Book 4 — CHAPTER I.

CONSUMPTION OF GOODS IN GENERAL.

SECTION CCVI.

NATURE AND KINDS OF CONSUMPTION.

As it is as little in the power of man to destroy matter as it is to create it, we mean by the consumption of goods, in the broad sense of the word, the abolition of or the doing away with an utility without any regard to the question whether another higher utility takes its place; in its narrower sense (consumption proper), a decrease of resources of any kind. Consumption is the counterpart of production (§ 30), the top of the tree of which production is the roots, and the circulation and distribution of goods the trunk. (A. Walker.) There is, also, what Riedel calls immaterial consumption, as when a utility disappears, either because the want itself to which it ministers disappears or because views have changed as to the means to be employed towards its satisfaction.[206-1]

SECTION CCVII.

NATURE AND KIND OF CONSUMPTION.—THE MOST USUAL KIND.

The commonest kind of consumption is that caused by the use of a thing, or by the employing of it for the purpose of acquisition or of enjoyment.[207-1] From time immemorial, enjoyment-consumption has been, preponderantly, the affair of women, as acquisition-consumption has been the business of men.[207-2] Other circumstances being equal, the degree or extent of consumption by use (use-consumption) is determined by national character. Thus, for instance, the cleanliness and love of order characteristic of the Dutch have contributed greatly to the long preservation in good condition of their dwellings and household articles.[207-3]

In the higher stages of civilization, the use of goods is wont to be divided more and more into special branches, according to the different peculiarities of the goods themselves, and of the different wants of men; a course of things which is, both as cause and effect, intimately related to the division of labor. I here speak of a principle of division of use (differentiation and specialization). Thus, for instance, Lorenz Lange, in 1722, found only one kind of tea in the trade between Russia and China; Müller, in 1750, found seven; Pallas, in 1772, ten; and Erman, in 1829, about seven hundred.[207-4] As the number of gradations of different kinds of the same goods increases with civilization, there is, in times of war, a retrogression in this respect, to a lower economic stage.[207-5]

Opposed to this, we have the principle of the combination of use. There are numberless kinds of goods which may serve a great many just as well as they can one exclusive user; and this either successively or simultaneously, inasmuch as there is no necessity why, with the increasing use of the object, the size of the object itself should increase in an equal proportion. (According to Marlo: wealth usable by one; wealth usable by many; wealth usable by all.) Thus, for instance, a public library may be incomparably more complete, and accessible in a still higher degree than ten private libraries which together cost as much as it did. And so, a restaurant-keeper may serve a hundred guests at the same time, with a much greater table-variety, more to their taste, and at a more convenient time, than if each person made the same outlay for his private kitchen.[207-6] While formerly, only the great could travel rapidly, combination of use has enabled even the lower classes to do so in our own days. There is, doubtless, a dark side to this picture, too. Combination of use requires frequently great sacrifices of personal independence, which should not be underestimated when they affect individuality of character, or threaten the intimacy and closeness of family life. It is, however, a bad symptom when the division of use increases without any corresponding combination of use.[207-7] [207-8]

SECTION CCVIII.

NATURE AND KINDS OF CONSUMPTION.—NOTIONAL CONSUMPTION.

By the notional consumption (Meinungsconsumtion), as Storch calls it, operated by a change of fashion, many goods lose their value, without as much as suffering the least change of form or leaving the merchant's shop. This kind of consumption, too, is exceedingly different in different nations. Thus, in Germany, for instance, fashions are much more persistent than in France.[208-1] In the most flourishing times of Holland, only noblemen and officers changed with the fashions, while the merchants and other people wore their clothes until they went to pieces.[208-2] In the East, fashions in clothing are very constant;[208-3] but the expensive custom there prevails, for a son, instead of moving into the house occupied by his father, to let it go to ruin, and to build a new one as a matter of preference. The same is true even in the case of royal castles. Hence, in Persia, most of the cities are half full of ruins, and are in time moved from one place to another.[208-4]

