_, if they should
increase
it to 5_l.
Ricardo - On The Principles of Political Economy, and Taxation
It may then be objected against such a tax,
1st. That by raising the wages of labour, and lowering profits,
it is an unequal tax, as it affects the income of the farmer,
trader, and manufacturer, and leaves untaxed the income of the
landlord, stockholder, and others enjoying fixed incomes.
2dly. That there would be a considerable interval between
the rise in the price of corn and the rise of wages,
during which much distress would be experienced by the
labourer.
3rdly. That raising wages and lowering profits is a
discouragement to accumulation, and acts in the same way
as a natural poverty of soil.
4thly. That by raising the price of raw produce, the
prices of all commodities into which raw produce enters,
would be raised, and that therefore we should not meet
the foreign manufacture on equal terms in the general
market.
With respect to the first objection, that by raising the wages of labour
and lowering profits it acts unequally, as it affects the income of the
farmer, trader, and manufacturer, and leaves untaxed the income of the
landlord, stockholder, and others enjoying fixed incomes,--it may be
answered, that if the operation of the tax be unequal, it is for the
legislature to make it equal, by taxing directly the rent of land, and
the dividends from stock. By so doing, all the objects of an income tax
would be obtained, without the inconvenience of having recourse to the
obnoxious measure of prying into every man's concerns, and arming
commissioners with powers repugnant to the habits and feelings of a free
country.
With respect to the second objection, that there would be a considerable
interval between the rise of the price of corn and the rise of wages,
during which much distress would be experienced by the lower classes,--I
answer, that under different circumstances, wages follow the price of
raw produce with very different degrees of celerity; that in some cases
no effect whatever is produced on wages by a rise of corn; in others,
the rise of wages precedes the rise in the price of corn; again, in some
the effect is slow, and in others the interval must be very short.
Those who maintain that it is the price of necessaries which regulates
the price of labour, always allowing for the particular state of
progression in which the society, may be seem to have conceded too
readily, that a rise or fall in the price of necessaries will be very
slowly succeeded by a rise or fall of wages. A high price of provisions
may arise from very different causes, and may accordingly produce very
different effects. It may arise from
1st. A deficient supply.
2nd. From a gradually increasing demand, which may be
ultimately attended with an increased cost of production.
3dly. From a fall in the value of money.
4thly. From taxes on necessaries.
These four causes have not been sufficiently distinguished and separated
by those who have inquired into the influence of a high price of
necessaries on wages. We will examine them severally.
A bad harvest will produce a high price of provisions, and the high
price is the only means by which the consumption is compelled to conform
to the state of the supply. If all the purchasers of corn were rich,
the price might rise to any degree, but the result would remain
unaltered; the price would at last be so high, that the least rich would
be obliged to forego the use of a part of the quantity which they
usually consumed, as by diminished consumption alone, the demand could
be brought down to the limits of the supply. Under such circumstances no
policy can be more absurd, than that of forcibly regulating money wages
by the price of food, as is frequently done, by misapplication of the
poor laws. Such a measure affords no real relief to the labourer,
because its effect is to raise still higher the price of corn, and at
last he must be obliged to limit his consumption in proportion to the
limited supply. In the natural course of affairs a deficient supply from
bad seasons, without any pernicious and unwise interference, would not
be followed by a rise of wages. The raising of wages is merely nominal
to those who receive them; it increases the competition in the corn
market, and its ultimate effect is to raise the profits of the growers
and dealers in corn. The wages of labour are really regulated by the
proportion between the supply and demand of necessaries, and the supply
and demand of labour; and money is merely the medium, or measure, in
which wages are expressed. In this case then the distress of the
labourer is unavoidable, and no legislation can afford a remedy, except
by the importation of additional food.
When a high price of corn is the effect of an increasing demand, it is
always preceded by an increase of wages, for demand cannot increase,
without an increase of means in the people to pay for that which they
desire. An accumulation of capital naturally produces an increased
competition among the employers of labour, and a consequent rise in its
price. The increased wages are not immediately expended on food, but are
first made to contribute to the other enjoyments of the labourer. His
improved condition however induces, and enables him to marry, and then
the demand for food for the support of his family naturally supersedes
that of those other enjoyments on which his wages were temporarily
expended. Corn rises then because the demand for it increases, because
there are those in the society who have improved means of paying for
it; and the profits of the farmer will be raised above the general level
of profits, till the requisite quantity of capital has been employed on
its production. Whether, after this has taken place, corn shall again
fall to its former price, or shall continue permanently higher, will
depend on the quality of the land from which the increased quantity of
corn has been supplied. If it be obtained from land of the same
fertility, as that which was last in cultivation, and with no greater
cost of labour, the price will fall to its former state; if from poorer
land, it will continue permanently higher. The high wages in the first
instance proceeded from an increase in the demand for labour: inasmuch
as it encouraged marriage, and supported children, it produced the
effect of increasing the supply of labour. But when the supply is
obtained, wages will again fall to their former price, if corn has
fallen to its former price: to a higher than the former price, if the
increased supply of corn has been produced from land of an inferior
quality. A high price is by no means incompatible with an abundant
supply: the price is permanently high, not because the quantity is
deficient, but because there has been an increased cost in producing it.
It generally happens indeed, that when a stimulus has been given to
population, an effect is produced beyond what the case requires; the
population may be, and generally is so much increased as,
notwithstanding the increased demand for labour, to bear a greater
proportion to the funds for maintaining labourers than before the
increase of capital. In this case a re-action will take place, wages
will be below their natural level, and will continue so, till the usual
proportion between the supply and demand has been restored. In this case
then, the rise in the price of corn is preceded by a rise of wages, and
therefore entails no distress on the labourer.
A fall in the value of money, in consequence of an influx of the
precious metals from the mines, or from the abuse of the privileges of
banking, is another cause for the rise of the price of food; but it will
make no alteration in the quantity produced. It leaves undisturbed too
the number of labourers, as well as the demand for them; for there will
be neither an increase nor a diminution of capital. The quantity of
necessaries to be allotted to the labourer, depends on the comparative
demand and supply of necessaries, with the comparative demand and supply
of labour; money being only the medium in which the quantity is
expressed; and as neither of these is altered, the real reward of the
labourer will not alter. Money wages will rise, but they will only
enable him to furnish himself with the same quantity of necessaries as
before. Those who dispute this principle, are bound to shew why an
increase of money should not have the same effect in raising the price
of labour, the quantity of which has not been increased, as they
acknowledge it would have on the price of shoes, of hats, and of corn,
if the quantity of those commodities were not increased. The relative
market value of hats and shoes is regulated by the demand and supply of
hats, compared with the demand and supply of shoes, and money is but the
medium in which their value is expressed. If shoes be doubled in price,
hats will also be doubled in price, and they will retain the same
comparative value. So if corn and all the necessaries of the labourer be
doubled in price, labour will be doubled in price also, and while there
is no interruption to the usual demand and supply of necessaries and of
labour, there can be no reason why they should not preserve their
relative value.
