No More Learning

If the profits of all trades were taxed, excepting the profits of the
farmer, all goods would rise in money value, excepting raw produce. The
farmer would have the same corn income as before, and would sell his
corn also for the same money price; but as he would be obliged to pay an
additional price for all the commodities, except corn, which he
consumed, it would be to him a tax on expenditure. Nor would he be
relieved from this tax by an alteration in the value of money, for an
alteration in the value of money might sink all the taxed commodities to
their former price, but the untaxed one would sink below its former
level; and therefore, though the farmer would purchase his commodities
at the same price as before, he would have less money with which to
purchase them.

The landlord too would be precisely in the same situation, he would have
the same corn, and the same money rent as before, if all commodities
rose in price, and money remained at the same value; and he would have
the same corn, but a less money rent, if all commodities remained at the
same price: so that in either case, though his income were not directly
taxed, he would indirectly contribute towards the money raised.

But suppose the profits of the farmer to be also taxed, he then would be
in the same situation as other traders; his raw produce would rise, so
that he would have the same money revenue, after paying the tax, but he
would pay an additional price for all the commodities he consumed, raw
produce included.

His landlord however would be differently situated, he would be
benefited by the tax on his tenant's profits, as he would be compensated
for the additional price at which he would purchase his manufactured
commodities, if they rose in price; and he would have the same money
revenue, if in consequence of a rise in the value of money, commodities
sold at their former price. A tax on the profits of the farmer, is not a
tax proportioned to the gross produce of the land, but to its net
produce, after the payment of rent, wages, and all other charges. As the
cultivators of the different kinds of land, No. 1, 2, and 3, employ
precisely the same capitals, they will get precisely the same profits,
whatever may be the quantity of gross produce, which one may obtain more
than the other; and consequently they will be all taxed alike. Suppose
the gross produce of the land of the quality No. 1, to be 180 qrs. , that
of No. 2, 170 qrs. , and of No 3, 160, and each to be taxed 10 quarters,
the difference between the produce of No. 1, No. 2, and No. 3, after
paying the tax, will be the same as before; for if No. 1 be reduced to
170, No. 2 to 160, and No. 3 to 150 qrs. ; the difference between 3 and 1
will be as before, 20 qrs. ; and of No. 3 and No. 2, 10 qrs. If after the
tax the prices of corn and of every other commodity should remain the
same as before, money rent as well as corn rent, would continue
unaltered; but if the price of corn, and every other commodity should
rise in consequence of the tax, money rent will also rise in the same
proportion. If the price of corn were 4_l. _ per quarter, the rent of No.
1 would have been 80_l. _, and that of No. 2, 40_l. _; but if corn rose
ten per cent. , or to 4_l. _ 8_s. _, rent would also rise ten per cent. ,
for twenty quarters of corn would then be worth 88_l. _, and ten quarters
44_l. _; so that in every case the landlord will be unaffected by such a
tax. A tax on the profits of stock always leaves corn rent unaltered,
and therefore money rent varies with the price of corn; but a tax on raw
produce, or tithes, never leaves corn rent unaltered, but generally
leaves money rent the same as before. In another part of this work I
have observed, that if a land-tax of the same money amount, were laid on
every kind of land in cultivation, without any allowance for difference
of fertility, it would be very unequal in its operation, as it would be
a profit to the landlord of the more fertile lands. It would raise the
price of corn in proportion to the burden borne by the farmer of the
worst land; but this additional price being obtained for the greater
quantity of produce yielded by the better land, farmers of such land
would be benefited during their leases, and afterwards, the advantage
would go to the landlord in the form of an increase of rent. The effect
of an equal tax on the profits of the farmer is precisely the same; it
raises the money rent of the landlords, if money retains the same value;
but as the profits of all other trades are taxed, as well as those of
the farmer, and consequently the prices of all goods, as well as corn,
are raised, the landlord loses as much by the increased money price of
the goods and corn on which his rent is expended, as he gains by the
rise of his rent. If money should rise in value, and all things should,
after a tax on the profits of stock, fall to their former prices, rent
also would be the same as before. The landlord would receive the same
money rent, and would obtain all the commodities on which it was
expended at their former price; so that under all circumstances he would
continue untaxed.

A tax on the profits of stock would also affect the stockholder, if all
commodities were to rise in proportion to the tax; but if from the
alteration in the value of money, all commodities were to sink to their
former price, the stockholder would pay nothing towards the tax; he
would purchase all his commodities at the same price, but would still
receive the same money dividend.

If it be agreed, that by taxing the profits of one manufacturer only,
the price of his goods would rise, to put him on an equality with all
other manufacturers; and that by taxing the profits of two
manufacturers, the prices of two descriptions of goods must rise, I do
not see how it can be disputed, that by taxing the profits of all
manufacturers, the prices of all goods would rise, provided the mine
which supplied us with money, were in the country taxed. But as money,
or the standard of money, is a commodity imported from abroad, the
prices of all goods could not rise; for such an effect could not take
place without an additional quantity of money, which could not be
obtained in exchange for dear goods, as was shewn in page 108. If
however, such a rise could take place, it could not be permanent, for it
would have a powerful influence on foreign trade. In return for
commodities imported, those dear goods could not be exported, and
therefore we should for a time continue to buy, although we ceased to
sell; and should export money, or bullion, till the relative prices of
commodities were nearly the same as before. It appears to me absolutely
certain, that a well regulated tax on profits, would ultimately restore
commodities both of home and foreign manufacture, to the same money
price which they bore before the tax was imposed.

As taxes on raw produce, tithes, taxes on wages, and on the necessaries
of the labourer, will, by raising wages, lower profits, they will all,
though not in an equal degree, be attended with the same effects.

The discovery of machinery, which materially improves home manufactures,
always tends to raise the relative value of money, and therefore to
encourage its importation. All taxation, all increased impediments,
either to the manufacturer, or the grower of commodities, tend on the
contrary to lower the relative value of money, and therefore to
encourage its exportation.




CHAPTER XIV.

TAXES ON WAGES.


Taxes on wages will raise wages, and therefore will diminish the rate of
the profits of stock. We have already seen that a tax on necessaries
will raise their prices, and will be followed by a rise of wages. The
only difference between a tax on necessaries, and a tax on wages is,
that the former will necessarily be accompanied by a rise in the price
of necessaries, but the latter will not; towards a tax on wages,
consequently, neither the stockholder, the landlord, nor any other
class but the employers of labour will contribute. A tax on wages is
wholly a tax on profits, a tax on necessaries is partly a tax on
profits, and partly a tax on rich consumers. The ultimate effects which
will result from such taxes then are precisely the same as those which
result from a direct tax on profits.