The national income of a country is, on the whole, much less affected by a change of fashion than the separate incomes of its people. The same whim which lowers the value of one commodity increases the value of another; and what has ceased to be in fashion among the rich, becomes accessible, properly speaking, to the poorer classes of the community for the first time.[208-5] The want of varying his enjoyments is so peculiar to man, and so intimately connected with his capacity for progress, that it cannot in itself be blamed. But if this want be immoderately yielded to, if the well-to-do should despise every article which has not the charm of complete novelty, the advantages of the whole pattern-system, by means of which the preparation of a large number of articles from the same model at a relatively small cost, would be lost. Besides, fashion, which makes production in large quantities, for the satisfaction of wants that are variable and free, possible, frequently means even a large saving in the cost of production.[208-6]

SECTION CCIX.

CONSUMPTION WHICH IS THE WORK OF NATURE.

The least enjoyable of all consumption (loss-consumption) is that which is the work of nature; and nature is certainly most consuming in the tropics. During the rainy season, in the region of the upper Ganges, mushrooms shoot up in every corner of the houses; books on shelves swell to such an extent that three occupy the place previously occupied by four; those left on the table get covered over with a coat of moss one-eighth of an inch in thickness. The saltpetre that gathers on the walls has to be removed every week in baskets, to keep it from eating into the bricks. Numberless moths devour the clothing. Schomburgk found that, in Guiana, iron instruments which lay on the ground during the rainy season became entirely useless within a few days, that silver coins oxydized, etc.; evidently a great obstacle in the way of the employment of machinery. In summer, the soil of this same region, so rich in roots, is so parched by the heat, that subterranean fires sometimes cause the most frightful destruction.

In Spanish America, there are so many termites and other destructive insects that paper more than sixty years old is very seldom to be found there.[209-1]

The warmer portions of the temperate zone are naturally most favorable to the preservation of stone monuments. Thus, for instance, in Persepolis, where there has been no intentional destruction, the stones lie so accurately superimposed the one on the other that the lines of junction can frequently be not even seen. The amphitheatre of Pola has lost in two thousand years only two lines from the angles of the stones.[209-2] The Elgin marble statues would certainly have lasted longer in Greece than they will in England. On the other hand, warm and dry climates have a very peculiar and exceedingly frightful species of nature-consumption in the locust plagues. The principal countries affected by such consumption are Asiatic and African Arabistan, the land of the Jordan and Euphrates, Asia Minor, parts of Northern India. On Sinai, locust plagues occur, on an average, every four or five years; but from 1811 to 1816, for instance, they destroyed everything each year. Their course is in its effects like an advancing conflagration. It turns the green country, frequently in a single day, into a brown desert; and famine and pestilence follow in its path.[209-3]

The colder regions of the temperate zone are exposed to danger and damage from land-slides in their long series of mountains, and from avalanches, from quicksands in many of their plains, from floods and the total destruction of land along their coasts;[209-4] but, on the other hand, they are, relatively speaking, freest from hurricanes, earthquakes and volcanoes, the ravages of which no human art or foresight is competent to cope with. From the point of view of civilization and of politics there is here a great advantage. See § 36. The former maritime power of Venice and of Holland is closely allied to the dangers with which the sea continually threatened them, and which was a continual spur to both. But, on the other hand, the danger from earthquakes which always impends over South America and Farther India, must produce consequences similar to those of anarchy or of despotism, because of the uncertainty with which they surround all relations. See § 39.[209-5]

SECTION CCX.

NECESSITY OF CONSIDERING WHAT IS REALLY CONSUMED.

