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The Forgotten Man and Other Essays/The Influence of Commercial Crises on Opinions about Economic Doctrines



ANY ONE who follows the current literature about economic subjects will perceive that it is so full of contradictions as to create a doubt whether there are any economic laws, or whether, if there are any, we know anything about them. No body of men ever succeeded in molding the opinions of others by wrangling with each other, and that is the present attitude in which the economists present themselves before the public. Like other people who engage in wrangling, the economists have also allowed their method to degenerate from argument to abuse, contempt, and sneering disparagement of each other. The more superficial and self-sufficient the opinions and behavior of the disputants, the more absolutely they abandon sober arguments and devote themselves to the method I have described. As I have little taste for this kind of discussion and believe that it only degrades the science of which I am a student, I have taken no part in it. In answer to your invitation, now, what I propose to do is to call your attention to some features of the economic situation of civilized nations at the present time with a view to establish two points:

  1. To explain the vacillation and feebleness of opinions about economic doctrine which mark the present time, and
  2. To show the necessity, just at this time, of calm and sober apprehension of sound doctrine in political economy.

At the outset let me ask you to notice the effects which have been produced during the last century by the developments of science and of the industrial arts. Formerly, industry was pursued on a small scale, with little or no organization. Markets were limited to small districts, and commerce was confined to raw materials and colonial products. Producer and consumer met face to face. The conditions of the market were open to personal inspection. The relations of supply and demand were matters of personal experience. Production was carried on for orders only in many branches of industry, so that supply and demand were fitted to one another, as we may say, physically. Disproportionate production was, therefore, prevented and the necessity of redistributing productive effort was made plain by the most direct personal experience. Under such a state of things, much time must elapse between the formation of a wish and its realization.

Within a century very many and various forces have been at work to produce an entire change in this system of industry. The invention of the steam engine and of the machines used in the textile fabrics produced the factory system, with a high organization of industry, concentrated at certain centers. The opening of canals and the improvement of highways made possible the commerce by which the products were distributed. The cheapening of printing and the multiplication of means of advertising widened the market by concentrating the demand which was widely dispersed in place, until now the market is the civilized world. The applications of steam power to roads and ships only extended further the same development, and the telegraph has only cheapened and accelerated the means of communicating information to the same end.

What have been the effects on industry?

1. The whole industry and commerce of the world have been built up into a great system in which organization has become essential and in which it has been carried forward and is being carried forward every day to new developments. Industry has been growing more and more impersonal as far as the parties to it are concerned. Our wants are satisfied instantaneously and regularly by the coöperation of thousands of people all over the world whom we have never seen or heard of; and we earn our living daily by contributing to satisfy the wants of thousands scattered all over the world, of whom we know nothing personally. In the place of actual contact and acquaintance with the persons who are parties to the transactions, we now depend upon the regularity, under the conditions of earthly life, of human wants and human efforts. The system of industry is built upon the constancy of certain conditions of human existence, upon the certainty of the economic forces which thence arise, and upon the fact that those forces act with perfect regularity under changeless laws. If we but reflect a moment, we shall see that modern industry and commerce could not go on for a day if we were not dealing here with forces and laws which may properly be called natural because they come into action when the conditions are fulfilled, because the conditions cannot but exist if there is a society of human beings collected anywhere on earth, and because, when the forces come into action, they work themselves out, according to their laws, without possible escape from their effects. We can divert the forces from one course to another; we can change their form; we can make them expend themselves upon one person or interest instead of upon another. We do this all the time, by bad legislation, by prejudice, habit, fashion, erroneous notions of equity, happiness, the highest good, and so on; but we never destroy an economic force any more than we destroy a physical force.