Neither a fall in the value of money, nor a tax on raw produce, though
each will raise the price, will _necessarily_ interfere with the
quantity of raw produce; or with the number of people, who are both able
to purchase, and willing to consume it. It is very easy to perceive why,
when the capital of a country increases irregularly, wages should rise,
whilst the price of corn remains stationary, or rises in a less
proportion; and why, when the capital of a country diminishes, wages
should fall whilst corn remains stationary, or falls in a much less
proportion, and this too for a considerable time; the reason is, because
labour is a commodity which cannot be increased and diminished at
pleasure. If there are too few hats in the market for the demand, the
price will rise, but only for a short time; for in the course of one
year, by employing more capital in that trade, any reasonable addition
may be made to the quantity of hats, and therefore their market price
cannot long very much exceed their natural price; but it is not so with
men; you cannot increase their number in one or two years when there is
an increase of capital, nor can you rapidly diminish their number when
capital is in a retrograde state; and therefore, the number of hands
increasing or diminishing slowly, whilst the funds for the maintenance
of labour increase or diminish rapidly, there must be a considerable
interval before the price of labour is exactly regulated by the price of
corn and necessaries; but in the case of a fall in the value of money,
or of a tax on corn, there is not necessarily any excess in the supply
of labour, nor any abatement of demand, and therefore there can be no
reason why the labourer should sustain a real diminution of wages.
A tax on corn does not necessarily diminish the quantity of corn, it
only raises its money price; it does not necessarily diminish the demand
compared with the supply of labour; why then should it diminish the
portion paid to the labourer? Suppose it true that it did diminish the
quantity given to the labourer, in other words, that it did not raise
his money wages in the same proportion as the tax raised the price of
the corn which he consumed; would not the supply of corn exceed the
demand? --would it not fall in price? and would not the labourer thus
obtain his usual portion? In such case indeed capital would be withdrawn
from agriculture; for if the price were not increased by the whole
amount of the tax, agricultural profits would be lower than the general
level of profits, and capital would seek more advantageous employment.
In regard then to a tax on raw produce, which is the point under
discussion, it appears to me that no interval which could bear
oppressively on the labourer, would elapse between the rise in the price
of raw produce, and the rise in the wages of the labourer; and that
therefore no other inconvenience would be suffered by this class, than
that which they would suffer from any other mode of taxation, namely,
the risk that the tax might infringe on the funds destined for the
maintenance of labour, and might therefore check or abate the demand for
it.
With respect to the third objection against taxes on raw produce,
namely, that the raising wages, and lowering profits, is a
discouragement to accumulation, and acts in the same way as a natural
poverty of soil; I have endeavoured to shew in another part of this work
that savings may be as effectually made from expenditure as from
production; from a reduction in the value of commodities, as from a rise
in the rate of profits. By increasing my profits from 1000_l. _ to
1200_l. _, whilst prices continue the same, my power of increasing my
capital by savings is increased but it is not increased so much as it
would be if my profits continued as before, whilst commodities were so
lowered in price, that 800_l. _ would procure me as much as 1000_l. _
purchased before.
Taxation under every form presents but a choice of evils; if it does not
act on profit, it must act on expenditure; and provided the burden be
equally borne, and do not repress reproduction, it is indifferent on
which it is laid. Taxes on production, or on the profits of stock,
whether applied immediately to profits, or indirectly, by taxing the
land or its produce, have this advantage over other taxes; no class of
the community can escape them, and each contributes according to his
means.
From taxes on expenditure a miser may escape; he may have an income of
10,000 per annum, and expend only 300_l. _; but from taxes on profits,
whether direct or indirect, he cannot escape; he will contribute to them
either by giving up a part or the value of a part of his produce; or by
the advanced prices of the necessaries essential to production, he will
be unable to continue to accumulate at the same rate. He may indeed have
an income of the same value, but he will not have the same command of
labour, nor of an equal quantity of materials on which such labour can
be exercised.
If a country is insulated from all others, having no commerce with any
of its neighbours, it can in no way shift any portion of its taxes from
itself. A portion of the produce of its land and labour will be devoted
to the service of the state; and I cannot but think that, unless it
presses unequally on that class which accumulates and saves, it will be
of little importance whether the taxes be levied on profits, on
agricultural, or on manufactured commodities. If my revenue be 1000_l. _
per annum, and I must pay taxes to the amount of 100_l. _, it is of
little importance whether I pay it from my revenue, leaving myself only
900_l. _, or pay 100_l. _ in addition for my agricultural commodities, or
for my manufactured goods. If 100_l. _ is my fair proportion of the
expenses of the country, the virtue of taxation consists in making sure
that I shall pay that 100_l. _, neither more nor less; and that cannot be
effected in any manner so securely as by taxes on wages, profits, or raw
produce.
The fourth and last objection which remains to be noticed is: That by
raising the price of raw produce, the prices of all commodities into
which raw produce enters, will be raised, and that therefore we shall
not meet the foreign manufacturer on equal terms in the general market.
In the first place, corn and _all_ home commodities could not be
materially raised in price without an influx of the precious metals; for
the same quantity of money could not circulate the same quantity of
commodities, at high as at low prices, and the precious metals never
could be purchased with dear commodities. When more gold is required, it
must be obtained by giving more, and not fewer commodities in exchange
for it. Neither could the want of money be supplied by paper, for it is
not paper that regulates the value of gold as a commodity, but gold that
regulates the value of paper. Unless then the value of gold could be
lowered, no paper could be added to the circulation without being
depreciated. And that the value of gold could not be lowered appears
clear, when we consider that the value of gold as a commodity must be
regulated by the quantity of goods which must be given to foreigners in
exchange for it. When gold is cheap, commodities are dear; and when gold
is dear, commodities are cheap, and fall in price. Now as no cause is
shewn why foreigners should sell their gold cheaper than usual, it does
not appear probable that there would be any influx of gold. Without such
an influx there can be no increase of quantity, no fall in its value, no
rise in the general price of goods.
