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the future profit and loss of its growth. The harvest of 1853
was almost the worst for a century throughout Western Europe ;
that of 1855 was very deficient ; that of 1856 was under an
average, while the war with Eussia still farther shortened
supply, and added to the cost of importation ; and the scarcity
of corn, and not the abundance of money, was the cause of the
sufferings of the labouring classes during the period. The
relative price of labour and bread in both countries has really
undergone an alteration in favour of those who purchase the
latter by the sale of the former. Thus in France, while corn
has considerably fallen, money wages have greatly advanced
both in country and town, and the advance has been constant.
In 1860, the average of wages in Paris was 4f. 55 c., and is
now computed at 5 f . ; and the pay of agricultural labour in the
country around Bordeaux has risen in the same time from



t316 The New Gold Ilines, and Prices in Europe in 1865.

40 to 50 sous a-day. In the United Kingdom, money wages
have also considerably risen ; and the rise in the price of animal
food, though greater in remote rural districts than in the large
towns, and considerably greater on the average than is shown
in any statistics on the subject, but little affects the bulk of the
rural population, since agricultural labourers have never been
accustomed to consume much of it. In towns, on the other
hand, money wages have risen fully as much as the price of
meat, the rise of which is, in fact, mainly due to an increased
expenditure of the working population ; and, accordingly, it is
pork, and the inferior qualities of mutton and beef, which have
risen most. The very causes which tend to raise wages and to
cheapen corn, tea, sugar, and clothing, evidently tend to raise
the price of animal food, by leaving the bulk of the people more
to expend on it ; it being a thing of which there are not the
same means of increasing the supply as of clothing and corn.
We cannot, indeed, exempt the owners of land from blame in
respect to the dearness of meat and dairy produce, since the
uncertain duration of tenure has been, along with some un-
favourable seasons, an obstacle to the increase of the domestic
supply, on which its price must chiefly depend. But the change
in the relative prices of corn and fresh animal food, and the
change in husbandry it is leading to, are mainly to be traced
to the general movement of commerce, which it is the endeavour
of this article to explain, and which is one certainly far from
injurious to the labouring classes in its general results. The
movement tends, as we have seen, to the production of every-
thing, money included, in the cheapest accessible places, and
its sale in the dearest accessible markets, and hence to equalize
prices aj)proximately in cheap and dear markets brought closer
together, thereby raising considerably the price of each class of
commodities in the places connected, in which it was previously
lowest, and, on the contrary, counteracting the effect of the
increase of money in those in which it was previously highest.
The price of corn has accordingly risen in many distant places
nearly to its level in England ; but in England its level has not
been raised. But just as the improvement in communication



The New Gold Mines, and Prices in Europe in 1865. 317

is not the same between all parts of the world alike, and the-
equalization of prices is not universal for any commodities, so
the improvement is not equal for all classes of commodities
alike ; and the price of commodities, such as fresh butter and
meat, which are portable only for a limited distance, has been
equalized over a much smaller area than tliat of corn. The
cheaper places to which London has access for fresh animal
food, are only the remoter parts of the kingdom itself and the
nearest parts of the Continent. Improvements in communica-
tion produce an approximation to equality in the prices of
portable goods only in proportion to their portability, and
hence a double change in relative prices ensues. In the first
place, the prices of easily portable articles approach to a level
in cheap and dear markets ; but, secondly, as all things are not
equally portable, a change is produced not only in comparative
prices in different places, but in the comparative prices of dif-
ferent commodities ; and both changes result in a disturbance
of the profits of different occupations, and a change in the
places of different industries. The same general cause tends
to raise the price of meat at Athlone almost to the price it
fetches in London, and to lower the price of corn in London
almost to its price at Odessa. And the consequence is, that
since labour and capital desert the occupations in which money
returns are declining and stationary, for those in which they
are increasing, the production of animal food is taking th&
place of the production of corn in this kingdom, and shep-
herds are increasing, and agricultural labourers decreasing, in
number.

