Tooke, have, after an elaborate investigation, satisfied themselves that the difference between paper and bullion was not greater than the enhancement in value of gold itself, and that the paper, though depreciated relatively to the then value of gold, did not sink below the ordinary value, at other times, either of gold or of a convertible paper. If this be true (and the evidences of the fact are conclusively stated in Mr. Tooke's History of Prices) the foundation of the whole case against the fundholder and other creditors on the ground of depreciation is subverted.

But, secondly, even if the currency had really been lowered in value at each period of the Bank restriction, in the same degree in which it was depreciated in relation to its standard, we must remember that a part only of the national debt, or of other permanent engagements, were incurred during the Bank restriction. A large part had been contracted before 1797; a still larger during the early years of the restriction, when the difference between paper and gold was yet small. To the holders of the former part, an injury was done, by paying the interest for twenty-two years in a depreciated currency: those of the second, suffered an injury during the years in which the interest was paid in a currency more depreciated than that in which the loans were contracted. To have resumed cash payments at a lower standard would have been to perpetuate the injury to these two classes of creditors, in order to avoid giving an undue benefit to a third class, who had lent their money during the few years of greatest depreciation. As it is, there was an underpayment to one set of persons, and an overpayment to another. The late Mr. Mushet took the trouble to make an arithmetical comparison between the two amounts. He ascertained by calculation, that if an account had been made out in 1819, of what the fundholders had gained and lost by the variation of the paper currency from its standard, they would have been found as a body to have been losers; so that if any compensation was due on the ground of depreciation,

it would not be from the fundholders collectively, but to them.

Thus it is with the facts of the case.

But these reasons

of fact are not the strongest. There is a reason of principle, still more powerful. Suppose that, not a part of the debt merely, but the whole, had been contracted in a depreciated currency, depreciated not only in comparison with its standard, but with its own value before and after; and that we are now paying the interest of this debt in a currency fifty or even a hundred per cent more valuable than that in which it was contracted. What difference would this make in the obligation of paying it, if the condition that it should be so paid was part of the original compact? Now this is not only truth, but less than the truth. The compact stipulated better terms for the fundholder than he has received. During the whole continuance of the Bank restriction, there was a parliamentary pledge, by which the legislature was as much bound as any legislature is capable of binding itself, that cash payments should be resumed on the original footing, at farthest in six months after the conclusion of a general peace. This was therefore an actual condition of every loan; and the terms of the loans were more favourable in consideration of it. Without some such stipulation, the government could not have expected to borrow unless on the terms on which men lend to the native princes of India. If it had been understood and avowed that, after borrowing the money, the standard at which it was computed might be permanently lowered, to any extent which to the "collective wisdom" of a legislature of borrowers might seem fit-who can say what rate of interest would have been a sufficient inducement to a person of common sense to risk his savings in such an adventure? However much the fundholders had gained by the resumption of cash payments, the terms of the contract insured their giving ample value for it. They gave value for more than they received; since cash payments were not resumed in six months, but in as many years, after the peace. So that

waving all our arguments except the last, and conceding all the facts asserted on the other side of the question, the fundholders, instead of being unduly benefited, are the injured party; and would have a claim to compensation, if such claims were not very properly barred by the impossibility of adjudication, and by the salutary general maxim of law and policy, "quòd interest reipublicæ ut sit finis litium."

CHAPTER XIV.

OF EXCESS OF SUPPLY.

§ 1. AFTER the elementary exposition of the theory of money contained in the last few chapters, we shall return to a question in the general theory of Value, which could not be satisfactorily discussed until the nature and operations of Money were in some measure understood, because the errors against which we have to contend mainly originate in a misunderstanding of those operations.

We have seen that the value of everything gravitates towards a certain medium point (which has been called the Natural Value), namely, that at which it exchanges for every other thing in the ratio of their cost of production. We have seen, too, that the actual or market value coincides, or nearly so, with the natural value, only on an average of years; and is continually either rising above, or falling below it, from alterations in the demand, or casual fluctuations in the supply: but that these variations correct themselves, through the tendency of the supply to accommodate itself to the demand which exists for the commodity at its natural value. A general convergence thus results from the balance of opposite divergences. Dearth, or scarcity, on the one hand, and over-supply, or, in mercantile language, glut, on the other, are incident to all commodities. In the first case, the commodity affords to the producers or sellers, while the deficiency lasts, an unusually high rate of profit: in the second, the supply being in excess of that for which a demand exists at such a value as will afford the ordinary profit, the sellers must be content with less, and must even, in extreme cases, submit to a loss.

Because this phenomenon of over-supply, and consequent

inconvenience or loss to the producer or dealer, may exist in the case of any one commodity whatever, many persons, including some distinguished political economists, have thought that it may exist with regard to all commodities; that there may be a general over-production of wealth; a supply of commodities in the aggregate, surpassing the demand; and a consequent depressed condition of all classes of producers. Against this doctrine, of which Mr. Malthus and Dr. Chalmers in this country, and M. de Sismondi on the Continent, were the chief apostles, I have already contended in the First Book; but it was not possible, in that stage of our inquiry, to enter into a complete examination of an error (as I conceive) essentially grounded on a misunderstanding of the phenomena of Value and Price.

The doctrine appears to me to involve so much inconsistency in its very conception, that I feel considerable difficulty in giving any statement of it which shall be at once clear, and satisfactory to its supporters. They agree in maintaining that there may be, and sometimes is, an excess of productions in general beyond the demand for them; that when this happens, purchasers cannot be found at prices which will repay the cost of production with a profit; that there ensues a general depression of prices or values (they are seldom accurate in discriminating between the two), so that producers, the more they produce, find themselves the poorer, instead of richer; and Dr. Chalmers accordingly inculcates on capitalists the practice of a moral restraint in reference to the pursuit of gain: while Sismondi deprecates machinery, and the various inventions which increase productive power. They both maintain that accumulation of capital may proceed too fast, not merely for the moral, but for the material interests of those who produce and accumulate; and they enjoin the rich to guard against this evil by an ample unproductive consumption.

* Supra, vol. i. pp. 82—5.