community are free; for, they argue, it partakes of the nature of confiscation of property, and even takes away one great inducement to industry, by discouraging the accumulation of wealth. Moreover, when riches, as they are in England, are mostly inherited, they bring with them a proportionate scale of expenditure and show, leaving a smaller surplus really at command of their owners than is possessed by many persons of comparatively moderate means. Reckoning the degree of poverty by the embarrassments and mortifications which it occasions, some of the poorest men in England are the holders of large and deeply mortgaged estates; and perhaps the sorest trials to which these are subjected are the visits of the tax-gatherer.

It would be hardly possible to exaggerate the difference between England and the United States in respect to the distribution of wealth. There, 60,000 persons own nearly all the land, and less than 250,000 possess four fifths of the whole property, both real and personal. Mr. Baxter, the latest and best authority on the subject, estimates that "the upper and middle classes," counting their families with them, contain but 22 per cent of the whole population, thus leaving over 23 millions for what he calls "the manual labor class," who are either entirely dependent upon wages, or engaged in occupations in which their gains are as small as if they worked for hire. In the United States, the number in the corresponding class cannot be relatively more than half as large; and there are certainly more than 60,000 land-owners in New England alone.

But there are special causes which make heavy indirect taxation, whether by customs duties or excise, a serious evil for the United States. Great Britain is an island of limited dimensions and dense population, where the administration is thoroughly organized, and the police and preventive service are well drilled and efficient; there, consequently, it is comparatively easy to prevent smuggling, and even to make evasions of excise difficult and infrequent. On the other hand, the United States are of vast size, stretching across a broad continent, with a coast-line measuring several thousand miles, and a northern frontier of immense length, the boundary often being only a river or an imaginary line that can be easily crossed. With such a frontier, how can smuggling be prevented, especially when there is so much temptation for it as

is offered by a tariff imposing a duty on nearly all imported goods, the average rate being as high as 48 per cent? Under such circumstances, the people probably pay at least one fourth more for taxes on imports than the government receives.

Under the excise system, also, evasion and fraud are frequent, and probably can never be in any great degree prevented. A rigorous enforcement of internal taxation in such a country as the United States is impossible. The character of our institutions, and the habits of the people, require great freedom of action for every one; the restraints imposed must be few, and the perquisitions of the tax-gatherer slight. The police and other agents of the administration must not be too compactly organized and drilled, or too rigid in their demands; they must not carry their watchfulness too far. The legitimate consequence of the theory that the people govern themselves is, that in many respects they are but imperfectly governed. The inconveniences which result from this state of things ought not to be complained of; they are the price of democratic government. A loose and defective mode of collecting the revenue is inevitable. During the first four years after the war, for every dollar which the government collected from the excise on tobacco and distilled spirits, the consumers probably paid three dollars.

CHAPTER XIX.

EFFECTS OF SPECULATION ON PRICES: THE PHENOMENA OF A COM

MERCIAL CRISIS.

THE Price of a thing may be defined to be its present market value, or temporary exchangeable power reckoned in money. Its permanent or natural Exchangeable Value, as we have already seen, depends on the Cost of its Production, and is the pivot about which the Price, or immediate market value, is perpetually oscillating, never departing from it far, or for any long time, in either direction. If the Price falls below the Cost, a smaller quantity of the article will be produced, and therefore, the Demand continuing the same, the Price will soon begin to rise. If the Price considerably exceeds the Cost, production will be stimulated, more of

the article will soon appear in the market, and then the Price will fall again.

The general principle is, that the Price so adjusts itself that the Demand shall be equal to the Supply. If the Supply be too great for the present Demand, if the market be overstocked with the article, a fall of Price must ensue; and this diminished Price will bring the commodity within the means of a larger number of consumers; that is, the Demand for it will be increased enough to take off the quantity which was a drug in the market at the higher Price. On the other hand, if the Demand should exceed the Supply, the Price will rise, and fewer people will then be able to purchase; that is, the Demand will be cut down to the level of the Supply.

If, for instance, flour should be ten dollars a barrel, it is beyond the means of a large class in the community, who will then be obliged to live on corn-meal and potatoes. We will suppose that only 600,000 barrels of flour can be sold at this Price, since this quantity will satisfy the wants of all who are able to pay ten dollars a barrel. But if the Price should fall to five dollars, the poorer class can purchase flour, and a million of barrels may consequently be disposed of. But if only 500,000 barrels should be brought to market, the competition of the buyers with each other will cause the Price to rise (say) from ten to twelve dollars. This enhancement of Price will so lessen the number who are able to buy, that now only half a million of barrels will be needed. Thus the fluctuations of Price are the means through which the Demand is always made just equal to the Supply.

