ment to stimulate production, of bad government to encourage consumption.

For the same reason, that the creation of a new product is the opening of a new vent for other products, the consumption or destruction of a product is the stoppage of a vent for them. This is no evil where the end of the products has been answered by its destruction, which end is the satisfying of some human want, or the creation of some new product designed for such a satisfaction. Indeed, if the nation be in a thriving condition, the gross national reproduction exceeds the gross consumption. The consumed products have fulfilled their office, as it is natural and fitting they should; the consumption, however, has opened no new vent, but just the reverse.

Having once arrived at the clear conviction, that the general demand for produce is brisk in proportion to the activity of production, we need not trouble ourselves much to inquire towards what channel of industry production may be most advantageously directed. The products created give rise to various degrees of demand, according to the wants, the manners, the comparative capital, industry, and natural resources of each country; the article most in request, owing to the competition of buyers, yield the S best interest of money to the capitalist, the largest profits to the adventurer, and the best wages to the labourer; and the agency of their respective services is naturally attracted by these advantages towards those particular channels.

In a community, city, province, or nation, that produces abun dantly, and adds every moment to the sum of its products, almost all the branches of commerce, manufacture, and generally of industry, yield handsome profits, because the demand is great, and because there is always a large quantity of produce in the market, ready to bid for new productive services. And, vice versa, wherever, by reason of the blunders of the nation or its government, production is stationary, or does not keep pace with consumption, the demand gradually declines; the value of the product is less than the charges of their production; no productive exertion is properly rewarded; profits and wages decrease; the employment of capital becomes less advantageous and more hazardous; it is consumed piecemeal, not through extravagance, but through necessity, and because the sources of profit are dried up.† The labouring classes experience a want of work; families before

* If the barren consumption of a product be of itself adverse to reproduction, and a diminution pro tanto of the existing demand or vent for produce, how shall we designate that degree of insanity, which would induce a govern. ment deliberately to burn and destroy the imports of foreign produce, and thus to annihilate the sole advantage accruing from unproductive consumption, that is to say, the gratification of the wants of the consumer?

+ Consumption of this kind gives no encouragement to future production, but devours products already in existence. No additional demand can be

in tolerable circumstances, are more cramped and confined; and those before in difficulties, are left altogether destitute. Depopulation, misery, and returning barbarism, occupy the place of abundance and happiness.

Such are the concomitants of declining production, which are only to be remedied by frugality, intelligence, activity, and freedom.

CHAPTER XVI.

OF THE BENEFITS RESULTING FROM THE BRISK CIRCULATION OF MONEY AND COMMODITIES.

It is common to hear people descant upon the benefits of an active circulation; that is to say, of numerous and rapid sales. It is material to appreciate them correctly.

The values engaged in actual production can not be realised and employed in production again, until arrived at the last stage of completion, and sold to the consumer. The sooner a product is finished off and sold, the sooner also can the portion of capital vested in it be applied to the business of fresh production. The capital being engaged a shorter time, there is less interest payable to the capitalist; there is a saving in the charges of production; it is, therefore, an advantage, that the successive operations performed in the course of production should be rapidly executed.

By way of illustrating the effects of this activity of circulation, let us trace them in the instance of a piece of printed calico.*

A Lisbon trader imports the cotton from Brazil. It is his interest, that his factors in America be expeditious in making purchases and remitting cargoes, and likewise, that he meet no delay in selling his cotton to a French merchant; because he thereby gets his returns the sooner, and can sooner recommence a new and equally lucrative operation. So far, it is Portugal that benefits by the increased activity of circulation; the subsequent advantage is on the side of France. If the French merchant keep the Brazil cotton but a short time in his warehouse, before he sells it

created, until there be new products raised; there is only an exchange of one product for another. Neither can one branch of industry suffer without af fecting the rest.

The term circulation, as well as many others employed in the science of political economy, is daily made use of at random, even by persons that pride themselves upon their precision. "The more equally circulation is diffused," says La Harpe, in one of his works, "the less indigence is to be found in the community." With great deference to the learned academician, what possible meaning can the word circulation have in this passage?

to the cotton spinner, if the spinner after spinning sell it immediately to the weaver, if the weaver dispose of it forthwith to the calico printer, and he in his turn sell it without much delay to the retail dealer, from whom it quickly passes to the consumer, this rapid circulation will have occupied for a shorter period the capital embarked by these respective producers; less interest of capital will have been incurred; consequently the prime cost of the article will be lower, and the capital will have been the sooner disengaged and applicable to fresh operations.

All these different purchases and sales with many others that, for brevity's sake, I have not noticed, were indispensable before the Brazil cotton could be worn in the shape of printed calicoes. They are so many productive fashions given to this product; and the more rapidly they may have been given, the more benefit will have been derived from the production. But, if the same commodity be merely sold several times over in a year in the same place without undergoing any fresh modification, this circulation would be a loss instead of a gain, and would increase, instead of reducing the prime cost to the consumer. A capital must be employed in buying and re-selling, and interest paid for its use, to say nothing of the probable wear and tear of the commodity.