2. Of course it follows that success in the production of wealth under this modern system depends primarily on the correctness with which men learn the character of economic forces and of the laws under which those forces act. This is the field of the science of political economy, and it is the reason why it is a science. It investigates the laws of forces which are natural, not arbitrary, artificial, or conventional. Some communities have developed a great hatred for persons who held different religious opinions from themselves. Such a feeling would be a great social force, but it would be arbitrary and artificial. Many communities have held that all labor, not mental, was slavish and degrading. This notion, too, was conventional, but it was a great social force where it existed. Such notions, either past or present, are worth studying for historical interest and instruction, but they do not afford the basis for a science whose object is to find out what is true in regard to the relations of man to the world in which he lives. The study of them throws a valuable sidelight on the true relations of human life, just as the study of error always throws a sidelight upon the truth, but they have no similarity to the law that men want the maximum of satisfaction for the minimum of effort, or to the law of the diminishing return from land, or to the law of population, or to the law of supply and demand. Nothing can be gained, therefore, by mixing up history and science, valuable as one is to the other. If men try to carry on any operation without an intelligent theory of the forces with which they are dealing, they inevitably become the victims of the operation, not its masters. Hence they always do try to form some theory of the forces in question and to plan the means to the end accordingly. The forces of nature go on and are true only to themselves. They never swerve out of pity for innocent error or well-intentioned mistakes. This is as true of economic forces as of any others. What is meant by a good or a bad investment, except that one is based on a correct judgment of forces and the other on incorrect judgment? How would sagacity, care, good judgment, and prudence meet their reward if the economic forces swerved out of pity for error? We know that there is no such thing in the order of nature.

I repeat, then, that the modern industrial and commercial system, dealing as it does with vast movements which no one mind can follow or compass in their ramifications and which are kept in harmony by natural laws, demands steadily advancing, clear, and precise knowledge of economic laws; that this knowledge must banish prejudices and traditions; that it must conquer baseless enthusiasms and whimsical hopes. If it does not accomplish this, we can expect but one result—that men will chase all sorts of phantoms and impossible hopes; that they will waste their efforts upon schemes which can only bring loss; and that some will run one way and some another until society loses all coherence, all unanimity of judgment as to what is to be sought and how to attain to it. The destruction of capital is only the least of the evils to be apprehended in such a case. I do not believe that we begin to appreciate one effect of the new civilization of the nineteenth century, viz., that the civilized world of to-day is a unit, that it must move as a whole, that with the means we have devised of a common consent in regard to the ends of human life and the means of attaining them has come also the necessity that we should move onward in civilization by a common consent. The barriers of race, religion, language, and nationality are melting away under the operation of the same forces which have to such an extent annihilated the obstacles of distance and time. Civilization is constantly becoming more uniform. The conquests of some become at once the possession of all. It follows that our scientific knowledge of the laws which govern the life of men in society must keep pace with this development or we shall find our social tasks grow faster than our knowledge of social science, and our society will break to pieces under the burden. How, then, is this scientific knowledge to grow? Certainly not without controversy, but certainly also not without coherent, steady, and persistent effort, proceeding on the lines already cut, breaking new ground when possible, correcting old errors when necessary.

3. It is another feature of the modern industrial system that, like every high organization, it requires men of suitable ability and skill at its head. The qualities which are required for a great banker, merchant, or manufacturer are as rare as any other great gifts among men, and the qualities demanded, or the degree in which they are demanded, are increasing every day with the expansion of the modern industrial system. The qualities required are those of the practical man, properly so called: sagacity, good judgment, prudence, boldness, and energy. The training, both scientific and practical, which is required for a great master of industry is wide and various. The great movements of industry, like all other great movements, present subordinate phenomena which are apparently opposed to, or inconsistent with their great tendencies and their general character. These phenomena, being smaller in scope, more directly subject to observation and therefore apparently more distinct and positive, are well calculated to mislead the judgment, either of the practical man or of the scientific student. In nothing, therefore, does the well-trained man distinguish himself from the ill-trained man more than in the balance of judgment by which he puts phenomena in their true relative position and refuses to be led astray by what is incidental or subsidiary. If, now, the question is asked, whether we have produced a class of highly trained men, competent to organize labor, transportation, commerce, and banking, on the scale required by the modern system, as rapidly as the need for them has increased, I believe no one will answer in the affirmative.