"The wages of the inferior classes of workmen," says Adam Smith, "I have
endeavoured to shew in the first book, are every where necessarily
regulated by two different circumstances; the demand for labour, and the
ordinary or average price of provisions. The demand for labour,
according as it happens to be either increasing, stationary, or
declining, or to require an increasing, stationary, or declining
population, regulates the subsistence of the labourer, and determines in
what degree it shall be either liberal, moderate, or scanty. The
_ordinary or average_ price of provisions determines the quantity of
money which must be paid to the workman, in order to enable him one year
with another to purchase this liberal, moderate, or scanty subsistence.
While the demand for labour, and the price of provisions, therefore
remain the same, a direct tax upon the wages of labour can have no other
effect than to raise them somewhat higher than the tax. "

To the proposition, as it is here advanced by Dr. Smith, Mr. Buchanan
offers two objections. First, he denies that the money wages of labour
are regulated by the price of provisions; and secondly, he denies that a
tax on the wages of labour would raise the price of labour. On the first
point, Mr. Buchanan's argument is as follows, page 59: "The wages of
labour, it has already been remarked, consist not in money, but in what
money purchases, namely, provisions and other necessaries; and the
allowance of the labourer out of the common stock, will always be in
proportion to the supply. Where provisions are _cheap and abundant_, his
share will be the larger; and where they are _scarce and dear_, it will
be the less. His wages will always give him his just share, and they
cannot give him more. It is an opinion indeed, adopted by Dr. Smith and
most other writers, that the money price of labour is regulated by the
money price of provisions, and that when provisions rise in price, wages
rise in proportion. But it is clear that the price of labour has no
necessary connexion with the price of food, since it depends entirely on
the supply of labourers compared with the demand. Besides, it is to be
observed, that the high price of provisions is a certain indication of a
deficient supply, and arises in the natural course of things, for the
purpose of retarding the consumption. A smaller supply of food, shared
among the same number of consumers, will evidently leave a smaller
portion to each, and the labourer must bear his share of the common
want. To distribute this burden equally, and to prevent the labourer
from consuming subsistence so freely as before, the price rises. But
wages it seems must rise along with it, that he may still use the same
quantity of a scarcer commodity; and thus nature is represented as
counteracting her own purposes: first, raising the price of food, to
diminish the consumption, and afterwards, raising wages to give the
labourer the same supply as before. "

In this argument of Mr. Buchanan, there appears to me, to be a great
mixture of truth and error. Because a high price of provisions is
sometimes occasioned by a deficient supply, Mr. Buchanan assumes it as a
certain indication of a deficient supply. He attributes to one cause
exclusively, that which may arise from many. It is undoubtedly true,
that in the case of a deficient supply, a smaller quantity will be
shared among the same number of consumers, and a smaller portion will
fall to each. To distribute this privation equally, and to prevent the
labourer from consuming subsistence so freely as before, the price
rises. It must therefore be conceded to Mr. Buchanan, that any rise in
the price of provisions, occasioned by a deficient supply, will not
necessarily raise the money wages of labour; as the consumption must be
retarded; which can only be effected by diminishing the power of the
consumers to purchase. But, because the price of provisions is raised by
a deficient supply, we are by no means warranted in concluding, as Mr.
Buchanan appears to do, that there may not be an abundant supply, with a
high price; not a high price with regard to money only, but with regard
to all other things.

The natural price of commodities, which always ultimately governs their
market price, depends on the facility of production; but the quantity
produced is not in proportion to that facility. Although the lands,
which are now taken into cultivation, are much inferior to the lands in
cultivation three centuries ago, and therefore the difficulty of
production is increased, who can entertain any doubt, but that the
quantity produced now, very far exceeds the quantity then produced? Not
only is a high price compatible with an increased supply, but it rarely
fails to accompany it. If, then, in consequence of taxation, or of
difficulty of production, the price of provisions be raised, and the
quantity be not diminished, the money wages of labour will rise; for as
Mr. Buchanan has justly observed, "The wages of labour consist not in
money, but in what money purchases, namely, provisions and other
necessaries; and the allowance of the labourer out of the common stock,
will always be in proportion to the supply. "

With respect to the second point, whether a tax on the wages of labour
would raise the price of labour, Mr. Buchanan says, "After the labourer
has received the fair recompense of his labour, how can he have recourse
on his employer, for what he is afterwards compelled to pay away in
taxes? There is no law or principle in human affairs to warrant such a
conclusion. After the labourer has received his wages, they are in his
own keeping, and he must, as far as he is able, bear the burthen of
whatever exactions he may ever afterwards be exposed to: for he has
clearly no way of compelling those to reimburse him, who have already
paid him the fair price of his work. " Mr. Buchanan has quoted with great
approbation, the following able passage from Mr. Malthus's work on
population, which appears to me completely to answer his objection. "The
price of labour, when left to find its natural level, is a most
important political barometer, expressing the relation between the
supply of provisions, and the demand for them, between the quantity to
be consumed, and the number of consumers; and, taken on the average,
independently of accidental circumstances, it further expresses,
clearly, the wants of the society respecting population, that is,
whatever may be the number of children to a marriage necessary to
maintain exactly the present population, the price of labour will be
just sufficient to support this number, or be above it, or below it,
according to the state of the real funds, for the maintenance of labour,
whether stationary, progressive, or retrograde. Instead, however, of
considering it in this light, we consider it as something which we may
raise or depress at pleasure, something which depends principally on his
majesty's justices of the peace. When an advance in the price of
provisions already expresses that the demand is too great for the
supply, in order to put the labourer in the same condition as before, we
raise the price of labour, that is, we increase the demand, and are then
much surprised, that the price of provisions continues rising. In this,
we act much in the same manner, as if, when the quicksilver in the
common weather glass, stood at _stormy_, we were to raise it by some
forcible pressure to settled fair, and then be greatly astonished that
it continued raining. "

"The price of labour will express, clearly, the wants of the society
respecting population;" it will be just sufficient to support the
population, which at that time the state of the funds for the
maintenance of labourers, requires. If the labourer's wages were before
only adequate to supply the requisite population, they will, after the
tax, be inadequate to that supply, for he will not have the same funds
to expend on his family. Labour will therefore rise, because the demand
continues, and it is only by raising the price, that the supply is not
checked.