The probable effect of a tax on raw produce would be to raise the price
of all commodities in which raw produce entered, but not in any degree
proportioned to the tax; while other commodities in which no raw produce
entered, such as articles made of the metals and the earths, would fall
in price: so that the same quantity of money as before would be adequate
to the whole circulation.
A tax which should have the effect of raising the price of all home
productions, would not discourage exportation, except during a very
limited time. If they were raised in price at home, they could not
indeed immediately be profitably exported, because they would be subject
to a burthen here from which abroad they were free. The tax would
produce the same effect as an alteration in the value of money, which
was not general and common to all countries, but confined to a single
one. If England were that country, she might not be able to sell, but
she would be able to buy, because importable commodities would not be
raised in price. Under these circumstances nothing but money could be
exported in return for foreign commodities, but this is a trade which
could not long continue; a nation cannot be exhausted of its money, for
after a certain quantity has left it, the value of the remainder will
rise, and such a price of commodities will be the consequence, that they
will again be capable of being profitably exported. When money had
risen, therefore, we should no longer export it in return for goods
imported, but we should export those manufactures which had first been
raised in price, by the rise in the price of the raw produce from which
they were made, and then again lowered by the exportation of money.
But it may be objected, that when money so rose in value, it would rise
with respect to foreign as well as home commodities, and therefore that
all encouragement to import foreign goods would cease. Thus, suppose we
imported goods which cost 100_l. _ abroad, and which sold for 120_l. _
here, we should cease to import them, when the value of money had so
risen in England, that they would only sell for 100_l. _ here: this
however could never happen. The motive which determines us to import a
commodity, is the discovery of its relative cheapness abroad: it is the
comparison of its natural price abroad, with its natural price at home.
If a country exports hats, and imports cloth, it does so because it can
obtain more cloth by making hats, and exchanging them for cloth, than if
it made the cloth itself. If the rise of raw produce occasions any
increased cost of production in making hats, it would occasion also an
increased cost in making cloth. If therefore both commodities were made
at home, they would both rise. One, however, being a commodity which we
import, would not rise, neither would it fall, when the value of money
rose; for by not falling, it would regain its natural relation to the
exported commodity. The rise of raw produce makes a hat rise from 30 to
33 shillings, or 10 per cent. : the same cause if we manufactured cloth,
would make it rise from 20_s. _ to 22_s. _ per yard. This rise does not
destroy the relation between cloth and hats; a hat was, and continues to
be, worth one yard and a half of cloth. But if we import cloth, its
price will continue uniformly at 20_s. _ per yard, unaffected first by
the fall, and then by the rise in the value of money; whilst hats, which
had risen from 30_s. _ to 33_s. _, will again fall from 33_s. _ to 30_s. _,
at which point the relation between cloth and hats will be restored.
To simplify the consideration of this subject, I have been supposing
that a rise in the value of raw materials would affect, in an equal
proportion, all home commodities; that if the effect on one were to
raise it 10 per cent. , it would raise all 10 per cent. ; but as the value
of commodities is very differently made up of raw material and labour;
as some commodities, for instance all those made from the metals, would
be unaffected by the rise of raw produce from the surface of the earth,
it is evident that there would be the greatest variety in the effects
produced on the value of commodities, by a tax on raw produce. As far as
this effect was produced, it would stimulate or retard the exportation
of particular commodities, and would undoubtedly be attended with the
same inconvenience that attends the taxing of commodities; it would
destroy the natural relation between the value of each. Thus, the
natural price of a hat, instead of being the same as a yard and a half
of cloth, might only be of the value of a yard and a quarter, or it
might be of the value of a yard and three quarters, and therefore rather
a different direction might be given to foreign trade. All these
inconveniences would not interfere with the value of the exports and
imports; they would only prevent the very best distribution of the
capital of the whole world, which is never so well regulated, as when
every commodity is freely allowed to settle at its natural price.
Although then the rise in the price of most of our own commodities,
would for a time check exportation generally, and might permanently
prevent the exportation of a few commodities, it could not materially
interfere with foreign trade, and would not place us under any
comparative disadvantage as far as regarded competition in foreign
markets.
CHAPTER VIII. *
TAXES ON RENT.
A tax on rent would affect rent only; it would fall wholly on landlords,
and could not be shifted to any class of consumers. The landlord could
not raise his rent, because he would leave unaltered the difference
between the produce obtained from the least productive land in
cultivation, and that obtained from land of every other quality. Three
sorts of land, No. 1, 2, and 3, are in cultivation, and yield
respectively with the same labour 180, 170, and 160 quarters of wheat;
but No. 3 pays no rent, and is therefore untaxed: the rent then of No. 2
cannot be made to exceed the value of ten, nor No. 1, of twenty
quarters. Such a tax could not raise the price of raw produce, because
as the cultivator of No. 3 pays neither rent nor tax, he would in no way
be enabled to raise the price of the commodity produced. A tax on rent
would not discourage the cultivation of fresh land, for such land pays
no rent, and would be untaxed. If No. 4 were taken into cultivation,
and yielded 150 quarters, no tax would be paid for such land; but it
would create a rent of ten quarters on No. 3, which would then commence
paying the tax.
A tax on rent, as rent is constituted, would discourage cultivation,
because it would be a tax on the profits of the landlord. The term rent
of land, as I have elsewhere observed, is applied to the whole amount of
the value paid by the farmer to his landlord, a part only of which is
strictly rent. The buildings and fixtures, and other expenses paid for
by the landlord, form strictly a part of the stock of the farm, and must
have been furnished by the tenant, if not provided by the landlord. Rent
is the sum paid to the landlord for the use of the land, and for the use
of the land only. The further sum that is paid to him under the name of
rent, is for the use of the buildings, &c. , and is really the profits of
the landlord's stock. In taxing rent, as no distinction would be made
between that part paid for the use of the land, and that paid for the
use of the landlord's stock, a portion of the tax would fall on the
landlord's profits, and would therefore discourage cultivation, unless
the price of raw produce rose. On that land, for the use of which no
rent was paid, a compensation under that name might be given to the
landlord for the use of his buildings. These buildings would not be
erected, nor would raw produce be grown on such land, till the price at
which it sold would not only pay for all the usual outgoings, but also
for this additional one of the tax. This part of the tax does not fall
on the landlord, nor on the farmer, but on the consumer of raw produce.
