It appears, then, that a demand delayed until the work is completed, and furnishing no advances, but only reimbursing advances made by others, contributes nothing to the demand for labour; and that what is so expended, is, in all

that the farmer, therefore, would, under B's régime, produce that much less of ordinary food, and more of expensive delicacies, for each day of the year, than was produced in A's time, and that there would be that amount less of food shared, throughout the year, among the labouring and poorer classes. This is what would be conformable to the principles laid down in the text. Those who think differently, must, on the other hand, suppose that the luxuries required by B would be produced, not instead of, but in addition to, the food previously supplied to A's labourers, and that the aggregate produce of the country would be increased in amount. But when it is asked, how this double production would be effected-how the farmer, whose capital and labour were already fully employed, would be enabled to supply the new wants of B, without producing less of other things; the only mode which presents itself is, that he should first produce the food, and then, giving that food to the labourers whom A formerly fed, should by means of their labour, produce the luxuries wanted by B. This, accordingly, when the objectors are hard pressed, appears to be really their meaning. But it is an obvious answer, that on this supposition, B must wait for his luxuries till the second year, and they are wanted this year. By the original hypothesis, he consumes his luxurious dinner day by day, pari passu with the rations of bread and potatoes formerly served out by A to his labourers. There is not time to feed the labourers first, and supply B afterwards: he and they cannot both have their wants ministered to: he can only satisfy his own demand for commodities, by leaving as much of theirs, as was formerly supplied from that fund, unsatisfied.

It may, indeed, be rejoined by an objector, that since, on the present showing, time is the only thing wanting to render the expenditure of B consistent with as large an employment to labour as was given by A, why may we not suppose that B postpones his increased consumption of personal luxuries until they can be furnished to him by the labour of the persons whom A employed? In that case, it may be said, he would employ and feed as much labour as his predecessors. Undoubtedly he would; but why? Because his income would be expended in exactly the same manner as his predecessor's ; it would be expended in wages. A reserved from his personal consumption a fund which he paid away directly to labourers; B does the same, only instead of paying it to them himself, he leaves it in the hands of the farmer, who pays it to them for him. On this supposition, B, in the first year, neither expending the amount, as far as he is personally concerned, in A's manner nor in his own, really saves that portion of his income, and lends it to the farmer. And if, in subsequent years, confining himself within the 'year's

its effects, so far as regards the employment of the labouring class, a mere nullity; it does not and cannot create any employment except at the expense of other employment which existed before.*

income, he leaves the farmer in arrears to that amount, it becomes an additional capital, with which the farmer may permanently employ and feed A's labourers. Nobody pretends that such a change as this, a change from spending an income in wages of labour, to saving it for investment, deprives any labourers of employment. What is affirmed to have that effect is, the change from hiring labourers to buying commodities for personal use; as represented by our original hypothesis.

In our illustration we have supposed no buying and selling, or use of money. But the case as we have put it, corresponds with actual fact in everything except the details of the mechanism. The whole of any country is virtually a single farm and manufactory, from which every member of the community draws his appointed share of the produce, having a certain number of counters, called pounds sterling, put into his hands, which, at his convenience, he brings back and exchanges for such goods as he prefers, up to the limit of the amount. He does not, as in our imaginary case, give notice beforehand what things he shall require; but the dealers and producers are quite capable of finding it out by observation, and any change in the demand is promptly followed by an adaptation of the supply to it. If a consumer changes from paying away a part of his income in wages, to spending it that same day (not some subsequent and distant day) in things for his own consumption, and perseveres in this altered practice until production has had time to adapt itself to the alteration of demand, there will from that time be less food and other articles for the use of labourers, produced in the country, by exactly the value of the extra luxuries now demanded; and the labourers, as a class, will be worse off by the precise amount.

* The grounds of a proposition, when well understood, usually give a tolerable indication of the limitations of it. There is a case in which a demand for commodities may create employment for labour, namely, when the labourer is already fed, without being fully employed. Work which can be done in the spare hours of persons subsisted from some other source, can (as before remarked) be undertaken without withdrawing capital from other occupations, beyond the amount (often very small) required to cover the expense of tools and materials. The reason of our theorem thus failing, the theorem itself fails, and employment of this kind may, by the springing up of a demand for the commodity, be called into existence without depriving labour of an equivalent amount of employment in another quarter. The demand does not, even in this case, operate on labour any otherwise than through the medium of an existing capital, but it affords an inducement which causes that capital to set in motion a greater amount of labour than it did before.