But this internal change in our industrial economy is a
small part of the change in the territorial division of labour
which the changes in relative prices in the world of commerce
are producing. For the very same reasons that the price of
meat has risen in England, but not that of corn, and that the
former has risen more in the remoter pai-ts of the country than
in the capital, and again, that the change in prices is producing
the changes in the occupations of the people just stated, prices
in general have rapidly risen in many foreign countries, and



318 TJie New Gold Mines ^ and Prices in Ficrove in 1865.

British, industry and capital have been attracted from domestic
to foreign employment. The pecuniary value of the produce
of cheap places rises in proportion as they are brought within
reach of the best markets ; and capital employed in the improve-
ment of their commercial situation, the development of their
resources, and the transport of their produce, obtains an extra-
ordinary profit from sharing in the increase of its money value.
If, for example, a cwt. of goods is worth £1 at one place, and
only 5s. at a distance for want of communication, a railway
company making the line of connexion may charge more for
the carriage of goods, and buy the land and unskilled labour
they require for its construction very much cheaper than if
prices were near an equality at the two places already.

The great rise of prices in India and the enormous growth
of its trade are regarded by many as passing results of the
American war. And it is desirable, with reference to the
future not only of India but of many other places under the
same economic conditions, or which will soon be brought under
them, and also with reference to the future outlets both for
English capital and enterprise, and the produce of the new
mines, to ascertain whether we ought really to regard the
increase of money in India, and of English capital engaged in
its foreign commerce or internal improvement, as a fortuitous
and transitory event, or, on the contrary, as the result of per-
manent causes, which, upon the one hand, are continually in-
vesting with additional value the capabilities and productions
of places circumstanced like India, and, on the other hand, are
finding food and materials from the cheapest accessible quarters
for countries like England, and new and remunerative employ-
ment for their accumulated capital and skill.

That the stream of the precious metals to India, and the rise
of prices ensuing, are not solely attributable to the payments
for cotton caused by the American war, is clear from the facts
that the bulk of the treasure was imported before 1861, and that
the balance of imports of specie above exports, reached fifteen
and a-half millions sterling in the year 1859-60, and has not
reached twenty millions a-year as the average since the war.



A



The New Gold Mines, and Prices in Eurojje in 1865. 319

It is an error to suppose we have paid the new cotton countries
sums of money proportioned to the price of cotton in our markets,
part of which has gone to our own merchants and carriers,
and part has been paid in our own manufactures. The balance
of trade is always considerably more in our favour than appears
in the official reports of the value of our imports and exports,
respectively. We are ourselves the chief carriers both of our
exports and imports, and foreign countries really pay more for
our exports, and we pay them less for our imports than appears
by our Custom-House valuation, since we receive ourselves a
great part of the freight of cargoes both outwards and inwards,
and of the mercantile profit on the exchange. The balance of
trade, however, has been largely in favour of India for many
years past, and the rise of prices was anterior to the war. In a
speech at Calcutta, in February, 1860, Mr. Wilson, after re-
ferring to the rapid growth of Indian commerce, observed :
* It is notorious how much the price of all country produce has
increased of late years, in consequence of the demand for expor-
tation. I am thankful to know that the benefits thus conferred
by our commerce upon the land have extended in no slight
degree to the labourer. It is no exaggeration to say that the
rate of wages has risen in many districts twofold, and in some
threefold, during the last few years. In the face of evidence
of this kind, can anyone doubt that all classes in India are in
a state of prosperity, unparalleled in any former time ?'* A
very different view of the matter has latterly been taken by

* Economist, Marcli 31, 1860. The following Table of prices of the chief
articles of daily consuraption in the ' Statement showing the Material and Moral
Progress of India for 1860-61, pursuant to Act 21 and 22 Vict., c. 10, sec. 53,'
shows the great rise of prices in Bengal before the cotton drain began : —





1849.


1859.


March, 1861.




R. A.


K. A.


K. A. K. A.


R. A. U. A.


Grain, . .