There can be little doubt, but that if a tax were laid on rent,
landlords would soon find a way to discriminate between that which was
paid to them for the use of the land, and that which was paid for the
use of the buildings, and the improvements which were made by the
landlord's stock. The latter would either be called the rent of house
and buildings, or in all new land taken into cultivation such buildings
and improvements would be made by the tenant, and not by the landlord.
The landlord's capital might indeed be really employed for that purpose;
it might be nominally expended by the tenant, the landlord furnishing
him with the means, either in the shape of a loan, or in the purchase of
an annuity for the duration of the lease. Whether distinguished or not,
there is a real difference between the nature of the compensations which
the landlord receives for these different objects; and it is quite
certain, that a tax on the real rent of land falls wholly on the
landlord, but that a tax on that remuneration which the landlord
receives for the use of his stock expended on the farm, falls on the
consumer of raw produce. If a tax were laid on rent, and no means of
separating the remuneration now paid by the tenant to the landlord under
the name of rent were adopted, the tax, as far as it regarded the rent
on the buildings and other fixtures, would never fall for any length of
time on the landlord, but on the consumer. The capital expended on these
buildings, &c. , must afford the usual profits of stock; but it would
cease to afford this profit on the land last cultivated, if the expenses
of those buildings, &c. did not fall on the tenant; and if they did, the
tenant would then cease to make his usual profits of stock, unless he
could charge them on the consumer.
CHAPTER IX.
TITHES.
Tithes are a tax on the gross produce of the land, and, like taxes on
raw produce, fall wholly on the consumer. They differ from a tax on
rent, inasmuch as they affect land which such a tax would not reach; and
raise the price of raw produce, which that tax e of raw produce, which
that tax would not alter. Lands of the worst quality, as well as of the
best, pay tithes, and exactly in proportion to the quantity of produce
obtained from them; tithes are therefore an equal tax.
If land of the last quality, or that which pays no rent, and which
regulates the price of corn, yield a sufficient quantity to give the
farmer the usual profits of stock, when the price of wheat is 4_l. _ per
quarter, the price must rise to 4_l. _ 8_s. _ before the same profits can
be obtained after the tithes are imposed, because for every quarter of
wheat the cultivator must pay eight shillings to the church.
The only difference between tithes and taxes on raw produce, is, that
one is a variable money tax, the other a fixed money tax. In a
stationary state of society, where there is neither increased nor
diminished facility of producing corn, they will be precisely the same
in their effects; for in such a state corn will be at an invariable
price, and the tax will therefore be also invariable. In either a
retrograde state, or in a state in which great improvements are made in
agriculture, and where consequently raw produce will fall in value
comparatively with other things, tithes will be a lighter tax than a
permanent money tax; for if the price of corn should fall from 4_l. _ to
3_l. _, the tax would fall from eight to six shillings. In a progressive
state of society, yet without any marked improvements in agriculture,
the price of corn would rise, and tithes would be a heavier tax than a
permanent money tax. If corn rose from 4_l. _ to 5_l. _, the tithes on
the same land would advance from eight to ten shillings.
Neither tithes nor a money tax will affect the money rent of landlords,
but both will materially affect corn rents. We have already observed how
a money tax operates on corn rents, and it is equally evident that a
similar effect would be produced by tithes. If the lands, No. 1, 2, 3,
respectively produced 180, 170, and 160 quarters, the rents might be on
No. 1, twenty quarters, and on No. 2, ten quarters; but they would no
longer preserve that proportion after the payment of tithes: for if a
tenth be taken from each, the remaining produce will be 162, 153, 144,
and consequently the corn rent of No. 1 will be reduced to eighteen, and
that of No. 2 to nine quarters. But the price of corn would rise from
4_l. _ to 4_l. _ 8_s. _ 10-2/3_d. _; for nine quarters are to 4_l. _ as ten
quarters to 4_l. _ 8_s. _ 10-2/3_d. _, and consequently the money rent
would continue unaltered; for on No. 1 it would be 80_l. _, and on No. 2,
40_l. _
The chief objection against tithes is, that they are not a permanent and
fixed tax, but increase in value, in proportion as the difficulty of
producing corn increases. If those difficulties should make the price of
corn 4_l. _ the tax is 8_s.
_, if they should increase it to 5_l. _, the
tax is 10_s. _, and at 6_l. _, it is 12_s. _ They not only rise in value,
but they increase in amount: thus, when No. 1 was cultivated, the tax
was only levied on 180 quarters; when No. 2 was cultivated, it was
levied on 180 + 170, or 350 quarters; and when No. 3 was cultivated, on
180 + 170 + 160 = 510 quarters. Not only is the amount of the tax
increased from 100,000 quarters, to 200,000 quarters, when the produce
is increased from one to two millions of quarters; but, owing to the
increased labour necessary to produce the second million, the relative
value of raw produce is so advanced, that the 200,000 quarters may be,
though only twice in quantity, yet in value three times that of the
100,000 quarters which were paid before.
If an equal value were raised for the church by any other means,
increasing in the same manner as tithes increase, proportionably with
the difficulty of cultivation, the effect would be the same. The church
would be constantly obtaining an increased portion of the net produce
of the land and labour of the country. In an improving state of society,
the net produce of land is always diminishing in proportion to its gross
produce; but it is from the net income of a country that all taxes are
ultimately paid, either in a progressive or in a stationary country. A
tax increasing with the gross income, and falling on the net income,
must necessarily be a very burdensome, and a very intolerable tax.
Tithes are a tenth of the gross, and not of the net produce of the land,
and therefore as society improves in wealth, they must, though the same
proportion of the gross produce, become a larger and larger portion of
the net produce.
Tithes however may be considered as injurious to landlords, inasmuch as
they act as a bounty on importation, by taxing the growth of home corn,
while the importation of foreign corn remains unfettered. And if in
order to relieve the landlords from the effects of the diminished demand
for land, which such a bounty must encourage, imported corn were also
taxed one tenth, and the produce paid to the state, no measure could be
more fair and equitable; since whatever were paid to the state by this
tax, would go to diminish the other taxes which the expenses of
government make necessary: but if such a tax were devoted only to
increase the fund paid to the church, it might indeed on the whole
increase the general mass of production, but it would diminish the
portion of that mass allotted to the productive classes.
