but one of the indications of that vast change in the social condition of mankind which is now so obviously and rapidly in progress.

This mercantile class, embracing not only merchants and traders, but the still more numerous body of common carriers, has of late years rapidly increased. The primitive merchants were mercantile hawkers, who dealt only in goods of small bulk, which they themselves transported from place to place. They were in general not citizens of the country in which they traded, but strangers; and for the most part they dealt only in a few articles of luxury, suited to the wants of a limited class of wealthy proprietors. At present, almost all articles of consumption pass through the hands of a number of mercantile persons before they reach the consumers. It happens not uncommonly that articles manufactured in a certain town or village, are transported, perhaps hundreds of miles, to the warehouse of some merchant, and are then sent back from that warehouse to the original place of manufacture, to be sold at retail and consumed. Everybody is aware how much the interests of this mercantile class are affected by fluctuations of price. Fortunes are often made, almost in a day, by a sudden rise in the value of an article of which a merchant happens to have a large quantity on hand, and great numbers of the mercantile class are overwhelmed with ruin by an unexpected fall in the value of the articles in which they deal. But the merchant is not affected merely by the fluctuation in the price of the articles in his possession. He has at all times large sums of money due to him, and he owes large sums of money to others. His ability to pay his own debts rests upon the ability of his debtors to pay theirs, and that ability depends upon the price of the articles which they produce or have in possession, or which their debtors produce or have in possession. Hence there is hardly any fluctuation in the price of any article whatever, which does not exercise an influence, more or less direct, upon the prosperity of the mercantile class as a whole, in addition to the particular influence which it may exert upon the fortunes of particular dealers.

It may thus be said that in England and America, and the same is true, to a greater or less extent, of all the states of modern Europe, society within the last fifty years has been reconstructed anew. This reconstruction consists principally in a new division of labor, which is perceptible not only in those three great divisions above marked, but in the almost infinite subdivisions to which each of those great divisions has been subjected.

One result of this division of labor has been a great increase in the gross amount of the production. The consumption of wealth within the last fifty years, as will most evidently appear when we take into consideration the vast expense of the wars of the French revolution, has been enormous. Europe, however, came out of those wars, not ruined and desolated, but more wealthy than before. The political changes which were simultaneous with those wars, greatly increased the productive capacity of France and many other countries, and at the same time scientific discoveries were made, which in many branches of industry enabled the same labor to produce much greater results.

Another result of the new distribution of employments is, that the whole community is made much more sensitive than heretofore to fluctuations of value. The interests of individuals are all intertwined together. Neither farmers, manufacturers, nor traders, can suffer to any great extent without

the evil extending to all. Even nations separated by a vast extent of ocean have become mutually dependent upon each other, in those cases where the trade between them is extensive. This is especially true of Great Britain and the United States. The commerce between these two nations is so large, that changes in price which take place in the one country are instantly felt in the other.

It is the obvious tendency of the reorganization of the social system, founded upon a new distribution and new subdivisions of labor, which is now going on with greater or less rapidity in all the countries which are called civilized, to unite men everywhere into one society, having common interests, which can best be promoted by the joint prosperity of all. This consequence, so far, is certainly good, and the results of it are evidently to be seen in the increasing spirit of humanity, which tends more and more to do away with national and sectarian antipathies, and to extend to those whom our forefathers denounced as infidels and barbarians, and whom they considered as out of the pale of benevolence, those sentiments of sympathy which men are accustomed to extend to friends and neighbors. The same effect is also apparent in the bosom of each separate community, in which there is an evident tendency towards the discontinuance of long established distinctions, to the acknowledgment of certain political rights existing in every citizen, and even a certain approach towards social equality.

It is not, however, our present intention to discuss the moral results of that revolution in the social condition of modern states, now so evidently in progress. We have only alluded to it as furnishing an explanation of the vastly increased energy with which fluctuations of price operate upon the welfare of modern communities, and as furnishing also an additional reason why the law of prices ought to be the subject of scientific inves tigation.

