Puslapio vaizdai

of universal man's. Anarchy is related to it as the Copernican astronomy to the Ptolemaic. It shifts the standpoint to the proper place, and at once unloads the endlessly multiplying cycles and epicycles of an arbitrary system.

"O tenebris tantis tam clarum extollere lumen, Qui primus potuisti, illustrans commoda vitæ."


It is difficult to see how the most exhaustive knowledge of Anarchy could have saved one from the bad break Mr. James alleges. His words were, 66 redundant wealth should result in Communism, and must do so the moment governments cease to protect thieves." The natural inference to draw is, that governments are the only thing that stands between us and Communism. But when Anarchy shall prevail there will be no governments: ergo, Anarchy will result in Communism.

It would certainly be fallacious to hold that saving is the sole cause of the wealth of nations or individuals; but this paper never put forward any such view. It never asserted even that a miser is an unconscious benefactor, either of himself or of any one else; though his heirs might feel grateful to him for his practice of accumulating, especially if they had not lived in very intimate relationship with him. The passage which Mr. James first criticised simply asserted that it would not be for the economic interest of a country for capitalists to devote that portion of their income which they now add to their capital- their wealth invested in productionto increasing the wages of their employees, "unless the working classes who received the increased wayes should save that which he - the employer is no longer able to save, save to invest in productive activities, or should, by inventions or greater personal skill, etc., increase the amount produced." The difference of view on this point between Mr. James and TO-DAY does not seem to be very marked. A large income is a grateful thing to an individual or a nation; industry, invention, and capital contribute to produce the income; but wealth which is consumed luxuriously cannot become capital. If Mr. James objects to designating by the word "saving" the process of setting apart as capital a portion of the wealth produced, instead of consuming it, the point is hardly worth insisting on.



The reports of heavy investments of Eng lish capital being made in this country reports doubtless exaggerated, but having a basis in fact have attracted attention to one of the most interesting contrasts between modern industrial societies and the militant societies which preceded them. Until within recent times, capital fluctuated more or less from trade to trade within nations, but did not often migrate from one nation to another. "Feelings," says Ricardo, as quoted by Mr. Bagehot, "which I should be sorry to see weakened, induced most men of property to be satisfied with a low rate of profit in their own country, rather than seek a more advantageous employment for their wealth in foreign nations."

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"But," continues Mr. Bagehot, "these feelings are being weakened every day. A class of cosmopolitan capitalists has grown up which scarcely feels them at all. When Ricardo wrote, trade of the modern magnitude was new; long wars had separated most nations from most others. Ricardo framed, and others have continued, a theory of foriegn trade in which each nation is bounded by a ring fence, through But which capital cannot pass in or out. the present state of things is far less simple, and much of that theory must be reinodelled. The truth is, that three great instruments for transferring capital have begun to operate on the largest scale between nation. The loan fund,' the first and most powerful of these, does so most strikingly. Whenever the English money market is bare of cash, it can at once obtain it by That is to raising the rate of interest. say, it can borrow money to the extent of millions at any moment to meet its occasions: or, what is the same thing, can call in loans of its own. Other nations can do so too, each in proportion to its credit and its wealth. A cosmopolitan loan fund exists, which runs everywhere as it is wanted, and as the rate of interest tempts it."


The feelings spoken of by Ricardo have not entirely disappeared; morcover, in most countries investments made by aliens are not quite so safe, not quite so well guarded by the government, as those made by citizens; there is in many nations a dislike to seeing foreign capital invested in their midst; but the prejudice against the man who invests his wealth in foreign lands instead of at home has almost entirely given away. Strangely enough, our Western States and Territories, which have profited more largely than any other country has ever done from the "international fund," have revived the otherwise obsolete prejudice, and have tried, even by legisla tion, to prevent further investment of English capital in their enterprises. In this they are evidently hoodwinked by lenders in the Eastern States, whose rates of interest are lowered by foreign competition. All these feelings antagonistic to the international investment of capital exist in their mildest form between thiscountry and England, and as the remuneration of capital is notably higher here than there, it is probable that English investments will continue to be made here largely. That being the case, it is an interesting question to us whether it is for the advantage of a nation in which the remuneration of capital is higher to receive investments from a nation whose capital is more abundant, and, therefore, commands a lower rate of profits, until the returns of capital in the two countries are approximately equal.

The question has been answered in both ways, as regards the particular case of this country and England. The shallowest objection is that the income of the investment is withdrawn from the country. But by hypothesis it is only the amount which the investment adds to the yearly product of the country that is withdrawn. The real question is, whether in practice it is not somewhat less, owing to the indirect effects which the capital produces on other industries of the country, and which do not appear in the dividends. The objection

simply amounts to a complaint, that Englishmen, having invested so much here, do not add to their investment each year. The case is somewhat similar to the complaint made in some portions of the West against Eastern capitalists for "sucking the life-blood of the communities" by receiving interest upon their mortgages, though it is not loans, but actual purchases of property, that are under consideration.

