France, he would probably put it in the Savings' Bank; that is, he would lend it to the bank, which, for shortness, we will suppose to be a bank both of savings and discount. In consequence of this loan, the bank will be able to lend or discount $100 more to one of its customers. Suppose a baker wishes to extend his business, but has not capital enough of his own to buy more flour with. He borrows this $100 of the bank for four months, and with it he immediately purchases twenty barrels of flour more than he could otherwise have purchased. What he borrows of the bank is not, in fact, the $100 bill which is handed to him across the counter, but the twenty barrels of flour which he buys with it; the bank-bill being only a ticket or certificate, in which the bank directors say to the flour-dealer, "Deliver this man twenty barrels of flour, and we will pay you for it." The flour-dealer complies, and immediately carries back the bill to the bank, and is paid for it either in hard specie, or in that amount carried to his credit, or in any other form that he may prefer. We may put aside, then, in future, any consideration of the bank-bills; for they are nothing but tickets of transfer, or orders from the bank to any merchant, asking him to deliver the bearer a certain amount of goods, and the bank will pay him for them.

But let us follow the laborer's $100 of savings. In what form do they now exist? Evidently they have become twenty barrels of flour, which the baker gradually transforms into many loaves of bread, and sells them to his customers. Before the four months expire, the bread is all sold and eaten; so that the $100 are now fairly consumed. But has their value disappeared? By no means. The baker's customers have paid him for this bread at least $120, so that he can now repay the bank the $100 that he borrowed, with the addition of two dollars for four months' interest, and put eighteen dollars into his own pocket as the reward of his labor. The bank, being again in funds, can now lend, we will suppose, $102 worth of leather, for four months, to an enterprising cordwainer, who begins immediately to manufacture it into boots and shoes. Before his four months have expired, these are all sold, (half of them, perhaps, are half worn out,) and he has received, it may be, $ 225 for them; so that he can now repay the bank its loan of $102, besides two dollars and a fraction

for interest, pay his workmen probably $100, for a good deal of labor was needed for the consumption of that amount of leather, and put a little more than twenty dollars into his own. pocket. At the end of eight months, then, the bank has a little over $104 to let out for another period of four months. A paper-maker borrows this, buys rags with it, makes paper out of them, sells it, and with the proceeds he pays the bank $106 and a fraction.

The year has now expired, and our frugal laborer, having occasion to make a different use of his savings, goes to the bank for them, and receives $ 104.50, the bank retaining nearly two dollars as compensation for its agency in the affair. Thus the laborer finds that, by some process incomprehensible to him, the $100 which he deposited in the bank for a year has hatched $4.50, which it certainly would not have done if it had been simply locked up in the vault for safe-keeping. Could he have followed that process, he would have seen his $100 successively becoming, or assuming the shape of, flour, bread, leather, shoes, rags, and paper; and in each of these forms, in turn, he would have seen it entirely consumed or used up. The flour, leather, and rags have been manufactured into corresponding articles, the bread has been eaten, the shoes are half worn out, and the paper is covered with writing and printing, so that a new supply of each is called for. There has been a net gain at each stage of the transaction, and the total gain has been fairly distributed among all the parties to it, compensating each for his labor or frugality.

If any one thinks the instance here analyzed is a trivial or exceptional one, so that it throws little light on the general theory of wealth, let him look at the last annual returns made. to the Legislature by all the Savings' Banks in Massachusetts, which show that the amount now deposited in those institutions exceeds $23,400,000; that it yields an annual average dividend of over 63 per cent; and that the number of depos itors exceeds 117,400, so that the average amount to the credit of each depositor is a fraction less than $200. This aggregate of savings-made up, be it remembered, by the labor and frugality of Irish domestics, small mechanics, operatives in great manufacturing establishments, day-laborers in the country, and the like-is more than twice enough to build and

keep in motion all the factories in Lowell; as the aggregate capital of all the great manufacturing establishments in that city, in 1845, fell short of eleven millions. Observe, also, that large sums are annually withdrawn from these institutions, for productive investment in other ways, and the deficit thus made is immediately supplied by fresh deposits;- so that these Savings' Banks resemble great lakes, in which the water ever remains at the same level, though they are constantly supplying running streams, which bear a fertilizing influence with them all their way towards the ocean.*