Nothing is more common, than to see hats or malt rise when taxed; they
rise because the requisite supply would not be afforded if they did not
rise: so with labour, when wages are taxed, its price rises, because, if
it did not, the requisite population would not be kept up. Does not Mr.
Buchanan allow all that is contended for, when he says, that "were he
(the labourer) indeed reduced to a bare allowance of necessaries, he
would then suffer no further abatement of his wages, as he could not on
such conditions continue his race? " Suppose the circumstances of the
country to be such, that the lowest labourers are not only called upon
to continue their race, but to increase it; their wages would have been
regulated accordingly. Can they multiply, if a tax takes from them a
part of their wages, and reduces them to bare necessaries?

It is undoubtedly true, that a taxed commodity will not rise in
proportion to the tax, if the demand for it will diminish, and if the
quantity cannot be reduced. If metallic money were in general use, its
value would not for a considerable time be increased by a tax, in
proportion to the amount of the tax, because at a higher price, the
demand would be diminished, and the quantity would not be diminished;
and unquestionably the same cause frequently influences the wages of
labour, the number of labourers cannot be rapidly increased or
diminished in proportion to the increase or diminution of the fund,
which is to employ them; but in the case supposed, there is no necessary
diminution of demand for labour, and if diminished, the demand does not
abate in proportion to the tax. Mr. Buchanan forgets that the fund
raised by the tax is employed by Government in maintaining labourers,
unproductive indeed, but still labourers. If labour were not to rise
when wages are taxed, there would be a great increase in the competition
for labour, because the owners of capital, who would have nothing to pay
towards such a tax, would have the same funds for imploying labour;
whilst the Government who received the tax would have an additional
fund for the same purpose. Government and the people thus become
competitors, and the consequence of their competition is a rise in the
price of labour. The same number of men only will be employed, but they
will be employed at additional wages.

If the tax had been laid at once on the people, their fund for the
maintenance of labour would have been diminished in the very same degree
that the fund of Government for that purpose had been increased; and
therefore there would have been no rise in wages; for though there would
be the same demand, there would not be the same competition. If when the
tax were levied, Government at once exported the produce of it as a
subsidy to a foreign state, and if therefore these funds were devoted to
the maintenance of foreign, and not of English labourers, such as
soldiers, sailors, &c. &c. ; then, indeed, there would be a diminished
demand for labour, and wages might not increase although they were
taxed; but the same thing would happen if the tax had been laid on
consumable commodities, on the profits of stock, or if in any other
manner the same sum had been raised to supply this subsidy: less labour
could be employed at home. In one case wages are prevented from rising,
in the other they must absolutely fall. But suppose the amount of a tax
on wages were, after being raised on the labourers, paid gratuitously to
their employers, it would increase their money fund for the maintenance
of labour, but it would not increase either commodities or labour. It
would consequently increase the competition amongst the employers of
labour, and the tax would be ultimately attended with no loss either to
master or labourer. The master would pay an increased price for labour;
the addition which the labourer received would be paid as a tax to
Government, and would be again returned to the masters. It must however
not be forgotten that the produce of taxes is often wastefully expended,
and that by diminishing capital they tend to diminish the real fund
destined for the maintenance of labour; and therefore to diminish the
real demand for it. Taxes then, generally, as far as they impair the
real capital of the country, diminish the demand for labour, and
therefore it is a probable, but not a necessary, nor a peculiar
consequence of a tax on wages, that though wages would rise, they would
not rise by a sum precisely equal to the tax.

Adam Smith, as we have seen, has fully allowed that the effect of a tax
on wages would be to raise wages by a sum at least equal to the tax, and
would be finally, if not immediately, paid by the employer of labour.
Thus far we fully agree; but we essentially differ in our views of the
subsequent operation of such a tax.

"A direct tax upon the wages of labour, therefore," says Adam Smith,
"though the labourer might perhaps pay it out of his hand, could not
properly be said to be even advanced by him; at least if the demand for
labour and the average price of provisions remained the same after the
tax as before it. In all such cases, not only the tax, but something
more than the tax, would in reality be advanced by the person who
immediately employed him. The final payment would in different cases
fall upon different persons. The rise which such a tax might occasion
in the wages of manufacturing labour, would be advanced by the master
manufacturer, _who would be entitled and obliged to charge it with a
profit, upon the price of his goods_. The rise which such a tax might
occasion in country labour would be advanced by the farmer, who, in
order to maintain the same number of labourers as before, would be
obliged to employ a greater capital. In order to get back this greater
capital, _together with the ordinary profits of stock_, it would be
necessary that he should retain a larger portion, or what comes to the
same thing, the price of a larger portion of the produce of the land,
and consequently that he should pay less rent to the landlord. The final
payment of this rise of wages, therefore, would in this case fall upon
the landlord, _together with the additional profits of the farmer who
had advanced it_. In all cases a direct tax upon the wages of labour
must, in the long run, occasion both a greater reduction in the rent of
land, and a greater rise in the price of manufactured goods, than would
have followed, from the proper assessment of a sum equal to the produce
of the tax, partly upon the rent of land, and partly upon consumable
commodities. " Vol. iii. p. 337. In this passage it is asserted that the
additional wages paid by farmers will ultimately fall on the landlords,
who will receive a diminished rent; but that the additional wages paid
by manufacturers will occasion a rise in the price of manufactured
goods, and will therefore fall on the consumers of those commodities.

Now suppose a society to consist of landlords, manufacturers, farmers,
and labourers. The labourers, it is agreed, would be recompensed for the
tax;--but by whom? --who would pay that portion which did not fall on the
landlords? --the manufacturers could pay no part of it; for if the price
of their commodities should rise in proportion to the additional wages
they paid, they would be in a better situation after than before the
tax. If the clothier, the hatter, the shoemaker, &c. , should be each
able to raise the price of their goods 10 per cent. ,--supposing 10 per
cent. to recompense them completely for the additional wages they
paid,--if, as Adam Smith says, "they would be entitled and obliged to
charge the additional wages _with a profit_ upon the price of their
goods," they could each consume as much as before of each other's
goods, and therefore they would pay nothing towards the tax. If the
clothier paid more for his hats and shoes, he would receive more for his
cloth, and if the hatter paid more for his cloth and shoes, he would
receive more for his hats. All manufactured commodities then would be
bought by them with as much advantage as before, and inasmuch as corn
would not be raised in price whilst they had an additional sum to lay
out upon its purchase, they would be benefited, and not injured by such
a tax.

