in 1839, at 64,000,000 thalers. Blom, Statistik
von Norwegen, I, 145. The older such estimates are, the more
unreliable they are.
[156-5] In Paris, in 1834, the square toise = 37 sq. feet, in the Rue
Richelieu and Rue St. Honoré, cost 1,500 to 2,000 francs; in Rue
neuve Vivienne, 2,500 to 3,500 francs; in 1857, from 200 to 500
francs per square meter, = 10 sq. feet, was very usual. (Wolowski.)
Before the gates of Paris, the rent amounted to as high as 250 francs

per hectare; at Fontainebleau, to only from 30 to 40. (Journal des
Economistes, Mars, 1856, 337.) In Market Square, Philadelphia, land
was worth from 3,000 to 4,000 francs per sq. toise, and in Wall
Street, New York, about 4,000 francs. (M. Chevalier, Letters sur
l'Amérique, 1836, I, 355.) In St. Petersburg, after 6 years, the house
frequently falls to the owner of the area. (Storch. by Rau, I, 248 f.) In
Manchester, the Custom House area cost from 10 to 12 pounds
sterling per square yard; in the center of the city, as high of £40, that
is, nearly £200,000 per acre. In Liverpool, in the neighborhood of the
Exchange and of Town Hall, the cost is from 30 to 40 pounds
sterling. (Athenæum, Dec. 4, 1852.) In London, a corner building on
London street, erected for £70,000, with only three front windows,
pays a rental of £22,000. (Allg. Zeitung, 1 Febr., 1866.) The villa at
Misenum—a very beautiful location—which the mother of the
Gracchi bought for about 5,000 thalers, came into the possession of
L. Lucullus, consul in the year B. C. 74, for about 33 times as much.
Mommsen, Römisch. Gesch., II, 382.

SECTION CLVII.
HISTORY OF RENT.—IMPROVEMENTS IN THE ART OF
AGRICULTURE.

Improvements in the art of agriculture which are confined to
individual husbandmen leave rent unaffected. They do not
perceptibly lower the price of agricultural products, and only effect
an increase of the reward of enterprise which is entirely personal to
the more skillful producers and does not attach to the ground itself.
But how is it when these improvements become general throughout
the country? If population and consumption remain unchanged, the
supply of agricultural products will exceed the demand. This would
compel farmers, if there be no avenue open to exports, to curtail
their production. The least fertile and most disadvantageously

situated parcels of land will be abandoned to a greater or less extent,
and the least productive capital devoted to agriculture, withdrawn.
In this way, rent goes down both relatively and absolutely, although
the owners of land may be able to partially cover their loss by the
gain which results to them as consumers and capitalists.[157-1] (§
186). After a time, however, and as a consequence of the diminished
price of corn, population and consumption will increase, and entail
an extension of agriculture and a consequent rise in rents.[157-2] If it,
relatively speaking, reaches the same point as before, it still is
absolutely much greater than before. Let us suppose that there are
three classes of land of equal extent in a country, which for an equal
outlay of capital produce 100,000, 80,000 and 70,000 bushels
yearly. The rent of the land here would be equal to at least 40,000
bushels. If the yield of production now doubles, while the demand
for agricultural products also doubles, the aggregate harvest will be
200,000 + 160,000 + 140,000 bushels, and consequently rent will
have risen to at least 80,000 bushels. But this increase of rent has
injured no one. If the population increases in a less degree than the
productiveness of the land, the consumer may, to a certain extent,
gain largely, and the landowner better his condition. However, great
agricultural improvements spread so gradually over a country, that,
as a rule, the demand for agricultural products can keep pace with
the increased supply. But even in this case, that transitory absolute
decline of rent may be avoided; and it cannot be claimed
universally, as it is by many who are satisfied with mumbling
Ricardo's words after him, that an increase of rent is possible only
by an enhancement of the price of the products of the soil. Where
the development of a people's economy is a normal one, the rent of
land is wont to increase gradually, but at the same time to constitute
a diminishing quota of the entire national income.[157-3]

Improvements in milling,[157-4] and in the instruments of
transportation[157-5] adapted to agricultural products, and the
introduction of cheaper[157-6] food, have the same effect as
improvements of agricultural production. All such steps in advance
render an increase in population, or in the nation's resources,
possible without any corresponding increase in the amount paid to
landowners as tribute money.[157-7]
The foregoing facts furnish us the data necessary to decide what
influence permanent soil improvements have on the rent of land.[157-
8]
The improved parcels of land now grow more fertile. Their
rentability also increases, while that of the others becomes not only
relatively but absolutely less, if the demand remains unaltered. The
whole is as if capital had been transformed into fertile land, and this
added to the improved land.
[157-1] Since it has seemed absurd to many writers to say that an
improvement in the art of agriculture may cause rents to decline
(compare Malthus, Principles, I, ch. 3, 8), John Stuart Mill,
Principles, IV, ch. 3, § 4, prefers to put the question thus: whether the
landowner is not injured by the improvement of the estates of other
people, although his own is included in the improvement. Compare
Davenant, Works, I, 361. And so the long agricultural crisis through
which Germany passed at the beginning of the third decade of this
century was produced mainly by the great impulse given to
agriculture (Thaer, Schuerz etc.), while population did not keep pace
with it. Similarly, at the same time, in England, McCulloch, Stat., I,
557 ff. Of course, the less fertile pieces of land declined even
relatively most in price. From 1654 to 1663, Switzerland
experienced a severe agricultural crisis, attended with oppressive
cheapness of corn, a great decline in the price of land, innumerable
cases of insolvency, revolts of the peasantry, emigration, etc. (Meyer
von Knonau, Handbuch d. schweiz. Gesch., II, 43.) The Swiss had,
precisely during the Thirty Years' War which spared them, so
extensively developed their agricultural interests, that now that other

countries began to compete with them, they could not find a market
large enough for their products. For English instances of similar
"agricultural distress" in the seventeenth and eighteenth centuries,
see Child, Discourse on Trade, 73, 124 seq.; Temple, Observations
upon the U. P., ch. 6; Tooke, History of Prices, I, 23 seq., 42. Even
where there have been no technic improvements, a series of
unusually good harvests may have the same results, of which there
are many instances scattered through Tooke's first volume.
There is great importance attached in England to the difference
between those agricultural reforms which save land and those which
effect a saving in capital and labor. The latter, it is said, decrease the
money rent of the landowner by depreciating the price of corn, but
leave the corn-rent unaltered. The former, on the other hand,
decrease the rent both in money and corn, but the money rent in a
higher degree. (Ricardo, Principles, ch. 2; J. S. Mill, Principles, IV,
ch. 3, 4.)
[157-2] When the demand for products of the soil which minister to
luxury, such as fat meat, milk, vegetables, is increasing, a greater
cheapness of the necessary wheat may raise rent, for the reason that
lands are now cultivated which were not formerly tillable. Thus,
there is now land in Lancashire which could not formerly be planted
with corn, because the laborers would have consumed more than the
harvest yielded. Since the large imports of the means of subsistence
from Ireland these lands have been transformed into artificial
meadows, gardens, etc. (Torrens, The Budget, 180 ff.) Compare
Adam Smith, I, 257, ed. Bas. Banfield would misuse these facts to
overturn the theory of Ricardo. (Organization of Industry, 1848, 49
ff.)
[157-3] The French testamentary tax was on an amount,
moveable property immoveable.
In 1835, of 552 mill. francs and 984 mill.
In 1853, of 820 " 1,176 "
In 1860, of 1,179 " 1,545 "

so that the preponderance of immoveable property constituted a
converging series of 78, 43, and 31 per cent. (Parieu.) In North
America, with its great unoccupied territory, the reverse is the case.
The census of 1850 gave a moveable property of 36 per cent.; that of
1860 of only 30 per cent. According to Dubost, the rent of land in
Algeria was 80 per cent., a gross product of only 10-15 francs per
hectare; in Corsica, 66 per cent., a gross yield of from 30-35 per
cent.; in the Department du Nord, 17.5-24 per cent., a gross yield of
from 500-740 francs. (Journal des Economistes, Juin, 1870, 336 ff.)
[157-4] The repeated sifting of the bran (mouture économique) had
great influence in this respect. In France, in the sixteenth century, a
setier of wheat gave only 144 pounds of bread. In 1767, according to
Malouin, L'Art du Bonlanger, it gave 192 pounds. It now gives from
223 to 240 pounds. The gain in barley is still greater; the setier gives
115 pounds of flour, formerly only 58. (Roquefort, Histoire de la Vie
Privée des Français, I, 72 ff. Beckmann, Beitr. zur Gesch. der Erfind.,
II, 54.)
[157-5] In the beginning of the eighteenth century, the counties in the
neighborhood of London addressed a petition to Parliament against
the extension of the building of turnpike roads which caused their
rents to decline, from the competition of distant districts. (Adam
Smith, Wealth of Nat., I, ch. 11, 1.) Compare Sir J. Stewart,
Principles, I, ch. 10. Improvements in transportation which affect the
longest and shortest roads to a market in an absolutely equal degree,
as, for instance, the bridging of a river very near the market, leave
rent unaffected. (von Mangoldt, V. W. L., 480.)
[157-6] Malthus, Principles, 231 ff. If the laboring class were to
become satisfied with living on potatoes instead of meat and bread as
hitherto, rents would immediately and greatly fall, since the
necessities of the people might then be obtained from a much smaller
superficies. But after a time, the consequent increase in population
might lead to a much higher rent than before; since a great deal of
land too unfertile for the cultivation of corn might be sown with
potatoes, and thus the limits of cultivation be reached much later.

[157-7] In France, between 1797 and 1847, the average price of
wheat did not rise at all. Hipp. Passy mentions pieces of land which
produced scarcely 12 hectolitres of wheat, but which now produce 20
—an increased yield of 170 francs, attended by an increase in the
cost of only 75 francs. (Journal des Economistes, 15 Oct., 1848.)
Moreover, it may be that a not unimportant part of modern rises in
the price of corn may be accounted for by the better quality of the
corn caused by higher farming. (Inama Sternbeg, Gesch. der Preise,
10 seq.) Such facts, readily explainable by Ricardo's theory, remove
the objection of Carey, Banfield and others, that the condition of the
classes who own no land has, since the middle ages, unquestionably
improved. Political Economy would be simply a theory of human
degradation and impoverishment, if the law of rent was not
counteracted by opposing causes. (Rœsler, Grundsätze, 210.)
According to Berens, Krit. Dogmengeschichte, 213, the actual
highness of rent is to be accounted for by the antagonism between
the "soil-law (Bodengesetz) of the limited power of vegetation," and
the "progress of civilization" (but surely only to the extent that the
latter improves the art of agriculture). Thus, too, John Stuart Mill,
Principles, I, ch. 12; II, ch. 11, 15 seq.; III, ch. 4 seq.; IV, ch. 2 ff.
[157-8] Thus, for instance, drainage works which, where properly
directed, have paid an interest of from 25 to 70 per cent. per annum
in England and Belgium on the capital invested.

SECTION CLVIII.
HISTORY OF RENT.—IN PERIODS OF DECLINE.

If a nation's economy be declining, in consequence of war for
instance, the disastrous influence hereof on rent may be retarded by
a still greater fall in wages or in the profit on capital. But it can be
hardly retarded beyond a certain point.[158-1] As a rule, the decline of
rents begins to be felt by the least fertile and least advantageously
situated land.[158-2] [158-3]

[158-1] "The falling of rents an infallible sign of the decay of
wealth." (Locke.) In England, in 1450, land was bought at "14 years'
purchase;" i. e., with a capital = 14 times the yearly rent paid, in
1470, at only "10 years' purchase." (Eden, State of the Poor, III,
App., I, XXXV.) This was, doubtless, a consequence of the civil war
raging in the meantime. The American war (1775-82) depressed the
price of land in England to "23¼ years' purchase," whereas it had
previously stood at 32. (A. Young.) The rent of land, in many places
in France, declined from 10,000 to 2,000 livres, on account of the
many wars during Louis XIV.'s reign. (Madame de Sévigné's Lettres,
25 Dec, 1689.) Even in 1677, it was only one-half of its former
amount (King, Life of Locke, I, 129.) The whole Bekes county
(comitat) in Hungary was sold for 150,000 florins under Charles VI.;
after the unfortunate war with France. (Mailath, Oesterreich, Gesch.,
IV, 523.) Compare Cantillon, Nature du Commerce, 248. In Cologne,
a new house was sold in the spring of 1848 for 1,000 thalers, the site
of which alone had cost 3,000 thalers; and there are six building lots
which formerly cost over 3,000 thalers, now valued at only 100
thalers. (von Reden, Statist. Zeitschr., 1848, 366.) On the other hand,
Napoleon's war very much enhanced English rents (Porter, Progress
of the Nation, II, 1, 150 ff.), because it affected England's national
husbandry principally by hindering the importation of the means of
subsistence. (Passy, Journal des Economistes, X, 354.)
[158-2] Thus the price of lands, in Mecklenburg, between 1817 and
1827, fell 30 to 40 per cent. in the least fertile quarters; in the better,
from 15 to 20 per cent. (von Thünen, in Jacob, Tracts relating to the
Corn Trade, 40, 187.) Per contra, see Hundeshagen Landwirthsch.
Gewerbelehre, 1839, 64 seq., and Carey, Principles, I, 354.
[158-3] The average rent in England was, in 1815, 17s. 3d. In the
counties, it was highest in Middlesex, 38s. 9d.; in Rutland, 38s. 2d.;
Leicester, 27s. 3d.; lowest in Westmoreland, 9s. 1d. In Wales, the
average was 7s. 10d.; highest in Anglesea, 19s.; lowest in Merioneth,
4s. 8d. In Scotland the average was 5s. 1½d.; highest, Midlothian,
24s. 6½d.; lowest, Highland Caithness, Cromarthy, Inverness and
Rosse, from 1s. 1d. to 1s. 5d.; Orkneys, 8½d.; Sutherland, 6d.;

Shetlands, 3d. In Ireland, the average was 12s. 9d.; highest in
Dublin, 20s. 1½d.; lowest, Donegal, 6s. (McCulloch, Stat., I, 544 ff.;
Yearbook of general Information, 1843, 193.) In France, Chaptal, De
l'Industrie Fr., 1819, I, 209 ff., estimates the average yield per
hectare at 28 francs; in the Department of the Seine, 216; Nord,
69.56; Lower Seine, 67.85; in the upper Alps, 6.2; in the lower Alps,
5.99: in the Landes, 6.25. While in the Landes, only 20 francs a
hectare are frequently paid, the purchase price in the neighboring
Medoc is sometimes 25,000 francs. (Journal des Economistes, Jan.
15, 1851.) In Belgium, the average price of agricultural land is 52.46;
in East Flanders, 53.19; in Namur, 29.24. (Heuschling, Statistique,
77.)

SECTION CLIX.
HISTORY OF RENT.—RENT AND THE GENERAL GOOD.

We so frequently hear rent called the result of the monopoly[159-1] of
land, and an undeserved tribute paid by the whole people to
landowners, that it is high time we should call attention to the
common advantage it is to all. There is evidently danger that, with
the rapid growth of population, the mass of mankind should yield to
the temptation of gradually confining themselves to the satisfaction
of coarse, palpable wants; that all refined leisure, which makes life
and the troubles that attend it worth enduring, and which is the
indispensable foundation of all permanent progress and all higher
activity, should be gradually surrendered. (See § 145.) Here rent
constitutes a species of reserve fund, which grows greater in
proportion as these dangers impend by reason of the decline of
wages and of the profit of capital, or interest.[159-2] Besides,
precisely in times when rent is high, the sale and divisibility of
landed estates act as a beneficent reaction against the monopoly of
land, which is always akin to the condition of things created by rent.

But it is of immeasurably greater importance that high rents deter
the people from abusing the soil in an anti-economic way; that they
compel men to settle about the centers of commerce, to improve the
means of transportation, and under certain circumstances to engage
in the work of colonization; while, otherwise, idleness would soon
reconcile itself to the heaping together of large swarms of men.[159-3]
The anticipation of rent may render possible the construction of
railroads, which enable the land to yield that very anticipated rent.
[159-1] "Rent is a tax levied by the landowners as monopolists."
(Hopkins, Great Britain for the last forty Years, 1834.) For a very
remarkable armed and successful resistance of farmers in the state of
New York to the claims for rent of the Rensselaer family, represented
by the government, see Wappäus Nord Amerika, 734.
[159-2] Malthus, Additions to the Essay on Population, 1817, III, ch.
10; compare also Verri, Meditazioni, XXIV, 3. The Physiocrates call
the landowners classe disponible, since, as they may live without
labor, they are best adapted to military service, the civil service, etc.,
either in person or by defraying the expenses of those engaged in
them. (Turgot, Sur la Formation etc., § 15; Questions sur la Chine,
5.)
[159-3] Well discussed by Schäffle, Theorie, 65, 72, 83. Malthus
considers the capital and labor expended in agriculture more
productive than any other, because they produce not only the usual
interest and wages, but also rent. If, therefore, the manufacturing and
commercial profit of a country = 12 per cent., and the profit of
capital employed in agriculture = 10 per cent., a corn law which
compelled the capital engaged in manufactures and commerce to be
devoted to agriculture would be productive of advantage to the
national husbandry in general, if the increase in rent should amount
to about 3 per cent. (On the Effects of the Corn Laws and of a Rise
or Fall in the Price of Corn on the Agriculture and the general Wealth
of the Country, 1815. The Grounds of an Opinion on the Policy of
Restricting the Importation of Foreign Corn, 1815.) Compare supra,

§ 55, and the detailed rectification in Roscher, Nationalökonomik
des Ackerbaues, etc., § 159 ff.

CHAPTER III.

WAGES.

SECTION CLX.
THE PRICE OF COMMON LABOR.

Like the price of every commodity, the immediate wages of
common labor is determined by the relation of the demand and
supply of labor. Other circumstances being the same, every great
plague[160-1] or emigration[160-2] is wont, by decreasing the supply, to
increase the wage's of labor; and a plague, the wages of the lowest
kind of labor most.[160-3] And so, the increased demand, in harvest
time, is wont to increase wages; and even day board during harvest
time is wont to be better.[160-4] [160-5] In winter the diminished
demand lowers wages again.[160-6] Among the most effective tricks
of socialistic sophistry is, unfortunately, to caricature the correct
principle: "labor is a commodity," into this other: "the laborer is a
commodity."
Moreover, common labor has this peculiarity, that those who have it
to supply are generally much more numerous than those who want
it; while the reverse is the case with most other commodities.
Another important peculiarity of the "commodity" labor, is, that it
can seldom be bought, without at the same time reducing the person

of the seller to a species of dependence. Thus, for instance, the seller
cannot be in a place different from that in which his commodity is.
Hence a change in the person, etc. of the buyer very readily
necessitates in the workman a radical change of life, and that the
levelling adjustment of local excess and want is rendered so difficult
in the case of this commodity.[160-7] Hence, it is that, if in the long
run the exchange of labor against wages is to be an equitable one (§
110), the master of labor must, so to speak, incorporate part of his
own personality into it, have a heart for faithful workmen and thus
attach them to himself.[160-8]
[160-1] High rate of Italian wages after the plague in 1348, but also
many complaints of the indolence and dissoluteness of workmen.
(M. Villani, I, 2 ff., 57 seq. Sismondi, Gesch. der ital. Republiken in
Mittelalter, VI, 39.) In England, the same plague increased the wages
of threshers from an average of 1.7 d. in 1348, to 3.3 d. in 1349.
Mowers received, during the 90 years previous, 1/12 of a quarter of
wheat per acre; in 1371-1390, from 1/7 to 1/6. The price of most of
their wants was then from 1/8 to 1/12 as high as in A. Young's time,
and wages ¼ as high. (Rogers, I, 306, 271, 691.) The great
earthquake in Calabria, in 1783, produced similar effects. (Galanti,
N. Beschreiburg von Neapel, I, 450.) Compare Jesaias, 13, 12. On
the other hand, depopulation caused by unfortunate wars is not very
favorable to the rate of wages; instance, Prussia in 1453 ff., after the
Polish struggle, and Germany, after the Thirty Years' War.
[160-2] How much it contributes to raise wages that workmen can, in
a credible way, threaten to move to other places, is illustrated by the
early high wages and personal freedom of sailors. Compare Eden,
State of the Poor, I, 36. In consequence of the recent great emigration
from Ireland, the weekly wages of farm hands in that country was
57.4 per cent. higher than in 1843-4. In Connaught, where the
emigration was largest, it was 87 per cent. higher. (London Statist.
Journ., 1862, 454.)
[160-3] Compare Rogers, I, 276, and passim.

[160-4] And this in proportion as the uncertainty of the weather
causes haste. In England, the harvest doubles wages. (Eden.) In East
Friesland, it raises it from 8-10 ggr. to 2 thalers sometimes
(Steltzner); in the steppes of southern Russia, from 12-15, to
frequently 40-50 kopeks. This explains why the country people who
come into the weekly market are anxious, during harvest time, to get
rid of their stocks as fast as possible. According to the Statist.
Journal, 1862, 434, 448, the average wages in harvest and other
times, amounted to:

In harvest time. Other times.
In Scotland for males, 18s. 7d. 12s. 11½d.
" " females, 11s. 4d. 5s. 7d.
In Ireland " males, 12s. 9d. 6s. 11½d.
" " females, 8s. 3d. 3s. 9d.
" " males, 15s. 4d. 7s. 1¼d.
" " females, 7s. 1¾d. 3s. 11d.
The reason why the wages of females rises more in harvest time
than the wages of males may be the same that in many places in
Ireland has made emigration more largely increase the wages of
women. (l. c., 454.) Every excess of workmen depresses, and every
scarcity of workmen enhances the wages of the lowest strata
relatively most.
[160-5] The wages of English sailors was usually 40-50 shillings a
month. During the last naval war, it rose to from 100 to 120, on
account of the great demand created by the English fleet.
(McCulloch, On Taxation, 40.)
[160-6] The winter wages of German agricultural laborers varies
between 6.1 and 20 silver groschens; summer wages between 7.9
and 27.5 silver groschens. Emminghaus, Allg. Gewerbelehre, 81,
therefore, advises that in winter the meal time of workmen in the
fields should be postponed to the end of the day, and winter wages
then made less low than at present.
[160-7] W. Thornton, On Labour, its wrongful Claims and rightful
Dues, its actual, Present and possible Future, 1869, II, ch. 1.
Harrison, Fortnightly Review, III, 50.
[160-8] Just as the husband binds himself in marriage. While in
concubinage there is apparent equality, it costs the woman a much
greater sacrifice than the man.

SECTION CLXI.

WAGES OF LABOR.—THE MINIMUM OF WAGES.

Human labor cannot, any more than any other commodity, be
supplied, in the long run, at a price below the cost of production.
[161-1] [161-2]
The cost of production here embraces not only the
necessary or customary means of subsistence of the workman
himself, but also of his family; that is, of the coming generation of
workmen. The number of the latter depends essentially on the
demand for labor. If this demand be such that it may be satisfied by
an average of six children to a family, the rate of wages must be
such as to support the workman himself and to cover the cost of
bringing up six children.[161-3] Where it is customary for the wife
and child, as well as for the father, to work for wages, the father
does not need to earn the entire support of the family, and hence
individual wages may be smaller.[161-4] But if it were to fall below
the cost mentioned above, it would not be long before increased
mortality and emigration, and a diminution of marriages and births
would produce a diminution of the supply; the result of which
would be, if the demand remained the same, a renewed rise of
wages.
Conversely, it would be more difficult for the rate of wages to be
maintained long much above that same cost, in proportion as the
gratification of the sexual appetite was more generally considered
the highest pleasure of sense, and the love of parents for their
children as the most natural human duty. As Adam Smith says,
where there is a great demand for men, there will always be a large
supply of them.[161-5]
[161-1] Compare Engel's beautiful lecture on the cost of labor to
itself (Selbstkosten = self-cost), Berlin, 1866.
[161-2] Wolkoff zealously and rightly argues, that the minimum
wages is not the taux naturel of wages. (Lectures, 118 ff., 284.) von

Thünen also divides wages into two component parts—that which
the workman must lay out in his support in order to continue able to
work, and that which he receives for his actual exertion. (Isolirter
Staat., II, 1, 92 seq.)
[161-3] Gasparin distinguishes five periods in the career of a
workman generally: a, he is supported by his parents; b, he supports
himself and is in a condition to save something; c, he marries, and
supports his children with trouble; d, the children are able to work,
and the father lives more comfortably; e, his strength and resources
decline. (Villermé, Tableau de l'État physique et moral des Ouvriers,
1840, II, 387.)
[161-4] Cantillon, Nature du Commerce, etc., 1755, is of opinion
that a day laborer, to bring up two children until they are grown,
needs about as much as he does for his own support; and that his
wife may, as a rule, support herself by her own work. (42 ff.) In
Germany, it is estimated that, in the case of day laborers, a woman
can earn only from 1/3 to ½ of what her husband does; mainly
because she is so frequently incapacitated for work by pregnancy,
nursing, etc. (Rau, Lehrbuch, I, § 190.) In France, in 1832, a man
working in the fields earned, on an average, 1¼ francs a day, the
wife ¾ of a franc (200 days to the year), the three children 38/100
francs (250 days to the year), an aggregate of 650 francs per annum.
(Morogues.) In England, the average amount earned in the country
was for males, per annum, £27 17s.; (munications[TN 6] relative to
the Support and Maintenance of the Poor, 1834, p. LXXXVIII.) The
wife of an English field hand, without children, earns 1/3 more than
one with children. In the case of mothers, a difference of fewer or
more children is unnoticeable in the effects on wages. (London
Statist. Journal, 1838, 182.) In the spinning factories in Manchester,
in 1834, children between 9 and 10 years of age were paid, weekly,
from 2s. 9d. to 2s. 10d.; between 10 and 12, from 3s. 6d. to 3s. 7d.;
between 12 and 14, from 5s. 8d. to 5s. 9d.; between 14 and 16, from
7s. 5d. to 7s. 6d. (Report of the Poor Commissioners, 204.) Those
manufactures which require great physical strength, like carpet and

sail-cloth weaving, and those carried on in the open air and in all
kinds of weather, allow of no such family competition and
debasement of wages. (Senior in the Report of the parliamentary
Committee on Hand Weavers, 1841.)
[161-5] Similarly, J. Möser, Patriot. Phant., I, 40. Adam Smith infers
from the following symptoms in a country that wages are higher
there than the indispensable minimum, viz.: if wages in summer are
higher than in winter, since it is seldom that enough is saved in
summer to satisfy the more numerous wants of winter; if wages vary
less from year to year and more from place to place than the means
of subsistence, it they are high even where the means of subsistence
are cheapest. (Wealth of Nat., I, ch. 8.)

SECTION CLXII.[TN 7]
COST OF PRODUCTION OF LABOR.

The idea conveyed by the expression necessaries of life is, within
certain limits, a relative one. In warm countries, a workman's
family needs less clothing, shelter, fuel and even food[162-1] than in
cold countries. This difference becomes still more striking when
the warm countries possess absolutely cheaper food as, for
instance, rice, Turkish wheat, bananas etc. Here, evidently, other
circumstances being the same, the rate of wages may be lower.[162-2]
The cultivation of the potato has operated in the same direction;
since an acre of land planted with potatoes yields, on an average,
twice as much food as the same acre planted with rye.[162-3] In
France, two-thirds of the population lived almost without animal
food, on chestnuts, Indian corn, and potatoes (Dupin), while in
England, malt, hops, sugar, brandy, tea, coffee, tobacco, soap,
newspapers, etc. are described as "articles chiefly used by the
laboring classes." (Carey.)

The standard of decency of the working class also has great
influence here. The use of blouses in Paris has nothing repulsive,
nor that of wooden shoes in many of the provinces of France, nor
the absence of shoes in lower Italy; while the English workman
considers leather shoes indispensable, as he did only a short time
ago a cloth coat. Compare infra, § 214.[162-4]
[162-1] Explained since Liebig's time by the fact that a part of food
is consumed to preserve animal heat: means of respiration in
contradistinction to means of nutrition. Recent research has shown
that in cold weather more urea and also more carbonic acid are
given off; hence the means of supplying this deficit should be
greater in cold weather than in warm. This more rapid
transformation is wont, when nutrition is sufficient, to be
accompanied by more energetic activity. (Moleschott, Physiologie
der Nahrungsmittel, 1850, 47, 50, 83.)
[162-2] This is opposed in part by the fact that a hot climate induces
indolence, and that therefore he needs a greater incentive to
overcome his disposition to idleness. Thus, in the cooler parts of
Mexico, the rate of wages was 26 sous a day, in the warmer, 32
sous. (Humboldt, N. Espagne, III, 103.)
[162-3] According to Engel, Jahrbuch für Sachsen, I, 419, on acres
similarly situated and under similar conditions, the lowest yielded:
Of Watery contents Watery contents
included. excluded.
wheat, 1,881 lbs. 1,680 lbs.
rye, 1,549 lbs. 1,404 lbs.
pease, 1,217 lbs. 1,095 lbs.
potatoes, 21,029 lbs. 5,257 lbs.
The dry substance of these products yielded:
Azotized Fecula. Mineral
Substance. Matter

Wheat, 282 lbs. 879 lbs. 49 lbs.
Rye, 243 lbs. 661 lbs. 34 lbs.
Pease, 309 lbs. 431 lbs. 33 lbs.
Potatoes, 525 lbs. 3,785 lbs. 178 lbs.
In Saxony, from 1838 to 1852, the average prices stood as follows:
Of Rye. Of Wheat. Of Potatoes.
One lb. of dry substance, 1 1.28 .95
One lb. of protein substance, 1 1.11 1.78
One lb. of fecula, 1 1.14 0.72
(loc. cit.) The high price of protein in wheat depends probably on
the more agreeable appearance and pleasanter taste of wheat flour;
the still higher price of potato protein on the exceedingly easy mode
of its preparation.
[162-4] As regards food alone, the cost of the support of a plowman
on Count Podewil's estate, reduced by Rau, Lehrbuch, § 191, to the
unit of rye, is annually 1,655 lbs. of rye. According to Koppe, it is
1,952 lbs.; to Block, 2,300 lbs.; to Kleemann, from 1,888 to 2,552
lbs.; to Möllenger, 2,171 lbs. The first three estimate the cost in
meat at 78, 160 and 60 pounds. Compare Block, Beitr. Z.
Landgüterschätzungskunde, 1840, 6. Exhaustive estimates for all
Prussian governmental districts in von Reden, Preussische Erwerbs,
und Verkehrsstatistik, 1853, I, 177 ff., according to which the
requirement, per family, varies between 71 thalers in Gumbinnen
and 204 thalers in Coblenz, the average being 105 thalers.
According to more recent accounts, a laborer's family in East
Prussia, gangmen not included, get along very well on 177 thalers
per annum. (von der Goltz, Ländl. Arbeiterfrage, 1872, 9 ff.) In
Mecklenburg, omitting Hofgänger, on 183 thalers. (Ann. des. patr.
Vereins, 1865, No. 26.)
The necessary outlay of the family of an agricultural day laborer in
England, in 1762, was estimated as follows: for bread and flour, £6
10s. per annum; for vegetables and fruit, £1 1-2/3s.; for fuel, light

and soap, 2-9-5/6s.; for milk, butter and cheese, £1 1-6-5/6s.; for
meat, £1 6s.; for house-rent, 1-6s.; for clothing, bedding, etc., 2-16-
1/3s.; for salt, beer and colonial wares, 1-16-5/6s.; for medicine,
expenses attending confinement of wife, etc., 1-6½s. (J. Wade,
History of the middle and working Classes, 1853, 545.) Concerning
1796, compare Sir F. M. Eden, State of the Poor, I, 660, 1823; Lowe,
on the present Condition of England. Compare on the receipts and
expenses of ten working families in and about Mühlhausen, the
tables in the Journal des Economistes, October, 1861, 50; and
further Ducpétiaux, Budgets économiques des Classes ouvrières en
Belgique, 1855. According to Playfair in Knop, Agriculturchemie, I,
810, ff., different classes of grown men need daily food.
Grammes. 1. 2. 3. 4. 5.
Plastic material, 56.70 70.87 119.07 155.92 184.27
Fat, 14.70 28.35 51.03 70.87 70.87
Starch, 340.20 340.20 530.15 567.00 567.00
Here 1 stands for a convalescent who can bear only enough to
preserve life; 2, the condition of rest; 3, moderate motion of from 5
to 6 English miles' walk daily; 4, severe labor = a walk of 20
English miles daily; 5, very severe labor = to a day's walk of 14
English miles, with a load weighing 60 lbs. If the fat be given in
terms of starch, the aggregate need of both substances in the case of
1 is 6.6 times as great as the need of plastic substance; in the case of
2, 3, 4, and 5, respectively 5.7, 5.2, 4.8 and 4.0 times as much.
A Dutch soldier doing garrison duty receives daily, in times of
peace, 0.333 kilogrammes of wheat flour, 0.125 of meat, 0.850 of
potatoes, 0.250 of vegetables, containing in the aggregate 60
grammes of albumen. In forts, where the service is more severe, he
receives 0.50 kilogrammes of wheat flour, 0.06 of rice or groats,
with an aggregate amount of 116 grammes of albumen. (Mulder,
Die Ernährung in ihrem Zusammenhange mit dem Volksgeiste,
übersetzt von Molecshott, 1847, 58 seq.) According to the
researches of Dr. Smith, in order to avoid the diseases caused by
hunger, a man needs, on an average, to take 4,300 grains of carbon

and 200 grains of nitrogen in his daily food; a woman 3,900 grains
of carbon and 180 grains of nitrogen. In 1862, the workmen in the
famishing cotton industries of Lancashire were actually reduced to
just about this minimum. (Marx, Kapital, I, 642.) Death from
starvation occurs in all vertebrates when the loss of weight of the
body, produced by a want of food, amounts to between two-fifths
and one-half of what it was at the beginning of the experiment.
(Chossat, Recherches expérimentales sur l'Inanition, 184, 3.)

SECTION CLXIII.
WAGES OF LABOR.—POWER OF THE WORKING CLASSES OVER
THE RATE OF WAGES.

In this way, the working classes hold in their own hands one of the
principal elements which determine the rate of wages; and it is
wrong to speak of an "iron law" which, under the control of supply
and demand, always reduces the average wages down to the means
of subsistence.[163-1] For the moment, indeed, not only individual
workmen, but the whole working class is master of the supply of its
commodity only to a very small extent; since, as a rule, the care for
existence compels it to carry, and that without interruption, its
whole labor-power to market. But it is true that the future supply
depends on its own will; since, with an increase or decrease in the
size of the families of workingmen, that supply increases or
diminishes. If, therefore, by a favorable combination of
circumstances, wages have risen above the height of urgent
necessity, there are two ways open to the working class to take
advantage of that condition of things. The workman either raises
his standard of living, which means not only that his necessary
wants are better satisfied, his decencies increased and refined, but
also and chiefly, that the intellectual want of a good prospect in the
future, which so particularly distinguishes the honorable artisan

from the proletarian is taken into consideration. And it is just here
that a permanent workingmen's union, which should govern the
whole class, might exert the greatest influence. Their improved
economic state can be maintained only on condition that the
laboring class shall create families no larger than they hope to be
able to support consistently with their new wants.[163-2]
Or, the laboring class continues to live on as before, from hand to
mouth, and employ their increased resources to gratify their sexual
appetite earlier and longer than before, thus soon leading to an
increase of population.
The English took the former course in the second quarter of the last
century, when English national economy received a powerful
impetus, and the large demand for labor rapidly enhanced the rate
of wages. The Scotch did in like manner a generation later. The
second alternative was taken by the Irish, when the simultaneous
spread of the cultivation of the potato[163-3] and the union with
England, at the beginning of the nineteenth century, gave an
extraordinary extension to their resources of food. While the
population of Great Britain, between 1720 and 1821, did little more
than double, the population of Ireland increased from 2,000,000 to
nearly 7,000,000 between 1731 and 1821. No wonder, therefore,
that the average wages of labor was twenty to twenty-four pence
per day in the former, and in the latter only five pence.
(MCCulloch.)[163-4]
Naturally enough, this difference of choice by the two peoples is to
be explained by the difference in their previous circumstances. The
Irish people, robbed by violence of their own higher classes, and,
therefore, and on this account precisely, almost entirely destitute of
a middle class, had lost the check on increase they possessed in the
middle ages, without having as yet assimilated to themselves[TN 8]

the checks which come with a higher stage of culture. Their
political, ecclesiastical and social oppression allowed them no hope
of rising by temporary sacrifices and energetic efforts permanently
to a better condition as citizens or gentlemen. Only the free man
cares for the future. Hence, the sexual thoughtlessness and blind
good nature, the original tendencies of the Irish people, necessarily
remained without anything to counterbalance them. It always
supposes a high degree of intelligence and self-restraint among the
lower classes, when an increase in the thing-value, or the real value
of wages, does not produce an increase in the number of workmen,
but in their well-being. The individual is too apt to think that it
matters little to the whole community whether he brings children
into the world or not, a species of egotism which has done most
injury to the interests in common of mankind. As a rule, it requires
a great and palpable enhancement of wages to make workmen, as a
class, raise their standard of living.[163-5] [163-6]
[163-1] Compare Lassalle, Antwortschreiben an das Central Comite
zur Berufung eines allg. deutschen Arbeitercongresses, 1863, 15;
also Turgot, sur la Formation etc., § 6. When Lassalle says that
when a varied standard of living has become a national habit it
ceases to be felt as an improvement, he says what is in a certain
sense true. But is the man to be pitied who, absolutely speaking, is
getting on well enough; relatively speaking, better off than before;
but who is only not better off than other men?
[163-2] A case in Holstein, in which, in the first half of the
eighteenth century, the serfs of a hard master conspired together not
to marry, and thus soon forced him to sell his estate. (Büsch,
Darstellung der Handlung, V, 3, II.)
[163-3] On the otherwise remarkable economic advance in Ireland
about 1750, see Orrey, Letters concerning the Life and Writings of
Swift, 1751, 127; Anderson, Origin of Commerce, a., 1751.

[163-4] Compare especially Malthus, Principles, ch. 4, sec. 2. How
little Adam Smith dreamt of this may be best seen in I, 115, Bas.
Recently, the average wages per week amounted in England to
22½s., in Scotland to 20½s., in Ireland to 14¾s. (Levi, Wages and
Earnings of the working Classes, 1866.)
[163-5] Thus the unheard of long series of excellent harvests in
England, between 1715 and 1765, contributed very largely to this
favorable transformation. Day wages expressed in wheat, between
1660 and 1719, amounted on an average to only about 2/3 of a peck;
between 1720 and 1750, to an entire peck. In the fifteenth century, a
similar series of good harvests contributed very much to the
flourishing condition of the "yeomanry." Under Henry VII.,
workmen earned from two to three times as much corn as they did a
century later. And so in France, the great Revolution at the end of
the eighteenth century, by setting free a vast quantity of hitherto
bound-up force, enhanced the productiveness of the entire economy
of the nation, and made the division of the national income more
nearly equal. There is an essential connection here between the
rapidity of the transition and the facts, that the habits of
consumption of the working class received a powerful impulse, and
that population increased much less rapidly than the national
income. Compare John Stuart Mill, Principles, II, ch. 11, 2. In our
own days again, English workmen had a splendid opportunity to
raise their standard of life. Emigration to Australia, etc.
preponderated over the natural increase of population to such an
extent that, in 1852, for instance, only 217,000 more human beings
were born in England and Wales than died, and 368,000 emigrated.
At the same time, exports increased: in 1849, they were
£63,000,000; in 1850 £71,000,000; about the end of 1853,
something like £90,000,000.
This golden opportunity was used by the English laboring classes to
both largely multiply marriages and to enhance the rate of wages.
The number of marriages contracted in England yearly, from 1843
to 1847, was 136,200; from 1853 to 1857, 159,000. The number of

births annually, from 1843 to 1847, was 544,800; from 1853 to
1857, 640,400. And wages, in a number of industries, rose, between
1839 and 1859, from about 18 to 24 per cent. (Quarterly Review,
July, 1860, 86), while the prices of most of the necessaries of life
declined. That, in the same time, the condition of English laborers
was elevated, both intellectually and morally, is proved by many
facts cited in Jones' and Ludlow's work on the social and political
condition of the laboring classes in England. In Germany, the recent
establishment of peace on a firm footing and the French war
contributions have given the country an impulse which might be
taken advantage of by the laboring class with the happiest results if
they would accustom themselves to more worthy wants and at the
same time preserve their accustomed industry.
[163-6] The cheapening of the necessaries of life, experience shows,
is more likely to lead to an increase of population; that of luxuries,
to a raising of the standard of life or of comfort.

SECTION CLXIV.
WAGES.—COST OF PRODUCTION OF LABOR.