Whenever there is question of consumption, it is necessary to examine with rigid scrutiny, what it is that has been really consumed; that is, that has lost in utility. The person, for instance, who pays twenty dollars for a coat, has consumed that amount of capital only when the coat has been worn out.[210-1] What is called the consumption of one's income in advance is nothing but the consumption of a portion of capital which the consuming party intends to make good from his future income.[210-2] Fixed capital, too, can certainly be directly consumed; for instance, when the owner of a house treats the entire rent he receives from it as net income, makes no repairs, and no savings to put up a new building at some future time. As a rule, however, the owner of fixed capital must, in order to consume it, first exchange it against circulating capital. Thus the prodigality and dissipation, especially of courts of absolute princes, have found numerous defenders who have claimed that they are uninjurious, provided only the money spent in extravagance remained in the country.[210-3] The prodigality itself, that is, the unnecessary destruction of wealth is not, on that account, any the less disastrous.[210-4] If, for instance, there are fire-works to the amount of 10,000 dollars, manufactured exclusively by the workmen of the country, ordered for a gala day; the night before they are used for purposes of display, the national wealth embraces two separate amounts, aggregating 20,000 dollars; that is, 10,000 dollars in silver and 10,000 in rockets, etc. The day after, the 10,000 in silver are indeed still in existence, but of the 10,000 in rockets, etc., there is nothing left. If the order had been made from a foreign country the reverse would have been the case, the silver stores of the people would have been diminished, but their supply of powder would remain intact.

In a similar way, there is occasion given for the greatest misunderstanding when people so frequently speak of producers and consumers as if they were two different classes of people. Every man is a consumer of many kinds of goods; but, at the same time, he is a producer, unless he be a child, an invalid, a robber, a pick-pocket, etc.[210-5] At the same time, Bastiat is right in saying that in case of doubt when the interests of production and of consumption come in conflict, the state, as the representative of the aggregate interest, should range itself on the side of the latter. If we carry things on both sides to their extremest consequences, the self-seeking desire of consumers would lead to the utmost cheapness, that is, to universal superfluity, and the self-seeking wish of producers to the utmost dearness, that is, to universal want.[210-6]

SECTION CCXI.

NATURE AND KINDS OF CONSUMPTION.—PRODUCTIVE CONSUMPTION.

There is no production possible without consumption. The embodiment of a special utility into any substance is a limitation of its general utility. Thus, for instance, when corn is baked into bread, it can no longer be used for the manufacture of brandy or of starch.[211-1]

When, therefore, consumption is a condition (outlay) to production it is called productive (reproductive).[211-2] Here, indeed, the form of the consumed goods is destroyed, but the value of the goods lives on in the new product.

There are different degrees of productiveness in consumption also. Thus, to a scholar, his outlay for books in his own branch is immediately productive; but nevertheless, books in departments of literature very remote from his own, pleasure trips, etc. may serve as nutrition and as a stimulus to his mind. According to § 52, we are compelled to consider all consumption productive which constitutes a necessary means towards the satisfaction of a real economic want. We may, indeed, distinguish between productive consumption in aid of material goods, of personal goods and useful relations; but in estimating the productiveness of these different sorts of consumption we are concerned not so much with the nature of the consumption as the results in relation to the nation's wants. The powder that explodes when a powder magazine burns is consumed unproductively; but the powder shot away in war may be productively consumed just as that used to explode a mine may be unproductively consumed; for instance, when the war is a just and victorious one and the mining enterprise has failed.[211-3]

The maintenance or support of those workmen whom they themselves acknowledge to be productive is presumably accounted productive consumption by all political economists. Why not, therefore, the cost of supporting and educating our children, who, it is to be hoped, will grow up later to be productive workmen. Man's labor-power is, doubtless, one of the greatest of all economic goods. But without the means of subsistence, it would die out in a few days. Hence we may, and even without an atomistic enumeration of the individual services and products of labor, consider the continued duration of that labor-power itself as the continued duration of the value of the consumed means of subsistence.[211-4]

SECTION CCXII.

UNPRODUCTIVE CONSUMPTION.

Moreover, unproductive consumption embraces not only every economic loss, every outlay for injurious purposes,[212-1] but also every superfluous outlay for useful purposes.[212-2] Yet, not to err in our classification here, it is necessary to possess the impartiality and many-sidedness of the historian, which enable one to put himself in the place of others and feel after them as they felt. The man, for instance, who, in cities like Regensburg and especially Rome, sees numberless churches often, so to speak, elbowing one another, cannot fail to recognize the difference between the buildings of to-day for business, political, educational and recreative purposes,[TN 39] and the medieval, for the satisfaction of spiritual wants. The latter also may, in their own sphere, and in their own time, have, as a rule, operated productively, as the former operate, often enough, by way of exception unproductively; as in the case of railway and canal speculations which have ended in failure. It would be difficult to decide between the relative value of the two kinds of wants, because the parties to the controversy do not, for the most part, share the want (Bedürfniss) of their respective opponents, frequently do not even understand it, and therefore despise it. Thus, there are semi-barbarous nations, who can entertain that respect for the laws which is necessary even from an economic point of view only to the extent that they see the person whose duty it is to cause them to be observed seated on a throne and surrounded by impressive splendor. Hence, such splendor here could not be considered merely unproductive consumption.[212-3]

