Part 17 (2/2)

Credit, upon a large scale, arose from the difficulty of transmitting coined money from place to place, and particularly from one country to another; and hence the invention of bills of exchange. A bill of exchange is an order by one person on another, to pay to a specified person, or his order, a sum of money specified, at a certain time and a certain place. It is evident that the bill of exchange travels as much more conveniently than a bag of money, as the bag of money travels more conveniently than the goods which it represents. For instance a box of hardware from Birmingham might be exchanged for a case of wine from Bordeaux, by a direct barter between the tradesman at Birmingham and the tradesman at Bordeaux; but this sort of operation must be a very limited one. Through the agency of merchants, the hardware finds it way to Bordeaux, and the wine to Birmingham, without any direct exchange between either place, or without either having more of the commodity wanted than is required by the market,--that is, the supply proportioned to the demand of each town. Through the division of labour, the merchant who exports the hardware to Bordeaux, and the merchant who imports the wine from Bordeaux, are different people; and there are other people engaged in carrying on other transactions at and with Bordeaux, with whom these merchants come in contact. When, therefore, the merchant at Bordeaux has to pay for the hardware in England, he obtains a bill of exchange from some other merchant who has to receive money from England, for the wine which he has sent there. And thus not only is there no direct barter between the grower of the wine and the manufacturer of the hardware, but the wine and the hardware are each paid for without any direct remittance of coined money from France to England, but by a transfer of the debt due from one person to another in each country. By this transfer, the transaction between the buyer and the seller is at once brought to maturity; and by this operation the buyer and seller are each benefited, because the exchange which each desires is rendered incomparably more easy, because more speedy and complete. The same principle applies to transactions between commercial men in the same country. The order for payment, which stands in the place of coined money in one case, is called a Foreign bill of exchange; in the other an Inland bill of exchange.

The operation of credit in a country whose industry is in an advanced state of activity, is extended over all its commercial transactions, by the necessity of obtaining circulating capital for the carrying forward the production of any commodity, from its first to its last stages. A manufacturer has a large sum expended in workshops, warehouses, machinery, tools. This is called his plant, or fixed capital. He has capital invested also in the raw material which he intends to convert into some article of utility. He works up his raw material; he makes advances for the labour required in working it up. The article is at length ready for the market. The wholesale dealer, who purchases of the manufacturer, sells to a retailer, who is in the habit of buying upon credit, long or short, because the article remains a certain time in his hands before it reaches the consumer, who ultimately pays for it. From the time when a fleece of wool is taken from the sheep's back in Australia, till it is purchased in the shape of a coat in London, there are extensive outlays in every department, which could not be carried on steadily unless there were facilities of credit from one person concerned in the production to another person concerned in the production,--the whole credit being grounded upon the belief that the debt contracted in so many stages will be repaid by the sale of the cloth to the consumer. The larger operations of this credit are represented by bills of exchange, or engagements to pay at a given date; and these bills being converted into cash by a banker, furnish a constant supply of consumable commodities to all parties concerned in advancing the production, till the produce arrives in the hands of the consumer. To judge of the extent to which credit is carried in this country, it is only necessary to mention, that five millions sterling are daily paid in bills and cheques by the London bankers alone; that the Bank of England alone, in 1853, discounted bills to the amount of twenty-five millions sterling; and that the note circulation of the United Kingdom is about forty millions. Credit, undoubtedly, if conducted upon fair principles, represents some capital actually in existence, and therefore does not really add to the acc.u.mulation or capital of the producers. But it enables men in trade at once to have stock and circulating capital--to use even their houses and shops and manufactories and implements; and to give, at the same time, a security to others upon that fixed capital. This process is, as it were, as if they coined that fixed capital. The credit, which is rendered as secure as possible in all its stages by the acc.u.mulating securities of the drawer, acceptor, and endorsers of a bill of exchange, brings capital into activity,--it carries it directly to those channels in which it may be profitably employed,--it conducts it to those channels by a systematic mode of payment for its use, which we call interest, or discount;--and it therefore carries forward acc.u.mulation to its highest point of productiveness.

If the reader will turn to the pa.s.sage in our third chapter, where Tanner describes the refusal of the traders to give him credit, he will see how capital, advanced upon credit, sets industry in motion. The Indians had acc.u.mulated no store of skins to exchange for the trader's store of guns, ammunition, traps, and blankets. The trader, although he possessed the articles which the Indians wanted, refused to advance them upon the usual credit; and they were consequently as useless to the Indians as if they had remained in a warehouse at Liverpool or Glasgow.

