Hence the price of anything depends on four variables.[85]

1. Its cost.

2. Its attainable quant.i.ty at that cost.

3. The number and power of the persons who want it.

4. The estimate they have formed of its desirableness.

(Its value only affects its price so far as it is contemplated in this estimate; perhaps, therefore, not at all.)

[85] The two first of these variables are included in the _x_, and the two last in the _y_, of the formula given at p. 162 of "Unto This Last," and the four are the radical conditions which regulate the price of things on first production; in their price in exchange, the third and fourth of these divide each into two others, forming the Four which are stated at p. 186 of "Unto This Last."

Now, in order to show the manner in which price is expressed in terms of a currency, we must a.s.sume these four quant.i.ties to be known, and the "estimate of desirableness," commonly called the Demand, to be certain. We will take the number of persons at the lowest. Let A and B be two labourers who "demand," that is to say, have resolved to labour for, two articles, _a_ and _b_. Their demand for these articles (if the reader likes better, he may say their need) is to be absolute, existence depending on the getting these two things. Suppose, for instance, that they are bread and fuel in a cold country, and let _a_ represent the least quant.i.ty of bread, and _b_ the least quant.i.ty of fuel, which will support a man's life for a day. Let _a_ be producible by an hour's labour but _b_ only by two hours' labour; then the cost of _a_ is one hour, and of _b_ two (cost, by our definition, being expressible in terms of time). If, therefore, each man worked both for his corn and fuel, each would have to work three hours a day. But they divide the labour for its greater ease.[86] Then if A works three hours, he produces 3_a_, which is one _a_ more than both the men want.

And if B works three hours, he produces only 1-1/2_b_, or half of _b_ less than both want. But if A works three hours and B six, A has 3_a_, and B has 3_b_, a maintenance in the right proportion for both for a day and a half; so that each might take a half a day's rest. But as B has worked double time, the whole of this day's rest belongs in equity to him. Therefore, the just exchange should be, A, giving two _a_ for one _b_, has one _a_ and one _b_;--maintenance for a day. B, giving one _b_ for two _a_, has two _a_ and two _b_;--maintenance for two days.

[86] This "greater ease" ought to be allowed for by a diminution in the times of the divided work; but as the proportion of times would remain the same, I do not introduce this unnecessary complexity into the calculation.

But B cannot rest on the second day, or A would be left without the article which B produces. Nor is there any means of making the exchange just, unless a third labourer is called in. Then one workman, A, produces _a_, and two, B and C, produce _b_;--A, working three hours, has three _a_;--B, three hours, 1-1/2_b_;--C, three hours, 1-1/2_b_. B and C each give half of _b_ for _a_, and all have their equal daily maintenance for equal daily work.

To carry the example a single step farther, let three articles, _a_, _b_, and _c_, be needed.

Let _a_ need one hour's work, _b_ two, and _c_ four; then the day's work must be seven hours, and one man in a day's work can make 7_a_, or 3-1/2_b_, or 1-3/4_c_. Therefore one A works for _a_, producing 7_a_; two B's work for _b_, producing 7_b_; four C's work for _c_, producing 7_c_.

A has six _a_ to spare, and gives two _a_ for one _b_, and four _a_ for one _c_. Each B has 2-1/2_b_ to spare, and gives 1/2_b_ for one _a_, and two _b_ for one _c_. Each C has 3/4 of _c_ to spare, and gives 1/2_c_ for one _b_, and 1/4 of _c_ for one _a_. And all have their day's maintenance.

Generally, therefore, it follows that, if the demand is constant,[87]

the relative prices of things are as their costs, or as the quant.i.ties of labour involved in production.

[87] Compare "Unto This Last," p. 177, et seq.

Then, in order to express their prices in terms of a currency, we have only to put the currency into the form of orders for a certain quant.i.ty of any given article (with us it is in the form of orders for gold), and all quant.i.ties of other articles are priced by the relation they bear to the article which the currency claims.

But the worth of the currency itself is not in the slightest degree founded more on the worth of the article for which the gold is exchangeable. It is just as accurate to say, "So many pounds are worth an acre of land," as "An acre of land is worth so many pounds." The worth of gold, of land, of houses, and of food, and of all other things, depends at any moment on the existing quant.i.ties and relative demands for all and each; and a change in the worth of, or demand for, any one, involves an instantaneously correspondent change in the worth, and demand for, all the rest--a change as inevitable and as accurately balanced (though often in its process as untraceable) as the change in volume of the outflowing river from some vast lake, caused by change in the volume of the inflowing streams, though no eye can trace, no instrument detect motion either on its surface, or in the depth.

