Complete Works of F Marion Crawford

by F. Marion Crawford

  It cannot be supposed that the owners of mines are ignorant of these laws, or of the prospect which awaits them, if things continue much longer in their present state — and in truth they have shown themselves active enough in supporting every scheme which has been brought forward with any show of reason as tending to keep up the value of the produce of their mines. Nevertheless, it appears that all remedies it has been attempted to apply are in themselves short-sighted; able, indeed, to maintain bullion values for a time, but utterly incapable of producing a permanent effect.

  It is strange that, in the face of all that has been written on the subject by those great political economists who have reduced the treatment of commerce and finance to an exact science, the radical misconceptions in regard to the nature of money, which were pardonable enough a century ago, should still maintain so firm a hold on the public mind. The action of the United States in the Act of 1878, by which it was believed that the mining interests had been so greatly benefited, and the wild talk about bi-metallism, not to mention the longing of Western men for what might but too easily prove a return to inconvertible paper, are merely the expressions of a strongly rooted but diseased belief that money is not like anything else; that money does not conform to the laws of nature, but is mysteriously acted upon and directed in its channels by an inscrutable and demoniac agency. Until it is completely understood that money, and especially the precious metals for purposes of coinage, is a commodity precisely similar in its nature to the ordinary objects of trade, and that the use of it is nothing more than a mutual understanding among nations for purposes of obvious convenience, it must necessarily be out of the question to deal effectually with the phenomena which arise in natural consequence out of such a use of it. I am fully aware that in making these statements I am not saying anything original, nor is that my intention, persuaded as I am that the singular and somewhat alarming situation of the United States in regard to the silver question is as capable of immediate and permanent solution by the mere application of known laws as the simplest equation of two unknown quantities can be, the moment the value of the one is determined. In regard to money I will, before proceeding, quote at length a passage from J. S. Mill, embodying the best definition of what money is with which I am acquainted:

  “Money, when its use has grown habitual, is the medium “ through which the incomes of the different members of the “community are distributed to them, and the measure by “which they estimate their possessions. As it is always “by means of money that people provide for their different “necessities, there grows up in their minds a powerful association leading them to regard money as wealth in a more “peculiar sense than any other article; and even those who “pass their lives in the production of the most useful objects “acquire the habit of regarding those objects as chiefly important by their capacity of being exchanged for money. “A person who parts with money to obtain commodities, “unless he intends to sell them, appears to the imagination “to be making a worse bargain than a person who parts “with commodities to get money; the one seems to be “ spending his means, the other adding to them. Illusions “which, though now in some measure dispelled, were long “powerful enough to overmaster the mind of every politician, both speculative and practical, in Europe.

  “It must be evident, however, that the mere introduction “of a particular mode of exchanging things for one another, “by first exchanging a thing for money, and then exchanging the money for something else, makes no difference in the essential character of transactions. It is not “with money that things are really purchased. Nobody’s “income (except that of the gold or silver miner) is derived “from the precious metals. The pounds or shillings which “a person receives weekly or yearly are not what constitutes his income; they are a sort of tickets or orders “ which he can present for payment at any shop he pleases, “and which entitle him to receive a certain value of any “commodity that he makes choice of. The farmer pays his “laborers and his landlord in those tickets, as the most “convenient plan for himself and them; but their real “income is their share of his corn, cattle and hay, and it “makes no essential difference whether he distributes it to “them directly or sells it for them and gives them the price; “but as they would have to sell it for money if he did not, “and as he is a seller at any rate, it best suits the purposes “of all that he should sell their share along with his own, “and leave the laborers more leisure for work and the land-”lord for being idle. The capitalists, except those who are “producers of the precious metals, derive no part of their “income from those metals, since they only get them by “buying them with their own produce, while all other “persons have their incomes paid to them by the capitalists, “or by those who have received payment from the capitalists, and as the capitalists have nothing from the first, “except their produce, it is that and nothing else which “supplies all incomes furnished by them. There cannot, in short, be intrinsically a more insignificant thing in the “economy of society than money, except in the character “of a contrivance for sparing time and labor. It is a “machine for doing quickly and commodiously what would “be done, though less quicklyand commodiously, without “if, and, like many other kinds of machinery, it only exerts “a distinct and independent influence of its own when it “gets out of order.” — (J. S. MILL, Pr of Pol. E., iii., 7, §3.)