When the credit was taken away from the Indians, they could no longer be exchangers. Their own necessities for clothing were too urgent to enable them to turn their attention from that supply to acc.u.mulate capital for exchange, after the winter had pa.s.sed away. They hunted only for themselves. The trader went without his skins, and the Indians without their blankets. Doubtless, the keenness of commercial activity soon saw that this state of things was injurious even to the more powerful party, for the accustomed credit was presently restored to the Indians. It was the only means by which that balance of power could be quickly restored which would enable the parties again to become exchangers. Every exchange presupposes a certain equality in the exchangers; and credit, therefore, from the capitalist to the non-capitalist, must, in many cases, be the first step towards any transaction of mutual profit. If the Indians had adopted the resolution of Tanner, to do without the blankets for the winter, and had subst.i.tuted the more imperfect clothing of skins,--and if the traders had persevered in their system of refusing credit, that is, of advancing capital,--the exchange of furs must have been suspended, until, by incessant industry, and repeated self-denial, the Indians had become capitalists themselves. They probably, after a long series of laborious acc.u.mulations, might have done without the credit--that is, have not consumed the goods which they received before they were in a condition to give their own goods as equivalents; and then, as it usually happens in the exchanges of civilized society, they would have ensured a higher reward for their labour. The credit rendered the labour of the Indians loss severe, inasmuch as it allowed them to work with the aid of the acc.u.mulations of others, instead of with their own acc.u.mulations. But it doubtless gave the traders advantage, and justly so, in the terms of the exchange. If the Indians had brought their furs to the mart where the dealers had brought their blankets, there would have been exchange of capital for capital. As the Indians had not acc.u.mulated any furs, and were only hoping to acc.u.mulate, there was, on the part of the white traders, an advance of a present good for a remote equivalent. The traders had doubtless suffered by the casualties which prevented the Indians completing their engagements.

They made a sudden, and therefore an unjust, change in their system. The forbearance of the Indians shows their respect for the rights of property, and their consequent appreciation of their own interests. They might, possessing the physical superiority, have seized the blankets and ammunition of the traders. If so, their exchanges would have been at an end; the capital would have gone to stimulate other industry; the Indians would have ripped up the goose with the golden eggs.

It is easy to see that the employment of capital, through the agency of credit, in all the minute channels of advanced commerce, must wholly depend upon the faith which one man has in the stability and the honesty of another; and also upon the certainty of the protection of the laws which establish security of property, to enforce the fulfilment of the contract.

It is necessary to establish this point of the security of property, as one of the rights, and we may add as the greatest right, of industry;--and therefore, at the risk of being thought tedious, we may call attention to the general state of the argument in reply to some who hold that the rights of property, and the rights of labour, are antagonistic.

The value of an article produced is the labour required for its production.

Capital, the acc.u.mulation of past labour, represents the entire amount of that labour which is not consumed;--it is the old labour stored up for exchange with new labour.

Those who attach an exclusive value to new labour as distinguished from old labour--or labour as distinguished from capital--say that the new production shall be stimulated by the old production, without allowing the old production to be exchanged against the new;--that is, that the old production shall be an instrument for the reward of new labour, but not a profitable one to its possessor.

The doctrine therefore amounts to this; that labour shall be exchanged with labour, but not with the produce of labour,--or that there shall be no exchange whatever;--for if the present labourers are to have the sole benefit of the capital, the principle of exchange, in which both exchangers benefit, is destroyed. There must be an end of all exchanges when the things to be exchanged are not equally desired by both parties.

If the capitalist is to lend or give the capital to the labourer without a profit, or without a perfect freedom which would ent.i.tle him to withhold it if no profit could be obtained, the balance is destroyed between capital and labour. Acc.u.mulation is then at an end; because the security of the thing acc.u.mulated to the acc.u.mulator is at an end. The security is at an end, because if the new labour is to have the advantage of the old labour without compensation or exchange, the new labour must take the old labour by force or fraud; for the new cannot proceed without the old;--labour cannot stir without capital.

Acc.u.mulation, therefore, being at an end, labour for an object beyond the wants of an hour is at an end. Society resolves itself into its first elements.