If the trade of cloth were left perfectly free, our manufacturers might
be able to sell cloth cheaper than we could import it. If a tax were
laid on the home manufacturer, and not on the importer of cloth, capital
might be injuriously driven from the manufacture of cloth to the
manufacture of some other commodity, as it might then be imported
cheaper than it could be made at home. If imported cloth should also be
taxed, cloth would again be manufactured at home. The consumer first
bought cloth at home, because it was cheaper than foreign cloth; he then
bought foreign cloth, because it was cheaper untaxed than home cloth
taxed: he lastly bought it again at home, because it was cheaper when
both home and foreign cloth were taxed. It is in the last case that he
pays the greatest price for his cloth, but all his additional payment is
gained by the state. In the second case, he pays more than in the first,
but all he pays in addition is not received by the state, it is an
increased price caused by difficulty of production, which is incurred,
because the easiest means of production are taken away from us, by being
fettered with a tax.
CHAPTER X.
LAND-TAX.
A land-tax, levied in proportion to the rent of land, and varying with
every variation of rent, is in effect a tax on rent; and as such a tax
will not apply to that land which yields no rent, nor to the produce of
that capital which is employed on the land with a view to profit merely,
and which never pays rent, it will not in any way affect the price of
raw produce, but will fall wholly on the landlords. In no respect would
such a tax differ from a tax on rent. But if a land-tax be imposed on
all cultivated land, however moderate that tax may be, it will be a tax
on produce, and will therefore raise the price of produce. If No. 3 be
the land last cultivated, although it should pay no rent, it cannot,
after the tax, be cultivated, and afford the general rate of profit,
unless the price of produce rise to meet the tax. Either capital will be
withheld from that employment until the price of corn shall have risen,
in consequence of demand, sufficiently to afford the usual profit; or if
already employed on such land, it will quit it, to seek a more
advantageous employment. The tax cannot be removed to the landlord, for
by the supposition he receives no rent. Such a tax may be proportioned
to the quality of the land and the abundance of its produce, and then it
differs in no respect from tithes; or it may be a fixed tax per acre on
all land cultivated, whatever its quality may be.
A land-tax of this latter description would be a very unequal tax, and
would be contrary to one of the four maxims with regard to taxes in
general, to which, according to Adam Smith, all taxes should conform.
The four maxims are as follow:
1. "The subjects of every state ought to contribute
towards the support of the Government, as nearly as
possible in proportion to their respective abilities.
2. "The tax which each individual is bound to pay ought
to be certain and not arbitrary.
3. "Every tax ought to be levied at the time, or in the
manner in which it is most likely to be convenient for
the contributor to pay it.
4. "Every tax ought to be so contrived as both to take
out and to keep out of the pockets of the people as
little as possible, over and above what it brings into
the public treasury of the state. "
An equal land-tax, imposed indiscriminately and without any regard to
the distinction of its quality, on all land cultivated, will raise the
price of corn in proportion to the tax paid by the cultivator of the
land of the worst quality. Lands of different quality, with the
employment of the same capital, will yield very different quantities of
raw produce. If on the land which yields a thousand quarters of corn
with a given capital, a tax of 100_l. _ be laid, corn will rise 2_s. _ per
quarter to compensate the farmer for the tax. But with the same capital
on land of a better quality, 2,000 quarters may be produced, which at
2_s. _ a quarter advance, would give 200_l. _; the tax, however, bearing
equally on both lands will be 100_l. _ on the better as well as on the
inferior, and consequently the consumer of corn will be taxed, not only
to pay the exigencies of the state, but also to give to the cultivator
of the better land, 100_l. _ per annum. during the period of his lease,
and afterwards to raise the rent of the landlord to that amount. A tax
of this description then would be contrary to the fourth maxim of Adam
Smith, it would take out and keep out of the pockets of the people, more
than what it brought into the treasury of the state. The taille in
France before the Revolution, was a tax of this description; those lands
only were taxed, which were held by an ignoble tenure, the price of raw
produce rose in proportion to the tax, and therefore they whose lands
were not taxed, were benefited by the increase of their rent. Taxes on
raw produce as well as tithes are free from this objection: they raise
the price of raw produce, but they take from each quality of land a
contribution in proportion to its actual produce, and not in proportion
to the produce of that which is the least productive.
From the peculiar view which Adam Smith took of rent, from his not
having observed that much capital is expended in every country, on the
land for which no rent is paid, he concluded that all taxes on the land,
whether they were laid on the land itself in the form of land-tax or
tithes, or on the produce of the land, or were taken from the profits of
the farmer, were all invariably paid by the landlord, and that he was in
all cases the real contributor, although the tax was in general,
nominally advanced by the tenant. "Taxes upon the produce of the land,"
he says, "are in reality taxes upon the rent; and though they may be
originally advanced by the farmer, are finally paid by the landlord.
When a certain portion of the produce is to be paid away for a tax, the
farmer computes as well as he can, what the value of this portion is,
one year with another, likely to amount to, and he makes a
proportionable abatement in the rent which he agrees to pay to the
landlord. There is no farmer who does not compute before hand what the
church tithe, which is a land-tax of this kind, is, one year with
another, likely to amount to. " It is undoubtedly true, that the farmer
does calculate his probable outgoings of all descriptions, when
agreeing with his landlord concerning the rent of his farm; and if for
the tithe paid to the church, or for the tax on the produce of the land,
he were not compensated by a rise in the relative value of the produce
of his farm, he would naturally deduct them from his rent. But this is
precisely the question in dispute: whether he will eventually deduct
them from his rent, or be compensated by a higher price of produce. For
the reasons which have been already given, I cannot have the least doubt
but that they would raise the price of produce, and consequently that
Adam Smith has taken an incorrect view of this important question.
Dr. Smith's view of this subject is probably the reason why he has
described "the tithe, and every other land-tax of this kind, under the
appearance of perfect equality, as very unequal taxes; a certain portion
of the produce being in different situations, equivalent to a very
different portion of the rent. " I have endeavoured to shew that such
taxes do not fall with unequal weight on the different classes of
farmers or landlords, as they are both compensated by the rise of raw
produce, and only contribute to the tax in proportion as they are
consumers of raw produce. Inasmuch indeed as wages, and through wages,
the rate of profits are affected, landlords, instead of contributing
their full share to such a tax, are the class peculiarly exempted. It is
the profits of stock, from which that portion of the tax is derived
which falls on those labourers, who from the insufficiency of their
funds, are incapable of paying taxes; this portion is exclusively borne
by all those whose income is derived from the employment of stock, and
therefore it in no degree affects landlords.