  It will be noticed in this definition that the case of mine owners is mentioned as being the only one in which income is derived from the precious metals, and it is of course conceivable that, in this country, where the class of persons who so derive their income is relatively very large, the special case is sufficiently important to require special consideration in applying general laws. “There cannot,” says the definition, “be intrinsically a more insignificant thing, “in the economy of society, than money, except in the “character of a contrivance for sparing time and labor.” But though money is a machine to save labor like any other, yet, in the case of all machines, the extent to which they are used and the price paid for them is a question of vital importance to those persons who make the machines. And so with the American producer of money: it is as indispensable for the maintenance of his income that the demand for the money he produces should continue, as it is that locomotives should continue to be used on railways, in order that locomotive manufacturers may get the interest of the capital they employ.

  It has indeed been said that money has a twofold function: that it is a commodity, and also the medium of exchange. But its use as a medium is certainly limited. It is as absurd to suppose it possible to increase the amount of money required for exchange, unless the collective trade of the world is extended, as it would be to try and force more water through an inch pipe than it will carry, though the reservoir supplying it were ever so large. After this fixed necessity of trade has been supplied, then there is no logical alternative possible for the strictest of economists but to allow that all the money produced over and above this is a simple commodity. And even if it is granted that the character of money as a commodity is somewhat modified by circumstances attending its circulation, those circumstances do not exist in connection with money which cannot circulate owing to its superfluity.

  To those familiar with Mr: J. S. Mill’s mode of reasoning, the following is a more simple demonstration: — Mr. Mill proves at length that “the value of money depends on its quantity combined with the rapidity of circulation.” Obviously, when there is no circulation at all, the second factor falls out, and the value of money which does not circulate depends solely on the cost of its production. So that, even by the strictest interpretation, the unemployed part, with which we now have to do, conforms entirely to the definition of a commodity.

  Superfluous money, then, is a commodity, and, therefore, in countries which produce it in the shape of precious metals, it is essential that there should be a market for it, or it will not continue worth producing; and if it ceases to be worth producing, those who own the land which yields it are as ba
dly off as a farmer would be if, by sudden isolation or other cause, he were totally prevented from selling any of the products of his land. And those who own mines constitute in this country a class whose interests are too considerable to be overlooked, and whose position is sufficiently strong to give them an influential voice in the government. These things are not in any sense matters of opinion, but rather they are demonstrated facts, to question which is merely to acknowledge a total ignorance of the subject.

  When it is admitted, as it must be, that silver in the United States is a mere commodity, produced and brought to market by the mine owners in precisely the same way as grain is raised and sold by farmers, it may fairly be supposed that the same, or nearly similar, conditions apply to the one as to the other. We will suppose, as we have a right to do, that the phenomenon which now appears in the silver market had appeared instead in the cereal market. We suppose, then, that, in a given year, other things remaining the same, there has been a harvest of wheat of extraordinary abundance, the preceding years not having been attended by any scarcity. It is evident that, since there has been no scarcity, there has been enough in the country each year to supply the home market; in other words, that as much has been grown as could be consumed, or as the buyers in the country could in any case be induced to purchase for their own use. And the buyers of cereals in one shape or another are the entire population of the country without a single exception, for probably all Americans eat some kind of bread. The year under notice has by the hypothesis, however, produced a quantity more than usual — a quantity more than all the buyers in the country, that is, than all the population of the country, can possibly be induced to buy. It is clear that the growers of this extraordinary crop will not be satisfied to sell the same amount as usual for the usual rates, allowing the remainder to perish without bringing any increased profit. At first they will probably endeavor to increase the demand by lowering the price, hoping that at the cheaper rate the demand will be increased beyond the ratio of cheapness; as, for instance, that by lowering the price 1/4, the public may be induced to take 1/2 more, as constantly occurs in actual commerce. But by the hypothesis the population have not suffered from any scarcity, and will not consume any more cereals even at the reduced prices; on the contrat, if the growers, finding their attempt to force a demand fail, should again raise the price, it is probable that the consumers, being accustomed to the lower price, would for some time consume less than their average, preferring to deny themselves rather than pay the old figure. The sellers would, therefore, in no case be better off than if there had been no extraordinary harvest, and would very likely, if there were any difference, realize less profit on the home consumption than in any ordinary years. Obviously, if they wish to get a market for their surplus stores of cereals they must look elsewhere, namely, to foreign countries. They will carry their corn to market abroad.

