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first place, that we dislike the use of the expression disposable capital. It is too general in its meaning for the application which is made of it. Disposable means any thing than can be disposed of, and hence, disposable capital includes not only such capital as the owner desires to dispose of, (which is the sense given to it by Say or his translator,) but all such as they could dispose of if they would. Now, in this sense all capital is disposable ; for what capital is there which a man cannot transfer to another? Thus, strictly speaking, though disposable capital is the source of supply for pecuniary loans, the supply itself consists of only a portion of that capital, viz., such portion as the owners are willing to devote to loans.

Say lays considerable stress in this connection on a distinction between fired and circulating capital. This distinction, as laid down by Adam Smith,' (who does not, however, apply it to this subject,) may be expressed by saying, that fixed capital is what does not leave its owner's hands, while circulating capital is what furnishes a revenue only by being transferred. A man's farm and agricultural implements are said to fall under the former designation; a merchant's goods, and sums paid in wages, under the latter.

We do not know any considerable practical value which this distinction would possess, could it be maintained. Nor do we think it of a well-marked character. What is called fixed capital may change hands, and yield a profit to the former owner from the transfer. What is called circulating capital may be held in the same hands for an indefinite period of time. What can be the use of a distinction so contingent? Look, for example, at an application which is made of it by Smith himself. Labouring cattle are a fixed capital ; cattle bought in and fattened for sale are a circulating capital ; cattle kept for increase, or for their milk, are a fixed capital. Now, suppose they are kept with no definite exclusive purpose; suppose their owner is ready to sell them if he can get a good price for them, and meanwhile uses them as labouring cattle, or derives a profit from their milk; what species of capital are they in this case? The distinction drawn is not one in the things themselves; it is only a distinction in the designs of the owner; and the things are one species of capital or another, according to the contingent fluctuations of those designs. A bull raised for labour is fixed capital ; had the same animal been raised for sale, it would have been circulating capital ; the sale of it as circulating capital to a man who intended to employ it in the increase of his stock of cattle, would have changed it at once into fixed capital.

It is to this circulating capital that Say restricts the expres

" Wealth of Nations, book ii. c. 1.

sion, disposable capital. In his representation the two terms are synonymous.

In our opinion, as we have said, the account which Say gives of the topic under consideration, falls far short of the truth. We take the broad position, that there is no species of capital which is not properly disposable capital, and may not affect the market rate of interest. Any capital which the owner does not wish to employ himself may be the foundation of a loan at interest. For example, a man possesses a farm which he cannot conveniently cultivate himself. He says to a neighbour, who is less pressed with occupation than himself, “ You shall have my farm for five thousand dollars, and you may postpone payment as suits your convenience, if you will give me your note for the sum with interest." Such a transaction might occur in regard to any and every item of what Smith, Say, and others, term fixed capital, which could be found in the whole world. Of ten men living together in the same city, nine might, in this way, put all their capital, of whatsoever species, into the hands of the tenth, in the shape of loans on interest ; nor would it be necessary to the transaction that a single cent's worth of what Say calls disposable capital should be concerned, except the pen, ink, and paper with which the transfers were executed. It would be but an idle objection to the propriety of our example, to say, that, in the case supposed, no loan of money in the form of money would take place. The question is merely whether money would be at interest. Most certainly it would be so, as really as in any case. To remove the slightest ground of objection, however, let us suppose that the tenth of the ten men mentioned possesses one thousand dollars in gold and silver, and that the capital of each of the nine is one thousand dollars, but is vested in other property than money, which property they are desirous of selling. The moneyed man may go to the first of the nine, and purchase his property, paying him his one thousand dollars. He may then say to him, “If you will lend me that money,

I will pay you interest for it at the rate of ten per cent. per annum. The sum may be lent, just as money is usually lent. The moneyed man may



to the second of the nine, and pursue the same course, and so throughout the whole number. In this case but one thousand dollars of what is called circulating or disposable capital would be concerned, and nine thousand dollars would actually be loaned in money. Clearly the transaction would be precisely the same as the former in the result to the nine men; the sole difference between the two cases is, that, in the one we have just stated, the tenth man would be obliged to possess one thousand dollars in cash, while, in the first case, his property might be what is termed fixed capital, or, indeed, he might not be worth any thing at all.

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The supply of capital for loans, then, depends on the amount of property, of any description, which its owners are willing to trust in the possession of others.

The demand for capital, on the other hand, is regulated mainly by the profits which attend its employment. It is an accurate remark of David Hume, that “no man will accept of low profits where he can have high interest, and no man will accept of low interest where he can have high profits." The profits of business and the interest of inoney, from their reciprocal operation upon each other, tend to the same level. The high rate of profits on capital in the early times of modern mercantile enterprise, was one important cause of the exorbitant rates of interest which were exacted. The annual profit made by Venice on all her mercantile capital, in the early part of the fifteenth century, was forty per cent. The profits of business are very high in Turkey, in China, and the East generally; the rate of interest is likewise enormous. In the United States profits of business are commonly higher than in most European countries; and capital is, therefore, commonly loaned at higher rates of interest.