We must, moreover, remark in this place as we did above, § 54, that it is easiest to pass the boundary line between productive and unproductive consumption in personal services. In 1830, the expenses of the state, in Spain, amounted to 897,000,000 of reals per annum; the outlay of municipal corporations, to 410,000,000, and that for external purposes of religion, 1,680,000,000. (Borrego.) This is certainly no salutary proportion; but it is scarcely evidence of a worse economic condition than the fact that in Prussia it would require a basin one Prussian mile in length, thirty-three and eight-tenths feet broad, and ten feet deep to hold all the brandy drunk in the country (Dieterici); or this other, that the British people spend yearly £68,000,000 sterling for taxes and £100,000,000 yearly for spirituous liquors.[212-4] Berkeley rightly says that the course practiced in Ireland, with its famishing proletarian population, of exporting the means of subsistence and exchanging them against delicate wines, etc., is as if a mother should sell her children's bread to buy dainties and finery for herself with the proceeds.[212-5] [212-6]

SECTION CCXIII.

EQUILIBRIUM BETWEEN PRODUCTION AND CONSUMPTION.

In all cases economic production is a means to some kind of consumption as its end.[213-1] The sharpest spur to productive activity is the feeling of want.[213-2] "Want teaches art, want teaches prayer, blessed want!" Well too has it been said: "Necessity is the mother of invention!" Leaving mere animals out of consideration,[213-3] those men who experience very few wants, with the exception of some rare and highly intellectual natures, prefer rest to labor. Therefore, when European merchants desire to engage in trade with a savage nation they have uniformly to begin by sending them their nails, axes, looking-glasses, brandy, etc., as gifts. Not until the savage has experienced a new enjoyment does the want of continuing it make itself felt; or is he prepared to produce for purposes of commerce.[213-4] In a state of normal development, the complete and continuing satisfaction of the coarser wants should constitute the foundation for the higher.[213-5]

SECTION CCXIV.

CAUSES OF AN INCREASE OF PRODUCTION.