1 2


to 1 4


1 11 to 2 2


2 6 to 2 7


Urrur Dhol,


1 7


„ 1 10


2 2 ,, 2 12


2 8 „ 2 9


Paddv, . .


7


,, 11


12 ,, 14




Ghee, . .


15 8


,, 21 8


23 8 ,, 27 8


28 „ 28 8


Oil, . . .


6 12


,,7


9 4 „ 9 6


17 ,, 2S 8


Tobacco, .


2 10


,,6


5 ,,5 8


4 8 ,, 8



320 The New Gold 3fines, and Prices in Europe in 1865..

several writers, who regard the rise in the price of all Indian
produce as a calamity to India resulting from the growth of
cotton for Europe instead of food for the natives. The real
increase in the cultivation of cotton in India has, however,,
been immensely exaggerated on the one hand, and the increase
in the cultivation of crops for native consumption in numerous
districts, has on the other hand been left out of sight. Our
import of cotton from Bombay, Madras, and Bengal, amounted
in 1860 to 570,000 bales, and in 1864 to 1,398,000 ; but the
bales in 1864 were considerably lighter than in 1860, and a great
part of their contents was not an additional growth, but cotton
withdrawn from native manufacture and the markets of China.
And there is copious evidence, that except in particular and
exceptional localities, the dearness of food has not arisen from
scarcity. In one of the principal new cotton districts — the
Nagpore country, in the lake region of which 300,000 acres
were under cotton — Mr. Temple's report on the trade and
resources of the central provinces of India for 1863-4, states
that ' agricultural produce abounds of all descriptions common
to India.' General Mansfield, in his Minute on the Currency
of India, March 8, 1864, observes: 'One great reason of the-
rise of prices in all descriptions of food, is the greater disposition
to consume. The people, being richer, actually eat more than
they did in the days of their poverty. Great tracts of land
which for ages had lain waste, are being daily brought into
cultivation.' In the ' Papers relating to a Gold Currency for
India,' lately published by order of the House of Commons,
there is a Memorandum by the Board of Revenue at Madras
which states : ' Agriculture is extending everywhere. There is
a great demand for cotton, and indeed for every product of the
field. Prices are at the same time exceedingly high.' And
the Madras Athenceum, not many weeks ago (March 4, 1865),
contained the following explanation of the rise of prices in that
Presidency : ' The rise in the price of provisions has succeeded a
general rise in the price of labour, skilled and unskilled. Men
engaged in mercantile pursuits, from the lowest ryots and
coolies, have been making money, and this has caused every-



The New Gold Mines ^ and Prices in Europe in 1865. 321

thing to be dear to those whose salaries were fixed in the good
old times. Mutton is not dear solely because pasturage and
grain are more costly, but because it has been eaten very much
more largely. People took to it as soon as they could afford it.
It has often been thought that religious prejudices among the
natives would always preserve animal food for the Englishman
at a cheap rate. But religious prejudices succumb under the
influence of rupees, as they are dispelled by the light which
rupees throw on the question.'

It is true that in particular places the dearness of the
necessaries of life is partly the result of a failure of the
crops, and is so far a misfortune; and in Bombay the late ex-
orbitant prices of cotton have really led to a diminished produc-
tion of food, and to a rise of general prices which cannot
be regarded as entirely of a durable or beneficial character.
But taking the upward movement of prices over India as a
whole, we cannot consider it as otherwise than both bene-
ficial and durable, and as being, like the rise of prices in
the Landes of the Gironde and at St. Nazaire,* the result
of a permanent improvement in commercial position, and in
the means of turning to profitable account the great natural
resources of the country and industrial powers of the people.
In a speech at the opening of a railway two yeoxQ ago, Sir
Bartle Frere, the remarkably able Governor of Bombay, said:
— 'We all know what vast sums, chiefly of English capital,
have of late years been spent in this country. Let us consider
for one moment what has been the effect of giving a fair day's
wages for a fair day's labour. As a rule, this was unknown before
the railway period. Not only were wages in most parts of the
country fixed by usage and authority, rather than by the natural
laws of demand and supply, but the privilege of labour was in

* ' St. Nazaire, a small fishing-town seven years since, has attained a prodi-
gious development, equal to any American city. France, a short time since, did
not possess a commercial port over an extent of 500 miles of coast washed by the
Atlantic. The manufacturers of that part of France were consequently placed in
a disadvantageous position in consequence of having no seaport whence to ship
their produce. The population has kept pace with the traffic. The value of
ground has risen with the population. Ground sold formerly for sixpence the
square yard is now worth almost £8.' — Times, April 29, 18G5.

