whether his crop, after supplying him with seed and what is consumed in his family, leaves him 400 bushels, to be sold at 75 cents a bushel, or 300, to be sold at $1. But, to the 25,000,000 of people in the United States, the difference between a crop of 75,000,000 and one of 100,000,000 of bushels, is, that in the one case there is three, and in the other four bushels for each of them. If the crop of the next year should rise to 125,000,000, it would be a positive addition to the national capital and prosperity; though its value, or the profits of the wheat-growers, estimated by value, should prove less instead of more than in a year when the crop was but 75,000,000. What is true of wheat is true of every other product, of the growth and manufacture of the country. It is the increase in their quantity, not in their value, on which the national well-being depends-and this is not indicated by the rate of profit. We have seen, indeed, that as labour becomes more productive, and the increase of capital more rapid, the rate of profit declines, though the absolute quantity of commodities which the capitalist can obtain for the use of his capital is enlarged, because their value diminishes more than the rate of profit. The gratuitous co-operation of the forces of Nature adds immensely to the capital of a nation, without adding to its value. Book-keeping by double entry makes no account of this on the merchant's ledger, and the statesman must, therefore, go to other sources of information to ascertain the rate of his country's progress in wealth.

Mr. M'Culloch holds the following language:—

"As capital is nothing more than the accumulated produce of previous industry, it is evident its increase will be most rapid when industry is most productive; or, in other words, when the profits of stock are highest.* The man who can produce a bushel of wheat in three days, has it in his power to accumulate twice as much as the man who, either from a deficiency of skill, or from his being obliged to cultivate a bad soil, is forced to labour six days to produce the same quantity; and the capitalist who can invest stock so as to yield him a profit of ten per cent., has it equally in his power

* Mr. M'Culloch adds the following note to this passage:

"To avoid all chance of misconception, it is necessary to observe that this refers to net profit, or to the sum which remains to the capitalist after all his outgoings are compensated, including therein a sum sufficient to insure his capital against risk, and to make up for whatever may be peculiarly disagreeable in his business."

to accumulate twice as fast as the capitalist who can only obtain five per cent. for his capital. Conformably to this statement, it is found that the rate of profit, or, which is the same thing, the power to accumulate capital, is always greatest in those countries which are most rapidly augmenting their wealth and population. ***** We have no hesitation in laying it down as a principle which holds good in every case, and from which there is really no exception, that if the governments of any two or more countries be equally liberal, and property in each equally well secured, their comparative prosperity will depend on the rate of profit. Wherever profits are high there is a great demand for labour, and the society rapidly augments both its population and its riches. On the other hand, wherever they are low the demand for labour is proportionably reduced, and the progress of society rendered so much the slower." - Principles of Political Economy, page 85: M' Vickars' edition.

he uses

"rate

If we understand Mr. M'Culloch in this passage, of profits" in the ordinary mercantile sense, and believes that it is a true measure of the growth of a nation's capital. We have sufficiently elucidated the misconception upon which this belief rests. We cannot dismiss the quotation, however, without referring to one of the consequences of that error, which it briefly indicates. Capital, it is argued, is the fund for the support and employment of labour. The increase of labourers and of industry depends upon the increase in the quantity of capital, and is limited by it. There can be no more industry than is supplied with materials to work up and food to eat. These propositions may be freely admitted, without conceding that the demand for labour is proportioned to the rate of profit, in the mercantile sense. A barrel of flour will maintain a labourer in equal health and efficiency for no longer period when it costs him ten days' labour than when it costs him five. It will enable him to exert the same amount of mechanical force in working up a ton of iron into plough-shares, whether those plough-shares command fifty days' labour or twenty-five; and more plough-shares are likely to be demanded by farmers at the cheap rate than the dear. It is the aggregate of a country's production that measures its power to maintain and employ labour, and if the aggregate value of a given quantity is smaller at one time than another, it proves that labour is efficient, and has increased power to command the necessaries and conveniences of life. The largest amount of these is distributed to labour, and the profits of the capitalist also command the largest amount, when the rate of profit is low.