Only when wants increase does production increase also.[214-1] The old maxim: Si quem volueris esse divitem, non est quod augeas divitias, sed minuas cupiditates (Seneca), would, if consistently carried out, have thwarted the advance of civilization and frustrated the improvement of man's condition. On the other hand, most political economists, without more ado, assume that individuals, and still more nations, are wont to extend the aggregate of their enjoyments just as far as there is a possibility of satisfying their wants. But they forget here how great a part is played in the world, as men are constituted, by the principle of inertia.[214-2] At the first blush, what seems more natural than that the less labor a people need employ to obtain the most indispensable means of subsistence, the more time and taste would remain to them to satisfy their more refined wants. According to this, we should expect to discover a more refined civilization, especially, in intellectual matters, in the earliest periods, when population is small, when land exists in excess and is not yet exhausted. But, in reality, precisely the reverse is the case. In the earliest stages of civilization[TN 42] accessible to our observation, we find materialism prevailing in its coarsest form, and life absorbed entirely by the lowest physical wants. (Tropical lands.) Where bread grows on the trees, and one needs only to reach out his hand and pluck it; where all one wants to cover his nakedness is a few palm leaves, ordinary souls find no incentive to an ant-like activity, or to a union among themselves for economic purposes.[214-3] When a Mexican countryman earns enough to keep himself and his family from absolute want by two days' labor in a week, he idles away the other five. It never occurs to him that he might devote his leisure time to putting his hut or his household furniture, etc., in better shape. The necessity of foresight even is almost unknown; and in the most luxuriantly fertile country in the world, a bad harvest immediately leads to the most frightful famine. Humboldt was assured that there was no hope of making the people more industrious except by the destruction of the banana plantations.[214-4] But, indeed, there would be little gained by such compulsory industry. To work for any other end than satiation, it is necessary that man should feel wants beyond the want created by mere hunger.[214-5] There are so many conditions precedent (and mutually limiting one another) to a general advance in civilization, that such an advance can, as a rule, take place only very gradually. Let us suppose, for instance, a single Indian in Mexico, perfectly willing to work six days in the week, and in this way to cultivate a piece of land three times as great as his fellow Indians. Where would he get the land? He would, for a time find no purchasers for his surplus, and therefore not be in a condition to pay the landlord as much as the latter hitherto received from the pasturage alone. Not until cities are built and offer the rural population the products of industry in exchange for theirs, can they be incited to, or become capable of effecting a better cultivation of the land. This incentive and this capacity, are inseparably connected with each other. Where the agricultural population produce no real surplus, but after the fashion of medieval times, produce everything they want themselves, and consume all their own products with the exception of the part paid to the state as a tax, there can scarcely be an industrial class, a commercial class, or a class devoted to science, art, etc. And, conversely, it is only the higher civilization which finds expression in the development of these classes, that, by a more skillful guidance of the national labor, can call forth its productiveness to an extent sufficient to yield a considerable surplus of agricultural commodities over and above the most immediate wants of the cultivators of the soil themselves. Hence, we find that precisely in those countries which are most advanced in the economic sense, there is relatively the smallest number of men engaged in agriculture, and relatively the largest number in production of a finer kind.[214-6] It is here as in private housekeeping: the poorer a man is, the greater is the portion of his income which he is wont to lay out for indispensable necessities.[214-7] [214-8]

EXPENSES OF

Consumption Purpose. a laborer's family in comfortable circumstances. family of the middle class. a well-to-do family.

In Belgium. per cent. In Saxony. per cent. In Saxony. per cent. In Saxony. per cent.

Food,61 ⎫ 62 ⎫ 55 ⎫ 50 ⎫

Clothing,15 ⎪ 16 ⎪ 18 ⎪ 18 ⎪

Shelter,10 ⎬ 95 12 ⎬ 95 12 ⎬ 90 12 ⎬ 85

Heating and lighting,05 ⎪ 05 ⎭ 05 ⎭ 05 ⎭

Utensils and tools,04 ⎭

Education, instruction, 02 ⎫ 02 ⎫ 3.5 ⎫ 5.5 ⎫

Public security,01 ⎪ 01 ⎪ 2.5 ⎪ 3.5 ⎪

Sanitary purposes01 ⎬ 5 01 ⎬ 5 2.0 ⎬ 10 3.0 ⎬ 15

Personal services,01 ⎭ 01 ⎭ 2.5 ⎭ 3.5 ⎭

SECTION CCXV.

NECESSITY OF THE PROPER SIMULTANEOUS DEVELOPMENT OF PRODUCTION AND CONSUMPTION.

Hence, one of the most essential conditions of a prosperous national economy is that the development of consumption should keep equal pace with that of production, and supply with demand.[215-1] The growth of a nation's economy naturally depends on this: that production should always be, so to speak, one step in advance of consumption, just as the organism of the animal body grows from the fact that the secretions always amount to something less than the amount of additional nutrition. A preponderance of secretions would here be disease; but so would be a too great preponderance of nutrition. Now, the politico-economical disease which is produced by the lagging behind of consumption and by the supply being much in advance of the demand, is called a commercial (market) crisis. Its immediate consequence is, that for a great many commodities produced, no purchasers can be found. The effect of this is naturally to lower prices. The profit of capital and wages diminish. A transition into another branch of production, not overcrowded, is either not possible at all or is attended with care, great difficulties and loss. It is very seldom that all these disadvantages are confined to the one branch in which the disease had its original seat. For, since the resources of the one class of producers have diminished, they cannot purchase as much from others as usual. The most distant members of the politico-economic body may be thereby affected.[215-2]

SECTION CCXVI.

COMMERCIAL CRISES IN GENERAL.—A GENERAL GLUT.