Y



322 The New Gold llities, and Prices in Europe in 1865.

general restricted to particular spots, and nothing like the power
of taking labour to the best market practically existed. The
result was that the condition of the labourer was wretched in the
extreme, and Government could do little to raise him above the
status of a serf of the soil. All this has now changed, and for
the first time in history the Indian coolie finds that he has in
his power of labour a valuable possession, which, if he uses it
right, will give him something better than a mere subsistence.
As a general rule, the labom-er works far harder and better,
and acquires new and more civilized wants in proportion to the
wages he receives.'

The whole population of India by no means indeed imme-
diately shares in the gains arising from access to better markets
and the ingress of European inventions, which on the contrary
tend to deprive some classes of their former means of subsist-
ence. * The native handloom is collapsing in every part of
India. The best wares of English manufacture are getting
possession of the market, and in the form of utensils for cooking,
eating, and drinking, are passing from luxuries into necessaries.
Even Cheshire salt is supplied at prices which are obtaining for
it a wide field of consumption in Northern India.'* This is part
of the general change in the relative profits of different occupa-
tions and the seats of different industries attending the altered
distribution of money, produced by closer international com-
merce and the tendency of all things to be bought and produced
in the cheapest and sold in the dearest places. Europe can now
manufacture cheaper than Asia, which was once the manufacturer
for Europe ; the steel of Shefiield has supplanted that of Da-
mascus ; and the looms of Asia Minor and India are constantly
decreasing in number. The same cause, however, which di-
minishes the earnings of Hindoo weavers increases the money
incomes of the Hindoo population as a whole ; for in proportion
as they are enabled to buy and sell in the best markets, they
get better prices for the numerous productions in which they
excel. Mr. Senior pointed out that the comparative number of
ounces of silver or gold the Indian and the Englishman can earn

* Papers relating to a Gold Currency for India, p. 74.



The New Gold 3Iines, and Prices m Europe in 1865. 323

in a year depends on the comparative productiveness of their
industry in exportable commodities. But an Indian labourer
earned, when Mr. Senior wrote, only a ninth of the money
earned by an English one, not because his labour was really less
productive in that proportion, but because his means of export-
ing the produce were greatly inferior. The price of Indian
cotton may decline ; Bombay may cease to be England's
principal cotton field ; yet may it be safely predicted that the
capabilities of India and its people for numerous other produc-
tions are such that, with the means of exportation henceforward
at their command, prices in the three Presidencies will never
subside to their former beggarly level. Future candidates for
appointments and undertakers of industrial enterprises in India,
would do well to include this result of the improved commercial
situation of India in their calculations.

The monetary future of India has a more general practical
importance for Englishmen. Mr. Fawcett remarked two years
ago, that the question of a future depreciation of money in
England, supposing the increase in the supplies from the mines
to continue, is substantially a question as to the continuance of
the drain of the precious metals to the East. We would expand
Mr. Fawcett's proposition into the wider one, that it is a question
as to the continued absorption of money in places in all quarters
of the world, including Europe itself, in which the amount
hitherto current has not been in proportion to their powers of
production. India is only a representative of a large class of
localities, whose industrial resources are providing new markets
for the produce of the mines. In India itself, the Grovernor of
Bombay observes in a Minutere commending a gold currency :
' Grreat quantities of silver absorbed in remote parts of the
country go to furnish a currency where no general medium of
exchange before existed. There can be no doubt rupees are now
found in hundreds of small bazaars where all trade used to be
conducted by barter.'*

