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pared by Sismondi to a spiral; that is to say, to a curve of that kind which goes round in ever-widening folds, the space between the returning line and that beneath it marking the margin of profit. To make the image true, however, we must suppose that space growing narrower with every sweep of the curve, so that the latter tends to settle into a perfect circle. This would represent the action of the law of profits during definite periods in England.

CHAPTER VI.

PRICES AND CURRENCY.

"So down he came; for loss of time,
Although it grieved him sore,
Yet loss of pence, full well he knew,
Would trouble him much more.

*

"'T was long before the customers

Were suited to their mind."-COWPER.

Prices distribute Commodities.

PRICES form a mechanism of extreme delicacy, by which, on the one hand, those real commodities which constitute real income are distributed to the consumers, and, on the other, the money incomes of consumers are drawn back into the form of money capital, so as to complete the operation of the capitalist. All produce of labour, as it leaves the hand of the wages-paid labourer, is capital, in the form called in this work specific. The grain from the farm, the cotton or the sugar from the plantation, the goods from the factory, are all specific capital; but sooner or later these masses break up into minute subdivisions, and become the specific ingredients of income. Their purpose is to be useful to man, and they can only be so by coming to be consumed by him in this form. That movement of money capital and money income which, constantly revolving in a contrary direction, corresponds to and meets this revolution of specific capital and specific income, has been already sufficiently explained. But there is still required an explanation of the laws regulating the variation of prices, and of the connection which income and prices have with the amount of the currency.

Retail Prices govern wholesale.

Prices are of two kinds, retail and wholesale.

Retail prices are those at which commodities are bought by consumers, but, in any scientific reasoning, must be considered as far as possible free from those accidental additions which custom or carelessness may make to them in particular cases. The general retail price of a commodity will then be that average price at which the actual supply of it can be disposed of by the whole body of retailers to those who want it for consumption.

Taken in this sense, it will be evident that retail prices must govern wholesale prices, or those paid by one dealer to another. N. matter how many dealers may intervene between the proucer and the consumer, these two parties at the extremities of the chain determine the permanent points between which prices oscillate. No speculation can cause more than a temporary disturbance.

Retail Prices limited by Incomes.

Every consumer proceeds upon some estimate of the sum which he can spend in a given period. Whether this be fixed or variable, his expectation of what it will be governs him. The amount of money which passes through his hands as capital, supposing him to be a dealer, or the extent of credit which he may have with his banker, or the merchant or manufacturer who supplies him with goods, have properly nothing to do with the matter. If a shopkeeper, in turning a capital of ten thousand pounds, derives from his profits a spending income of only five hundred a year, his power as a consumer is exactly the same with that of the surgeon, who receives fees to the same amount, and sees them vanish to landlord, taxgatherer, and tradesmen, as fast as they come in. exceptions do not hinder the generality of the rule.

Dishonest
Each can

only pay, for all the goods and services he requires, the sum total of his spending income. If he pays more for bread and meat, he must pay less for wine and coach hire. When necessaries become dearer, he either obtains luxuries cheaper or goes without them. But if the income of each consumer determines the sum total of the prices that he can pay, the aggregate incomes of the body of consumers must determine the sum total of prices that can be paid for all things that go into consumption. Hence, prices and incomes being measured in money, it is totally inconceivable that an enhancement can take place in prices generally without an enlargement of the aggregate of income. It is true that every change in prices affects one or more classes of incomes, and that in a general rise of prices many commodities become dearer, while certain incomes only follow the movement, and others remain stationary; but still it will also remain true that each portion of commodities, as it goes into consumption at the higher price, is bought by the consumer upon a previous view of his income. Hence a rise in general prices requires, as an indispensable antecedent condition, a rise, not in each class of incomes, but in the aggregate of income, that is to say, in the sum total of the fund which the body of consumers calculate upon as available for expenditure.

The prices which retailers, and those who offer personal services, can obtain, are clearly fixed by the means of the consumer. Yet the proposition that retail prices govern wholesale prices may seem to conflict with some common appearances in the wholesale markets. The banker and the speculator are supposed to exercise great power in raising and depressing prices, and there can be no doubt that a great facility in obtaining capital on loan does contribute to raise the prices not only of one, but of several articles. But these fluctuations are only temporary, and whatever power over the markets may be assigned to expansions and contractions of credit, they are still always subordinate to the two great considerations which govern all bonâ fide dealers; namely, first, the probable extent of the

supply within a certain period; secondly, the price at which that supply can find purchasers in the retail market'. In great articles, of which the supply from year to year may vary greatly with harvests, as corn, sugar, cotton, the first consideration is always the probable supply. The supply once ascertained, or supposed to be so, there is some price at which the whole may be expected to go into consumption. At lower prices it will not, at higher it cannot, be disposed of. At that point, then, the price tends to settle, and no efforts of speculation can cause a great or prolonged deviation from it. Let the cotton crop be short, and the most wide-spread destruction of credit will not beat down the price perceptibly; let it be abundant, and hoards of capital will not prevent a fall. In articles like manufactured goods, of which the supply may be regularly increased or diminished, those who regulate it consider the cost at which they can produce, and the quantity that can find consumers at that price. All intermediate speculations are corrected and controlled by these two considerations.

Of course there is continually disturbance, both from miscalculation and dishonesty. Both the yield of crops, and the means of consumers, are under or over estimated, and prices fluctuate accordingly; but at the bottom of such variations, and controlling them all, are ever working the forces which carry out the general law that has been indicated.

Retail prices, then, govern wholesale prices, and are themselves governed by the amount of incomes devoted to expenditure.

Increased Income antecedent to Depreciation.

Hence, what is called the depreciation of a currency, or a state of things in which an increased amount of it should be

This is in effect a repetition of Mr. Mill's exposition of the equation of demand and supply, one of the most important contributions, as it appears to me, ever made to economical science. I may add that Mr. Tooke's great work abounds with illustrations of the immense effects on prices of variations in supply. Yet the abstract treatises take little notice of this cause.

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