4. Another observation to which we are led upon noticing the character of the modern industrial system is that any errors or follies committed in one portion of it will produce effects which will ramify through the whole system. We have here an industrial organism, not a mere mechanical combination, and any disturbance in one part of it will derange or vitiate, more or less, the whole. The phenomena which here appear belong to what has been called fructifying causation. One economic error produces fruits which combine with those of another economic error, and the product of the two is not their sum, nor even their simple product, but the evil may be raised to a very high power by the combination. If a number of errors fall together the mischief is increased accordingly. Currency and tariff errors constantly react upon each other, and multiply and develop each other in this way. Furthermore, the errors of one nation will be felt in other nations through the relations of commerce and credit which are now so close. There is no limit to the interest which civilized nations have in each other's economic and political wisdom, for they all bear the consequences of each other's follies. Hence when we have to deal with that form of economic disease which we call a commercial crisis, we may trace its origin to special errors in one country and in another, and may trace out the actions and reactions by which the effects have been communicated from one to another until shared by all; but no philosophy of a great commercial is adequate nowadays unless it embraces in its scope the whole civilized world. A commercial crisis is a disturbance in the harmonious operation of the parts of the industrial organism. During economic health, the system moves smoothly and harmoniously, expanding continually, and its health and vigor are denoted by its growth, that is, by the accumulation of capital, which stimulates in its turn the hope, energy, and enterprise of men. Industrial disease is produced by disproportionate production, a wrong distribution of labor, erroneous judgment in enterprise, or miscalculations of force. These all have the same effect, viz., to waste and destroy capital. Such causes disturb, in a greater or less degree, the harmonious working of the system, which depends upon the regular and exact fulfillment of the expectations which have been based on coöperative effort throughout the whole industrial body. The disturbance may be slight and temporary, or it may be very serious. In the latter case it will be necessary to arrest the movement of the whole system and to proceed to a general liquidation, before starting again. Such was the case from 1837 to 1842, and such has been the case for the last five years. It is needless to add that this arrest and liquidation cannot be accomplished without distress and loss to great numbers of innocent persons, and great positive loss of capital, to say nothing of what might have been won during the same period but must be foregone.

The financial organization is the medium by which the various parts of the industrial and commercial organism are held in harmony. It is by the financial organization that capital is collected and distributed, that the friction of exchanges is reduced to a minimum, and that time is economized, through credit, between production and consumption. The financial system furnishes three indicators—prices, the rate of discount, and the foreign exchanges—through which we may read the operation of economic forces now that their magnitude makes it impossible to inspect them directly. Hence the great mischief of usury laws which tamper with the rate of discount, and of fluctuating currencies which falsify prices and the foreign exchanges. They destroy the value of the indicators, and have the same effect as tampering with the scales of a chemist or the steam-gauge of a locomotive.

In the matter of prices we have another difficulty to contend with, which is inevitable in the nature of things. We must choose some commodity to be the denominator of value. We can find no commodity which is not itself subject to fluctuation in its ratio of exchange with other things. Great crises have been caused in past times by fluctuations in the value of the commodities chosen as money, and such an element is, no doubt, at hand in the present crisis, although it had nothing to do with bringing it about. It follows that any improvement in the world's money is worth any sacrifice which it can possibly cost, if it tends to secure a more simple, exact, and unchanging standard of value.

The next point of which I wish to speak is easily introduced by the last remark; that point is the cost of all improvement. The human race has made no step whatever in civilization which has not been won by pain and distress. It wins no steps now without paying for them in sacrifices. To notice only things which are directly pertinent to our present purpose: every service which we win from nature displaces the acquired skill of the men who formerly performed the service; every such step is a gain to the race, but it imposes on some men the necessity of finding new means of livelihood, and if those men are advanced in life, this necessity may be harsh in the extreme. Every new machine, although it saves labor, and because it saves labor, serves the human race, yet destroys a vested interest of some laborers in the work which it performs. It imposes on them the necessity of turning to a new occupation, and this is hardly ever possible without a period of distress. It very probably throws them down from the rank of skilled to that of unskilled labor. Every new machine also destroys capital. It makes useless the halfworn-out machines which it supersedes. So canals caused capital which was invested in turnpikes and state coaches to depreciate, and so railroads have caused the capital invested in canals and other forms to depreciate. I see no exception to the rule that the progress won by the race is always won at the expense of some group of its members.