It is not to be inferred from this view of tithes, and taxes on the land
and its produce, that they do not discourage cultivation. Every thing
which raises the exchangeable value of commodities of any kind, which
are in very general demand, tends to discourage both cultivation and
production; but this is an evil inseparable from all taxation, and is
not confined to the particular taxes of which we are now speaking.
This may be considered indeed as the unavoidable disadvantage attending
all taxes received and expended by the state. Every new tax becomes a
new charge on production, and raises natural price. A portion of the
labour of the country which was before at the disposal of the
contributor to the tax, is placed at the disposal of the state. This
portion may become so large, that sufficient surplus produce may not be
left to stimulate the exertions of those who usually augment by their
savings the capital of the state. Taxation has happily never yet in any
free country been carried so far as constantly from year to year to
diminish its capital. Such a state of taxation could not be long
endured; or if endured, it would be constantly absorbing so much of the
annual produce of the country as to occasion the most extensive scene of
misery, famine, and depopulation.
"A land-tax," says Adam Smith, "which like that of Great Britain, is
assessed upon each district according to a certain invariable canon,
though it should be equal at the time of its first establishment,
necessarily becomes unequal in process of time, according to the unequal
degrees of improvement or neglect in the cultivation of the different
parts of the country. In England the valuation according to which the
different counties and parishes were assessed to the land-tax by the
4th. William and Mary, was very unequal, even at its first
establishment. This tax, therefore, so far offends against the first of
the four maxims above mentioned. It is perfectly agreeable to the other
three. It is perfectly certain. The time of payment for the tax being
the same as that for the rent, is as convenient as it can be to the
contributor. Though the landlord is in all cases the real contributor,
the tax is commonly advanced by the tenant, to whom the landlord is
obliged to allow it in the payment of the rent. "
If the tax be shifted by the tenant not on the landlord but on the
consumer, then if it be not unequal at first, it can never become so;
for the price of produce has been at once raised in proportion to the
tax, and will afterwards vary no more on that account. It may offend if
unequal, as I have attempted to shew that it will, against the fourth
maxim above mentioned, but it will not offend against the first. It may
take more out of the pockets of the people than it brings into the
public treasury of the state, but it will not fall unequally on any
particular class of contributors. M. Say appears to me to have mistaken
the nature and effects of the English land-tax, when he says, "Many
persons attribute to this fixed valuation, the great prosperity of
English agriculture. That it has very much contributed to it there can
be no doubt. But what should we say to a Government, which, addressing
itself to a small trader, should hold this language: 'With a small
capital you are carrying on a limited trade, and your direct
contribution is in consequence very small. Borrow, and accumulate
capital; extend your trade, so that it may procure you immense profits;
yet you shall never pay a greater contribution. Moreover, when your
successors shall inherit your profits, and shall have further increased
them, they shall not be valued higher to them than they are to you; and
your successors shall not bear a greater portion of the public burdens. '
"Without doubt this would be a great encouragement given to manufactures
and trade; but would it be just? Could not their advancement be
obtained at any other price? In England itself, has not manufacturing
and commercial industry made even greater progress, since the same
period, without being distinguished with so much partiality? A landlord
by his assiduity, economy, and skill, increases his annual revenue by
5000 francs. If the state claim of him the fifth part of his augmented
income, will there not remain 4000 francs of increase to stimulate his
further exertions? "
If Mr. Say's suggestion were followed, and the state were to claim the
fifth part of the augmented income of the farmer, it would be a partial
tax, acting on the farmer's profits, and not affecting the profits of
other employments. The tax would be paid by all lands, by those which
yielded scantily as well as by those which yielded abundantly; and on
some lands there could be no compensation for it by deduction from rent,
for no rent is paid. A partial tax on profits never falls on the trade
on which it is laid, for the trader will either quit his employment, or
remunerate himself for the tax. Now those who pay no rent could be
recompensed only by a rise in the price of produce, and thus would M.
Say's proposed tax fall on the consumer, and not either on the landlord
or farmer.
If the proposed tax were increased in proportion to the increased
quantity, or value, of the gross produce obtained from the land, it
would differ in nothing from tithes, and would equally be transferred to
the consumer. Whether then it fell on the gross or on the net produce of
land, it would be equally a tax on consumption, and would only affect
the landlord and farmer in the same way as other taxes on raw produce.
If no tax whatever had been laid on the land, and the same sum had been
raised by any other means, agriculture would have flourished at least as
well as it has done; for it is impossible that any tax on land can be an
encouragement to agriculture; a moderate tax may not, and probably does
not, greatly prevent, but it cannot encourage production. The English
Government has held no such language as M. Say has supposed. It did not
promise to exempt the agricultural class and their successors from all
future taxation, and to raise the further supplies which the state
might require, from the other classes of society; it said only, "in this
mode we will no further burthen the land; but we retain to ourselves the
most perfect liberty of making you pay, under some other form, your full
quota to the future exigencies of the state. "
Speaking of taxes in kind, or a tax of a certain proportion of the
produce, which is precisely the same as tithes, M. Say says, "This mode
of taxation appears to be the most equitable; there is however none
which is less so: it totally leaves out of consideration the advances
made by the producer; it is proportioned to the gross, and not to the
net revenue. Two agriculturists cultivate different kinds of raw
produce: one cultivates corn on middling land, his expenses amounting
annually on an average to 8000 francs; the raw produce from his lands
sells for 12,000 francs; he has then a net revenue of 4000 francs.
"His neighbour has pasture or wood land, which brings in every year a
like sum of 12,000 francs, but his expenses amount only to 2000 francs.
He has therefore on an average a net revenue of 10,000 francs.
