MRS. B

HAVING obtained some knowledge of the nature of value, we may now proceed to examine the use of money.

Without this general medium of exchange, trade could never have made any considerable progress; for as the subdivisions of labour increased, insuperable difficulties would be experienced in the adjustment of accounts. The butcher perhaps would want bread, at a time that the baker did not want meat; or they might each be desirous of exchanging their respective commodities, but these might not be of equal value.

CAROLINE

It would be very difficult, I believe, at any time to make such reckonings exactly balance each other.

MRS. B

In order to avoid this inconvenience, it became necessary for every man to be provided with a commodity which would be willingly taken at all times in exchange for goods. Hence arose that useful representative of commodities, money, which, being exclusively appropriated to exchanges, every one was ready either to receive or to part with for that purpose.

CAROLINE

When the baker did not want meat he would take the butcher's money in exchange for his bread, because that money would enable him to obtain from others what he did want.

MRS. B

Various commodities have been employed to answer the purpose of money. Mr. Salt, in his Travels in Abyssinia, informs us, that wedges of salt are used in that country for small currency, coined money being extremely scarce. A wedge of rock-salt, weighing between two and three pounds, was estimated at 1-30th of a dollar.

CAROLINE

I HAVE been reflecting much upon the subject of revenue, Mrs. B.; but I cannot comprehend how farmers can afford to pay their rent if they do not make more than the usual profits of capital. I had imagined that they began by raising greater produce from the same capital than merchants or manufacturers, but that the deduction of their rent eventually reduced their profits below those of other branches of industry.

MRS. B

You were right in the first part of your conjecture, but how did you account for the folly of farmers in chusing a mode of employing their capital which after payment of their rent yielded them less than the usual rate of profit?

CAROLINE

I believe that I did not consider that point. I had some vague idea of the superior security of landed property; and then I thought they might be influenced by the pleasures of a country life.

MRS. B

Vague ideas will not enable us to trace inferences with accuracy, and to guard against them we should avoid the use of vague and indeterminate expressions. For instance — when you speak of the security of landed property being advantageous to a farmer, you do not consider that in the capacity of farmer a man possesses no landed property; he rents his farm; if he purchases it, he is a landed proprietor as well as a farmer. It is not therefore the security of landed property which is beneficial to a farmer, but the security or small risk in the raising and disposing of his crops.

MRS. B

WE mentioned commerce as one of the modes of employing capital to produce a revenue; but deferred investigating its effects until you had acquired some knowledge of the nature and use of money. We may now, therefore, proceed to examine in what manner commerce enriches individuals, and augments the wealth of a country.

Those who engage their capitals in commerce or trade act as agents or middle-men between the producers and the consumers of the fruits of the earth; they purchase them of the former, and sell them to the latter; and it is by the profits on the sale that capital so employed yields a revenue.

There are two distinct sets of men engaged in trade: merchants, who purchase commodities (either in a rude or a manufactured state) of those who produce them: this is called wholesale trade; and shopkeepers, who purchase goods in smaller quantities of the merchants, and distribute them to the public according to the demand: this constitutes the retail trade.

CAROLINE

Trade will no doubt bring a revenue to those who employ their capital in it; but I do not conceive how it contributes to the wealth of the country: for neither merchants nor shopkeepers produce any thing new; they add nothing to the general stock of wealth, but merely distribute that which is produced by others. It is true that mercantile men form a considerable part of the community; but if their profits are taken out of the pockets of their countrymen, they may make fortunes without enriching their country.

MRS. B

WE differ so much respecting the merit of the passage you mentioned this morning, that I cannot help suspecting some inaccuracy in the quotation.

CAROLINE

Then pray allow me to read it to you; it is immediately after the return of Telemachus to Salentum, when he expresses his astonishment to Mentor at the change that has taken place since his former visit; he says, “Has any misfortune happened to Salentum in my absence? the magnificence and splendour in which I left it have disappeared. I see neither silver, nor gold, nor jewels, the habits of the people are plain, the buildings are smaller and more simple, the arts languish, and the city is become a desert.” — “Have you observed,” replied Mentor with a smile, “the state of the country that lies round it?”— “Yes,” said Telemachus, “I perceive that agriculture is become an honourable profession, and that there is not a field uncultivated.” — “And which is best,” replied Mentor, “a superb city, abounding with marble, gold, and silver, with a steril and neglected country; or a country in a state of high cultivation, and fruitful as a garden, with a city where decency has taken place of pomp? A great city full of artificers, who are employed only to effeminate the manners, by furnishing the superfluities of luxury, surrounded by a poor and uncultivated country, resembles a monster with a head of enormous size, and a withered, enervated body, without beauty, vigour, or proportion. The genuine strength and true riches of a kingdom consist in the number of people, and the plenty of provisions; and innumerable people now cover the whole territory of Idomeneus, which they cultivate with unwearied diligence and assiduity. His dominions may be considered as one town, of which Salentum is the centre; for the people that were wanting in the fields, and superfluous in the city, we have removed from the city to the fields.”