Any one who will look back upon the last twenty-five years cannot fail to notice that the changes, advances, and improvements have been numerous and various. We are accustomed to congratulate each other upon them. There can be no doubt that they must and will contribute to the welfare of the human race beyond what any one can now possibly foresee or measure. I am firmly convinced, for my opinion, that the conditions of wealth and civilization for the next quarter of a century are provided for in excess of any previous period of history, and that nothing but human folly can prevent a period of prosperity which we, even now, should regard as fabulous. We can throw it away if we are too timid, if we become frightened at the rate of our own speed, or if we mistake the phenomena of a new era for the approach of calamity, or if the nations turn back to mediæval darkness and isolation, or if we elevate the follies and ignorances of the past into elements of economic truth, or if, instead of pursuing liberty with full faith and hope, the civilized world becomes the arena of a great war of classes in which all civilization must be destroyed. But, such follies apart, the conditions of prosperity are all provided.

We must notice, however, that these innovations have fallen with great rapidity upon a vast range of industries, that they have accumulated their effects, that they have suddenly altered the currents of trade and the methods of industry, and that we have hardly learned to accommodate ourselves to one new set of circumstances before a newer change or modification has been imposed. Some inventions, of which the Bessemer steel is the most remarkable example, have revolutionized industries. Some new channels of commerce have been opened which have changed the character and methods of very important branches of commerce. We have also seen a movement of several nations to secure a gold currency, which movement fell in with a large if not extraordinary production of silver and altered the comparative demand and supply of the two metals at the same time. This movement had nothing arbitrary about it, but proceeded from sound motives and reasons in the interest of the nations which took this step. There is here no ground for condemnation or approval. Such action by sovereign nations is taken under liberty and responsibility to themselves alone, and if it is taken on a sufficiently large scale to form an event of importance to the civilized world, it must be regarded as a step in civilization. It can only be criticized by history. For the present, it is to be accepted and interpreted only as an indication that there are reasons and motives of self-interest which can lead a large part of the civilized world to this step at this time.

The last twenty-five years have also included political events which have had great effects on industry. Our Civil War caused an immense destruction of capital and left a large territory with millions of inhabitants almost entirely ruined in its industry, and with its labor system exposed to the necessity of an entire re-formation. Part of the expenditures and losses of the war were postponed and distributed by means of the paper currency which, instead of imposing industry and economy to restore the losses and waste, created the foolish belief that we could make war and get rich by it. The patriotic willingness of the nation to be taxed was abused to impose taxes for protection, not for revenue, so that the industry of the country was distorted and forced into unnatural development. The collapse of 1873, followed by a fall in prices and a general liquidation, was due to the fact that every one knew in his heart that the state of things which had existed for some years before was hollow and fictitious. Confidence failed because every one knew that there were no real grounds for confidence. The Franco-Prussian war had, also, while it lasted, produced a period of false and feverish prosperity in England. It was succeeded by great political changes in Germany which, together with the war indemnity, led to a sudden and unfounded expansion of speculation, amounting to a mania. Germany undoubtedly stands face to face with a new political and industrial future, but she has postponed it by a headlong effort to realize it at once. In France, too, the war was followed by a hasty, and, as we are told, unwise extension of permanent capital, planned to meet the extraordinary demand of an empty market. In England the prosperity of 1870–1872 has been followed as usual by developments of unsound credit, bad banking, and needless investments in worthless securities.