It is recognized as an advantage that within a country, capital should fluctuate freely from trade to trade according as now one, now another, yields profits greater than the average. It is not an advantage to those engaged in the industry to which the capital is attracted; but it is more important that the inhabitants should be supplied cheaply with any necessary than that a few should make exceptionally large profits. To take a concrete instance: suppose that petroleum sells for one cent more per gallon in consequence of the control exercised over its production by the Standard Oil Trust; then the country as a whole is injured by the existence of the trust. It might seem at first as if the amount of wealth could not be affected-only its distribution, that the cent which now goes to the pockets of stockholders in the trust would be retained by the people at large. But more oil would be used if the price per gallon were a cent less; therefore, just as any circumstance which should force people to use less oil than they now use would be an injury to the country as a whole, so any thing which would enable them to use more oil without extra cost the springing up of a rival concern, say—would be a benefit.

Plainly, it would make no difference whether the capital that started the competing establishment came from abroad or was subscribed at home, as far as the particular industry is concerned. But every investment of foreign capital must act in a manner analogous to the case supposed, for, if the foreign investors did not succeed in discovering the industries in which profits were greatest, their action

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would liberate domestic capital that would be applied to such industries. Hence investments of foreign capital made in a country are a benefit to it.

The case, however, is not quite so simple as this. In new countries, whose resources are undeveloped, the returns of both capital and labor are usually higher than in old countries. If the migration of labor and capital between them is entirely free, the former will rapidly approach the condition of the latter. But it is worth observing that it is to the advantage of a country for the returns of labor to be high and of capital to be low, that is, for the laborers to obtain a large share of the annual-products of the country. In so far as the reward of labor is determined by the law of supply and demand, the immigration of laborers must have a tendency to lower wages, and the immigration of capital to raise wages. Again, if the laborer be regarded as a sharer in the annual production of the country, the law of diminishing returns, as it is called, makes it inadvisable for the country to encourage much immigration.

There is evidently a limit to the amount of wheat or of any crop that may be raised on a given area of land, with our present knowledge of agriculture, at any rate. After this limit has been reached, the application of more labor and capital to that land would be useless. But it is not profitable in practice to apply enough labor and capital to reach this limit. By applying a small amount of labor and capital a small crop will result; by applying double the amount, more than twice as large a crop; by doubling the amount again the crop will not be quite doubled; while, if the labor and capital are doubled a third time, the crop will not be increased enough to make the operation profitable. Evidently there is a limit to the amount of capital and labor that can profitably be applied to a given area of land; and what is true of agriculture is true of all extractive industries. After a certain limit has been reached, in order to double the amount of coal or iron

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from a mine more than double the labor and capital must be applied. The extractive industries form the basis of all others, and, besides, "the chief concern of the masses of the people is with the cost of the raw materials of food, clothing, and shelter. It is of no advantage to the laborer that at a small additional expense he can have his cotton wrought into forms which a century ago would have excited the admiration of a court, if all the cotton he can procure is not enough to keep him warm." Consequently, the law of diminishing returns extends over all industry.

These considerations show that there may be too many laborers in a country — so many that, however skilful and industrious they may be, the share of each in the annual products of the country will be very small. Nor is it conceivable that any extension of knowledge and invention can ever change this fact. It has been calculated that the entire working force of the nation would not have been able to harvest our last year's wheat crop with the implements in use twenty years ago, quickly enough to prevent a large part of it from wasting; and yet there is a limit to the population which this country is able to support now, no less than there was twenty years ago not the same limit, to be sure, but the present population seems to press against the present limit almost as much as the former population did against its limit.

The objections against the unrestricted. immigration of laborers are very grave; but do they apply to the immigration of capital? Not at all; for it is not to the advantage of a country that the rate of profits upon capital should be high. The amount of capital has an important influence upon production, and the more there is of it seeking investment in any country, the larger will be the production of that country, the lower the rate of profit upon the capital, and consequently the larger the relative and absolute share of the classes who do not possess capital. Looking at the subject both in its general and in its

particular aspects, we are led to the conclusion that a country is benefited by the immigration of capital in any amount, but that the immigration of laborers can easily 100 great for the best interests of the country.



The power which words exercise over the minds of men I had almost said intelligent men is exemplified by the present phase of the tariff controversy.

International commerce if called by the name of "free trade" is regarded as destructive to our domestic industries; but if the name "reciprocity" is applied to it, its beneficial effects are extolled to the skies. The New York Tribune commends a resolution of the Produce Exchange, "in favor of the enlargement of foreign markets for American products," though the most of its space is taken up in trying to show that the one thing needful is to concentrate every effort upon securing a home market for American products. The Boston Traveller devotes an article to show the benefits which might be derived from "reciprocal" trade with Canada, and in almost the same. breath praises Congress for placing obstructions in the way of such trade. The course of these papers would seem neither consistent nor intelligent nor honest; but neither consistency nor intelligence nor honesty is to be expected from a party organ Partisanship as exemplified by these papers is absolutely incompatible with those qualities. The readers, however, cannot all be partisans. It cannot be true that the minds of them all are occupied in supporting the administration and bringing confusion upon its opponents. Some of them might be expected to perceive the inconsistency, and doubtless would perceive it but for the introduction of the new word," reciprocity"; their attention is so taken up with its connotations that none is left for its denotation.