If then neither the labourers nor the manufacturers would contribute
towards such a tax; if the farmers would be also recompensed by a fall
of rent, landlords alone must not only bear its whole weight, but they
must also contribute to the increased gains of the manufacturers. To do
this, however, they should consume all the manufactured commodities in
the country, for the additional price charged on the whole mass is
little more than the tax originally imposed on the labourers in
manufactures.

Now it will not be disputed that the clothier, the hatter, and all other
manufacturers, are consumers of each other's goods; it will not be
disputed that labourers of all descriptions consume soap, cloth, shoes,
candles, and various other commodities: it is therefore impossible that
the whole weight of these taxes should fall on landlords only.

But if the labourers pay no part of the tax, and yet manufactured
commodities rise in price, wages must rise, not only to compensate them
for the tax, but for the increased price of manufactured necessaries,
which, as far as it affects agricultural labour, will be a new cause for
the fall of rent; and, as far as it affects manufacturing labour, for a
further rise in the price of goods. This rise in the price of goods will
again operate on wages, and the action and re-action, first of wages on
goods, and then of goods on wages, will be extended without any
assignable limits. The arguments by which this theory is supported, lead
to such absurd conclusions that it may at once be seen that the
principle is wholly indefensible.

All the effects which are produced on the profits of stock and the wages
of labour, by a rise of rent and a rise of necessaries, in the natural
progress of society, and increasing difficulty of production, will be
produced by a rise of wages in consequence of taxation; and therefore
the enjoyments of the labourer, as well as those of his employers, will
be curtailed by the tax; and not by this tax particularly, but by any
other which should raise an equal amount.

The error of Adam Smith proceeds in the first place from supposing, that
all taxes paid by the farmer must necessarily fall on the landlord, in
the shape of a deduction from rent. On this subject I have explained
myself most fully, and I trust that it has been shewn, to the
satisfaction of the reader, that since much capital is employed on the
land which pays no rent, and since it is the result obtained by this
capital which regulates the price of raw produce, no deduction can be
made from rent; and consequently either no remuneration will be made to
the farmer for a tax on wages, or if made, it must be made by an
addition to the price of raw produce.

If taxes press unequally on the farmer, he will be enabled to raise the
price of raw produce, to place himself on a level with those who carry
on other trades; but a tax on wages, which would not affect him more
than it would affect any other trade, could not be removed or
compensated by a high price of raw produce; for, the same reason which
should induce him to raise the price of corn, namely, to remunerate
himself for the tax, would induce the clothier to raise the price of
cloth, the shoemaker, hatter, and upholsterer, to raise the price of
shoes, hats, and furniture.

If they could all raise the price of their goods, so as to remunerate
themselves, with a profit, for the tax; as they are all consumers of
each other's commodities, it is obvious that the tax could never be
paid; for who would be the contributors if all were compensated?

I hope then that I have succeeded in shewing, that any tax which shall
have the effect of raising wages, will be paid by a diminution of
profits, and therefore that a tax on wages is in fact a tax on profits.

This principle of the division of the produce of labour and capital
between wages and profits, which I have attempted to establish, appears
to me so certain, that excepting in the immediate effects, I should
think it of little importance whether the profits of stock, or the wages
of labour, were taxed. By taxing the profits of stock, you would
probably alter the rate at which the funds for the maintenance of labour
increase, and wages would be disproportioned to the state of that fund,
by being too high. By taxing wages, the reward paid to the labourer
would also be disproportioned to the state of that fund, by being too
low. In the one case by a fall, and in the other by a rise in money
wages, the natural equilibrium between profits and wages would be
restored. A tax on wages then does not fall on the landlord, but it
falls on the profits of stock: it does not "entitle and oblige the
master manufacturer to charge it with a profit on the prices of his
goods," for he will be unable to increase their price, and therefore he
must himself wholly and without compensation pay such a tax. [16]

If the effect of taxes on wages be such as I have described, they do not
merit the censure cast upon them by Dr. Smith. He observes of such
taxes, "These, and some other taxes of the same kind, by raising the
price of labour, are said to have ruined the greater part of the
manufactures of Holland. Similar taxes, though not quite so heavy, take
place in the Milanese, in the states of Genoa, in the duchy of Modena,
in the duchies of Parma, Placentia, and Guastalla, and in the
ecclesiastical states. A French author of some note, has proposed to
reform the finances of his country, by substituting in the room of other
taxes, this most ruinous of all taxes. 'There is nothing so absurd,'
says Cicero, 'which has not sometimes been asserted by some
philosophers. '" And in another place he says: "taxes upon necessaries,
by raising the wages of labour, necessarily tend to raise the price of
all manufactures, and consequently to diminish the extent of their sale
and consumption. " They would not merit this censure; even if Dr. Smith's
principle were correct that such taxes would enhance the prices of
manufactured commodities; for such an effect could be only temporary,
and would subject us to no disadvantage in our foreign trade. If any
cause should raise the price of a few manufactured commodities, it would
prevent or check their exportation; but if the same cause operated
generally on all, the effect would be merely nominal, and would neither
interfere with their relative value, nor in any degree diminish the
stimulus to a trade of barter; which all commerce, both foreign and
domestic, really is.

I have already attempted to shew, that when any cause raises the prices
of all commodities in general, the effects are nearly similar to a fall
in the value of money. If money falls in value, all commodities rise in
price; and if the effect is confined to one country, it will affect its
foreign commerce in the same way as a high price of commodities caused
by general taxation; and therefore in examining the effects of a low
value of money confined to one country, we are also examining the
effects of a high price of commodities confined to one country. Indeed
Adam Smith was fully aware of the resemblance between these two cases,
and consistently maintained that the low value of money, or, as he calls
it, of silver in Spain, in consequence of the prohibition against its
exportation, was very highly prejudicial to the manufactures and foreign
commerce of Spain. "But that degradation in the value of silver, which
being the effect either of the peculiar situation, or of the political
institutions of a particular country, takes place only in that country,
is a matter of very great consequence, which, far from tending to make
any body really richer, tends to make every body really poorer. The rise
in the money price of all commodities, which is in this case peculiar to
that county, tends to discourage more or less every sort of industry
which is carried on within it, and to enable foreign nations, by
furnishing almost all sorts of goods for a smaller quantity of silver
than its own workmen can afford to do, to undersell them not only in
the foreign, but even in the home market. " Vol. ii. page 278.