Not only is the demand for loans of capital peculiarly pressing in the United States, on account of the high rates of interest, but the supply of capital for loans is probably much less in proportion to the entire national capital than in any other country, on account of the structure and condition of society. In the old countries an immense proportion of the national capital exists in large masses in the hands of a few, and those few have generally little inclination to employ it themselves; in our country, capital is more equally diffused, and the owner more generally employs it himself

, instead of confiding it to other hands. On this account interest is higher than it would otherwise be ; since, as we have represented, interest is regulated mainly by the amount of capital which the owners are willing to lend, considered in reference to the demand. It is to be observed, however, that this same condition of society operates to diminish the demand for loans.

It is very evident, from what we have said, that the plenty or scarcity of money, in itself considered, has no effect whatsoever upon interest. Money may be very plenty, and be all used for other

purposes than loans, because men wish to make use of their property themselves. Money may be really very scarce, and yet there may be a great deal offered on loan. Accordingly, it is often observed that, when the rates of interest are excessively high, and men can with difficulty obtain the slightest loan,

1 Essays, part ii. essay iv.
2 Muratori, Script. Rer. Ital. t. xxii. p. 958.

money often exists in abundance, but is hoarded, or otherwise disposed of, instead of being lent. So, too, it is by no means true that loans are always found difficult to be obtained just in proportion to the rise of prices generally, though this rise is a sure indication of scarcity of money. The rate of interest depends on other contingencies than the scarcity or plenty of any single article.

There are several things, which have not yet been noticed, that affect the rate of interest. As to moral considerations, such as benevolence on one side, or dishonesty on the other, they cannot be estimated, and, besides, do not fall within our scope. The duration of a loan is rightly stated by Say to be a circumstance of some weight in determining interest.' A man will not generally lend a sum for twenty years at so low a rate as he will for one year. When the lender can reclaim his loan at pleasure, as is virtually the case in regard to government stocks, his terms will be still more favourable to the borrowing party. The infamy of interest has often enhanced its rate. Lenders need considerable inducement to encounter it. This infamy has been of different degrees in different periods and places, and has affected rates of interest accordingly. Moreover, all regulations of law or custom, which tend in any degree to create a monopoly of loans, tend likewise to enhance rates of interest.

The principles we have laid down, evince the absurdity of judging, as some men would have us, whether a country is prosperous or not by remarking whether the rate of interest is low or not in that country. Even Hume says: “Interest is the barometer of the state, and its lowness is a sign, almost infallible, of the flourishing condition of a people." Adam Smith, also, expatiates at length on the connection between low interest and national advancement. If this rule of estimation be accurate, the old countries of Europe are in a much more prosperous condition than the United States. The truth is, that interest is low in places where the stagnation of enterprize, from whatever cause the stagnation results, renders the demand for money small in comparison with the supply. Thus interest was never so low in France as in 1812, a year of extreme national distress. Interest is highest in those portions of our country which are in the most thriving condition. An elevation of the rates of interest is perfectly consistent with actual advancement in wealth ; for such elevation may arise from an increase of demand for capital exceeding the proportion in which the capital itself is increased.

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' Political Economy, book ii. c. 8, sec. 1.

? Essays, part ii. essay 4th. VOL. XXII.-NO. 43.


A decrease in the rates is possible, in perfect consistency with growth in prosperity ; for the supply of money for loans may be augmented in greater proportion than the national wealth. High profits will, other things being equal, cause high rates of interest. Now, high profits, in such business as is carried on, are perfectly consistent with national impoverishment, as well as consequent on national advancement. In Turkey, and in the United States, money bears a high rate of interest. Are the reasons of this fact the same in both countries? So far is the rate of interest from being, as Hume terms it, a national barometer, that no conclusion whatever can be drawn from it alone in regard to a people's condition.

ART. IX.---The Martyr's Triumph, the Buried Valley, and

Other Poems. By GRENVILLE MELLEN. Boston: 1833.

Among the numerous poets who have strung their lyres on the banks of the Hudson and amidst the valleys of New England, there is none who, in our estimation, has breathed sweeter and purer strains than Grenville Mellen. We have just passed a delightful session in the perusal of the collection of his effusions, contained in the volume whose title we have transcribed; and, grateful for the enjoyment he has yielded us, we are desirous of returning the obligation by a public acknowledgment. But this, although one, is not the only reason of our present undertaking. We wish to try whether we cannot, by analysing the character of Mr. Mellen's poetry, discover the sources from which our pleasure flowed. We are induced to make this effort from the conviction that the productions of our bard, although in general courteously and kindly treated by the writers of poetical criticism, have never yet had that degree of consideration paid to them which we think they deserve. There are many poets of the day with not half the merit of Grenville Mellen, who have received a thousand times more notice. Modest as a man, and as a writer despising affectations and the whole train of ad captandum peculiarities, which are so frequently the resources of poets destitute of powers truly valuable and capable of affording genuine pleasure ; and above all, less industrious than many of his contemporaries in boring for editorial

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