It being conceded that "an enlargement of foreign markets for American products"

is desirable, reciprocity treaties offer a means of securing this desideratum. In order that we may sell more to foreign countries, it is necessary that we buy more of them; otherwise we should be selling the increase for nothing. It is, of course, possible that we may sell largely to any given country without buying much of its products, but if, in the long run, our imports are of less value than our exports, it is plain that we are the losers. Now if, by making a treaty agreeing to do certain things which it would be for our advantage to do anyway, and calling these stipulations concessions, we can induce any nation to extend its trade with us, this is undoubtedly a wise thing to do. True, the reflection may present itself that an intelligent nation would not thus be deceived for its own good (or evil); but this country is hardly in position to throw stones at other nations for stupid obstruction of trade.

For what are the implications if a recip rocity treaty is asserted to be for the advantage of both nations entering into it? Suppose that this country has been imposing a duty upon sugar from Cuba, and that Cuba has levied a duty upon wheat from this country. Now, if a treaty by which sugar is admitted free here and wheat there, is for the advantage of both countries, it certainly follows that the duties were an evil to both countries; and the same inference will hold if for sugar is substituted coal, or iron, or wool, or lumber, or tin, or cloth, or glassware, or any article whatever. Reciprocity is utterly inconsistent with the theory of protection. For how, in the supposed case, would the treaty be of benefit to the two nations? Evidently because the Cubans would get their wheat more easily by exchanging sugar for it than they could by growing it, and we should get sugar more easily by giving wheat for it than by making it. Unless both nations could derive a profit in this way, there would be no exchange of American wheat for Cuban sugar, treaty or no treaty. No law is needed to prevent us from exchang

ing sugar produced here for wheat produced in Cuba; or cutlery made here for corn grown in Belgium. Neither in this nor in foreign countries are the people sufficiently stupid to make exchanges which do not yield a profit; but they are, the majority of them, stupid enough to favor laws which prevent them from making exchanges that would be profitable to them.

The acme of inconsistency, however, seems to have been reserved for the dis

covery of the American Congress. To start with the intention of passing the strongest possible protective measure and to end with a free-trade amendment destined to apply to half the world, is an achievement which I do not think has ever before been accomplished by a legislative body. Still it is, perhaps, ungracious to Complain of these Congressmen for permitting themselves to exhibit a little grain of common-sense after the colossal stupidity involved in assenting to the provisions of the McKinley bill. And as the light comes at the end, after a long, though only a partial discussion of the subject, sanguine persons will, no doubt, be found to point to it as an evidence of progress.


The Forum for September contains, for political articles: Money Interests in Political Affairs, E. L. GODKIN; Federal Control of Elections, SENATOR JOHN T. MORGAN; Railway Reorganization, SIMON STERNE; and Matrimony and the State, REV. MINOT J. SAVAGE.

In the first, Mr. Godkin begins by reciting the fact to which Mr. D. A. Wells has called attention, that both in Europe and the United States there has recently set in an unmistakable reaction from "free trade" toward "protection." He dissents from Mr. Wells's economic explanation of this fact, and suggests that the cause of the reaction must be sought in the political, rather than in the economic, conditions. The change which has taken place in the political conditions is the

great shifting of political power which has occurred in every European nation, except Russia, between 1860 and 1880." Another way

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of expressing the same thing is that the franchise has been extended till, in the countries named, practical universal (male) suffrage exists. The classes which were formerly the governing classes are so no longer, but are swamped by the flood of votes from the larger class, which now, for the first time, participates in government. This idea is sufficiently trite, but is here expressed more scientifically than usual, and is illustrated from contemporary politics with much skill and clearness. The battle of free trade must be fought over again; the lesson must be learned afresh — or rather must be learned by a new and much less docile class. They will not learn it from books; they will only learn by experiment. Just why this contrast between the present and the past wielders of political power should be suggested is far from clear, nor does the writer attempt to justify the contrast here deliberately elaborated. The reader is left to draw the inference that, in the past, the governing class has not had to learn from experience, but was convinced by deductive reasoning, and by Adam Smith, that the government could not support the people. Be that as it may, Socialism is now rampant. Personal interest is enlisted on its side, and success attends every new effort in that direction. "Nobody who thinks his business is likely to be ruined if a certain party gets into power will refrain from saving himself with any weapons within his reach. This means simply that whenever protection is menaced, it is sure to buy as many votes as it thinks necessary for security, — probably the most important political truth of our day."

Mr. Morgan tries to reply to Mr. Chandler's criticism of the course of the Democrats in Congress on the Federal Elections Law. He maintains that the Southern States must be ruled by the whites, and that no machinery will succeed in passing the political power from their hands to those of the negroes. Some evidence of the injurious effect of negro rule during the years of reconstruction is produced. Thus, in Alabama a debt of $25,000,000 was saddled on the State, but without anything to show for the outlay. The most noteworthy feature of this, as of the article to which it is a rejoinder, is the absurdly exaggerated notion of their personal consequence which Senators seem to cherish. This appears not from any particular expressions, but from the general tone of the articles. A little exces

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