Thus, then, the real working power or worth of the currency is founded on the entire sum of the relative estimates formed by the population of its possessions; a change in this estimate in any direction (and therefore every change in the national character), instantly alters the value of money, in its second great function of commanding labour.

But we must always carefully and sternly distinguish between this worth of currency, dependent on the conceived or appreciated value of what it represents, and the worth of it, dependent on the existence of what it represents. A currency is true or false, in proportion to the security with which it gives claim to the possession of land, house, horse, or picture; but a currency is strong or weak, worth much or worth little, in proportion to the degree of estimate in which the nation holds the house, horse, or picture which is claimed. Thus the power of the English currency has been, till of late, largely based on the national estimate of horses and of wine: so that a man might always give any price to furnish choicely his stable, or his cellar, and receive public approval therefor: but if he gave the same sum to furnish his library, he was called mad, or a Bibliomaniac. And although he might lose his fortune by his horses, and his health or life by his cellar, and rarely lost either by his books, he was yet never called a Hippomaniac nor an Oinomaniac; but only Bibliomaniac, because the current worth of money was understood to be legitimately founded on cattle and wine, but not on literature. The prices lately given at sales for pictures and MSS. indicate some tendency to change in the national character in this respect, so that the worth of the currency may even come in time to rest, in an acknowledged manner, somewhat on the state and keeping of the Bedford missal, as well as on the health of Caractacus or Blink Bonny; and old pictures be considered property, no less than old port. They might have been so before now, but it is more difficult to choose the one than the other.

Now, observe, all these sources of variation in the power of the currency exist wholly irrespective of the influences of vice, indolence, and improvidence. We have hitherto supposed, throughout the a.n.a.lysis, every professing labourer to labour honestly, heartily, and in harmony with his fellows. We have now to bring farther into the calculation the effects of relative industry, honour, and forethought, and thus to follow out the bearings of our second inquiry: Who are the holders of the Store and Currency, and in what proportions?

This, however, we must reserve for our next paper,--noticing here only that, however distinct the several branches of the subject are, radically, they are so interwoven in their issues that we cannot rightly treat any one, till we have taken cognisance of all. Thus the quant.i.ty of the currency in proportion to number of population is materially influenced by the number of the holders in proportion to the non-holders; and this again by the number of holders of goods. For as, by definition, the currency is a claim to goods which are not possessed, its quant.i.ty indicates the number of claimants in proportion to the number of holders; and the force and complexity of claim. For if the claims be not complex, currency as a means of exchange may be very small in quant.i.ty. A sells some corn to B, receiving a promise from B to pay in cattle, which A then hands over to C, to get some wine. C in due time claims the cattle from B; and B takes back his promise. These exchanges have, or might have been, all effected with a single coin or promise; and the proportion of the currency to the store would in such circ.u.mstances indicate only the circulating vitality of it--that is to say, the quant.i.ty and convenient divisibility of that part of the store which the habits of the nation keep in circulation. If a cattle-breeder is content to live with his household chiefly on meat and milk, and does not want rich furniture, or jewels, or books,--if a wine- and corn-grower maintains himself and his men chiefly on grapes and bread;--if the wives and daughters of families weave and spin the clothing of the household, and the nation, as a whole, remains content with the produce of its own soil and the work of its own hands, it has little occasion for circulating media. It pledges and promises little and seldom; exchanges only so far as exchange is necessary for life. The store belongs to the people in whose hands it is found, and money is little needed either as an expression of right, or practical means of division and exchange.

But in proportion as the habits of the nation become complex and fantastic (and they may be both, without therefore being civilized), its circulating medium must increase in proportion to its store. If everyone wants a little of everything,--if food must be of many kinds, and dress of many fashions,--if mult.i.tudes live by work which, ministering to fancy, has its pay measured by fancy, so that large prices will be given by one person for what is valueless to another,--if there are great inequalities of knowledge, causing great inequalities of estimate,--and finally, and worst of all, if the currency itself, from its largeness, and the power which the possession of it implies, becomes the sole object of desire with large numbers of the nation, so that the holding of it is disputed among them as the main object of life:--in each and all these cases, the currency enlarges in proportion to the store, and, as a means of exchange and division, as a bond of right, and as an expression of pa.s.sion, plays a more and more important part in the nation's dealings, character, and life.

Against which part, when, as a bond of Right, it becomes too conspicuous and too burdensome, the popular voice is apt to be raised in a violent and irrational manner, leading to revolution instead of remedy. Whereas all possibility of Economy depends on the clear a.s.sertion and maintenance of this bond of right, however burdensome.