One, and I think the only one of the disadvantages of a low value of
silver in a country, proceeding from a forced abundance, has been ably
explained by Dr. Smith. If the trade in gold and silver were free, "the
gold and silver which would go abroad, would not go abroad for nothing,
but would bring back an equal value of goods of some kind or another.
Those goods too would not be all matters of mere luxury and expense, to
be consumed by idle people, who produce nothing in return for their
consumption. As the real wealth and revenue of idle people would not be
augmented by this extraordinary exportation of gold and silver, so would
neither their consumption be augmented by it. Those goods would,
probably the greater part of them, and certainly some part of them,
consist in materials, tools, and provisions, for the employment and
maintenance of industrious people, who would reproduce with a profit,
the full value of their consumption. A part of the dead stock of the
society would thus be turned into active stock, and would put into
motion a greater quantity of industry than had been employed before. "

By not allowing a free trade in the precious metals when the prices of
commodities are raised, either by taxation, or by the influx of the
precious metals, you prevent a part of the dead stock of the society
from being turned into active stock--you prevent a greater quantity of
industry from being employed. But this is the whole amount of the evil;
an evil never felt by those countries where the exportation of silver is
either allowed or connived at.

The exchanges between countries are at par only, whilst they have
precisely that quantity of currency which in the actual situation of
things they should have to carry on the circulation of their
commodities.
If the trade in the precious metals were perfectly free,
and money could be exported without any expense whatever, the exchanges
could be no otherwise in every country than at par. If the trade in the
precious metals were perfectly free, if they were generally used in
circulation, even with the expenses of transporting them, the exchange
could never in any of them deviate more from par, than by these
expenses. These principles I believe are now no where disputed. If a
country used paper money not exchangeable for specie, and therefore not
regulated by any fixed standard, the exchanges in that country might
deviate as much from par, as its money might be multiplied beyond that
quantity which would have been allotted to it by general commerce, if
the trade in money had been free, and the precious metals had been used,
either for money, or for the standard of money.

If by the general operations of commerce, 10 millions of pounds
sterling, of a known weight and fineness of bullion, should be the
portion of England, and 10 millions of paper pounds were substituted, no
effect would be produced on the exchange; but if by the abuse of the
power of issuing paper money, 11 millions of pounds should be employed
in the circulation, the exchange would be 9 per cent. against England;
if 12 millions were employed, the exchange would be 16 per cent. ; and if
20 millions, the exchange would be 50 per cent. against England. To
produce this effect it is not however necessary that paper money should
be employed: any cause which retains in circulation a greater quantity
of pounds than would have circulated, if commerce had been free, and the
precious metals of a known weight and fineness had been used, either for
money, or for the standard of money, would exactly produce the same
effects. Suppose that by clipping the money, each pound did not contain
the quantity of gold or silver which by law it should contain, a greater
number of such pounds might be employed in the circulation, than if they
were not clipped. If from each pound one tenth were taken away, 11
millions of such pounds might be used instead of 10; if two tenths were
taken away, 12 millions might be employed; and if one half were taken
away, 20 millions might not be found superfluous. If the latter sum were
used instead of 10 millions, every commodity in England would be raised
to double its former price, and the exchange would be 50 per cent.
against England, but this would occasion no disturbance in foreign
commerce, nor discourage the manufacture of any one commodity. If for
example, cloth rose in England from 20_l. _ to 40_l. _ per piece, we
should just as freely export it after as before the rise, for a
compensation of 50 per cent. would be made to the foreign purchaser in
the exchange; so that with 20_l. _ of his money, he could purchase a bill
which would enable him to pay a debt of 40_l. _ in England. In the same
manner if he exported a commodity which cost 20_l. _ at home, and which
sold in England for 40_l. _ he would only receive 20_l. _, for 40_l. _ in
England would only purchase a bill for 20_l. _ on a foreign country. The
same effects would follow from whatever cause 20 millions could be
forced to perform the business of circulation in England, if 10 millions
only were necessary. If so absurd a law, as the prohibition of the
exportation of the precious metals, could be enforced, and the
consequence of such prohibition were to force 11 millions instead of 10
into circulation, the exchange would be 9 per cent. against England; if
12 millions, 16 per cent. ; and if 20 millions, 50 per cent. against
England. But no discouragement would be given to the manufactures of
England; if home commodities sold at a high price in England, so would
foreign commodities; and whether they were high or low would be of
little importance to the foreign exporter and importer, whilst he would,
on the one hand, be obliged to allow a compensation in the exchange when
his commodities sold at a dear rate, and would receive the same
compensation, when he was obliged to purchase English commodities at a
high price. The sole disadvantage then which could happen to a country
from retaining by prohibitory laws a greater quantity of gold and silver
in circulation than would otherwise remain there, would be the loss
which it would sustain from employing a portion of its capital
unproductively, instead of employing it productively. In the form of
money this capital is productive of no profit; in the form of materials,
machinery, and food, for which it might be exchanged, it would be
productive of revenue, and would add to the wealth and the resources of
the state. Thus then I hope I have satisfactorily proved, that a
comparatively low price of the precious metals, in consequence of
taxation, or in other words, a generally high price of commodities,
would be of no disadvantage to a state, as a part of the metals would be
exported, which, by raising their value, would again lower the prices
of commodities. And further, that if they were not exported, if by
prohibitory laws they could be retained in a country, the effect on the
exchange would counterbalance the effect of high prices. If then taxes
on necessaries and on wages would not raise the prices of all
commodities on which labour was expended, they cannot be condemned on
such grounds; and moreover, even if the opinion that they would have
such an effect were well founded, they would be in no degree injurious
on that account.

It is undoubtedly true, that "taxes upon luxuries have no tendency to
raise the price of any other commodities, except that of the commodities
taxed;" but it is not true, that "taxes upon necessaries, by raising the
wages of labour, necessarily tend to raise the price of all
manufactures. " It is true, that "taxes upon luxuries are finally paid by
the consumers of the commodities taxed, without any retribution. They
fall indifferently upon every species of revenue, the wages of labour,
the profits of stock, and the rent of land;" but it is not true, "that
taxes upon necessaries _so far as they affect the labouring poor_, are
finally paid partly by landlords in the diminished rent of their lands,
and partly by rich consumers, whether landlords or others, in the
advanced price of manufactured goods;" for _so far as these taxes affect
the labouring poor_, they will be almost wholly paid by the diminished
profits of stock, a small part only being paid by the labourers
themselves in the diminished demand for labour, which taxation of every
kind has a tendency to produce.

