"On the contrary, a fresh stimulus would be given to the manufactures both of Scotland and the metropolis, inasmuch as nothing but their being able to dispose of their produce to greater advantage, could have induced the merchants to change the home for a foreign market. The fact is, that when a home trade is changed for a foreign trade, an additional capital, belonging to the nation with which it is carried on, enters into it; but there is no diminution whatever either of the capital or industry of the nation which has made the change. So far from this, they are plainly diverted into more productive channels, and are employed with greater advantage."

It will not escape observation, that while the argument in the first of the above passages is conditional, the conclusion drawn from it in the second is absolute. To make them homogeneous, the latter should read "The fact is, that when a home trade is changed for a DOUBLE foreign trade, an additional capital," &c.

In regard to the passage we have italicised, it may be remarked, that if we grant the sole inducement of the Scotch merchants, in sending their goods to Portugal instead of London, to have been the ability to dispose of them to greater advantage, yet it is by no means clear in respect to the London traders. They have lost the domestic market, which the exchange of their merchandise for that of Scotland furnished-lost it, not because they saw any advantage in the withdrawal of their Scottish customers, but because of the supposition that the latter could do better elsewhere. It is no longer a matter of choice whether they will sell to Scotland or to France, but a matter of necessity that they sell abroad or make no sale. The question is not one of the greatest profit, but of the least practicable loss. The goods already produced must be sold; and, as the purchasers no longer come for them, they must go in search of purchasers. If, when the existing stock is exhausted, the trade stops, then the labour which produced it is thrown out of one employment, to which it has been trained, and in which it has acquired knowledge and skill, to take its chance of finding another, and beginning a new apprenticeship to acquire the knowledge and skill necessary for its prosecution. If, on the contrary, the trade continues, and the producers are kept in their former employment, it proves, not that it is as advantageous to them as before the change, but only that it is less unprofitable than to starve in idleness, or to throw away the capital which they have accumulated through their skill, by betaking themselves to employments for which they are unfitted.

The radical error in Mr. M'Culloch's argument is, that the producers, the ultimate and real parties to every exchange, are left out of view, and merchants are substituted for them a class whose profits depend simply upon the price at which they can vend commodities abroad; while, in respect to its internal exchanges, it is the quantity of commodities that is of consequence to a nation, and their price is immaterial. If price and value always corresponded, then, so far as the interests of the nation in the aggregate are concerned, the less the price of any given quantity of the products of its own labour, the better. It is evidence that those products are attainable with little labour, and that the community has a large stock of conveniences at its command-at its command if its available labour is actually employed, but not otherwise. Price and value correspond in respect to the aggregate interest, only when the actual labour of the community is equal to its potential labour, when the entire productive ability of the community is exerted, under the most advantageous extension of the division of labour; for the associated people is burdened with the support of all its constituents, whether productive or unproductive. The private trader has no such burden; if he increase its amount by throwing an individual out of employment and rendering him a pauper, to subserve an immediate personal interest, he derives all the profit, while, of the accompanying loss, but an infinitesimal portion falls upon himself, and the rest is levied upon the guiltless. A profit in dollars and cents, on the day-book, is the consummation and end of a transaction with him, though a debit to a hundred times its amount in the ledger of a county poor-house may be its consequence. The moment we begin to talk of merchants, or to permit their notation of profit to mix itself up with our tacit transitions of thought, these vital considerations fade from our view, unless a strenuous effort is made to retain them. An author writing deliberately in his study, may avoid any absurdity from this cause sufficiently flagrant to be startling, while it escapes a practised debater, who is delivering the same ideas with less cautious premeditation, and who only exposes by pardonable inadvertence, what lurked undetected in the reasoning of his teacher. Thus, Sir Robert Peel, in a speech in Parliament in defence of the repeal of the Corn Laws, on the 6th July, 1849,

endeavoured to support the doctrine of Ricardo and the modern British Economists, by the following illustration:

"Let us suppose the case of two artizans or dealers, resident in the same town-a shoemaker and a tailor. The one wants clothes, the other shoes: they think it right to encourage the domestic industry of their own town- to deal with each other and not with strangers. The shoemaker gives ten shillings to the tailor for a certain quantity of clothes, which he could get for seven shillings if he bought them in a neighbouring town. But, by way of compensation, the tailor gives him his custom, and pays ten shillings for shoes, which he could buy from a distant shoemaker for seven. Is there not a loss of six shillings to the town in which they live, as the result of this dealing between these tradesmen?"

