The laborer's proportion is thus increased, in virtue of the same law by which it is also decreased. The smaller the fund out of which two parties are to be paid, the larger is the proportion falling to each!

§ 10. "Nothing," says Hume, in his Essay on Interest, "is esteemed a more certain sign of the flourishing condition of any nation, than the lowness of interest; and with reason-though," as he continues, "I believe the cause is somewhat different from what is commonly apprehended. Lowness of interest is generally ascribed to plenty of money. But money, however plentiful, has no other effect, if fixed, than to raise the price of labor. ***Prices have risen near four times since the discovery of the Indies, and it is probable that gold and silver have multiplied much more; but interest has not fallen much above half. The rate of interest, therefore, is not derived from the quantity of the precious metals."

The effect here ascribed to increase in the quantity of money is perfectly correct-raising, as it does, not only the price of labor, but also that of land, and of all the rude products of the soil. Their prices had risen in the day when this passage was written, but those of finished commodities had largely declined -facilitating the purchase of the precious metals, by diminishing the cost of reproduction, and thereby lowering the rate of interest.

It is here denied, that increase in the quantity of money can. have any effect upon the price paid for its use. Had Mr. Hume, however, reflected more carefully on the subject, he would certainly have seen that men whose wages were high, always obtained money at lower rates of interest, than were paid by those whose wages were low. Had he looked around the world, he would have seen, that interest was low in all those countries in which land and labor were high in price, while high in those in which land was cheap, and man was enslaved. Further, he would have seen, that precisely as axes, or engines, are improved in quality, and as labor is rendered more productive, the owner of such machines is forced to content himself with a rate of compensation steadily diminishing in the proportion borne by it to the cost of the machine-leaving to the man who uses it, a constantly diminishing proportion of a constantly increasing quantity.

For the same exact reason, would the latter allow to the owner of that machinery of exchange which consists in gold and silver pieces, a smaller compensation for their use-feeling that, with the improved instruments now in use, he could, with the same effort, lay by more shillings, than his predecessor of the days of the Plantagenets, could lay by pence. Value cannot exceed the cost of reproduction. As that declines and labor rises, interest falls necessarily—that fall being, in the words of Mr. Hume, "a certain sign of the flourishing condition of a nation;" and for the plain and simple reason, that it is an evidence of a high value of land and labor-giving power to purchase cheaply the precious metals.

The causes of a high rate of interest are, as Mr. Hume informs his readers, "not the scarcity of gold and silver," but "a great demand for borrowing, little riches to supply the demand, and great profits arising from commerce;" or, more properly, trade. It is under these circumstances, certainly, that interest is always high-they being found, invariably, in all those countries which -having the balance of trade against them—cannot obtain, or retain, a proper supply of the great machinery of association, called money. Those who have it obtaining, then, great profits, and the many who have it not, being impoverished, there is “great demand for borrowing," with "little riches to supply the demand;" precisely as we see to be the case throughout the Western States at the present moment. Low interest proceeds, as he says, from there being "a small demand for borrowing, great riches to supply the demand, and small profits arising from commerce." When money is abundant, the reward of labor rises; and hence it is that there is then a diminished necessity for borrowing, with daily diminution of the trader's power. Producers and consumers then grow rich, because of their increased ability to retain, for their own uses and purposes, the products of their labor. When money is scarce, merchants become princes. When it abounds, there is a daily increasing tendency towards the elevation of the men who labor, to an equality of condition with the trader, who lives by the labor of others.

§ 11. Adam Smith's doctrines on the subject of interest, have for their base the erroneous theory which forms the staple of

those of the Ricardo-Malthusian school. "When," as he says, "the most fertile and best situated lands have all been occupied, less profit can be made by the cultivation of what is inferior both in soil and situation, and less interest can be afforded for the stock which is so employed."*

Unfortunately for this theory, the facts are directly the reverse. -the first poor colonist commencing, invariably, with the poorer lands; and it being only as he obtains improved machinery, that he is enabled to cultivate the richer soils. Precisely as he does this, the rate of interest falls. The larger the return to labor, the greater is the facility for obtaining money by means of which to circulate its products - the rate of interest tending to decline with every increase in the power to command the commodity for whose use it is paid.

This erroneous idea of Dr. Smith led him, necessarily, into many contradictions of himself. Thus, after assuring his readers that interest falls in countries growing in wealth and population -because of the steadily increasing necessity for applying labor to the cultivation of poorer soils - he tells them, that it is in countries in which the wages of labor are low that interest is high; as in Bengal, where the farmer pays forty, fifty, or sixty per cent.; or as it was in Sicily when Brutus claimed only fortyeight. It is difficult, however, to imagine anything better calculated to produce these low wages, and consequent high interest, than the very circumstances described as invariably accompanying the growth of wealth and decline of interest-a growing necessity for applying labor to soils yielding, from year to year, less in return to labor. To look, however, to either Hume or Smith, for consistency in any portion of their works in which they treat of money, would be as much labor lost, as would be the search for it in the works of Ricardo and Malthus, treating of the growth of wealth and population.