The greater number of such crises are doubtless special; that is, it is only in some branches of trade that supply outweighs demand. Most theorists deny the possibility of a general glut, although many practitioners stubbornly maintain it.[216-1] J. B. Say relies upon the principle that in the sale of products, as contradistinguished from gifts, inheritances, etc., payment can always be made only in other products. If, therefore, in one branch there be so much supplied that the price declines; as a matter of course, the commodity wanted in exchange will command all the more, and, therefore, have a better vent. In the years 1812 and 1813, for instance, it was almost impossible to find a market for dry goods and other similar products. Merchants everywhere complained that nothing could be sold. At the same time, however, corn, meat and colonial products were very dear, and, therefore, paid a large profit to those who supplied them.[216-2] Every producer who wants to sell anything brings a demand into the market exactly corresponding to his supply. (J. Mill.) Every seller is ex vi termini also a buyer; if, therefore production is doubled, purchasing power is also doubled. (J. S. Mill.) Supply and demand are in the last analysis, really, only two different sides of one and the same transaction. And as long as we see men badly fed, badly clothed, etc., so long, strictly speaking, shall we be scarcely able to say that too much food or too much clothing has been produced.[216-3]

SECTION CCXVII.

COMMERCIAL CRISES IN GENERAL.

All these allegations are undoubtedly true, in so far as the whole world is considered one great economic system, and the aggregate of all goods, including the medium of circulation, is borne in mind. The consolation which might otherwise lie herein is made indeed to some extent unrealizable by these conditions. It must not be forgotten in practice that men are actuated by other motives than that of consuming as much as possible.[217-1] As men are constituted, the full consciousness of this possibility is not always found in connection with the mere power to do, to say nothing of the will to do.[217-2] There are, everywhere, certain consumption-customs corresponding with the distribution of the national income. Every great and sudden change in the latter is therefore wont to produce a great glut of the market.[217-3] The party who in such case wins, is not wont to extend his consumption as rapidly as the loser has to curtail his; partly for the reason that the former cannot calculate his profit as accurately as the latter can his loss.[217-4]

Thus laws, the barriers interposed by tariffs, etc., may hinder the too-much of one country to flow over into the too-little of another. England, for instance might be suffering from a flood of manufactured articles and the United States from an oppressive depreciation in the value of raw material; but the tariff-laws places a hermetic dike between want on one side and superfluity on the other. Strong national antipathies and great differences of taste stubbornly adhered to may produce similar effects; for instance between the Chinese and Europeans. Even separation in space, especially when added to by badness of the means of transportation may be a sufficient hinderance especially when transportation makes commodities so dear that parties do not care to exchange. In such cases, it is certainly imaginable that there should be at once a want of proper vent or demand for all commodities; provided, we look upon each individual class of commodities the world over as one whole, and admit the exception that in individual places, certain parts of the whole more readily find a market because of the general crisis.

Lastly, the mere introduction of trade by money destroys as it were the use of the whole abstract theory.[217-5] So long as original barter prevailed, supply and demand met face to face. But by the intervention of money, the seller is placed in a condition to purchase only after a time, that is, to postpone the other half of the exchange-transaction as he wishes. Hence it follows that supply does not necessarily produce a corresponding demand in the real market. And thus a general crisis may be produced, especially by a sudden diminution of the medium of circulation.[217-6] And so, many very abundant harvests, which have produced a great decline in the value of raw material, and no less so a too large fixation of capital which stops before its completion,[217-7] may lead to general over-production. In a word, production does not always carry with itself the guaranty that it shall find a proper market, but only when it is developed in all directions, where it is progressive and in harmony with the whole national economy. To use Michel Chevalier's expression, the saliant angles of the one-half must correspond to the re-entrant angles of the other, or confusion will reign everywhere. Even in individual industrial enterprises, the proper combination of the different kinds of labor employed in them is an indispensable condition of success. Let us suppose a factory in which there are separate workmen occupied with nothing but the manufacture of ramrods. If these now exceed the proper limits of their production and have manufactured perhaps ten times as many ramrods as can be used in a year, can their colleagues, employed in the making of the locks or butt-ends[TN 45] of the gun, profit by their outlay? Scarcely. There will be a stagnation of the entire business, because part of its capital is paralyzed, and all the workmen will suffer damage.[217-8] [217-9]

SECTION CCXVIII

PRODIGALITY AND FRUGALITY.