It is a want of knowledge and of foresight, or miscalculations, upon this point, which overwhelm, not individuals only, but whole communities with seasons of great distress. Take the United States at the present moment, for an example. The total wealth of the country, its means of producing, were never greater than now. Its products also, at the present moment, are very great. But, owing to a fall of prices, under which the country has suffered for the last four years, a great proportion of the citizens are in a very uneasy position. What has been the cause of that fall of prices? Did it originate from causes beyond our control, or was it in the power of wisdom and good judgment to have averted it, or if not to have averted it, to have escaped or to have anticipated the disastrous results which it has produced? These are questions in the highest degree interesting and important, and certainly there is hardly any way in which the community can be better served than by collecting facts, and throwing out suggestions towards arriving at a complete solution of these problems.

All those sudden falls of prices which have attracted attention within the last fifty years, have uniformly been preceded by an unusual rise of prices. The fall has, in general, been great, only in comparison with the previous rise. A state of depression and poverty has thus been brought into imme diate juxtaposition with a state of prosperity and wealth. That the commercial nations have made a great advance within the last fifty years, is unquestionable. But their advance has been like that of the frog out of the well,-three steps suddenly forward, and then again two steps as sud

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denly back, a method of progression which has certainly been attended with very great inconveniences.

If it be possible to discover the means of giving a greater uniformity to this advance, even though its rapidity should thereby be somewhat retarded, a great benefit would be conferred upon mankind. It may even be questioned whether the suffering of the two steps backward, does not, in point of fact, considerably exceed the pleasure of the two steps forward; so that, after all, it remains a serious question whether, by this sort of progress, the sum of human happiness is really increased.

We shall proceed, in subsequent numbers, to examine some current notions as to the cause of the fluctuations of prices, and to throw out some suggestions upon that subject which appear to be worthy of consideration.

ART. IV. CAUSES OF UNSTEADINESS OF THE CURRENCY, AND THE REMEDY THEREFOR.

NUMBER FIVE.

OF THE ECONOMICAL AND MORAL EFFECTS OF THE BANKING SYSTEMS OF FRANCE, GREAT BRITAIN, AND THE UNITED STATES.

IF you wish your business well done, you must do it yourself. If you wish your capital well employed, you must see yourself to its employment. Such is the lesson taught by experience. Where men give most attention to the management of their own affairs, there is labor most productive, and there is found the most rapid improvement of physical and moral condition.

Experience teaches us, that whenever there is difficulty in finding employment for capital-whenever the currency is expanded-there is a tendency to the transfer of it to distant places, to be invested in speculations of doubtful character, the risk of which is to be repaid with extravagant profits. It likewise teaches us, that so long as men can find steady and profitable employment at home for their capital-so long as the currency is moderate in amount the tendency to distant investments is small, and men are found to prefer moderate and certain profits at home, to the chance of large but uncertain profits at a distance. In the one case, they seek fortune as the slow but certain reward of labor, whereas, in the other, they seek to attain it by by the short but uncertain road of speculation. The one tends to the promotion of morality, while the other tends to produce a gambling spirit throughout the community.

We propose now to examine the systems of the several nations and states, to which we have before referred, with a view to ascertain which it is that tends most to promote the habit of personal attention to the management of capital, and which tends most to withdraw it from the control of the owner.

Placing the various modes of employing capital in the order of productiveness, we should obtain the following arrangement:

I. Where the owner employs it himself.

II. Where he personally attends to lending it out, as where he holds houses or lands, for which he receives rent, or interest: or where he takes secu rity on the property of others.

III. Where he unites with his immediate friends and neighbors, to open a shop for lending out their capital to people of the neighborhood who may have occasion to use it: the business being transacted by a committee of the proprietors, a board of directors, all of whom are personally well known to all the parties interested.

IV. Where he unites with similar persons in the establishment of offices for insurance against losses by fire or water, or in making roads and canals in their own vicinity, or in any other business that can be carried on under the immediate superintendence of the whole, or a part, of the

owners.

V. Where he unites with the people of a distant town or city to open a money-shop on a large scale, the business being transacted by persons of whom he knows little, and the loans being made to others of whom he knows nothing.

VI. Where he unites in the formation of such shops in distant states, as in the case of the banks of Mississippi and Louisiana, to be managed by persons over whom he has no control whatever.

VII. Where he unites in the formation of manufacturing, mining, or other companies, at a distance, or in the transaction of any business of which he has no knowledge, and must be altogether dependent on the skill and honesty of agents.

VIII. Where he places his capital in foreign countries, to be applied to the mining of gold, silver, coal, iron, &c., or in the construction of roads or canals.

