affected by the general tone of their opinions and sentiments. Their policy will be dictated by the instincts of producers, and not by that of shopkeepers. They will look to the aggregate of production, not to the rate of profits in trade, as the test of national prosperity. Accordingly, the great continental nations, France, Russia, the German States united in the Zollverein or Customs Union have practically repudiated the idea which has so long controlled the commercial policy of England. What England has gained by that policy is thus described by one of her own learned and respected writers, who speaks of that nation as the one "where the aristocracy is richer and more powerful than that of any other country in the world, the poor are more oppressed, more pauperized, more numerous in comparison to the other classes, more irreligious, and very much worse educated than the poor of any other European nation, solely excepting uncivilized Russia and Turkey, enslaved Italy, misgoverned Portugal, and revolutionized Spain."

*

In the preceding remarks we have treated of capital as actually employed in production by its owner, or under his immediate personal supervision, and have spoken of a general rate of profits as if there was a uniformity in the returns received by different individuals. This is true, only in the same sense that it may be affirmed that wages in the various employments may be regarded as being, at the same time and place, all compensating circumstances taken into account, either equal or always tending towards equality. The same general considerations which were indicated in the discussion of that subject, will guide the student in his inquiries upon this head.

It has been shown in a preceding chapter that what are called Profits, when capital is put to use by its owner at his own risk, and what is called Rent or Interest, when it is borrowed by another, to be employed at his risk, are really the same thing-that a certain and liquidated Profit is called Rent or Interest, and a contingent and indeterminate Rent or Interest is called Profit. The principal circumstances which serve to obscure the perception of their identity are the following:

* Joseph Kay, of Trinity College, Cambridge, at the close of his work on National Education.

The person who devotes his own physical and mental labour to superintending the transformations which his own capital undergoes, in the processes of growth, manufacture, or exchange, earns wages. They are not paid to him, however, in any distinct sum, or by any particular individual or number of individuals, but result from the gross return in the whole course of his transactions. They may fail for a year, or even for a series of years, to be paid at all. To estimate what amount should be referred to the head of wages, the capitalist would consider the sum he would have to pay, upon the supposition that he should entirely abandon the care of his property to a manager. What would he have to pay an agent to secure the same skill, the same anxious vigilance and untiring pains, the same integrity to his interest that he can reckon on in himself? Nor is it simply the sum certain which would secure such services that he is to reckon as his own wages, for the latter are generally more or less uncertain. The problem is, what would the entirely competent and trustworthy manager demand, if the capitalist should make his salary contingent upon the success of his operations. Suppose him to ask for a proposal in this manner:

"I intend to commit to your charge a capital, which I can convert into $100,000 of money, and which I can lend to the State of New York at an interest of five per cent., not only with an absolute certainty that the interest will be regularly paid, and the sum lent reimbursed to me at the expiration of the term of the loan, but with the utmost confidence that I can go into Wall Street on any day in the meantime, if I should see an opportunity of making a more profitable investment, and by selling my State stock, replace my $100,000 with a premium.* Now I think your services honestly worth, say $2000 per annum; but I am determined to put myself in no worse condition in any event, than if I lent my capital to the State. How much do you require to be added to your salary, to accede to the stipulation that you shall receive it, only in case the year's profits shall afford sufficient means after paying me $5000?" The manager might reply:

* At the time this passage is written, New York five per cent. stocks, redeemable in 1866, are selling at 115; and 4 per cent. stocks, redeemable in 1858, 1859, and 1864, at 101.

"According to the best calculation my experience enables me to make, there will be about one year in six in which we shall get no profits at all, and do well to keep the capital unimpaired. I must obtain enough additional salary in each of those five years, to compensate for its failure in the sixth. I ask twenty per cent. to insure me, and will take $2400 a year on the terms you propose, or $2000, to be paid each year, without contingency. I reckon them to come to the same thing."

Whether the capitalist employs the manager upon terms thus adjusted between them, or employs himself, it is plain that $2400 per annum, or 2 per cent. upon his capital, should be charged against the gross profits, and credited as paid for wages.

