The World's Greatest Books - Volume 14 Part 28

Credit, as a subst.i.tute for money, is but a transfer of capital from hand to hand, generally from persons unable to employ it to hands more competent to employ it efficiently in production. Credit is not a productive power in itself, though without it the productive powers already existing could not be brought into complete employment.

In international trade we find that the law that permanent value is proportioned to cost of production does not hold good between commodities produced in distant places as it does in those produced in adjacent places.

Between distant places, and especially between different countries, profits may continue different, because persons do not usually remove themselves or their capital to a distant place without a very strong motive. If capital removed to remote parts of the world as readily, and for as small an inducement, as it moves to another quarter of the same town, profits would be equivalent all over the world, and all things would be produced in the places where the same labour and capital would produce them in greatest quant.i.ty and of best quality. A tendency may even now be observed towards such a state of things; capital is becoming more and more cosmopolitan.

It is not a difference in the _absolute_ cost of production which determines the interchange between distant places, but a difference in the _comparative_ cost. We may often by trading with foreigners obtain their commodities at a smaller expense of labour and capital than they cost to the foreigners themselves. The bargain is advantageous to the foreigner because the commodity which he receives in exchange, though it has cost us less, would probably have cost him more.

The value of a commodity brought from a distant place does not depend on the cost of production in the place from whence it comes, but on the cost of its acquisition in that place; which in the case of an imported article means the cost of production of the thing which is exported to pay for it. In other words, the values of foreign commodities depend on the terms of international exchange, which, in turn, depend on supply and demand.

It may be established that when two countries trade together in two commodities the exchange value of these commodities relatively to each other will adjust itself to the inclinations and circ.u.mstances of the consumers on both sides in such manner that the quant.i.ties required by each country of the article which it imports from its neighbour shall be exactly sufficient to pay for one another, a law which holds of any greater number of commodities. International values depend also on the means of production available in each country for the supply of foreign markets, but the practical result is little affected thereby.

_IV.--On the Influence of Government_

One of the most disputed questions in political science and in practical statesmanship relates to the proper limits of the functions and agency of governments. It may be agreed that they fall into two cla.s.ses: functions which are either inseparable from the idea of government or are exercised habitually by all governments; and those respecting which it has been considered questionable whether governments should exercise them or not. The former may be termed the _necessary_, the latter the _optional_, functions of government.

It may readily be shown that the admitted functions of government embrace a much wider field than can easily be included within the ring-fence of any restrictive definition, and that it is hardly possible to find any ground of justification common to them all, except the comprehensive one of general expediency; nor to limit the interference of government by any universal rule, save the simple and vague one that it should never be admitted but when the case of expediency is strong.

A most important consideration in viewing the economical effects arising from performance of necessary government functions is the means adopted by government to raise the revenue which is the condition of their existence.

The qualities desirable in a system of taxation have been embodied by Adam Smith in four maxims or principles, which may be said to have become cla.s.sical:

(1) The subjects of every state ought to contribute to the support of the government as nearly as possible in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

(2) The tax which each individual has to pay ought to be certain, and not arbitrary. A great degree of inequality is not nearly so great an evil as a small degree of uncertainty.

(3) Every tax ought to be levied at the time or in the manner in which it is most likely to be convenient for the contributor to pay it. Taxes upon such consumable goods as are articles of luxury are all finally paid by the consumer, and generally in a manner that is very convenient to him.

(4) Every tax ought to be so contrived as to take out and keep out of the pockets of the people as little as possible over and above what it brings into the public treasury.

Taxes on commodities may be considered in the following way. Suppose that a commodity is capable of being made by two different processes.

It is the interest of the community that of the two methods producers should adopt that which produces the best article at the lowest price.

Suppose, however, that a tax is laid on one of the processes, and no tax at all, or one of lesser amount, on the other. If the tax falls, as it is, of course, intended to do, upon the process which the producers would have adopted, it creates an artificial motive for preferring the untaxed process though the inferior of the two. If, therefore, it has any effect at all it causes the commodity to be produced of worse quality, or at a greater expense of labour; it causes so much of the labour of the community to be wasted, and the capital employed in supporting and remunerating the labour to be expended as uselessly as if it were spent in hiring men to dig holes and fill them up again. The loss falls on the consumers, though the capital of the country is also eventually diminished by the diminution of their means of saving, and in some degree of their inducements to save.

Taxes on foreign trade are of two kinds: taxes on imports and on exports. On the first aspect of the matter it would seem that both these taxes are paid by the consumers of the commodity. The true state of the case, however, is much more complicated.

