circumstances already mentioned. On this point, Sir James Steuart reasons thus : "The number of the buyers of subsistence, nearly determines the quantity to be sold; because it is a necessary article, and must be provided in a determinate proportion for every one, and the more the sale is frequent, the more the price is determinate. Next, as to the standard; this, I apprehend, must depend upon the faculties of the buyers, and these again must be determined by the extent of those of the greatest number of them; that is to say, by the extent of the faculties of the lower classes of the people. This is the reason why bread, in the greatest famine, never can rise above a certain price; for did it exceed the faculties of the great classes of a people, their demand would be withdrawn, which would leave the market overstocked for the consumption of the rich; consequently, those persons who in times of scarcity are forced to starve, can be such only whose faculties fall, unfortunately, below the standard of those of the great class; consequently, in countries of industry, the price of subsistence never can rise beyond the powers to purchase of that numerous class, who enjoy nothing beyond their physical-necessary; consequently, never to such an immoderate height as to starve considerable numbers of the people, a thing which very commonly happens in countries where industry is little known, where multitudes depend merely upon the charity of others, and who have no resource left so soon as this comes to fail them. "The faculties, therefore, of those who labour for a physicalnecessary, must, in industrious nations, determine the standard value of subsistence, and the value in money which they receive for their work, will determine the standard of their faculties, which must rise or fall according to the proportion of the demand for their labour."* I have quoted this passage in Sir James Steuart's words, because, though somewhat obscurely expressed, it suggests a principle, sound and important; and because it seems, on a superficial view, to be contradicted by facts, which a few years. * [Political Economy, Book II. chap. xxviii.; Works, vol. II. pp. 82, 83.] ago fell under our observation. In reality, however, the fact and theory are perfectly consistent, inasmuch as the latter, proceeding on the supposition that the poor have no resources but their own industry, is plainly inapplicable to a state of things where the poor are secured in a legal provision, and where a general spirit of humanity prompts to such exertions as this country never fails to exhibit during the pressure of a scarcity. It must be remembered, too, that the ordinary principles which regulate the prices of necessaries, were, during the late years of dearth, deranged completely by the sudden emission of an immense quantity of paper occasioned by the stoppage of issues of specie at the Bank of England, a circumstance of which I shall have occasion to take particular notice afterwards, and which, therefore, I shall content myself at present with merely mentioning. On this question, I know, very opposite opinions have been entertained by some writers of high reputation for commercial knowledge. One writer, Mr. Boyd,* overlooking almost entirely the effects of the scarcity occasioned by the bad harvest in 1799, a scarcity demonstrated beyond the possibility of a doubt, and relieved very imperfectly by importations, amounting in twelve months to seven or eight millions sterling;-has ascribed in a pamphlet, which for some time gained a large share of the public attention, the high price of necessaries during the following winter, chiefly to the rapid addition which had been made to the circulating medium. That the augmentation of the quantity of money, or of paper performing the functions of money, has a tendency to depreciate that money or paper, he states, as a principle universally recognised, and as no less invariable in its operation than the law of gravitation. In opposition to this reasoning, an author of the highest personal respectability, Sir Francis Baring,† and of unquestionable eminence as a commercial politician, has stated it confidently as a first principle, though without offering the slightest proof [A Letter, &c., on the Stoppage +[Observations on the Publication of of Issues in Specie at the Bank of Walter Boyd, Esq., M.P., &c. 1801.] England, &c. 1800.] of it, that bank-notes circulating at par cannot contribute to raise prices by any possible means. Into the discussion of these questions I cannot enter at present; although I must own that the subject does not appear to me to have been exhausted in either of these publications. One consideration only which I shall endeavour to illustrate very fully in another part of the course, I shall suggest very briefly; that abstracting altogether from the point in dispute between these two writers, the sudden addition made to the circulating medium of this country, about the very period when the scarcity took place, may have operated very powerfully on prices, by a process of which neither of them has taken any notice. In consequence of this addition an increased facility was given to all who possessed credit, to add to the fund of their expenditure, and such as felt their limited incomes inadequate to meet the increasing exigencies of the times, were enabled, by encroaching silently on their capitals, or by anticipating their future resources, to