We now go back to the principle first enunciated, and which seems to be firmly established; - that the whole wealth of a civilized nation is in a state of constant flux and renovation, the apparent stability and unchangeableness of the fortunes of individuals offering no exception to this principle. The instance analyzed also proves, that a gain, a profit, an addition to the national stock, is made only at and by these successive changes of form. What is inconsumable is also necessarily unproductive. We consume in order that we may produce, and we must consume before we can produce. If Scripture may be reverently quoted on such a topic, "that which thou sowest is not quickened except it die." The wealth which is literally locked up or buried only rots or rusts; and we might just as well bury only stones or sand in its place. But money or wealth is not locked up when placed in banks, institutions for savings,-moneyed corporations, as they are called, and the like. These institutions are nothing but contrivances for collecting it, setting it in motion, and making it circulate around us like the atmosphere which we breathe. The wealth which would otherwise be scattered in many little hoards, remaining idle because owned by those whose circumstances would not allow them to use it to advantage, or the separate sums being too small to admit of a profitable application, is, by these means, brought together and made

The whole amount deposited in the Savings' Banks of Great Britain and Ireland, a year or two since, had risen to nearly $140,000,000, the number of individual depositors being over one million. No one can deposit more than £ 150 in one of these institutions, and the sum is not allowed to accumulate to more than £ 200; the presumption being, that, for larger sums, other safe modes of investment can be found.

as efficient as the vast accumulations of great capitalists. The aggregate thus formed is made to do its full part in supplying the lungs of industry, keeping it alive and active, and making all the parts of the body politic and social contribute to the sustenance and growth of the whole. The twenty-three millions in the Savings' Banks, and the fifty-seven millions of capital in the banks of deposit and circulation, (I speak only of Massachusetts,*) do not rest there, but are at this moment circulating around us,-driving the wheels of our factories, supplying our mechanics with tools and our tradesmen with goods, building and freighting our ships, bringing to us the productions of all habitable climes, hurrying from one task to another with indefatigable ardor, and assuming a thousand different forms and hues, according to our necessities and desires.

"Whatever a person saves from his revenue," says Adam Smith, "he adds to his capital, and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits." "What is annually saved is as regularly consumed as what is annually spent, and nearly in the same time too; but it is consumed by a different set of people. That portion of his revenue which a rich man annually spends is, in most cases, consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption. That portion which he annually saves, as, for the sake of the profit, it is immediately employed as a capital, is consumed in the same manner, and nearly in the same time too, but by a different set of people; by laborers, manufacturers, and artificers, who reproduce, with a profit, the value of their annual consumption."

The rapid increase of capital in Massachusetts, as indicated by the Bank Returns, deserves notice. The statistics to illustrate the passage in the text were first collected in 1850; and then, the amount lodged in the Savings' Banks was only about thirteen millions, and the aggregate capital in the banks of deposit and circulation was but thirty-seven millions. Hence, in five years, the savings of people of moderate means have increased seventy-seven per cent, and bank capital has received an addition of fifty-four per cent.

THE AIMS AND ADVANTAGES OF POLITICAL ECONOMY. 13

CHAPTER II.

66

THE AIMS, THE LIMITATIONS, AND THE ADVANTAGES OF THE STUDY OF POLITICAL ECONOMY: THE LAISSEZ-FAIRE," OR 66 LET-ALONE" PRINCIPLE.

We are now entitled to assume, that the theory of wealth is a large and complicated one, embracing many curious and difficult problems, and resting upon many general principles or laws, the discovery and development of which constitute a distinct and important science. One of these laws or general facts — the transmutations of capital—has been pointed out and briefly elucidated. And we perceive that it is a fruitful one, pregnant with important conclusions and inferences respecting the institution of property and the modes of favoring industry and increasing national wealth. If the science has been successfully cultivated, many more such general laws must have been discovered in it, a knowledge of which is all important to the statesman, the merchant, and the philanthropist. As Political Economy is expounded in the books, whether by Adam Smith, Ricardo, Sismondi, or Mill, it may, or may not, be well founded and trustworthy in all its parts. Authorities differ on many points. But these men have not been studying a mere chimera, or wasting their energies in a vain pursuit. There are general laws affecting the production and distribution of wealth, whether they have been discovered or not, and a knowledge of these laws is a very different thing from the practical knowledge, the acquaintance with details, and the natural shrewdness, which enable a man to acquire property, and to take good care of it when acquired.

And this leads me to remark, that Political Economy is not, as many suppose, the art of money-making, any more than meteorology is the art of predicting the weather. It is no art at all, but a science; for its immediate end is knowledge, not action, or the guidance of conduct. The meteorologist says that the phenomena of the atmosphere and the weather, irregular as they are in their occurrence, and obscure as to their