By taxing exports we may draw into our coffers, at the expense of foreigners, not only the whole tax, but more than the tax; in other cases we shall gain exactly the tax; in others less than the tax. In this last case, a part of the tax is borne by ourselves, possibly the whole, even more than the whole.

If the imposition of the tax does not diminish the demand it will leave the trade exactly as it was before. We shall import as much and export as much; the whole of the tax will be paid out of our own pockets.

But the imposition of a tax almost always diminishes the demand more or less. It may therefore be laid down as a principle that a tax on imported commodities, when it really operates as a tax, and not as a prohibition, either total or partial, almost always falls in part upon the foreigners who consume our goods. It is not, however, on the person from whom we buy, but on those who buy from us that a portion of our custom duties spontaneously falls. It is the foreign consumer of our exported commodities who is obliged to pay a higher price for them because we maintain revenue duties on foreign goods.

We now reach the consideration of the grounds and limits of the principle of _laisser-faire,_ or non-interference by government.

Whatever theory we adopt respecting the foundation of the social union there is a circle round every human being which no government ought to be permitted to overstep; there is a part of the life of every person of years of discretion within which the individuality of that person ought to reign uncontrolled either by any other individual or by the public collectively. Scarcely any degree of utility short of absolute necessity will justify prohibitory regulation, unless it can also be made to recommend itself to the general conscience.

A general objection to government agency is that every increase of the functions devolving on the government is an increase of its power both in the form of authority and, still more, in the indirect form of influence. Though a better organisation of governments would greatly diminish the force of the objection to the mere multiplication of their duties, it would still remain true that in all the advanced communities the great majority of things are worse done by the intervention of government than the individuals most interested in the matter would do them if left to themselves.

Letting alone, in short, should be the practice; every departure from it, unless required by some great good, is a certain evil.

MONTESQUIEU

The Spirit of Laws

Charles Louis de Secondat, Baron de La Brede et de Montesquieu, was born near Bordeaux, in France, Jan. 18, 1689. For ten years he was president of the Bordeaux court of justice, but it was the philosophy of laws that interested him rather than the administration of them. He travelled over Europe and studied the political systems of the various countries, and found at last in England the form of free government which, it seemed to him, ought to be introduced into France. For twenty years he worked at his masterpiece, "The Spirit of Laws" ("De l'Esprit des Lois"), which was published anonymously in 1748, and in which he surveys every political system, ancient and modern, and after examining their principles and defects, proposes the English const.i.tution as a model for the universe. It may be doubted if any book has produced such far-reaching effects. Not only did it help on the movement that ended in the French Revolution, but it induced those nations who sought for some mean between despotism and mob-rule to adopt the English system of parliamentary government. "The Spirit of Laws" is rather hard reading, but it still remains the finest and the soundest introduction to the philosophical study of history.

Montesquieu died on February 10, 1755.

_I.--On a Republic_

There are three kinds of governments: the republican, the monarchical, and the despotic. Under a republic, the people, or a part of the people, has the sovereign power; under a monarchy, one man alone rules, but by fixed and established laws; under a despotism, a single man, without law or regulation, impels everything according to his will or his caprice.

When, in a republic, the whole people possesses sovereign power, it is a democracy. When this power is in the hands of only a part of the people it is an aristocracy. In a democracy the people is in certain respects the monarch, in others it is the subject. It cannot reign except by its votes, and the laws which establish the right of voting are thus fundamental in this form of government. A people possessing sovereign power ought to do itself everything that it can do well; what it cannot do well it must leave to its ministers. Its ministers, however, are not its own unless it nominates them; it is, therefore, a fundamental maxim of this government that the people should nominate its ministers. The people is admirably fitted to choose those whom it must entrust with some part of its authority. It knows very well that a man has often been to war, and that he has gained such and such victories, and it is therefore very capable of electing a general. It knows if a judge is hardworking and if the generality of suitors are content with his decisions, and it knows if he has not been condemned for corruption; this is sufficient to enable a people to elect its praetors.

All these things are facts about which a people can learn more in a market-place than a monarch can in a palace. But does a people know how to conduct an affair of state, to study situations, opportunities, and profit by them? No. The generality of citizens have sufficient ability to be electors, but not enough to be elected, and the people, though it is capable of forming a judgment on the administration of others, is not competent to undertake the administration itself. The people have always too much action or too little. Sometimes with a hundred thousand arms it overtakes everything; sometimes with a hundred thousand feet it moves as slowly as a centipede.