We have already explained that the Demand consists of two elements, the disposition to purchase and the ability to purchase; and these two must coexist in order to constitute an effectual Demand, and thereby affect the Price. In like manner, it is only "the Supply" in a narrow and restricted sense, which will have the influence here explained. Not all the commodity which is in being, not all even of that portion of it which is intended sooner or later to be sold, constitutes what is properly termed the Supply. The word is restricted to that portion of the article which is already in the market, or is now offered for sale. The quantity held in store by speculators, awaiting an expected rise of Price,

has no more effect on the present market, than the portion which is already sold and is held in store only for consumption, - as when the government has purchased sufficient stores for the army six months in advance.

And even in reference to what is now offered for sale, it should be observed that the Price does not vary in the same ratio with the deficiency or excess of Supply. This depends upon the nature of the commodity, or rather upon the nature of the desire to possess it, whether it be a natural and imperative want, or only an artificial one. If the article be a mere luxury, or desired only for the gratification of taste, a deficiency of one third in the amount offered for sale will not make the Price one third larger; rather than purchase it at a cost so much enhanced, many persons will do without it altogether. If the annual Supply of diamonds from the mines were reduced one half, it is not probable that the Price of them would be doubled, or even that it would be materially increased; as they are of little use except for purposes of display, persons would gratify their ostentatious feelings by purchasing some other commodity at a Price nearly equivalent to what they formerly paid for diamonds. Large pearls, or other gems of high cost, would answer just as well. On the other hand, if the article is a necessary of life, so that people will submit to any sacrifice rather than resign it, and especially if it be of such a nature that an apprehended scarcity of it operates strongly on the fears of the multitude, a deficiency of one third may double, triple, or quadruple the Price. "The Price of corn in England," says Mr. Tooke, "has risen from one hundred to two hundred per cent, when the utmost computed deficiency of the crops has not been more than between one sixth and one third below an average, and when that deficiency has been relieved by foreign supplies."

"To

To what point, then, will the enhancement of Price in either case whether of luxuries or necessaries - be carried? that point," says Mr. Mill, "whatever it be, which equalizes the Demand and Supply; to the Price which cuts off the extra third from the Demand, or brings forward additional sellers sufficient to supply it." It appears, also, that articles of high cost, and therefore in comparatively limited demand, are more steady in Price; while those of prime necessity and in general use, such as breadstuffs and fuel, are liable to sudden and violent fluctuations.

The influence of mercantile speculations on Price has been well explained by McCulloch. "It rarely happens," he says, "that either the actual Supply of any species of produce in extensive demand, or the intensity of that Demand, can be exactly measured. Every transaction in which produce is bought that it may be afterward sold, is, in fact, a speculation. The buyer anticipates that the Demand for the article he has purchased will be such, at some future period, either more or less distant," or at some other place, either in the same country or across sea, "that he will be able to dispose of it at a profit; and the success of the speculation depends, it is evident, on the skill with which he has estimated the circumstances that will determine the future price of the commodity. It follows, therefore, that in all highly commercial countries, where merchants are possessed of large capitals, and where they are left to be guided in the use of them by their own discretion and foresight, the prices of commodities will frequently be very much influenced, not merely by the actual occurrence of changes in the accustomed relation of the Supply and Demand, but by the anticipation of such changes.

"It is the business of the merchant to acquaint himself with every circumstance affecting the particular description of commodities in which he deals. He endeavors to obtain, by means of an extensive correspondence, the earliest and most authentic information with respect to everything that may affect their Supply or Demand, or the Cost of their Production; and if he learned that the Supply of an article had failed, or that, owing to changes of fashion or to the opening of new channels of commerce, the Demand for it had been increased, he would most likely be disposed to become a buyer, in anticipation of profiting by the rise of Price, which, under the circumstances, could hardly fail of taking place; or if he were a holder of the article, he would refuse to part with it unless for a higher Price than he would previously have accepted. If the intelligence received by the merchant were of a contrary description, if, for example, he learned that the article was now produced with greater facility, or that there was a falling off in the Demand for it, caused by a change of fashion, or by the shutting up of some of the markets to which it had previously been admitted, he would act differently; in this case, he would anticipate a fall of prices, and would either decline purchasing the article