The first necessity of all economical government is to secure the unquestioned and unquestionable working of the great law of Property--that a man who works for a thing shall be allowed to get it, keep it, and consume it, in peace; and that he who does not eat his cake to-day, shall be seen, without grudging, to have his cake to-morrow. This, I say, is the first point to be secured by social law; without this, no political advance, nay, no political existence, is in any sort possible. Whatever evil, luxury, iniquity, may seem to result from it, this is nevertheless the first of all Equities; and to the enforcement of this, by law and by police-truncheon, the nation must always primarily set its mind--that the cupboard door may have a firm lock to it, and no man's dinner be carried off by the mob, on its way home from the baker's. Which, thus fearlessly a.s.serting, we shall endeavour in the next paper to consider how far it may be practicable for the mob itself, also, in due breadth of dish, to have dinners to carry home.

III.

THE CURRENCY-HOLDERS AND STORE-HOLDERS. THE DISEASE OF DESIRE.

It will be seen by reference to the last paper that our present task is to examine the relation of holders of store to holders of currency; and of both to those who hold neither. In order to do this, we must determine on which side we are to place substances such as gold, commonly known as bases of currency. By aid of previous definitions the reader will now be able to understand closer statements than have yet been possible.

The currency of any country consists of every doc.u.ment acknowledging debt which is transferable in the country.

This transferableness depends upon its intelligibility and credit. Its intelligibility depends chiefly on the difficulty of forging anything like it;--its credit much on national character, but ultimately always on the existence of substantial means of meeting its demand.

As the degrees of transferableness are variable (some doc.u.ments pa.s.sing only in certain places, and others pa.s.sing, if at all, for less than their inscribed value), both the ma.s.s and, so to speak, fluidity, of the currency, are variable. True or perfect currency flows freely, like a pure stream; it becomes sluggish or stagnant in proportion to the quant.i.ty of less transferable matter which mixes with it, adding to its bulk, but diminishing its purity. Substances of intrinsic value, such as gold, mingle also with the currency, and increase, while they modify, its power; these are carried by it as stones are carried by a torrent, sometimes momentarily impeding, sometimes concentrating its force, but not affecting its purity.

These substances of intrinsic value may be also stamped or signed so as to become acknowledgments of debt, and then become, so far as they operate independently of their intrinsic value, part of the real currency.

Deferring consideration of minor forms of currency, consisting of doc.u.ments bearing private signature, we will examine the principle of legally authorized or national currency.

This, in its perfect condition, is a form of public acknowledgment of debt, so regulated and divided that any person presenting a commodity of tried worth in the public market, shall, if he please, receive in exchange for it a doc.u.ment giving him claim for the return of its equivalent, (1) in any place, (2) at any time, and (3) in any kind.

When currency is quite healthy and vital, the persons entrusted with its management are always able to give on demand either--

A. The a.s.signing doc.u.ment for the a.s.signed quant.i.ty of goods. Or,

B. The a.s.signed quant.i.ty of goods for the a.s.signing doc.u.ment.

If they cannot give doc.u.ment for goods, the national exchange is at fault.

If they cannot give goods for doc.u.ment, the national credit is at fault.

The nature and power of the doc.u.ment are therefore to be examined under the three relations which it bears to Place, Time, and Kind.

1. It gives claim to the return of equivalent wealth in any Place. Its use in this function is to save carriage, so that parting with a bushel of corn in London, we may receive an order for a bushel of corn for the Antipodes, or elsewhere. To be perfect in this use, the substance of currency must be to the maximum portable, credible, and intelligible. Its non-acceptance or discredit results always from some form of ignorance or dishonour: so far as such interruptions rise out of differences in denomination, there is no ground for their continuance among civilized nations. It may be convenient in one country to use chiefly copper for coinage, in another silver, and in another gold,--reckoning accordingly in centimes, francs, or sequins; but that a French franc should be different in weight from an English shilling, and an Austrian zwanziger vary in weight and alloy from both, is wanton loss of commercial power.

2. It gives claim to the return of equivalent wealth at any Time. In this second use, currency is the exponent of acc.u.mulation: it renders the laying up of store at the command of individuals unlimitedly possible;--whereas, but for its intervention, all gathering would be confined within certain limits by the bulk of poverty, or by its decay, or the difficulty of its guardianship. "I will pull down my barns and build greater" cannot be a daily saying; and all material investment is enlargement of care. The national currency transfers the guardianship of the store to many; and preserves to the original producer the right of re-entering on its possession at any future period.

3. It gives claim (practical, though not legal) to the return of equivalent wealth in any Kind. It is a transferable right, not merely to this or that, but to anything; and its power in this function is proportioned to the range of choice. If you give a child an apple or a toy, you give him a determinate pleasure, but if you give him a penny, an indeterminate one, proportioned to the range of selection offered by the shops in the village. The power of the world's currency is similarly in proportion to the openness of the world's fair, and commonly enhanced by the brilliancy of external aspect, rather than solidity of its wares.