Here then we have, in a brief and inadequate statement, circumstances in all these great industrial nations peculiar to each, yet certainly sufficient to account for a period of reaction and distress. We have also before us great features of change in the world's industry and commerce which must ultimately produce immeasurable advantages, but which may well, operating with local causes, produce temporary difficulty; and we have to notice also that the local causes react through the commercial and credit relations of nations to distribute the evil.

It is not surprising, under such a state of things, that some people should lose their heads and begin to doubt the economic doctrines which have been most thoroughly established. It belongs to the symptoms of disease to lose confidence in the laws of health and to have recourse to quack remedies. I have already observed that certain phenomena appear in every great social movement which are calculated to deceive by apparent inconsistency or divergence. Hence we have seen the economists, instead of holding together and sustaining, at the time when it was most needed, both the scientific authority and the positive truth of their doctrines, break up and run hither and thither, some of them running away altogether. Many of them seem to be terrified to find that distress and misery still remain on earth and promise to remain as long as the vices of human nature remain. Many of them are frightened at liberty, especially under the form of competition, which they elevate into a bugbear. They think that it bears harshly on the weak. They do not perceive that here "the strong" and "the weak" are terms which admit of no definition unless they are made equivalent to the industrious and the idle, the frugal and the extravagant. They do not perceive, furthermore, that if we do not like the survival of the fittest, we have only one possible alternative, and that is the survival of the unfittest. The former is the law of civilization; the latter is the law of anticivilization. We have our choice between the two, or we can go on, as in the past, vacillating between the two, but a third plan—the socialist desideratum—a plan for nourishing the unfittest and yet advancing in civilization, no man will ever find. Some of the crude notions, however, which have been put forward surpass what might reasonably have been expected. These have attached themselves to branches of the subject which it is worth while to notice.

1. As the change in the relative value of the precious metals is by far the most difficult and most important of the features of this period, it is quite what we might have expected that the ill-trained and dilettante writers should have pounced upon it as their special prey. The dabblers in philology never attempt anything less than the problem of the origin of language. Every teacher knows that he has to guard his most enthusiastic pupils against precipitate attempts to solve the most abstruse difficulties of the science. The change in the value of the precious metals which is going on will no doubt figure in history as one of the most important events in the economic history of this century. It will undoubtedly cost much inconvenience and loss to those who are in the way of it, or who get in the way of it. It will, when the currency changes connected with it are accomplished, prove a great gain to the whole commercial world. The nations which make the change do so because it is important for their interests to do it. Now, suppose that it were possible for those who are frightened at the immediate and temporary inconveniences, to arrest the movement—the only consequence would be that they would arrest and delay the inevitable march of improvement in the industrial system.

2. The second field, which is an especial favorite with the class of writers which I have described, is that of prognostications as to what developments of the economic system lie in the future. Probably every one has notions about this and every one who has to conduct business or make investments is forced to form judgments about it. There is hardly a field of economic speculation, however, which is more barren.

3. The third field into which these writers venture by preference is that of remedies for existing troubles. The popular tide of medicine is always therapeutics, and the less one knows of anatomy and physiology the more sure he is to address himself exclusively to this department, and to rely upon empirical remedies. The same procedure is followed in social science, and it is accompanied by the same contempt for scientific doctrine and knowledge and remedies. To bring out the points which here seem to me important, it will be necessary to go back for a moment to some facts which I have already described.