It is very remarkable, that an intelligent man could bring himself to suppose that this question could be answered otherwise than in the negative. The transaction is a barter of shoes for clothes, and nothing more. How can it possibly affect the interest of the town whether one price or another is put upon them, the same being put upon both? To take an extreme case, let us suppose that the clothes are exhibited in the tailor's window, with a ticket marked £1000 upon them, and the shoemaker is obliged to borrow the money from a banker in order to purchase them. The next day, the tailor seeing a pair of shoes, also ticketed £1000, purchases them with the identical money he had received of the shoemaker, and the latter takes the money back to the banker in payment of his debt. The town was possessed of shoes, clothes, and £1000, in coin, before the exchange: it is possessed of the same afterwards. What is true of a town is true of a larger territory. To those who are exchanging labour, the prices affixed to its products are immaterial, so that the price bears the same proportion to labour in one case as in the other.

Sir Robert Peel explains the application of this passage, by treating the shillings as representing each an hour's labour; and the exchange between the shoemaker and tailor, as the giving of ten hours' labour by each for that which might have been procured in seven. "Could not each party," he asks, "have procured that for which he gave the labour of ten hours by the labour of seven, and thus have had three hours at his disposal?" That evidently depends upon the question, whether he could obtain employment or not. Each has condemned the other to idleness, and each has, unhappily, ten hours at his disposal, with no customer for them. The

problem is, how is a man to obtain seven shillings by ten hours of idleness? Doubtless, it is easier to obtain seven shillings than ten, by working at the same rate of wages, but when wages cease they are equally unattainable.

While the illustration presented by Peel serves to show that reasoning, based upon the relations of price, really determines nothing in regard to the aggregate interest of a community, it nevertheless suggests a question which has something substantial in it. We may assume it to be satisfactorily proved, that domestic exchange, other things being equal, maintains twice the amount of productive industry that a foreign trade to the same extent would support. Two labourers, however, whose toil only suffices to procure their own subsistence, add no more to the capital of the nation than does one. Whether one of them or two are merely provided with food, the surplus stock of the community is stationary. If they should cease to exist, the nation would be no poorer than before, except in a military point of view. If, however, they produce a surplus, however small, beyond their own wages, the national wealth is increased, and the loss of one of them would be a positive injury. We must inquire, therefore, whether domestic exchange has any advantage over foreign trade, in rendering a given amount of labour more productive, as well as in supporting a greater quantity of labour.

It has been shown that the advantage of exchange, foreign or domestic, arises from its increasing production, by causing the division of labour. All the instances employed for the purpose of illustration, have been those of labour devoted to adapting materials for the use of consumers. The hatter, the shoemaker, the tailor, take cloth made of wool, flax, or cotton, and the skins and furs of animals, and change their form, converting them from the shape in which they came from the hands of the original producer, into manufactured fabrics, ready for wear. If the result of either system of exchange is to render their labour more efficient, it must be either by the saving of materials, that is, by producing the same quantity and quality of fabrics from less material or by enabling them to work up a greater amount of material by the same quantity of labour. The latter is obviously of no benefit, unless a greater quantity of material is produced. Unless more wool, flax, and

cotton are raised, the skill which converts them into clothing by a smaller expenditure of toil would be fruitless, but for the fact, that the labour which is saved from the work of conversion can be applied to that of producing materials. In the other case, where the advantage obtained is that of saving a waste of material, we find the same ultimate profit. Under all circumstances, the benefit exhibits itself in a given utility produced, with a surplus of materials, which are the basis of a further utility. The question, then, is reduced to this: Which system is most favourable to the production of primary materials; that under which the materials are wrought into the shape adapted for final consumption in the immediate vicinity of the producers, and there exchanged for the labour of those who are engaged in changing the shape of materials, and getting them in the hands of the persons to whose wants they are ultimately to minister, or the system which sends them abroad, for the use of other communities?

The grand divisions of the arts are those of Production, `Conversion, and Exchange, Agriculture, Manufactures, and Commerce. The first includes Mining, and every mode of industry by which the elemental wealth, contained in the bosom of the earth, is brought to the surface and severed from the place of its formation, to be transported and modified for human use. The second comprehends all the arts which effect mechanical or chemical alterations in the form and composition of materials, whether carried on in extensive establishments, and with vast and complicated machinery, or by the solitary workman, with the simplest tools. The third includes all those employments, the object of which is to change the location and ownership of products, by transportation, or simple purchase and sale. Agriculture is the first in order and importance; the others are only subsidiary to it-their advantages being summed up in the fact, that they enable communities to devote a larger share of their energies to the first pursuit of man, and measured by the proportion in which they secure the power to do so.

We are thus brought to consider the influence which the vicinity or remoteness of manufacturing consumers exerts upon the productiveness of agricultural industry; that vicinity or remoteness depending, as is sufficiently apparent, upon the degree in which the system