Strabo, the ancient geographer, has described a tribe amongst whom the t.i.tle of the priest to the priesthood was acquired by having murdered his predecessor; and consequently the business of the priest in possession was not to discharge the duties of the priesthood, but to watch sword in hand, to defend himself against the new claimant to the office. If the principle were to be recognized, that the acc.u.mulation of _former_ labour belongs to the _present_ labourers; and that the best t.i.tle to the acc.u.mulation is to have added nothing towards it, but only to be willing to add,--the t.i.tle of the labourers in possession would require to be maintained by a constant encounter with new claimants; as the priest of Strabo, who had dispossessed the previous priest, had to dread a similar expulsion from his office, by a new violence.

The course of national misery resulting from national disorders always begins with financial embarra.s.sment; by the destruction of capital, or its withdrawal from all useful works. Capital was circulated only because it could be circulated with security. If the present capitalists were driven away, as some reasoners would imply might easily be done, and the labourers were left to work the tools and steam-engines--to labour in the manufactories, and to inhabit the houses of the present capitalists,--production could not go on an hour, unless the appropriation of the plunder were secured to the individual plunderers.

In speaking of credit, then, we naturally turn to the only foundation upon which credit rests--the security of property. Commercial men, who know how easily credit is destroyed by individual guilt or imprudence, also know how easily it is interrupted, generally by a combination of circ.u.mstances over which an individual, apart from a nation, has no control. The instant that any circ.u.mstances take place which weaken the general confidence in the security of property, credit is withdrawn. The plant remains--the tools and warehouses stand--the shops are open; but production languishes, labour is suspended. The stocks of consumable commodities for the maintenance of labour may still in part exist, but they do not reach the labourer through the usual channels. Then men say, and say truly, confidence is shaken; the usual relations of society are disturbed. Capital fences itself round with prudence--hesitates to go on acc.u.mulating--refuses to put its existence in peril--withdraws in great part from production--

”Spreads its light wings, and in a moment flies.”

Within these six years we have had before our eyes a fearful example of the universal evil created by the sudden loss of confidence in the security of property; The revolution of 1848, which overthrew the government of Louis Philippe, was a.s.sociated with a general belief that the whole fabric of society was about to be shaken in the overthrow of capital. The capital was instantly withdrawn from circulation; there was no exchange; there was no labour. The more immediate sufferers were the workmen themselves; and the mode in which the ruling power relieved them by giving forced employment was wholly unavailing, except as a temporary expedient. After several dreadful months of tumult and bloodshed, a little confidence was restored by the pressure of an armed force; and when at length a government was established that rested upon security of property, it was hailed as the greatest of all blessings, although accompanied with some evils to which Englishmen, especially, cannot shut their eyes. When capital and labour could once more work in a safe union, France quickly developed those great natural resources with which she is blessed; and the ingenuity of her people was again called into activity, to carry forward and perfect those resources by higher and higher exertions of science and skill.

When the great body of the people of a country are so generally educated as to know that it is the interest of the humblest and the poorest that property shall be secure, there will be little occasion for fencing round property with guards, against the secret violence of the midnight robber, or the open daring of the noonday mob. ”It is an enlightened moral public sentiment that must spread its wings over our dwellings, and plant a watchman at our doors.”[35] A very little insecurity destroys the working of capital. The cloth trade of Verviers, a town in France, was utterly ruined, because the morals of the people in the town were so bad, and the police so ineffectual, that the thefts in the various stages of the manufacture amounted to eight per cent. upon the whole quant.i.ty produced. The trade of the place, therefore, was destroyed; and the capital went to encourage labour in places where the rights of property were better respected.

But, generally speaking, the security of property is not so much weakened by plunder, as by those incessant contentions which hara.s.s the march of capital and labour; and keep up an irritation between the cla.s.ses of the capitalists and the labourers, who ought to be united in the most intimate compact for a common good. These irritations most frequently exhibit themselves in the shape of combinations for the advance of wages. We have no hesitation in declaring our opinion that it is the positive duty of the working-man to obtain as high wages as he can extract out of the joint products of capital and labour; and that he has an equal right to unite with other workmen in making as good a bargain as he can, consistently with the rights of others, for his contribution of industry to the business of production. But it is also necessary for us to declare our conviction that, in too many cases, the working men attempt an object which no single exertion, and no union however formidable or complete, can ever accomplish. They attempt to force wages beyond the point at which they could be maintained, with reference to the demand for the article produced;--and if they succeed they extinguish the demand, and therefore extinguish the power of working at any wages. They drive the demand, and therefore the supply, into new channels;--and they thrust out capital from amongst them, to work in other places where it can work with freedom and security. Above all, such combinations, and the resistance which they call up, have a tendency to loosen the bonds of mutual regard which ought to subsist between capitalists and labourers. Their real interests are one and the same.