"A law ordains that a twelfth of the produce of all the fruits of the
earth be levied in kind, whatever they may be. From the first is taken
in consequence of this law, corn of the value of 1000 francs; and from
the second, hay, cattle, or wood, of the same value of 1000 francs. What
has happened? From the one, a quarter of his net income, 4000 francs,
has been taken; from the other, whose income was 10,000 francs, a tenth
only has been taken. Income is the net profit which remains after
replacing the capital exactly in its former state. Has a merchant an
income equal to all the sales which he makes in the course of a year?
certainly not; his income only amounts to the excess of his sales above
his advances, and it is on this excess only that taxes on income should
fall. "
M. Say's error in the above passage lies in supposing that because the
value of the produce of one of these two farms, after re-instating the
capital, is greater than the value of the produce of the other, on that
account the net income of the cultivators will differ by the same
amount. M. Say has wholly omitted the consideration of the different
amount of rent, which these cultivators would have to pay. There cannot
be two rates of profit in the same employment, and therefore when
produce is in different proportions to capital, it is the rent which
will differ, and not the profit. Upon what pretence would one man with a
capital of 2000 francs, be allowed to obtain a net profit of 10,000
francs from its employment, whilst another with a capital of 8000 francs
would only obtain 4000 francs? Let M. Say make a due allowance for rent;
let him further allow for the effect which such a tax would have on the
prices of these different kinds of raw produce, and he will then
perceive that it is not an unequal tax, and further that the producers
themselves will not otherwise contribute to it, than any other class of
consumers.
CHAPTER XI.
TAXES ON GOLD.
The rise in the price of commodities, in consequence of taxation or of
difficulty of production, will in all cases ultimately ensue; but the
duration of the interval, before the market price of commodities
conforms to their natural price, must depend on the nature of the
commodity, and on the facility with which it can be reduced in quantity.
If the quantity of the commodity taxed could not be diminished, if the
capital of the farmer or of the hatter for instance, could not be
withdrawn to other employments, it would be of no consequence that their
profits were reduced below the general level by means of a tax; unless
the demand for their commodities should increase, they would never be
able to elevate the market price of corn and hats up to the increased
natural price. Their threats to leave their employments, and remove
their capitals to more favoured trades, would be treated as an idle
menace which could not be carried into effect; and consequently the
price would not be raised by diminished production. Commodities however
of all descriptions can be reduced in quantity, and capital can be
removed from trades which are less profitable to those which are more
so, but with different degrees of rapidity. In proportion as the supply
of a particular commodity can be more easily reduced, the price of it
will more quickly rise after the difficulty of its production has been
increased by taxation, or by any other means. Corn being a commodity
indispensably necessary to every one, little effect will be produced on
the demand for it in consequence of a tax, and therefore the supply
could not be long excessive, even if the producers had great difficulty
in removing their capitals from the land; the price of corn therefore,
will speedily be raised by taxation, and the farmer will be enabled to
transfer the tax from himself to the consumer.
If the mines which supply us with gold were in this country, and if
gold were taxed, it could not rise in relative value to other things
till its quantity were reduced. This would be more particularly the
case, if gold were exclusively used for money. It is true that the least
productive mines, those which paid no rent, could no longer be worked,
as they could not afford the general rate of profits till the relative
value of gold rose, by a sum equal to the tax. The quantity of gold, and
therefore the quantity of money would be slowly reduced; it would be a
little diminished in one year, a little more in another, and finally its
value would be raised in proportion to the tax; but in the interval, the
proprietors or holders, as they would pay the tax, would be the
sufferers, and not those who used money. If out of every 1000 quarters
of wheat in the country, and every 1000 produced in future, government
should exact 100 quarters as a tax, the remaining 900 quarters would
exchange for the same quantity of other commodities that 1000 did
before; but if the same thing took place with respect to gold, if of
every 1000_l. _ money now in the country, or in future to be brought into
it, government could exact 100_l. _ as a tax, the remaining 900_l. _
would purchase very little more than 900_l. _ purchased before. The tax
would fall upon him, whose property consisted of money, and would
continue to do so till its quantity were reduced in proportion to the
increased cost of its production caused by the tax.
This perhaps would be more particularly the case with respect to a metal
used for money, than any other commodity, because the demand for money
is not for a definite quantity, as is the demand for clothes, or for
food. The demand for money is regulated entirely by its value, and its
value by its quantity. If gold were of double the value, half the
quantity would perform the same functions in circulation, and if it were
of half the value, double the quantity would be required. If the market
value of corn be increased one tenth by taxation, or by difficulty of
production, it is doubtful, whether any effect whatever would be
produced on the quantity consumed, because every man's want is for a
definite quantity, and, therefore, if he has the means of purchasing, he
will continue to consume as before; but for money, the demand is
exactly proportioned to its value. No man could consume twice the
quantity of corn, which is usually necessary for his support, but every
man purchasing and selling only the same quantity of goods, may be
obliged to employ twice, thrice, or any number of times the same
quantity of money.
The argument which I have just been using, applies only to those states
of society in which the precious metals are used for money, and where
paper credit is not established. The metal gold like all other
commodities has its value in the market ultimately regulated by the
comparative facility or difficulty of producing it; and although from
its durable nature, and from the difficulty of reducing its quantity, it
does not readily bend to variations in its market value, yet that
difficulty is much increased from the circumstance of its being used as
money. If the quantity of gold in the market for the purpose of commerce
only, were 10,000 ounces, and the consumption in our manufactures were
2000 ounces annually, it might be raised one fourth, or 25 per cent. in
its value, in one year, by withholding the annual supply; but if in
consequence of its being used as money, the quantity employed were
100,000 ounces, it would not be raised one fourth in value in less than
ten years. As money made of paper may be readily reduced in quantity,
its value, though its standard were gold, would be increased as rapidly
as that of the metal itself would be increased if it had no connexion
whatever with money.
If gold were the produce of one country only, and it were used
universally for money, a very considerable tax might be imposed on it,
which would not fall on any country, except in proportion as they used
it in manufactures, and for utensils; upon that portion which was used
for money, though a large tax might be received, nobody would pay it.