As the cheapening of the means of subsistence, when the circle of
wants of the laboring class has not correspondingly increased, leads
to a decline of wages, so an enhancement of their price must, when
wages are already so low as only to be able to satisfy indispensable
wants, produce an increase in the rate of wages. The transition in
the former case is as pleasing as in the latter it is replete with the
saddest crises.[164-1] The slower the rise in the price of the means of
subsistence is, the more it is to be feared that the working classes
will seek to meet it, not by emigration or by a diminished number
of marriages, but by decreasing the measure of their wants, the
introduction of a poorer quality of food, etc.[164-2]

However, all this is true only of permanent changes in the average
price of the means of subsistence, such as are produced, for
instance, by the development of agriculture, by taxation etc.
Transitory fluctuations, such as result, for instance, from a single
good or bad harvest, cannot have this result.[164-3] It is, in poor
countries at least, one of the worst effects of a bad harvest, that it
tends to positively lower the rate of wages. A multitude of persons
who would otherwise be able to purchase much labor are now
deterred from doing so, by the enhancement of the price of food.
[164-4]
On the other hand, the supply increases: many men who
before would not work even for money, see themselves now
compelled to do so. Those who have been workmen hitherto are
compelled by want to make still greater exertions.[164-5]
In very cheap years, all this is naturally reversed.[164-6]
[164-1] According to McCulloch, Edition of Adam Smith, 472, the
food of a day laborer's family constitutes between 40 and 60 per
cent. of their entire support. In the case of Prussian field hands, it is
generally 54 per cent. greatest in the province of Saxony, viz., 58
per cent. and lowest in Posen, 43 per cent. Compare Rau, Lehrbuch,
I, § 191. This may serve as a point of departure, from which to
measure the influence of a given enhancement of the price of corn.
In opposition to Buchanan (Edition of Adam Smith, 1817, 59), who
had denied the influence of the price of the means of subsistence on
the rate of wages, see Ricardo, Principles, ch. 16.
[164-2] How easily English farmers have accustomed themselves to
the consequences of momentary calamities, may be seen from John
Stuart Mill, Principles, II, ch. 11, 5 seq.; Thornton, Population and
its Remedy, 1846, passim. Malthus, Principles, sec. 8, shows in
opposition to Ricardo, Principles, ch. 8, that it is not all one to the
laboring classes whether their wages rise while the price of the
means of subsistence remains the same, or whether the rate of
wages remaining nominally the same, the commodities to be

purchased decline in price. If for instance, potato-food,
physiologically considered, was just as good as flesh-food and
wheat bread, yet an unmarried workman or a father with a number
of children below the average would be able to save less from the
former for the reason that it possesses less value in exchange.
(Edinburg Rev., XII, 341.) Thus, e. g., in Ireland, between A. Young
and Newenham (1778-1808), the rate of wages increased more than
the price of potatoes, but all other means of subsistence in a still
greater ratio. (Newenham, A view of Ireland, 1808.) Compare
Malthus, On the Policy of Restricting the Importation of foreign
Corn, 1815, 24 ff.; contra. Torrens, on the Corn trade, 1820, 374 ff.
[164-3] Compare Garve in MacFarlan, On Pauperism, 1785, 77.
Thus, in the United States, the same quantities of coffee, leather,
pork, rice, salt, sugar, cheese, tobacco, wool, etc., could be earned in
1836 by 23.5 days' labor; in 1840, by 20.75; in 1843, by 14.8; in
1864, by 34.6. (Walker, Science of Wealth, 256.)
[164-4] The person who formerly consumed perhaps four suits of
clothes in a year now limits himself to two, and forces the tailor to
dismiss one journeyman. In Bavaria, the dear times, 1846-47, and
probably also the disturbances of 1848-49, caused officials,
pensioners, annuitants and professional men to discharge one-tenth
of the female domestics they employed in 1840. (Hermann, Staatsw.
Unters, II, Aufl., 467.)
[164-5] The labor of digging during the time of scarcity in England
was paid one-third of the price usually paid in good years. (Porter,
Progress of the Nation, III, 14, 454.) On the Slavic[TN 9] portions of
Silesia, see Hildebrand's Jahrb., 1872, I, 292. According to Rogers,
I, 227 ff., 315 ff., and the table of prices in the appendix to Eden,
State of the Poor, the price in England of a quarter of wheat and a
day's wages was, in—
1287, 2s. 10¼ d. 3 d.
1315, 14s. 10-7/8 d. 3 d.
1316, 15s. 11-7/8 d. 3-7/8 d.

1392, 3s. 2-5/8 d. 5 d.
1407, 3s. 4 d. 3 d.
1439, 8s.-26s. 8 d. 4½ d.
1466, 5s. 8 d. 4-6 d.
1505, 6s. 8 d. 4 d.
1575, 20s. 8 d.
1590, 21s. 3-6 d.
1600, 10 d.
[164-6] Petty, Several Essays on Political Arithmetic, 133 ff. Adam
Smith, Wealth of Nat., I, ch. 8. Ricardo, Principles, ch. 9. In Hesse,
in consequence of a series of many rich harvests from 1240 to 1247,
no servants could be had at all, so that the nobility and clergy were
obliged to till their own lands. (Anton, Gesch. der deutschen
Landwirthschaft, 111, 209.)

SECTION CLXV.
WAGES.—THE DEMAND FOR LABOR.

The demand for labor, as for every other commodity, depends, on
the one hand, on the value in use of it, and on the other, on the
purchaser's capacity to pay for it (his solvability), These two
elements determine the maximum limit of wages, as the means of
support considered indispensable by the workmen determine the
minimum. There are circumstances conceivable under which the
rise in wages might entirely eat up rents; but there must always be a
portion of the national income reserved to reward capital (its
profit). If wages were to absorb the latter also, the mere owner of
capital would cease to have any interest in the progress of
production. Capital would then be withdrawn from employment
and consumed.[165-1] Obviously, no man engaged in any enterprise
can give more as wages to his workmen than their work is worth to
him.[165-2] Hence the additional product in any branch of industry,

due to the labor of the workman last employed, has a controlling
influence on the rate of the wages which can be paid to his fellow
workmen. If the additional products of the workmen successively
last employed constitute a diverging series,[165-3] the last term in the
series is the natural expression of the unsurpassable maximum of
wages; if they constitute a converging series, men the employer can
pay the last workman higher wages than the additional product due
to him; provided, however, that the reduction which is to be
expected in the case of the workmen previously employed to the
same level still leaves him a sufficiently high rate of profit.[165-4]
Hence the growing skill of a workman, in and of itself, makes an
increase of his wages possible;[165-5] while, conversely, if he can be
replaced by capital, which always relatively decreases the value in
use of his labor, there is a consequent pressure on his wages.
[165-1] Storch, Handbuch, I, 205 seq.
[165-2] Higher wages promised, for instance, as a reward for saving
a human life or some other very precious thing in great danger of
being destroyed. In the case of material production, labor is worth to
the party engaged in the enterprise, at most, as much as the price of
the product after the remaining cost of reproducing it is deducted.
[165-3] Possibly in consequence of a better division of labor or of
some other advance made in the technic arts.
[165-4] Thus, for instance, in harvesting potatoes, if, after they have
been ploughed up, only those nearest the surface are collected, a
laborer can gather over thirty Prussian scheffels in a day. But the
fuller and completer the gathering of potatoes desired is, the smaller
will be the product of one workman and of one day's labor. If,
therefore, a man wants to gather even the last bushel in a potato
field of 100 square rods, so much labor would be required to
accomplish it that the workman would not gather enough to feed
him during his work, to say nothing of supplying his other wants.

Supposing that 100 scheffels of potatoes had grown on 100 square
rods, and that of these were harvested—
When the number of Then the additional
men employed yield obtained
in gathering them was by the last workman
employed is
4, 80 scheffels,
5, 86.6 " 6.6 scheffels.
6, 91 " 4.4 scheffels.
7, 94 " 3 scheffels.
8, 96 " 2 scheffels.
(von Thünen, Der isolirte Staat, II, 174
ff.)
[165-5] In Manchester, in 1828, the wages paid for spinning one
pound of cotton yarn, No. 200, was 4s. 1d.; in 1831, only from 2s.
5d. to 2s. 8d. But, in the former year, the spinner worked with only
312 spools; in the latter, with 648; so that his wages increased in the
ratio of 1274 to 1566. (Senior, Outlines.)

SECTION CLXVI.
WAGES.—PRICE OF COMMON LABOR.

In the case of a commodity as universally desired as human labor
is, the idea of the purchasers' capacity to pay (solvability) must be
nearly commensurate with the national income, or to speak more
correctly, with the world's income.[166-1] In regard to the different
kinds of labor, and especially to common labor, it is evident that the
different kinds of consumption require very different quantities of
them. Here, therefore, we depend on the direction which national
consumption takes, and this in turn is most intimately related to the
distribution of the national income.[166-2] If all workmen were
employed in nothing but the production of articles consumed by

workmen, the rate of wages would be determined almost
exclusively by the ratio between the number of the working
population and the amount of the national income. But, if this were
the case, landowners and capitalists would be obliged to live just as
workmen do, and their highest luxury would have to consist in
feeding idlers. (§ 226). The effect must be much the same, when
the wealthy are exceedingly frugal and employ their savings as
rapidly as possible in the employment of common home labor;
while, on the other hand, the exportation of wheat, wood, and other
articles, which the working classes consume, in exchange for
diamonds, lace, champagne, diminishes the efficient demand for
common labor in a country.[166-3]
The assumption frequently made, that the demand for labor
depends on the size of the national capital, is far from exact.[166-4]
Thus, for instance, every transformation of circulating into fixed
capital, especially when the labor used in effecting this
transformation is ended, diminishes the demand for other labor.
That principle is not unconditionally true, even in the case of
circulating capital. Thus, for instance, the rate of wages is wont to
be raised by the transfer of capital from such businesses as require
little labor into such as require much.[166-5] Only that part of
circulating capital can have any weight here which is intended,
directly or indirectly, for the purchase of labor and for the purchase
of each kind of labor in particular.[166-6] The capital of the employer
is, by no means, the real source[166-7] of the wages of even the
workmen employed by him, It is only the immediate reservoir
through which wages are paid out, until the purchasers of the
commodities produced by that labor make good the advance, and
thereby encourage the undertaker to purchase additional labor.
Correlated to this is the fact, that other circumstances being the

same, those workmen usually receive the highest wages who have
to do most immediately with the consumer.[166-8]
[166-1] Senior denies this. Let us suppose that agriculture in Ireland
employs on every 200 acres ten working men's families, one-half of
whom are used to satisfy the aggregate wants of the working people,
and the other half in the production of wheat to be exported to
England. If now the English market requires meat and wool instead
of wheat, the Irish landowner will, perhaps, find it advantageous, of
the ten laboring families, to employ one in stock raising, a second in
obtaining food, etc. to support the laborers, and to discharge all the
others. If, then, the increased net product is employed in the
purchase of other Irish labor, all goes on well enough; but if, instead
of this, the landowners should import articles of English
manufacture, the demand for labor in Ireland would doubtless
decrease, notwithstanding the increase of its income. (Outlines, I,
154.) Senior here overlooks two things: first, that in the supposed
case, if eight-ninths of Irish laborers are thrown out of employment,
spite of the increased income of the owners of landed estates,
Ireland's national income is on the whole probably diminished (§
146), and secondly, that, possibly, the demand for labor in England
experiences a greater increase than the decrease in Ireland; since,
with the addition to the world-income, there would be an increase in
the world-demand for labor.
[166-2] Compare Hermann, Staatswirthsch. Untersuch., 280 ff.
Earlier yet, Malthus, Principle of Population, II, ch. 13.
[166-3] Thus, Thomas More, Utopia, 96, 197, thinks that if every
one was industrious and engaged in only really useful business, no
one would need to fatigue himself very much; while, as it is now,
the few real laborers there are wear themselves out in the service of
the vanity of the rich, are poorly fed and worked exceedingly hard.
[166-4] McCulloch, Principles, 104, seq. 2d ed.

[166-5] Thus, in France, during the continental blockade, distant
ocean commerce declined, and manufactures flourished instead.
(Lotz, Revision, III, 134.)
[166-6] Thus, Adam Smith divides "the funds destined for the
payment of wages" into two kinds: the excess of employers' income
over their own maintenance, and the excess of their capital over the
demands of their own use of it. (Wealth of Nat, I, ch. 8.) Senior
considers it a self-evident principle, that the rate of wages depends
on the size of the "fund for the maintenance of laborers compared
with the number of laborers to be maintained." (Three Lectures on
the Rate of Wages, 1830, Outlines, 153, ff.) But what determines the
quota of the aggregate national wealth and national income that is to
constitute this fund? Carey, Rate of Wages, 1835, has a very
exhaustive commentary on Senior.
[166-7] Watts, Statist. Journal, 1861, 500, asserts altogether too
generally that an "increase of profit increases the future wages-fund,
and consequently the demand for laborers;" and that therefore every
new machine useful in manufactures must also be of use to the
laboring class. The employer engaged in any enterprise who has
grown richer, can pay more wages, but whether he will do it
depends on other causes, and even his ability to do it, in the long
run, on his customers. When John Stuart Mill, Principles, I, ch. 5, 9,
says that only the capital which comes into the hands of labor before
the completion of their work contributes to their support, it is as if
he were to explain the phenomena of prices by demand and supply,
and nothing else, denying the influence of the cost of production, of
value in use, and of the deeper determining causes upon them.
(Supra, § 107, note 1.) Compare Roesler, Z. Kritik der Lehre vom
Arbeitslohn, 1861, 104 ff. In England, the superstition which to a
great extent attached to the idea "wages-fund," was first questioned
by F. Longe, Refutation of the Wages-Fund Theory of modern
Political Economy, 1866. See also Thornton, On Labour, II, ch. 1.
Even John Stuart Mill dropped his earlier erroneous views on this
subject. (Fortnightly Review, May and June, 1869.) Not, however,

without exaggeration, as is proved by his well-known saying, that
laborers needed capital but no capitalists. Still, even here, he
tenaciously holds that a rise in wages which increases the price of
some classes of commodities, must decrease the aggregate demand
for commodities. But better paid workmen may now increase their
demand for commodities to the same extent that the purchasers of
labor who do not gain as much as before, or the consumers of the
goods whose price has been enhanced diminish theirs. (Brentano, in
Hildebrand's Jahrbb., 1871, 374.) Only, this increase need not affect
the very commodities influenced by the decrease.
[166-8] Thus, the person who builds his own house is wont to pay
his workmen better than a contractor or builder by profession; and
the maker of the entire manufactured article, as a rule, suffers less
frequently than the maker of only half of it. (Hermann, Staatsw.
Unters., II, Aufl., 471.)

SECTION CLXVII.
DIFFERENCE OF WAGES IN DIFFERENT BRANCHES OF LABOR.

All the causes which make wages higher in some branches of labor;
than in others, may be divided into three great categories.[167-1]
A. Rare personal acquirements. The supply of labor requiring rare
personal ability will always be limited.[167-2] Such labor must,
naturally, have great value in use, when a small supply of it is met
by a great demand.[167-3] It sometimes happens that a species of
labor can be utilized only by a small circle of persons who demand
it. But the wages for it is raised very high by the great solvability of
those who do demand it. How frequently it happens, for instance,
that a minister is paid a very high salary for the ability he possesses
of making complicated and dry affairs of state attractive to the
personal taste of his sovereign.[167-4] Here, particularly, the

confidence which the workman inspires by his skill and fidelity
enters as an element. Without this confidence, there are many kinds
of business which would be crushed out entirely by the control it
would be necessary to subject them to, and others would not be
possible at all.[167-5] When, for instance, in a large manufacturing
establishment, understrappers, workmen, foremen, subordinate
superintendents, directors, etc., draw different salaries, their pay, if
equitably graduated, should be in harmony with the principles laid
down in § 148, The head of a manufacturing establishment, for
instance, who has organized a more perfect division and
coöperation of labor, himself, and by means of which ten men are
enabled to perform the work before performed by twenty, may
equitably retain, as the reward of his organizing power, a
considerable amount of what was previously paid out in wages.
Louis Blanc's proposition, that all should receive equal salaries is,
as Bastiat remarks, equivalent to the assertion that a yard of cloth
manufactured by a lazy or unskillful workman is worth as much as
two yards manufactured by an industrious and skillful one.[167-6]
Such qualified labor, as is treated of here, may be most accurately
estimated, the quality of which supposes a certain cost of
acquisition. This cost may be considered as the outlay of so much
capital, which, with interest,[167-7] should come back to the
workman in his wages. Otherwise, others would be deterred from
entering the same business by the example of his loss. Here,
especially, it is necessary to take into account the long period of
apprenticeship or tuition, and the large fees paid for the same; and
this, whether they depend on the natural difficulties in the way of
acquirement or on artificial obstacles opposed to freedom of
competition.[167-8] The influence of these circumstances is
particularly great in those kinds of labor which require a "liberal"
education.[167-9] Among the costs of production proper, peculiar to

this labor-force, must be included, also, the necessary support of
the workman, during the interval between the completion of his
studies and the beginning of his full reward.[167-10]
When a species of work requires special current expenses to be
made in order to its proper performance, these also should of
course be made good to the workman in his wages. Most
intellectual labor, for instance, requires quiet surroundings. The
brain-worker cannot share his study with his family, and, therefore
should receive wages or remuneration large enough in amount to
enable him to arrange his dwelling accordingly. A similar
circumstance, only in a much higher degree, enhances the price
paid for diplomatic service.
[167-1] Excellent germs thereof in Adam Smith, Wealth of Nat., I,
ch. 10, 1. Earlier yet, in Galiani, Della Moneta, I, 2. Cantillon,
Nature du Commerce, 24 ff.
[167-2] Even in the case of mere manual labor, for instance, a
skillful packer of goods is paid higher wages than a mere day
laborer; a sower better than a plowman or a digger; a vintner, in
general, better than an agricultural laborer: in the Palatinate of the
Rhine, in the ratio of 36:24. Thus, almost anyone can paint a door or
a house, while an artist possesses a species of natural monopoly.
[167-3] Thus, the Greek juggler, who understood how to throw
lintels from a certain distance through the eye of a needle, was very
appropriately rewarded by his king with a bushel of lintels. On the
other hand, the high fee paid for an operation for cataract depends
both on the great importance of the eye which cannot be replaced in
any way, and on the rarity of the courage among doctors to pierce
the eye of a living man. Very remarkable achievements, which it
requires great education to understand, are generally paid for at a
very low rate. (Stein, Lehrbuch, 123.)

[167-4] I need only recall Richelieu and Mazarin, the last of whom
left an estate worth 200,000,000 livres. (Voltaire, Siècle de Louis
XIV., ch. 6.) In Parisian industries, few workmen are as well paid as
those who are skilled in rapidly effecting changes of form. The so-
called premières de modes frequently received more than 1,800
francs a year, while the apprêteuses received only from 15 to 20
sous a day. (Revue des deux Mondes, Sept. 15, 1850.) There are
women there paid very well for making pin-cushions, pen-wipers,
etc., each one of a different form; but as soon as any one form
ceases to be a novelty, the wages paid for making it sinks to a
minimum. (M. Mohl, Gewerbswissenschaftliche Reise durch
Frankreich, 87.)
[167-5] Jewelers, lawyers, statesmen, generals. Senior says that of
the income of £4,000 which a lawyer or a doctor draws, only £40
are wages for his labor; £3,000 are a rent paid for the possession of
extraordinary talent, or for his good luck, and £960 as the interest on
his intellectual capital, which is also the chief element of wealth.
(Outline, 134.)
[167-6] On the sad experience of the tailors' association founded by
Louis Blanc himself, at Clichy, and in consequence of which they
soon gave up paying equal wages and returned to piece wages, see
Journal des Economistes, Mars, 1850, 349.
[167-7] As the interest on land improvements assumes the character
of rent, so also does that of the education of labor the character of
wages. The rate of interest usual in a country, and the average
duration of the life of the workman affect the capital thus invested
as a species of annuity.
[167-8] Wages in the country are generally lower than in the cities.
In the electorate of Hesse, for instance, on the supposition of steady
employment, males, in the country, received 69 thalers, 23 silver
groschens a year; females, 55 thalers, 9 silver groschens; in the
cities, on the other hand, males, 88 thalers, 23 silver groschens, and
females 61 thalers, 28 silver groschens. (Hildebrand,[TN 10]

statistische Mittheilungen, 101, 137.) And so, according to
Colquhoun, Treatise on Indigence, 1806, the English agricultural
laborers received, on an average, £31 per annum, and manufacturing
workmen, £55. The reason of this is, besides the greater facility of
learning how to perform agricultural labor, the greater dearness of
living in cities, and in England also, because industry has developed
much more rapidly than agriculture.
[167-9] The cost of bringing up a common laborer, in England,
according to Senior, is £40; a gentleman, £2,040. (Outlines, 205.)
The more expensive an education which one acquires for its own
sake and without any special object beyond this in view, is, the less
can the capital laid out in it affect wages. (von Mangoldt, V. W. L.,
382.)
[167-10] If the salaries of clergymen are, on an average, lower than
the income of a lawyer or a doctor, it is partly because theological
candidates are provided for much earlier, and partly because of the
lesser cost attending the study of theology. Thus, at the end of the
eighteenth century, there were 350 students at the University of
Tubingen who are maintained gratis, on foundation-money, and who
had previously attended monastery schools, free of charge. (Nicolai,
Reisebescreibungen, XI, 73.) The remarkable contrast between the
high wages of the Athenian sophists and the low wages of modern
abbés, Adam Smith accounts for principally by the many
scholarships of modern times. In Saxony, in 1850 etc., the outlay by
the state and of foundation-funds for the education of a student
amounted to an average of nearly 140 thalers. (Engel.)

SECTION CLXVIII.
DIFFERENCE OF WAGES IN DIFFERENT BRANCHES OF LABOR.
(CONTINUED.)

B. The great economic risk of the work. When a branch of labor
necessary to a country is, notwithstanding, attended by many

chances of failure to the individual who devotes himself to it, a
sufficient supply of the labor can be relied on only in case that the
danger attending it is compensated for by a corresponding premium
paid to success.[168-1] The choice of a profession or avocation,
Adam Smith has compared to a lottery, in which the fortunate
winners gain only what the unfortunate have lost. The greater the
prizes, the greater also the number of blanks.[168-2] However, the
surplus wages in risky kinds of labor are not sufficient to constitute
a full insurance premium. This is connected with the vanity of men
who, as a rule, over-estimate not only their talent but their good
fortune,[168-3] and especially in youth, when they decide on the
choice of a profession, etc. According to this, wages must be
specially low where even complete failure does not endanger the
living or the social position of the workman. Partly on this account
are the industries carried on by women so poorly remunerated;[168-4]
as also such work as is done by a large class of people to fill up
their leisure hours.[168-5]
The prospect of frequent interruptions in any kind of labor must
have the same effect on the wages paid for it as its economic or
business risk.[168-6] Thus, for instance, a mason or roofer must earn
at least enough, during the days he can work, to enable him to live
during the time he is prevented working by bad weather. Hence, the
highness of his wages may, in some respects, be called an apparent
one.[168-7] Wages paid by the week more generally tend to equality
than wages paid by the day, and more so yet wages paid by the
year, for then winter and summer compensate the one for the other.
When the workman must be ever ready to perform his task, account
must be taken not only of the number of hours he is engaged, but
also of fractions of his waiting hours, which must be paid for
likewise.[168-8] Two half days cost almost everywhere more than one
whole one.

The number of holidays plays a very important part here. In
Protestant countries, the workman must, in about three hundred
work days, earn enough to live on for about sixty holidays as well.
In Catholic countries, before the time of Clement XIV., he had to
earn enough in addition to support himself for about one hundred
and fifty holidays, on ninety of which he performed no work
whatever.[168-9] So large a number of holidays produces a higher
rate of wages or necessitates a low standard of life among the
working classes.[168-10] Something similar is true of evening leisure
and rest;[168-11] i. e., of the time when labor ceases.
[168-1] The greater the preparatory cost of labor is, the more
difficult it is for workmen to go from one kind of labor to another;
but, at the same time, the more certain it is that, without the
inducement of a premium paid, there will be no after increase or
recruiting of labor-force.
[168-2] Thus, for instance, in the country, where doctors generally
get along well enough, the most skillful never obtains any very
distinguished position. But, in large cities, on the other hand, there
is the greatest difference between first-class physicians and obscure
practitioners. Great generals usually obtain a larger income and
greater influence than great admirals; and so it is that prizes in the
military lottery are greater, and there are therefore more blanks than
in the naval lottery. The common soldier is almost everywhere
worse paid than the common sailor. (Adam Smith.) To some extent,
this depends on the prison-like life of the seaman in times of
service, and in the absence of an attractive uniform. As to the extent
that the lottery comparison is defective, see Macleod, Elements,
215.
[168-3] Who, otherwise, would have anything to do with a lottery in
which the mass of players were certain to lose, and the keeper of it
to gain? And this accounts for the fact well known to all financiers,
that the amount of the budget remaining the same, a greater

eagerness to enter the military service of the country is inspired by
endowing the higher positions munificently—provided they are
attainable by all—and paying the lower ones in a very niggardly
way, than when the pay is made more uniform. Something similar is
to be observed in the ecclesiastical service of the Roman and
Protestant churches, inasmuch as the former, considered from an
economic point of view, offers more magnificent prizes, but also
more blanks, while the latter divides its emoluments more equally.
[168-4] As most seamstresses are, when the worst comes to the
worst, supported by their parents, connections by marriage,
brothers, etc., the condition of those who have to live by their needle
must be a pretty hard one. Who is not familiar with the refrain to
Hood's celebrated song of the shirt: "Oh God, that bread should be
so dear, and flesh and blood so cheap!" There is a "distressed
needlewoman's society" in London. They undoubtedly suffer from
an overcrowding of their avocation, yet their chief desire is that the
competition of all who do not live exclusively by the labor of their
hands should be prohibited; for instance, that of seamstresses who
are paid for their work outside of factories. (Edinb. Rev., 1851, 24.)
In Paris, in 1845, the yearly earnings of women workers averaged
375 francs, their yearly wants 500 francs. (Journal des Economistes,
X, 250.) This does not apply to female servants whose wages,
especially in highly cultured localities as the vicinity of large cities
(Holstein, Brandenburg), is very high. In England, the wages of
female domestics is frequently higher than in the United States; and
hence nearly two-thirds of all English girls between fifteen and
twenty-five years of age serve as maids. Browning, Political and
Domestic Condition of Great Britain, 413; Carey, Rate of Wages,
92. A remarkable indication that women thrive only in the family.
(Compare § 250.)
[168-5] Thus, the darning of stockings in the sandy parts of North
Germany, in the Highlands of Scotland, in the Faroe Islands, and
formerly, even in the ante-rooms of the Russian nobility. (Schlözer,
Anfangsgründe der Staatswirthsch, I, 126.) Flax spinning and linen

weaving in Westphalia and Ireland, and wool weaving in the East
Indies. Manufacturing industries must be in a very highly developed
condition, and machinery carried to a high degree of perfection to
compete in price with these accessory industries. Cheapness of
many products manufactured in convents and monasteries.
[168-6] Among these interruptions, may also be reckoned the
prospect the laborer has of being early incapacitated for work, and
thus of seeing himself cut off from every other source of support.
This is one of the principal reasons why opera singers are generally
better paid than actors.
[168-7] In Leipzig, in 1863, mason and carpenter journeymen
earned during the summer, from twenty silver groschens to one
thaler, ordinary garden workmen, 20 silver groschens, while
shoemaker journeymen did not make much more than 3½ thalers a
week, and manual laborers, only from 10 to 15 silver groschens a
day. The masons of Paris have the reputation of being the best
patrons of the savings banks, and, on that account, are more exposed
to being attacked by thieves than any other class. (Frégier, Des
Classes dangereuses, II, 3, 1.) High wages paid for threshing in East
Prussia, because, the workman during the winter can be employed
in very few different kinds of labor, and therefore must earn his
entire support by threshing. In Paris, of 101,000 persons engaged in
industry in 1860, 6,400 had to calculate on no interruption of their
work, the remaining number, however, lost with a certain degree of
regularity, from 2 to 4 months a year. (Revue des deux Mondes, 15
Fév., 1865.) If the interruption can be so accurately estimated in
advance that the workman may engage in some business for himself
during the interval, as for instance when the workmen in the
Bavarian breweries work during the summer as masons, its
influence on wages decreases. (Storch, Handbuch, I, 192.) As to
how, in Switzerland, since 1850, the guaranty of full employment to
masons in winter is considered as an addition to the wages of
summer, see Böhmert, Arbeiterverhältnisse, I, 141.

[168-8] Commissionaires, hack-drivers, Extraposthalter in
Germany, porters, nurses, guides, servants in watering places and
countries visited by tourists. A London porter gets at least a shilling
an hour. If employed by the day, he of course gets smaller wages.
Image venders, who travel from house to house, sell their wares
much lower at their own houses. The person who calls them in from
the street is obliged to pay them not only for this one journey, but
for several others which yielded them no profit.
[168-9] If we call the minimum daily need or the absolute
requirement of the workman = m, the rate of daily wages in the
former case must amount to at least m + m/6; in the latter, on the
other hand, to m + m/4. A Bavarian holiday estimated at a minus of
much more than 1,000,000 florins. (Hermann, II, Anfl., 192.)
[168-10] Von Sonnenfels, Polit. Abhandlungen, 1777, 332 ff.
[168-11] In a part of Lower Bavaria, in which there were 204
holidays in a year, among them the anniversaries of the consecration
of 40 churches in the country about, and a feast day following each
such anniversary, as well as target-shooting festivals, the celebration
begins at 4 o'clock P. M. of the preceding day. (Rau, Lehrbuch, I, §
193.)

SECTION CLXIX.
THE DISAGREEABLENESS OF CERTAIN CLASSES OF LABOR.—
ITS EFFECT ON WAGES.

C. Lastly, the personal disagreeableness of the work, which must be
compensated for by higher wages. The uncleanness of a coal-
worker's task, that of the chimney-sweep, and the repulsive labor of
the butcher, demand high compensation, while other branches of
business, themselves productive of pleasure, and therefore engaged

in by many for pleasure's sake only, yield relatively little to those
who engage in them as a regular industry.[169-1]
To this category belong the kinds of labor which require
extraordinary effort,[169-2] or which put life or health in unusual
jeopardy.[169-3] But, indeed, when the danger attending any kind of
work is made glorious by the romantic light of honor, or by still
higher motives, it ceases to have any influence on wages.[169-4] On
the other hand, the disreputableness of a business in itself raises
wages;[169-5] whereas, scholars, poets, etc., leaving the charm
inherent in their occupations out of account, are for the most part
remunerated only by the honor paid them, and, not unfrequently,
only by fame after they have gone hence.[169-6] And yet their talents
are so rare, the preparation so laborious, the economic risk so great!
Nor is there for the really creative workman any such thing as
evening rest. (Riehl.) Common intellectual labor is worse paid in
our days than it was, comparatively speaking, a generation ago;
because the increased average education makes it less burthensome
to most people, and even seem positively agreeable to many. It
would, indeed, be a dangerous retrogressive step towards
barbarism, if it should come to such a pass, that labor
preponderantly intellectual should be permanently more poorly
remunerated than mere muscular labor.[169-7] [169-8]
[169-1] Thus the chase, fishing in rivers (compare Theocrit., Idyll.,
21), gardening, fine female manual labor, and literature.
[169-2] The high wages paid to mowers and threshers may be
accounted for on this ground (§ 160). In countries that have a strong
heavy soil, wages are frequently 20 per cent. higher than under
circumstances otherwise similar where it is sandy or light. In
Mexico, a digger gets about twice the wages of an agricultural
laborer. (Senior, On the Value of Money, 56.)

[169-3] Almost every trade predisposes to some special disease.
Compare Halfort, Enstehung, Verlauf und Behandlung der
Krankheiten der Künstler und Gewerbetreibenden, 1845. Livy,
Traité d'Hygiène publique et privée, 1850, II, 755. It has been
noticed, in Sheffield, that thoughtless steel polishers look
unfavorably on certain new inventions intended to protect workmen
against inhaling small particles of stone and iron dust. They dread
that if these inventions come into general use, their wages would be
lowered in consequence; and prefer a short and merry life to one
longer and more quiet.
In places in which nearly all kinds of work are dangerous, the
danger cannot of course relatively raise the wages of anyone. Thus,
in the Thuringian forest, the wages of the haulers of wood are very
low. (Lotz, Revision, III, 151.)
[169-4] Missionaries! Besides the extremely small wages paid to
common soldiers (in the German infantry only 36.5 thalers cash per
annum, to which in Leipzig, for instance, rations, etc., add about 34
thalers more) is an outlay made by the government principally to
effect a levy of the tax of the compulsory labor that lies in
conscription. (Knies.) In the volunteer system, the difference
between officers and men is wont to be much smaller. Thus, Gustav
Wasa paid his German mercenaries as follows: 6 marks a month to
captains, five to lieutenants and 4 to common soldiers. (Geijer,
Schwed. Gesch., II, 125 seq.) Similarly in the case of the Greek
hired troops. (Böckh, Staatshaushalt der Athener, I, 165 ff.) As to
how little at the outbreak of a war, soldier earnest money is
increased, and positions as officers most sought after, see Hermann,
II, Aufl., 479.
[169-5] Thus, for instance, the skinning or flaying of dead animals
is comparatively well paid, to which the rarity of the application of
the work of executioners contributes. (J. Moser, Patr. Ph., I, No. 34.)
The high wages of actors, singers, dancers, and especially of the
female members of the stage, depends principally on the contempt
with which they were formerly looked upon; excommunicated by

the Catholic church, and a scarcely milder sentence passed upon
them by the Protestant, until about the middle of the eighteenth
century. (Schleiermacher, Christliche Sitte, 681.) Compare even J.
J. Rousseau, Lettre sur les Spectacles à Mr. d'Alembert sur son
Article Genève.
[169-6] Schiller's "Theilung der Erde." Blanqui says of the learned:
"They are most frequently satisfied with a citizen-crown, and think
themselves remunerated when justice has been done to their genius.
Their magnanimity impels them, to their own injury, to diffuse their
knowledge as rapidly as possible. Thus they are like the light of day
which no one pays for, but which all enjoy, without thanking the
giver as they ought." The reward of intellectual labor is called an
honorarium. (Riehl, Die Deutsche Arbeit, 1861, 232.) According to
J. B. Say, Traité, II, ch. 7, the poor wages of savants depends on the
fact that they take to market, and all at once, a great quantity of
what they produce, which cannot even be used up.
[169-7] In Switzerland, journeymen are often better paid than the
clerks kept by the greater tradesmen. (Böhmert,
Arbeiterverhältnisse, II, 168.) In England, also, since 1850, the
wages for "unskilled labor" has risen, relatively, most. (Tooke, Hist.
of Prices, VI, 177.) It would be a frightful peril to our whole
civilization if school teachers and subordinate officials should be
turned into enemies of the entire existing state of things by want.
[169-8] The high wages paid to engineers on railroads is accounted
for by the wear, physical and mental, their employment entails, and
also by their unavoidable expenses away from home; further, by the
importance of the interests confided to their trust. On the Leipzig-
Dresden Railway, locomotive engineers, for the most part
previously journeymen blacksmiths, earned 900 thalers a year.
Similarly, in the case of pilots. The high wages paid on board ships
engaged in the slave-trade arose from the unhealthiness of the
African coast, where formerly one-sixteenth of the crew died yearly
(Edinburg Rev., 480), from the moral turpitude of the business, and
from the severe penalties under which it was afterwards prohibited.

On the other hand, the low wages paid to European mining laborers
is largely the consequence of the certainty of being cared for in old
age, of those so employed. Weavers' wages are low because the
facility of learning the trade makes it possible for the business to be
carried on at home; and hence there is a comparatively great
pressure to engage in it. (Baines, History of the Cotton Manufacture,
485 ff.)
According to the first annual report of the poor law commissioners
(202), the weekly wages in Manchester of hod-carriers was 12s.; of
hand-weavers, 7-15s.; of diggers, 10-15s.,; of pack-carriers, 14-15s.;
of shoemakers, 15-16s.; of machine-weavers, 13-16-5/6s.; of white-
washers, 18s.; of tailors, 18s.; of dyers, 15-20s.; of plasterers, 19-
21s.; of masons, 18-22s.; of tinsmiths, 22-24s.; of carpenters, 24s.;
of spinners, 20-25s.; of machinists, 26-30s.; of iron founders and
power-loom tenders, 28-30s. In Belgium, the average daily wages
for male labor was 1.18 francs for agricultural laborers; for those
engaged in industry, 1.48 francs; in the manufacture of linen,
0.80[TN 11] francs; of cotton, 1.55; of woolens, 1.62; of silk, 1.25; of
stockings, 1.14; of glass, 2.58; of coal, 1.33. All according to the
Statistique générale de la B. In Athens, in the time of Aristophanes,
a pack-carrier earned 4 oboli a day; a street sweeper, 3; a stone
cutter on the public works, 6; a carpenter, 5; for roofing houses and
taking down scaffoldings, each man, 6. The architects who
superintended the building of the temple of Polias, on the other
hand, got only 6 oboli per day, and the contractor 5. (Böckh, I, 165
ff.)
The Edictum Diocletiani of the year 301 after Christ contains the
following provisions in relation to wages, besides "board:"
shepherds, camel-drivers and muleteers, 20 denarii; agricultural
laborers, water-carriers, scavengers, 25; bakers, masons, roofers,
house-finishers and repairers of the inside, lime burners,
wheelwrights and common clay moulders, 50; boatsmen, sailors,
makers of marble or mosaic floors, 60; wall painters, 70; clay
moulders for statues, 75; artistic painters, 150. (ed. Mommsen, cap.

7.) In slave countries, the price of different slaves is to be judged,
mainly, by the above rules. Concerning the Greeks, see Böckh, I, 95
ff. St. John, The Hellenes, III, 23 ff. It is a characteristic fact that the
Romans, after the Syrian war, began to pay high prices for the
hitherto much despised kitchen slaves. (Livy, XXXIX, 6.)
Remarkable fixed prices for slaves by Justinian: Cod. VI, 43, 3; VII,
7, 1, 5. Thus, in the Lex Burgundionum, tit. 10, the compensation
for the murder of a common laborer is fixed at 30 solidi; of a
carpenter, at 40; of a smith, at 50; of a silversmith, at 100; of a
goldsmith, at 150. Advanced civilization is wont to raise the price of
slaves who perform work of a higher quality, just as it raises the
wages of labor of a higher quality.

SECTION CLXX.
RATE OF WAGES.—INFLUENCE OF CUSTOM.

Custom always exerts a great influence where there is question of
choosing an avocation with the intention of devoting one's self to it
entirely and exclusively. There is a public opinion which fixes the
gradation of the different classes of labor and their appropriate
reward, which is slow to change, and which both determines, and is
determined by the relation of supply and demand. There is an
equilibrium between the pleasantness of work and the rate of wages
only in the case of such kinds of labor as are on the same social
footing. It frequently happens, however, that the most repulsive
work has to be performed by those who are forced to accept any
pay and to be satisfied with it.[170-1] There are many branches of
labor those engaged in which still form a kind of exclusive caste;
and the pay of the higher branches is maintained at a high rate,
especially by the fact that the members of the castes to which they
belong are provident in their marriages. The lower classes are not
in a condition to meet the preparation necessary to engage in such

professions, even if they were certain of being afterwards
reimbursed with interest for the outlay.[170-2] One of the chief causes
of the lowness of wages paid to women is, that so few branches of
labor are traditionally open to them, that the few that are, are
intended to supply luxuries, and are, besides, for the most part,
over-crowded. The distribution of the aggregate wages earned by
any industry, among the higher and lower classes of workmen who
coöperate in it, depends very largely on their social position
relatively to one another.[170-3] [170-4] Here political forms and
changes may exert the greatest influence.[170-5]
Thus, the artificial increase of the wages of masters effected by the
former guild-system was produced, to say the least, as much at the
cost of the journeymen and apprentices as of the public. And if, on
the other hand, it cannot be said that the most recent marked rise in
wages, in so many countries, is merely the consequence of the
extension of the parliamentary right of suffrage, certain it is that the
two phenomena are very closely related, and that both are at once
the effect and the cause of the intensified feeling of individuality
and of the consciousness of constituting a class in the community
of the lower strata of society.
[170-1] At least where the supply of labor in general surpasses the
demand. Compare J. S. Mill, Principles, II, ch. 14, 3d ed. The
dangerous industries in which lead, quicksilver, arsenic, etc. are
manipulated or employed, should be and can be better paid than
they actually are. In the Bavarian Palatinate, stone-cutters rarely
reach their 45th year; and yet their wages are very low, because of
the comparative over-population of the country. (Rau, Haussen's
Archiv., N. T. X., 228.) But the lowness of wages here is certainly
and mainly caused by the little thought the workmen themselves
give to considerations of health.

[170-2] The lower the rate of wages of any class sinks, the more
difficult it becomes for parents to devote their children to another
career.
[170-3] In Paris, 24,463 workmen with less than 3 francs daily;
157,216, with from 3 to 5; 10,393, with from 5 to 20 and even 3 to 5
francs. It is remarkable, however, how uniform the average wages in
the different trades is: vêtements, 3.33 francs; fils et tissus, 3.42;
boisellerie, vannerie, 3.44; garçons boulangers, bouchers 3.50; arts
chimiques et céramiques 3.71; bâtiments, 3.81; carosserie, 3.86;
peaux et cuirs, 3.87; ameublement, 3.90; articles de Paris, 3.94;
métaux communs, 3.98; métaux précieux, 4.17; imprimerie, 4.18.
(Journal des Economistes, Janv. 1853, 111.)
[170-4] How the Roman advocates were given to all sorts of
ostentation, and even borrowed costly rings in order to raise their
honoraria, see Juvenal, VII, 105, ff.
[170-5] The salaries paid to the employees in the office of the
minister of finance in France and the United States were as follows:
to the porter, 1,500 and 3,734 francs; the lowest clerk, 1,000 to
1,800, and 5,420 francs; to the head clerk, 3,200 to 3,600, and 8,672
francs; the secretary general, 20,000 and 10,840 francs; to the
minister, 80,000 and 32,520 francs. (Tocqueville, Démocratie aux
États-Unis, II, 74.) In the treasury department, at Washington, of
158 employees, only 6 received less than $1,000 salary, but only 2
over $2,000. (M. Chevalier, Lettres sur l'Amérique du Nord, II, 151,
456.) Compare Büsch, Geldumlauf, IV, 34. In Russia, the wages of
the higher classes of laborers as compared with those paid the
commoner class is much higher than in Germany. (Kosegarten, in
Haxthausen, Studien, III, 583.) On the other hand, in England, since
1850, the rate of wages for unskilled labor has risen relatively more
than any other. (Tooke, Hist. of Prices, VI, 177.)