All men are united in one bond of interests, and rights, and duties; and although each of us have particular interests, the parts which we play in society are so frequently changing, that under one aspect we have each an interest contrary to that which we have under another aspect. It is in this way that we find ourselves suddenly bound closely with those against whom we thought ourselves opposed a moment before; and thus no cla.s.s can ever be said to be inimical to another cla.s.s. In the midst, too, of all these instantaneous conflicts and unions, we are all interchangeably related in the double interest of capitalists and consumers,--that is, we have each and all an interest that property shall be respected, and that production shall be carried forward to its utmost point of perfection, so as to make its products accessible to all. The power of production, in its greatest developments of industry, is really addressed to the satisfaction of the commonest wants. If production, as in despotic countries, were princ.i.p.ally labouring that some men might wear cloth of gold whilst others went naked, then we should say that production was exclusively for the rich oppressor. But, thank G.o.d, the man who _exclusively_ wears ”purple and fine linen every day” has ceased to exist. The looms do not work for him alone, but for the great ma.s.s of the people. It is to the staple articles of consumption that the capitals of manufactures and commerce address their employment. Their employment depends upon the ability of the great body of the people to purchase what they produce. The courtiers of the fifteenth century in France carried boxes of sugar-plums in their pockets, which they offered to each other as a constant compliment; the courtiers of the next age carried gingerbread in the same way; and lastly, the luxury of snuff drove out the sugar-plums and the gingerbread. But the consumption of tobacco would never have furnished employment to thousands, and a large revenue to the state, if the use of snuff had rested with the courtiers. The producers, consequently, having found the largest, and therefore the most wealthy cla.s.s of consumers amongst the working men, care little whether the Peer wears a silk or a velvet coat, so that the Peasant has a clean s.h.i.+rt. When capital and labour work with freedom and security, the wants of all are supplied, because there is cheap production. It is a bad state of society where

”One flaunts in rags, one flutters in brocade.”

Those who like the brocade may still wear it in a state of things where the rights of industry are understood; but the rags, taking the average condition of the members of society, are banished to the lands from which capital is driven,--while those who labour with skill, and therefore with capital, have decent clothes, comfortable dwellings, wholesome food, abundant fuel, medical aid in sickness, the comfort and amus.e.m.e.nt of books in health. These goods, we have no hesitation in saying, all depend upon the security of property; and he that would destroy that security by force or fraud is the real destroyer of the comforts of those humbler cla.s.ses whose rights he pretends to advocate.

The principles which _we_ maintain, that the interests of all men, and of the poorer cla.s.ses especially, are necessarily advanced in a constantly increasing measure by the increase of capital and skill, have been put so strikingly by a philosophical writer, that we cannot forbear quoting so valuable an authority in support and ill.u.s.tration of our opinions:--

”The advantage conferred by the augmentation of our physical resources, through the medium of increased knowledge and improved art, have this peculiar and remarkable property,--that they are in their nature diffusive, and cannot be enjoyed in any exclusive manner by a few. An eastern despot may extort the riches and monopolize the art of his subjects for his own personal use; he may spread around him an unnatural splendour and luxury, and stand in strange and preposterous contrast with the general penury and discomfort of his people; he may glitter in jewels of gold and raiment of needle-work; but the wonders of well-contrived and executed manufacture which we use daily, and the comforts which have been invented, tried, and improved upon by thousands, in every form of domestic convenience, and for every ordinary purpose of life, can never be enjoyed by him. To produce a state of things in which the physical advantages of civilized life can exist in a high degree, the stimulus of _increasing comforts and constantly elevated desires_ must have been felt by millions; since it is not in the power of a few individuals to create that wide demand for useful and ingenious applications, which alone can lead to great and rapid improvements, unless backed by that arising from the speedy diffusion of the same advantages among the ma.s.s of mankind.”[36]

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