All the facts offered for consideration by both the present and the past, tend to prove the universal truth of the proposition, that the rate of profit, and the rate of interest, tend, of necessity, to decline, as the prices of raw materials tend more closely towards approximation. The people of the United States give a constantly increasing quantity of wheat, rice, flour, cotton, Wealth of Nations, book 1, chap. xi.

and tobacco, for a diminishing one of gold, silver, iron, lead, and other metals; and hence it is that their rate of interest is so high.*

§ 12. Mr. Mill is of opinion that "there is at every time and place some particular rate of profit, which is the lowest that will induce the people of that country and time to accumulate savings, and to employ those savings productively”—that minimum varying "according to circumstances." It is, however, when people are most driven to saving, that they are most inclined to hoard, and least disposed to employ their means in any manner tending to benefit either the community or themselves. Saving implies stoppage of circulation; whereas, the profitable employment of capital involves an increase in its rapidity-the two things being wholly inconsistent with each other. Four per cent. is the point at which people are willing to save, in England- that rate being now, in Mr. Mill's opinion, as much productive of the hoarding propensity at the present time, as was forty per cent. in the reign of King John, or as is that rate in the present day, in the Burmese empire. Such a rate, as he says, "always exists;" and "when once it is reached, no further increase of capital can for the present take place."†

The total absence of consistency in the doctrines of the RicardoMalthusian school, is here most clearly obvious. Having first subjected man to a great law of nature, in virtue of which labor becomes from year to year less productive, and accumulation less possible, we next are told, that men are willing to save in one part of the world, provided they can obtain four per cent.; whereas,

* Both interest and wages being low in Holland, and both being high in the United States, it might be supposed that these cases formed exceptions to the general rule above propounded. When examined, however, they do but prove its truth. The one vegetates on the accumulations of the past. The other lives, by drawing on the future. The mere annuitant is forced to content himself with the lowest rate of profit, and the smallest wages. The spendthrift eats, drinks, and makes merry, but his place of final destination is the poor-house. The people of the United States live by the sale of their soil. Were the potential energies of which the earth is annually deprived, valued in accordance with the price paid to Peru for guano with which to replace a part of them, they would, probably, be found to amount to little short of half the total value given to land by all the people who have occupied it since the days of the Puritans. (See ante, vol. ii. p. 198.) Hence it is, that the proportion of movable to fixed property is so large, and that the tendency towards the ultimate re-establishment of slavery, throughout the Union, is so great.

J. S. MILL: Principles of Political Economy, book 4, chap. iv. ? 3.

in another, they must be tempted to economy by forty; man being thus invested with power to determine for himself whether capital shall, or shall not, increase—although living, moving, and having his being, under a great law, that should render accumulation more difficult from year to year.

Why, however, was the rate of profit so high in England in the days of the Plantagenets? Why is it now so high in India, Mexico, Turkey, and all other of the non-manufacturing countries of the world? Why is it so much lower in France and England? Why is it that capital accumulates so much more rapidly in France, than in Portugal? Such are the questions to be asked of science; but they must remain unanswered by modern economists, so long as they shall persist in assuming the existence of a great law, in virtue of which the tendency to poverty and degradation increases, as men become more numerous, and more enabled to combine their efforts. The true answer to all of them, is to be found in the simple propositions that capital accumulates in the direct ratio of the economy of human effort; that, the more rapid its growth, the greater is the tendency to decline in the value of all previous accumulations; and that, the less their value, the less is the charge for their use, and the greater the tendency to increase of wealth, strength, and power.

§ 13. Mr. McCulloch tells his readers, that laborers "neither will, nor in fact can, be brought to market, unless the rate of wages be such as may suffice to bring them up, and maintain them. From whatever point of the political compass we may set out, the cost of production is," as he thinks, "the grand principle to which we must always come at last."* Men, women, and children are manufactured and "brought to market," in Ireland, to work at four-pence a day, because the peasantry of that country "live in miserable mud-cabins, without either a window or a chimney, or anything that can be called furniture; while in England the cottages of the peasantry have glass windows, and chimneys, are well furnished, and are as much distinguished for their cleanliness, and comfort, as those of the Irish for their filth and misery."t

This is, certainly, a convenient mode of accounting for the * Essay on Wages, p. 27. † Ibid, p. 32. VOL. III.-9