SECTION CLXXI.

HISTORY OF THE WAGES OF COMMON LABOR.—IN THE LOWER
STAGES OF CIVILIZATION.

In very low stages of civilization, where there is scarcely any such
thing as rent, and where capital is extremely rare, the wages of
labor, notwithstanding its small amount absolutely speaking, must
eat up the greatest part of the product.[171-1] With every further
advance, the condition of the laboring class is modified, according
as the natural decline in this relative amount of their wages is
outweighed or counterbalanced, or neither outweighed nor
counterbalanced, by the increase in the aggregate product; in other
words, in the national income in general as compared with the
number of workmen.
[171-1] Adam Smith, Wealth of Nat., I, ch. 8. Thus in the case of
nations of hunters. The wages of free laborers in Russia, at the
beginning of this century, were so high that mowers, in the vicinity
of Moscow, received a good half of the corn mowed by them, (von
Schlözer, Aufangsgründe, I, 65.) As a rule, the natural relation of the
three branches of income is here postponed by the intervention of
slavery. (§ 76, 155.) But, for instance, since the negroes have been
emancipated, in the southern states of the American Union, it has
become necessary to promise them one-half of the cotton crop as
wages, and for the employer to run all the risk of a bad harvest. (R.
Somers, The Southern States since the War, 1871.) On the wretched
pay of domestic servants in the middle ages, see Grimm, D.
Rechtsalterth., 357.

SECTION CLXXII.
HISTORY OF THE WAGES OF COMMON LABOR.—IN
FLOURISHING TIMES.

When, where a nation's economy[172-1] is growing and flourishing,
capital increases more rapidly than population, there is a search for
employment by capital still greater than the search for employment
by labor. The consequence is, of course, a decline in the rate of
interest, and a rise in the rate of the wages of labor, although the
latter may be compelled to surrender a part of its increase to rent,
which also rises. If simultaneously with these phenomena, there
have been great advances made in national productive skill,
especially in the cultivation of land; if, therefore, labor and the
capital consumed have become more prolific, the condition of the
laboring class is improved in a two-fold manner; the condition of
capitalists needs, to say the least, grow no worse, and the increase
of rent paid to landowners may be avoided.[172-2]
This favorable development is most striking in the colonies of rich
and highly civilized parent countries, where the labor, capital and
social customs of an old and ripe civilization are found together
with the overflowing natural forces inherent in a virgin soil,
engaged in the work of economic production. Here the growth of
national wealth is most rapid; and the rate of wages is here wont to
be highest.[172-3] With the high rate of interest that obtains where
capital is rapidly saved, and with the low price of land, it is not a
matter of difficulty for good workmen to enter into the ranks of
landowners and capitalists. In North America, and especially in the
western part,[172-4] it is very frequently in the normal course of
economic development for young people to begin to work on
wages, then to work on their own account, and finally to become
themselves employers of labor.
[172-1] Compare Hermann, Staatswirths. Unters., 241 ff.; J. S. Mill,
Principles, ch. 3. As to how Carey confounds the rise and fall of the
productiveness of labor with the rise and fall of wages, see J. S.
Mill's views in Lange, 1866, 218 ff.

[172-2] In England, wages from 1400 to 1420, estimated in produce,
were much higher than from 1500 to 1533. (Statist. Journal, 1861,
544 ff.) Later, a quarter of wheat was earned by day labor as
follows: under Elizabeth, in about 48 days; during the seventeenth
century, in 43 days; between 1700 and 1766, in 32 days; between
1815 and 1848, in from 19 to at most 28¾ days. (Hildebrand, Nat.
Oek. der Gegenwart und Zukunft.) Since 1860, it has been earned in
about 14 days. About 1668, the wages paid to English laborers and
servants was one-third higher than twenty years before. (Sir J.
Child, Discourse on Trade, p. 43 of the French translation.) D.
Defoe, Giving Alms no Charity, 1704, draws a much more favorable
picture of the time next succeeding. Adam Smith, Wealth of Nat., I,
ch. 8, shows how money-wages, in the eighteenth century, were
higher and the price of corn lower than in the seventeenth century.
Between 1737 and 1797, wages in most parts of England, except in
the immediate neighborhood of the great cities, doubled. (Eden, I,
385.) In Scotland, about the year 1817, the wages of married farm
servants, expressed in corn, were about 60 per cent. higher than in
1792. (Sinclair, Grundgesetze des Ackerbaues, 105.)
Boisguillebert, Traité des Grains, I, 2, estimates the wages in
France, for agricultural laborers, at least from 7 to 8 sous, of present
money, and at twice that amount in harvest time. In 1697, laborers
in Paris received from 40 to 50 sous. (Détail de la France, I, ch. 1,
ch. 7.) Vauban estimates wages in large cities at 22½-45 sous; for
country manual laborers, at 18 sous; for agricultural laborers, 12-13-
1/5 sous. (Project d'une Dime royale, 89 Daire.) On the other hand,
Chaptal, De l'Industrie, Fr. I, 245, 1819, speaks of an average wage
—25 sous. Dureau de la Malle, Economie polit. des Romains, I,
151, allows agricultural laborers, in 80 departments of France, only
20-25 sous. According to Moreau de Joannés, Journal des Econ.,
Oct. 1850, the average wages of a French agricultural family
amounted per annum, in 1700, to 135 francs; in 1760, to 126; in
1788, to 161; in 1813, to 400; in 1840, to 500 francs. While A.
Young, Travels in France, 1787-89, speaks of wages of 20 sous a
day; Peuchet, Statist. élémentaire, 1805, 361, assumes it to be 30

sous, although the price of corn was not much higher. Compare
Birkbeck, Agricultural Tour of France, 13, who is of opinion even,
that French laborers are better situated than the English (?). From
1830 to 1848, wages decreased about 30 per cent. (L. Faucher,
Revue des deux Mondes, Avril, 1848.) Levasseur, Histoire des
Classes ouvrières en France, II, 1858.
General data for whole countries are obviously very doubtful. In
Germany, for instance, economically active places have witnessed
an undoubted elevation of the condition of the laboring classes.
Thus, in Hamburg and Lower Saxony, about the end of the
eighteenth century (Büsch, Geldumlauf, II, 56 ff.); while in
Thuringia, in 1556, a sümmer of rye was earned by 7 summer days'
labor, and in 1830 ff. by 8. (Lotz, Handbuch, I, 404.) In Hessen,
also, there has been but a very small increase in wages.
(Hildebrand, Nat. Oek., I, 190.) According to von der Goltz,
Ländliche Arbeiterfrage, 1872, 84 seq., wages in the country during
the last twenty or thirty years have increased on an average, 50 per
cent. at least; in Bavaria about 100 per cent.; in the Rhine province,
male wages, about 100; female wages, from about 75 to 100 per
cent. The masterly investigations of the wages of typesetters in Jena
and Halle by Strasburger in Hildebrand's Jahrb., 1872, I ff., show
that from 1717 to 1848, there was scarcely any change in them. A
million m's was paid for in 1717-40 with 26.93 Prussian sheffels of
rye; 1804-47 with from 24.80 to 28.80. Since then, a remarkable
rise; so that in 1871, up to November, 76.26 was reached. The prices
of food, dwellings, fuel, clothing, such as is in demand by such
laborers, rose between 1850 and 1860, 16.7 per cent., and the wages
for 1,000 m's in the same period of time rose about 14.3 and 43.7
per cent. In the industrious manufacturing vicinity of Moscow,
wages in 1815 were four times as high as in 1670, while the means
of subsistence rose relatively much less. (Storch, I, 203.)
[172-3] In the United States, the wages of carpenters and masons,
about the end of the last century, were $0.62 and $0.75; in 1835, of
the former from $1.12 to $1.25, and for the latter from $1.37 to

$1.50. In 1848, the general wage was $0.75. The price of corn, in
the meantime, did not rise, and the price of manufactured articles
was much smaller. (Carey, Rate of Wages, 26 seq.; Past, Present and
Future, 154.) In New York, as far back as 1790, wages were much
higher (Ebeling, Geschichte und Erdbeschreibung von
Nordamerika, II, 917); and between 40 and 50 years ago, a
journeyman mason might earn over 700 thalers per annum.
Agricultural laborers, in 1835, got $9 a month and their board,
valued at $65 for the whole year. In the vicinity of large cities, both
were higher. (Carey, 91.) The condition of the factory hands, in
Lowell, is a very good one. In 1839, more than 100 of them had
over $1,000 each in the savings banks, and pianos at their mess
places. (Boz, Notes on America, 1842.) Most of them could save
$1.50 a week. Colton, in his Public Economy (1849), says that a
workman would consider himself in a bad way if he could not save
half of his wages. Compare Chevalier, Lettres sur l'Amérique, II,
174, 122, 19; I, 221 ff.
Apprentices in the United States, in almost every instance, begin to
be paid wages as soon as their work begins to prove useful. The
work of half-grown children, who had not yet left the parental roof,
was so well paid that it was estimated that a child earned for his
parents, on the whole, £100 more than he cost them. What an
incentive to marriage! (Adam Smith, Wealth of Nat., I, ch. 8.) In
Canada, agricultural laborers earn between £24 and £30 per annum
and their board. In and around Melbourne, agricultural laborers got
from 15 to 20 shillings a week and lodging; herdsmen, £35 to £40 a
year; girls, from £20 to £45 (Statist. Journal, 1872, 387 ff.); female
cooks, from £35 to £40; male cooks, from £52 to £156. In hotels,
girls, from £30 to £35; female cooks, from £50 to £100; domestic
servants, £39 to £52; carpenters, masons, etc., 10 shillings a day; the
best tailors, from 60 to 75 shillings a week; shoemakers, from 40 to
55 shillings; bakers, from 40 to 60 shillings a week. (Statist. Journal,
1871, 396 seq.) In San Francisco, a short time since, servant girls
got $25 a month; Chinese, $1 a day; common laborers, $2; skilled
artisans, from $3 to $5. (Whymper, Alaska, 299, 326.) The wages of

a European tradesman, in Rio Janeiro, was from I to 2 Spanish
piasters a day. (Martius, Reise, I, 131.) In the English West Indies, a
new-born negro was formerly worth £5. (B. Edwards, History of the
West Indies, II, 128.) The high wages paid in young colonies are
frequently made temporarily still higher, by a large influx of capital
in the shape of money, brought by emigrants, and by government
outlays. Thus, in Van Diemen's land, for instance, in 1824,
carpenters, masons, etc. got 12 shillings a day; in 1830, 10; in 1838,
only from 6 to 7, although between 1830 and 1838, the export trade
of the island trebled while the population scarcely doubled.
(Merivale, On Colonies, II, 225.)
[172-4] As to how many workmen in the eastern part of North
America buy land in the west, and so threaten their employers with
immediate emigration, see Brentano, Arbeitergilden, II, 131.
However, in Massachusetts, women's wages are in many instances
so low that, considering the dearness of the means of subsistence, it
is almost impossible to understand how they exist. (Statist. Journal,
1872, 236 ff.)

SECTION CLXXIII.
HISTORY OF THE WAGES OF COMMON LABOR.—IN
FLOURISHING NATIONS.

A permanently[173-1] high rate of wages[173-2] is, both as cause and
effect, very intimately connected with a flourishing condition of
national life. It proves on the one hand, great productiveness of the
public economy of the people generally: prudence, self-respect and
self-control, even of the lowest classes, virtues, which, however,
are found, on the whole, only where political liberty exists, and
where the lowest classes are rightly valued by the higher.[173-3] On
the other hand, it produces a condition of the great majority of that
portion of the population who have to support themselves on the

wages they receive, worthy of human beings, a condition in which
they can educate their children, enjoy the present and provide for
the future. Equality before the law and participation in the affairs of
government are empty phrases, and even tend to inflame the
passions, where the rate of wages is not high. When the lower
classes are dissatisfied, in highly civilized countries, with the
sensitiveness and mobility of the whole national life, there can be
no certainty of the freedom of the middle classes or of the rule of
the upper. Here, in other respects, also, the philanthropy of
employers harmonizes remarkably well with their reasonable self-
interest. According to § 40, only the well-paid workman can
accomplish anything really good, just as, conversely, only the good
workman is on the whole, and in the long run, well paid. This
suggests the physiological law, that where muscular activity is
great, nutrition must be great, likewise; and the rapid waste and
repair of tissues strengthens the muscles and gives tone to the
whole physical life. With a correct insight into the relations of
things, antiquity described its greatest worker, Herakles, as a great
eater also. A well-paid workman, who costs and accomplishes as
much in a day as two bad ones, is cheaper than they. He works
much more cheerfully and faithfully, is, hence, more easily
superintended, is less frequently sick, and later decrepid. [173-4] His
childhood costs less, and his burial is not so expensive. In cases of
need, he can more easily bear the weight of taxation or a temporary
lowering of wages. [173-5] We might say of the granting of holidays
and of evening leisure something similar to what we have said of
the rate of wages. They are indispensable requisites to the
development of a desirable individuality in the working classes;
and when used for that purpose are certainly no detriment to the
product of labor or to employers.[173-6] [173-7]

In consideration of all the blessings attending a high rate of wages,
we may well be induced to put up with a certain and frequently
inconvenient external defiance of the lower classes which is wont
to accompany it.[173-8] It teaches the upper classes many a moral
lesson, and is surely a lesser sin in the lower, than the cowardly,
malicious crimes of the oppressed. When wages are so low that
they have to be supplemented by begging or public charity, the
effect on morality is the same as when government officials, who
cannot live on their salaries, resort to bribery or embezzlement.[173-
9] [173-10]

[173-1] A merely momentary rise in wages might be the result of a
great calamity, destructive of human life, and might seduce
workmen not intellectually prepared for it into idleness. Compare
von Taube, Beschreib. von Slavonien etc., II, § 4.
[173-2] On the necessity of free wages, that is of an excess over and
above the costs of support and of maintaining one's position, see
Roesler, Grandsätze, 394.
[173-3] Dans aucune histoire on ne rencontre un seul trait, qui
prouve que l'aisance du peuple par le travail a nui à son obéissance,
(Forbonnais.) This is true only of well governed countries. When, in
England, about the middle of the eighteenth century, a great
improvement took place in the condition of the laboring classes,
Postlethwayt (Great Britain's commercial Interests, 1759) was one
of the first to recognize its general beneficial character; also Th.
Mortimer. (Elements of Commerce, Politics and Finance, 1774, 82
ff.) Benjamin Franklin, before the American revolution, was of
opinion that high wages made people lazy. (On the Price of Corn,
1776. On the laboring Poor, 1768.) He afterwards, however,
acknowledged its generally good effect, and that even the products
of labor might be cheapened thereby. (On the Augmentation of
Wages, which will be occasioned in Europe by the American
Revolution. Works II, 435 ff.) See further, Paoletti, Veri Mezzi di

render felici le Società, ch. 15; Ricardo, Principles, ch. 5; Th.
Brassey, on Work and Wages, 1872. Umpfenbach, Nat. Oek, 181,
calls the costliness of labor to the purchaser of labor, "givers'
wages," their purchasing power to the laborer himself, "receivers'
wages," and is of opinion, that as civilization advances, the former
declines and the latter rises.
[173-4] When in the department of the Tarn flesh food was
introduced among journeymen smiths instead of mere vegetable
diet, the sanitary improvement that followed was so great that the
number of days lost by sickness in a year decreased from 15 to 3.
(Moleschott.)
[173-5] In high stages of civilization, it is always more profitable,
the result being the same, to keep a few well fed cattle than many
poorly fed. (Roscher, Nationalök. d. Ackerbaues, § 179.) Infra, §
231. When the drainage of Oxford street in London was made while
wages were rising, it happened that the cubic foot of masonry work
at 10 shillings per day was cheaper than it was formerly at 6
shillings per day. (Brassey, 68 ff.) Senior calls it an absurdity to
consider the high wages paid in England as an obstacle in the way
of its successful competition with other countries. Rather would he
consider it as the necessary result of the excellence of English labor.
Thus, in his Lectures on the mercantile Theory of Wealth, p. 76, he
says that if the English employ a part of their labor injudiciously,
they must pay it not in proportion to what it really accomplishes, but
to what it might do if well employed. If a man calls in a doctor to
cut his hair, he must pay him as a doctor. If he puts a man to
throwing silk who might earn 3 ounces of silver a week spinning
cotton, he must pay him weekly 3 ounces of silver, although he may
deliver no more silk within that time than an Italian who gets only
1½ ounces.
[173-6] Norfolk country workmen never worked more than 10 hours
a day except in harvest and seed time. But a plowman there
accomplished as much in 5 days as another in 8. (Marshall, Rural
Economy of N., 138.) In southwestern Germany, the country

working day is from 2 to 4 hours shorter than in the northeast, and
yet just as much is accomplished in the former quarter. (von der
Goltz, Ländl. Arbeiterfrage, 88, 131.) Thus the coal diggers of South
Wales work 12 hours a day, those of Northumberland, 7; and yet the
same achievement is 25 per cent. dearer in case of the former. In the
construction of the Paris-Rouen Railroad, the English achieved
more than the French, although the former worked from 6 A. M. to
5:30 P. M., and the latter from 5 A. M. to 7 P. M. (Brassey, 144 ff.)
Examples from English manufactories in Marx, Kapital, I, 401 seq.
In an English factory the hours worked were 12, and afterwards, 11.
This caused the number of attendants of the evening school to grow
from 27 to 98. (Horner.) Dollfuss, in Mühlhausen, reduced the
number of hours worked from 12 to 11, and let the wages remain the
same as before. The result was besides a great saving made in fuel
and light, a surplus product of at least 1-2/3 per cent. Something
similar observed by M. Chevalier, Cours, I, 151.
Hence J. Möser, Patr. Ph., III, 40, desired, on this account, that work
in the evening should be prohibited by law. In England, not only the
moral necessity, but also the economic general utility of leisure time
of workmen has been defended, among others by Postlethwayt,
Dictionary of Trade and Commerce, I, prelim. Discourse, 1751. A
beautiful law, V Moses 24, 15. Only, care must be taken not to go to
the other extreme, which is still more detrimental to personality. The
North American ideal of 8 hours a day for work, 8 for eating,
sleeping, etc., and 8 for leisure, would be injurious except to
workmen intellectually very active. But the provision to be met with
in many states of the Union and in the arsenal employ of the
government, that in case of doubt, the work day is to be tacitly
assumed as of 8 hours, has, it is said, correspondingly lowered
wages. See supra, § 168.
[173-7] In India, where the institution of caste is found, nearly half
the year is made up of feast days, while in rationalistic China there
is no Sunday and very few general holidays. (Klemm, A.
Kulturgeschicht. VI, 425. Wray, The practical Sugar Planter, 1849.)

The Judaic-Christian sanctification of the seventh day is a happy
medium between these two extremes. Recuperation and
collectedness get their due without its costing too much to action.
Ora et labora! Compare Sismondi, N. P. II, ch. 5. Which is best,
traveling on foot, to drag along all the time, or to walk decently and
rest properly between times? The rest of Sunday, even leaving the
work of recuperation and edification out of account, is necessary in
the interests of the family and of cleanliness. The French decadis
accomplished materially even too little: ils ont à faire à deux
ennemis, qui ne cèderont pas, la barbe et la chemise blanche. (B.
Constant.) Hence, an English prize essay on the material advantages
of Sunday found 1,045 competitors among English working men.
(Tübinger Zeitschr., 1851, 363.)
[173-8] Thus Parkinson, A Tour in America, complains that with
four servants in the house, he was obliged to polish his own shoes,
and with his wife and children to milk the cows, while his people
were still asleep. Strange servants bringing a message, come in with
their hats on. All domestics are called mister or misses. Servant
maids are called "helps," and their masters, "employers." If a person
at a hotel asks for a laundress, he is answered: "Yes, man, I will get
a lady to wash your clothes." Similarly in Fowler, Lights and
Shadows,... three Years' Experience in Australia. But, at the same
time, it is remarkable how seldom a native born white American
accepts a fee. On the other hand, Russia is the classic land of fees.
There is a popular story in that country to the effect that when God
divided the earth among the different nations, they were all satisfied
except the Russians, who begged a little drink-money or fee in
addition, (von Haxthausen, Studien, I, 70.) Similarly in Egypt.
(Ebers, Durch Gosen zum Sinai, 1873, 31 seq.) The system of
feeing servants holds a middle place between the modern system of
paying for everything lawfully and the medieval system in which
people either rob, donate or beg.
[173-9] Compare Garve in Macfarlan, 90. The wages of English
wool workers in 1831 amounted to:

Tax per capita of the
population for
In support of the poor.
Leeds, 22—22½s. 5s. 7d.
Gloucester, 13—15¼s. 8s. 8d.
Somerset, 16¾—19¾s. 8s. 9d.
Wilts, 13-7/12—15-5/12s. 16s. 6d.
Ure, Philosophy of Manufactures, 476. After an enthusiastic eulogy
of high wages, McCulloch remarks especially that the English poor
rates cost more than if the laborers were obliged to provide for
themselves by getting higher wages. (Principles, III, 7.) Sad results
of the system which came into vogue in the South of England in
1795, to supplement wages according to the price of corn and the
number of children. Previously the laboring classes married only
after the age of 25 and even at 35, and not until they had saved from
£40 to £50. After the above mentioned system was adopted, even
minors married. (Edinburg Review, LIII, 4, 7.)
[173-10] Von Thünen, Isolirte Staat., II, 1, 154, gives the following
formula as the expression of ideal wages: √ap, in which a = the
necessary requirement for maintenance of the workmen, and p = the
aggregate product of his labor. von Thünen attached so much
importance to this formula that he had it engraved on his tomb-
stone. But even if it were possible to reduce capital-generating labor
and wage-labor to a common denominator, it would not be possible
nor equitable to maintain the same dividing measure when capital
and labor contributed in very different amounts to the production of
the common product. An artist, for instance, who could make costly
vessels out of very cheap clay and with cheap fuel would get too
little by von Thünen's law; a mechanic who used a very efficient and
costly machine, too much. The fundamental defect in his theory, von
Thünen himself seems to have obscurely felt. Compare the letter in
his Lebensbeschreibung, 1868, 239 and Roscher, Geschichte der
Nat. Oek., in Deutschland, 895 ff.

SECTION CLXXIV.
HISTORY OF THE WAGES OF COMMON LABOR.—IN DECLINING
COUNTRIES AND TIMES.

When, circumstances being otherwise unaltered, the aggregate
income of a nation decreases, the wages of labor are wont to be
lower in proportion as the points above mentioned, and which are
unfavorable to the laborer in his competition, appear.[174-1] The
worse distribution, also, of the national resources, when, instead of
a numerous middle class, a few over-rich people monopolize all
that is to be possessed, diminishes the wages of common labor and
thus again produces a worse distribution than before.[174-2] In a
similar way, wages must decline when the mode of life of the
laboring class, or the quality of their work, has deteriorated. Some
of these causes may exist transitorily even among otherwise
flourishing nations; as, for instance, in war times,[174-3] or when
population for a while grows more rapidly than national wealth.
But among nations universally declining, they are all wont to meet,
and one strengthens the other.[174-4] One of the saddest symptoms of
such a condition is the low value here put upon the life and strength
of workmen. The cheapness of labor has indeed a charm for
enterprising spirits, which induces them to employ human labor
even where machinery, beasts, etc., would economically be better
adapted to the performance of the work.[174-5] Day-laborers are, on
this account, more profitable to persons of enterprise
(Unternehmer=undertaker) because they can more easily rid
themselves of them. But such egotistic calculation should have no
place even in the case of actual slaves.[174-6]
Besides, it not unfrequently happens, that the laboring class seek to
oppose the decline of wages by increasing their industry,
shortening their holidays and leisure, and by drawing their wives

and children into their work. This may, under certain
circumstances, result in an increase of the national income, and
thus constitute a transition to the restoration of high wages,
especially if beforehand there was reason to complain of the
idleness of the working class. But if the other circumstances of
competition are unfavorable to the working class, if especially they
used their personally increased income to add to the population, it
would not be long before they fell back to their previous state. In
such case, the consequence is, that the same quantity of labor has
become cheaper; that all permanent profit falls to the capitalists and
landowners, and all that remains to the laboring class is only
greater toil, a sadder home-life, and sadder children. The danger of
such an issue is all the greater, because few things so much
contribute to reckless marriages and the thoughtless procreation of
children, as the industrial coöperation of wife and child.[174-7] [174-8]
[174-1] Hence Adam Smith says that it is not the richest countries in
which wages are highest, but those which are becoming rich most
rapidly.
[174-2] The classic lands of low wages and pauperism are especially
the East Indies and China. A minister of Kienlong was punished
after he had extorted about 20,000,000 thalers. (Barrow, II, 149.) In
the confiscation of the well known Keschen, the authorities,
according to their own accounts, found 682 pounds of gold and
more than 6,000,000 pounds in silver. Considering the colossal[TN
12]
banquets of the rich, embracing several hundred courses, of
which Meyen, Reise um die Erde, II, 390, describes an example, the
wretched food of the poor is doubly striking. Count Görtz relates
that in Canton, rats and serpents are regularly exposed for sale.
(Reise, 445.) The lowness of wages appears from the fact—one of
many—that servants frequently get nothing but their board.
(Haussmann, Voyage en Chine, etc.) In the cities, tradesmen with
their tools run hither and thither about the streets begging for

employment in the most imploring manner. Thousands live all their
lives on rafts. Numberless instances of infanticide from want of
food, (§ 251.) The influence of these circumstances on the morality
of the people is best illustrated by the fact that Keschen, when he
was ambassador to Thibet, preferred to confide his newly collected
treasures to the escort of the French missionaries he persecuted
rather than to the mandarins named by himself, so much more
highly did he estimate European than Chinese honesty. (Edinburg
Rev., 1851, 425 ff.) In the Chinese picture-writing, the word
happiness was designated by a mouth well corked with rice. Chinese
statisticians speak of mouths (Maul) where ours treat of the number
of heads or souls. Ritter, Erdkunde, II, 1060. More favorable
accounts in Plath, Münch. Akad., 1873, 784, 788 seq.
In the East Indies, a great many of the rejected castes live on
carrion, dead fish, noxious insects, and even the middle class find
wheat flour too dear, and therefore mix it with peas, etc. (Ritter, VI,
1143.) It is said that Bengal, in the famine of 1770, lost more than
one-third of its inhabitants. (Mill, History of British India, III, 432.)
Eloquent description of misery in Rickard, India, or Facts submitted
to illustrate the Character and Condition of the native Inhabitants, II,
London, 1832. An immense number of badly paid servants of whom
it may however be said that each one accomplishes very little. The
Pindaries may pass for an extreme of Indian pauperism,
corresponding to the pirate-calamity during the later Roman
Republic. (Quarterly Review, XVIII, 466 ff.; Ritter, VI, 394 ff.)
[174-3] Thus, in England, during the last great war, wages rose less
than the price of corn, and sank less after it. About 1810, wages
were nearly 100 per cent. higher than in 1767; but, on the other
hand, the price of wheat, 115; of meat, 146; of butter, 130, and of
cheese, 153 per cent. (Edinburg Rev., XL., 28.) If it has some times
been observed that crime, communistic machinations and
revolutionary movements grow less frequent in times of war, the
fact is not to be ascribed necessarily to a better condition of the

laboring class. It might possibly be the consequence of the strongest
and wildest elements of the laboring class finding some other career.
[174-4] Adam Smith, loc. cit., on this point describes China as a
stationary country (according to R. Fortune, Wanderings in China,
1847, 9, a decided decline has been noticeable there for a long
time), and Bengal as a declining one. On the condition of wages
among the Romans, Juvenal, III, 21 ff., is one of the principal
sources. Hence the desire to emigrate because honest labor had no
longer any foothold (23 ff.). Poor dwellings of the laboring class,
dark, exposed to danger from fire (166, 190 ff., 225), and yet
comparatively dear (223 seq.). Numerous crowds of robbers and
beggars (302 ff.; IV, 116 ff.; V, 8; XIV, 134). On beggary, see
Seneca, Controv., V, 33. De Element., II, 6. De Vita beata, 25 ff.
Martial, V, 81, XIV, 1, complains of the absence of outlook among
the poorer classes. Horace, too, is rich in passages which might be
appropriately cited in this connection. Characteristic question of the
nabobs, in Petron., 48, 5: What on earth is that thing called a
pauper?
[174-5] Thus, in China, the East Indies, etc., people travel in
palanquins borne by men; in a multitude of cases, Chinese
commodities are carried in wheelbarrows; and a great many roads
are constructed, in reference not to wagons, properly so-called, but
to this species of vehicle. How heartless the Chinese, who, before
they save a drowning man, first higgle about the reward, and take
pleasure in pestilence, famine, etc., because those who survive profit
by them. See Finlaison, Journey of the Mission to Siam, 1826, 62 ff.
[174-6] Hence Menander (342-290 before Christ) says it is better to
be the slave of a good master than to live wretched in freedom.
(Stobœus, Flor., 62, § 7. Meinecke, Fr. com. Gr., IV, 274.) Libanios,
too, (Tom., 483, Reiske), in his "Blame of Poverty," represents
slavery as better cared for, and freer from worry. Horrible contracts
made even in Cæsar's time, from want, by freemen, to become
gladiator-slaves. Cicero, pro Roscio, Am. 6; Horat., Serm., II, 7, 58
ff.; Petron., 117; Seneca, Epist., 37. And so by Justinian, cases of

declined freedom are supposed. (L. 15, Justin., Cod., VII, 2.) "Dans
une armée on estime bien moins un pionnier, qu'un cheval de
caisson, parce que le cheval est fort cher, et qu'on a le pionier pour
rien. La suppression de l'esclavage a fait passer ce calcul de la
guerre dans la vie commune." (Linguet.)
[174-7] Sismondi is guilty, however, of a philanthropic exaggeration
when he says that the labor of children is always fruitless to the
laboring classes. (R. P. I., 235.)
[174-8] The bringing into juxtaposition of the rates of wages in
different countries is doubtless one of the most important objects of
comparative statistics. Only it is necessary not to confine it to the
money amount of wages, but to make it embrace the prices of the
principal means of subsistence. Thus, in France, before the outbreak
of the French Revolution, a French workman earned a cwt. of bread
on an average of 10.5 days; one of meat in 36.8; an English
workman, in 10.4 and 25.3 days. (A. Young.) In the interior of
Russia, a female weaver earns, in a day, almost one Prussian
scheffel of rye, in Bielefeld, only about one-tenth of a scheffel; a
table-cloth weaver, in the former place, 18 silver groschens, while
the scheffel costs from 12 to 15 silver groschens. (von Haxthausen,
Studien, I, 119, 170.) According to Humboldt, the money-wages
paid in Mexico were twice as high, and the price of corn two-thirds
as dear, as in France. (N. Espagne, IV, 9.) According to Rau,
Lehrbuch, I, § 180, the procuration of the following means of
subsistence required in day labor in:
Column code:
A = Manchester. B & C = Hanover. D = Upper Canada. E =
Brandenburg. F = Gratz.

A. B. C. D. E. F.
Cwt. 1810-20 1700[TN 13] 1827 1830 1820-33 1826-45
beef, 26 33 35 6.6 34 36
potatoes, 1.85 — — — 1 2.68
wheat, 5.5 — — 2 7.6 11
rye, — 6.5 8.7 1.5 5.4 8.6
butter, 42.3 87 64 22 83 84
sugar, 96 181 128 — — —
Estimated in silver, the East Indian laborer earns from £1 to £2 a
year; the English, £9 to £15; the North American, £12 to £20.
(Senior.) Hildebrand, Nat-Oek., I, 195 ff., assures us that the
average rate of wages in Germany, in 1848, amounted to 400 thalers
a year; in England, to 300 thalers; and that the prices of the means
of subsistence in the latter country were 1½ times higher than in the
former. Engel, Ueber die arbeitenden Klassen in England, 1845,
shows only the dark side of a real picture, and is silent on the other,
and is well corrected by Hildebrand, I, 170 ff. Excellent statistics in
Sir F. M. Eden, State of the Poor, I, 491-589. On the more recent
times, compare the Edinburgh Review, April, 1851, April, 1862;
Quarterly Rev., Oct., 1859, July, 1860. Ludlow and Jones, loc. cit.
On the situation in France, see Blanqui's report in the Mémoires de
l'Académie des Sciences morales et politiques, II, 7. Leplay, Les
Ouvriers des deux Mondes, II, 1858. Very important are the
"Reports from Her Majesty's diplomatic and consular Agents abroad
respecting the Condition of the industrial Classes, and the Purchase-
power of money in foreign Countries." (1871.)

SECTION CLXXV.
WAGE POLICY.—SET PRICE OF LABOR.

Among the artificial means employed to alter the existing rate of
wages, we may mention first, a rate of wages fixed by
governmental authority. These have, in many places, constituted an

intermediate step between serfdom and the free wage-system. In
most cases, this measure was intended in the interest of the upper
classes to prevent the lower obtaining the full advantage of their
freedom under the favoring circumstances of competition.[175-1] In
later times, another cause has frequently been added to this, viz.: by
diminishing the cost of production to increase foreign sales. (See §
106.) In the higher stages of civilization, nations will scarcely look
with favor on the diminution of the rightful, for the most part,
individually small gains of the most numerous, the poorest and
most care-worn class of the community.[175-2] The purchasers of
labor would, in consequence, be badly served, since they would
have lost the possibility of obtaining better workmen by paying
higher wages. Hence, there would, probably, be none but mediocre
labor to be found.[175-3] On the other hand, fixed rates which keep
within the limits described in § 114 are, under certain
circumstances, desirable. This is especially the case where the
purchasers of labor on the one hand, and the buyers of labor on the
other, have formed themselves into united groups, and where the
rate fixed is only in the nature a treaty of peace under governmental
sanction, when a war over prices had either broken out actually or
there was danger to fear that one would break out. It must not be
forgotten, that thus far common labor has scarcely had any thing
similar to an "exchange."[175-4]
[175-1] The plague known as the black death of 1348, which
devastated the greater part of Europe, was followed by many
complaints on the part of the buyers of labor, of the cupidity and
malicious conspiracies of the working classes. (See supra § 160.)
Fixed rates of wages under Peter the Cruel of Castile, 1351;
contemporaneously in France, Ordonnances, II, 350, and in
England, 25 Edw. III, c. 2; 37 Edw. III, c. 3. In France, the wages of
a thresher were fixed at the one-twentieth or the one-thirtieth of a
scheffel, while in present Saxony it is from one-fourteenth to one-

twelfth. In England, under the same ruler, who had seen his castle at
Windsor built, not by day laborers for wages, but by vassal masons,
vassal carpenters, etc., whom he got together from all parts of the
kingdom. That the rates might not be evaded, the succeeding king
forbade both the leaving of agriculture for industry and change of
domicile[TN 14] without the consent of a justice of the peace. (12
Richard II., c. 3.) All such provisions were little heeded in the 16th
century. (Rogers, the Statist. Journal, 1861, 544 ff.)
Fixed rates of wages under Henry VII. and Henry VIII., in the
interest of workmen. (Gneist, Verwaltungsrecht, II, Aufl., 461 ff.)
The fact that in 5 Elizabeth, c. 4, another attempt was made to fix
the rate of wages by governmental provisions, in which the person
paying more than the sum fixed was threatened with 10 days'
imprisonment, and the person receiving less with 12, was in part
akin to the English poor laws. If a poor man had the right to be
eventually employed and supported by the community, it was, of
course, necessary that the justice of the peace should be able to
determine at what wages anybody should be prepared to work
before he could say: I can find no work. Extended by 2 James I., c.
6, to all kinds of work for which wages were paid. (Eden, State of
the Poor, V, 123 ff., 140.) The buyers of labor in the eighteenth
century frequently complained that these fixed wages were more to
the advantage of workmen than of their masters. (Brentano, English
Guilds., ed. by Toulmin Smith, 1870, Prelim. CXCI.)
In Germany, the depopulation caused by the Thirty Years' War
explains why, before and after the peace of Westphalia, so many
diets were concerned with fixing the rate of wages of servants.
Compare Spittler, Gesch., Hanovers, II, 175. Among the most recent
instances of English fixed rates of wages, is 8 George III., for
London tailors, and the Spitalfields Act of 1773, for silk weavers
who had, a short time before, revolted. Also in New South Wales,
about the end of the last century, on account of the high rate of
colonial wages. (Collins, Account of the English Colonies of New
South Wales, 1798.) Later, Mortimer, Elements of Politics,

Commerce and Finance, 1174, 72, maintains fixed rates of wages to
be necessary. In Germany the imperial decree of 1830, tit., 24, and
again the ordinance of Sept. 4, 1871, provide that each magistrate
shall fix the rate of wages in his own district. Chr. Wolf, Vernunftige
Gedanken vom gesellsch. Leben der Menschen, 1721, § 487, would
have the rates so fixed that the laborers might live decently and
work with pleasure.
[175-2] Proposal for a fixed sale of wages in the protocols of the
Chamber of Lords of Nassau, 1821, 12.
[175-3] The Spitalfields Act was repealed in 1824, for the reason
that the manufacturers themselves attributed the stationary condition
of their industries for a hundred years to the fact that they were
hampered by that act. Ricardo's and Huskisson's prophecies, on this
occasion, fulfilled by the great impulse which the English silk
industries soon afterwards received.
[175-4] Compare Brentano, Arbeitergilden der Gegenwart, II, 288.
However, fixed rates of wages equitably arranged, in the
establishment of which neither party has been given an advantage
over the other, have continued to exist much longer than our
distrustful and novelty-loving age would think possible. Thus
compositors' wages in London, from 1785 to 1800, from 1800 to
1810, from 1810 to 1816, and from 1816 to 1866, remained
unaltered; those of London ship builders, from 1824 to 1867; of
London builders, from 1834 to 1853, and from 1853 to 1865.
(Brentano II, 213. Compare II, 250, 267 ff.)

SECTION CLXXVI.
WAGES-POLICY.—STRIKES.