Prodigality is less odious than avarice, less irreconcilable with certain virtues, but incomparably more detrimental to a nation's economy. The miser's treasures, even when they have been buried, may be employed productively, at least, after his death; but prodigality destroys resources. So, too, avarice is a repulsive vice, extravagance a seductive one. The practice of frugality[218-1] in every day life is as far removed from one extreme as the other. It is the "daughter of wisdom, the sister of temperance and the mother of freedom." Only with its assistance can liberality be true, lasting and successful. It is, in short, reason and virtue in their application to consumption.[218-2] [218-3]

SECTION CCXIX.

EFFECT OF PRODIGALITY.

Prodigality destroys goods which either were capital or might have become capital. But, at the same time, it either directly or indirectly increases the demand for commodities. Hence, for a time, it raises not only the interest of capital, but the prices of many commodities. Consumers naturally suffer in consequence; many producers make a profit greater than that usual in the country until such time as the equilibrium between supply and demand has been restored by an increase of the supply of the coveted products. But the capital of spendthrifts is wont to be suddenly exhausted; demand suddenly decreases, and producers suffer a crisis. As Benjamin Franklin says, he who buys superfluities will at last have to sell necessities. Thus the extravagance of a court may contribute to the rapid prosperity of a place of princely residence.[219-1] But it should not be forgotten that all the food-sap artificially carried there had to be previously withdrawn from the provinces. The clear loss caused by the destruction of wealth should also be borne in mind.[219-2] [219-3]

SECTION CCXX.

WHEN SAVING IS INJURIOUS.

The act of saving, if the consumption omitted was a productive one, is detrimental to the common good; because now a real want of the national economy remains unsatisfied.[220-1] The effecting of savings by curtailing unproductive consumption may embarrass those who had calculated on its continuance. But its utility or damage to the whole national economy will depend on the application or employment of what is saved. Here two different cases are possible.

A. It is stored up and remains idle. If this happens to a sum of money, the number of instruments of exchange in commerce is diminished. Hence, in consequence, there may be either a general fall in the price of commodities, or some commodities may remain unsold; that is, according to § 217, a commercial crisis of greater or smaller extent.[220-2] If it be objects of immediate consumption that are stored up and lie idle, articles of food or clothing, for instance, the price of such commodities is wont to be raised by the new and unusual demand for them, precisely as it is lowered afterwards when the stores are suddenly opened and thrown upon the market.[220-3]

B. If the saving effected be used to create fixed capital, there is as much consumption of goods, the same support of employed workmen, the same sale for industrial articles as in the previous unproductive consumption; only, there the stream is usually conducted into other channels. If a rich man now employs in house-building what he formerly paid out to mistresses; masons, carpenters, etc. earn what was formerly claimed by hair-dressers, milliners, etc.: there is less spent for truffles and champagne and more for bread and meat. The last result is a house which adds permanently either to personal enjoyment, or permanently increases the material products of the nation's economy.[220-4] And it is just so when the wealth saved is used as circulating capital. Here, the wealth saved is consumed in a shorter or longer time; and to superficial observers, this saving might seem like destruction; but it is distinguished from the last by this, that it always reproduces its full equivalent and more. However, the whole quantity of goods brought into the market by such new capital cannot be called its product. Only the use (Nützung) of the new capital can be so called; that is the holding together or the development in some other way of other forces which were already in existence until their achievements are perfected and ready for sale.[220-5] [220-6]

SECTION CCXXI.

LIMITS TO THE SAVING OF CAPITAL.

It may be seen from the foregoing, that the mere saving of capital, if the nation is to be really enriched thereby, has its limits. Every consumer likes to extend his consumption-supply and his capital in use (Gebrauchskapitalien); but not beyond a certain point.[221-1] Besides, as trade becomes more flourishing, smaller stores answer the same purpose. And no intelligent man can desire his productive capital increased except up to the limit that he expects a larger market for his enlarged production. What merchant or manufacturer is there who would rejoice or consider himself enriched, if the number of his customers and their desire to purchase remaining the same, he saw his stores of unsaleable articles increase every year by several thousands?