It is from Dr. Smith's erroneous view of the effect of those taxes, that
he has been led to the conclusion, that "the middling and superior ranks
of people, if they understood their own interest, ought always to oppose
all taxes upon the necessaries of life, as well as all direct taxes upon
the wages of labour. " This conclusion follows from his reasoning, "that
the final payment of both one and the other falls altogether upon
themselves, and always with a considerable overcharge. They fall
heaviest upon the landlords, who always pay in a double capacity; in
that of landlords, by the reduction of their rent, and in that of rich
consumers, by the increase of their expense. The observation of Sir
Matthew Decker, that certain taxes are in the price of certain goods,
sometimes repeated and accumulated four or five times, is perfectly just
with regard to taxes upon the necessaries of life. In the price of
leather, for example, you must pay, not only for the tax upon the
leather of your own shoes, but for a part of that upon those of the
shoemaker and the tanner. You must pay too for the tax upon the salt,
upon the soap, and upon the candles, which those workmen consume while
employed in your service, and for the tax upon the leather, which the
salt-maker, the soap-maker, and the candle-maker consume, while employed
in their service. "

Now as Dr. Smith does not contend that the tanner, the salt-maker, the
soap-maker, and the candle-maker, will either of them be benefited by
the tax on leather, salt, soap, and candles; and as it is certain, that
government will receive no more than the tax imposed, it is impossible
to conceive, that more can be paid by the public upon whomsoever the tax
may fall. The rich consumers may, and indeed will, pay for the poor
consumer, but they will pay no more than the whole amount of the tax;
and it is not in the nature of things, that "the tax should be repeated
and accumulated four or five times. "

A system of taxation may be defective; more may be raised from the
people, than what finds its way into the coffers of the state, as a
part, in consequence of its effect on prices, may possibly be received
by those, who are benefited by the peculiar mode in which taxes are
laid. Such taxes are pernicious, and should not be encouraged; for it
may be laid down as a principle, that when taxes operate justly, they
conform to the first of Dr. Smith's maxims, and raise from the people as
little as possible beyond what enters into the public treasury of the
state. M. Say says, "others offer plans of finance, and propose means
for filling the coffers of the sovereign, without any charge to his
subjects. But unless a plan of finance is of the nature of a commercial
undertaking, it cannot give government more than it takes away, either
from individuals, or from government itself, under some other form.
Something cannot be made out of nothing, by the stroke of a wand. In
whatever way an operation may be disguised, whatever forms we may
constrain a value to take, whatever metamorphosis we may make it
undergo, we can only have a value by creating it, or by taking it from
others. The very best of all plans of finance is to spend little, and
the best of all taxes is, that which is the least in amount. "

Dr. Smith uniformly, and I think justly, contends, that the labouring
classes cannot materially contribute to the burdens of the state. A tax
on necessaries, or on wages, will therefore be shifted from the poor to
the rich: if then, the meaning of Dr. Smith is, "that certain taxes are
in the price of certain goods sometimes repeated, and accumulated four
or five times," for the purpose only of accomplishing this end, namely,
the transference of the tax from the poor to the rich, they cannot be
liable to censure on that account.

Suppose the just share of the taxes of a rich consumer to be 100_l. _,
and that he would pay it directly, if the tax were laid on income, on
wine, or on any other luxury, he would suffer no injury if by the
taxation of necessaries, he should be only called upon for the payment
of 25_l. _, as far as his own consumption of necessaries, and that of his
family was concerned, but should be required to repeat this tax three
times, by paying an additional price for other commodities to remunerate
the labourers, or their employers, for the tax which they have been
called upon to advance. Even in that case the reasoning is inconclusive:
for if there be no more paid than what is required by Government; of
what importance can it be to the rich consumer, whether he pay the tax
directly, by paying an increased price for an object of luxury, or
indirectly, by paying an increased price for the necessaries and other
commodities he consumes? If more be not paid by the people, than what is
received by Government, the rich consumer will only pay his equitable
share; if more is paid, Adam Smith should have stated by whom it is
received.

M. Say does not appear to me to have consistently adhered to the obvious
principle, which I have quoted from his able work; for in the next page,
speaking of taxation, he says, "When it is pushed too far, it produces
this lamentable effect, it deprives the contributor of a portion of his
riches, without enriching the state. This is what we may comprehend, if
we consider that every man's power of consuming, whether productively or
not, is limited by his income. He cannot then be deprived of a part of
his income, without being obliged proportionally to reduce his
consumption. Hence arises a diminution of demand for those goods, which
he no longer consumes, and particularly for those on which the tax is
imposed. From this diminution of demand, there results a diminution of
production, and consequently of taxable commodities. The contributor
then will lose a portion of his enjoyments; the producer, a portion of
his profits; and the treasury, a portion of its receipts. "

M. Say instances the tax on salt in France, previous to the revolution;
which, he says, diminished the production of salt by one half. If,
however, less salt was consumed, less capital was employed in producing
it; and therefore, though the producer would obtain less profits on the
production of salt, he would obtain more on the production of other
things. If a tax, however burdensome it may be, falls on revenue, and
not on capital, it does not diminish demand, it only alters the nature
of it. It enables Government to consume as much of the produce of the
land and labour of the country, as was before consumed by the
individuals who contribute to the tax. If my income is 1000_l. _ per
annum, and I am called upon for 100_l. _ per annum for a tax, I shall
only be able to demand nine tenths of the quantity of goods, which I
before consumed, but I enable Government to demand the other tenth. If
the commodity taxed be corn, it is not necessary that my demand for corn
should diminish, as I may prefer to pay 100_l. _ per annum more for my
corn, and to the same amount abate in my demand for wine, furniture, or
any other luxury. [17] Less capital will consequently be employed in the
wine or upholstery trade, but more will be employed in manufacturing
those commodities, on which the taxes levied by Government will be
expended.