Where the wages-receiving class feel themselves to be a special
class, vis-a-vis of the purchasers of their labor, they have frequently
endeavored, by the preconcerted suspension of labor upon a large

scale, to force their masters to pay them higher wages, or grant
them some other advantage.[176-1] It is hard to say whether such
strikes have more frequently failed or succeeded.[176-2]
As a rule, a war over prices, carried on by such means, and without
force on either side, must generally issue in the victory of the richer
purchasers of labor.[176-3] The latter require the uninterrupted
continuation of labor for their convenience and profit; but the
workmen need it to live. It is but seldom that the workmen will be
in a condition to stop work for more than a few months, without
feeling the sting of hunger. The purchaser of labor can live longer
on his capital; and the victory here belongs to the party who, in the
struggle, holds out longest. Hence, a strike that lasts more than six
weeks may, for that reason alone, be considered a failure. The
employers of labor, on account of their smaller number and greater
education, make their counter-coalition much more secret and
effective. How many instances there are in which labor-saving
machines have come into use more rapidly than they otherwise
would have come but for the influence of these coalitions![176-4]
On the other hand, it cannot be ignored that a host of workmen, by
means of an organization which provides them with a unity of will,
such as the heads of great enterprises naturally possess, must
become much better skilled in carrying on a struggle for higher
wages. Where wages in general tend to rise, but by force of custom,
which is specially powerful here (§ 170), are kept below their
natural level, a strike may very soon attain its end. And workmen
are all the more to be wished God-speed here in proportion as
employers are slow to decide of their own motion upon raising
wages, and where, under certain circumstances,[176-5] a single cold-
hearted master might force all his competitors to keep wages down.
If even the entire working class should follow the example of the

strikers, so that all commodities, in so far as they are products of
labor, should grow dearer to an extent corresponding to the rise in
wages, there would still remain an improvement of the condition of
the working class at the cost of the interest paid on capital and the
profits of enterprise. It is, of course, otherwise with the struggle of
workmen against the natural conditions which determine the rate of
their wages (§§ 161-166) in which they might, in turbulent times,
possibly succeed[176-6] temporarily, but would, in the long run, have
to fail.[176-7]
The working class will be best fortified in such a struggle for
higher wages when their organization is a permanent one, and
when they have taken care, during good times, to collect a certain
amount of capital to protect their members, during their cessation
from work, against acute want. This is the object of the trades-
unions as they have grown up in England, especially since the total
decline of the guild system and of governmental provisions relating
to apprentices, fixed rates of wages[176-8] etc. But it cannot be
denied that these unions, although democratic in form, often
exercise a very despotic sway over their members;[176-9] that they
have, so far as the employers of labor are concerned, and the non-
union laborers, gone back to a number of measures, outgrowths of
the guild and embargo systems, which it was fondly hoped had
been forever banished by the freedom of industry.[176-10] What many
of the friends of this system hope it may accomplish in the future,
viz.: regulate the whole relation between capital and labor, and
thus, on the whole, control the entire public economy of a people,
[176-11] is, fortunately, all the more certainly a chimera, as any

national or universal approximation to this end would be the most
efficacious way to compel employers of labor to the formation of
corresponding and probably far superior opposing unions.
Notwithstanding this, however, I do not doubt that the recent

development of trades-unions in England is both a cause and an
effect of the rise in wages in the branches of industry in question,
as well as of the moral elevation of the condition of the working
class which has simultaneously taken place.[176-12] The mere
possibility of a strike is of itself calculated, in the determination of
the rate of wages, to procure for the equitable purchaser of labor
the desirable preponderance over the inequitable.[176-13]
[176-1] Even Boisguillebert, Traité des Grains, was acquainted with
instances of this kind in which from 600 to 800 workmen
simultaneously left their masters. There are much earlier instances
in Italy. Thus, in Sienna, in 1381 and 1384, in which the nobility
sided with the workmen. (Rerum Ital. Scriptores, XV, 224, 294.)
Strikes of journeymen began to be much more frequent in Germany
in the guilds, from the time of the prospect of their becoming
masters themselves, and of their living in the family of the masters
had decreased. On similar strikes at Spires,[TN 15] in 1351, at
Hagenau in 1409, and Mainz in 1423, see Mone's, Zeitschrift, XVII,
56; XIII, 155, and Hegel, Strassb. Chr., II, 1025. A remarkable strike
of the Parisian book printers under Francis I. (Hildebrand's Jahrb.,
1873, II, 375 ff.) In so-called "home manufactures," where the
"manufacturer" is both orderer, preparer and seller, but strikes are
scarcely possible without much fixed capital. The strike of the
factory spinners in Lancashire in 1810 caused 30,000 workmen to
stop work for four months.
Among the next following coalitions of labor, those of the Glasgow
weavers in 1812 and 1822 were very important. In the latter, two
workmen who would not participate with the strikers were blinded
with sulphuric acid. In 1818, great strike by the Scotch miners. The
Preston strike of 1853 lasted 36 weeks. It is said that 6,200 male and
11,800 female working people took part in it. (Athenæum, 30 Sept.,
1854.) Compare Morrison, Essay on the Relations between Labor
and Capital, 1854. For a history of Swiss strikes, especially of the
Zürich compositors' strike in 1873, see Böhmert,

Arbeiterverhältnisse, II, 287 ff. Comic type of a strike of married
women in Aristophanes, Lysistrata. A practical one in Rome at the
departure of the plebeians for the holy mountains, 492 before Christ.
(Livy, II, 32,) then, on a small scale, on the removal of the pipers
after Tiberius, 311 before Christ. (Liv., IX, 30.)
[176-2] Instances of successful strikes: Fortnightly Review, Nov.
1865. Similarly in Germany, in 1865; but there, in truth, many
strikes were only defensive and intended to restore the former thing-
value of the declined money (Werke, XIII, 151). The English
strikes, in 1866 and 1867, failed nearly all, so that wages again
declined to their level in 1859, and in many places, to what they had
been in the crisis-year 1857. (Ausland, 16 April, 1868.) As to how
even in Victoria, strikes which opposed a decline of wages from 16
to from 8 to 10 shillings a day failed, after doing great injury, see
Statist. Journ., 1861, 129 ff.
[176-3] The Preston strikers of 1853 got even from their non-
striking colleagues, £30,000. Had their masters prevented this, the
affair would have been terminated much sooner. (Quart. Rev., Oct.
1859.) But employers are much more frequently divided by rivalries
than workmen, especially in strikes against new machines or when a
manufacturer, who has too large a supply of goods on hand, desires
a strike himself. On account of their smaller number, too, they are
less in a condition to declare a recusant colleague in disgrace. Adam
Smith's remark that coalitions of capitalists are much more frequent
than those of workmen, only that much less is said of them, is
hardly applicable to our time. (Wealth of Nat., I, ch. 8, p. 100, ed.
Bas.) But, since the strike of the London builders in 1859, capitalists
have begun to form more general opposing unions. On a very
energetic one among the ship builders on the Clyde, see Count de
Paris, Les Associations ouvrières en Angleterre, 1869, ch. 7.
Examples on a smaller scale, Edinburg Review, LXXXIX, 327 ff.
On the other hand, a "lock-out" on the part of capitalists is very
difficult, from the fact that it is impossible to prevent idle workmen
from being supported from the poor fund. Moreover, there can be no

greater folly than for the workmen to add insult to their masters to
their demand for higher wages, because then the limits within which
the latter are willing to continue the business at all, are made much
narrower, than they would be on a merely economic estimate.
[176-4] Thus the "iron man," by which a single person can put from
1,500 to 3,000 spindles in motion; also an improved plane-machine,
by means of which several colors can be printed at once. (Ure,
Philosophy of Manufactures, 366 ff.) Machines for riveting
cauldrons. (Dingler, Polytechnisches Journal, LXXV, 413.)
[176-5] Compare the statements in the Statist. Journal, 1867, 7.
[176-6] Thus in several places in 1848, and in Paris in 1789, where
even the lackeys and apothecary clerks formed such unions.
(Wachsmuth, Gesch. Frankreichs im Revolutionszeitalter, I, 178.)
Similarly, frequently in isolated factories.
[176-7] Thornton mentions six instances in which strikes and strike-
unions may permanently raise wages: a, when those engaged in an
enterprise have a virtual monopoly in their own neighborhood; b,
when the country has, for the industry in question, great advantage
over other lands; c, when the demand for the product of the industry
is necessary on account of an increasing number and increasing
capacity to pay of customers; d, when the progress of the arts,
especially of machinery, makes the industry more productive; e,
when the rise in the rate of wages affects all branches of industry to
the same extent, and at the same time; f, when the industry is carried
on on so large a scale that it yields greater profit, even while paying
a smaller percentage than other industries. (On Labour, III, ch. 4.) It
is easy to see that many of these conditions meet in the building
industries in large cities.
[176-8] Compare Brentano in the Preliminary Essay to T. Smith's
English Guilds, ch. LXXII ff. The same author's Die Arbeitergilden
der Gegenwart Bd., I, 1871.

[176-9] The greater number of strikes begin with a small minority,
generally of the best paid workmen, whom the others follow
unwillingly but blindly. (Edinb. Rev., 149, 422.) The despotic power
of the Unions over their members depends principally on the fact
that their treasury serves not only to maintain strikes but at the same
time as an insurance fund for old age and sickness, and that every
case of disobedience of a member is punished by expulsion, i. e.,
with the loss of everything he has contributed. Hence the Quart.
Rev., Oct., 1867, advises that these two purposes which are so hard,
technically speaking, to reconcile with each other, should be
required to be kept separate, especially as most of the unions,
considered as benevolent associations, are really insolvent. (Edinb.
Review, Oct., 1867, 421 ff.) On the other hand, both the Count of
Paris, ch. 3, and Thornton are favorable to the admixture of humane
and offensive objects in the trades-unions, because the former
contribute to make the latter milder. Brentano, I, 153, has no great
objection to the insolvency shown by the books of the unions vis-a-
vis of their duties as insurers, since, hitherto, the subscription of an
extraordinary sum has never failed to make up the deficit. A strike is
detrimental in proportion as the striking workmen represent more of
the previous preliminary operations that go to finish a product; as
when, for instance, the 50 or 60 spinners in a factory strike, and in
consequence, from 700 to 800 other workmen are thrown out of
employment and forced into idleness against their will. What might
not have been the consequence of the great union of the coal miners
of Durham and Northumberland, the members of which numbered
40,000 men, and stopped work from April to the beginning of
September, 1864, so that at last it became necessary to carry Scotch
coal to Newcastle! Compare Engels, Lage der arbeitenden Klassen
in England, 314 ff.
[176-10] The English unions even forbid their members to exceed
the established time of work, or the established task. Thus, for
instance, a penalty of one shilling for carrying at any time more than
eight bricks in the case of masons, and a similar penalty inflicted on
the person's companions who witness the violation of the rule and

do not report the guilty party. Equality of wages for all members;
piece-wages allowed only when the surplus earned is divided among
one's companions. Hence the complete discouragement of all skill
or industry above the average. If an employer exceeds the
prescribed number of apprentices; if he engages workmen not
belonging to the union; if he introduces new machines, a strike is
ordered. With all this the severest exclusion respectively of one
class of tradesmen by the other. If a carpenter lays a few stones, a
strike immediately! (Quart. Rev., October, 1867, 363, 373.) Rigid
shutting out of the products of one district from another. (Edinburg
Rev., October, 1867, 431.) The poor hand-weavers were thus
prevented going from their over-crowded trade into another. (J.
Stuart Mill, Principles, II, ch. 14, 6.) However, many trades-unions
still seem to be free from these degenerations, and the most
influential unions the most moderate in their proceedings. (Count de
Paris, ch. 8, 9; Thornton, III, ch. 2.) Brentano expressly assured us
that such degeneration of the unions in England is confined to the
building trades-unions. (I, 68, 188.)
[176-11] "They have no notion of contenting themselves with an
equal voice in the settlement of labor questions; they tell us plainly
that what they aspire to is to control the destinies of labor, ... to
dictate, to be able to arrange the conditions of employment at their
own discretion." (Thornton, III, ch. 1.) The membership of the
English trades-unions was estimated, at the Manchester Congress,
June, 1868, at 500,000 by some, and at 800,000 by others. Brentano,
II, 310, speaks of 960,000. Since 1830, there have been frequent
endeavors to effect a great combination, with special organizations
of the different trades. During recent years, there have been even
beginnings of an international organization, although in Germany,
for instance, at the end of 1874, there were 345 trades-unions, with a
membership of over 21,000. (M. Hirsch.) A formal theory of
workmen's unions to culminate in popular representation, in
Dühring, Arbeit und Kapital, 1866, especially, p. 233; while the
American Walker accuses all such combinations, which used

compulsion on any one, of moral high treason against republican
institutions. (Science of Wealth, 272.)
[176-12] The former view, for instance, of Harriet Martineau, "The
tendence of strikes and sticks to produce low wages" (1834) is now
unconditionally shared only by few. When Sterling says that the
momentary success of a strike is followed by a two-fold reaction
which restores the natural equilibrium, viz.: increase of the number
of workmen and decrease of capital (Journal des Econ., 1870, 192),
he overlooks not only the length of the transition time which would
certainly be possible here, but also that an altered standard of life of
the workmen prevents the former, and one of the capitalists the
latter. The Count of Paris and Thornton do not doubt that the
elevation of the condition of the English working classes, as proved
by Ludlow and Jones, is to be ascribed, in part, to the effect of the
trades-unions. Many of the unions work against the intemperance
and quarrelsomeness of their members. The people's charter of
1835, came from the London "workingmen's association."
[176-13] On the great utility of the arbitration courts between
masters and workingmen, by which the struggle for wages is
terminated in a peaceable manner and without any interruption of
work, see Schäffle, Kapitalismus and Socialismus, 659. More
minutely in Thornton, III., ch. 5. Faucher, Vierteljahrsschr., 1869,
III, 302, calls attention to the fact that such "boards" may be abused
to oppress small manufacturers.

SECTION CLXXVII.
WAGES-POLICY.—STRIKES AND THE STATE.

Should the state tolerate the existence of strikes or strike-unions?
Legislation in the past most frequently gave a negative answer to
the question, as well from a repugnance for high wages as for the
self-help of the masses.[177-1] But even leaving the above reasons

out of consideration, every strike is a severe injury to the national
resources in general,[177-2] one which causes that part especially to
suffer from which those engaged in the various enterprises and the
working class draw their income. And, even for the latter, the
damage endured is so great that it can be compensated for only by
very permanently high wages.[177-3] How many a weak man has
been misled by a long cessation from work during a strike, which
ate up his savings, into lasting idleness and a devil-may-care kind
of life. When employers, through fear of strikes, keep all large
orders, etc. secret, the workmen are not in a condition to forecast
their prospects and condition even for the near future. And in the
end a dread of the frequent return of such disturbances may cause
capital to emigrate.[177-4]
However, where there exists a very high degree of civilization,
there is a balance of reasons in favor of the non-intervention of
governments,[177-5] but only so long as the striking workmen are
guilty of no breach of contract and of no crime. Where every one
may legally throw up his employment, there is certainly no
plausible legal objection to all of them doing so at once, and then
forming new engagements. Coalitions of purchasers of labor for the
purpose of lowering wages, which are most frequent though
noiselessly formed, the police power of the state cannot prevent. If
now it were attempted to keep the working class alone from
endeavoring to correspondingly raise their wages, the impression
would become general, and be entertained with right, that the
authorities were given to measuring with different standards.
Where the working classes so sensitively feel the influence of the
government on the state of their wages, they would be only too
much inclined to charge every chance pressure made by the
circumstances of the times to the account of the state, and thus
burthen it with a totally unbearable responsibility. Since 1824,

freedom of competition has prevailed in this matter on both sides in
England.[177-6] The dark side of the picture would be most easily
brightened by a longer duration of contracts of labor.[177-7]
Whether the trades-unions, when they shall have happily withstood
the fermentative process now going on, shall be able to fill up the
void created by the downfall of the economically active
corporations of the latter part of the middle ages, we shall discuss
in our future work, Die Nationalökonomik des Gewerbfleisses. One
of the chief conditions precedent thereto is the strict justice of the
state, which should protect members of the unions from all tyranny
by their leaders, and from violations of the legal rights of non-
members.[177-8]
[177-1] Thus even 34 Edw. III., c. 9. Journeymen builders were
forbidden by 3 Henry VI., c. 1, to form conspiracies to enhance the
rate of wages, under pain of felony. Finally, 39 and 40 George III., c.
106, threatened any one who, by mere persuasion, should induce a
workman to leave his master's service, etc., with 2 months in the
work-house, or 3 months' imprisonment. In France, as late as June
and September, 1791, all conspiracies to raise wages were
prohibited under penalty, the incentive to such prohibition being the
opposition to all intérêts intermédiaries between the intérêts
particulier; and the intérêt general which is characteristic of the
entire revolution. Compare the law of 22 Germinal, 11. The German
Empire on the 16th of August, 1731, threatened journeymen strikers
even with death, "when accompanied by great refractoriness and
productive of real damage." (Art. 15.)
[177-2] The strike of the spinners of Preston, to compel equal wages
with those of Bolton, lasted from October to the end of December,
1836. The spinners got from their treasury 5 shillings a week
(previously 22½ shillings wages); twisters, 2 to 3 shillings; carders
and weavers lived on alms. In the middle of December, the funds of
the union were exhausted. Altogether, the workmen lost 400,000

thalers; the manufacturers, over 250,000; and many merchants
failed. (H. Ashworth, Inquiry into the Origin and Results of the
Cotton Spinners' Strike.) The Preston strike of 1853 cost the
employers £165,000, the workmen, £357,000. (Edinburgh Rev.,
July, 1854, 166.) The North-Stafford puddlers' strike, in 1865, cost
the workmen in wages alone £320,000. Concerning 8 strikes that
failed, mostly between 1859 and 1861, which cost in the aggregate
£1,570,000, of which £1,353,000 were wages lost, see Statist.
Journ., 1861, 503. A great mortality of the children of workingmen
observed during strikes!
[177-3] Watts assumes that the strikers seek to attain, on an average,
an advance in their wages of five per cent. Now, a week is about
equivalent to two per cent. of the year. If, therefore, a strike lasted
one month, the increase of wages it operates must last one and
three-fifths years to compensate the workmen for their loss. A strike
that lasts 12½ months would require 20 years to effect the same, and
this does not include interest on lost wages. (Statist. Journal, 1861,
501 ff.) However, it is possible that the striking workingmen
themselves should lose more than they gained, but that, for the
whole working class, the gain should exceed the loss; since those
who had not participated in the strike would participate in the
increased wages. Thornton is of opinion that employers have won in
most strikes, but surrendered in the intervals between strikes, so that
now English workmen receive certainly £5,000,000 more in wages
than they would be getting were it not for the trades-unions. (III, ch.
3-4.)
[177-4] By the Norwich strike, about the beginning of the fourth
decade of this century, what remained of the industrial life of that
city disappeared. (Kohl, Reise, II, 363 ff.) Similarly in Dublin.
(Quart. Rev., October, 1859, 485 ff.) In Cork, the workingmen's
union, in 1827, allowed no strange workmen to join them, and, it is
said, committed twenty murders with a view to that end. The
builders demanded 4s. 1d. a day wages. This discouraged the
erection of new buildings, and it frequently happened that they

found employment only one day in two weeks. (Edinb.[TN 16] Rev.,
XLVII, 212.) When workingmen struggle against a natural decline
of the rate of wages, they, of course, add to their misfortune.
[177-5] The grounds on which Brentano, following Ludlow and
Harrison, justifies the intervention of the state, have a very
dangerous bearing, inasmuch as they do not suppose, as a condition
precedent, a perfectly wise and impartial governmental authority.
[177-6] 5 George IV., c. 95: "provided no violence is used." Further,
6 George IV., c. 129, and 122 Vict., c. 34. The law of 1871 declares
the trades-unions lawful, allows them the right of registration, and
thus empowers them to hold property. In France, the law of May 25,
1864, alters articles 414 to 416 of the Code pénal to the effect that
only such strikes shall be punished as happen à l'aide de violences,
voies de fait, manœuvres frauduleuses; also coalitions against the
libre exercise du travail à l'aide d'amendes, défenses, proscriptions,
interdictions. But these amendments were rendered rather
inoperative by the fact that meetings of more than 20 persons could
be held only by permission of the police.
[177-7] As, for instance, the coal workers in the north of England
required a half year's service. So long as the trades-unions consider
themselves, by way of preference, as instruments of war, it is
conceivable how they oppose all binding contracts for labor. So now
among the German journeymen book-printers, and so, also, for the
most part, in England. (Brentano, II, 108.) In quieter times, when
the trades-unions shall have become peace institutions, this will be
otherwise. We cannot even enjoy the bright side of the freedom of
birds without enduring its dark side! In Switzerland, breaches of
contract by railroad officers are guarded against by their giving
security beforehand; in manufactures, by the holding back of from 3
to 14 days' wages. (Böhmert, Arbeiterverhältnisse, II, 91, 388 ff.)
[177-8] In Switzerland, the trades-unions have shown themselves
very powerful against the employers of tradesmen, but rather
powerless against manufacturing employers, and thus materially

increased the already existing inferiority of the former. (Böhmert, II,
401.) They may, however, by further successful development,
constitute the basis of a new smaller middle class, similar to the
tradesmen's[TN 17] guilds at the end of the middle ages; and indeed
by a new exclusiveness, in a downward direction. This would be a
bulwark against the destructive inroads of socialism similar to that
which the freed peasantry in France were and still are. While this is
also Brentano's view, R. Meyer, Emancipationskampf des vierten
Standes, 1874, I, 254 ff., calls the trades-unions a practical
preparation for socialism to which the English "morally went over"
in 1869 (I, 751); which indeed loses much of the appearance of truth
from the fact that Marx (Brentano, Arbeitergilden, II, 332) and the
disciples of Lassalle (Meyer, I, 312) hold the trades-unions in
contempt. John Stuart Mill approves of all trades-unions that seek to
effect the better remuneration of labor, and opposes all which would
bring the wages paid for good work and bad work to the same level.
(Principles, II, ch. 14, 6; V, ch. 10, 5.) Compare Tooke, History of
Prices, VI, 176. Reports of the Commissioners appointed to inquire
into the Organization and Rules of Trades-Unions, 1857.

SECTION CLXXVIII.
WAGES-POLICY.—MINIMUM OF WAGES.

The demand[178-1] so frequently heard recently, that the state should
guaranty an "equitable" minimum of wages, could be granted
where the natural rate of wages has fallen below that minimum,
only on condition that some of the working class in the distribution
of the wages capital (no longer sufficient in all the less profitable
branches of business) should go away entirely empty handed.
Hence, as a rule, in addition to that wages-guaranty, the guaranty of
the right to labor is also required. But as useful labor always finds
purchasers (the word "useful" being here employed in the sense of
the entire economy of a people, and understood in the light of the

proper gradation of wants and the means of satisfying them), such a
right to labor means no more and no less than that the state should
force labor which no one can use, upon others.[178-2] Something
similar is true of Louis Blanc's proposition that the rate of wages of
the workmen should be determined and regulated by their own
votes and among themselves.[178-3]
All such measures are injurious in proportion as they, by extending
aid and the amount of the minimum, go beyond the limits of
benevolence, and approach those of a community of goods. (§ 81
ff.) However, if they would be lasting and not pull workmen
rapidly down to the very depths of universal and irremediable
misery, these measures should be accompanied by the bestowal of
power on the guarantor to hold the further increase of the human
family within bounds.[178-4]
The condition of workmen can be continued good or materially
improved only on condition that their numbers increase less rapidly
than the capital destined for wages. The latter increases usually and
most surely by savings. But only the middle classes are really
saving. In England, for instance, the national capital increases
every year by at least £50,000,000, while the working classes spend
at least £60,000,000 in tobacco and spirituous liquors, i. e., in
numberless instances, only for a momentary injurious enjoyment
by the adult males of the class, one in which their families have
almost no share. According to this, every compulsory rise in wages
would be a taking away from the saving class and a giving to a
class that effect no savings. Is not this to act after the manner of the
savages who cut down a fruit tree in order more conveniently to
relish its fruit?[178-5]
Benjamin Franklin calls out to workmen and says: If any one tells
you that you can become rich in any other way than through

industry and frugality, do not listen to him; he is a poisoner! And,
in fact, only those changes permanently improve the condition of
the working classes which are useful to the whole people: enhanced
productiveness of every branch of business in the country,
increased capital, the growth (also relative) of the industrial middle
classes, the greater education, strength of character, skill and
fidelity in labor of workmen themselves. Much especially depends
upon their foresight and self-control as regards bringing children
into the world. Without this latter virtue even the favorable
circumstances would be soon trifled away.[178-6]
[178-1] Compare, besides, the Prussian A. L. R., II, 19, 2. In Turgot,
droit du travail, and droit au travail are still confounded one with
the other. Œuvres éd. Daire, II, 302 ff; especially 306. In such
questions, people generally think only of factory hands. But have
not writers just as good a droit au travail to readers whom the state
should provide them with, lawyers to clients and doctors to patients?
[178-2] L. Faucher calls the droit au travail worse than the equal
and compulsory distribution of all goods, because it lays hands on
not only present products but even on the productive forces. It
supposes that unlimited production is possible; that the state may
regulate the market at pleasure to serve its purposes; that, in fact, the
state can give without having first taken what it gave. (Mélanges
d'Economie politique, II, 148 ff.) The French national assembly
rejected the "right to labor" on the 15th of September, 1848, by 596
ayes to 187 nays, after the provisional government had proclaimed
it, February 25. Le Droit au Travail à l'Assemblée nationale avec des
Observations de Faucher, Wolowski, Bastiat etc., by J. Garnier,
Paris, 1848.
[178-3] L. Blanc, De L'Organization du Travail, 1849.
[178-4] "Every one has a right to live. We will suppose this granted.
But no one has a right to bring creatures into life to be supported by
other people. Whoever means to stand upon the first of these rights

must renounce all pretension to the last.... Posterity will one day ask
with astonishment what sort of people it could be among whom
such preachers could find proselytes." (J. S. Mill, Principles, II, ch.
12.)
[178-5] Compare Morrison, loc. cit. Quarterly Rev., Jan. 1872, 260.
The English savings in the savings banks, between 1839 and 1846,
increased yearly in amount only £1,408,630, and scarcely half of
this came from wages-workmen in the narrower sense of the term.
What the latter contribute to the fund for the old and sick is not
really productive capital but only individually deferred
consumption. Let us suppose that a man had an income of $3,000 a
year, of which he laid out yearly $2,000 ($1,000 for wages, $1,000
for rent and interest[TN 18] on capital), and that he capitalizes $1,000.
If now this man were, either through philanthropy or in furtherance
of socialism, to double the wages he paid, the result would not be
detrimental to the economic interests of the whole country only on
the supposition that working classes who received the increased
wages should either save what he is no longer able to save, or that
by inventions or greater personal skill, etc., they should increase the
national income.
[178-6] According to Hildebrand's Jahrbb., 1870, I, 435, 193, North
American workmen, the quality of work being supposed the same,
now accomplish from 20 to 30 per cent. less than before 1860. Thus,
in 1858, in New York, a steam engine was manufactured for
$23,000, in 2,323 work days. In 1869, a similar one was built for
$40,000 in 3,538 days. In the former case, the manufacturer made a
profit. In the latter, he lost $5,000.
John Stuart Mill, II, ch. 13. Against the "philanthropists" who find it
hard to preach to the poor, the only efficacious means of improving
their condition, Dunoyer, L. du T., IV, ch. 10, says: The rich do
employ it, although they have much less need of it! Even Marlo
admits that a guaranty of the right to labor, without any measures to
limit population, would, in a short time, and irredeemably lead the
country to destruction. (Weltökonomie, I, 2, 357.) von Thünen, der

isolirte Staat., II, 1, 81 ff., would take a leap out of the vicious circle
that those who live by the labor of their hands can produce no rise in
their wages, because they are too little educated to hold their
increase properly in check; and that, on the other hand, they cannot
give their children a decent education, because their wages are too
low; by suggesting that educational institutions should be
established by the state, and that these should elevate the subsequent
generation of workmen intellectually.

CHAPTER IV.

INTEREST ON CAPITAL.

SECTION CLXXIX.
THE RATE OF INTEREST IN GENERAL.

Interest on capital,[179-1] or the price paid for the use of capital,
should not be confounded with the price of money (§ 42); although
in common life people so frequently complain of want of money
where there is only a want of capital, and sometimes even when
there is a superabundance of money.[179-2] This error is connected
with the fact, that for the sake of convenience, loans of capital are
so often effected in the form of money and that they are always at
least estimated in money; but neither of these things is essential.
In reality, however, we as seldom meet with interest[179-3] pure and
simple, as we do with rent pure and simple. A person who works
with his own capital can, at best, by a comparison with others,

determine where, in the returns of his business, wages stop and
interest begins.[179-4] And even in the loaning of capital, it depends
largely on supply and demand, whether the creditor shall suffer a
deduction in consequence of the absence of care and labor
attending his gain, and whether the debtor, in order to get some
capital at all, shall sacrifice a part of the wages of his labor.[179-5]
When Adam Smith assumes it to be the rule that the "profit of
stock" is about twice as great as the "interest of money,"[179-6] it is
evident that a considerable amount of what is properly wages or
profit of the employer (Uhternekmer = undertaker) is included in
the former.
Many businesses have the reputation of paying a very large interest
on the capital employed in them, when in reality they only pay the
undertaker of them wages unusually high as compared with the
amount of capital employed in them. Apothecaries, for instance, are
called in some places "ninety-niners," because it is said that they
earn 99 per cent. To discover the error, it would be sufficient to
inquire the rate of interest on the capital borrowed by the
apothecary on hypothecation, for instance, to enlarge his industry.
But on the other hand, such a man who has more than any other
manufacturer to do with the most delicate materials and with them
in greater variety, requires proportionately greater caution and
knowledge. Besides, as the guardian of the health and life of so
many, and even as the comptroller of physicians, he should be a
man who inspired universal and unqualified confidence.[179-7] By
the rate of interest customary in a country, we mean the average
rate of the interest on money-capital employed safely and without
trouble.
[179-1] In the case of fixed capital, we generally speak of rent; in
the case of circulating capital, of interest. If interest be conceived as
a fractional part of the capital itself, the relation between the two is

called "the rate of interest," most generally expressed as a
percentage, and for one year.
[179-2] In Russia, great depreciation of the assignats, and yet the
people complained of a "want of money." (Storch, Handbuch, II,
15.) According to the San Francisco correspondent of the Times,
Jan. 31, 1850, one per cent. a day discount was paid there! Compare
North, Discourse on Trade, 11 seq.
[179-3] Gross interest and net interest corresponding to the
difference between gross product and net product.
[179-4] This is the natural rent of capital in contradistinction to the
stipulated rent. (Rau, Lehrbuch, I, § 223.)
[179-5] Thus, for instance, a so-called beginner who is conscious of
possessing great working capacity, but who possesses for the time
being little credit. Tooke, Considerations on the State of the
Currency, 1826, distinguishes three kinds of capitalists: a, those who
are averse to running any risk whatever or incurring any trouble, or
are not able to incur any risk or trouble, for whom every great
increase of the sinking fund lowers the rate of interest, and every
war loan raises it; b, those who will run no risk, but who are not
averse to the trouble of looking after their investments and of
endeavoring to obtain a higher rate of interest; c, such as, to obtain a
higher rate of interest, unhesitatingly risk something. Borrowers he
divides thus: a, those who employ the borrowed capital and their
own in such a way as to enable them to meet their obligations and
besides to earn a reasonable profit; b, those who need others' capital
to make up for the momentary failure of the productiveness of their
own; lastly c, unproductive consumers.
[179-6] Wealth of Nat., I, ch. 9. The gross product of English cotton
industry was, in 1832, estimated at £32,000,000, viz: £8,000,000
worth of material, £20,000,000 wages, £2,000,000 interest,
£2,000,000 undertaker's profits. (Schön, Nat. Oek, 104.)

[179-7] Adam Smith, I, ch. 10, 1: where the reasons why a shop-
keeper in a small town apparently gets a larger interest than one in a
large city, and yet gets rich less frequently, are developed. The high
profit made from industrial secrets, Adam Smith very correctly
considers wages (I, ch. 7). Why not also that made by inn-keepers?
(I, ch. 10, 1.) When the returns of a business differ according to
circumstances which depend on the person of the conductor of the
business himself, and may by him be transferred into another
business, etc.; when the competition in it is determined by personal
agreeableness or disagreeableness, it is evident that the larger
returns are to be ascribed rather to the highness of wages than of the
rate of interest. The profit also which a second-hand hirer makes is
wages. (Riedel, Nat. Oek., 376.)

SECTION CLXXX.
RATE OF INTEREST IN GENERAL.—ITS LEVEL.

Within the limits of the same national-economic territory, the
different employments of capital tend uniformly to pay the same
rate of interest.[180-1] If one branch of business were much more
profitable than another, it would be to the interest of the owners of
capital to allow it to flow into the former and out of the latter, until
a level was reached.[180-2]
The most noticeable exception to this rule is only an apparent one.
The revenue (Nutzung) derived from the use of capital must not be
confounded with its partial restoration.[180-3] Thus, for instance, the
rent of a house, if the entire capital is not to be sooner or later
consumed entirely, must embrace, besides a payment for the use of
the house, a sum sufficient to defray the expenses of repairing it,
and even to effect a gradual accumulation of capital for the purpose
of rebuilding. The risk attending the investment of capital plays a

very large part and must be taken into special consideration. If the
risk in a business be so great that ten who engage in it succeed and
ten fail, the returns of the former, which are more than double those
usual in the country, in reality pay, when the ten who failed are
taken into the account, only the rate of interest customary in the
country. The risk may depend on the uncertainty of the person to
whom the capital is confided;[180-4] on the uncertainty of the branch
of business in which it is intended to employ it,[180-5] or on the
uncertainty of the commercial situation in general; but especially
may it depend on the uncertainty of the laws.[180-6] The temporary
lying idle of capital, for instance, in dwelling houses at bathing
places during the winter season, increases the rate of interest much
more than it does the rate of wages in the corresponding case of the
lying idle of labor; for the reason that there is something
pleasurable in the repose of the latter. (Senior.) On the whole, the
vanity of mankind has an effect upon the rate of interest similar to
that which it has on the rate of wages. (See § 168.) It causes the
small chances of loss to be estimated below their real value, and the
extraordinary chances of gain above it.[180-7]
[180-1] Compare Harris, Essay on Money and Coins, 13. Per
contra, Ganilh, Dictionnaire analyt., 107. According to Hermann,
Staatsw. Untersuchungen, 147, a product which withdraws an
amount of capital = a from the immediate use of its owner for n
months must bring in in its price a surplus, over and above the
outlay of capital, which would bear the same ratio to the profit from
another product which employed an amount of capital = b, m
months, that an bears to bm.
[180-2] The class of bankers, etc. which precisely in the higher
stages of civilization is one so highly developed, is called upon to
adjust these differences.
[180-3] Life annuities and annual revenues, à fonds perdu.

[180-4] Hence, for instance, good men engaged in industrial
pursuits who employ borrowed capital productively pay lower
interest than idlers who are suspected of desiring only to spend it in
dissipation. High house-rent usually paid by proletarians.
[180-5] Thus even in Anderson's time, it was necessary that the
profit of one good year in the whale fishery should compensate for
the damage caused by six bad ones. (Origin of Commerce, III, 184.)
Slave-traders made their calculations to lose from three to four out
of five expeditions. (Athenæum, May 6, 1848) Similarly in
smuggling and contraband. High rate of interest in gross adventure
trade and bottomry contracts, frequently 30 and even 50 per cent.; in
ancient Athens, for a simple voyage to the Black Sea, 36 per cent.,
while the rate of interest customary in the country was only from 12
to 18 per cent.; the interest paid by rented houses only 8-1/7, and by
land leases only 8 per cent. (Bockh, Staatshaushalt der Athener, I,
175 ff.; Isaeus de Hagn., Hered., 293) In Rome, before Justinian's
time, maritime interest was unlimited. (Hudtwalker, De Foenore
nautico Romano, 1810.) And so in the manufacture of powder, the
frequent explosion of the mills has to be taken into account: in
France and Austria, 16 per cent. per annum. (Hermann, Principien,
119.) Here belong those new enterprises which, when they succeed,
pay a high profit. Thaer, in reference to this insurance premium,
says: if the capital employed to purchase a landed estate yields 4 per
cent., the inventory (Inventar) should bring in at least 6, and the
working capital 12 per cent. (Ration. Landwirthschaft.)
[180-6] Compare supra, § 91; infra, §§ 184, 188.
[180-7] Thus Friedr. Perthes, in Politz, Jarhbüchern, Jan., 1829, 42,
thinks that the publication of scientific books in Germany, since
1800, caused, on the whole, a loss of capital. In the Canadian
lumber trade, also, speculators, in the aggregate, lost more than was
gained. Yet the business goes on because of its lottery character.
(John Stuart Mill, II, ch. 15, 4.) In lotteries, it is certain that the
aggregate of players lose. So too in speculation in English stocks, on
account of the costs to be paid the state. In the case of frightful

losses, which may afford food for the imagination, the reverse is
found. Thus, for instance, in England, fire insurance, stamp duties
included, was paid for at a rate five times as high as mathematical
calculation showed it to be worth. (Senior, Outlines, 212 ff.) Much
here depends naturally on national character, which, in England for
instance, or in the United States, is much more adventurous than in
many quiet regions of continental Europe.

SECTION CLXXXI.
RULE OF INTEREST IN GENERAL.—CAUSES OF DIFFERENT
RATES.

The real exceptions to the above rules are caused by a prevention
of the leveling influx and outflow of capital. Among nations in a
low stage of civilization, there is wont to be a multitude of legal
impediments in this respect. The existence of a difference of
classes, of privileged corporations, etc., not only restrains the
transition of workmen, but also of capital from one branch of
industry to another. But even the mere routine of capitalists, that
blind distrust of everything new so frequently characteristic of
easily contented men, may produce the same result.[181-1] In the
higher stages of civilization, patents for inventions and bank
privileges, are causes of a lastingly higher rate of interest than is
usual in the country.[181-2] Finally, since in many enterprises only a
large amount of capital can be used at all, or at least with most
advantage, the aggregation of which from many small sources is
ordinarily much more difficult than the division of a large one into
small fractional parts; the rate of interest for very small amounts of
capital, and especially in the higher stages of civilization, is usually
lower than that of large amounts of capital. We need only mention
interest paid by savings-bank investments.[181-3]

If circulating capital has been changed into fixed capital, its yield
will depend upon the price of the particular goods in the production
of which it has been made to serve. Compared with the cost of
restoration of fixed capital, this yield may, in a favorable case,
constitute an extraordinarily high rate of interest, in an unfavorable
a very low one; and the former of these two extremes has a greater
chance of being realized, in proportion as it is difficult to multiply
fixed capital of the same kind; the latter, the more exclusively it
can be employed in only one kind of production, and the longer
time it takes to be used up by wear.[181-4] When fixed and
circulating capital coöperate in production, the latter, because it can
be more easily withdrawn, but also more easily replaced, first takes
out its own profit, that is the profit usual in the country and leaves
all the rest to the former. When fixed capital is sold, practically no
attention is paid to what it originally cost. The purchaser pays only
for the prospective revenue it will yield, which he capitalizes at the
rate of interest usual in the country. The seller henceforth looks
upon his gain as an accretion to capital, his loss as a diminution of
capital, and no longer as high or low interest.[181-5] That accretion
might be considered the wages, paid once for all, for the intelligent
labor which governed the original investment of the capital, and
vice versa.
[181-1] Thus the rate of interest in the Schappach valley remained
for a long time much lower than in the vicinity, for the reason that
the peasantry who had grown rich through the lumber trade
possessed notwithstanding little of the spirit of enterprise. (Rau,
Lehrbuch, I, § 233.)
[181-2] Here the law produces a species of artificial fixation.
[181-3] Von Mangoldt, Unternehmergewinn, 150.

[181-4] In other words, the more fixed they are. Thus, for instance,
dwelling houses in declining cities, canals, etc. which have been
supplanted by better commercial routes; or again, the shafts and
stulms of a mine which has been abandoned. When Versailles
ceased to be a royal residence, the value of inhabited houses sank to
one-fourth of what it had been. (Zinkeisen in Raumer's histor.
Taschenbuch, 1837, 426.) A rate of interest greater than that usual in
a country is seldom found where freedom of competition prevails,
since it is necessary there to distinguish between rent and interest on
capital. When in an open city, the capital employed in the
construction of dwelling houses detractis detrahendis pays 8 per
cent., while the rate of interest customary in the country is only 4
per cent., the supply of houses will grow continually greater. Only
the difficulties in the way of transferring capital from one business
to another could here retard the leveling process, which where the
political prospect for instance was bad, might last a long time—one
of the principal reasons why, in 1848, the rent of houses declined
much less than their purchase prices. The conjuncture was not
serious enough to prevent the increase of population; but it entirely
stopped the building of new houses. On the other hand, a bridge or
railroad company may maintain a high rate of profit because
competition cannot exist in the face of the great expense such
enterprises require; but especially because the party who has here
the advantage of priority may lower the price of transportation to
such a point as to entirely discourage his rival. Compare Hermann,
Staatsw. Untersuchungen, 145 ff. Interesting example of the London
gas and water companies in Senior, Outlines, 101.
[181-5] Thus, for instance, Leipzig-Dresden railroad stock cost
originally 100 thalers per share, and was taken at that rate. The
yearly dividends amounted in 1856 to 13 thalers; that is, 13 per cent.
for the original stockholders. But a person who on the 30th
September, 1856, paid 285 thalers for a share, received but an
interest of 4½ per cent. on his capital. It is characteristic, how Serra,
Sulle Cause, etc., 1613, I, 9, calls the high and the low rate of
interest prezzo basso e alto delle entrate.

SECTION CLXXXII.
VARIATIONS OF THE RATE OF DISCOUNT.

The fact that in commerce, etc., the rate of interest on capital
loaned for short periods of time (discount) is subject to great
fluctuations, while the mortgage rate of interest, for instance,
remains the same throughout, depends on similar causes.[182-1] Yet
there are contingencies in trade which, when taken immediate
advantage of, promise enormous profits, but which may disappear
within a month; risks of the most dangerous kind which can be
conjured only by the immediate aid of capital. These are both
sufficient grounds of a high rate of interest. Again, there are times
of the profoundest calm in the commercial world, during which
capitalists are perfectly willing to make loans at a low rate of
interest, provided they are sure to be able to get back their capital
with the first favorable breeze that blows. Agriculture is too
immovable to come opportunely to the assistance of capitalists,
here as a receiver and there as a loaner of capital. As the cycle of its
operations is gone through usually only in a series of years, sudden
influxes or outflows of capital would cause it the greatest injury.
[182-2]

[182-1] Nebenius, Oeff. Credit, I, 74 ff. Thus, Hamburg discount
towards the end of the last century fluctuated between 2½ and 12
per cent., while the capital invested in agriculture brought an
interest almost invariably of 4 per cent. (Büsch, Geldumlauf, VI, 4,
19.) At the same time, in Pennsylvania, the usual rate of interest was
6 per cent. per annum, and the rate of discount not unfrequently
from 2 to 3 per cent. a month. (Ebeling Geschichte und
Erdbeschreib. von Amerika, IV, 442.) During the crisis of 1837, it
happened that ¼ per cent. a day was paid. (Rau, Archiv. N. F. IV,
382.) In the Prussian ports, during the crisis of 1810, it is said that in
July the rate of discount was 2½ per cent. a month. (Tooke,

Thoughts and Details, I, 111.) In Hamburg and Frankfort the rate of
discount rose in the spring of 1848, but declined in June to 2; until
December it was 1¼, until the summer of 1849, ¾ per cent. (Tüb.
Zeitschr., 1856, 95.) Rate of discount in France, about 1798, at least
2 per cent. a month. (Büsch, loc. cit., IV, 52.) Half a year previous,
capital employed in the purchase of land paid an interest of from 3
to 4 per cent. Legal interest was 5 per cent.; discount, at most, 6 per
cent.; in very prosperous times 8-9, per cent. (Forbonnais,
Recherches et Considérations, I, 372.)
[182-2] Remarkable case in Cicero's time in which bribery, carried
on on a large scale, raised the rate of discount from 4 to 8 per cent.
Cicero ad. Quint. M, 15; ad. Att. IV, 15.

SECTION CLXXXIII.
EFFECT OF INCREASED DEMAND FOR LOANS.