One of the chief characteristics of the great improvements in industry, which have been described, is that they bring about new distributions of population. If machinery displaces laborers engaged in manufactures, these laborers are driven to small shopkeeping, if they have a little capital; or to agricultural labor, if they have no capital. Improvements in commerce will destroy a local industry and force the laborers to find a new industry or to change their abode. When forces of this character coöperate on a grand scale, they may and do produce very important redistributions of population. In like manner legislation may, as tariff legislation does, draw population to certain places, and its repeal may force them to unwelcome change. We may state the fact in this way: let us suppose that, in 1850, out of every hundred laborers in the population, the economical distribution was such that fifty should be engaged in agriculture, thirty in manufacturing, and the other twenty in other pursuits. That is to say that, with the machinery and appliances then available, thirty manufacturing laborers could use the raw materials and food produced by fifty agricultural laborers so as to occupy all to the highest advantage. Now suppose that, by improvements in the arts, twenty men could, in 1880, use to the best advantage the raw materials and food produced by sixty in agriculture. It is evident that a redistribution would be necessary by which ten should be turned from manufacturing to land. That such a change has been produced within the last thirty years and that it has reached a point at which is setting in the counter movement to the former tendency from the land to the cities and towns, seems to me certain. There are even indications of great changes going on in the matter of distribution which will correct the loss and waste involved in the old methods of distribution long before any of the fancy plans for correcting them can be realized, and which are setting free both labor and capital in that department. Now if we can economize labor and capital in manufacturing, transportation, and distribution, and turn this labor and capital back upon the soil, we must vastly increase wealth, for that movement would enlarge the stream of wealth from its very source.

Right here, however, we need to make two observations.

1. The modern industrial system which I have described, with its high organization and fine division of labor, has one great drawback. The men, or groups of men, are dissevered from one another, their interests are often antagonistic, and the changes which occur take the form of conflicts of interest. I mean this: if a shoemaker worked alone, using a small capital of his own in tools and stock, and working for orders, he would have directly before him the facts of the market. He would find out without effort or reflection when "trade fell off," when there was risk of not replacing his capital, when the course of fashion or competition called upon him to find other occupation, and so on. When a journeyman shoemaker works for wages, he pays no heed to these things. The employer, feeling them, has no recourse but to lower wages. It is by this measure that, under the higher organization, the need of new energy, or of a change of industry, or of a change of place is brought home to the workman. To him, however, it seems an arbitrary and cruel act of the master. Hence follow trade wars and strikes as an especial phenomenon of the modern system. It is just because it is a system, or more properly still, an organism, that the readjustments which are necessary from time to time in order to keep its parts in harmonious activity, and to keep it in harmony with physical surroundings, are brought about through this play of the parts on each other.

2. A general movement of labor and capital towards land, throughout the civilized world, means a great migration towards the new countries. This does not by any means imply the abandonment or decay of older countries, as some have seemed to believe. On the contrary, it means new prosperity for them. When I read that the United States are about to feed the world, not only with wheat and provisions, but with meat also, that they are to furnish coal and iron to mankind, that they are to displace all the older countries as exporters of manufactures, that they are to furnish the world's supply of the precious metals, and I know not what all besides, I am forced to ask what is the rest of the world going to do for us? What are they to give us besides tea, coffee, and sugar? Not ships, for we will not take them and are ambitious to carry away all our products ourselves. Certainly this is the most remarkable absurdity into which we have been led by forgetting that trade is an exchange. Neither can any one well expect that all mankind are to come and live here. The conditions of a large migration do, however, seem to exist. A migration of population is still a very unpopular idea in all the older states. The prejudice against it is apparent amongst Liberals and Tories, economists and sentimentalists. There is, however, a condition which is always suppressed in stating the social problem as it presents itseff in hard times. That problem, as stated, is: "How are the population to find means of support?" and the suppressed condition is: "if they insist on staying and seeking support where they are and in pursuits to which they are accustomed." The hardships of change are not for one moment to be denied, but nothing is gained by sitting down to whine about them. The sentimental reasons for clinging to one's birthplace may be allowed full weight, but they cannot be allowed to counterbalance important advantages. I do not see that any but land owners are interested to hold population in certain places, unless possibly we add governing classes and those who want military power. When I read declamations about nationality and the importance of national divisions to political economy (observe that I do not say to political science), I never can find any sense in them, and I am very sure that the writers never put any sense into them.