M. Say says that M. Turgot, by reducing the market dues on fish (_les
droits d'entrée et de halle sur la marée_) in Paris one half, did not
diminish the amount of their produce, and that consequently, the
consumption of fish must have doubled. He infers from this, that the
profits of the fisherman and those engaged in the trade, must also have
doubled, and that the income of the country must have increased, by the
whole amount of these increased profits; and by giving a stimulus to
accumulation, must have increased the resources of the state. [18]

Without calling in question the policy, which dictated this alteration
of the tax, I may be permitted to doubt whether it gave any great
stimulus to accumulation. If the profits of the fisherman and others
engaged in the trade, were doubled in consequence of more fish being
consumed, capital and labour must have been withdrawn from other
occupations to engage them in this particular trade. But in those
occupations capital and labour were productive of profits, which must
have been given up when they were withdrawn. The ability of the country
to accumulate was only increased by the difference between the profits
obtained in the business in which the capital was newly engaged, and
those obtained in that from which it was withdrawn.

Whether taxes be taken from revenue or capital, they diminish the
taxable commodities of the state. If I cease to expend 100_l. _ on wine,
because by paying a tax of that amount I have enabled Government to
expend 100_l. _ instead of expending it myself, one hundred pounds worth
of goods are necessarily withdrawn from the list of taxable
commodities. If the revenue of the individuals of a country be 10
millions, they will have at least 10 millions worth of taxable
commodities. If by taxing some, one million be transferred to the
disposal of Government, their revenue will still be nominally 10
millions, but they will remain with only nine millions worth of taxable
commodities. There are no circumstances under which taxation does not
abridge the enjoyments of those on whom the taxes ultimately fall, and
no means by which those enjoyments can again be extended, but the
accumulation of new revenue.

Taxation can never be so equally applied, as to operate in the same
proportion on the value of all commodities, and still to preserve them
at the same relative value. It frequently operates very differently from
the intention of the legislature, by its indirect effects. We have
already seen, that the effect of a direct tax on corn and raw produce,
is, if money be also produced in the country, to raise the price of all
commodities, in proportion as raw produce enters into their composition,
and thereby to destroy the natural relation which previously existed
between them. Another indirect effect is, that it raises wages, and
lowers the rate of profits; and we have also seen, in another part of
this work, that the effect of a rise of wages, and a fall of profits, is
to lower the money prices of those commodities which are produced in a
greater degree by the employment of fixed capital.

That a commodity when taxed can no longer be so profitably exported, is
so well understood, that a drawback is frequently allowed on its
exportation, and a duty laid on its importation. If these drawbacks and
duties be accurately laid, not only on the commodities themselves, but
on all which they may indirectly affect, then indeed there will be no
disturbance in the value of the precious metals. Since we could as
readily export a commodity after being taxed as before, and since no
peculiar facility would be given to importation, the precious metals
would not, more than before, enter into the list of exportable
commodities.

Of all commodities, none are perhaps so proper for taxation, as those
which either by the aid of nature or art, are produced with peculiar
facility. With respect to foreign countries, such commodities may be
classed under the head of those which are not regulated in their price
by the quantity of labour bestowed, but rather by the caprice, the
tastes, and the power of the purchasers. If England had more productive
tin mines than other countries, or if from superior machinery or fuel
she had peculiar facilities in manufacturing cotton goods, the prices of
tin, and of cotton goods would still in England be regulated by the
comparative quantity of labour and capital required to produce them, and
the competition of our merchants would make them very little dearer to
the foreign consumer. Our advantage in the production of these
commodities might be so decided, that probably they could bear a very
great additional price in the foreign market, without very materially
diminishing their consumption. This price they never could attain,
whilst competition was free at home, by any other means but by a tax on
their exportation. This tax would fall wholly on foreign consumers, and
part of the expenses of the Government of England would be defrayed, by
a tax on the land and labour of other countries. The tax on tea, which
at present is paid by the people of England, and goes to aid the
expenses of the Government of England, might, if laid in China, on the
exportation of the tea, be diverted to the payment of the expenses of
the Government of China.

Taxes on luxuries have some advantage over taxes on necessaries. They
are generally paid from income, and therefore do not diminish the
productive capital of the country. If wine were much raised in price in
consequence of taxation, it is probable that a man would rather forego
the enjoyments of wine, than make any important encroachments on his
capital, to be enabled to purchase it. They are so identified with
price, that the contributor is hardly aware that he is paying a tax. But
they have also their disadvantages. First, they never reach capital, and
on some extraordinary occasions it may be expedient that even capital
should contribute towards the public exigencies; and secondly, there is
no certainty as to the amount of the tax, for it may not reach even
income. A man intent on saving will exempt himself from a tax on wine,
by giving up the use of it. The income of the country may be
undiminished, and yet the state may be unable to raise a shilling by the
tax.

Whatever habit has rendered delightful, will be relinquished with
reluctance, and will continue to be consumed notwithstanding a very
heavy tax; but this reluctance has its limits, and experience every day
demonstrates that an increase in the nominal amount of taxation, often
diminishes the produce. One man will continue to drink the same quantity
of wine, though the price of every bottle should be raised three
shillings, who would yet relinquish the use of wine rather than pay
four. Another will be content to pay four, yet refuse to pay five
shillings. The same may be said of other taxes on luxuries: many would
pay a tax of 5_l. _ for the enjoyment which a horse affords, who would
not pay 10_l. _ or 20_l. _ It is not because they cannot pay more, that
they give up the use of wine and of horses, but because they will not
pay more. Every man has some standard in his own mind by which he
estimates the value of his enjoyments, but that standard is as various
as the human character. A country whose financial situation has become
extremely artificial, by the mischievous policy of accumulating a large
national debt, and a consequently enormous taxation, is particularly
exposed to the inconvenience attendant on this mode of raising taxes.
After visiting with a tax the whole round of luxuries; after laying
horses, carriages, wine, servants, and all the other enjoyments of the
rich, under contribution; a minister is disposed to conclude that the
country is arrived at the maximum of taxation, because by increasing the
rate, he cannot increase the amount of any one of these taxes. But in
this conclusion he will not be always correct, for it is very possible
that such a country could bear a very great addition to its burdens
without infringing on the integrity of its capital.




CHAPTER XV.

TAXES ON OTHER COMMODITIES THAN RAW PRODUCE.


On the same principle that a tax on corn would raise the price of corn,
a tax on any other commodity would raise the price of that commodity. If
the commodity did not rise by a sum equal to the tax, it would not give
the same profit to the producer which he had before, and he would remove
his capital to some other employment.

The taxing of all commodities, whether they be necessaries or luxuries,
will, while money remains at an unaltered value, raise their prices by a
sum at least equal to the tax. [19] A tax on the manufactured necessaries
of the labourer would have the same effect on wages as a tax on corn,
which differs from other necessaries only by being the first and most
important on the list; and it would produce precisely the same effects
on the profits of stock and foreign trade. But a tax on luxuries would
have no other effect than to raise their price. It would fall wholly on
the consumer, and could neither increase wages, nor lower profits.