Thus, jobbing in merchandise necessarily causes a loss, either to the jobber, if the price be not raised by transaction, or to the consumer, if it be raised.*

The activity of circulation is at the utmost pitch to which it can be carried with advantage, when the product passes into the hands of a new productive agent the instant it is fit to receive a new modification, and is ultimately handed over to the consumer, the instant it has received the last finish. All kind of activity and bustle not tending to this end, far from giving additional activity to circulation, is an impediment to the course of production,—an obstacle to circulation by all means to be avoided.

With respect to the rapidity of production arising from the more skilful direction of industry, it is an increase of rapidity not in circulation, but in productive energy. The advantage is analogous; it abridges the occupation of capital.

I have made no distinction between the circulation of goods and of money, because there really is none. While a sum of money lies idle in a merchant's coffers, it is an inactive portion of his capital, precisely of the same nature as that part of his ca pital which is lying in his warehouse in the shape of goods ready for sale.

The best stimulus of useful circulation is, the natural wish of all classes, especially the producers themselves, to incur the

The trade of speculation, as we have before observed, (suprà, Chap. 9.) is sometimes of use in withdrawing an article from circulation, when its price is so low as to discourage the producer, and restoring it to circulation, when that price is unnaturally raised upon the consumer.

least possible amount of interest upon the capital embarked in their respective undertakings. Circulation is much more apt to be interrupted by the obstacles thrown in its way, than by the want of proper encouragement. Its greatest obstructions are, wars, embargoes, oppressive duties, the dangers and difficulties of transport. It flags in times of alarm and uncertainty, when social order is threatened, and all undertakings are hazardous. It flags too, under the general dread of arbitrary exactions, when every one tries to conceal the extent of his ability. Finally, it flags in times of jobbing and speculation, when the sudden fluctuations caused by gambling in produce, make people look for a profit from every variation of mere relative price: goods are then held back in expectation of a rise, and money in the prospect of a fall; and, in the interim, both these capitals remain inactive and useless to production. Under such circumstances, there is no circulation, but of such produce as can not be kept without danger of deterioration; as fruits, vegetables, grain, and all articles that spoil in the keeping. With regard to them, it is thought wiser to incur the loss of present sale, whatever it be, than to risk considerable or total loss. If the national money be deteriorated, it becomes an object to get rid of it in any way, and exchange it for commodities. This was one of the causes of the prodigious circulation that took place during the progressive depreciation of the French assignats. Every body was anxious to find some employment for a paper currency, whose value was hourly evaporating; it was only taken to be re-invested immediately, and one might have supposed it burnt the fingers it passed through. On that occasion, men plunged into commerce, of which they were utterly ignorant; manufactures were established, houses repaired and furnished, no expense was spared even in pleasure; until at length all the value each individual possessed in assignats was finally consumed, invested or lost altogether.

CHAPTER XVII

OF THE EFFECT OF GOVERNMENT REGULATIONS INTENDED TO

INFLUENCE PRODUCTION.

STRICTLY speaking, there is no act of government but what has some influence upon production. I shall confine myself in this chapter to such as are avowedly aimed at the exertion of such influence; reserving the effects of the monetary system, of loans, and of taxes, to be treated of in distinct chapters.

The object of governments, in their attempts to influence production, is, either to prescribe the raising of particular kinds of

produce, which they judge more advantageous than others, or to prescribe methods of production, which they imagine preferable to other methods. The effects of this two-fold attempt upon national wealth will be investigated in the two first sections of this chapter; in the remaining two, I shall apply the same principles to the particular cases of privileged companies, and of the corntrade, both on account of their vast importance, and for the purpose of further explaining and illustrating the principles. We shall see by the way, what reasons and circumstances will require or justify a deviation from general principles. The grand mischiefs of authoritative interference proceed not from occasional exceptions to established maxims, but from false ideas of the nature of things, and the false maxims built upon them. It is then that mischief is done by wholesale, and evil pursued upon system; for it is well to beware, that no set of men are more bigoted to system, than those who boast that they go upon none." *

SECTION I

Effect of Regulations prescribing the Nature of Products.

The natural wants of society, and its circumstances for the time being, occasion a more or less lively demand for particular kinds of produce. Consequently, in these branches of production, productive services are somewhat better paid than in the rest; that is to say, the profits upon land, capital and labour, devoted to those branches of production are somewhat larger. This additional profit naturally attracts producers, and thus the nature of the products is always regulated by the wants of society. We have seen, in a preceding chapter (xv.,) that these wants are more ample in proportion to the sum of gross production, and that society in the aggregate is a larger purchaser, in proportion to its means of purchasing.

When authority throws itself in the way of this natural course of things, and says, the product you are about to create, that which yields the greatest profit, and is consequently the most in request, is by no means the most suitable to your circumstances;

* The greatest sticklers for adhering to practical notions, set out with the assertion of general principles: they begin, for instance, with saying, that no one can dispute the position, that one individual can gain only what another loses, and one nation profit only by the sacrifices of another. What is this but system? and one so unsound, that its abettors, instead of possessing more practical knowledge than other people, show their utter ignorance of many facts, the acquaintance with which is indispensable to the formation of a correct judgment. No man, who understands the real nature of production, and sees how new wealth may be, and is daily created, would attempt to advance so gross an absurdity.