The price paid for the use of capital naturally depends on the
relation between the supply and demand, and especially of
circulating capital. The increase of the supply need no more
unconditionally lower the rate of interest than the price of any other
commodity. If 50 hunters kill 1,000 deer yearly, and give 100 deer
per annum as interest to the capitalists who provided them with
ammunition and rifles, a second capitalist with an equal number of
rifles and an equal amount of ammunition may appear on the scene.
If now 2,000 deer a year are killed, the rate of profit of the
capitalists will probably remain the same. But if the woods are not
rich enough in game for this, or the hunters not numerous enough,
too indolent, or too easily satisfied, the rate of interest falls.[183-1]
The difficulties in the way of the desired increase of capital are
here of great importance. The smaller the surplus over and above
their absolutely necessary wants, which the people produce, the

less their tendency to make savings, the less the inclination to
capitalization; and the less the security afforded by the law is, the
higher must the rate of interest be to induce people to face these
difficulties. We may very well transfer the idea of cost of
production to this condition.[183-2]
The demand for capital depends, on the one hand, on the number
and the solvability of borrowers, especially of non-capitalists like
landowners and workmen; and, on the other hand, on the value in
use of the capital itself. Hence the growth of population is, other
circumstances being the same, a means to raise the rate of interest;
because it infallibly increases the competition of borrowers of
capital, even if the increased rate must take place at the expense of
wages. The solvability or paying capacity of the land-owning class
as contrasted with the capitalists can, in the last analysis, depend
only on the extent and fertility of their lands and on the quality of
their agricultural husbandry; the solvability or paying capacity of
the working class, only on their skill and industry. Where these
have grown, an increase of the rate of interest may be found in
connection with an absolute growth of the rate of wages and of
rent, because the aggregate income of the nation has become
greater.
The value in use of capital, which is more homogeneous in
proportion as it has the character of circulating capital (res
fungibiles) is, in most instances, synonymous with the skill of the
working class, and the richness of the natural forces connected with
it. The deciding element, therefore, is the yield of the least
productive investment of capital which must be made to employ all
the capital seeking employment. This least productive employment
of capital must determine the rate of interest customary in a country
precisely as cost of production on the most unfavorable land

determines the price of corn (§§ 110, 150), and as the result of the
work of the laborer last employed does the rate of wages. (§ 165.)
What portion of the total national income, after deduction is made
of rent, shall go to the capitalists and what portion to the working
class, will depend mainly on whether the capitalists compete more
greedily for labor or the laboring classes for capital.[183-3] If, for
instance, capital should increase more rapidly than population,
there must be a relative increase in wages, and vice versa.[183-4] This
is true especially of that peculiar kind of higher wages which we
shall (§ 145, ff.) designate as the "undertaker's profit." The smaller
the number of persons engaged in enterprises is, in comparison
with the number of retired persons who live on their rents, incomes,
etc., the smaller is the portion of the so-called net profit of
enterprise the latter must be satisfied with in the shape of interest.
[183-5]

[183-1] It is one of Ricardo's (Principles, ch. 21) chief merits, that
he demonstrated the groundlessness of the opinion that the mere
increase of capital must, on account of the competition of
capitalists, lower the rate of interest, as is assumed by Adam Smith,
I, ch. 9, J. B. Say, Traité, II, 8, and others. Compare also, John
Stuart Mill, Principles, IV, ch. IV, 1.
[183-2] Storch, Handbuch, II, 20.
[183-3] Frequent withdrawals of capital must, other circumstances
being the same, temporarily raise the rate of interest. In the long run,
however, the question is decided by this: whether public opinion
considers labor a greater sacrifice than the saving of capital.
Compare Roesler, loc. cit., 8.
[183-4] Compare Hermann, Staatsw. Unters., 240 ff. Very much
depends on whether the new increased consumption (of workmen
when wages are rising, of capitalists when wages are declining) is of

goods which are mainly the product of large capital, large factories,
etc., or chiefly of common labor, (von Mangoldt, Grundriss, 155
seq.) When Adam Smith suggests that the relation between wages
and the profit of capital is determined by this: whether there is a
market demand for more work or more commodities, for more
"work to be done" or "work done" (I, ch. 7), he is, spite of
appearances, very unsatisfactory. Malthus distinguishes a restrictive
principle of the rate of interest, viz.: the return made to the least
productive agricultural capital, and a regulative one, viz.: the
reciprocal relation between demand and supply of capital and labor.
(Principles, ch. 5, sec. 4.) Ricardo, ch. 6, makes the profit of capital
at all times and in every country depend on the quantity of labor
which it is necessary to expend on the land which pays no rent, in
order to satisfy the wants of workmen—a very correct theory.
Only Ricardo himself (ch. 21) and his school postulate altogether
too unconditionally that their wants would always coincide with the
minimum of maintenance or support. Thus, for instance, J. S. Mill,
Principles, IV, ch. 3, 4. However, Mill instead of Ricardo's "wages"
employs the better expression, "cost of labor." Senior teaches that
the distribution of the aggregate result between laborers and
capitalists depends on the anterior course of both classes: on the
value of the capital previously employed by capitalists to produce
the means of satisfying working men's wants, and on the number of
workmen which the previous laboring population have brought into
existence. (Outlines, 188 ff.) Concerning von Thünen's vain attempt
at a general formula, see supra, § 173. Fourier's idea that 5/12[TN 19]
of the product should be distributed among labor, 3/12 among talent,
and 4/12 among capital, is entirely baseless. (N. Monde, 309 ff.)
Considérant, Destinée sociale, 192 ff. As early a writer as H. Boden,
Fürstliche Machtkunst, 1700 and 1740, 42, came strikingly near the
truth. According to him, a low rate of interest is produced by four
circumstances: surplus capital, a dearth of landed estates, a want of
credit and exact justice, and lastly, the heavy taxation of capital.

[183-5] Thus, in the last century, Spanish capitalists loaned capital
readily to sure commercial companies, at from 2 to 3 per cent. per
annum. (Bourgoing, Tableau de l'Espagne, I, 248.) The
contemporary low rates of interest in Hannover, Büsch, Geldumlauf,
VI, 4, 12, endeavors to explain by the absence of opportunities for
investment, as no one dared to loan to any extent on fiefs or on the
land of the peasantry, and because there was no law governing bills
of exchange, etc.

SECTION CLXXXIV.
HISTORY OF THE RATE OF INTEREST.

Among barbarous nations, the loaning of capital is wont to happen
so seldom, and to be limited so strictly to near relations, that it does
not yet occur to any one to stipulate for a regular compensation
therefor.[184-1] But, however, when they pass from this state to
interest proper, the rate must be, of course, very high.[184-2] The
premium for insurance is here very great, the possibility and
inclination to accumulate capital exceedingly small. Even of the
existing supply of capital, a great part remains idle, because the
faculty and the institutions necessary to concentrate it and permit it
to flow are wanting. (§ 43.) The unskillfulness of labor is more
than overcome by the excess of fertile and naturally productive
land, of rich sites still unoccupied, the cream of which, as it were,
needs only to be culled. Population is indeed sparse, but the usually
prevailing absence of freedom of the lower classes prevents wages
claiming the full benefit of competition.[184-3] This last
circumstance is especially important.[184-4] For a given amount of
the national income and of rent, every depression of wages must
obviously raise the rate of interest, and every enhancement of
wages lower it.[184-5]

[184-1] Tacit., Germ., 26; Marculf, Form., 18, 25 ff., 35; Savigny,
Ueber das altrömische Schuldrecht, in the transactions of the Berlin
Academy, 1833, 78 seq.
[184-2] According to the Lex Visig., V, 5, § 8, the maximum rate of
interest allowed on loans of money was 12½ per cent., and on other
res fungibiles, 50 per cent. From the 12th to the 14th century, the
Lombards and the Jews in France and England took generally (?) 20
per cent. a year. (Anderson, Origin of Commerce, a., 1300.) Philip
V. of France, in 1311, fixed the rate of interest at the fairs in
Champagne at 15 per cent. (a species of discount) at most, and at a
maximum everywhere of 20 per cent. (Ordonnances de la France, I,
484, 494, 508.) The legal rate of interest in Verona, in 1288, was
fixed at a maximum of 12½ per cent.; in Modena, 1270, at 20 per
cent. (Muratori, Antiquitt. Ital., I, 894); in Bresica, 1268, at 10 per
cent. (v. Raumer, Geschichte der Hohenstaufen, V, 395 ff.) Frederick
II. wished to reduce it to 10 per cent. for Naples, but failed.
(Bianchini, Storia delle Finanze di Nap., I, 299.) The tables of
Cibrario, Economia polit. del medio Evo., III, 380, for 1306-1399,
show for upper Italy interest to have been at 20, 15, 14, 10, and also
5½ per cent. About 1430 the Florentines, in order to moderate the
enormously high rate of interest, called Jews to their city, and the
latter promised not to charge over 20 per cent. (Cibrario, III, 318.)
In the Rhine country, the Kowerzens, during the 14th century, took
from 60 to 70 per cent., for which they had, however, to pay a heavy
tax to the archbishop. (Bodmann, Rh. Alterthümer, 716.) Of Jewish
maximum rates of interest, in the 14th and 15th centuries, see
Stobbe, Juden in Deutschland während des M. Alters, 103, 110, 234
seq.; Hegel, Strassb. Chr., II, 977, 984.
The rate of interest usual in these countries must not however be
calculated from the data furnished by these usurious rates and fixed
rates of interest, simply. In Germany, the rate of interest promised
by princes in the 13th and 14th centuries was usually 10 per cent.
The Frankfort municipal loans made by Jews in the 14th century
bore interest at the rate of 9, 11-2/3, 13, 18, 26, and even 45 per

cent. (Kriegk, F.'s Bürgerzwiste, 343, 539.) The rate of interest in the
purchase of annuities continually declined between 1300 and 1500,
especially in the time of the emancipation of manual laborers. Old
Base documents give, between 1284 and 1580, as the highest rate,
11-3/9, and as the least, 5 per cent. The latter became more and
more usual later, especially in the sale of house-rents (Hauszins), so
that in 1841 all annuities (Renten) might be canceled by a payment
of their amounts multiplied by 20. Until the beginning of the 15th
century, in the city, the rule was 6 to 7 per cent.; outside of it, 8 to
10 per cent. (Arnold, Geschichte des Eigenthums in den deutschen
Städten, 222 seq., 227 seq.) According to the Bremen Jahrb. of
1784, 164 seq., the rate of interest in the case of Handfesten, in
1295, = 10 per cent., gradually sank: in the 15th century it was
never over 6-2/3; after 1450, generally 5; in 1511 only 4 per cent. In
1441 ff., in Augsburg, people were satisfied with a business profit of
7-2/3 per cent., while the usual rate of interest paid by house-rent,
etc. was 5 per cent. (Hegel, Augsb. Chr., II, 134 seq., 157.)
Handsome tables in the rate of interest in the purchase of annuities
for all Germany, from 1215 to 1620, give as the rule, 7 to 10,
scarcely ever over 15 per cent., in M. Neumann, Geschichte des
Wuchers, 266 ff. For the upper Rhine, compare Mone's Zeitschr., 26
ff. Among the Fathers of the councils of Constance and Basil 5 per
cent. was considered equitable. Compare F. Hammerlin, 1389-1457,
De Emtione et Venditione unius pro viginti. Russian interest at 40
per cent., according to the laws of Jaroslaw (ob. 1054 after Christ).
Karamsin, Russ. Gesch., II, 47.
[184-3] The high rate of interest in many countries at present may
be thus accounted for. In the United States, during the last century,
less than 8 per cent. was seldom paid. (Ebeling, III, 152.) According
to M. Chevalier, Lettres sur l'Amérique du Nord, 1836, I, 59, the
rate of interest in Pennsylvania was 6, in New York, 7, in most of
the slave states, 8-9; in Louisiana, 10 per cent. In South Australia
(1850) it was, with full security, 15-20 per cent. (Reimer,
Südaustralien, 39.) In the West Indies, about the end of the last
century, a strong negro might produce a revenue equal to one-fourth

of his capital value. (B. Edwards, History of the British West Indies,
II, 129.) In Brazil, the lowest rate of interest was at 9 per cent., and
12-18 per cent. was nothing unusual. (Wappäus, M. and S. Amerika,
1871, 1413.) In Cuba, for the government 10, for private parties, 12
to 16 per cent. (Humboldt, Cuba, I, 231.) In Potosi, in 1826, Temple
got 30 per cent. interest on chattel mortgage, and from 2 to 4 per
cent. a month was offered, while the rate of interest in Buenos Ayres
amounted to 15 per cent. per annum. (Temple, Travels, II, 217.) In
Russia, Storch, Handbuch,[TN 20] I, 262, speaks of 8-10 per cent.
According to v. Haxthausen, it was, in the interior, never less than
from 8 to 12 per cent. per annum; at Kiew and Odessa, 1¼, 1½ and
2 per cent. per month. (Studien, I, 58, 467; II, 495.) In Greece, the
rate of interest on first mortgages is at least 10, on a second, 15-18
per cent. (Ausland, 1843, No. 82.)
[184-4] Nebenius, Oeff. Credit, I, 55.
[184-5] Only in this particular instance is what Ricardo so
frequently insists on true, viz: that the rate of wages can be
increased only at the expense of the profit of capital, and vice versa.

SECTION CLXXXV.
HISTORY OF THE RATE OF INTEREST.—INFLUENCE OF AN
ADVANCE IN CIVILIZATION.

With an advance in civilization, the rate of interest is wont to
decline.[185-1] [185-2] One of the chief causes of this phenomenon is
the necessity, as population and consumption increase, to employ
capital in the fertilization of less productive land, and in less
profitable investments.[185-3] An increase in the stock of money does
not necessarily depreciate the rate of interest. If this increase comes
in connection with a corresponding depreciation of the individual
pieces of metal, it cannot be said that the nation has thereby
become richer in capital. All that would be required in such case is

only a greater number of pounds of gold or silver, or more paper
bills to represent the same capital.[185-4] Only during the transition-
period, during which the depreciation of money is still incomplete,
is the rate of interest wont to be lowered; and all the more, since
loaned capital is generally offered and sought after in the form of
money.[185-5] [185-6]
The decline of the rate of interest generally shows itself earliest in
the large cities, which are everywhere the national organ, in which
the good and bad symptoms of later civilization may be soonest
observed.[185-7]
Moreover, the condition of capitalists is not necessarily made
worse by a decline of the rate of interest. It is possible that, for a
long time, the increase of capital should continue more rapid than
the decrease of interest for each individual. (If, indeed, the
aggregate interest of capital should become absolutely smaller,
there is always a pleasant remedy available, viz.: to consume a part
of the capital!) But, however, a decline of the rate of interest is
nearly always followed by increased activity on the part of
capitalists; and they come to the resolve to retire later to enjoy the
results of their previous labors. In Holland, after the time of Louis
XIV., no branch of business was wont to pay more than from two to
three per cent. In the case of the purchase of land, no one calculated
on more than two per cent. Hence it was scarcely possible for small
capitalists there to live on their interest; and the good sense of the
people so well adapted itself to this state of things that to live in
leisure on one's rents was considered a not entirely honorable mode
of existence.[185-8] The lower the rate of interest, the larger, in
highly civilized countries, is the stock on hand of cash apt to
become, for the reason that business men then hope to gain more

by the advantages of cash payments than by the saving of interest.
[185-9] [185-10]

[185-1] Proudhon's idea, that this decline might at last bring about a
total abolition of interest, is based on the same error as this other:
that since a man may keep diminishing his per diem quantum of
food, he might finally dispense with food altogether. Proudhon's
Banque du Peuple—People's Bank—which, by gradually
diminishing the interest on its loans to the minimum cost of its
administration, should compel other capitalists to follow its
example.
[185-2] Thus, in England, by virtue of 37 Henry III., c. 9, the legal
interest was = 10 per cent.; by 21 James I, c. 17 = 8; about 1651 = 6
per cent. (confirmed in 1660); by 12 Anne, ch. 16 = 5 per cent. In
the time of George II., where the security was good, only 3 per cent.
was, as a rule, paid. In France, the legal rate of interest, at the
beginning of the 16th century, was 1/10 of the capital; after 1657,
1/12; 1601 (Sully), 1/16; 1634 (Richelieu), 1/18; 1665 (Colbert),
1/20. Compare Forbonnais Recherches et Considérations, I, 48,
225, 385 ff. It continued at this rate of 5 per cent. with short
interruptions until the revolution. (Warnkönig, Franz. Staats. und
Rechtsgeschichte, II, 588 seq.)
The rates of interest in Russia, in the 16th century, had already
declined to 20 per cent. (Herberstein, Reise, 41 ff.; Karamsin, Russ.
Geschichte, VII, 169.) In Holland, in 1623, it was estimated that
land purchases paid 3 per cent.; hypothecations, 4 to 6; deposits, 5
to 6; a flourishing business, 10 per cent. Compare Usselinx in
Laspeyres, Geschichte der volkswirthschaftl. Anschauungen der
Niederländer, 76. About 1660, the rate of interest usual in Italy and
Holland was at most 3 per cent. (in war times, 4); in France, 7; in
Scotland, 10; in Ireland, 12; in Spain, 10 to 12; in Turkey, 20 per
cent. (Sir J. Child, Discourse on Trade, French translation, 75 ff.)
Side by side with 6 per cent. as the rate of interest in England, it was
(a little later) 10 in Ireland. Petty, Political Anatomy of Ireland, 74.

The same course of things is to be observed in ancient times. In
Solon's time, and again in that of Lysias, it was 18 per cent. (Böckh,
Staatshaushalt der Athener, I, 143 ff.) I am of opinion that the rate of
interest declined during this long interval, but rose again in
consequence of the Peloponnesian[TN 21] war. Among friends, in the
time of Demosthenes, 10 per cent. (adv. Onetor., I, 386.) Aristotle,
Rhet., III, 10, mentions 12 per cent., which Aeschines, adv. Ctes.,
104, and Demosthenes, adv. Aph., I, 820, 824, call low. The rate of
commercial interest in Egypt (146 before Christ) seems to have
been 12 per cent. per annum. (Letronne, Recompense promise à
celui, etc., 1833, 7.) Contemporaneously in Rome, a similar rate of
interest must have been considered usurious. (Cicero, ad. Att., I,
12.) Under the emperor Claudius, 6 per cent. (Columella, De Re
rust., III, 3.) Justinian allowed to personae illustres 4 per cent. per
annum. (L. 26 Cod., IV, 32.)
[185-3] A Huron with his bow and arrow kills 12 pieces of game;
the European, with a much better capital, his rifle, only 5. Compare
v. Schözer, Anfangsgründe, I, 28. Mallthus, Principles, ch. 5.
According to Ricardo, ch. 6, the decline of the rate of interest
because of the necessity of carrying on agriculture under harder
conditions, must make all capital of which raw material forms a part
more valuable; while the possessors of money-capital particularly
find no indemnification. Wakefield, England and America, 1853,
accounts for it by saying that production, besides the coöperation of
capital and labor, needs "a field of employment;" and Bastiat,
Harmonies, ch. 5, 13, by saying that with the advance of
civilization, the results of former services lose in value as compared
with later ones, because performed under less favorable
circumstances.
[185-4] D. Hume, Discourses No. 4 On Interest. Per contra, see
Locke, Considerations of the Consequences of the Lowering of
Interest; Law, sur l'Usage des Monaies, 1697 (Daire); and
Montesquieu, Esprit des Lois XXII, 6. Cantillon draws a very nice
distinction: If the increased amount of money in a state comes into

the hands of loaners, it will decrease the current rate by increasing
the number of loaners; but if it comes into the hands of consumers,
the rate rises, because now the demand for commodities is so much
greater. (Nature du Commerce, 284.)
[185-5] The reviews in the Göttingen G. Anz., 1777, and of von
Iselin, in the Ephemeriden der Menschheit, II, 170 ff., 177, question
Adam Smith's (Wealth of Nat., II, ch. 4) entirely too positive denial
of the influence of the American production of gold and silver on
the diminution of the rate of interest, a view which was shared also
by Turgot, Form. et Distr., § 78. See a beautiful comparison between
a declining of the prices of the currency which, promotes
production, with the phenomena attending the growth of a tree, in
Schäffle, N. Oek., II, Aufl., 249.
[185-6] Thus the rate of interest in Rome fell from 12 to 4 per cent.
when Octavian suddenly threw the treasures of conquered Egypt
upon the market, and the price of commodities only doubled. When
later commerce had divided this amount of money among the
provinces, it rose again. (Sueton., Oct., 41; Dio C., LI, 17, 21; Oros,
IV, 19.) Law's emissions of paper, in colossal amounts, depressed
the rate of interest to 1¼ per cent. (Dutot, Réflexions, 990—Daire.)
But as soon as the paper money had lost its value, the former
condition returned. Similar observations in Rio de Janeiro: Spix und
Martius, Reise, I, 131.
[185-7] While in Paris the capital safely invested paid 2½ to 3 per
cent., 57 out of 61 conseils généraux declared, in 1845, that the rate
of interest on hypothecations, in their departments, was always over
5 per cent.; 17 estimated it at an average of from 6 to 7 per cent.; 12
at from 7 to 10; some said 12 and 15, and even 22 per cent. in the
case of small sums loaned for a short time. (Chegarny, Rapport au
Nom de la Commission de la Réforme hypoth., 29 Avril, 1851.) In
Russia, at the beginning of this century, the rate of interest in the
Baltic provinces was 6 per cent.; in Moscow, 10; in Taurien, 25; in
Astracan, 30 per cent. (v. Schlözer, Anfangsgründe I, 102.) In 1750,
in Naples, the rate of interest was from 3 to 5 per cent., in the

provinces from 7 to 9 per cent. (Guliani, della Moneta, IV, 1.) In
Trajan's time in Rome, 6; in Bithynia, 12 per cent. (Plin., Epist. VII,
18; X, 62.)
[185-8] Delacourt Aanwysing, 1669, I, 7. Temple, Observations on
the U. Provinces, ch. 6, Works L. 1854. Even Descartes says of
Holland's ubi nemo non exercet mercaturam. Compare per contra,
H. Grotius, Jus Belli et Pacis, II, 12, 22. Very large capitalists, in
Smith's time, certainly lived generally on the interest of their money:
Richesse de Hollande, II, 172. In England, at the present day,
likewise, a vast number of persons who live on the interest of their
money, occasionally take part in the speculation in commodities;
which explains why so-called commercial crises are incomparably
more extensive there, and reach incomparably deeper, than in
Germany. Similarly, according to Conring, De Commercii, 1666, c.
36, in Venice and Genoa.
[185-9] Hence the larger cash balances in England at the present
day, which, however, are not kept in the form of coin, but of bank
notes and bankers' deposits.
[185-10] As to how every frugal capitalist works to the injury of
capitalists as a class, but to his own advantage, by lowering the rate
of interest and increasing the rate of wages, see Senior, Outlines,
188 ff.

SECTION CLXXXVI.
HISTORY OF THE RATE OF INTEREST.—CAUSES OF A HIGH RATE
IN THRIVING COMMERCIAL NATIONS.

There are, however, even where a people's economy is in a
flourishing condition, many obstacles which cause the decline of
the rate of interest to take a retrogressive course, or which at least
may delay it for a time.

To this category belong all the modifications of a nation's economy
alluded to in § 183.[186-1] Among them, therefore, is every extension
of the limits of productive land. Let us suppose a nation which, its
capital and labor remaining the same in every respect, should
suddenly double its territory. The less productive places where
investments were made in the old province are now abandoned, and
labor and capital emigrate to the new. The result is, of course, an
increase of the aggregate national income, and, at the same time, a
decrease of rent. (§ 157.) Hence, the interest on capital and the
wages of labor, taken together, must greatly increase. Which of
these two branches shall profit most and longest by the increase
will depend upon whether capital or the number of workmen
increases most rapidly.[186-2] A similar effect must be produced
when, by changes or modifications in the commercial situation, in
the tariff, etc., a nation is enabled to obtain the means of
subsistence at cheaper rates from more fertile and less settled
countries.[186-3]
The introduction of better methods of production has very different
immediate consequences, according as these methods affect the
commodities which minister to the wants peculiar to workmen as a
class, or do not. Let us suppose, as a first case, that the cost of
ordinary clothing is reduced one half by reason of newly
discovered material, better machines, etc. As in the case of the
whole people, so also in that of the owners of capital as consumers,
there is, in consequence, an addition to their enjoyment of life.
Their interest as well as their capital, compared with clothing
material, would have become more valuable. But the relation
between capital and interest, that is, the rate of interest, could not
be directly changed. (Compare infra, note 3.) Only when the
working class employ their materially increased wages to increase
population; when in consequence hereof, their wages, estimated in

money, again decline beyond what it was before; when, therefore,
the price of a given quantity of labor declines, does the rate of
interest rise, although a portion of that which the workmen have
lost may be added to rent on account of the increased population?
[186-4] [186-5] If the applicability of the new method of production is

confined to articles of luxury used by the upper classes, for
instance to fine lace, the rate of interest usual in the country will be
affected thereby only to the extent that through the medium of
commerce such products are exchanged with foreign nations
against commodities consumed by the working classes. But there
are very few improvements in production which have not led to a
greater cheapness of those things which satisfy the wants of the
working class; and this is especially clear in the improvements in
the means of transportation so usual in our day.
However, the increase of fixed capital, such as machines, railroads,
etc., once they are completed, may, at first, cause a depression of
the rate of wages, as well as an enhancement of the rate of interest;
the former from the fact that a number of workmen is thereby, at
least temporarily, thrown out of employment; the latter because the
conversion of so much circulating into fixed capital must diminish
the supply of the former.[186-6]
A second class of obstacles consists in the diminution of the supply
of capital. War, for instance, always causes such a destruction of
capital, and at the same time for the most part renders the
reproduction of capital more difficult to such a degree that the rate
of interest is wont to rise greatly.[186-7] Something similar is true of
other great catastrophes and of extravagance on a large scale.[186-8]
Every state loan, whether intended for direct consumption or to
procure capital for use (Nutzkapitalien), decreases the supply of

circulating capital which most directly determines the market rate
of interest.[186-9] [186-10]
[186-1] Wolkoff very well shows that the economic progress of
mankind is effected partly by the improvement of production, and
partly by saving. The former increases the rate of interest, the latter
lowers it. (Lectures, 182, 189. Compare supra, § 45.)
[186-2] Thus the rate of interest in Russia rose, after Catherine II.
had conquered the provinces situated on the Black Sea. (Storch,
Handbuch, II, 34.) The same is still more strikingly apparent in the
judicious planting of agricultural colonies.
[186-3] Abolition of the English corn laws! Foreign commerce
when very advantageous, always adds to the well-being of the
people; to the rate of interest, however, only to the extent that
articles which are calculated to satisfy the wants of the working
class become cheaper in consequence; and this in turn lowers the
rate of wages. Let us suppose that a country had hitherto purchased
yearly 10,000 barrels of wine for $1,000,000. It might now happen
that, in consequence of an advantageous commercial treaty, for
instance, the 10,000 barrels might be obtained for $500,000. If, after
this, wine-drinkers want to spend $1,000,000 for wine as they did
before, they of course double their consumption of wine, but the rate
of interest remains unchanged. If, on the other hand, they leave their
consumption of wine where it was before and apply the saved half
million to effect an increased demand for home products, the capital
required for this production is set free at the same time. Hence, the
relation between the supply and demand for capital has not changed,
abstraction made of certain difficulties in the transaction. Compare
Ricardo, Principles, ch. 7, rectifying Adam Smith, Wealth of Nat., I,
ch. 9.
[186-4] An increase in the rate of interest caused by a diminution in
the rate of wages does not last long. Capital now increases more
rapidly, and the increase is accompanied by an increased demand for
labor. If, in the mean time, workmen have become accustomed to a

lower standard of life, the increasing wages are followed by an
increase of population: then the necessity of having recourse to the
cultivation of land of a worse quality is an additional cause of a
decreasing rate of interest. (Edinb. Rev., March, 1824, 26.)
[186-5] According to this, it is easy to tell what influence the
increasing skill or activity of the working class (for instance by a
decrease in the number of holidays, coöperation of wife and child)
must have. Where there has been no accompanying and
corresponding elevation of the standard of life, and of the want of
the class, the gain soon falls to the lot of the capitalists or
landowners.
[186-6] See the very clear but not entirely complete discussion in
John Stuart Mill, Principles, IV, ch. 3 ff. When new railways,
machines, etc., before they are complete, simultaneously increase
the rate of interest and the rate of wages, and even sometimes rent,
although they do not immediately increase the national income in
any way, the phenomena are to be explained, not by a distribution of
income, but as the result of an advance of capital made.
[186-7] Compare supra, § 184. The rise of the rate of interest in
Basil, between 1370 and 1393, Arnold (loc. cit.) accounts for by the
wars and defeats of the upper German cities. Similarly in Zürich,
1457. (Joh. Müller, Schweizer Geschichte, IV, 211.) During the time
immediately following the Spanish war of succession, the usuriers
les flus modérés in France got 12-15 per cent. a year. (Dutot,
Réflexions, 1866.) In Russia the rate of interest, after the war of
1805-15, rose by 4-5 per cent. (Storch, Handbuch, 35 seq.) Per
contra, Nebenius, Oeff. Credit., 70 seq.
[186-8] Thus the Hamburg conflagration, combined with the bad
harvests of 1841, raised the rate of interest in Mecklenburg for a
long series of years. Similarly in Würtemburg, the many bad
harvests from 1845 to 1853, which are said to have caused a
deficiency of 50,000,000 florins. (Tübinger Zeitschr., 1856, 568.)

[186-9] In bad times, state loans are usually effected at a
disproportionally high rate of interest. This also operates
momentarily on the general rate of interest, to the injury of persons
engaged in business enterprises; who, by the very fact of the
withdrawal of so much capital, become involved in an unfavorable
competition. In the long run, indeed, the high or low rates of interest
paid by national debts, in so far as the creditor cannot demand
reimbursement, has no influence on the rate of interest usual in the
country. Such debts as cannot be declared due assume the character
of stationary capital, the value in exchange of which is determined
by their yearly return, capitalized at the rate of interest usual in the
country. (Hermann, Staatswirthschaftliche[TN 22] Untersuch., 223.)
[186-10] The coöperation of most of the causes above mentioned
raised the English rate of interest which had sunk to 3 per cent. to an
average of 5, from about 1760 to 1816. Thus Gauss, in a manuscript
work which I have used, relates that the fund for the support of
professors' widows in Göttingen was, in 1794, expected to pay only
3 per cent. In 1799, the trustees observed that their capital could
often be safely invested at 4 per cent.; somewhat later the rate of
interest rose to 5 per cent., at which point it remained for years.
About 1843 ff. the rate of interest in old Bavaria was only 4 per
cent.; in more highly cultured Rhenish Bavaria, 5 per cent.

SECTION CLXXXVII.
HISTORY OF THE RATE OF INTEREST.—EMIGRATION OF
CAPITAL.

Midway between these classes of obstacles lies the very usual
proceeding of highly civilized nations whose rate of interest is low,
to transfer their capital into countries with a higher rate of interest,
where the production of raw material is predominant.[187-1] This is
most thoroughly accomplished by the emigration for good of the
capitalists themselves; but also least frequently, because the natural

attachment of man to his native country is usually too powerful,
among the well-to-do classes, to be overcome by the attraction of a
higher rate of interest. Temporary settlements in foreign countries
are by far more frequent. Either the capitalist removes there
himself, for a time, to return enriched, at farthest, in his old age; or
he establishes a permanent branch of his business there, and
superintends it through the agency of a trusted representative. The
inhabitants of northern Italy, during the last centuries of the middle
ages, maintained such establishments, not only for the purpose of
carrying on commerce in merchandise along the shores of the
Levant, but also the money trade in the principal countries of the
west.[187-2] Similarly, the Hanseatic cities contemporaneously in the
north and northeast of Europe; and, to-day, the English in almost all
the important seaport cities in the world.[187-3] Such enterprises are
always somewhat dangerous, especially in countries but little
advanced in civilization.[187-4]
The best means to facilitate the migration of capital is credit. It is,
indeed, true, that in international trade, ordinary private loans are
seldom made. To make such loans would be to run too many risks;
risks through a want of knowledge of persons or circumstances, on
account of the difficulties in the way of continued supervision, and
of being able to assert and defend one's rights away from home.[187-
5] Loans are much more readily made to foreign states, to great

corporations, or joint-stock companies, whose condition is well-
known; and which, by reason of their perpetuity, have a deep and
obvious interest in maintaining an honorable reputation. The
issuing of certificates of stock, etc., has greatly facilitated
international trade in capital.[187-6] But the mode of loaning in
foreign parts preferred is to sell them commodities, and to require
payment for them only after some time has elapsed, of course, with
interest. Purchases, on the contrary, are paid for immediately,

possibly even in advance.[187-7] The lower the rate of interest in a
country is, the longer and more cheaply can it give credit to others;
a new reason why the less civilized countries are particularly fond
of trading with the most civilized. [187-8] [187-9]
[187-1] Nebenius, Der öffentliche Credit, 83 ff. After the end of the
Napoleonic war, English capital flowed, by way of preference,
towards South America, afterwards towards Spain and Portugal;
after 1830, to North America; after 1840, towards Germany and
France, to be invested in the construction of railways in the latter
countries.
[187-2] The inhabitants of Asti began in 1226 to carry on the trade
in money in trans-Alpine counties. In 1256, Louis IX. ordered 150
Asti money-changers to be thrown into prison, and he confiscated
the money they had loaned in France, to the amount of over 800,000
livres. They were afterwards turned over to their enemy, the Count
of Savoy, as usurers. (Muratori, Scr. Rerum Ital., XI, 142 seq.)
About 1268, Louis IX. banished all money-changers of Lombard or
Cahors origin: they were allowed only three months in which to
collect their debts. (Sismondi, Histoire des Fr., VIII, 112.) About
1277, again all Italian money dealers were imprisoned, and 120,000
gold guldens extorted from them. (Giov. Villani, VII, 52.) After the
Lombards had lost their freedom, the business passed into the hands
of the Florentines and of the inhabitants of Lucca. (Sismondi, Gesch.
der ital. Republiken, IV, 602; Dante, Inferno, XXI, 38.) Great part
played by the brothers Franzesi as dealers in articles of luxury, and
loaners on pledge etc., at the court of Philip IV. They seem to have
instigated the persecution of other Italian money dealers, in 1291,
from jealousy. (Sismondi, Histoire des Fr., VIII, 429 seq.) Great
losses of the Florentines by the English-French war in 1337:
Edward III. remained in the debt of his bankers Peruzzi and Bardi to
the amounts respectively of 135,000 and 184,000 marks sterling; so
that they and many others failed. France imprisoned all the Italian
money dealers, and compelled them to pay a large amount of
ransom-money. (G. Villani, XI, 71.) In 1376, the Pope who was

engaged in a struggle with Florence, called upon all princes to
despoil all Florentine merchants within their jurisdiction of their
wealth, and to sell them as slaves; and France and England actually
did so. (Sismondi, Geschichte der ital. Republiken, V, 257 seq., VII,
74.)
[187-3] Shortly before the French Revolution, Cadiz had over 50
wholesale merchants against 30 retail, 30 modistes and at least 100
tradesmen from France. (Bourgoing, Tableau, III, 130.) Commercial
colonies!
[187-4] Thus even the emperor Paul of Russia caused the property
of English factors to be confiscated. The galleons which Holland
and England captured in the Spanish war of succession belonged
mostly to Amsterdam houses. (Ranke, Franz. Gesch., IV, 226.) Even
Galiani, Della Moneta, IV, 3, thinks that, on this account, such
commerce is incompatible with the warlike spirit. It is certain,
however, that a government like the English would do well not to
permit a war with such countries as Russia or the United States to
break out too suddenly, that their subjects might have time to collect
all their outstanding dues. When, in 1855, it was reported in London
that all Russian drafts were dishonored, people looked upon that fact
as the surest sign of coming war. English merchants had called in
their advances to Russia during the preceding economic period, and
refused to make new ones.
[187-5] This of course disappears when the borrowing country is
dependent on the loaning country. Thus, the Canton of Uri formerly
prohibited the inhabitants of the Livinerthal to borrow capital except
from them. It is said that, at the beginning of this century, the Uri
capital then loaned amounted to one-half a million florins, that is, an
average of 250 per householder. Now it is not over one-fifth of that
amount. (Franscini, Canton Tessin, 126.) Think also of the
plantation colonies! But even the East Indies may be looked upon as
a species of colony for England. Hence Fawcett, Manual, 105, is
rightly of the opinion that no other country has the possibility of
being as useful to the East Indies as England. And in fact, the East

Indian railways obtained of their capital of £82,500,000, only a very
small part, £800,000, in India itself, a very small proportion of
which latter sum was subscribed by the native population. (Ausland
24, Juli, 1869.)
[187-6] What England is to-day, the Italian commercial cities were
in the 16th and 17th centuries, viz.: the chief market for foreign
loans. (Compare Mun, England's Treasure, 1664, ch. 4.) The
Genovese loaned money in foreign countries at 2 and 3 per cent.
(Montanari, Della Moneta, 1867, cap. 2.) It is said that the Dutch, in
1778 invested 1,500 millions of livres in foreign national debts,
especially those of France and England. (Richesse de Hollande, II,
178.) According to J. G. Forster, Schriften, III, 335, in 1781 alone,
in Europe, 800 millions loaned capital. The Niederl. Jaerboek of
1789, p. 729, estimates the amount of interest coming from abroad,
English and French not included, at from 50 to 60 millions of
florins. About 1844, according to official estimates, 1,000 million
florins in foreign loans, that is one-third of whole national income.
(Allgemeine Zeitung, 1844, No. 35.) Now, Belgium, 300 million
florins, in Austrian evidences of indebtedness. (Quarterly Review,
October, 1862, 402.) According to Baumstark, Staatswissensch.
Versuche über Staatscredit, etc., 1833, 77, foreign nations, between
1818 and 1825, borrowed in England £49,000,000; and, about the
same time, England participated in Russian, French and North
American loans to the extent of £55,500,000. It is said that there
were, in 1843, £25,000,000 English capital in the canals, railroads
and banks of the United States. (Porter, Progress of the Nation, III,
4, 634.)
[187-7] It is evident, from many of Demosthenes' orations on
private matters, that Athens was in the habit of advancing the
commercial capital needed by a great part of the inhabitants of the
Mediterranean coast. Many colonial cities, Phaselis, for instance,
had the very worst reputation in this respect. They were virtually
pirates as regards Athens. (Adv. Lacrit., 931.) Here also it seems
that the goods taken for the loan had to be brought to Athens. (941.)

On the regular advances of Prussian merchants to their Lithuanian
and Polish vendors, in the 15th century, while the former were
forbidden even to buy on credit, see Hirsch, Geschichte des
Danziger Handels, 167, 177. In Colbert's time, the Dutch gave 12
months credit in Europe. (J. De Wit, Mémoires, 184.) In England,
Child perceives a great advance in this: that in 1650, in all business
in the interior, there was a credit of 3 to 18 months given; and in
1669, everything was paid for in cash. (Discourse on Trade, 45.)
Concerning previous times, see W. Raleigh, Observations touching
Trade and Commerce with the Hollander and other nations, 1603.
(Works, VIII, 951 ff.) In North America, merchants in the interior
frequently purchase their goods of importers on 6 months credit.
(Tellkampf, Beiträge, I, 52.) In the West Indies, about the end of the
last century, the English gave a credit, generally, of from 12 to 16
months. (B. Edwards, History of the British West Indies, II, 383.) In
Brazil, in the case of imports, 4, 8 and even 12 months credit;
payment in monthly installments, and frequently even longer delay,
without interest. In the case of exports, when cash payments are not
made, 1 per cent. a month, (v. Reden, Garn und Leinenhandel, 332.)
Recently only about 40 per cent. of foreign advances are made at 12
to 20 months, 60 per cent. at from 50 to 70 days. (Tübing. Zeitschr.,
1864, 517.)
In Buenos Ayres, the producer or collector of export articles
required the price to be paid usually a long time in advance
(habilitacion), a very bold but necessary procedure, on account of
his poverty. (Robertson, Letters on S. America, I, 174 ff.) In the corn
trade in South Russia, at least one-half of the purchase money was
required to be paid in advance, and even before shipment, the other
half as soon as the corn arrived in the harbor, and, hence,
sometimes, long before it was put on board. (W. Jacob, On the Corn
Trade of the Black Sea, 23.) Compare Tooke, View of the Russian
Empire, I, 339, Richesse de Hollande, II, 43, Storch, Handbuch, II,
61 seq. Russia was, about 1770, a credit-giving nation to the still
poorer Persians. (Gmelin, Reise, III, 413.) The Spaniards also, in
their American colonies, had always an expedition ready and

waiting, the payment for which was made on the arrival of the
second. (Depons, Voyage dans la Terre Firme, II, 368.) Moreover,
active commerce simply, especially when circuitous, may be
considered as in some way an international loan; and thus it is that
the favorable "balance," by means of which claim-rights are
obtained in foreign countries, is secured.
[187-8] Notwithstanding the gratitude of the United States towards
France, and spite of all the French ambassador could do, the English
immediately after the conclusion of peace, attracted the greatest part
of American trade to themselves. (Chaptal, de l'Industrie Fr., I, 103.)
Countries with a low rate of interest have an advantage in this
respect, which grows after the manner of compound interest, when
the duration of the advance of capital is prolonged. (Senior,
Outlines, 195.)
[187-9] How capitalists may, by the giving of international credit,
fall into an injurious habit, is shown by the late and troublesome
building up of the Dutch railway system, while so many foreign
railway enterprises were provided with Dutch capital.

SECTION CLXXXVIII.
HISTORY OF THE RATE OF INTEREST.—EFFECT OF A LOW RATE
ON STATIONARY NATIONS.