  It is highly probable that some other country produces some article which cannot be so cheaply produced at home, and of which home consumers would buy more if it were offered for sale. This article, then, will be at once selected by those who have surplus cereals to dispose of, as a suitable object of barter, and if the country which produces it will take the cereals to the extent to which they are offered the equilibrium will be restored, provided that the whole quantity of the newly imported article obtained in barter for the surplus cereals finds buyers in the home country. But if obstacles lie in the way of such a barter, so that, while the producer of cereals is unable to dispose of them at home, he cannot sell them or barter them abroad on such terms as to obtain some return, if ever so small, for his pains, he will abandon the attempt, and his best course will obviously be to hoard his surplus in the hope that he may be able to dispose of it at some future time. He does so, and just so much capital as is represented by his hoarded surplus will be lying inactive, that is, doing no good to himself or any one else. The example ends here. It is a complete case growing out of an hypothesis which it is perfectly reasonable to assume; and it is, moreover, a case which actually occurs in some parts of the United States, with the difference that the maize and wheat are consumed as fuel, and are thus of some small use, the obstacle to barter in such cases being the too great expense of transportation to the market. Though I have taken cereals as an example, because they are almost universally consumed in every civilized country, I clearly might have taken any other commodity in illustration, though the case would then have been less universally illustrative, owing to the restrictions attaching to commodities used more in one branch of society than another.

  The example I have here imagined is only a particular instance in the general illustration of international demand and supply familiar to all political economists. Let us take the existing state of things in America in regard to the production of gold and silver, and see in what respects it coincides with the example I have described.

  In America, as I have before said, silver and gold are commodities extracted from mines by means of labor paid for and capital laid out in the necessary tools and machinery by the capitalists who own the soil in which the mine lies. Mines, therefore, correspond to farms where the farmer owns the land, supplies the tools and employs labor. The produce of the mine, like the produce of the farm, must pay for the labor, maintain the owner, and yield besides at least as much profit as could be got for the employment of the same amount of capital elsewhere; otherwise the mine, like the farm, will cease to be worked. The miner, like the farmer, must convert his produce into money, which he does by selling it to the dealer. The dealer pays for the produce in money. So does the State or the exporter of bullion. The State deals in money and the exporter of bullion also deals in money, and here there arises a competition. The State has a strong interest in keeping specie in the country, and the exporter of bullion, as long as his trade is a profitable one (and when it is not so any longer he will cease to engage in it), has an equally strong interest in sending bullion out of the country. Now, in several countries, notably in those in which the metal it is desired to throw into circulation actually circulates, the State endeavors to attract bullion to the mint, by not only coining it gratis, but by returning to the producer a somewhat greater number of coins than his bullion is actually worth. It is true that this is effected by alloying the silver, but the State which issues these alloyed coins also engages to receive them in payment of debts to itself of a greater or less amount.

  As long as the bullion exporter and the Government continue to make it worth the miner’s trouble to produce the precious metals, just so long will he continue to do so, and no longer.

  Before proceeding with the exposition of the situation it will be well to pause and eliminate all obviously unnecessary details from the case, as only tending to complicate it. In the first place we need practically deal only with one of the precious metals, since whatever is true of the one will be also true of the other. In America, the production and disposal of silver present very similar characteristics to those of gold, but many of them appear in a much higher degree of development, in proportion as the amount (not the value) of silver produced in the United States is far greater than the amount (not the value) of the gold, and still continues to increase, whereas gold has been produced at a nearly unvarying rate for the last twenty-five years; and consequently, conforms so far to all the conditions of any ordinary commodity, produced with the same regularity, that we may for the present postpone the consideration of it. We shall therefore deal solely with silver at present. Next, we may leave the exporter of bullion out of the question. For, as a matter of fact, his intervention is at present of small importance, the accumulations of silver being found in the hands of the Government, and not in those of the bullion exporter, whose operations are not nearly so extensive and are conducted on the principle of “small profits and quick returns.” The case to be considered, therefore, as of the most general importance, is that in which the miner produces the silver and the State takes it for coinage, buying it of him and paying for it
in currency. This has continued to occur to a considerable amount ever since it was supposed that the State must buy the silver and issue it to ensure its going into circulation; and it is principally this action which has caused the accumulation of considerable hoards of coined dollars in the vault of the treasury. As a matter of fact it did not require much foresight to see that this would be the very way to prevent its circulating, and that, if the Government had bought no silver but had contented itself with coining and returning to the owners what was brought to the mint, there would most probably have been, at the present moment, a larger number of silver dollars in circulation than there actually is of them; a fact which I shall presently show.