This is a quality peculiar to money. All other commodities of which
there exists a limited quantity, and which cannot be increased by
competition, are dependant for their value, on the tastes, the caprice,
and the power of purchasers; but money is a commodity which no country
has any wish or necessity to increase: no more advantage results from
using twenty millions, than from using ten millions of currency. A
country might have a monopoly of silk, or of wine, and yet the prices of
silks and wine might fall, because from caprice or fashion, or taste,
cloth and brandy might be preferred, and substituted; the same effect
might in a degree take place with gold, as far as its use is confined to
manufactures: but while money is the general medium of exchange, the
demand for it is never a matter of choice, but always of necessity; you
must take it in exchange for your goods, and therefore there are no
limits to the quantity which may be forced on you by foreign trade, if
it fall in value; and no reduction to which you must not submit, if it
rise. You may indeed substitute paper money, but by this you do not, and
cannot lessen the quantity of money; it is only by the rise of the price
of commodities, that you can prevent them from being exported from a
country where they are purchased with little money, to a country where
they can be sold for more, and this rise can only be effected by an
importation of metallic money from abroad, or by the creation or
addition of paper money at home. If then the King of Spain, supposing
him to be in exclusive possession of the mines, and gold alone to be
used for money, were to lay a considerable tax on gold, he would very
much raise its natural value; and as its market value in Europe is
ultimately regulated by its natural value in Spanish America, more
commodities would be given by Europe for a given quantity of gold. But
the same quantity of gold would not be produced in America, as its value
would only be increased in proportion to the diminution of quantity
consequent on its increased cost of production. No more goods then would
be obtained in America, in exchange for all their gold exported, than
before; and it may be asked, where then would be the benefit to Spain
and her colonies? The benefit would be this, that if less gold were
produced, less capital would be employed in producing it; the same value
of goods from Europe would be imported by the employment of the smaller
capital, that was before obtained by the employment of the larger; and
therefore all the productions obtained by the employment of the capital
withdrawn from the mines, would be a benefit which Spain would derive
from the imposition of the tax, and which she could not obtain in such
abundance, or with such certainty, by possessing the monopoly of any
other commodity whatever. From such a tax, as far as money was
concerned, the nations of Europe would suffer no injury whatever; they
would have the same quantity of goods, and consequently the same means
of enjoyment as before, but these goods would be circulated with a less
quantity of money.
If in consequence of the tax, only one tenth of the present quantity of
gold were obtained from the mines, that tenth would be of equal value
with the ten tenths now produced. But the King of Spain is not
exclusively in possession of the mines of the precious metals; and if he
were, his advantage from their possession, and the power of taxation,
would be very much reduced by the limitation of demand and consumption
in Europe, in consequence of the universal substitution, in a greater or
less degree, of paper money. The agreement of the market and natural
prices of all commodities, depends at all times on the facility with
which the supply can be increased or diminished. In the case of gold,
houses, and labour, as well as many other things, this effect cannot,
under some circumstances, be speedily produced. But it is different with
those commodities which are consumed and reproduced from year to year,
such as hats, shoes, corn, and cloth; they may be reduced if necessary,
and the interval cannot be long before the supply is contracted in
proportion to the increased charge of producing them.
A tax on raw produce from the surface of the earth, will, as we have
seen, fall on the consumer, and will in no way affect rent; unless, by
diminishing the funds for the maintenance of labour, it lowers wages,
reduces the population, and diminishes the demand for corn. But a tax on
the produce of gold mines must, by enhancing the value of that metal,
necessarily reduce the demand for it, and must therefore necessarily
displace capital from the employment to which it was applied.
Notwithstanding then, that Spain would derive all the benefits which I
have stated from a tax on gold, the proprietors of mines from which
capital was withdrawn would lose all their rent. This would be a loss
to individuals, but not a national loss; rent being not a creation, but
merely a transfer of wealth: the King of Spain, and the proprietors of
the mines which continued to be worked, would together receive not only
all that the liberated capital produced, but all that the other
proprietors lost.
Suppose the mines of the 1st, 2nd, and 3rd quality to be worked, and to
produce respectively 100, 80, and 70 pounds weight of gold, and
therefore the rent of No. 1 to be thirty pounds, and that of No. 2 ten
pounds. Suppose now the tax to be seventy pounds of gold per annum on
each mine worked; and consequently that No. 1 alone could be profitably
worked; it is evident that all rent would immediately disappear. Before
the imposition of the tax, out of the 100 pounds produced on No. 1, a
rent was paid of thirty pounds, and the worker of the mine retained
seventy, a sum equal to the produce of the least productive mine. The
value then of what remains to the capitalist of the mine No. 1 must be
the same as before, or he would not obtain the common profits of stock;
and consequently, after paying seventy out of his 100 pounds for tax,
the value of the remaining thirty must be as great as seventy were
before, and therefore the value of the whole hundred as great as 233
pounds before. Its value might be higher, but it could not be lower, or
even this mine would cease to be worked. Being a monopolised commodity,
it could exceed its natural value, and then it would pay a rent equal to
that excess; but no funds would be employed in the mine, if it were
below this value. In return for one-third of the labour and capital
employed in the mines, Spain would obtain as much gold as would exchange
for the same, or very nearly the same, quantity of commodities as
before. She would be richer by the produce of the two thirds liberated
from the mines. If the value of the 100 pounds of gold should be equal
to that of the 250 pounds extracted before; the king of Spain's portion,
his seventy pounds, would be equal to 175 at the former value: a small
part of the king's tax only would fall on his own subjects, the greater
part being obtained by the better distribution of capital.
The account of Spain would stand thus:
_Formerly produced_:
Gold 250 pounds, of the value of (suppose) 10,000 yards of
cloth.
_Now produced_:
By the two capitalists who quitted the mines,} 5,600 yards of
the value of 140 pounds of gold, or } cloth.
By the capitalist who works the mine, No. 1, }
thirty pounds of gold increased in value, } 3,000 yards of
as 1 to 2-1/2, and therefore now of the } cloth.
value of }
Tax to the king seventy pounds, now of the } 7,000 yards of
value of } cloth.
------
15,600
------
Of the 7000 received by the king, the people of Spain would contribute
only 1400, and 5600 would be pure gain, effected by the liberated
capital.
If the tax, instead of being a fixed sum per mine worked, were a certain
portion of its produce, the quantity would not be reduced in
consequence. If a half, a fourth, or a third of each mine were taken for
the tax, it would nevertheless be the interest of the proprietors to
make their mines yield as abundantly as before; but if the quantity were
not reduced, but only a part of it transferred from the proprietor to
the king, its value would not rise; the tax would fall on the people of
the colonies, and no advantage would be gained. A tax of this kind would
have the effect that Adam Smith supposes taxes on raw produce would have
on the rent of land--it would fall entirely on the rent of the mine. If
pushed a little further, the tax would not only absorb the whole rent,
but would deprive the worker of the mine of the common profits of stock,
and he would consequently withdraw his capital from the production of
gold. If still further extended, the rent of still better mines would be
absorbed, and capital would be further withdrawn; and thus the quantity
would be continually reduced, and its value raised, and the same effects
would take place as we have already pointed out; a part of the tax would
be paid by the people of the Spanish colonies, and the other part would
be a new creation of produce, by increasing the power of the instrument
used as a medium of exchange.