Beneficial as the spur of a low rate of interest is for countries
capable of development, it is a heavy drag on a stationary people,
and more so on those who have lost a portion of the field for the
investment of their capital by the competition of too powerful
rivals.[188-1] A real superabundance of capital is attended with cares
and temptations for the middle classes very similar to those caused
by a so-called over-population, especially to dishonesty and
extravagance.[188-2] When capital, population and the skillfulness of
labor remaining the same, continues to increase, the enlarged

capital may very readily have every succeeding year only the same
return to divide among its owners, that the smaller had in previous
years.[188-3] Hence additional saving here would produce no real
enrichment of the people; and it might even happen that the instinct
to accumulate capital might in the future become torpid to a greater
degree than the capital itself had increased. In any case, however,
the decline of the rate of interest can continue only to a certain
point. There are numberless persons who would rather consume
their capital, or invest it in hazardous speculations than put it out at
interest at one per cent. a year.[188-4] At least, the tendency of a
decline in the rate of interest is, in the case of the richer, to increase
the amount of capital consumed as compared with productive
capital. The more moderate, sober and provident a people are, the
lower may the rate of interest decline without producing this effect.
And so, the more the capital of a nation is concentrated in the
hands of a few; because then the owners of capital are all the later
forced to break in upon it, for the sake of subsistence.[188-5] [188-6]
Among nations which have totally declined, the rate of interest is
wont to reach a high point once more; the natural result of great
losses of capital and men, while, at the same time, the freedom of
the lower classes and the security of property have been either
curtailed or lost. The weakness of age is, in many respects, even in
the case of nations, a second childhood.[188-7]
[188-1] Temple, Works I, 102, assures us that the Dutch in his time
considered the payment of the principal of a public debt a real
misfortune: "they receive it with tears, not knowing how to dispose
of it to interest with such safety and ease." On Italy, see Bandini (ob.
1760), Sopra le Maremme Sienese, 154 seq.; earlier Montanari,
Della Moneta, 57. In the England of the present time, small
capitalists especially belong to the so-called "uneasy" classes.

[188-2] Numberless bankrupts and unbounded extravagance in
Holland. (Richesse de Hollande, II, 168.) In England, the hazardous
enterprises of 1825 were very much promoted by the action of the
government which a short time before reduced the interest on its
state debt. (Tooke, History of Prices, II, 148 ff.)
[188-3] J. S. Mill, IV, ch. 4, 4. When Ricardo, ch. 6, says that every
increase of productive capital must enhance the value in use, and
still more the value in exchange, of a nation's property, but under
such circumstances only to the advantage of the working class, and
still more of the land owning class, he at least apparently
presupposes an improvement, or increase of labor.
[188-4] Think only of the so-called commercial crises, the
speculation-rage preceding which is excited by the lowness of the
rate of interest, the destruction of capital in which makes the rate of
interest to retrograde materially. However, this very decline is, in
itself, only a spur to speculation in evidences of national
indebtedness, stocks, etc., in commodities, only where, without such
speculation, a rise in prices was to be expected. Thus, for instance,
the great English periods of speculation: 1796 ff., in colonial
products; 1808 ff., in raw materials in general; 1814, in articles of
export, were times in which there was not the slightest facility in
obtaining credit. (Tooke, History of Prices, III, 159.)
[188-5] Between 1829 and 1849, the highest rate of interest paid by
English capital employed in cotton industries was little over 2½ per
cent. (Edinb. Rev., April, 1849, 429.)
[188-6] As the symptoms of a condition are very frequently
mistaken for its cause, there have been many writers who, blinded
especially by the contemplation of Holland, considered the lowness
of the rate of interest as the causa causans of all wealth, and who
promised really magical results from its legislative regulation by the
state. Thus Sir Thomas Culpeper, A Tract against the high Rate of
Usury, 1623; continuation 1630; Sir J. Child, Brief Observations
concerning Trade and the Interest of Money, 1668; Discourse of

Trade, 1690. Anderson (ob. 1765), was of a similar opinion: Origin
of Commerce, a. 1601, 1651; and even Ganilh, Dictionnaire
analytique, 99 seq. (Infra, § 162.) Per contra, the anonymous essay,
Interest of Money mistaken, 1668, and Locke, Considerations of the
Consequences of the Lowering of Interest and Raising the Value of
Money, 1691. Most moderns have considered the decline of the rate
of interest an evil. Thus, for instance, Canard, Principes, ch. 5, who
uniformly makes this the starting point of a nation's downfall. See
also McCulloch, Principles, III, 8. Malthus draws a comparison
between the saving of capital and the generation of children: only a
high rate of interest makes the former really useful, and a high rate
of wages the latter.
Even great destruction and disturbances of capital by war, by loans
to the state, for instance, are soon made good, provided the sources
of the saving of capital are not dried up. (Principles, III, 370 ff., 401,
ff.) John Stuart Mill expressly counsels rich and highly civilized
nations not to neglect beneficent enterprises, although economically
unproductive, because capital might be lost in them. The result of
such a loss would, under certain circumstances, simply be that less
capital would be exported or wasted in speculation. (Principles, II,
ch. 5, 1.) Similarly Canard, who, therefore, compares state loans
with blood-letting, as a remedy for a plethoric disease. (Ch. 9.)
Turgot confounded cause and effect when he compared a high rate
of interest to an inundation, below the level of which nothing can be
produced; and which, the lower it became, the more dry ground
there was for men to work on. (Sur la Formation, etc., § 89.)
[188-7] Rate of interest in Persia from 40 to 50 per cent. a year.
(Ausland, 1844, No. 208.) In Tripoli, Christians and Jews alike loan
the Arabs at the rate of 5 per cent. a month; at least 1½ or 2. (Rohlfs,
von Tripolis nach Alexandrien, 1871, I, 22.) In most of the East
Indian kingdoms, the rate of interest is so high for the government
itself that when the creditor, even without a return of the capital,
gets the interest only for a few years, he is considered passably well

indemnified. (J. S. Mill, II, ch. 15, 2.) In China, 12 to 15 per cent.;
36 nothing unheard of. (Barrow, China, 562.)

SECTION CLXXXIX.
INTEREST-POLICY.—LEGITIMATENESS OF INTEREST.

The legitimateness of interest is based on two unquestionable
grounds: on the real productiveness of capital, and on the real
abstinence from enjoyment of it by one's self.[189-1] Let us suppose a
nation of fishermen with no private ownership in land and no
capital, living naked in caverns, on sea-fish which the ebb of the
ocean has left in the puddles along the shore, and which are caught
only with the hand.[189-2] All workmen here may be equal, and each
catch and consume three fish a day. Let us again suppose that some
clever savage reduces his consumption to two fish a day, for one
hundred days, and uses the stock of one hundred fish collected in
this way to enable him to devote all his strength and labor, during
fifty days, to the construction of a boat and a net. With the aid of
this capital he, from the first, catches thirty per day. What now will
his fellow tribesmen, who are not capable of such intelligent and
systematic self control to do as he has done, do? What will they
offer him for the use of his capital? In discussing this question both
parties will very certainly consider not only the fifty days' labor
spent in the construction of the boat, etc., but also the one hundred
and fifty days during which its maker had to abstain from his full
ration of food. If the borrower, of the thirty fish which may be
caught daily with the aid of his capital, gives twenty-seven away,
his condition is at least no worse than it was at first. On the other
hand, the lender, if compensated only for the wear and tear of his
capital, would reap no profit whatever from his loan. The interest to
be paid will be fixed somewhere between these two extremes by

the relation between demand and supply. A loan which pays no
interest is a donated use of capital. (Knies.)[189-3] Interest may be
called the reward of abstinence (Senior), in the same way as wages
is called the reward of industry.[189-4] With the abolition of interest,
exchange would be limited to the mere present, without any
mediation between the past and the future. A great number of
services would bring no equivalent in return, and, therefore, as a
rule, never be performed. Most of the charges commonly made in
our day against the "tyranny of capital" are, at bottom, only a
complaint that capital is not inexhaustible; and even those
workmen who are obliged to pay most to capital would be much
worse off without it.
[189-1] The Greeks very appropriately call interest τόκος,[TN 23] i.
e., that which is born. In the loaning of capital productively
invested, the creditor, in the interest received, consumes the real
produce of his property. If the debtor has consumed the property
unproductively, the creditor indeed lives on the debtor's other
returns or supplies; which, however, without his intervention would
probably have been consumed by their owner.
[189-2] We here, for the time being, make abstraction of all
entangling surrounding circumstances. However, Diodor., III, 15 ff.,
and Strabo, XVI, 773, describe a very similar condition of things
among the Ichthyographs; also Hildebrand, Reise, um die Erde, III,
2, in China. In the Sudan, whole generations fetch water every day
from a distant town, instead of working for a few weeks to dig a
deep well nearer home. (Barth, Afr. Reise, III, 297.)
[189-3] The most recent relapse into the old error of the
unproductiveness of capital, viz.: that of Karl Marx (Das Kapital;
Kritik der polit. Oekonomie, I, 167) is a turning round and round of
the author in the vicious circle of his demonstration. If the value of
every commodity depends simply on the labor necessary to bring it
into existence, or on the time of labor required to produce it, it is

self-evident that the value of the capital consumed for the purpose
of its production, can at most be only preserved in the new product,
and that all the additional value (Mehrwerth) of the latter should be
ascribed to labor. (172, and passim.) Hence, strictly speaking, the
capitalist who advances capital to workmen, is still bound in duty to
be grateful to the latter when the value of his advance is preserved
to him undiminished, (§ 173) and all interest levied by him should
be considered as a payment towards the extinguishment of the
capital [debt] itself. (556.) Relying on such theories, many socialists
admit private property and even the right of inheritance to means of
enjoyment and use capital (Gebrauchskapitalien) provided only that
land and productive capital should pass over into the "collective
property" of society, with compensation, however, to their former
owners. Considering the short duration of most goods used in
enjoyment or consumed, the evil consequences of a community of
goods mentioned in § 81, could not be avoided to any extent by this
means.
How entirely fallacious the above assumption is, is seen most
strikingly in the case of such goods as cigars, wine, cheese, etc.,
which, without the least addition of labor, by merely postponing the
consumption of them, obtain a much larger value both in exchange
and in use. Or, how would it be possible, for instance, to reduce the
value of a hundred-year-old tree, over and above the cost of planting
it, to labor alone? Similarly, the fact that on a Chilian hacienda, 25
per cent. of the cattle can be slaughtered and no diminution of the
herd take place. (Wappäus, M. und S. Amerika, 784.) Strassburger
rightly inquires: if all the profit of capital is based on a cheating of
workmen by capitalists, who is cheated in the case in which a
manufacturer without workmen earns more with an increased
capital than before with a small capital? (Hildebrand's Jahrb., I,
103.)
[189-4] In a time full of nabobism and pauperism, when some can,
without the least abstinence, make immense savings, and others
none at all even with the greatest abstinence, we may comprehend

where the socialists find food for their derision of the expression,
"reward of abstinence."

SECTION CXC.
INTEREST-POLICY.—AVERSION TO INTEREST.

At the same time, there is a strong aversion to the taking of interest
prevalent among nations in a low stage of civilization. Industrial
enterprises of any importance do not as yet exist here at all, and
agriculture is most advantageously carried on by means of a great
many parcels of land, but with little capital. The purchase of land is
so rare, and hampered by legal restrictions to such a degree, that
loans for that purpose are almost unheard of. And just as seldom
does it happen, by reason of the superabundance of land, that the
heir of a landowner borrows capital to effect an adjustment with his
co-heirs, and thus enter alone into the possession of the estate.
Here, as a rule, only absolute want leads to loaning.[190-1] If, in
addition to this, we consider the natural height of the rate of wages
in such times, the small number and importance of the capitalist
class (§ 201), the tardy insight of man into the course and nature of
economic production,[190-2] it will not be hard to understand the
odium attached in the middle age of every nation to so-called
interest-usury[190-3] (Zinswucher).
Most religions, the Christian excepted (the universal religion!),
have been founded in the earlier stages of the nations who profess
them, and have there, at least outwardly, exercised their greatest
influence. No wonder, therefore, that so many religions have
prohibited the taking of interest. Thus, for instance, the Jewish
which, indeed, allows interest to be taken from foreigners, but
raises loaning without interest among Jews in their commerce with

one another, to the dignity of a duty binding on the conscience of
the beneficent rich.[190-4] [190-5] Similarly in the Koran.[190-6] The
Fathers of the Church, also, on the whole, look with disfavor on the
taking of interest, relying upon well-known passages in the Old
Testament, and, in part, on misunderstood expressions in the New.
[190-7]
This is especially true of the Fathers of the Church from the
beginning of the fourth century, when the Roman empire was
frightfully impoverished by the devastations of the barbarians, and
as a consequence the conditions as to interest which prevail in the
lowest stages of civilization had returned. Mercy towards the poor
usually occupies the foreground in the demonstrations of the
Fathers.[190-8]
[190-1] Distress-debts in contradistinction to acquisition-debts.
(Schmalz, Staatswirthsch. Lehre in Briefen, I, 227.) Compare
Hesiod., Opp., 647; also Herodot., I, 138.
[190-2] Thus Aristotle, calls the taking of interest a gain against
nature, since money is only a medium of exchange, and cannot
produce its like. (Polit., 3, 23, Schn.) Similarly, Plato, De Legg., V,
742, and Seneca, De Benef., VII, 10. Compare, however, Tacit.,
Annal, XIII, 42 seq. As late a writer as Forbonnais, 1754, accounts
for interest thus: Some people hoard their money instead of
spending it; hence a scarcity or want of money, and those who need
it are obliged, in order to draw it out, to promise to pay interest.
(Eléments de Commerce, II, 92 ff.)
[190-3] Numerous disturbances on account of debt, during the first
centuries of the Roman Republic, until finally (compare Livy, VII,
42), the taking of interest was in the year 349 (?) before Christ,
entirely prohibited. (Tacit., Annal. VI, 16.) The public opinion in
such matters may be understood from the words of Cato: majores
ita in legibus posuerunt, furem dupli condemnari, foeneratorem
quadrupli. (De Re rust.) The foenerari compared with the hominem
occidere. (Cato, in Cicero, De Off., II, 25.) In the higher stages of

civilization little heed was paid to the law, in practice (compare
Livy, XXXV, 7; Plut., Cato, I, 21.), although the democratic party
always held fast to the legal perpetuation of the prohibition of
interest. (Mommsen, Römisch. Gesch., III, 493.)
[190-4] Exod., 22, 25; Levit., 25, 35 ff.; Deuteron., 15, 7 seq.; 23,
19 seq.; Psalms, 15, 5; 109, 11; 112, 5; Proverbs, 28, 8; Jerem., 15,
10; Hes., 18, 8. After the return from exile, the prohibition was
restored. (Net. 5, 1 ff.) Was there, in the long duration of such
prescriptions, an educational measure having reference to the
peculiar fault towards which the Jewish national character had a
special tendency? In Josephus's time even, usury practiced on one's
country people was universally despised (Antiq. Jud., IV, 8, 25.),
and the Talmud continues it. Compare Michaelis, De Mente ac
Ratione Legis M. Usuram prohibentis. In Russia, the orthodox Jews
are wont to evade the legal rate of interest by exacting one-half the
profit, and estimating it approximately in advance at a probable
sum. If, afterwards, the debtor declares under oath that he made no
profit, the creditor has no more to say; but then the borrower would
lose all credit in the future. (Bonav. Mayer, Die Juden unserer Zeit,
1842, 13 seq.)
[190-5] The Mosaic passages, however, only prohibit the taking of
interest from poor people of one's own country.
[190-6] The prohibition in the Koran, ch. 2, 30, is regularly evaded
in Persia, by deducting the proper amount at the moment the loan is
made. (Chardin, IV, 157 ff.) Under the Mongolian rulers, it was
done by way of preference, by a fictitious sale for cash, at prices out
of all proportion. "Why cannot capitalists either buy land or carry on
trade?" asked Sultan Gazan, on an occasion when the prohibition of
interest was strongly insisted on. (d'Ohsson, Histoire des Mongols,
IV, 397.)
[190-7] For instance, Luke, 6, 34 ff., where interest is no more
prohibited than in Luke, 14, 12 ff., the mutual invitation of friends to
a feast. Not less groundless is the supposed allegorical allusion

(Matthew, 21, 12) to interest-creditors. Rather might an approval of
interest be inferred from Matthew, 25, 27.
[190-8] Origen, for instance, would have the creditor take no
interest; but exhorts the debtor to return double the amount unasked.
(Homil., III, ad. Ps., § 37.) Hence there is here no condemnation of
interest, but only an effort to transform all legal relations into
relations of love. Quite the reverse in Lactant., Instit., VI, 12; Basil,
ad. Matth., 5 ff.; Ambrose, De Off., III, 3; Chrysost., ad. Matth.
Hom., 56; Tim., VII, 373 ff. (Paris, 1727); Hieronym., ad. Ezech., V,
367 c. (Francof, 1684); Augustin., Epist., 54. Even Cyprian, 183,
318 (Paris, 1726).

SECTION CXCI.
INTEREST-POLICY.—THE CANON LAW, etc.

The canon law, from the first, endeavored to prevent contracts for
interest. We may even say that the prohibition of interest-usury is
the key-stone of the whole system of the political economy of the
Corpus Juris Canonici. The development of that law coincides, as
to time, with the senility of the Roman Empire and the childhood of
modern nations.[191-1] In the golden age of papal power, every
interest-creditor was refused the communion, the testamenti factio
and the right of ecclesiastical burial. Proceedings at law could not
be instituted for the recovery of the principal debt until the creditor
had restored all the interest obtained. In the council of Vienna, in
1311, it was declared heresy to defend the taking of interest. The
universal antipathy of the church towards the growing importance
of the bourgeoisie,[191-2] and the desire to give the spiritual courts
an extensive jurisdiction in litigated cases, may have contributed
largely to the adoption of these measures. In later medieval times,
the secular power offered its services to execute these laws;[191-3]

and, to judge of what public opinion in this matter was, we need
only call to mind the decided disapproval of interest by Dante,
Luther and Shakespeare.[191-4]
The Weddeschat, a species of pledge or loan on security,
constituted the transition from this state of things to the modern
economic system of interest. The Weddeschat was a sale with a
reserved right of redemption, by which the debtor gave his creditor
the use and enjoyment of a piece of land a sort of interest in kind,
but which he could at any time recover back, by payment of the
principal. This was not very oppressive on the debtor, as he was the
only party who could recall the contract.[191-5] In a higher stage of
civilization, indeed the continuance of this species of land-pledge
would be exceedingly disadvantageous, since the momentary
possessor of a piece of land which might be bought back by
another person at any time at a price fixed in advance, would
scarcely think of improving it.[191-6]
And so, the introduction of rent-purchase (Rentekauf) was an
important step in advance: the incumbrancing of a piece of land
which remained in the possession of the debtor with an interest in
kind paid to the creditor. The latter could never claim anything
further, while the debtor and his heirs might redeem the land from
this interest-incumbrance by paying back the purchase money.[191-7]
As the Pope, on the 19th of January, 1569, renewed, in express
terms, the prohibition of all interest not based on rent-purchase, so
did the police ordinances of the Empire, of the sixteenth century,
declare it to be the only lawful form of loaning at interest;
provided, always, that only the debtor could demand the
cancellation of the contract.[191-8] We find, however, that, on the
whole, at least Protestant countries had, before 1654, adopted the
modern Roman law relating to interest.[191-9] [191-10]

However, the long persistence of the prohibition of the canon law
in relation to interest, even with the refuge afforded by the
introduction of the rent-purchase system, and of dormant
partnerships (Commanditen) etc., so common in the sixteenth
century,[191-11] would be unintelligible, if, contemporaneously, the
Jews did not carry on an important and somewhat free trade in
capital,[191-12] precisely as the Armenians, Hindoos and Jews do in
the Mohammedan world of to-day.
[191-1] The apostolic canons and several decrees of councils of the
fourth century prohibit the taking of interest by the clergy. A
Spanish provincial council dared, in 313, to extend the prohibition
to the laity. Pope Leo I. condemned the taking of interest by the laity
also, but only in the form of a moral law. (443.) The synod of
Constantinople (814) punished the violation of the prohibition with
excommunication. See Thomas Aquin. (ob. 1274.) De Usuris, in the
Quæstiones disputatae et quod libetales. The canon law, however,
always permitted delay-interest (Verzugszinsen), and Gregory IX,
allowed justa et moderata expensa et congruam satisfactionem
damnorum to be taken into account, (c. 17, X.) De Fora Comp. II, 2.
A tacit recognition of the productiveness of capital is to be found in
c. 7, X. De Donatt. inter. Virum. cett. IV, 20; and the later
schoolmen, Antonin and Bernhardin, (ob. 1459 and 144) are pretty
clear on the point. But Albertus Magnus had already recognized the
damnum emergens and Thomas Aquinas the lucrum cessans as
causes of interest. (Tübinger Zeitschr., 1869, 151, 159, 161.) The
essentially modern character of Roman law, which, in the form it
has finally assumed, is in harmony with a high development of
national economy, accounts for the fact that the glosse of Accursius
relying on Irnerius and Bulgarus entirely ignores the prohibition of
interest. For a similar reason, in the 16th century, Donellus and
Cujacius stand entirely on Roman ground. In the interval, indeed,
men like Bartolus and Baldus were not disquieted by the canon law.
(Endemann, Studien in der Römisch-Canonischen Wirtchaftsund
Rechtslehre, I, 18, 27 seq. 61.) Compare the rich historical material

in Salmasius, De Usuris, 1638; De Modo Usurarum, 1639, and De
Mutuo, 1640.
[191-2] A. Thierry, Lettres sur l'Histoire de France, éd. 2., 248 ff.
[191-3] Thus the emperor Basil, in the year 867, as Justinian had
before him, forbade the further payment of interest, once the amount
already paid equaled the principal. (L. 29 seq.; Cod. IV, 32, Nov.,
121, 2.) Compare Sachsenspiegel, I, 54. Edward the Confessor is
said to have issued the first prohibition of interest. (Anderson,
Origin of Commerce, a. 1045.) Edward III. forbade all interest as
the ruin of commerce. (Idem a., 1341.) About 1391, the lower
House had its zeal aroused against the "shameful vice of usury;" and
again, in 1488, all interest on money and all rent-purchases
stipulated for on unlawful conditions, were threatened with a fine of
£20, the pillory, and six months imprisonment. (Anderson, a., 1488.)
In France, the edict of Philip IV. of 1312. Compare Beaumanoir,
Coûtumes, ch. 67, des Usures, No. 2.
[191-4] Dante, Inferno, XI, 106 ff., suggests that interest-creditors
had violated the command of Moses, I, 3. Macchiavelli seems to
judge otherwise: Compare Istoria Fior., VII, a, 1464; VIII, a, 1478.
Very interesting discussions on the legitimateness of the taking of
interest in 1353 seq., in which the Dominicans, up to the time of
Savonarola, defended the strictest opinion. (M. Villan, III, 106.)
Luther, Tract on Trade and Money, 1524, and Sermon on Usury,
1519. Later still, Luther became more moderate. Thus, in his letter
to the Danzig counsel, 1525, in Neumann, Geschichte des Wuchers
in Deutschland, 617 ff., in which, for instance, he blames the
forcible carrying out of interest-prohibitions, draws a distinction
between rich and poor, etc. So, too, in his letter: An die Pfarrherren,
wider den Wucher zu predigen, 1540. Melanchthon, Phil. moral.,
137 ff., is also more moderate. Calvin was clearer in this matter, and
no longer recognized the canonical prohibition of interest. (Epistolæ
et Responsa, Hanov., 1597, epist. 383.) Similarly Zwinglius, who
will not praise interest, but considers it a natural consequence of
property (Opp. ed. Tugur., 1530, I, 319 ff.), and even Erasmus, ad.

Evang. Luc., 6, 44. Adagia v. Usuræ nautt. In Shakespeare, compare
Merchant of Venice. Bodinus also rejects on principle, even Roman
interest, which he held to be 1½ per cent. a year: De Republ., 1584,
V. 2. Even the practical Dutch excluded the so-called "table-
keepers," from the communion up to 1657. Compare the contests
hereon in Laspeyres, Gesch. d. volkswirthsch. Ansich. d. Niederl.,
258 ff.
[191-5] The mutual right of cancellation (Kündbarkeit) in the case
of these contracts during periods poor in capital and credit, would
easily have ruined the debtor. Compare J. Möser, Patr. Ph., II, No.
18. Hence municipal rights in the latter part of the middle ages,
which in many other respects are so antagonistic to Rome, have
seldom anything to object to its measures in this matter.
[191-6] A reason why, as A. Strüver remarks, the Church which was
more a creditor than a debtor, never approved the Weddeschat above
mentioned.
[191-7] The institution of rent-purchase (Rentekauf) was already
developed in the Hanse cities at the beginning of the fourteenth
century. (Stobbe, in the Zeitschr. f. deutsches Recht, XIX, 189 ff.)
About 1420, the bishops of Silesia inquired of the Pope, whether
such contracts which had been the practice in Silesia for a century
were lawful. The answer was a favorable one, although he left the
rate of interest free in this particular case (Extr. Com. III, 5, 1, 2);
after Alexander IV., however, as early as 1258, had instructed
inquisitors not to take part in litigations concerning usurious
contracts. Formerly all such contracts were prohibited in express
terms. (Decret. Greg., V. 19, 1, 2), although, in France, the
ordinances of Louis IX. and Louis X. (1254 and 1315) had
established fixed rates of interest therefor. Between pledge and rent-
purchase, the right of the (virtual) loaner to expel the (virtual)
borrower, which after fell into disquietude, occupies, so to speak, a
middle place. (Compare Eichhorn, D. St.- und R.-Gesch., II, § 361,
a III, § 450.) It was decreed, in France, in 1565, that all rent in kind

should be converted into money rent. (Warnkönig, Franz., St.- und
R.-Gesch., II, 585 ff.)
[191-8] Magnum Bullar. Roman., II, 295.
[191-9] A Prussian law allowing interest even without a contract of
rent-purchase as far back as 1385. (Voigt, Geschich. von Preussen,
V, 467.) In Marseilles, in 1406, a rate of interest of ten per cent.
allowed. (Anderson, Origin of Commerce, s. a.) Likewise in
England, 37 Henry VIII., c. 9. In Brandenburg, 1565, 6 per cent.
(Mylius, C. C., March, II, 1, 11.) A retrograde step by 5 and 6
Edward VI., c. 20; by which all interest was again prohibited. These
laws had, practically, the effect of increasing interest to 14 per cent.,
and were therefore repealed in 1571. How unnatural the prohibition
was is apparent from the fact that by 4 and 5 Philip and Mary, c. 2,
the possessor of 1,000 marks was estimated equal to a person with
£200 annual income. In Denmark, the taking of interest at 5 per
cent. was allowed in 1554, since "although it is contrary to God's
command, yet [according to an opinion given by Melanchthon] this
commerce cannot be entirely abolished." (Kolderup-Rosenvinge's
Dänische R. G., in Homeyer, § 142.) Similar views of the elector
Augustus, 1583. (Cod. August 1, 139 ff.)
The German Empire, in 1600, allowed the debtor to contract that, in
case of delay, the contract might be declared annulled. In France, on
the other hand, even during the 18th century, nearly all loans were
made in the form of rent-purchase (Law, Trade and Money, 127),
and the creditor could declare the contract void only in case the
debtor did not pay him the rent. (Warnkönig, Franz. R. G., II, 585
ff.) For strictly Catholic countries, the prohibition relating to the
taking of interest still really remains. However, Leo X.'s bull, Inter
multiplices, exempts the so-called monti di pietà, and by this means
put obstacles in the way of saving, and promoted real usury. Of this
last, Niebuhr, Briefe, II, 399, adduces very striking instances from
the Pope's own temporal dominion. In the case of pledge, even 12
per cent. per annum is required. (Rom im Jahr, 1833, 163.) Yet, in
1830, the Poenitentiaria Romana instructed the clergy, without,

however, deciding the chief question, not to disquiet people any
longer in the confessional who had taken interest. (Guillaumin,
Dictionnaire de l'Economie politique, art. usure.) On the Russian
Sect, Staroverzen, which still condemns the taking of interest, see
Storch, Handbuch, II, 19. By the Russian government it was
permitted very early. Ewers, Ältestes Recht der R., 323 seq.
[191-10] The first scientific defense of interest is generally
considered to be that of Salmasius, loc. cit. Yet Bacon, Sermones
fideles, C. 39 (after 1539), and at bottom also H. Grotius, De Jure
Belli et Pacis, 1626, taught that it was lawful to take interest in so
far as it was not against the love due to one's neighbor (Endemann,
loc. cit., I, 62 ff.), and Besold, Quaestiones aliquot de Usuris, 1598,
was as near the truth as Salmasius.[TN 24] Compare supra, note 4.
How earnestly North and Locke labored against the lowering of
interest by governmental interference, see Roscher, Z. Gesch. der
engl. Volkswirths., 90, 102 ff. The best writers, in strictly Catholic
countries, did violence to themselves in this matter for a long time
after. Thus Galiani, Della Moneta, II, I seq.; and one cannot help
being greatly surprised at witnessing the subtleties which Turgot,
Mémoire sur le Prêt d'Argent, 1769, had to have recourse to, to
prove the clearest matters. Thus: at the moment of the loan, a sum of
money is exchanged against the mere promise of the other party,
which is certainly less valuable. [If it were not, why should he
borrow?] This difference must, therefore, be made up in interest,
etc. Mirabeau even was a decided opponent of interest. (Philos.
rurale, ch. 6.) Compare, however, the theological defense by
Viaixnes, 1728, in the Traité des Prêts de Commerce, Amsterdam,
1759, IV, 19 ff.
[191-11] Of course, evaded in a thousand ways in practical life.
Thus, for instance, people gave wheat, other commodities, and even
uncoined gold and silver as loans, and had what interest they
pleased promised them. In alienating the capital, they might
stipulate à fonds perdu, as they thought best. (Turgot, I, c. § 29.)
When debtors had promised under oath to make no complaint, the

church ordered that they should be helped officially. When the
temporal power showed itself lax, Alexander III. decreed that such
questions should be brought before the spiritual courts. (Decret.
Greg. V., tit. 19; 13 Innocent, Epist., VIII, 16; X, 61.) In England,
Richard of Cornwall obtained a monopoly of the whole loaning
business. (Matth. Paris, ed. 1694, 639: compare, also, 20 Henry III.,
5.), from which fact the existence of the custom of taking interest
about 1235, is apparent. Cases in which English kings borrowed and
promised payment back cum damnis, expensis et interesse:
Anderson, Origin of Commerce, a. 1274, 1339.
[191-12] Compare Gioja, Nuovo Prospetto, III, 190. The canon law
desired to put an interdict on their taking interest also: Decret.
Greg., V, tit. 19, 12, 18. Frequently, also, a minimum of interest was
provided for them: Ordonnances de la Fr., L. 53 seq. II, 575. Receuil
des anciennes, Lois, I, 149, 152. John of France extended this to
four deniers per livre per week, that is, annually 86-2/3 per cent.! (J.
B. Say, Traité II, ch. 8.) In Austria, in 1244, 174 per cent. allowed!
(Rizy, Ueber Zinstaxen und Wuchergesetze, 1859, 72 ff.)

SECTION CXCII.
INTEREST-POLICY.—GOVERNMENT INTERFERENCE.—FIXED
RATES.

Instead of the medieval prohibition of interest, most modern states
have established fixed rates of interest, the exceeding or evasion of
which, by contract or otherwise, is declared null and void, and is
usually punishable as usury.[192-1] If the fixing of the rate is
intended to depress the rate of interest customary in the country,[192-
2] [192-3]
it uniformly fails of its object. If control were great enough,
vigilant and rigid enough, which is scarcely imaginable, to prevent
all violations of the law, it is certain that less capital would be
loaned than had been, for the reason that every owner of capital

would be largely interested in employing his capital in production
of his own. More capital, too, would go into foreign parts, and
there would be less saved by those not engaged in any enterprise of
their own. All of this would happen to the undoubted prejudice of
the nation's entire economy.[192-4] [192-5]
If, on the other hand, the control by the government be not great
enough, the law would, in most cases, be evaded; especially as
each party, creditor as well as debtor, would find it to his advantage
to evade it. The latter, who otherwise would not be able to borrow
at all, is, as a rule, more in need of obtaining the loan, than the
creditor is to invest his capital. How easily, therefore, might he be
induced to bind himself by oath or by word of honor![192-6] He
would, moreover, be compelled to pay the creditor not only the
natural interest and the ordinary insurance premium, but also for
the special risk he runs when he violates the law threatening him
with a severe penalty.[192-7] Hence the last result is either a material
enhancement of the difficulty of obtaining loans or an enhancement
of the rate of interest.[192-8]
[192-1] This is, historically, the second meaning of the word usury,
while in the middle ages, for instance in England, under Elizabeth
(D. Hume), the taking of any interest whatever was called usury.
Science should employ this word only in the sense used in § 113.
[192-2] In Switzerland, at the end of the 17th century, not only were
those punished who took more interest than the law prescribed, but
those who took less. (Compare Rechtsquellen von Basel, Stadt und
Land, 1865, Bd. II.)
[192-3] Fixed rates of interest of this kind are to be accounted for in
part by a still continuing aversion of the legislator for interest in
general; in part, by the opinion which prevails that precisely the
most useful and most productive classes might be elevated by an
artificial lowness of the rate of interest. (But most especially the

government itself, which borrows more than it lends.) When Louis
XIV. about 1665, lowered the rate of interest to 5 per cent., he
claimed in the preamble to his decree that it would have the effect of
promoting the welfare of landowners and business men, and of
preventing idleness. Similarly Sully, Economies royales, L, XII. And
so J. Child, Discourse of Trade, 69 ff., says that every lowering of
the rate of interest, by law, produced a completely corresponding
increase of the national wealth. He says, since the first reduction (?)
of interest in 1545, the national wealth increased six fold; since the
last, in 1651, the number of coaches increased a hundred fold;
chamber-maids wore now better clothes than ladies formerly; on
'Change there were more persons with a fortune of £10,000 than
before with £1,000. Similarly Culpeper: compare Roscher, Z.
Geschichte der eng. Volkswirthsch., 57 ff. Later, the French
generally thought that a lowering of the rate of interest would prove
injurious to the noblesse de la robe; hence even in 1634, parliament
was opposed to it. (Forbonnais, Recherches et Considérations, I, 48,
226.) Darjes says that information of all loans of capital should be
made to the police authorities, and that the authorities might compel
payment and the loaning of the principal over again to parties in
need of capital. (Erste Gründe, 426 seq.) Something analogous[TN
25]
practically provided for by the Würtemberg Landesordnungen of
the 16th century. (Compare also von Schröder, F. Schatz- und
Rentkammer, XXV, 3.)
[192-4] Precisely a high rate of interest is a powerful incentive to
saving, and to the importation of capital.
[192-5] Usurae palliatae, interest taken out of the capital, or stem-
interest, called also money-usury in contradistinction to patent
interest-usury. To this category belong the written acknowledgments
of indebtedness to a larger amount than that actually received;
acknowledging it in a higher kind of money than that in which the
loan was made; the compulsory taking by the debtor of commodities
at a disproportionately high price, in the place of money, or at a
disproportionately low one, by the creditor. See the enumeration of

such things in the police regulations of the empire, 1530, art. 26,
and 1548, art. 17. Thus, in Paris, jewels are "sold" to students hard-
pressed for money, which immediately find their way to the monts
de piété, and have to be paid for some time after to the usurious
"seller," at a most exorbitant price. The person who loans $100 at 6
per cent., and retains the interest for the next following year from
the date of the loan, takes in reality nearly 6.4 per cent. Fraudulent
accessory expenses of all kinds, faux frais, expenses of registration,
for prolongation, and extinguishment, etc. Here belong, also, the
provisions introduced into contracts to make redemption more
difficult, the fixing of terms of payment in such a manner that the
debtor is almost forced to let them slip by—called "usury in the
conditions" in Austria. Remarkable instances from the 16th century
in Vasco, Usura libera, § 57 ff. Recently, Braun und Wirth, Die
Zinswuchergesetze, 1856, 190 ff. In view of the manifold business
transactions behind which the interest-usurer may take refuge, the
complete prevention of the latter would break the legs of commerce
(loc. cit., 145 ff.).
[192-6] If the state, by annulling such promises, should incite the
people to violate them, it would be a frightful step towards the
demoralization of the nation: "thus rewarding men for obtaining the
property of others by false promises, and then, not only refusing
payment, but invoking legal penalties on those who have helped
them in their need." (J. S. Mill, Principles, V, ch. 10, 2.) Besides, the
Austrian usury law of 1803 punishes the borrower also as a
spendthrift, and imprisons him for six months (§ 18), or else it
designates where he shall make his domicile (Ortsverweisung).
Modern loaning on drafts and bills of exchange, the acceptance of
which is forged with the knowledge of the creditor, corresponds to
what Plutarch, Quaest., Gr., 53, relates of the Cretans, who had,
especially in later times, the worst possible reputation for avarice
and dishonesty. (Polyb., VI, 46. Paul to Titus, I, 12.)
[192-7] He must insure him against the usury laws. (Adam Smith.)
According to Krug, Staatsökonomie, the usury laws should be called

so because they promote usury, not because they prevent it.
Compare to some extent, Montesquieu, Esprit des Lois, XXII, 18 ff.
[192-8] When Catherine II. reduced the rate of interest in Livonia,
in 1785, from 6 to 5 per cent., it soon became impossible, even on
the best security, to borrow at less than 7 per cent. (Storch,
Handbuch, II, 26.) And so, when in New York, in 1717, the rate of
interest was reduced to 6 per cent., it became necessary, the
following year, to raise it again to 8 per cent. The merchants,
themselves, petitioned that it might be so raised, because they found
it impossible to get any loans whatever. (Ebeling, Geschichte und
Erdbeschreib. von Nord Amerika, III, 152.) In Chili, the legal rate of
interest is 6 per cent., the actual rate, however, never under 12 per
cent., and frequently 18 to 24 per cent. In Peru, on the other hand,
the repeal of the usury laws rapidly reduced the rate of interest from
50 to 24 per cent., and finally to 12. (Pöppig, I, 118.)

SECTION CXCIII.
INTEREST-POLICY.—EFFORTS TO AVOID THE EVIL EFFECTS OF A
FIXED RATE.

It has been thought possible to avoid the evil effects of a fixed legal
rate of interest, by regulating it in such a way as to make it
coincident with the rate customary in the country.[193-1] But there
are numberless transactions in which an insurance premium, or
premium for risk or certain expenses of administration[193-2] on the
part of the loaner is inseparable from the true interest. Here, even
the law which entered most into detail could never properly
provide for the infinite gradations or shades of risk and trouble; and
the rate in a great many transactions would, therefore, be placed
below the natural height. Turgot long since observed that the value
of a promise of future payment is different not only for different
persons, but at different times. Thus, for instance, it is really less

after there have been numerous cases of bankruptcy than at other
times.[193-3] If, now, it was desired to fix the maximum rate of
interest in such a way that it should equal the rate customary in the
country, where the security is good, the best real property security
for instance, the consequence would be, that those persons who had
no such guaranty to offer (leaving the loaning "among brothers" out
of the question) would either be unable to borrow money at all, or,
by evading the law, only at an artificially higher rate. Hence the
legislator causes injury where he wished to favor. This has been
observed in England in almost all past commercial crises.[193-4] The
man who makes it his business to loan his capital, on short time
and in small sums, undertakes a trade which the examination, and
the surveillance of a large number of small debtors, and the
necessity of reinvesting the many small sums paid him, render
exceedingly[TN 26] troublesome and disagreeable. Moreover, in
loaning on short terms of payment, there is always danger that his
money may lie idle for some length of time. These are reasons
sufficient, why, in such cases, when the whole compensation is
denominated interest, a rate of interest greater than usual in the
country is equitable and even necessary. (§ 179.)[193-5]
It has been frequently suggested that spendthrifts and adventurers
should be hindered using, or to speak more correctly, abusing the
nation's wealth by laws prohibiting the rate of interest at which
they might be expected to obtain credit; and this in the interest
alike of the creditors they might possibly find and in their own.[193-
6]
But almost every inventor of genius, from Columbus to
Stephenson, has been obliged to be considered "an adventurer" for
a time by "solid men." The law limits him thus, and more
especially during the critical period of outlay which precedes the
undoubted triumph of his idea, to his own means or the gifts of
others. [193-7] And how inadequate, as rule, are both. The rich are as

seldom discoverers, as discoverers are skillful supplicants. And, as
regards spendthrifts, they may ruin themselves in so many
thousands of ways, especially by buying or selling, and unhindered
by the state, that it is scarcely apparent why the one way of
borrowing should be legally closed to them.[193-8] How is it, if the
law itself drives them into the hands of a worse class of creditors,
and compels them to pay yet a higher rate of interest? Are they not
simply more rapidly ruined? States, themselves, have scarcely ever
given any heed to their own usury laws in borrowing or loaning.
[193-9]

[193-1] In Austria, in 1803, in loaning on pledge, 4 per cent.; in
other loans and in the trade of merchants with one another, 6 per
cent. In France, since 1807, with merchants, 6 per cent.; with others,
5. Salmasins, De Mono Usur., c. 1, advises that the maximum
should be fixed as high as that usual in the most unfavorable cases.
The reduction from such rate, where possible, would regulate itself.
[193-2] Petty, Quantulumcunque concerning money, 1682.
[193-3] Sur le Prêt d'Argent, § 36.
[193-4] How many merchants would have avoided bankruptcy here
if they had been allowed to borrow at 8 per cent.! The established
rate of 5 per cent. was certainly too low, considering the great
demand for capital and the want of confidence at the moment, to
permit capital to be loaned at that rate. Many saw themselves
compelled to sell their merchandise or evidences of state
indebtedness at a loss of 30 per cent., in order to meet their
obligations. But the person who, to anticipate the receipts due in 6
months, for instance, consents to suffer a loss of 30 per cent., pays,
in a certain sense, interest at the rate of 60 per cent. a year. Compare
Tooke, Considerations on the State of the Currency, 60, and History
of Prices, II, 163, on the Crisis of 1825-26. Since the Bank, least of
all, could exceed the legal rate of interest, numberless applications
were made to it in times of war in order to obtain the difference

between the legal rate and the rate usual in the country. (Thornton,
Paper Credit of Great Britain, ch. 10.) Prussia, November 27, 1857,
suspended the usury laws for 3 months, on account of the
commercial crisis, except the provisions relating to pawn-broker and
minors.
[193-5] Turgot tells of Parisian "usurers" who made weekly
advances to the market women of la Halle, and received for 3 livres,
2 sous interest; that is 173 per cent. a year. The premium for
insurance may have been very high here. When such loaners were
brought before the courts, and they were sentenced to the galleys,
the usual punishment for usury, their debtors came and testified their
gratitude by begging for mercy to them! (Mémoire sur le Prêt
d'Argent, § 14, 31.) Compare Cantillon, Nature du Commerce, 276.
[193-6] Thus, Adam Smith, Wealth of Nations, II, ch. 4. Similarly,
Roesler Grundsätze, 495 ff. Compare, per contra, Jer. Bentham,
Defense of Usury: showing the Impolicy of the present legal
Restraints on the Terms of pecuniary Bargains in Letters to a Friend.
To which is added a Letter to Adam Smith on the Discouragement
imposed by the above Restraints to the Progress of inventive
Industry, 1787; 3 ed., 1816.
[193-7] The first steamboat in the United States was, for a long
time, called the "Fulton-folly!"
[193-8] It is just as hard to see why only money-capital should have
a fixed rate of interest, and not buildings, etc. likewise.
[193-9] In Holland, the legal rate of interest was lowered, in 1640,
to 5 per cent., and in 1655 to 4; but not since. (Sir J. Child,
Discourse of Trade, 151.) Besides, Locke, Considerations on the
Lowering of Interest, Works, III, 34, assures us that, in his time, a
man in England could make contracts for unlimited interest.