We may now return to consider the remedies proposed for hard times. We shall see that although they are quack remedies, and although they set at defiance all the economic doctrines which have been so laboriously established during the last century, they are fitted to meet the difficulty as it presents itself to land owners, governments, military powers, socialists, and sentimentalists. The tendency is towards an industrial system controlled by a natural coöperation far grander than anybody has ever planned, towards a community of interest and welfare far more beneficent than any universal republic or fraternity of labor which the Internationalists hope for, and towards a free and peaceful rivalry amongst nations in the arts of civilization. It is necessary to stop this tendency. What are the means proposed?

1. The first is to put a limit to civil liberty. By civil liberty (for I feel at once the need of defining this much-abused word) I mean the status which is created for an individual by those institutions which guarantee him the use of his own powers for his own development. For three or four centuries now, the civilized world has been struggling towards the realization of this civil liberty. Progress towards it has been hindered by the notion that liberty was some vague abstraction, or an emancipation from some of the hard conditions of human life, from which men never can be emancipated while they live on this earth. Civil liberty has also been confused with political activity or share in civil government. Political activity itself, however, is only a means to an end, and is valuable because it is necessary to secure to the individual free exercise of his powers to produce and exchange according to his own choice and his own conception of happiness, and to secure him also that the products of his labor shall be applied to his satisfaction and not to that of any others. When we come to understand civil liberty for what it is, we shall probably go forward to realize it more completely. It will then appear that it begins and ends with freedom of production, freedom of exchange, and security of property. It will then appear also that governments depart from their prime and essential function when they undertake to transfer property instead of securing it, and it may then be understood that legal tender laws, and protective tariffs as amongst the last and most ingenious devices for transferring one man's product to another man's use, are gross violations of civil liberty. At present the attempt is being made to decry liberty, to magnify the blunders and errors of men in the pursuit of happiness into facts which should be made the basis of generalizations about the functions of government, and to present the phenomena of the commercial crisis as reasons for putting industry once more in leading strings. It is only a new foe with an old face. Those who have held the leading strings of industry in time past have always taken rich pay for their services, and they will do it again.

2. The second form of remedy proposed is quite consistent with the last. It consists in rehabilitating the old and decaying superstition of government. It is called the state, and all kinds of poetical and fanciful attributes are ascribed to it. It is presented, of course, as a superior power, able and ready to get us out of trouble. If an individual is in trouble, he has to help himself or secure the help of friends as best he can, but if a group of persons are in trouble together, they constitute a party, a power, and begin to make themselves felt in the state. The state has no means of helping them except by enabling them to throw the risks and losses of their business upon other people who already have the burdens and losses of their own business to bear, but who are less well organized. The "state" assumes to judge what is for the public interest and imposes taxes or interferes with contracts to force individuals to the course which will realize what it has set before itself. When, however, all the fine phrases are stripped away, it appears that the state is only a group of men with human interests, passions, and desires, or, worse yet, the state is, as somebody has said, only an obscure clerk hidden in some corner of a governmental bureau. In either case the assumption of superhuman wisdom and virtue is proved false. The state is only a part of the organization of society in and for itself. That organization secures certain interests and provides for certain functions which are important but which would otherwise be neglected. The task of society, however, has always been and is yet, to secure this organization, and yet to prevent the man in whose hands public power must at last be lodged from using it to plunder the governed—that is, to destroy liberty. This is what despots, oligarchs, aristocrats, and democrats always have done, and the latest development is only a new form of the old abuse. The abuses have always been perpetrated in the name of the public interest. It was for the public interest to support the throne and the altar. It was for the public interest to sustain privileged classes, to maintain an established church, standing armies, and the passport and police system. Now, it is for the public interest to have certain industries carried on, and the holders of the state power apportion their favor without rule or reason, without responsibility, and without any return service. In the end, therefore, the high function of the state to regulate the industrial organization in the public interest is simply that the governing group interferes to make some people give the products of their labor to other people to use and enjoy. Every one sees the evils of the state meddling with his own business and thinks that he ought to be let alone in it, but he sees great public interests which would be served if the state would interfere to make other people do what he wants to have them do.