CAROLINE

I THINK I now understand very well how an income is derived from agriculture and manufactures; and also how it is produced by trade; but there are many men of property who follow none of these occupations; how, therefore, can their capital yield an income?

MRS. B

When a man possesses a very large property, he frequently will not be at the trouble of employing it himself; but will engage some other person to do it for him. You have seen that a landed proprietor who does not farm his own estate derives a revenue from the farmer in the form of rent.

CAROLINE

But I allude to men of fortune without landed property, who live upon their income, although their capital is not employed.

MRS. B

Reflect a moment, and you will be convinced that no capital can yield an income without being employed. If, therefore, the owner does not invest it in some branch of industry himself, another person must do it for him. A capitalist under such circumstances may be supposed to say, “I am possessed of an ample stock of subsistence for labourers, and of materials for workmanship, but I will engage some other person to take charge of so troublesome an undertaking as that of setting the people to work, and collecting the profits derived from their labours.”

MRS. B

IN our last conversation I think we came to this conclusion, that capital is almost as beneficial to the poor as to the rich; for though the property of the one, it is by its nature destined for the maintenance of the other.

CAROLINE

It comes to the labourer in the form of wages, but as we must allow the capitalist a profit on his work, I should like very much to know what proportion that profit bears to the wages of the labourer.

MRS. B

It varies extremely, but the wages of the labourer can never be permanently less than will afford him the means of living, otherwise he could not labour.

CAROLINE

On the other hand, they can never be equal to the whole value of the work he produces, for if his master made no profit by him he would not employ him.

MRS. B

Such then are the two extremes of the wages of labour, but they admit of many intermediate degrees of variation. If besides furnishing subsistence for himself, the wages of the labourer would not enable him to maintain a wife and bring up a family, the class of labourers would gradually diminish, and the scarcity of hands would then raise their wages, which would enable them to live with more comfort and rear a family; but as the capitalist will always keep wages as low as he can, the labourer and his family can seldom command more than the necessaries of life.

MRS. B

BEFORE we proceed to the subject of trade, it is necessary that you should understand what is meant by the value of commodities.

CAROLINE

That cannot be very difficult; it is one of the first things we learn.

MRS. B

What is learnt at an age when the understanding is not yet well developed, is not always well learnt. What do you understand by the value of commodities?

CAROLINE

We call things valuable which cost a great deal of money; a diamond necklace, for instance, is very valuable.

MRS. R.

But if, instead of money, you gave in exchange for the necklace silk or cotton goods, tea, sugar, or any other commodity, would you not still call the necklace valuable?

CAROLINE

Certainly I should; for, supposing the necklace to be worth 1000l., it is immaterial whether I give 1000l. in money, or 1000l. worth of any thing else in exchange for it.

MRS. B

The value of a commodity is therefore estimated by the quantity of other things generally for which it will exchange, and hence it is frequently called exchangeable value.

CAROLINE

Or, in other words, the price of a commodity.

MRS, B.

No; price does not admit of so extensive a signification. The price of a commodity is its exchangeable value, estimated in money only. It is necessary that you should remember this distinction.

MRS. B

I HAVE some further remarks to make to you on the nature of capital.

A land owner, when he increases his capital by savings from his income, may probably, instead of employing the whole of his additional capital on husbandmen, find it more advantageous to lay out some part of it on workmen to build barns and outhouses, to store his crops and shelter his cattle; he may plant trees to produce timber, build cottages, and bring into cultivation some of the waste land on his farm.

A manufacturer also, in proportion as he increases the number of his workmen, must enlarge his machinery or implements of industry.

CAROLINE

But the capital laid out in buildings, tools, and machinery will not yield a profit, like that which is employed in the payment of workmen, the produce of whose labour is brought to market?

MRS. B

The farmer and manufacturer would not lay out their capital in this way, did they not expect to reap a profit from it. If a farmer has no barn or granary for his corn, he will be compelled to sell his crops immediately after the harvest, although he might probably dispose of them to greater advantage by keeping them some time longer. So a manufacturer, by improving or enlarging his machinery, can, with less labour, perform a greater quantity of work, and his profits will be proportionate.

Thus, for instance, when a manufacturer can afford to establish a steam-engine, and employ a stream of vapour as a substitute for the labour of men and horses, he saves the expense of more than half the number of hands he before employed.