the spare capital as fast as it was generated into income, and thus kept up a whirl of the whole industrial machinery, the like of which was never known before. The strain was prodigious; but as fast as the capital was taken off it reappeared spouting up through a thousand apertures. The Government loans not only did not diminish, but enormously increased the aggregate stock of monied capital, and there was also a great increase, though not a corresponding increase, in the stocks of commodities, on account of the stimulus given to industry'. In the same way our present abundance of disposable money capital is no doubt the return of the vast railway expenditure, and of the loan spent in Ireland.

If this be so, then, it may be said that we have a very simple receipt for becoming prosperous at any time, for we need do no more than squander our accumulated funds in any way that employs labour.

Money Capital squandered returns into new Hands.

Such squandering, if it were only of the capital now lying dormant, would unquestionably answer the purpose, and the funds so spent would first increase the aggregate of wages and profits, and after doing so find their way back to the money market. The process, however, is open to this objection, that

'Mr. M'Culloch is one of the most distinguished disciples of Ricardo; and his complete edition of Ricardo's works is not the least of his many claims to the gratitude of students, for, whatever errors they may contain, those works must always be important in the history of the science. But the real value of Mr. M'Culloch's own publications arises from his having totally departed from the abstract method of his master, and his argument against the principle laid down by Mr. Senior falls with its whole weight upon the practice of Ricardo. Mr. M'Culloch's knowledge of the economical condition and history of England can scarcely be exceeded, and he has satisfied himself as to the fact that the wealth of England was increased during the war. But the supposed cause, namely, the stimulus of taxation, satisfies no one but himself. The above development of Mr. Blake's explanation I think must now convince him that the true cause was the stimulus of a constantly-increased demand, the sudden cessation of which, in 1815, rendered the stimulus of taxation intolerable.

it would be made wholly at the expense of the capitalists. The return would be made to the aggregate stock, but in the hands of a different set of persons from those from whom the outlay proceeded. The precise evil of the war expenditure was the immense transfer of property, which was in this way brought about. The food and clothing consumed by soldiers and seamen, the ships' stores and ammunition wasted, the manufactured goods and colonial produce, the export of which paid the chief part of the subsidies to foreign powers, and the whole amount of gold withdrawn from the currency and sent out of the country, were losses absolutely trivial compared with the disturbance caused by the unnatural and pernicious impulse given to the growth of the money power. The mass of the nation was made drunk with industrial excitement, by an artificial demand, and during its intoxication it was induced to mortgage away, as of no moment, the inheritance of those who were to come after. A greater immediate sacrifice would have saved much evil. The mischief is done, however, and in bearing it as well as we can we must remember that, at the worst, it was not too great a price to pay for maintaining intact the sacredness of the English soil.

The Revolution may be quickened or retarded.

If the view here given of the relation between money capital and money income be correct, it will appear that the industrial revolution, by which the former passes into the latter, and again reappears with increase in its original form, may be at any moment either accelerated or retarded. Every saving made out of income, so long as it remains in the form of unemployed or disposable money capital, is a diminution of demand, and therefore retards the industrial revolution.

Every investment of new capital, by creating an addition to income, increases demand and quickens the industrial revolution, even when the investment does not prove profitable. Every such investment, however, which is not profitable quickens

industry only while the outlay of capital lasts, and is then followed by greater stagnation than before.

Law of the Increase of Money Capital.

In these propositions lies the law of the increase of money capital, and in connection with it should be noted the manner in which that element of money which has been called in a previous chapter bank credit, or bank-made money capital, adapts itself to every acceleration of the wheel of industry. Every new amount of money which passes into income, by creating new demand, opens exactly that prospect of gain which increases mercantile speculation, and the advances of bankers to support it. The new investment, indeed, may be imprudent, and in that case the merchants and bankers depending on its return will lose, but others will gain; and the most rapid conversion of capital into income would not create a demand so great as that bank credit would not be able, by its expansion, to furnish the monetary means for producing and distributing the goods which it required.

But whatever be the law which determines the increase of money capital, it is in the order of cause and effect superior to, and must regulate, the increase of specific capital, or capital in the form of commodities. Everybody knows that new demand is almost instantly followed by new production. In the mills of Manchester and Leeds, or the workshops of Birmingham and Sheffield, the productive power scarcely ever attains its full stretch. Agriculture, of course, yields more slowly to the impulse, but during the extra demand of the late war the increase of agricultural production in England was almost unparalleled, and under free trade every spinner and knife-grinder who can find a market abroad, must be considered as a real producer of imported corn.

Mr. Mill's Law of Increase.

The law of the increase of capital, sanctioned by Mr. Mill, appears to me to be either absolutely not true, or, if true in any

sense, to be so completely severed by abstraction from all the disturbing forces which concur in the production of actual results as to be of no practical use whatever.

That law, as I conceive it, is contained in the following propositions :

1. So long as the standard of comfort amongst the labouring class remains unaltered, there is some definite quantity of food and other necessaries, without which a labourer cannot bring up a family, and that quantity is the moral minimum of wages.

2. The tendency of population to excess prevents actual wages from permanently exceeding that moral minimum. 3. Whenever new capital is applied to land, the return is some definite amount of produce determined by the operations of nature. That return replaces the wages of the labourers, and yields, besides, a surplus which is profit, its proportion to the outlay determining the rate of agricultural profit.

4. The rate of agricultural profit so determined, or that obtained at what Dr. Chalmers calls the margin of cultivation, determines the rate of all profit.

5. Hence the observed tendency of general profits to fall is to be referred to the constant diminution in the proportionate returns which land makes to new capital.

The law involves all these particulars, and I am obliged to state them in my own language because I cannot find them presented in one view in the writings of any of the economists. The long chain of deductions which it exhibits, however, involves processes of such length and complexity that the connection between the first premises and the last conclusion appears to me to be almost as slight and distant, as if one should say that the currents of the Atlantic affected the height of water at London Bridge. There is no doubt some connection between the two, but none which the utmost progress of science will ever make appreciable in the navigation of the

river. The stress laid upon these unqualified and unverified deductions appears to me to be the peculiar vice introduced into economical reasonings by the example and influence of Mr. Ricardo, and it is only to be got rid of by a careful application of the principles of inquiry which Mr. Mill has laid down in his logic of the moral sciences.

A single appeal to experience is, I think, sufficient to overthrow the supposed law as showing the cause of the decline of profit. It is admitted by Mr. Mill, and is indeed notorious, that, owing to agricultural improvements, the law of diminishing fertility of land may be and has been practically suspended for a long series of years. During such suspension, however, all the common phenomena of declining profits have presented themselves, and therefore, of course, must be traced to causes quite unconnected with the state of cultivation.

Profits and Wages may both fall.

Profits, then, are not determined by wages, or by the fertility of the land, but by the competition of capitalists, which reduces them to that minimum which is the least that will induce men to abstain from consumption. They may fall, therefore, while the margin of cultivation remains stationary. Profits and wages are not cause and effect, but co-ordinate effects of that cause, or assemblage of conditions, which determines the equation of demand and supply, between the wages fund on the one hand, and the amount of labour on the other. The moving forces are the desires, calculations, and competition of labourers on the one hand, and those of capitalists on the other.

Further, both profits and wages, as measured in money, may fall at the same time, from the double pressure of unemployed money capital and unemployed labour, to the advantage of all those who hold, in the form of dividends, rents, or salaries, fixed or nearly fixed claims on the receipts from the annual produce.

The line of revolution of capital and income has been com