CURRENCY AND THE TARIFF.
TO THE EDITOR OF THE SPECTATOR.
8th November 1842.
Stn—I am a constant reader of your paper, and I may add, an admirer of your independence and sincerity; but I have noticed some fallacies which have appeared in it lately, to which I beg permission to call your attention.
It is not long since you remarked, that the quantity of cattle imported under the new Tariff bad nut been sufficient to account for the fall in the price of English stock ; and you inferred, consequently, that the alteration in the Tariff was not the cause of the reduced price. If you had paused to consider upon what causes prices depend—if you bad remembered that the price of commodities in money is but another term for the price of money in commodities, and that a fall in the price of produce might as well be caused by a diminished supply of money as by an increased supply of produce—you would have hesitated before you drew the inference I have alluded to.
Before I remark any further upon this inference, I must notice another fal- lacy, which appears in your last paper. You state that money is plentiful ; and in proof of it cite the fact of 50,0001. having been lent at l per cent. This may he very well for a conversation between merchants or brokers, but it is an improper expression in a philosophical discussion, and conveys erro- neous ideas. You infer that the abundance of money is the cause of the low rate of interest ; a fact which has been disproved again and again. Money is a thing constantly in motion, and in itself utterly and always unproductive ; and when A. B. lends his 50,000!. it is not the money which carrier the interest, but the capital into which that money is instantly exchanged. The self-same sum (coin or notes) advanced by A. B. today may be lent by C. D. tomorrow; and it is not the abundance of the money, but the unproductivess of the capital, (of which the coin is but the representative for the hour,) which le the cause of the low rate of interest. It is capital which one man lends to another; money is but the means of transferring it ; and if the state of things is such that capi- tal applied to the purposes of industry is unproductive of profit, or if the times are such as to make the risk of using it very great, of course there will be few persons willing to use it, and the rate of interest will below.
It may be, therefore, that interest may decline and money at the same time be less plentiful than before; and there is no better proof of the scarcity of money than the fact that more goods are given for it. To return to the first fallacy. If you will consider for a moment that mar- kets lying side by side, (as England and the Continent,) must in a natural state of things base nearly equal prices ; that an actual diversity of prices to a large extent has actually existed between us in consequence of our high pro- tecting-duties having enabled us to maintain an amount of circulation of money greater than the proportion which could have existed in circulation here had the 'markets of the world, (or even our own markets only,) been free ; and that the last Tariff was an approximation, though to a trifling extent only, to the natural order of things; you will perceive that the fall in the price of stock, or any other commodity, might as well be occasioned by a general contraction of the circulation as by the importation of the particular commodity; and that the alteration of the Tariff having immediately preceded the fact, it probably was so ; and I beg you to observe, that the fall in prices which has taken place has been sufficiently general, (though for particular reasons not in all cases equal,) to lead us to look for a general and not for a particular cause.
And allow me to call your attention to the effect of any general variation in the prices of the country. Our National Debt is a property to the holders of Government Stock, and yet it is a truth too notorious to require pointing out that Government Stock is not a visible, tangible, or consumable article: so also mortgages are property to the mortgagee, and so are all debts to the credi- tor: meanwhile, the capital or real wealth of the country consists of visible and tangible things only ; and the former species of property is but a mortgage upon the latter, and the proportion which exists between the former and the latter is measured by reference to a money-value. If, therefore, the value of money (or, in other words, if the money-price of commodities) varies, of course the proportion between the capital of the country and the amount it is mortgaged for varies also. To illustrate this britfly. If the real risible and tangible capi- tal of the country be 3,000 millions in present money-value, and the invisible property (public and private debts) be 2,000 millions in amount, and prices fall twenty per cent, of course the money-value of the real capital sinks to 2,400 millions, whilst tie mortgage upon it remains 2,000 as before. Our debts in- crease from four sixths of our capital to five-sixths; which, raking our capital at 3,000 millions, is the same thing as making the amount of our debts and taxes 500 millions more. How such an event operates in detail, we had an example in the increased pressure of taxation and in the revolution of private fortunes produced by the Currency Act of 1819, which operated not only upon the contracts of landlord and tenant, mortgagor and mortgagee, but on all other relations of debtor and creditor; and we had an instance of an opposite result under the Bank Restriction Act of 1797.