IX. Where he lends his money to foreign governments, such as those of Spain and Portugal, Mexico, Peru, Colombia, and Chili.

While waiting to find satisfactory means of investment, he has his choice between,

I. Depositing his capital in a bank that will give him half the usual interest.

II. Depositing it in another, whose reputation is greater, but which will allow no interest, or,

III. Hoarding it in the form of gold or silver.

In these forms, capital constitutes currency, or is liable to become so at the will of the owners, who never permit it to remain absolutely, or com paratively, unproductive, except where it is difficult to obtain the usual rate of interest, with good security. The existence of a large amount of capital seeking employment is, therefore, prima facie evidence of a difficulty in obtaining secure investments with moderate interest, and we may reasona. bly expect to find it accompanied by a disposition to engage in hazardous enterprises, of certain risk and doubtful return, but in which the promise of a large return is held out to induce investments, being precisely those modes of employing capital that an economist would be least disposed to recommend.

If this view is correct, we shall find that where unemployed capital least exists, the owners give most attention to their own affairs, and there least exists the spirit of gambling; and where the amount of capital seeking in. vestment or currency-is in the greatest ratio to production, there is the greatest tendency to place it under the control of others. It will also be

found, that where currency is least, capital is most profitably appplied, and there is a rapid improvement in the condition of man: and where it is most abundant, capital is applied least profitably, and there is a slow improvement of condition.

It has been shown, that the currency is greatest in France, that England is next in order, and that it diminishes as we pass through the United States, from the south to the north and east, and that it is less in New England than in any other part of the world. We should therefore find in that portion of the Union the greatest tendency to the superior and profitable, and in France and England to the inferior and unprofitable, modes

of investment.

In FRANCE, the restrictions upon trade are so numerous, that vast numbers of persons and vast amounts of capital remain idle that would otherwise be profitably employed. Taxes upon the transfer of real estate tend to prevent investments in land.* Insecurity in regard to mortgages, combined with taxation, prevents individuals from investing their capital in that way. Those who have occasion to borrow, have, therefore, to pay a high rate of interest, while much capital is uninvested. Interest on a first mortgage is rarely below 6 per cent, while small proprietors and manufacturers pay 8, 9, 12, and 15 per cent. The amount of capital invested in trade is small, and the shopkeeper demands high profits. The workman of the towns, in his purchases, pays 50 per cent, and even 100 per cent, per annum. For the peasant, in his dealings with the blacksmith, the tavern-keeper, and the village shopkeeper, it is sometimes 100 per cent per quarter. The mean rate of interest throughout France, in transactions of all descriptions, is at least 15 to 20, or perhaps 25 per cent. Here we have abundant evidence that where insecurity exists, the owner of capital obtains but a small return, while the workman is obliged to allow a large proportion for the use of it. While the government can borrow at 4 per cent per annum, and while the bons du tresor, or treasury notes, bear an interest of 2 per cent only, the owner of land pays 6 per cent, in addition to the heavy charges of the government; and the farmer pays to the dealer with whom he performs his exchanges, 100 per cent, because of regulations which prevent the application of capital to the increase of the number of shops, roads, canals, and all other machinery tending to facilitate his approach to market.

While thus deprived of the right of using their capital themselves, they

# " By the general subdivision of landed property that now exists in France, it has come to pass that a man's land lies sometimes so split up into small parcels, and at such distances from each other, that his whole time would be taken up in moving merely from one part of his commune to another; and he cannot exchange parcels at a distance for others lying nearer home, because the law-costs, stamps, &c., necessary for such a transaction are so heavy, that for a piece of land yielding not more than ten or twenty francs a year in raw produce, he would have to pay one hundred francs for the conveyance of it. There are made in France every year, about 250,000 mortgages of 300 francs and under, the duration of which is for one year, or two years, at most. The cost of each of these mortgages is 31 francs, 60c.; so that for one year, the expense amounts to 10 per cent. The total cost of conveying land, and of drawing up other documents connected with landed property in France, is 100 millions of francs per annum, paid, be it remembered, in great part, by the poorest class of land-owners. The consequence is, that the whole country is overrun by lawyers and officers of the law; notwithstanding which, it is not a whit the better cultivated, or better man. aged."-Foreign Quarterly Review, July, 1840: p. 236, American edition.

+ Chevalier, t. ii. p. 489.

VOL. III.-NO. IV.

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