Allowance for wages, so considerable in the case we have supposed, as to be nearly half what the capitalist might be willing to accept as sufficient remuneration for a loan upon absolute security, sinks in proportion, as the capital rises in amount. It is as easy, or very nearly so, to manage a bank with a capital of $1,000,000, as one of $100,000; but the compensation of a manager, which in the one instance would amount to an annual average of 21 per cent. upon its capital, in the other would come to but a quarter of one per cent. The large bank could lend money at 5 per cent., while the small must obtain 7 to pay the same dividend to its stockholders. It is one of the advantages resulting from the association of little capitals, that a great economy is effected in the expense of management. While in some modes of employing capital, the portion of gross profits which should legitimately be carried to the account of wages is so insignificant as to escape notice, in others it makes so large a portion that the idea of profit is almost lost. The man who, having worked for a dollar a day, has accumulated a sufficient surplus to buy him a horse and cart―a hundred and fifty or two hundred dollars-which enable him to earn two dollars a day, scarcely regards any portion of his gains as distinct from wages; and if he does, the wood-sawyer, whose capital is but the one-hundredth part as much, obliterates the distinction entirely.

In the imaginary colloquy we have given, the manager suggests that, for about one-sixth of the time the capital entrusted to his care is to be employed, it will probably fail to secure any profit whatever.

Every mode in which it can be used involves some chances of this description, but there is a marked diversity in the degree of risk attending different employments. The peculiar hazards attending some investments, such as the destruction of shipping and cargoes by the casualties of the sea, and of buildings and merchandise on land by fire, are so capable of strict numerical calculation, that it has given rise to the employment of capital for the purpose of insuring other capital against loss by such accidents. The cost of such well ascertained chances, when provision is made for them by the payment of an insurance, is readily seen to be a distinct item from profits, and the proper deduction is habitually made for them in estimating the latter. They go to the proper account, that of maintaining the capital, to which they belong as appropriately as the expenses of keeping machinery in repair. There are, however, a variety of risks depending upon more complicated causes, which it has as yet been found impossible to calculate with precision, and against which no system of direct insurance has been devised. The owner of a gunpowder mill is aware that it is liable to explosion. He can guard against it in some degree by extreme caution in conducting the manufacture, by improvements in his apparatus, and by separating the stores of powder, so that an explosion in one building may involve the loss of but a small portion of the stock. All these precautions involve an expense which is appreciable, and which enters into the price of his merchandise. That portion of risk which remains is sufficient to deter men from engaging in the manufacture; to limit the quantity which any given price would, but for the risk, bring to market; and thereby to enable him to secure a profit which, in a series of years, is sufficient to restore the capital destroyed by explosions. The check which tends to prevent him from obtaining a price more than adequate to maintain his capital, and increase it by a profit equal to that obtained in other employments, is the readiness of men to withdraw their capital from a business in which it increases at a slow rate, and invest it in one in which it is observed to be increasing more rapidly. The inference that profits are really higher in a business of this character, will not be hastily drawn from the experience of a single individual, nor even from that of all the gunpowder manufacturers of a nation for two or three years. If,

however, it should be ascertained from inquiries into the history of a large number of them, for a sufficiently long period to exclude the probability of special good fortune, that the aggregate value of their capital had grown at such a rate as, after compensating for what may be deemed objectionable in its hazards, to much exceed the rate in other employments, it is quite certain that capital would be speedily diverted from the less advantageous investments, and so increase the quantity of powder waiting for purchasers in the market, as to bring down its price, and reduce the profit of its makers to the general level.

It is obvious that those risks which may be traced to moral or political causes produce the same effect, in requiring a fund to provide for the insurance of capital, as if they resulted from the physical properties of matter. The State of Pennsylvania contains immense beds of iron-ore, coal, and limestone, lying in the immediate vicinity of each other, and has in its canals and railroads every facility for the cheap transportation of raw materials and the completed manufacture. Food, too, is abundant and cheap. There is no reason, in the nature of things, why railroad bars cannot be made in that State, and in some of our other States, Tennessee for example, at as low a cost as anywhere else in the world. The price of British iron is subject, however, to excessive fluctuations. Between 1825 and 1843, the English price of merchant bar-iron ranged from £15, about $72, to £4 10s., about $22 per ton. Within the past six months there has been an increase in the price of bars in the Glasgow market, of £3, or $14 50 per ton.* The present tariff fixing an ad valorem duty upon iron of 30 per cent, this advance in the foreign price involves an additional one of $4 35 in the duty; making a total rise in the price at which British iron competes with domestic, of nearly $19 per ton. The Pennsylvania iron-masters who have been able to keep their mills going, during the great reduction in the price of iron since 1847, consequent upon the cessation of the railroad mania in England, now obtain $20 per ton more than they did within a year. Such an advance will pro

* In February, 1852, English railroad iron was sold in New York at $40 per ton; it now (January, 1853,) brings $65, and is expected to go up to $75 or $80 before a reaction takes place.