We have said that the fallacy of which we are treating infects

the reasoning of many Economists. It lies at the ground of one of the arguments against protective duties. These, it is urged in substance, can never increase the industry of a country unless they increase the rate of profit; and this cannot be effected by transferring capital from employments in which they were securing the usual rate, to others which require protection, because without it they would give an inferior rate. If the protected employments are brought up to the current rate of profit, by giving to those who engage in them the ability to demand higher prices for their products, than those at which they can be procured from abroad, the excess is taken from the pockets of the consumers, and it is merely a transfer of capital from one body of consumers to another, without any addition to the general stock, but at a positive loss, in the substitution of a less profitable for a more profitable employment. Of the validity of the argument in other respects this is not the place to speak; but the considerations we have presented show, that it fails to disprove the alleged advantages of a protective system, in providing increased employment for domestic industry. It is pertinent, moreover, to the point under immediate discussion, to remark that a confusion of the amount of profits with their rate, may taint the argument in another particular. The publisher of this book will prefer to obtain a profit of five cents upon each of three thousand copies, rather than ten cents each upon a single thousand. A large part of his outlay, in type-setting, stereotyping, &c., will be the same in one case as the other; his fixed capital, in presses, buildings, &c., is the same in either event. The small amount of profit upon each copy will, I imagine, give a greater rate upon his capital, as well as a greater aggregate, and the sale of the greater number will cheapen its cost to the purchaser. In like manner, the producers of a protected commodity may be enabled to secure the rate of profit usual in unprotected employments, by having an extended sale secured to them, instead of its being shared by foreigners, not only without any increase of cost to the consumer, but by virtue of its diminution.

It is not to be inferred that any real conflict exists between the collective interest of a people and that of an individual. His interest, while he is engaged in the production of any commodity, is

promoted by its requiring little labour, and, therefore, being able to command little labour in exchange. It is only when it is finished, and he assumes the character of a trader in respect to it, that an apparent discrepancy between his interest and that of the community of consumers begins to show itself. While, however, he is the producer of but one, or, at most, of a very few kinds of commodities, he is the consumer of a great variety. A great profit upon the sale of that one is delusive and fruitless, if it will procure him but few objects of consumption when he comes to expend it. The farmer desires that the labour he devotes to the cultivation of a field shall result in a large crop of corn. He wants cotton for clothing, and he therefore desires the crop of cotton should be large; for, when it is so, more cotton will be obtained for a given quantity of corn than when the cotton crop is small and the corn crop large. His interest requires that a large stock of all the commodities he may need should come to market, and, to this end, that labour may be everywhere efficient and in constant activity. If it be so, the share of the aggregate production coming to each member of community, will grow from year to year, unless population increases more rapidly than capital.

We have shown that, in the natural course of things, the capital of a nation increases in a more rapid ratio than its value, and, therefore, that the amount of the increase is greater than would be indicated by the rate of profit. If the latter is six per cent., then we may infer that more than six per cent. in quantity has been added in a year to the stock of good things which provide subsistence and comfort for its people. It is of so much consequence that this proposition should be thoroughly understood and established, that, at the risk of needless repetition, we may be pardoned for a further illustration. Mr. Ericsson is now testing his Caloric engine. If it succeeds according to his anticipations, it will save four-fifths of the coal which is consumed in producing the same effect in a steamengine. Suppose its power to come up to the calculation of the inventor, and that it shall be substituted for every steam-engine now at work in the United States, the same amount of labour which now mines coal, transports it to the steam-engines, feeds their furnaces, and directs the forces they bring into productive action. will accom

plish the same effect, if exerted in the same way to keep caloric engines at work; but, by the side of each of these will lie a pile of coal at the end of the year, sufficient to keep them in motion for four years longer. The industry exerted in providing the coal, and the various commodities, cloth, iron, machinery, &c., in the making of which the engines are employed, will possess no more value than it does at present, nor will the articles which the engines have assisted in making; but the country will be richer by the heaps of unburnt coal by the power of running its engines for four years without any cost for fuel. It is needless to say that this is not the shape in which the facts will present themselves. The value of the coal that is saved will disappear from the articles manufactured by the caloric engine, and the purchasers of those articles will use the money which is left in their pockets, as the difference between the new and the old price, to buy the coal to warm their houses, or for other conveniences. Now, what we conjecture in this case, is actually taking place every day. It happens every time that a stream, whose waters have been running to waste for centuries, is made to turn the waters of a mill; every time that a mechanical invention, or a discovery in practical chemistry, wrests fresh power from unpaid Nature. every instance, the aggregate production is enlarged in a greater ratio than the sum of value, or the rate of profit. Each item in the aggregate constitutes demand for labour,* because it will reward labour-will tempt somebody to work, as the means of getting it; or, if not in the finished state and ready for consumption, requires further labour for its completion.

In

The ratio of increase of national capital being more than commensurate with the rate of profit, we may be sure that, if the rate of increase in population does not exceed the latter, it cannot equal the former. Every country in an advanced state of civilization takes

"The demand for labour increases with the increase of stock, whatever be its profits; and, after these are diminished, stock may not only continue to increase, but to increase much faster than before. It is with industrious nations, who are advancing in the acquisition of riches, as with industrious individuals. A great stock, though with small profits, generally increases faster than a small stock with great profits."-Wealth of Nations, Book I., chap. 9.