Taxes which are levied on a country for the purpose of supporting war,
or for the ordinary expenses of the state, and which are chiefly devoted
to the support of unproductive labourers, are taken from the productive
industry of the country; and every saving which can be made from such
expenses will be generally added to the income, if not to the capital of
the contributors. When for the expenses of a year's war, twenty millions
are raised by means of a loan, it is the twenty millions which are
withdrawn from the productive capital of the nation. The million per
annum which is raised by taxes to pay the interest of this loan, is
merely transferred from those who pay it to those who receive it, from
the contributor to the tax to the national creditor. The real expense is
the twenty millions, and not the interest which must be paid for it. [20]
Whether the interest be or be not paid, the country will neither be
richer nor poorer. Government might at once have required the twenty
millions in the shape of taxes; in which case it would not have been
necessary to raise annual taxes to the amount of a million. This however
would not have changed the nature of the transaction. An individual
instead of being called upon to pay 100_l. _ per annum, might have been
obliged to pay 2000_l. _ once for all. It might also have suited his
convenience rather to borrow this 2000_l. _, and to pay 100_l. _ per annum
for interest to the lender, than to spare the larger sum from his own
funds. In one case it is a private transaction between A and B, in the
other Government guarantees to B the payment of the interest to be
equally paid by A. If the transaction had been of a private nature, no
public record would be kept of it, and it would be a matter of
comparative indifference to the country whether A faithfully performed
his contract to B, or unjustly retained, the 100_l. _ per annum in his
own possession. The country would have a general interest in the
faithful performance of a contract, but with respect to the national
wealth, it would have no other interest than whether A or B would make
this 100_l. _ most productive, but on this question it would neither have
the right nor the ability to decide. It might be possible, that if A
retained it for his own use, he might squander it unprofitably, and if
it were paid to B, he might add it to his capital, and employ it
productively. And the converse would also be possible, B might squander
it, and A might employ it productively. With a view to wealth only, it
might be equally or more desirable that A should or should not pay it;
but the claims of justice and good faith, a greater utility, are not to
be compelled to yield to those of a less; and accordingly, if the state
were called upon to interfere, the courts of justice would oblige A to
perform his contract. A debt guaranteed by the nation, differs in no
respect from the above transaction. Justice and good faith demand that
the interest of the national debt should continue to be paid, and that
those who have advanced their capitals for the general benefit, should
not be required to forego their equitable claims, on the plea of
expediency.

But independently of this consideration, it is by no means certain, that
political utility would gain any thing by the sacrifice of political
integrity; it does by no means follow, that the party exonerated from
the payment of the interest of the national debt would employ it more
productively than those to whom indisputably it is due. By cancelling
the national debt, one man's income might be raised from 1000_l. _ to
1500_l. _, but another man's would be lowered from 1500_l. _ to 1000_l. _
These two men's income now amount to 2500_l. _, they would amount to no
more then. If it be the object of Government to raise taxes, there would
be precisely the same taxable capital and income in one case, as in the
other. It is not then by the payment of the interest on the national
debt that a country is distressed, nor is it by the exoneration from
payment that it can be relieved. It is only by saving from income, and
retrenching in expenditure, that the national capital can be increased;
and neither the income would be increased, nor the expenditure
diminished by the annihilation of the national debt. It is by the
profuse expenditure of Government, and of individuals, and by loans,
that a country is impoverished; every measure therefore which is
calculated to promote public and private oeconomy will relieve the
public distress; but it is error and delusion, to suppose that a real
national difficulty can be removed, by shifting it from the shoulders of
one class of the community, who justly ought to bear it, to the
shoulders of another class, who upon every principle of equity ought to
bear no more than their share. From what I have said, it must not be
inferred that I consider the system of borrowing as the best calculated
to defray the extraordinary expenses of the state. It is a system which
tends to make us less thrifty--to blind us to our real situation. If the
expenses of a war be 40 millions per annum, and the share which a man
would have to contribute towards that annual expense were 100_l. _, he
would endeavour, on being at once called upon for his portion, to save
speedily the 100_l. _ from his income. By the system of loans he is
called upon to pay only the interest of this 100_l. _, or 5_l. _ per
annum, and considers that he does enough by saving this 5_l. _ from his
expenditure, and then deludes himself with the belief that he is as rich
as before. The whole nation, by reasoning and acting in this manner,
save only the interest of 40 millions, or two millions; and thus, not
only lose all the interest or profit which 40 millions of capital,
employed productively, would afford, but also 38 millions, the
difference between their savings and expenditure. If, as I before
observed, each man had to make his own loan, and contribute his full
proportion to the exigencies of the state, as soon as the war ceased,
taxation would cease, and we should immediately fall into a natural
state of prices. Out of his private funds, A might have to pay to B
interest for the money he borrowed of him during the war, to enable him
to pay his quota of the expense; but with this the nation would have no
concern. A country which has accumulated a large debt is placed in a
most artificial situation; and although the amount of taxes, and the
increased price of labour, may not, and I believe does not, place it
under any other disadvantage with respect to foreign countries, except
the unavoidable one of paying those taxes, yet it becomes the interest
of every contributor to withdraw his shoulder from the burthen, and to
shift this payment from himself to another; and the temptation to remove
himself and his capital to another country, where he will be exempted
from such burthens, becomes at last irresistible, and overcomes the
natural reluctance which every man feels to quit the place of his birth,
and the scene of his early associations. A country which has involved
itself in the difficulties attending this artificial system, would act
wisely by ransoming itself from them, at the sacrifice of any portion of
its property which might be necessary to redeem its debt. That which is
wise in an individual, is wise also in a nation. A man who has
10,000_l. _, paying him an income of 500_l. _, out of which he has to pay
100_l. _ per annum towards the interest of the debt, is really worth only
8000_l. _, and would be equally rich, whether he continued to pay 100_l. _
per annum, or at once, and for only once, sacrificed 2000_l. _ But where,
it is asked, would be the purchaser of the property which he must sell
to obtain this 2000_l. _? The answer is plain: the national creditor, who
is to receive this 2000_l. _, will want an investment for his money, and
will be disposed either to lend it to the landholder, or manufacturer,
or to purchase from them a part of the property of which they have to
dispose. To such an effect the stockholders themselves would largely
contribute.