In a popular state the people are divided into certain cla.s.ses, and on the way in which this division is carried out depend the duration of a democracy and its prosperity. Election by lot is the democratic method; election by choice the aristocratic method. Determination by lot allows every citizen a reasonable hope of serving his country; but it is a defective measure, and it is by regulating and correcting it that great legislators have distinguished themselves. Solon, for instance, established at Athens the method of nominating by choice all the military posts, and of electing by lot the senators and the judges; moreover, he ordained that the candidates for election by lot should first be examined, and that those who were adjudged unworthy should be excluded; in that manner he combined the method of chance and the method of choice.

It does not require much probity for a monarchy or a despotism to maintain itself. The force of the laws in one, and the uplifted sword of the tyrant in the other, regulates and curbs everything. In a democracy, however, everything depends upon the political virtues of the people.

When a democracy loses its patriotism, its frugality, and its pa.s.sion for equality, it is soon destroyed by avarice and ambition.

The principle of democracy grows corrupt, not only when a people loses its spirit of equality, but when this spirit of equality becomes excessive, and each man wishes to be the equal of those whom he has chosen to rule over him. Great successes, and especially those to which the people have largely contributed, give it so much pride that it is no longer possible to direct it. Thus it was that the victory over the Persians corrupted the republic of Athens; thus it was that the victory over the Athenians ruined the republic of Syracuse. There are two excesses which a democracy must avoid: the spirit of inequality, which leads to an aristocracy or to the government by one man; and the spirit of excessive equality, which ends in despotism.

_II.--On an Aristocracy_

In an aristocracy the sovereign power is in the hands of a group of persons. It is they who make the laws and see that they are carried out, and the rest of the people are the subjects of the n.o.bility. When there is a great number of n.o.bles, a senate is necessary to regulate the affairs which the n.o.bles themselves are too numerous to deal with, and to prepare those which they are able to decide on. In this case the aristocracy exists in the senate, the democracy in the n.o.ble cla.s.s, and the people count for nothing.

The best aristocracy is that in which the popular party, which has no share of the power, is so small and so poor that the governing cla.s.s has no reason for oppressing it. Thus when Antipater made a law at Athens that those who had not two thousand drachmas should be excluded from voting, he formed the best aristocracy possible--for this qualification was so slight that it excluded very few people, and no one who had any consideration in the city. Aristocratic families should belong to the people as much as possible. The more an aristocracy resembles a democracy, the more perfect it is. The most imperfect of all is that in which the lower cla.s.ses are ground down by the upper cla.s.ses.

An aristocracy has by itself more force than a democracy. The n.o.bles form a corporation which, by its prerogative and for its particular interest, restrains the people; but it is very difficult for this corporation to restrain its own members as easily as it restrains the populace. Public crimes can, no doubt, be punished, as it is in the general interests of an aristocracy that this should be done; but, as a rule, private misdeeds in the n.o.bility will be overlooked. A corporation of this sort can only curb itself in two ways--either by a great political virtue, which leads the n.o.bles to regard the people as their equals and makes for the formation of large republic, or by the lesser virtue of moderation, which enables them to conserve their power.

An aristocracy grows corrupt when the power of the n.o.bles becomes arbitrary. When the governing families observe the laws they form a monarchy which has several monarchies; this is a very good thing in its nature, because all these monarchies are bound together by the laws.

But when they no longer observe them, they form a despotic state which has many despots.

The extreme corruption comes about when the n.o.bility becomes hereditary; it can no longer be moderate in the exercise of its powers. If the n.o.bles are small in number their power increases, but their surety diminishes; if they are great in number, their power is less, but their surety more certain, for power goes on increasing, and surety goes on diminishing up to the despot whose power is as excessive as his peril. A mult.i.tude of n.o.bles in an hereditary aristocracy thus makes the government less violent; but as they will have but little political virtue, they will grow nonchalant, idle, and irresponsible, so that the state at last will have no longer any force or resilience.

An aristocracy is able to maintain its force if its laws are such that they make the n.o.bility feel more the dangers and fatigues of government than the pleasures of it, and if the state is in such a situation that it has something to dread, and that its surety comes from within, and its danger threatens from without. A certain confidence forms the glory and the safety of a monarchy, but a republic lives on its perils. The fear of the Persians kept the Greek states in strict obedience to republican laws. Carthage and Rome intimidated and strengthened each other. It is a strange thing, but democracies and aristocracies are like water, which grows corrupt only when it is too long unmoved and untroubled.

_III.--On the Monarchy_

Intermediary, subordinate, and dependent powers const.i.tute the nature of a monarchical government, in which a single man governs by means of fundamental laws. The most natural of intermediary, subordinate powers is that of a n.o.bility. This is indeed an essential part of a monarchy, of which the maxim is: "No king, no n.o.bility; no n.o.bility, no king."