* Papers relating to a Gold Currency for India, p. 9. In page 89 of these
Papers the following passage occurs : — * Partly owing to the change from a
native to a European form of government, partly to the suhstitution of money

Y 2



324 The Neiv Gold Mines , and Prices in Europe in 1865.

Adam Smith has ohserved that the difficulties of land traffic
are such that commerce settles first on the borders of seas and
rivers, and is long before it penetrates into the inland parts
even of the most opulent and mercantile countries. And not-
withstanding the immense improvement in the means of land
carriage, it is still true, not only of Asia, but even of the
most civilized countries in Europe, that there are inland dis-
tricts in which prices are far below the surrounding level,
because they cannot or do not sell in the best markets, or on
the same terms as their neir^hbours. While some French
writers expatiate on the rise of prices in the parts of France
intersected by railways, others complain that in a country whose
institutions are intended to favour equality, the railways pro-
moted by Government have created a shocking inequality in
local incomes and prices, by giving some places the power of
transporting their produce cheaply to the capital, while others
are not nearer to good markets than before railways were
invented. A railway map of the world enables anyone to
predict that prices must rise greatly and soon in a vast number
of places. However obvious the remark, it is one of great
practical importance in trade, speculation, emigration, the
purchase of land, and industrial enterprises of a hundred
different kinds, that the price of labour and produce will
eventually rise wherever the soil is productive, and the means
of locomotion are defective ; and will rapidly rise wherever
those means are suddenly and greatly improved. But physical
obstacles to traffic are by no means the only causes of low prices ;
ignorance is often the mountain to be removed, and it is one
which still divides England itself into regions with different
monetary rates. Mainly from the want of agricultural sta-
tistics, the differences in the wages of farm-labourers, th&
profits of small shopkeepers, and the prices of produce in
different counties are surprising. An excellent authority on
this subject drew attention last winter to the fact that, while in

for barter in remote districts, but chiefly to the general increase of prices and
■wages, and the vastly augmented amount and numbers of transactions, the require-
ments of India for coin are only beginning to be felt.'



The NeiD Gold Klines ^ and Prices in Europe in 18G5. 325

some counties the farmers were paying ruinous prices for fodder,
in others, hay, straw, turnips, mangolds, and carrots were
selling at much the usual rates * But these are inequalities
which cannot continue; and the fact of their present existence
enables us to foresee in a great measure the future movements
of money and prices, and the most profitable places for the
investment of capital. Knowing the places where prices will
rise as soon as their resources are turned to account, and their
markets frequented, the capitalist knows places in which he
can get a large return for the expense of assisting to develop
these resources, or carry the produce to the best buyers. For
•example, a considerable part of the enormous prices paid in
Europe for cotton imported from the East has really been
received by our own merchants ; and the fact serves to explain
the discrepancy between our own official accounts of the value
of our imports from India, and those of India itself as to tlie
value of its exports to us. And the enormous profits which
have been made of late years in our foreign trade, and upon
various investments of capital in regions the pecuniary value of
whose produce has rapidly risen, is one principal cause of the
high rates of interest latterly prevailing. A high rate of
interest, like a high scale of prices, may arise from several
oauses. It may arise from a scarcity of capital, a great demand
on the part of unproductive borrowers, or high profits which
enable producers to borrow on liberal terms to the lender.
Governments may pay a high interest out of taxes, but mer-
cantile men can only pay it out of profits, and the maximum of
profit fixes the maximum permanent rate of interest in trade.
Mr. Mill is of opinion that the new mines have tended to lower
the rate of interest. ' The masses of the precious metals which
are constantly arriving from the gold countries are, it may be
said, wholly added to the funds that supply the loan market.
So great an additional capital tends to depress interest. 'f And
there can be no doubt that a great portion of the new gold



* Daily News, Novem'ber 19, 1864.

t Frincipks of FoUtical Economy (sixth ed.), Book iii., chap. 23.



326 The Neiv Gold Mines , and Prices in Europe in 1865.

received in this country did at first enter the loan market, and



Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 30 of 41)