We have said that the currency consists of orders for equivalent goods. If equivalent, their quality must be guaranteed. The kinds of goods chosen for specific claim must, therefore, be capable of test, while, also, that a store may be kept in hand to meet the call of the currency, smallness of bulk, with great relative value, is desirable; and indestructibility, over at least a certain period, essential.

Such indestructibility and facility of being tested are united in gold; its intrinsic value is great, and its imaginary value is greater; so that, partly through indolence, partly through necessity and want of organization, most nations have agreed to take gold for the only basis of their currencies;--with this grave disadvantage, that its portability enabling the metal to become an active part of the medium of exchange, the stream of the currency itself becomes opaque with gold--half currency and half commodity, in unison of functions which partly neutralize, partly enhance each other's force.

They partly neutralize, since in so far as the gold is commodity, it is bad currency, because liable to sale; and in so far as it is currency, it is bad commodity, because its exchange value interferes with its practical use. Especially its employment in the higher branches of the arts becomes unsafe on account of its liability to be melted down for exchange.

Again. They partly enhance, since in so far as the gold has acknowledged intrinsic value, it is good currency, because everywhere acceptable; and in so far as it has legal exchangeable value, its worth as a commodity is increased. We want no gold in the form of dust or crystal; but we seek for it coined because in that form it will pay baker and butcher. And this worth in exchange not only absorbs a large quant.i.ty in that use,[88] but greatly increases the effect on the imagination of the quant.i.ty used in the arts. Thus, in brief, the force of the functions is increased, but their precision blunted, by their unison.

[88] The waste of labour in obtaining the gold, though it cannot be estimated by help of any existing data, may be understood in its bearing on entire economy by supposing it limited to transactions between two persons. If two farmers in Australia have been exchanging corn and cattle with each other for years, keeping their accounts of reciprocal debt in any simple way, the sum of the possessions of either would not be diminished, though the part of it which was lent or borrowed were only reckoned by marks on a stone, or notches on a tree; and the one counted himself accordingly, so many scratches, or so many notches, better than the other. But it would soon be seriously diminished if, discovering gold in their fields, each resolved only to accept golden counters for a reckoning; and accordingly, whenever he wanted a sack of corn or a cow, was obliged to go and wash sand for a week before he could get the means of giving a receipt for them.

These inconveniences, however, attach to gold as a basis of currency on account of its portability and preciousness. But a far greater inconvenience attaches to it as the only legal basis of currency.

Imagine gold to be only attainable in ma.s.ses weighing several pounds each, and its value, like that of a malachite or marble, proportioned to its largeness of bulk;--it could not then get itself confused with the currency in daily use, but it might still remain as its basis; and this second inconvenience would still affect it, namely, that its significance as an expression of debt, varies, as that of every other article would, with the popular estimate of its desirableness, and with the quant.i.ty offered in the market. My power of obtaining other goods for gold depends always on the strength of public pa.s.sion for gold, and on the limitation of its quant.i.ty, so that when either of two things happen--that the world esteems gold less, or finds it more easily,--my right of claim is in that degree effaced; and it has been even gravely maintained that a discovery of a mountain of gold would cancel the National Debt; in other words, that men may be paid for what costs much in what costs nothing. Now, if it is true that there is little chance of sudden convulsion in this respect, the world will not rapidly increase in wisdom so as to despise gold, and perhaps may even desire it more eagerly the more easily it is obtained; nevertheless the right of debt ought not to rest on a basis of imagination; nor should the frame of a national currency vibrate with every miser's panic and every merchant's imprudence.

There are two methods of avoiding this insecurity, which would have been fallen upon long ago if, instead of calculating the conditions of the supply of gold, men had only considered how the world might live and manage its affairs without gold at all.[89] One is to base the currency on substances of truer intrinsic value; the other, to base it on several substances instead of one. If I can only claim gold, the discovery of a continent of cornfields need not trouble me. If, however, I wish to exchange my bread for other things, a good harvest will for the time limit my power in this respect; but if I can claim either bread, iron, or silk at pleasure, the standard of value has three feet instead of one, and will be proportionally firm. Thus, ultimately the steadiness of currency depends upon the breadth of its base; but the difficulty of organization increasing with this breadth, the discovery of the condition at once safest and most convenient[90]

can only be by long a.n.a.lysis which must for the present be deferred.

Gold or silver[91] may always be retained in limited use, as a luxury of coinage and questionless standard, of one weight and alloy among nations, varying only in the die. The purity of coinage when metallic, is closely indicative of the honesty of the system of revenue, and even of the general dignity of the State.[92]