Now if these two measures could be carried out—if liberty could be brought into misapprehension and contempt, and if the state-superstition could be saved from the decay to which it is doomed, the movements of population and the changes in industry, commerce, and finance, could be arrested. The condemnation of all such projects is, once and for all, that they would arrest the march of civilization. The joy and the fears which have been aroused on one side and on the other by the reactionary propositions which have been made during the last five years are both greatly exaggerated. Such reactionary propositions are in the nature of things at such a time. It must be expected that the pressure of distress and disappointed hopes will produce passionate reaction and senseless outcries. From such phenomena to actual practical measures is a long step. Every step towards practical realization of any reactionary measures will encounter new and multiplying obstacles. A war of tariffs at this time would so fly in the face of all the tendencies of commerce and industry that it would only hasten the downfall of all tariffs. Purely retaliatory tariffs are a case of what the children call "cutting off your nose to spite your face." Some follies have become physically impossible for great nations nowadays. Germany has been afflicted: first, by too eager hopes, second, by the great calamity of too many and too pedantic doctors, third, by a declining revenue, and fourth, by socialistic agitation amongst the new electors. It appears that she is about to abandon the free-trade policy although she does not embrace protection with much vigor. The project already comes in conflict with numerous and various difficulties which had not been foreseen, and, in its execution, it must meet with many more. The result remains to be studied. France finds that the expiration of each treaty of commerce produces consequences upon her industry which are unendurable, and while the task of adjusting rival and contending interests so as to create a new system drags along, she is compelled to ward off, by temporary arrangements, the revival of the general tariff which the treaties had superseded. In the meantime her economists, who are the most sober and the best trained in the world, are opening a a vigorous campaign on the general issue. If England should think of reviving protection, she would not know what to protect. If she wanted to retaliate, she could only tax raw materials and food. The proposition, as soon as it is reduced to practical form, has no footing. As for ourselves we know that our present protective system never could have been fastened upon us if it had not been concealed under the war legislation, and if its effects had not been confused with those of the war. It could not last now if the public mind could be freed from its absorption in sectional politics, so that it would be at liberty to turn to this subject.

In conclusion, let me refer again to another important subject on which I have touched in this paper—what we call the silver question. It would, no doubt, be in the power of civilized nations to take some steps which would alleviate the inconveniences connected with the transition of several important nations from a silver to a gold currency. For one nation, which has no share in the trouble at all, to come forward out of "magnanimity" or any other motive to save the world from the troubles incident to this step, is quixotic and ridiculous. It might properly leave those who are in the trouble to deal with it amongst themselves. Either they or all might, however, do much to modify the effects of the change. The effort to bring about an international union to establish a bimetallic currency at a fixed ratio is quite another thing. It will stand in the history of our time as the most singular folly which has gained any important adherence. As a practical measure the international union is simply impossible. As a scientific proposition, bimetallism is as absurd as perpetual motion. It proposes to establish perpetual rest in the fluctuations of value of two commodities, to do which it must extinguish the economic forces of supply and demand of those commodities upon which value depends. The movement of the great commercial nations towards a single gold currency is the most important event in the monetary history of our time, and one which nothing can possibly arrest. It produces temporary distress, and the means of alleviating that distress are a proper subject of consideration; but the advantages which will be obtained for all time to come immeasurably surpass the present loss and inconvenience.

I return, then, to the propositions with which I set out. Feebleness and vacillation in regard to economic doctrine are natural to a period of commercial crisis, on account of the distress, uncertainty, and disorder which then prevail in industry and trade; but that is just the time also when a tenacious grasp of scientific principles is of the highest importance. The human race must go forward to meet and conquer its problems and difficulties as they arise, to bear the penalties of its follies, and to pay the price of its acquisitions. To shrink from this is simply to go back and to abandon civilization. The path forward, as far as any human foresight can now reach, lies in a better understanding and a better realization of liberty, under which individuals and societies can work out their destiny, subject only to the incorruptible laws of nature.