This is another difference between national resources or world resources and private resources. The resources of a private person, which are only a link in the whole chain of trade, and which are, therefore, estimated at the value in exchange of their component parts should, indeed, always be increased by savings made. (§ 8.) For even the most excessive increase of supply in general, which largely lowers the price of a whole class of commodities, will never reduce the price of individual quantities of that commodity below zero, and scarcely to zero. It is quite otherwise in the case of national or world resources which must be estimated according to the value in use of their component parts. Every utility supposes a want. Where, therefore, the want of a commodity has not increased, and notwithstanding there is a continuing increase in the supply, the only result must be a corresponding decrease in the utility of each individual part.[221-2]

If a people were to save all that remained to them over and above their most urgent necessities, they would soon be obliged to seek a wider market in foreign countries, or loan their capital there; but they would make no advance whatever in higher culture nor add anything to the gladness of life.[221-3] On the other hand, if they would not save at all, they would be able to extend their enjoyments only at the expense of their capital and of their future. Yet these two extremes find their correctives in themselves. In the former case, a glut of the market would soon produce an increased consumption and a diminished production; in the latter the reverse. The ideal of progress demands that the increased outlay with increased production should be made only for worthy objects, and chiefly by the rich, while the middle and lower classes should continue to make savings and thus contribute to wipe out differences of fortune.[221-4]

SECTION CCXXII.

SPENDTHRIFT NATIONS.

As there are extravagant and frugal individuals, so also are there extravagant and frugal nations. Thus, for instance, we must ascribe great national frugality to the Swiss. In many well-to-do families in that country, it is a principle acted upon to require the daughters to look to the results of their white sewing, instead of giving them pin-money; to gather up the crumbs after coffee parties in the presence of the guests, and to make soup of them afterwards, etc. Sons are generally neither supported nor helped to any great extent by their parents in their lifetime, and are required to found their own homes. They, therefore, grow rich from inheritance only late in years, when they are accustomed to a retired and modest mode of life, and have little desire, from mere convenience sake, to change it for another. And so Temple informs us that it never occurs to the Dutch that their outlay should equal their income; and when this is the case they consider that they have spent the year in vain. Such a mode of life would cost a man his reputation there as much as vicious excess does in other countries. The greatest order and the most accurate calculation of all outlay in advance is found in union with this; so that Temple assures us he never heard of a public or private building which was not finished at the time stipulated for in advance.[222-1]

On the other hand, the Englishman lives rather luxuriantly. He is so used to enjoying comparative abundance, that when English travelers see the peasantry of the continent living in great frugality, they generally attribute it to poverty and not to their disposition to make savings. If England has grown rich, it is because of the colossal magnitude of its production, which is still more luxuriant and abundant than its consumption.[222-2] This contrast may be the effect in part of nationality and climate;[222-3] but it is certainly the effect in part also of a difference in the stage of civilization which these countries have respectively reached. The elder Cato had a maxim that a widow might, indeed, allow her fortune to diminish, but that it was a man's duty to leave more behind him than he had inherited.[222-4] And how prodigally did not the lords of the universe live in later times!

SECTION CCXXIII.

THE MOST DETRIMENTAL KIND OF EXTRAVAGANCE.

The kind of extravagance which it is most natural we should desire to see put an end to, is that which procures enjoyment to no one. I need call attention only to the excessive durability and solidity of certain buildings. It is more economical to build a house that will last 60 years for $10,000, than one which will last 400 years for $20,000; for in 60 years the interest saved on the $10,000 would be enough to build three such houses.[223-1] This is, of course, not applicable to houses built as works of art, or only to produce an imposing effect. The object the ancient Egyptians had in view in building their obelisks and pyramids continues to be realized even in our day.

I might also call attention to the premature casting away of things used. Our national economy has saved incredible sums since rags have been manufactured into paper. In Paris 4,000 persons make a living from what they pick up in the streets.[223-2]