relieve themselves from the pressure of the present moment, and to maintain their former rank in society. Their consumption accordingly, was not diminished to the same extent as it must otherwise have been from absolute necessity, and that economy, which is the natural and most effectual palliative for the evils of scarcity, was thus counteracted in its operation. This inconvenience, however great as it is, was certainly accompanied with a consequence, on which it is impossible to reflect without satisfaction, although it probably contributed more than any other single cause to enhance the price of necessaries. The circumstance to which I allude is the increased facility which the higher and middling classes thus acquired of enlarging the funds of their charity. That the amount of voluntary contributions was in this manner greatly augmented, cannot, I think, be reasonably denied; and that these, added to the legal provisions for poor, rendered the price of provisions much higher than it otherwise would have been, seems equally indisputable. The competition was thus kept up much beyond what the unassisted means of the poor could have produced; and the operation of those circumstances was prevented which would have limited prices long before they approached that height which they actually reached. Numbers must have been left to perish from want of food; and a melancholy remedy would have been provided against the evils of dearth, by a diminution of the numbers of competitors. But on this subject I shall again have an opportunity of treating before the conclusion of these Lectures.-(End of Interpolation from Notes.) [SECT. V.-OF INTEREST.] Having finished the very slight view which our time permitted me to take of money considered as a medium of exchange, and of the principles which regulate its value in relation to that of commodities, I proceeded (at our last meeting) to consider the tendency which this important invention has, to facilitate the accumulation of stock or capital, which Turgot and Mr. Smith have shown to be so intimately connected with the increase of National Wealth; in this respect its effects in promoting the progress of society are no less striking than those which it produces, (as I had occasion formerly to remark,) by facilitating the separation of professions, and the distribution of labour among the different orders of the community. Before the introduction of gold and silver in trade, undertakings of every kind, but especially those of manufactures and of commerce, must evidently have been extremely confined, on account of the perishable nature of every other species of property which could be employed as a medium of exchange, and the trouble attending the preservation of them. "A great number of those arts," as M. Turgot observes, "which are indispensable for the use of the most indigent members of society, require that the same materials should pass through many different hands, and undergo, during a considerable space of time, difficult and various operations. Such, for example, is the art of preparing leather for the purposes of the shoemaker. Whoever has seen the work-house of a tanner, must immediately perceive the impossibility of one, or even several indigent persons providing themselves with leather, tan, utensils, &c., causing the requisite buildings to be erected, and procuring the means of their subsistence till such time as their leather can be sold. In this art, and many others, must not those that work have learned the craft in some degree before they begin to exercise it on materials which are not to be obtained without expense? In what manner are the materials to be collected for the manufactory; the ingredients and the necessary tools for their preparation? How shall this multitude of workmen subsist till the commodity comes to market; a multitude of whom none individually could earn his subsistence by the preparation and sale of a single hide? Who shall defray the expenses for the instruction of the apprentices, and maintain them till their labour can be useful? All this, it is manifest, requires the aid of a proprietor of capital, who shall supply the advances necessary for the purchase and preparation of materials, and for the wages of the workmen employed in preparing them. This capitalist, on the other hand, will naturally expect that the sale of the commodity will not only return to him his advances, but will afford an emolument sufficient to indemnify him for what his money would have procured him, if he had turned it towards the acquisition of land; and, moreover, a salary due to his trouble, and attention, and risk. In proportion as the capital returns to him by the sale of his works, he employs it in new purchases for supporting his family, or maintaining his manufactory. By this continual circulation he lives on his profits; accumulating what he can save to increase his stock, and thereby to enlarge his enterprises still farther."* Similar observations might be made to illustrate the necessity of advances for lucrative enterprises in commerce, and also in agriculture, wherever the cultivation of land is carried on to a considerable extent. All such enterprises, therefore, must necessarily have been confined within very narrow limits, till the accumulation of stock was facilitated by the introduction of money; an inven * [Réflexions sur la Formation et la Distribution des Richesses, lxi.; Euvres, Tome V. pp. 65-67.] |