With this experience to guide us, we may anticipate the result of any general fall of prices which may be occasioned by a partial or total repeal of the Tariff; indeed we need not anticipate, for we are at this moment adding to our stock of actual experience. You will find the above calculation worth pondering. That an almost total repeal of the protecting Tariff, must ultimately come seems absolutely certain; and how to escape the evil 1 have pointed out, (an evil which if the Tariff: were wholly abolished would amount pretty nearly to a national bankruptcy in regard to all existing contracts,) may be worth considering, if the future peace and happiness of the country is to lie regarded. That it may be avoided I am sure, and that it can be avoided by one means only. I am also sure, that if Sir ROBERT PEEL had adopted that only remedy contemporane- ously with the other great measures of last session, he might by this time have congratulated himself with the smiles and thanks of the people and the prospect of an increasing and abundant revenue.
1 know the scorn that will curl the lips of many of your readers at the Mil- lion of that only remedy which I have alluded to,—namely, an alteration and reduction of the standard weight of the coin ; and 1 know that I might speak to the winds with equal prospect of convincing them as to the majority of those who may happen to read this letter ; and therefore I will not waste either your space or my own time iu explaining how or why that measure would operate, how it would be just, and why it would be harmless. Time, the re- vealer of all things, will one day bring experimental conviction to those who cannot now understand; and may God assuage the sufferings which must inter- vene! Yet, baying mentioned the subject, 1 would just observe, that there are other causes besides mere fiscal ones—causes entirely beyond the control of governments—which are slowly and steadily progressing to reduce the money-
prices of all the nations of the world, to change the relations of debtor and
creditor, and to necessitate the measure I have mentioned. These are chiefly, 1st, That the supply of the precious metals (by which it has pleased govern- ments to fix the relations of debtor and creditor) is, and long has been, de- clining; a fact abundantly proved by Parliamentary documents. 2d, That the consumption of those metals, both by abrasion and for purposes of luxury, is rapidly increasing. And 3d, That the population and commerce of the
world is increasing, and is requiring, and will require, an increased supply of the precious metals, if even the present relation between them and commodities is
to be maintained. A fourth reason, peculiar to England, might also be stated in the various hostile tariffs recently made by other states, which tariffs, by en- hancing their prices, necessarily diminish ours.
[So far as we understand our correspondent, we believe there is much im- portant truth in his general views: but he is greatly mistaken if he imagines that we did not know the unproductiveness of capital to be the primary cause of a low rate of interest. In describing from time to time the symptoms of the state of trade as they arose, we have expressly pointed to their origin in the unproductiveness of capital, and its consequent want of employment : money was " plenty" in the City because of this want of employment,
and the low rate of interest was a consequence of the low rate if profit. Such has always been our doctrine. With respect to the low price of cattle,
this is the substance of all that we have stated from time to time, as passing inci-
dents gave occasion for our remarks : that various influences have been at work— the Tariff in some degree; the panic created by the Tariff; the failing means
of the people to purchase. But mentioning those influences, as producing a special effect, is not denying the existence of general causes, producing similar effects. If the lower price of cattle was caused merely by the diminished sup- ply of money, it was not caused by the importation of cattle; which was our
point. But the Tariff, adds the writer, might equalize or has equalized prices here and abroad. It tends to equalize prices of commodities of equal value: it tends to equalize the price of French and English beef, if the French beef be equal to the English in quality. But the tendency can only be carried into effect by importations—by a transfer of a cheap overplus to the site of a dear deficiency; and in that case we should still recognize the process of equaliza- tion in the tangible shape of imported beeves.—ED.]