SECTION CXCIV.

INTEREST-POLICY.—REPEAL OF THE USURY LAWS.

However, the complete repeal of the usury laws[194-1] has not under
all circumstances accomplished what it was supposed it would; and
the state should take great care, lest by an incautious framing of its
laws, it should put judges in such a position that they may be
compelled to coöperate in the execution of immoral contracts.[194-2]
In the lowest strata, so to speak, of the loaning business, the
medieval condition continues to exist (§ 190) after it has
disappeared in the upper. Here, the loan is effected scarcely ever
for the purposes of production, but most generally because of the
most urgent necessity; and the debtor is not in a condition, from
want of education, and especially from his ignorance of arithmetic,
to estimate the magnitude of the burthen he has undertaken. The
business of loaning is, under such circumstances, considered
dishonorable, to some extent, by the public. And when a business
necessary in itself is held disreputable by public opinion, the usual
result is that bad men alone engage in it.[194-3] Real competition
which would but fix the natural price is wanting here in proportion
as the debtor is anxious for secrecy.[194-4]
Abuses in this respect are best guarded against by the establishment
of government loan-institutions, and by the publicity of the
administration of justice to debtors.[194-5] Besides, every contract
might be prohibited the terms of which were such that an
inexperienced borrower could not from them obtain a clear
conception of the burthen he accepts, or which hindered him from
paying the debt at a proper time.[194-6]
Lastly, there should be a rate of legal interest fixed by the state to
be charged in such cases as interest is found to be in justice due,
but in which none is provided for by contract; and this rate should

approximate as nearly as possible to the rate usual in the country.
[194-7] [194-8]

[194-1] In 1787, Joseph II. abolished the penalties for usury, but
allowed the provisions denying a legal remedy, in cases of usurious
demand of over 4 per cent. for hypothecations, 6 per cent. for bills
and 5 per cent. for other loans, to remain. Compare the prize essay
by Günther, Versuch einer vollständigen Untersuchung über Wucher
und Wuchergesetze, 1790; v. Kees, über die Aufhebung der
Wuchergesetze, 1791; Vasco, Usura libera, 1792. The opposite view
represented by Ortes, E. N., II, 24, and v. Sonnenfels, Ueber Wucher
und Wuchergesetze, 1789, and zu Herrn von Kees, Abhandlung, etc.,
1791. The debates on the repeal of the usury laws in the French
Chamber of Deputies, after which Lherbette's motion in favor of
their repeal was rejected. In France they were, during the assignat-
period of bewilderment virtually, and in 1804-1807 expressly (C. C.,
Art. 1907), but only provisionally repealed. In Würtemberg, all
those having the right to draw bills of exchange were exempted
from them in 1839. Since the law of 1848, governing bills of
exchange, gave all persons capable of contracting, the right to draw
bills of exchange, the usury laws have ceased to have any existence;
without much noise before and without much complaint after. (A.
Allgem. Ztg., 24 März, 1857.) Recent complete or partial repeal of
the usury laws: in England, in 1854; in Denmark, in 1855; in Spain,
in 1856; Sardinia, Holland, Norway and Geneva, 1857; Oldenburg,
1858; Bremen, 1859; in the kingdoms of Saxony and Sweden, in
1864; Belgium, 1865; Prussia, the North German Confederation,[TN
27]
and to some extent Austria, in 1867.
[194-2] Compare F. X. Funck, Zins und Wucher, 1868, a moral
theological treatise which rightly demands a more rigid popular
morality in relation to real usury, after the repeal of the usury laws.
The recent cases in which courts have juridically acquitted usurers
because they could not do otherwise, but have branded them
morally, are of very questionable propriety, in view of the facility
with which high and usurious rates of interest may be confounded.

R. Meyer, Emancipationskampf, I, 78, advises that the capitalist be
allowed to ask whatever interest he wishes, but that the state, as
judge and executor of the laws, should enforce payment only at a
certain rate determined by law.
[194-3] Many laws seem to purposely permit this, inasmuch as they
allow a rate of interest, higher in proportion as the position of the
creditor is less respectable. Thus, formerly, in some places, the Jews
might require higher interest than the Christians. Justinian allows
personis illustribus only 4 per cent.; ordinary private persons, 6 per
cent.; money-changers, etc., 8 per cent. (L. 26, Cod. IV, 32.) On the
other hand, according to the Indian legislation of Menu, the
Brahman is obliged to confine himself to 2, the warrior to 3, the
vaysya to 4, the sudra to 5 per cent. per month at most. (Cap. 8.)
[194-4] Turgot considered that only the prêteurs à la petite semaine,
pawnbrokers who loaned to hard-pressed people on the confines of
the middle class and artisans, and the infamous characters who
advanced money to the sons of rich men to spend in dissipation, still
passed for usurers. Only the latter are injurious; not, however,
because of the high rate of interest they charge, but because they
help in a bad cause. (Sur le Prêt d'Argent, § 32.) According to
Colquhoun, Police of the Metropolis, 167, there are women in
London from whom the hucksteresses borrow 5 shillings every day
and return them every evening with ½ shilling interest. Something
analogous happens much more frequently in the country, especially
in the loaning in kind of productive capital to poor persons. Thus, in
Tessin, there are many "iron cattle" which the borrower is obliged to
return at their original value, plus an interest of about 36 per cent.
(Franscini, C. Tessin, 152.) On the Rhine, frequently as much as
200 per cent. a year, is stipulated for in such contracts. Morstadt, der
N. Oekonom. Heft., IX, 727.
[194-5] Compare J. J. Becher, Polit. Discurs, 1668, 219; v.
Schröder, F. Schatz- und Rentkammer, Bd. §§ 123, 133 ff. The first
montes pictatis were expressly intended to check the usury of the
Jews. Thus, in Florence, in 1495, after the expulsion of the Jews,

voluntary contributions were made to found a municipal loaning
establishment. Similarly, Tiberius, Tacit. Ann., VI, 16 seq. Count
Soden, Nat-Oek., IV, 57; V, 319, advises that all contracts for
interest should be recorded in a public registry, under pain of their
being held not actionable.

[194-6] Günther, loc. cit., thinks that, in every contract in which the
rate of interest is masked, its real rate should be expressed under
penalty of invalidity. In addition to this, he would have those who
have attained their majority put in full control of their fortune only
after they had undergone an examination.
It seems opportune that the old prohibition against interest on
interest (Cicero, ad. Att., V, 21, and L, 26, Digest, XIV, 6) and the
provision that the interest should not be permitted to be greater than
the alterum tantum (Digest, l. c.) should be permitted to continue.
(Digest, l. c.) Both of these measures were first decreed by Lucullus,
for the protection of Asia Minor. Compare § 115. Florentine law, of
1693, that interest in arrears, or that interest on interest beyond 7
years, should not be added to the principal without an express
contract to that effect. (Vasco, Usura libera, § 155.) In England, the
usury laws were by 2 and 3 Victor., c. 37, repealed, but only to the
extent of excepting from their provisions bills of not over 12
months, and money loans not over £10. Compare Rau, Lehrbuch II,
§ 323.
[194-7] Compare Locke, Considerations: Works, 10, 32 ff. In Spain,
the Council of State is required to regulate the rate of legal interest
yearly (law of 1856, art. 8); a thing which, according to Braun,
would be better done in each individual case by the judges
themselves. (Faucher's Vierteljahrsschrift, 1868, II, 13.)
[194-8] In Athens, the rate of interest in general was voluntary from
the time of Solon, who, however, did away with slavery for debt.
(Lysias adv. Theomn., 360.) Yet there was a legal rate of interest of
18 per cent. for the case in which a divorced husband delayed the
return of his wife's dowry. Compare Böckh, Staatshaushalt der
Athener, I, 148.

CHAPTER V.

THE UNDERTAKER'S PROFIT.
(UNTERNEHMERLOHN.)

SECTION CXCV.
THE REWARD OF ENTERPRISE.

The essence of an enterprise or undertaking, in the politico-
economical sense of the word, consists in this, that the undertaking
party engages in production for the purpose of commerce, at his
own risk. In the earlier stages of a nation's economy, the production
of consumers is, naturally enough, limited chiefly by their own
personal wants. Somewhat later, when the division of labor has
been further developed, the workman produces at first, enough to
meet occasional determinate "orders;" and still later to meet them
regularly and as a business. Later yet, and in stages of civilization
yet higher, especially when the freedom of labor constantly grows,
as it is wont to, here, and the freedom of capital and trade becomes
more extensive, enterprise plays a part which grows more
important as time rolls on, and is usually carried on more at one's
own risk.[195-1] This transition is a great advance, inasmuch as the
advantages of the coöperation of labor and of use may be utilized
in a much higher degree by undertakers (Unternehmer) than by
producers who labor only to satisfy their own household wants, or
to meet "orders" already made. The awakening of latent wants, a
matter of the utmost importance to a people who would advance in
civilization, is something which can enter into the mind only of a
man endowed with the spirit of enterprise (an undertaker).[195-2]

While most English political economists have confounded the
personal gain of the undertaker with the interest on the capital used
by him,[195-3] many German writers have called the "undertaker's
earnings" or profit a special, and fourth, branch of the national
income, coördinate with rent, wages, and the interest on capital.[195-
4]
Yet, the net income of every undertaker is either the fruit of his
own land used for purposes of production and of his capital, in
which case it is subject to the usual laws of development of rent
and interest; or, it must be considered as wages paid for his labor.
[195-5]
These wages he earns, as a rule, by organizing and inspecting
the work, calculating the chances of the whole enterprise;
frequently by, at the same time, keeping the books and acting as
cashier; and, in the case of small undertakings, as a common
fellow-workman. (Tradesman, peasant). In every case, however,
even when he puts an agent paid by himself in his place, he earns
these wages from the fact that his name keeps the whole enterprise
together; and for the reason that, in the last instance,[195-6] he has to
bear the care and responsibility attending it.[195-7] When a business
goes wrong, the salaried director or foreman may permit himself to
be called on to engage in another; but the weary, watchful nights
belong to the undertaker or man of enterprise, alone; and "how
productive such nights frequently are!"[195-8]
This profit of the undertaker is subject essentially to the same
natural law as wages in general are; only it differs in this from all
other branches of income, that it can never be stipulated for in
advance. Rather does it consist of the surplus which the product of
the undertaking affords over and above all the rent stipulated for in
advance or estimated at the rate usual in the country, the interest on
capital, and wages of common labor.[195-9]

[195-1] At first, usually imperfect enterprises in which the shop-
instruments, etc., are kept ready for present orders; and then
complete or perfect enterprises. (v. Mangoldt,
Volkswirthschaftslehre, 255.)
[195-2] v. Mangoldt, Lehre vom Unternehmergewinn, 1855, 49 ff.
The same author shows, in his Volkswirthschaftslehre, that it is
better for the general good that the risk should be borne by the
producer than by the consumer. In the case of the taking of orders,
there is danger only of a technic failure, but in enterprise proper,
there is possible also an economic miscarriage of the work, even
when successful from a technic point of view. But in the case of the
undertaker (man of enterprise), responsibility is much more of an
incentive, production much more steady, and therefore much better
able to exhaust all means of help. Consumers are much more certain
in their steps, as regards price, etc., since they find what they want
ready made.
[195-3] Thus John Stuart Mill, Principles, II, ch. 15, 4, teaches with
a certain amount of emphasis that the "gross profits of stock" are
different not so much in the different branches in which capital is
employed, as according to the personal capacity of the capitalist
himself or of his agents. There are scarcely two producers who
produce at precisely the same cost, even when their products are
equal in quality, and equally cheap. Nor are there two who turn over
their capital in precisely the same time. These "gross profits"
uniformly fall into three classes: reward for abstinence, indemnity
for risk, remuneration for the labor and skill required for
superintendence. Mill complains that there is in English no
expression corresponding to the French profit de l'entrepreneur.
[The translator has taken the liberty to use the expression
"undertaker's profit," for what the French call the profit de
l'entrepreneur, and the Germans Unternehmerlohn, spite of its
funereal associations, and because Mill himself employed it,
although he recognized that it was not in good usage.—Tr.] (II, ch.
15, 1) Adam Smith had the true doctrine in germ (Wealth of Nat., I,

ch. 6), but those who came after him did little to develop it.
Compare Ricardo, Principles, ch. 6. 21. Read, Political Economy,
1829, 262 ff., and Senior, Outlines, 130 seq., were the first to divide
profit into two parts: interest-rent (Zinsrente) and industrial gain.
Similarly, Sismondi, N. P., IV, ch. 6. According to A. Walker,
Science of Wealth, 1867, 253, 285, "profits are wages received by
the employer."
[195-4] Hufeland, Grundlegung, I, 290 ff.; Schön, Nat-Oek., 87, 112
ff.; Riedel, Nat-Oek., II, 7 ff.; von Thünen, Der isolirte Staat, II, 1 80
ff.; v. Mangoldt, Unternehmergewinn, 34 ff. The latter divides the
undertaker's profit (profit de l'entrepreneur) into the following parts:
A. Indemnity for risk. If this be only an indemnity exactly
corresponding to the risk, it cannot be looked upon at all as net
income, but only as an indemnification for capital. If individual
undertakers, favored by fortune, receive a much larger
indemnification than is necessary to cover their losses, such
indemnification is not income either, but an extraordinary profit not
unlike a lottery-gain, unless it be called, perhaps, the reward of
extraordinary courage (Eiselen), i. e., wages. If, lastly, the indemnity
is uniformly somewhat larger than the risk, in order to compensate
for the continual feeling that one is running a risk, it must be
remembered that all remuneration for present sacrifice, made
directly for the sake of production, is wont to be embraced under the
name of wages.
B. Wages and interest for the labor and capital utilized only in one's
own production, and which cannot be let. v. Mangoldt himself
admits, that, in the long run, only certain qualified labor belongs to
this category.
C. Undertaker's rent (Unternekmerrente) depending on the rarity of
undertakers (men of enterprise) compared with the demand. This,
therefore, is not a third component part, but only one which adds to
the other two, Storch, Handbuch, I, 180, and Rau, Lehrbuch, I, §
237 ff., consider the profit of the undertaker as an admixture of

wages and interest. Professor J. Miscszewicz has given expression to
an interesting thought in opposition to myself: that credit is a fourth
factor of production (natural forces, labor and capital being the other
three) produced by the three older factors, as capital by the two
oldest. The undertaker's profit he then considers the product of this
fourth factor, corresponding to rent, interest and wages.
[195-5] Compare Canard, Principes, ch. 3; J. B. Say, Traité, II, ch.
7, Cours pratique, V, 1-2, 7-9, distinguishes three branches of
income: rent, interest and the profits of industry; and he divides the
latter again into the profits of the savant, the undertaker and
workmen, (v. Jacob, Grundsätze der Nat.-Oek., § 292; Lotz,
Handbuch, I, 471; Schmalz, Staatswirthschaftslehre, I, 116;
Nebenius, Oeff. Credit, I, Aufl., 466.)
[195-6] I need only call attention to the influence that the mere
name of a general sometimes exerts over the achievements and
sometimes even over the composition of his army (Wallenstein!);
and how important it sometimes is to keep his death a secret. And so
the mere name of a minister of finance may facilitate loans, etc.
[195-7] It is sufficient to mention the different positions occupied by
the shareholders and preferred creditors of a joint-stock company.
[195-8] Compare von Thünen's Isolirter Statt, II, 80 ff., and his Life,
1868, 96. Meister muss sich immer plagen! (Schiller.) See a long
catalogue of books on the position of the undertaker in the principal
different branches of industry in Steinlein, Handbuch der
Volkswirthschaftslehre, I, 445 ff.
[195-9] Tantièmes occupy a middle place between wages and the
undertaker's profit; dividends a middle place between undertaker's
profit and the interest of capital. On this is based Rodbertus's view,
that an increase of joint stock companies raises ceteris paribus the
rate of interest, and an increase of productive associations the rate of
wages, for the reason that in each instance, there is some admixture
of "undertaker's profit," or reward of enterprise.

SECTION CXCVI.
UNDERTAKER'S PROFIT.—CIRCUMSTANCES ON WHICH IT
DEPENDS.

As the wages or reward of labor, in all instances, depends on the
circumstances mentioned in § 167 ff., so, also does the reward of
enterprise; in other words, the undertaker's profit or wages. It
depends, therefore:
A. On the rarity of the personal qualities required in a business,
which qualities may be divided into technical and ethical qualities.
Among the latter are, especially, the capacity to inspire capitalists
with confidence and workmen with love for their task; the
administrative talent to systematize a great whole made up of men
and to order it properly, to keep it together by sternness of
discipline in which pedantry has no part, and by economy with no
admixture of avarice; and frequently endurance and even presence
of mind. These ethical, statesmanlike qualities are, take them all in
all, a more indispensable condition of high undertaker's profit than
the technical are.[196-1]
B. On the risk of the undertaking in which not only one's property,
but one's reputation, may be lost.[196-2]
C. As to the disagreeableness of the undertaking or enterprise, we
must take into especial consideration the disinclination of
capitalists in general to assume the care and trouble of concerning
themselves directly with the employment of their capital. (§ 183.)
The undertaker's profit is, besides, lower in proportion as he needs
to care less for the profitable application of the different sources of
production, and for their preservation. Hence it is, in general,
higher for the direction of circulating than of fixed capital; in

speculative trade and in wholesale trade which extends to the
whole world, than in retail trade and merely local business.[196-3]
It has, indeed, been remarked, that the undertaker's profit is, as a
rule, proportioned to the capital employed.[196-4] This may be true in
most cases, but only as the accidental compromise between
opposing forces. It is evident that the greater the enterprise is, the
greater may be the surplus over and above the compensation
stipulated for in advance of all the coöperating productive forces,
and not only absolutely but also relatively. We need only call to
mind the successful results attending the greater division of labor
(§ 66) and the greater division of use (Gebrauchstheilung) (§ 207);
the greater facility of using remains in production on a large scale,
and the fact that all purchases, and all obtaining of capital are
made, when the items are large, at cheaper rates, because of the
more convenient conducting of the business.
This is true up to the point where the magnitude of the whole
becomes so great as to render the conducting of it difficult.
Considered even subjectively, the great undertaker, whose name
and responsibility keep a great many productive forces together,
may demand a higher reward, because there are so few persons
competent to do the same. On the other hand, it cannot be denied
that a support in keeping with his position may be called the
amount of the cost of production of the undertaker's labor. If this
cost is once fixed by custom, it will, of course, be relatively high in
those branches of business which permit only of the employment of
a small capital.[196-5]
In the higher stages of civilization, the undertaker's profit has, like
the rate of interest, a tendency to decline. This decline is, indeed, in
part, only an apparent one, caused by the decreased risk and the
smaller indemnity-premium. But it is, in part, a real one, produced

by the increased competition of undertakers.[196-6] The more
intelligent landowners and workmen become, the more readily do
they acquire the capacity and desire to use the productive forces
peculiar to them in undertakings of their own; and the number of
retired persons who live from their rents grows smaller with the
decline of the rate of interest. The strong competition of
undertakers now leads to degeneration, and undertakings or
enterprises become usual in which the gains or losses are
subjective, and are destitute of all politico-economical
productiveness; for instance, the purchase of growing fruits, and
businesses carried on in "margins," or differences. It is self-evident
that the circumstances which retard the rate of interest, or turn it
retrograde, would have a similar effect on the undertaker's profit. (§
186.) On the whole, a rapidly growing people meet with great gains
and losses, but the preponderance is in favor of the former. A
stationary people are wont to become more and more careful and
cautious. A declining people underestimate the chances of loss,
although in their case they tend more and more to preponderate
over the chances of gain. (v. Mangoldt.)
[196-1] Thus Arkwright, by his talent for organization principally,
attained to royal wealth, while Hargreaves, a greater inventive
genius, from a technic point of view, had to bear all the hardships of
extreme poverty.
[196-2] An experienced Frenchman, Godard, estimates that of 100
industrial enterprises attempted or begun, 20 fail altogether before
they have so much as taken root; that from 50 to 60 vegetate for a
time in continual danger of failing altogether, and that, at the
furthest, 10 succeed well, but scarcely with an enduring success.
(Enquête commerciale de 1834, II, 233.)
[196-3] Thus Ganilh, Théorie de l'Economie politique I, p. 145, was
of the opinion that in France's foreign trade the profit was only 20,

and in its internal trade, scarcely 10 per cent. of the value put in
circulation.
[196-4] Hermann loc. cit. 208.
[196-5] According to Sinclair, Grundgesetze des Ackerbaues, 1821,
the profit on capital of English farmers was wont to be from 10 to
18 per cent. Only in very remarkable cases, by persons in very
favorable circumstances, was from 15 to 20 per cent. earned; that is,
on the whole, less than in commerce and industry. In the case of
farmers of meadow land, 15 per cent. and even more was not
unusual; because there is a need of less outlay here, but more
mercantile speculation, especially in the fattening of live stock.
At the end of the last century English farmers expected 10 per cent.
profit on their capital. (A. Young, View of the Agriculture of Suffolk,
1797, 25.) And so Senior is of opinion that, in the England of to-day,
industrial enterprises of £100,000 yield a profit of less than 10 per
cent. a year; those of £40,000, at least 12½ per cent.; those of from
£10,000 to £20,000, 15 per cent.; smaller ones 20 per cent. and even
more. He makes mention of fruit hucksters who earned over 20 per
cent. a day; that is, over 7,000 per cent. a year! (Outlines, 203 seq.)
In Manchester, manufacturers, according to the same authority,
turned over their capital twice a year at 5 per cent.; retail dealers,
three times a year at 3½ per cent. (Ibid, 143.) Torrens, The Budget
(1844), 108, designates 7 per cent. as the minimum profit which
would induce an English capitalist to engage in an enterprise of his
own. According to v. Viebahn, Statistik des Regierungsbezirks
Düsseldorf, 836, I, 180, the undertaker's profit, i. e., the surplus
money of the value of the manufactured articles, after deduction
made of the raw material and wages, in the Berg country, amounted
to, in 81 iron factories, 146,400 thalers; in 6 cotton factories, to
21,200 thalers; in 15 cloth factories, to 14,725 thalers; in 4 worsted
factories, to 1,700 thalers; in 4 brush factories, to 800 thalers; in 2
tobacco factories to 10,220 thalers; in 2 paper factories, to 7,400
thalers; on an average, 1,924 thalers; although many undertakers

earned only from 200 to 400 thalers, and some few from 5,000 to
10,000 thalers.
[196-6] This is, of course somewhat oppressive to many individuals,
and hence we find that in those countries which are unquestionably
making great advances in civilization, there are so many complaints
of alleged growing impoverishment. Compare Sam. Fortrey,
England's Interest and Improvement, 1663; R. Coke, A Treatise
wherein is demonstrated that the Church and State of England are in
equal danger with the Trade of it, 1671. Britania languens, showing
the Grounds and Reasons of the Increase and Decay of Land, etc.,
1680. And per contra, England's great Happiness, wherein is
demonstrated that a great Part of our Complaints are causeless,
1677. Analogous claims might be shown to exist in Germany by a
collection of almost any number of opinions advanced during the
last thirty years.

SECTION CXCVI (a.).
UNDERTAKER'S PROFIT.—HAVING THE "LEAD."

The undertaker's profit is that branch of the national income in
which the greater number of new fortunes are made. If a landowner
has a large income, he generally considers himself obliged to make
a correspondingly large outlay, one in keeping with his position;
and workmen who are not undertakers themselves seldom have the
means to make large savings. Besides, undertakers stand between
the purchasers of their products and the lessors of the productive
forces used by them in the peculiarly favorable situation which I
may describe by the expression: having, as they say in card-
playing, "the lead."[196a-1] When, in the struggle for prices, one
party occupies a position which enables him to observe every
change of circumstance much sooner than his opponent, the latter
may always suffer from the effects of erroneous prices. If, for

instance, the productiveness of business increases, even without
any personal merit of the individual undertakers themselves, it will
always be some time before the decline in the price of commodities
and the rise in the rate of interest take place, as a result of the
increased competition of undertakers, consequent upon the
extraordinary rate of the undertaker's profit. It is difficult, and even
impossible in most instances for the proprietors of the productive
forces which they have rented out, to immediately estimate
accurately the profit made by undertakers. On the other hand, the
least enhancement of the price of the forces of production is
immediately felt by the undertakers, and causes them to raise their
prices. They just as quickly observe a decline of the prices of the
commodities, and know how to make others bear it by lowering
wages and the rate of interest.[196a-2] It should not be forgotten that
the persons most expert, far-seeing, active and expeditious in things
economic, belong to the undertaking class.[196a-3] [196a-4]
[196a-1] The same principle is effective in intermediate commerce,
and in the intervention of bankers between government and state
creditors.
[196a-2] This is much less the case in rents, for the reason that
contracts here are made for a much longer term. Hence, here the
farmer has as much to fear as to hope from a change of
circumstances. Hence, too, we meet with a farmer who has grown
rich much more seldom than with a manufacturer or a merchant.
[196a-3] If an undertaker can cede his higher reward to another and
guaranty its continuance, the circumstances which enable him to do
this assume the nature of fixed capital; for instance, the trade or
clientèle secured by custom or privilege. If the undertaker has not
the power to dispose of it in this way, the increased profit either
disappears with his retirement from the business or falls to the
owner of the capital employed, and still more to the land owner.
Thus, for instance, how frequently it has happened that a store,

which has been largely resorted to by the public, drawn thither by
the business tact of the lessee, has afterwards been rented by the
owner at a higher rent! (Hermann, loc. cit. 210.)
[196a-4] Lassalle's socialistic attacks on Political Economy have
been directed mainly against the undertaker's profit or reward.
Compare the work "Bastiat-Schulze von Delitzsch, der ökonom.
Julian oder Kapital und Arbeit," 1863. By means of state credit, he
would have this branch of income turned over to common labor.
Dühring also, Kapital und Arbeit 90, declaims not so much against
capital as against "the absolutism of undertakers." Schäffle D.
Vierteljahrsschrift Nr. 106, II, 223, objects to this, that undertakers
give value in exchange to unfinished products, a great service
rendered even to the laboring class, who otherwise would have to
resign the advantages of the division of labor.
The undertaker's profit is precisely the part of the great politico-
economical tree from which further growth chiefly takes place. To
artificially arrest it, therefore, would be to hasten the stationary
state, and thus make general and greater the pressure on workmen
and capitalists, which it is sought to remove locally. Hence Roesler,
Grundsätze, 507 ff., very appropriately calls the undertaker's profit
the premium paid by society to those who most effectually combat
the "law of rent." The importance of a good undertaker may be
clearly seen when a joint stock manufacturing company pays a
dividend of from 20 to 30 per cent., while one close by, of the same
kind, produces no profit whatever. But, at the same time, the
socialistic hatred of this branch of income may be easily accounted
for, in a time full of stock-jobbing, which last never produces except
a pseudo-undertaker's profit.

CHAPTER VI.

CONCLUDING REMARKS ON
THE THREE BRANCHES OF INCOME.

SECTION CXCVII.
INFLUENCE OF THE BRANCHES OF INCOME ON THE PRICE OF
COMMODITIES.

We have seen, § 106, that the cost of production of a commodity,
considered from the point of view of individual economy, may be
reduced to the payment for the use of the requisite productive
forces rented or loaned to the producer. Hence every great variation
in the relation of the three branches of income to one another must
produce a corresponding variation in the price of commodities.[197-
1]
When, for instance, the rate of wages increases because they
absorb a larger part of the national income, those commodities in
the production of which human labor, directly employed, is the
chief factor, must become dearer as compared with others. Whether
this difference shall be felt principally by the products of nature or
of capital (compare § 46 seq.), depends on the causes which
brought about the enhancement of the rate of wages. Thus, a large
decrease of population, or emigration on a large scale, will usually
lower rent as well as the rate of interest;[197-2] an extraordinary
improvement made in the art of agriculture, only the former; and an
extraordinary increase of capital, only the latter. The usual course
of things, namely that the growth of population necessitates a
heavier draft on the resources of the soil, and thus causes rents to
go up, and makes labor dear, must have the effect of raising the
price of the products of labor and of natural forces, as compared
with the products of capital; and all the more as it causes the rate of
interest to suffer a positive decline. The products of mechanical

labor become relatively cheaper; and cheaper in proportion as the
producing machinery is more durable; therefore in proportion as, in
the price of the services it renders, mere interest preponderates over
compensation for its wear and tear.[197-3]
Let us, for a moment, leave ground-rent out of the question
entirely, and suppose a nation's economy whose production is
conducted by eleven undertakers employed on different
commodities. Let us suppose that undertaker No. 1 uses machinery
exclusively and employs only as many workmen as are strictly
necessary to look after it, that undertaker No. 2 has a somewhat
larger number of workmen and a somewhat smaller amount of
fixed capital, etc.; and that this increase in the number of workmen
and decrease in the amount of fixed capital continues until we
reach undertaker No. 11, who employs all his capital in the
payment of wages. If now, the rate of wages were to rise, and the
interest on capital to fall in the same proportion, the commodities
produced by undertaker No. 11 would rise most in price, and those
of No. 1 decline most. In the case of undertaker No. 6, the opposing
influences would probably balance each other, and if the producers
of money belonged to this sixth class, it would be very easy to get a
view of the whole change in the circumstances of production, in the
money-price of the different commodities.[197-4]
[197-1] Compare Adam Smith, I, ch. 7, fin. This relative increase or
decrease of one branch of income at the expense or to the advantage
of another, should be distinguished from the absolute change of its
amount which does not affect the cost of production. Thus, for
instance, when the rent of land indeed increases, but in consequence
of a simultaneous improvement in agriculture, a decline in the rate
of interest, and an enhancement of the price of wheat is avoided (§
157). So, too, when individual wages increase on account of the
greater skill and energy of labor, but the same quantity and quality

of labor do not become dearer (§ 172 seq.); and lastly, when the rate
of interest remaining unaltered, the receipts of capitalists are
increased by reason of an increase of their capital (§ 185).
[197-2] After the great plague in the 14th century in England, when
all the products of labor became dearer, skins and wool fell largely
in price: Rogers, I, § 400.
[197-3] Anyone who carefully reads all the five divisions of
Ricardo's first chapter will soon find that this great thinker rightly
understood the foregoing, although the great abstractness and
hypothetical nature of his conclusions might easily lead the reader
astray. The proposition which closes the second part, and which has
been so frequently misunderstood by his disciples, can be
maintained only on the supposition that the prices of all
commodities hitherto have been made up of equal proportions of
rent, capital and wages. But think of Brussels lace and South
American skins!
[197-4] Compare J. Mill, Anfangsgründe der polit. Oekonomie,
Jacob's translation, § 13 ff.; McCulloch, Principles, III, 6. Adam
Smith was of opinion, that higher wages enhanced the price of
commodities in an arithmetical ratio, a higher rate of interest in a
geometrical one (I, ch. 9). Similarly Child, Discourse of Trade, 38.
This last Kraus, Staatswirthschaft, better expresses by saying that an
increase in the rate of interest operates in the ratio of the
compounded interests.

SECTION CXCVIII.
REMEDY IN CASE ONE FACTOR OF PRODUCTION HAS BECOME
DEARER.

When one of the three branches of income has grown as compared
with the others; in other words, when the factor of production
which it represents has become relatively dearer, it is to the interest

of the undertaker and of the public, that it should be replaced where
possible by another and cheaper productive force. (§ 47.) On this
depends the advantageousness of intensive agriculture (high
farming) in every higher stage of civilization. There land is dear
and labor cheap. Hence, efforts are made to get along with the least
amount of land-surface, and this minimum of land is made more
productive by a number of expedients in cultivation, by manuring
it, by seed-corn, etc., of course also by the employment of
journeymen laborers, oxen, etc. And since the price of land is
intimately connected with the price of most raw material, remains
are here saved as much as possible, often with a great deal of
trouble.[198-1] In a lower stage of civilization, such savings would be
considered extravagance. As land is here cheap, and capital dear, it
is necessary to carry on the cultivation of land extensively; that is,
save in capital and labor, and allow the factor nature to perform the
most possible. The clearing up of untilled land, or the draining of
swampy land etc., would be frequently injurious here; for it would
require the use of a very large amount of capital to obtain land of
comparatively little value.
In large cities, it is customary to build houses high in proportion to
the dearness of the land.[198-2] Thus, in England, where the rate of
interest is low and wages high, labor is readily supplanted by
capital. In countries like the East Indies or China, the reverse is the
case. I need only call attention to the palanquins used in Asia
instead of carriages; to the men who in South America carried ore
down eighteen hundred steps to the smelting furnaces,[198-3] and, on
the other hand, to the "elevators," so much in favor in England,
which are used in factories to carry people from one story to
another inside to save them the trouble of going up stairs.[198-4]

[198-1] The sickle instead of the scythe; careful threshing by hand,
and, where the rate of interest is low, threshing by machinery
instead of the treading out of the sheaf by oxen. Thus in Paris the
scraps from restaurants and soap factories are made into stearin; and
the remnants in shawl factories in Vienna are sent to Belgium to be
used by cloth manufacturers.
[198-2] Remarked in ancient times of Tyre, which was situated on a
small island, and, therefore, without the possibility of horizontal
extension. (Strabo, XVI, 757.)
[198-3] Humboldt, N. Espagne II, ch. 5, II, ch. 11.
[198-4] Thus, in England, the safety of railroad trains is not secured
as in Germany by a multitude of watchmen, etc.; but by solid
barriers, by bridges at every crossing, in other words, by capital.

SECTION CXCIX.
INFLUENCE OF FOREIGN TRADE.

Foreign trade, that great means of coöperation of labor among
different nations, affords such a remedy in a very special manner. It
very frequently happens that the undertakers of one country, when
a certain factor of production seems too dear at home, borrow it
elsewhere. Thus, for instance, a country with a high rate of wages
draws on another for labor, and one with a high rate of interest on
another for capital.[199-1] We elsewhere consider such a course of
things from the standpoint of the supplying country, which in this
way is healed of a heavy plethora of some single factor of
production which disturbs the harmony of the whole. (§§ 187, 259,
ff.). But, at the same time, the supplied country, considered from a
purely economic point of view, reaps decided advantages
therefrom. If, for instance, a Swiss confectioner returns from Saint

Petersburgh to his home, after having made a fortune in an honest
way, no one can say that Russia has grown poorer by the amount of
that fortune. This man made his own capital; if he were to remain
in Russia, its national economy would be richer than before his
immigration thither. Now, it is, at least, no poorer, and has in the
meantime had the advantage of the more skilled labor of the
foreigner.[199-2] And, so, when a capitalist living in Germany
purchases Hungarian land, the national income of Hungary is
diminished by the amount of the annual rent which now goes to
Germany; but it receives an equal amount in the interest on capital,
provided the purchase was an honorable one and the capital given
in exchange for the land honestly invested.[199-3] If Hungary, in
general, had a superabundance of land but a lack of capital, the
economic advantage is undoubted.[199-4]
These economic rules, indeed, are applicable only to the extent that
higher and national considerations do not in the interest of all,
create exceptions to them. "Is not the life more than meat, and the
body than raiment?" No rational people will allow certain services
to be performed for them preponderantly by foreigners, even when
they can be performed cheaper by the latter—the services of
religion, of the army, of the state, etc. The same is true of
landownership; and all the truer in proportion as political and legal
rights of presentation and other forms of patronage are attached to
it. Lastly, hypothecation-debts which go beyond certain limits, may
entail the same consequences as the complete alienation of the
land;[199-5] and Raynal may have been, under certain circumstances,
right when he said, that to admit foreigners to subscribe to the
national debt was equivalent to ceding a province to them.[199-6] It is
obvious that a great power may do much in this relation that would
be a risk to a small state.[199-7] [199-8]

[199-1] "The transportation of productive capital and industrial
forces from one point where their services are worse paid for, to
another where they find a rich reward, will not be apt to be made so
long as the equilibrium may be obtained [most frequently much
more easily] by the interchange of the products." (Nebenius, Oeff.
Credit, I, 48.) The repeal of the corn laws in England certainly
diminished the emigration of English capital.
[199-2] For an official declaration of the Brazilian state in this
direction, see Novara Reise.
[199-3] Basing himself hereon, Petty, Political Anatomy of Ireland,
82 ff., questions the usual opinion, that Ireland suffered so much
from absenteeism. He says that a prohibition of absenteeism carried
out to its logical conclusion would require every man to sit on the
sod he had tilled himself. Carey, On the Rate of Wages, 1835, 477,
calls English capitalists who draw interest from America, absentees.
[199-4] The older political economists have, as a rule, ignored this
law, and were wont to consider every payment of money to a
foreign country as injurious. Thus, for instance, Culpeper, Tract
against the high Rate of Usury, 1623, 1640, disapproves all loans
made from foreign countries, because they draw more money in
interest, and in repayment of the principal out of the nation, than
they brought into it at first; and all the more, as the loan is generally
procured, not in the precious metals, but in foreign goods, of which
there is a superabundance in the home country. Similarly Child,
Discourse of Trade, 1690, 79, who claims that the creditor was
always fattened at the expense of the debtor. Hence v. Schröder,
Fürst, Schatz- und Rentkammar, 141, advises that the capital
borrowed in foreign countries should be confiscated. Compare, also,
v. Justi, Staatswirthschaft, II, 461. And yet the very simplest
calculation shows, that if a man borrows $1,000 at 5 per cent. and
makes 10, he is doing a good business with the borrowed capital.
This Locke, Considerations, 9, recognizes very clearly. Compare,
also, J. B. Say, Traité, II, ch. 10, and Hermann, Staatsw. Unters.,
365 seq.

[199-5] Think of the English creditors in Portugal and the Genoese
in Corsica (Steuart, Principles, II, ch. 29.) Considered simply from
an economic standpoint, the Edinburg Review, XX, 358, very
clearly demonstrates that England should recruit her army from
Ireland, where wages are so much lower than in Great Britain. But
how dangerous in a political sense! In 1832, one-fourth of the stock
of the United States Bank was in the hands of foreigners, and hence
its opponents nick-named it the "British Bank." By the rules of the
principal bank in Philadelphia, in 1836, only American citizens were
allowed a vote in its proceedings. Similarly in the case of the Bank
of France. (M. Chevalier, Lettres sur l'Amerique du N. I, 364.) It
may be remarked in general, that the older political economists have
based correct political views on false economic principles, while the
more modern ignore them entirely.
[199-6] Compare Montesquieu, E. des Lois L, XXII, 17; Blackstone,
Commentaries, I, 320.
[199-7] Thus Austria conceded, in 1854-55, a number of railways to
French capitalists, and always favored the purchase of landed
estates by small foreign princes. In the latter case, Austrian
influence abroad was much more promoted by the measure than was
foreign influence in Austria.
[199-8] Every nationality is not worth the sacrificing of the highest
economic advantage or profit to it. Or, would it be preferable to
leave the Hottentots and Caffirs, poor, barbarous and heathenish?

SECTION CC.
INFLUENCE OF THE BRANCHES OF INCOME ON THE PRICE OF
COMMODITIES.

In relation to foreign trade, in the narrowest sense of the term, fears
were formerly very frequently expressed and are sometimes even
now, which in the last analysis are based on the assumption that

one country might be underbid by another in all branches of
commodities.[200-1] This is evidently absurd. Whoever wants to pay
for foreign commodities can do it only in goods of his own. When
he pays for them with money, the money is either the immediate
product of his own husbandry (mining countries!), or the mediate
product obtained by the previous surrender of products of his own.
To receive from foreign countries all the objects which one has
need of, would be to receive them as a gift.
It is just as absurd to fear that the three branches of income in the
same country's economy should be all relatively high at the same
time, and competition with foreign countries be thus made more
difficult. Rent and interest especially in this respect have to demean
themselves in ways diametrically opposed to each other.[200-2] When
trade is entirely free, every nation will engage at last in those
branches of production which require chiefly the productive forces
which are cheapest in that country; that is which the relatively low
level of the corresponding branch of income recommends to
individual economy and enterprise. The merely absolute and
personal height of the three branches of income has, as we have
said, no direct influence on the price of commodities. In this
respect, all these may be higher in one country than in another.
Thus, for instance, English landowners, capitalists and workmen
may be all at the same time in a better economic condition
respectively than Polish landowners, capitalists and workmen,
when the national income of England stands to its area and
population in general, in a much more favorable ratio than the
Polish.[200-3]
[200-1] Thus, Forbonnais, Eléments du Commerce I, 73. J. Moser,
Patr. Ph., I, No. 2.