But though a demand for velvet does nothing more in regard to the employment for labour and capital, than to determine so much of the employment which already existed, into that particular channel instead of any other; still, to the producers already engaged in the velvet manufacture, and not intending to quit it, this is of the utmost importance. To them, a falling off in the demand is a real loss, and one which, even if none of their goods finally perish unsold, may mount to any height, up to that which would make them choose, as the smaller evil, to retire from the business. On the contrary, an increased demand enables them to extend their transactions-to make a profit on a larger capital, if they have it, or can borrow it; and, turning over their capital more rapidly, they will employ their labourers more constantly, or employ a greater number than before. So that an increased demand for a commodity does really, in the particular department, often cause a greater employment to be given to labour by the same capital. The mistake lies in not perceiving that in the cases supposed, this advantage is given to labour and capital in one department, only by being withdrawn from another; and that when the change has produced its natural effect of attracting into the employment additional capital proportional to the increased demand, the advantage itself ceases.

The demand for commodities is a consideration of importance rather in the theory of exchange, than in that of production. Looking at things in the aggregate, and permanently, the remuneration of the producer is derived from. the productive power of his own capital. The sale of the produce for money, and the subsequent expenditure of the money in buying other commodities, are a mere exchange of equivalent values, for mutual accommodation. It is true that, the division of employments being one of the principal means of increasing the productive power of labour, the power of exchanging gives rise to a great increase of the produce; but even then it is production, not exchange, which

remunerates labour and capital. We cannot too strictly represent to ourselves the operation of exchange, whether conducted by barter or through the medium of money, as the mere mechanism by which each person transforms the remuneration of his labour or of his capital into the particular shape in which it is most convenient to him to possess it; but in no wise the source of the remuneration itself.

§ 10. The preceding principles demonstrate the fallacy of many popular arguments and doctrines, which are continually reproducing themselves in new forms. For example, it has been contended, and by some from whom better things might have been expected, that the argument for the incometax, grounded on its falling on the higher and middle classes only, and sparing the poor, is an error; some have gone so far as to say, an imposture; because in taking from the rich what they would have expended among the poor, the tax injures the poor as much as if it had been directly levied from them. Of this doctrine we now know what to think. So far, indeed, as what is taken from the rich in taxes, would, if not so taken, have been saved and converted into capital, or even expended in the maintenance and wages of servants or of any class of unproductive labourers, to that extent the demand for labour is no doubt diminished, and the poor injuriously affected, by the tax on the rich; and as these effects are almost always produced in a greater or less degree, it is impossible so to tax the rich as that no portion whatever of the tax can fall on the poor. But even here the question arises, whether the government, after receiving the amount, will not lay out as great a portion of it in the direct purchase of labour, as the tax-payers would have done. In regard to all that portion of the tax, which, if not paid to the government, would have been consumed in the form of commodities (or even expended in services if the payment has been advanced by a capitalist), this, according to the principles we have investigated, falls definitively on the rich, and

not at all on the poor. There is exactly the same demand for labour, so far as this portion is concerned, after the tax, as before it. The capital which hitherto employed the labourers of the country, remains, and is still capable of employing the same number. There is the same amount of produce paid in wages, or allotted to defray the feeding and clothing of labourers.

If those against whom I am now contending were in the right, it would be impossible to tax anybody except the poor. If it is taxing the labourers, to tax what is laid out in the produce of labour, the labouring classes pay all the taxes. The same argument, however, equally proves, that it is impossible to tax the labourers at all; since the tax, being laid out either in labour or in commodities, comes all back to them; so that taxation has the singular property of falling on nobody. On the same showing, it would do the labourers no harm to take from them all they have, and distribute it among the other members of the community. It would all be "spent among them," which on this theory comes to the same thing. The error is produced by not looking directly at the realities of the phenomena, but attending only to the outward mechanism of paying and spending. If we look at the effects produced not on the money, which merely changes hands, but on the commodities which are used and consumed, we see that, in consequence of the income-tax, the classes who pay it do really diminish their consumption. Exactly so far as they do this, they are the persons on whom the tax falls. It is defrayed out of what they would otherwise have used and enjoyed. So far, on the other hand, as the burthen falls, not on what they would have consumed, but on what they would have saved to maintain production, or spent in maintaining or paying unproductive labourers, to that extent the tax forms a deduction from what would have been used and enjoyed by the labouring classes. But if the government, as is probably the fact, expends fully as much of the amount as the tax-payers would have done in the