[200-2] For a thorough refutation of the error that everything is
dearer in England than in France, see Journ. des Econ., Mai, 1854,
295 seq. A distinguished architect assured me in 1858, that a person
in London could build about as much for £1 as for from 6 to 7
thalers in Berlin; only the aggregate expense in both countries is
made up of elements very different in their relative proportions.
[200-3] We very frequently hear that countries with high wages
must be outflanked in a neutral market by countries with a low rate
of wages. Ricardo's disciples reject this, because a decrease in the
profit would put the undertaker in a condition to bear the loss
caused by the high wages paid. See Report of the Select Committee
on Artisans and Machinery. Senior ridicules such reasoning very
appropriately by inquiring: "Might not the loss enable him to bear
the loss?" Outlines, 146. And so J. B. Say thinks that wages are
always lowest when undertakers are earning nothing. The truth is
rather this: a country with a relatively high rate of wages cannot, in
a neutral market, offer those commodities the chief factors required
for the production of which is labor; but the comparatively low rate
of interest or low rents, or the lowness of both found in connection
therewith, must fit it to produce other commodities very
advantageously. If, therefore, the rate of wages rises, the result will
be to divert production and exports into other channels than those in
which they have hitherto flowed. The old complaint of Saxon
agriculturists, that there is a lack of labor in the country, is certainly
very surprising in a nation as thickly populated as Saxony. But the
remedy proposed by the most experienced practitioners consists
chiefly in a higher rate of wages to enable workmen to care for
themselves in old age, the introduction of the piece-work system
and an increase of agricultural machines. But it seems to me, that
the whole situation there points to the advantage of in part limiting
the large farming hitherto practiced to live-stock raising and other
branches in which labor may be spared, and in part of replacing it,
by small farming of plants which are objects of trade.

Many points belonging to this subject have been very well discussed
by J. Tucker, in his refutation of Hume's theory on the final and
inevitable superiority of poor countries over rich ones in industrial
matters. (Four Tracts on political and commercial Subjects, 1774,
No. 1; L. Lauderdale, Inquiry, 206.)

SECTION CCI.
HARMONY OF THE THREE BRANCHES OF INCOME.—
INDIVIDUAL DIFFERENCE IN THEM.

As national-economical civilization advances, the personal
difference of the three branches of income is wont to become more
and more sharply defined.[201-1] The struggle between landowners,
farmers and workmen, which Ricardo necessarily assumed, did not
exist at all in the middle ages; since landowners and farmers were
then usually one and the same person, and since workmen, either as
slaves or peasants, were protected against competition properly so
called. And so in the industry of that time, based on the trades or on
domestic industry.[201-2] [201-3]
When, later, the division of labor increases, all the differences of
men's aptitudes are turned to more advantage, and are more fully
developed. In the same proportion that a working class is
developed, the members of which are nothing but workmen, and
can scarcely hope to possess capital or land,[201-4] there grows up,
side by side with it, a class of mere capitalists, who come to obtain
an ever-increasing importance.
Considered from a purely economic point of view, this transition
has its great advantages. How much must the existence of a special
class of capitalists facilitate the concentration of capital and the
consequent promotion of production, as well as its (capital's) price-

leveling influx and outflow! Even "idle" capitalists have this of
good, that, without them, no competent man, destitute of means
could engage in any independent enterprise. When, indeed, the gulf
between these two classes passes certain bounds, it may, politically
and socially, become a great evil. (§ 63.)[201-5]
[201-1] Among nations in their decline, rent and interest fall into
one possession again, because capitalists here are wont to buy the
land. (Roscher, Nationalökonomik des Ackerbaues, § 140 ff.)
[201-2] Related to this peculiarity of the middle ages is the fact that
the canon law looked with disfavor on the personal separation of the
three factors of production. So also in the prohibition of the
Weddeschat referred to § 161, instead of rent-purchase (Rentekauf),
also by extending the idea of partnership to a number of transactions
which are only forms of loan. (Endemann in Hildebrand's Jahrb.,
1863, 176 ff.) Antiquity also, with the independence of its οἶκος,[TN
28]
with its slavery, etc., had not developed the difference between
the three branches of industry to any extent. Rodbertus, in
Hildebrand's Jahrbb., 1865, I, 343.
[201-3] If older writers, like Steuart, etc., speak so little of capital,
labor and rent, and so much of city and country, it is not on account
of ignorance simply. The contrast between the latter was then much
more important than to-day, and that between the former much less
developed. When, indeed, Colton, Public Economy of the United
States, 1848, 155 ff., claims that because in America the three
branches of income do not exist in so separated a condition as in
Europe, therefore European Political Economy and its theories are
not applicable to America, he forgets that science should not be
simply a description or impression made of the reality, but an
analysis of it.
[201-4] It is a very characteristic fact that, in our days, when
workmen are spoken of, it is generally day laborers and tradesmen
that are understood. In Prussia, in 1804, 17.8 per cent. of the

population earned their living by letting out their labor; in 1846,
22.8 per cent. as day-laborers, servants, journeymen, tradesmen and
factory hands. (Dieterici.)
[201-5] Ricardo, Principles, ch. 4, recognizes the bright side as well
as Sismondi, N. P., I, 268, or Buret, De la Misère des Classes
laborieuses en Angleterre et en France, 1841, its dark side. Sismondi
thinks that land and the capital employed in its cultivation are found
to the greatest disadvantage in the hands of the same person. The
existence of a thrifty peasant class (also of a class of tradesmen) is
one of the best means to prevent the too wide separation of the three
branches of income.

SECTION CCII.
HARMONY OF THE THREE BRANCHES OF INCOME.—NECESSITY
OF THE FEELING OF A COMMON INTEREST.

Every class corresponding to a branch of the national income must
live with the consciousness that its interests coincide with the
economic interests of the whole nation. Whenever the entire
national income increases, each branch of it may increase without
any injury to the others, and, as a rule, does really increase.[202-1]
But it is possible that the land owning class may be specially
dependent on the prosperity of the whole people. How easy it is for
workmen to emigrate; and how much easier yet for capital!
England, to-day, can scarcely carry on a great war, in which it
would not, at least at the beginning, have to fight English capital.
[202-2] Where the treasure is, the heart is also! The land alone is

immovable. It alone cannot be withdrawn from the pressure of
taxation or from the distress of war. It alone cannot flee into foreign
parts.[202-3] [202-4] At the same time, it cannot be denied that the
possibility of being able to carry one's fortune out of a country in

one's pocketbook and to be able to procure there with one's money
the same conveniences, customs, etc., to which one was
accustomed at home, is, under certain circumstances, an important
element of political and religious freedom. Moreover, the bright
side and the dark of every class of owners, especially the dread of
all unnecessary and also of all necessary change, must be common
to rent and interest. Hence, where there is a marked and well-
defined separation of the branches of income, it will be always
considered a difficult but unavoidable problem, how to enable mere
labor to take an active part in the affairs of the state.[202-5]
In times when calm prevails (not, however, in transition-crises such
as are referred to in § 24), there is a public opinion concerning
merit and reward, we might say a public conscience, by which a
definite relation of the three branches of income to one another is
declared equitable. Every "fair-minded man" feels satisfied when
this relation is realized, and this feeling of satisfaction is one of the
principal conditions precedent to the prosperity of production;
inasmuch as upon it depends the participation (Theilnahme) of all
owners of funds and forces. Every deviation from this relation or
proportion is, of course, a misfortune,[202-6] but never so great as
when it takes place at the expense of the wages of labor. It should
never be forgotten that rent is an appropriation of the gifts of
nature, and that interest is a further fruit obtained by frugality from
older labor already remunerated. Besides, the rate of wages when
high, generally adds to the efficiency of labor, which cannot be
claimed for interest or rent.[202-7] The best means to preserve the
harmony of the three branches of income is, however, universal
activity. "Rich or poor, strong or weak, the idler is a knave." (J. J.
Rousseau.)

[202-1] The contrast between Adam Smith, at the end of the first
book, and Ricardo, ch. 24, in regard to this point, is very
characteristic of the times of those two authors. According to Smith,
the private interests of the landowners and laborers run entirely
parallel; only both classes are easily deceived as to their own
interests. Capitalists understand their own interest very well, and
represent it with great energy; but their interest is in opposition to
the common good, in so far as their profit among a poor and
declining people is higher than among a rich and flourishing one.
Ricardo, on the other hand, thinks that the interest of the landowners
is opposed to that of all others for the reason that they desire that the
cost of the production of wheat etc. should be as high as possible.
Related to this is the fact that, in Adam Smith's time, the new theory
of rent remained almost unnoticed, but that after 1815, it became
rapidly popular. In a similar way, the socialists of the present time
are wont to charge the undertaking class with opposing their own
interests to those of the whole people, meaning by the whole the
majority. (§ 196 a.)
[202-2] Towards the end of the 14th century the great Flemish
merchants always sided with the absolutism of France in opposition
to their own Artevelde.
[202-3] Hence it is, that in so many constitutions, charters of cities,
etc., the exercise of the higher rights of citizenship is conditioned by
the possession of a certain quantity of land, and that landownership
is considered as a species of public function.
I read, a short time ago, the life of a North-German noblemen who,
in 1813, had fought bravely against the French, "although he was a
man of large estates, and the enemy might therefore very easily have
laid hands on them." If this "although" of his eulogist expressed the
actual feeling of large landed proprietors, a great many old political
institutions would have lost all foundation.

Ad. Müller was of opinion that the rights of primogeniture, etc.,
might be an obstacle in the way of the development of the net
income of a nation's economy; but that they gave to the state and to
the national life the warlike tone so necessary to them, etc.
(Elemente, II, 90.)
[202-4] "The Roman capitalists on whom Pompey counted, left him
in the lurch at the moment of danger, because Cæsar destroyed only
the constitution, but respected their business relations." (K. W.
Nitsch.)
[202-5] Kosegarten, Nat. Oek., 186, thinks that, on account of the
struggle between the labor interest and the interest of capitalists, in
our times, the "fourth estate" is not as well represented by persons
belonging to the propertied classes as the constitutionalist party
thinks. And in fact, Jarke, Principienfragen, 1854, 197, would have
it represented by the government, in order to prevent the struggle
between rich and poor. See Cherbuliez, Riche ou Pauvre, p. 242 seq.
[202-6] A. Walker shows, in a very happy manner, how no
misfortune, however great, whether it come from heaven or from
earth, in the shape of pestilence, drought, flood or oppressive
taxation, so rapidly and hopelessly ruins a nation's economy as
when the harmony which should exist between capital and labor is
disturbed by foul play or legal frauds between labor or capital and
their reward. (Sc. of Wealth, 66.)
[202-7] Compare Lotz, Revision, III, 322 ff., 327, 334 ff. Handbuch,
I, 511 ff. Lafitte, Sur la Réduction de la Rente, 56. Fuoco
exaggerates this into the principle: che la distribuzione, e non la
produzione, sia la prima e principal operazione in economia. (Saggi
economici, II, p. 44.)

CHAPTER VII.

DISTRIBUTION OF NATIONAL INCOME.

SECTION CCIII.
EFFECT OF AN EQUAL DIVISION OF THE NATIONAL INCOME.

The best distribution of the national income among a people is that
which enables them to enjoy the greatest amount and variety of real
goods, and permanently to produce real goods in an increasing
quantity and variety.
If the income of a people were divided equally among all, each one
would indeed, be, to a very great extent, independent of all others.
But then, no one would care to devote himself to the coarser and
less agreeable occupations, and these would be either entirely
neglected, or people would have to take turns in engaging in them.
[203-1] (§ 9.) And thus would disappear one of the chief advantages

of the division of labor, viz: that the higher orders of talent are
devoted to the higher orders of labor. Besides, it is very doubtful,
whether, under such circumstances, there would still be any solvent
(zahlungsfähige) demand for the achievements of art.
Nor would the saving of capital prosper, where such equality
prevailed. Most men consider the average outlay of their equals as
an unavoidable want, and save only to the extent that they possess
more than others of their class. If, therefore, every one had an equal
income, no one would consider himself in a condition to save.[203-2]
The same consideration would deter most men from every
economic venture, and yet no great progress is possible where no
venture is made.[203-3] [203-4]

[203-1] According to Schäffle, System, II, 379 ff., "the distribution
of the social return of production which conduces to the attainment
of the highest measure of civilization in the moral association of
men and in all the grades of that association, and thereby to the
satisfaction of all true human wants in the highest degree." Thus
only can a satisfactory line of demarkation be drawn between the
profit of capital and the wages of labor (384).
[203-2] See Aristoph., Plut., 508 ff. Not taken into consideration
sufficiently by Benjamin Franklin, in his eulogy of the equality of
property: The internal State of America, 1784.
[203-3] The essential characteristic of the desert is, according to
Ritter, Erdkunde, I, 1019 seq., its uniformity. No break in the
horizontal plain, and hence no condensation of atmospheric vapor
into bodies of water of any considerable size. The composition of
the soil is everywhere the same; nothing but masses of silex and
salt, hard and sharp. Lastly, extreme mobility of the surface, which
undulates with every wind, so that no plant can take root in it.
Nearly every feature in this picture finds its analogon in the extreme
political and economic equality of men.
[203-4] Les supériorités, qui ne sont dues qu'à, un usage plus
intelligent et mieux réglé de nos facultés naturelles, loin d'être un
mal, sont un véritable bien. C'est dans la plus grande prospérité, qui
accompagne un plus grand et plus heureux effort, qu'est le principe
de tout développement. (Dunoyer, Liberté du Travail, IV, 9, 10.)
But, indeed, the rich man should never forget that society "inasmuch
as it permits the concentration of wealth in his hands, expects that
he will employ it to better advantage than the mass of mankind
would if that same wealth were equally divided among them."
(Brentano.)

SECTION CCIV.

DISTRIBUTION OF NATIONAL INCOME.—MONEYED
ARISTOCRACIES AND PAUPERISM.

The extreme opposite of this, when the middle class disappears and
the whole nation falls into a few over-rich men and numberless
proletarians, we call the oligarchy of money, with pauperism as the
reverse of the medal. Such a social condition has all the hardship of
an aristocracy without its palliatives. As it is, as a rule, the
offspring of a degenerated democracy,[204-1] it cannot in form depart
too widely from the principle of equality. Only get rich, they cry to
the famishing poor; the law puts no obstacle in your way, and you
shall immediately share our position.[204-2] Here the uniformity and
centralization of the state, which are an abomination in the eyes of
genuine aristocracy, are carried to the extreme. Capital takes the
place of men, and is valued more than men. All life is made to
depend on the state, that its masters, the great money-men, may
control it as they will. The falling away of all restrictions on trade,
and of all uncommercial considerations relating to persons and
circumstances, gives full play to capital, and speculators seek to
win all that can be won. And, indeed, all colossal fortunes are
generally made at the expense of others, either with the assistance
of the state-power or by speculation in the fluctuations of values.
[204-3]
The dependence of proletarians on others is here all the
greater, because from a complete absence of capital and land, so far
as they are concerned, they are compelled, uninterruptedly, to carry
their entire labor-force to market; and also because the supply of
labor is made in masses embracing a large number of individuals,
while the demand for labor lies in the hands of very few, and may
be very readily and systematically concentrated.[204-4] So great and
one-sided a dependence is, for men too far removed from one
another for real mutual love, doubtless one of the greatest of moral
temptations. It is as easy a matter for the hopelessly poor to hate

the law, as it is for the over-rich to despise it.[204-5] Under such
circumstances, the contagious power of communism, the dangers
of which to order and freedom we have treated of in § So, is great.
There is a dreadful lesson in the fact of history, that six individuals
owned one-half of the province of Africa, when Nero had them put
to death![204-6] Externally, a moneyed oligarchy will always be a
weak state. The great majority who have nothing to lose take little
interest in the perpetuation of its political independence. They
rather rejoice at the downfall of their oppressors hitherto, and are
cheered by the hope of obtaining a part of the general plunder.[204-7]
The rich, too, separated from the neglected and propertyless masses
of the nation, and rightly distrustful of them, begin to forget their
nationality, and to balance its advantages against the sacrifices
necessary to preserve it. But, a merely materialistic calculation
leads doubtless to the conclusion, that universal empire is the most
rational form of the state. The world-sovereignty of Rome was, by
no circumstance more promoted than by the struggles between the
rich and the poor, which devastated the orbis terrarum, and in
which the Romans generally sided with the property classes.[204-8]
[204-9] [204-10] [204-11]
However, the worst horrors of the contrast here
described can occur only in slave-countries. Compare Roscher,
Nationalökonomik des Ackerbaues, § 141.
[204-1] The more the lower classes degenerate into the rabble, and
the more the national sovereignty comes into the hands of this
rabble, the easier will it become for the rich to buy up the State.
[204-2] In the middle stages of the nation's economy, such as are
described in §§ 62, 66, 90, 207, in which even the relative
advantages of industry on a large scale over industry on a small
scale, are not much developed the making political rights dependent
on the possession of a certain amount of property is certainly a
means of promoting equality. Hence, therefore, a reconciliation

between the differences of class created by birth, may be effected
for a long time here.
[204-3] Hermann, Staatsw. Untersuchungen, II, Aufl. 136.
[204-4] Necker, Législation et Commerce des Grains, 1775,1.
passim. Compare Bacon, Serm fideles, 15, 29, 34, 39.
[204-5] Schiller's terrible words:
"Etwas muss er sein eigen nennen,
Oder der Mensch wird morden und brennen."
—i. e., "Something must he call his own, or man will murder and
burn."
It is one of J. G. Fichte's fundamental thoughts that as all property is
based on mutual disclaimer, the person who has nothing of his own,
has disclaimed nothing, and therefore reserves his original right to
everything. (Geschlossener Handelstaat., Werke, III, 400, 445.)
[204-6] Plin., H. N., XVIII, 7.
[204-7] How frequently this circumstance turned to the advantage of
the Germans during the migration of nations! Compare Salvian, De
Gubern, Dei, VII. Very remarkable answer given by a Roman taken
prisoner by Attila, why it must be more agreeable to live among the
Huns than in the over-civilized Roman Empire: Prisci legatio, in
Niebuhr, Corp. histor. Byzant., I, 191 ff. And thus the conquest of
Constantinople by the crusaders, took place amid the jubilation of
the populace and of the country people: Nicetus, Chron. Hist. Urbs
capta, § 11, 340. This law of nature becomes most apparent when
one compares the preponderating power of Rome against Carthage,
with its weakness against the Cimbri and Mithradates. May not
Hannibal have been to his own country a phenomenon like that
which Cæsar was afterwards to Rome? A healthy and united
Carthage he certainly could have held against Italy.

[204-8] On the tendencies of the later times of the Jewish monarchy
toward an oligarchy of money, see Amos, 2, 6 seq.; 6 1 ff.; 8, 5 ff.;
Micha, 2; 2 Isaias, 5, 8 seq. Compare Nehem. 5. While Exodus, 30
and 38, mentions over 663,000 taxable men, the ten tribes
comprising the kingdom of Israel had only 60,000. XII Kings, 15,
19. Ewald, Geschichte des Volkes Israel, II, 2, 320.
[204-9] The spirit of the Grecian moneyed oligarchy is best revealed
by Plato, De Republ., VIII, and Aristotle, Polit., III, VI, passim, the
first of whom considers the contrast between rich and poor as in
itself demoralizing (IV, 422). All that can be called by the name of
tradition, the political faith of a people, and the national feeling of
right, had, in the Grecian world, been transformed into mere
reasoning and concerned itself, with frightful exclusiveness, to the
contrast existing between rich and poor. Compare Aristot., Pol., II,
4, 1, with Droysen, Gesch. des Hellenismus, II, 496 etc., and the
citations from Menander in Stob., Serm., LXXXIX, 503, in which
gold and silver are proclaimed almighty. It is a remarkable proof of
the omne venalia esse in Greece that Thucydides (II, 65) lauds even
Pericles, especially for his incorruptibility. Demosthenes says of his
contemporaries, that it excited envy when any one was bribed,
laughter when he confessed it; that he who was convicted of it
(bribery) was pardoned, and he who blamed it, hated. (Phil., II,
121.) Compare the list in Demosth., Pro. Cor., 324; Pausan, III, 10.
In Athens, on the occasion of the census-constitution imposed
forcibly on the state by Antipater, that in a population of 21,000
citizens, only 9,000 had a property worth 2,000 drachmas or more,
that is, enough for a man to live on in the most niggardly way, on
the highest interest it would yield. If, in addition to this, account be
taken of the large number of slaves, the small number of the
property class is all the more surprising, inasmuch as Lycurgus'
financial administration bears evidence that the people were in a
flourishing and comfortable condition; that afterwards, peace for the
most part prevailed, and that Alexander's victories enabled Grecian
commerce to make large gains. Compare Boeckh, Staatsh. IV, 3, 9.

In Sparta, the governing class finally numbered only 700 families,
100 of which owned all the land, and 600 of which were, therefore,
only noble proletarians. It is well known that the social attempts at
reform by Agis and Kleomenes only precipitated the downfall of the
state. (Plutarch, Agis and Kleomenes.) Aratos owed a great part of
the consideration in which he was held to the reputation which he
obtained by protecting the property of the Sicyonian exiles
(Thirlwall, History of Greece, VIII, 167), while on the other hand,
men like Agathocles and Nabis supported their faction by
persecution of the rich, new debtor-laws and new division of land.
(Polyb., XIII, 6, XVI, 13, XVII, 17, XXVI, 2; Livy, XXXII, 38, 40,
XXXIV, 31, XXXVIII, 34; Plutarch, Cleom, 20.) Livy expressly
says that all the optimates were in favor of the Romans, and that the
multitude wanted novare omnia (XXXV, 34). On the frightful
struggle between these opposite parties, on the revolutions and
counter revolutions, see also Polyb., XIII, 1, 2; XVIII, 36 ff., XXX,
14; XXII, 21; XXXVIII, 2, 3; Diodor., XIX, 6, 9; Exc., 587, 623;
Livy, XLI, 25, XLII, 5; Pausan, VII, 14. In Bœotia, no one was for
25 years, chosen by the people for the higher offices, from whom
they did not expect a suspension of the administration of justice in
the matter of crimes and debts, as well as the spending of the
national treasure. (Polyb., XX, 14, 5, 6.) The events at Corinth,
before its conquest by the Romans, forcibly remind one of the Paris
Commune of 1871. This decline had, as usual, begun earliest in the
colonies: thus, in Sicily, even in Thucyd., V, 4. Milesian struggle off
the πλουτὶς[TN 29] and χειρομάχα [TN 30] in Plutarch, Qu. Gr., 32;
Athen., XII, 524.
[204-10] The disappearance of the middle class in Rome, between
the second and third Punic war, was brought about chiefly by the
great foreign conquests made by it. An idea of the wealth which the
governors of the provinces might extort may be formed from this
among other facts, that Cicero originally demanded against Verres a
fine of 5,000,000 thalers. (Cic., in Verrem Div., 5.) Verres is related
to have said, that he would be satisfied if he could retain the first
year's booty; that during the second, he collected for his defenders;

and during the third, for his judges! (Cic., in Verr., I, 14.) Even
Cicero became richer within the space of one year, in Cilicia, where
it was well known he was not oppressive, by 110,000 thalers, which
sum does not include numerous presents, pictures, etc. (Drumann,
Gesch. Roms., VI, 384.) On the frightful oppression and extortion
practised by Brutus (!) in Asia, see Cicero, ad. Att, V, 21; VI, 1.
Sallust, in his Jugurtha, has shown how such men waged war, and to
what extremes their well-deserved want might push them in his
Catiline. Patricium scelus! Most of the senators were in debt to
Crassus; and this, together with his great political insurance-activity
and power in elections, criminal cases at law, etc., it depended that
he, for a time, figured beside Cæsar and Pompey.
The wealth of these important personages must, and that not only
relatively, have made the poor poorer and their luxury excited the
covetousness of the people; but especially the great number of
slaves they kept, combined with their pasturage system of
husbandry, which rapidly spread over all of Italy after the provinces
had emptied their granaries to supply the wants of the sovereign
people, must have made it less and less possible for the proletarians
to live by the work of their hands. Previously, the lower classes of
the free born had been exempted from the military service, while
slaves were conscripted for the fleet. Now, all this was changed; and
thus was taken away one of the chief causes which had made the
labor of free day laborers more advantageous on the larger estates.
(Nitzsch, Gracchen, 124 ff., 235 ff.) The spoils of war and conquest
caused the higher middle class to prefer to engage in the usurious
loaning of money rather than in industry which would much more
rapidly have formed a small middle class. (Mommsen, R. G. I, 622
ff.)
Hence, the misera ac jejuna plebecula, concionalis hirudo aerarii,
according to Cicero, ad Att., I, 16, 6. At a time, when the Roman
census showed a population of over 1,500,000, Philippus, 104
before Christ, otherwise a "moderate" man, could claim that there
were not 2,000 citizens who had any property. (Cic., de Off., II, 21.)

True, those few were in such a position, that Crassus would allow
that those only were rich, who could feed an army at their own
expense. (Cicero, Parad., VI, 61; Plin., H. N., XXXIII, 47.)
Concerning the colossal private fortunes under some of the earlier
imperators, see Seneca, De Benef., II, 27; Tacit., Ann., XII, 53, XIII,
32; XIV, 35; Dial. de Causis, 8, Dio C., LXIII, 2 seq.
The clients of the time, that is the numerous poorly paid idlers
treated as things of little value, in the service of the great,
correspond, on a small scale, to the position of the great crowd in
relation to the emperor. Compare Friedländer, Sittengeschichte
Roms., I, 296 ff. As late as the West-Gothic storm, there were many
houses which drew 4,000 pounds in gold, and about 1/3 as much in
kind, from their estates, per annum. (Plut., Bibl. Cod., 80, 63,
Bekk.) Goddess Pecunia Majestas divitiarum, in Juvenal, I, 113.
If we take the Roman proletariat in its wider extent, the most
frightful picture it presents is its slave-wars. Such a war Sicily had
shortly before the tribunate of the elder Gracchus, cost over a
million (?) livres; and at the same time there was a great uprising of
slaves desolating Greece. (Athen., VI, 83, 87 ff., 104.) A second war
broke out in the time of Cimbri. But the most frightful was that
under Spartacus, who collected 100,000 men, and the course of this
uprising will always remain a type of proletarian and slave revolts.
It originated among the most dangerous class of slaves, most
dangerous because best prepared for the struggle, the gladiators, and
among the immense ergastula, where they were held together in
large masses. It spread with frightful rapidity, because the
combustible material on which it fed was everywhere to be found. It
was conducted with the most revolting cruelty. What the slaves
demanded before all else was vengeance, and what dread had a
gladiator of a death unaccompanied by torture?
After the first successes of the slaves dissensions broke out among
them. Such hordes can nowhere long preserve a higher object than
the momentary gratification of their passions—a fact which shields
human society from their rage. Piracy, also, is another side of this

proletarian system. It found its strongest aliment in the system of
spoliation practiced by the Romans in Asia Minor. The oppressed
along the whole coast, joined the pirates "preferring to do violence
rather than to suffer." (Appian, B. Mithr., 92, Dio C., XXXII, 3.) The
temples and the wealthy Romans were in special danger. But the
worst feature in the horrible picture was that many of the great
shared in the spoils with the robbers. They bought slaves and other
booty from them at mock prices, even close by the gates of Rome.
(Strabo, XIV, 668 seq., Dio C., XXXVI, 5.) Precisely as the slave-
wars were looked upon with pleasure by the poorer free men.
Incendiarism was one of the chief weapons of mutinous pauperism.
(Drumann, IV, 282.) The celebrated bacchanalian trial and the
questions of poisoning which followed it as a consequence (186
before Christ) may be looked upon, in Rome, as the first marked
symptoms of the disruption between the oligarchy of money and the
proletariat. This put the morality of the higher classes in a bad light,
while, at the same time, a large slave conspiracy in Apulia, which
was not suppressed until the year 185, exhibited the reverse of the
picture. Cato, the censor, endeavored to oppose this tendency by
high sumptuary taxes, and by establishing proletarian colonies. At
the same time we see the various parties among the nobility uniting
and the publicans joining them. (Nitzsch, Gracchen, 124 ff.) The
history of the last hundred years of the Republic turns chiefly on the
three great attempts made by the proletariat to overthrow the citadel
of the moneyed oligarchy, under the Gracchi, under Marius and
under Cæsar. The last was permanently successful but entailed the
loss of the freedom of both parties.
Among the pretty nearly useless remedies employed, besides those
described in § 79, I may mention the following also: the great
number of agrarian laws intended to lessen estates of too great
extent owned by one person, and to restore a free peasant
population, in the years 133, 123, 100, 91, 59 before Christ; the law
in Hannibal's time (Livy, XXI, 63) that no senator should own a ship
with a capacity of more than 300 amphora; the provision (Sueton.,
Caes., 42) that all great herd-owners should take at least one-third of

their shepherds from the ranks of freemen; the many laws de
repetundis, the first of which was promulgated 149 before Christ,
intended to protect the provinces against spoliation by the
governors; the L. Gabinia, 56 before Christ, which prohibited the
loaning by the provinces in Rome; lastly, a rigid enforcement of
police provisions against slaves, especially against their bearing
arms, which were carried to such an extent, that slaves who had
killed a boar with a spear were crucified. (Cicero, in Verr., II, 3.)
The chief rule of every real oligarchy of money is, while they hold
the lower classes in general under their yoke with great severity, to
keep dangerous elements in good humor at the expense of the state.
Among these are especially the rabble in large cities and the
soldiery. Compare Roscher, Betrachtungen über Socialismus und
Communismus, 436, 437.
[204-11] In medieval Italy, also, popular freedom was lost through a
moneyed oligarchy and a proletariat. Popolo grasso and minuto
(bourgeoisie—peuple) in Florence. The former were reproached
especially with the breach of trust in the matter of the public
moneys (Sismondi, Gesch. der Ital. Republiken, II, 323, seq.), which
reminds one of the French cry, corruption in 1847. Machiavelli
gives a masterly description of the class contrasts during the last
quarter of the fourteenth century, in his Istoria Fiorent., III, a. 1378,
4. The poor, whose spokesmen recall the most desperate shibboleths
of modern socialists, dwell principally on this, that there is only one
important difference, that between rich and poor; that all men are by
nature entirely equal; that people get rich only through deceit or
violence; that the poor want revenge etc. It is significant how, in
Florence, the largest banker finally became absolute despot, and that
contemporaneously in Genoa, the Bank of St. George, in a measure,
absorbed the state; the former supported by numerous loans made to
influential persons like Crassus (Machiavelli, Ist. Fior., VII); the
latter by the overstraining of the system of national debt.

SECTION CCV.

DISTRIBUTION OF THE NATIONAL INCOME.—HEALTHY
DISTRIBUTION.

Hence a harmony of the large, medium and small incomes may be
considered the indispensable condition of the economic prosperity
of a people.[205-1] This prosperity is best secured when the medium-
class income prevails, when no citizen is so rich that he can buy the
others, and no one so poor that he might be compelled to sell
himself. (J. J. Rousseau.)[205-2] Where there is not a numerous class
of citizens who have time enough to serve the state even gratis, as
jurymen, overseers of the poor, municipal officers, representatives
of the people etc. (compare § 63), and property enough to be
independent of the whims and caprices of others, and to maintain
themselves and the state in times of need, even the most excellent
of constitutions must remain a dead letter. Nor should there be an
entire absence of large fortunes, and even of inherited large
fortunes. The changes of ministry which accompany constitutional
government are fully possible only when the choice of men who
would not lose their social position by a cessation of their salaries
as public functionaries is not altogether too limited.[205-3] Thus the
transaction of the most important political business, especially that
which relates to foreign affairs, requires a peculiar elasticity of
mind, and a capacity for routine on the grandest scale, which with
very rare exceptions, can be acquired only by habituation to them
from childhood, and which are lost as soon as the care for food is
felt. The bird's-eye-view of those who are born "great" does not, by
any means, embrace the whole truth of human things, but it does a
very important side of it. Among this class, as a rule, it is easiest to
find great party leaders, while leaders who have to be paid by their
party, generally become in the long run, mere party tools.[205-4] It is
true that it requires great intellectual and moral power to resist the
temptations which a brilliant hereditary condition presents;

temptations especially to idleness, to pride and debauchery. For
ordinary men, it is a moral and, in the end, an economic blessing,
that they have to eat their bread in the sweat of their brow,[205-5] and
that they can grow rich only by long-continued frugality.[205-6]
However, the distribution of the national income, and every change
in that same distribution, constitute one of the most important but
at the same time one of the most obscure departments of statistics.
[205-7]
When inequality increases because the lower classes
absolutely decline, there is no use in talking any longer about the
prosperity of the nation.[205-8] It is different, of course, when only
the higher classes become, relatively speaking, higher yet. But even
this latter kind of inequality may operate disastrously, inasmuch as
it nourishes the most dangerous tendency of democracy, that of
envy towards those who are better off.
[205-1] Verri Meditazioni, VI.
[205-2] Aristotle's view that, in a good state, the middle class should
preponderate. (Polit. IV, 6, Sch.) Sismondi says: la richesse se
réalise en jouissances; mais la jouissance de l'homme riche ne
s'accroît pas avec ses richesses. (Etudes sur l'Economie politique,
1837, I, 15.)
[205-3] If state offices were to be filled by doctors or lawyers who
live by their practice, after a time, only those could be had who had
no large practice to sacrifice, that is, beginners or obscuranti.
[205-4] Per contra, see Bazard, Doctrine de Saint Simon, 323. But
Sismondi is certainly right: nous ne croyons point, que les hommes
qui doivent servir à l'humanité de flambeau naissent le plus souvent
au sein de la classe riche; mais elle seule les apprécie et a le loisir
de jouir de leurs travaux. (Etudes, I, 174.)
[205-5] To appreciate the demoralizing effects of an income
obtained without labor and without trouble on men of small culture,

we need only witness the bourgeoisie at great watering places,
pilgrimage places, seats of courts and university cities supported
largely by students. Similarly at Mecca, Medina, Meschhed, Rome,
etc. (Ritter, Erdkunde VIII, 295 seq. IX, 32), and even in Palestine,
during the crusades, when the miserable Pullanes counted on the
tribute of the pilgrims. (Wilken, VII, 369, according to Jacob de
Vitriaco.)
[205-6] A man with $100,000 a year has a much less incentive to
make savings than 100 men with $1,000 each per annum,[TN 31] for
the reason that his economic wants are already all richly satisfied,
and he can have little hope of improving it by saving. (von
Mangoldt, V. W. L., 141.)]
[205-7] Harrington's fundamental thought (1611-1677, Works,
1700) is, that the nature of the constitution of a state depends on the
distribution of the ownership of its land. "Balance of property!"
Where, for instance, one person owns all the land or the larger
portion of it, we have a despotism; where the distribution is more
equal, a democracy, etc. All real revolutions are based upon a
displacement of the centre of gravity of property, since in the long
run, superstructure and foundation can not be out of harmony with
each other. For this reason, agrarian laws are the principal means to
prevent revolutions. (Roscher, Gesch. der English.
Volkswirthschaftslehre, 53 ff.) Montesquieu also pays special
attention to the political consequences of the distribution of wealth.
Thus, for instance, in monarchies, the creation of large fortunes
should be promoted by the right of primogeniture; in aristocracies,
on the other hand, the great wealth of a few nobles is as detrimental
as that of extreme poverty. (Esprit des Lois, V, 8, 9.)
[205-8] The common assertion of the socialists, that the inequality
of property is frightfully on the increase, is as far from being proved
as is the opposite one of Hildebrand, Nat. Oek. der Gegenwart und
Zukunft, I, 245 ff. According to Macaulay, Hist. of England, ch. 3,
there were, in England, in 1685, only about three (ducal) families
with an annual income of about £20,000 a year. The average income

of a lord amounted to £3,000; of a baronet, to £900; of a member of
the house of commons, to scarcely £800; and a lawyer with £1,000
per annum was considered a very important personage. At the same
time, there were 160,000 families of free peasants, that is more than
1/7 of the whole population, whose average income amounted to
from £60 to £70. For the year 1821, Marshall, Digest of all
Accounts, etc., II, 1833, assumes, that there were 4,000 families
with over £5,000 yearly income; 52,000 families with from £1,500
to £5,000; 386,000 families with from £200 to £1,000; 2,500,000
families with less than £200. Compare, per contra, the Edinburg
Review, 1835. The income tax statistics of 1847 show that 22
persons had an income of at least £50,000 a year; 376 persons, from
£10,000 to £50,000; 788, from £5,000 to £10,000; 400, from £4,000
to £5,000; 703, from £3,000 to £4,000; 1,483, from £2,000 to
£3,000; 5,234, from £1,000 to £2,000; 13,287, from £500 to £1,000;
91,101, from £150 to £500.
If we compare these numbers with the corresponding ones of the
income tax of 1812, the numbers of those who returned an income
of £150 to £500 increased 196 per cent.; of those with an income of
from £500 to £1,000, 148 per cent.; of from £1,000 to £2,000, 148
per cent.; of from £2,000 to £5,000, 118 per cent.; of from £5,000
and more, 189 per cent.; while the population in general had
increased by about 60 per cent. Compare Athenæum, August, 1850;
Edinburgh Rev., April, 1857. Between 1848 and 1857, the
development was less favorable, so that the incomes of from £150
to £500 subject to taxation, increased only 7 per cent.; those from
£500 to £1,000 about 9.56 per cent.; those from £10,000 to £50,000,
by 42.4, and those over £50,000, 142.1 per cent. Between 1858 and
1864, the incomes derived from industry and commerce, subject to
taxation below £200, had increased about 19.4 per cent.; those over
£10,000, 59 per cent.; while the aggregate amount of all taxed
incomes in this category increased 19 per cent. (Stat. Journal, 1865,
546.) According to Baxter, The National Income of the United
Kingdom, 1868, there are now 8,500 persons with a yearly income
of £5,000 and more, who draw in the aggregate 15.6 per cent. of the

national British income, and on the average nearly £15,000 each.
There are, further, 48,800 persons with a yearly income of from
£1,000 to £5,000; 178,300 with from £300 to £1,000; 1,026,400
with from £100 to £300; and 1,497,000 with less than £100 a year
from their property. In addition to this, 10,961,000 workmen on
wages, with an aggregate income of £324,600,000. Compare §§
172, 230.
In France, the number of so-called électeurs, who paid direct taxes
to at least the amount of 200 francs was, in 1831, 166,583, and
increased uninterruptedly until 1845, when it was 238,251, while
the population had increased only 8.5 per cent.
In Prussia, the revenue from class-taxation up to 1840, increased,
unfortunately, in a smaller proportion than the population: hence the
lowest classes must have increased relatively more than the others.
(Hoffmann, Lehre von den Steuern, 176 ff.) Between 1852 and
1873, according to the statistical returns from class-taxation and of
the classified income tax, the growth of large incomes in the
provinces of old Prussia, seems to have been much more rapid than
that of the smaller ones. Thus, for every 100 taxpayers, with an
income of from 400 to 1,000 thalers, there was an increase to 175.5;
of from 1,000 to 1,600 thalers, for every previous 100, 210.2; from
1,600 to 3,200 thalers, 232.3; of from 3,200 to 6,000, 253.9; of from
6,000 to 12,000 thalers, 324.8; of from 12,000 to 24,000, 470.6; of
from 24,000 to 52,000 thalers, 576.3; of from 52,000 to 100,000
thalers, 568.4; of from 100,000 to 200,000 thalers, 533.3; of over
200,000, 2,200. Hence, probably, a greater growth towards the top,
than the general increase in the population will account for.
This concentration of property took place most noticeably in Berlin,
where for instance, between 1853 and 1875 the incomes of from
1,000 to 1,600 thalers increased 212.2 per cent.; those from 24,000
to 52,000, 994.1 per cent. There are now in the whole state 2.24 per
cent. of the population (including those dependent on them) subject
to the income tax; that is, estimated as having a yearly income of
1,000 thalers. Of the remaining 97.76 per cent., more than a quarter,

and probably more than one-half, are as a class free from taxation,
because their income is presumably less than 140 thalers (6,049,699
against 532,367, exempt for other reasons and 4,850,791 belonging
to classes subject to taxation: these three numbers probably not
including dependents). Among the payers of an income tax, there
are 79,464 with an average income of 1,237 thalers per annum;
41,366 with 2,171 thalers; 12,305 with 4,279 thalers; 4,030 with
8,383 thalers; 1,655 with 16,527 thalers; 513 with 32,428 thalers;
163 with 65,595 thalers; 39 with 137,692 thalers; 21 with 427,142
thalers; and one with 1,700,000 thalers per annum. (Preuss. statist.
Ztschr., 1875, 116, 132, 142, 145, 149.) As the reverse of this
picture, we may take the fact that, in 1870, of 1,047,974 cases of
guardianship, there were only 208,614 in which there was any
property to be looked after. (Justiz-Minist-Blatt, 1872, No. 6.)
The figures from Bremen are very favorable. The incomes subject to
taxation amounted, in 1847, to 71.6 thalers per capita; in 1869, to
131.2.[TN 32] The incomes subject to taxation in class No. 1, that is
from 250 to 399 thalers, increased 78 per cent.; in class No. 2, 400
to 499 thalers, 45 per cent.; in class No. 3, 500 thalers and more, by
57 per cent. The average income of the third class amounted, in
1847-50, to 1,952 thalers; 1866-69, to 2,439 thalers. In 1848, there
were, of estates of over 3,000 thalers subject to taxation, only 38 to
every 1,000 inhabitants; in 1866, 49. (Jahrb. f. amtl. Statistik
Bremens, 1871, Heft 2, p. 185 seq.)

BOOK IV.

CONSUMPTION OF GOODS.