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others, should enter into business on his own account, and trade with his own capital, we ought to subtract $10,000 a year from his annual gains, before those gains are considered as any indication of the general rate of profit in his business.

Again, the risk incurred varies much in different employments. If, in a particular business, three ventures out of four fail altogether, or result in a loss, the gains of the fourth venture, on an average, must be high enough to compensate for all these losses, and to afford at least the ordinary rate of profit for the capital required during all the time which is consumed by all four ventures. The gains of the slave-trade between the coast of Africa and Brazil are so great, that if three ships out of four are captured and condemned, with all their slaves on board, the profit on the return cargo of the fourth ship is large enough to make the business a lucrative one to the merchant. The true rate of profit, then, must be calculated only after a large deduction is made from the total gains as an insurance against total loss.

But here another element comes in to modify our calculations, an element already once mentioned as "the lottery principle in human nature." So much does the prospect of splendid gains outweigh, in the estimation of sanguine and adventurous persons, the chances of loss, that an undue proportion of capital is attracted into some very uncertain employments, and the rate of profit in them is consequently reduced to a very low point, often, indeed, to nothing or less than nothing. There is no doubt that the average gains in a trade in which large fortunes may be made,—in our own flour-trade, for instance, or in California mining,-"are lower than those in which gains are slow, though comparatively sure, and in which nothing is to be ultimately hoped for beyond a competency. In such points as this, much depends on the characters of nations, according as they partake more or less of the adventurous, or, as it is called when the intention is to blame it, the gambling spirit. This spirit is much stronger in the United States than in Great Britain; and in Great Britain than in any country on the Continent of Europe. In some Continental countries, the tendency is so much the reverse, that safe and quiet employments probably yield a less average profit to

the capital engaged in them than those which, at the price of greater hazards, offer greater gains."*

The moral character of individuals-or, at any rate, the estimation in which they are held in the community — is affected by the comparative prevalency of the gambling spirit. Here, the standard phrase for a "failure," or an act of bankruptcy, is "misfortune in business";- that is, fortune only is blamed, the individual is pitied, and the sympathy of his companions and former rivals helps him to try again. The reason why the act is so leniently viewed is, that it is so frequent; no one can conscientiously blame his neighbor for what is so likely to happen to himself,- for what, perchance, has happened to himself more than once. I have heard it estimated on good authority, that in Boston, where the estimate of commercial honor is certainly as high as in any city of the United States, at least two thirds of the young men who commence business on their own account fail in the course of the first five years. No one reproaches them for this fact; for not a few even of the wealthy men of the city remember their own two or three unsuccessful trials before they finally acquired a fortune. Still, in estimating the profits of trade as compared with those of agriculture, the professions, and the mechanic arts, the number and amount of such failures must be taken into view, or our calculations will be very wide of the truth. The prevalence of this speculating or gambling spirit is undoubtedly one of the reasons why the rate of interest in this country continues so high; lenders are affected with it as well as borrowers, and will incur great hazards when tempted by usurious rates.

In England, bankruptcy is a more serious matter. The bankrupt not only loses credit; he also, to a great extent, loses caste. He is a dishonored man, whose sense of personal deg radation is not infrequently so keen as to drive him to suicide. Sidney Smith wittily remarks, that an Englishman's idea of Paradise is a place where people always pay their debts. Hence the opprobrium incurred by our repudiating States was so much greater in England than in this country, and was expressed with so much bitterness as absolutely to goad and sting the defaulters into a sense of the heinousness of their act,

* J. S. Mill's Political Economy, Vol. I. p. 489.

and an attempt to retrieve their reputation. There was a time when a Mississippian or a Pennsylvanian in London ran great risk of being treated as roughly as General Haynau was in Barclay's brewery. And yet, serious and wholly indefensible as was the breach of faith on the part of the defaulting States, the complaints of the English bond-holders were exaggerated and unreasonable. They knowingly incurred a greater risk, for the sake of obtaining a higher interest; they deliberately preferred investment at considerable hazard in American funds at six per cent, to a perfectly safe investment in English government funds at three per cent, and therefore had comparatively little ground for complaint when a certain portion of their hazardous investment turned out unfavorably. Most of the American States redeemed all their obligations without delay; some others were unable for a time to pay the interest, but ultimately redeemed their credit by paying off the arrears; two or three others were hopelessly bankrupt. Considered as one transaction, and on purely commercial principles, the total investment of English funds in American stocks was a successful enterprise; the bond-holders obtained more than they would have received from an equivalent investment in the English national debt.

In France, the lot of the bankrupt is still more severe; he not only loses his social position, but the law prevents him from engaging in any other business on his own account till he has redeemed his outstanding obligations.

I have dwelt at length upon these circumstances affecting the rate of profits, because they illustrate the principle already stated, that the theory of Political Economy is but an exposition of human nature as it appears when engaged in the pursuit of wealth. The rate of profits varies according to the opinions, and habits of mind and action, of those who apply capital to productive uses. The money-getting propensity is but one tendency or phasis of human nature, and it is constantly modified and controlled by the other passions and habits of men, with which it is blended, and among which it is by no means the strongest.

Another illustration of this general principle is found in a circumstance just alluded to, the extraordinary fluctuations of the grain and flour market in this country, - fluctuations

which are so great and frequent as to put all calculation at defiance, and to make the gains of the dealers nearly as uncertain as the chance of drawing a prize in a lottery. As the results of successful speculation in this branch are very brilliant, and as bankruptcy is no disgrace, the business is probably more overdone—that is, the average rate of profit is lower than in any other enterprise whatsoever. Flour may be five dollars a barrel in New York at the beginning of the season, may rise to twelve dollars in the course of the summer, and fall even below its starting-point when the next crop comes in. The effect of such changes as these on the business of a dealer who has a stock of a quarter of a million of barrels at a time may be easily seen. He may literally gain or lose one or two millions of dollars in one season. How are such fluctuations possible? At the first sight, it would appear that the price of bread-stuffs would be the most stable of all prices. The quantity needed, the number of mouths to be satisfied with food, varies by a fixed and well-known law of increase from year to year. The average crop over a country so extensive as this varies but little; a bad harvest in one State is compensated by an unusually good one in another. And should there be any marked deficiency or excess, foreign commerce stands ready, as usual, to equalize the market by distributing the aggregate product uniformly where it is most needed.

But the vast quantity of the article which is produced and consumed every year, and the fact that it is also an article of prime necessity for all classes of people, introduce a new element into the calculation. The hopes and fears of men are strongly excited in relation to a product on which not merely comfort, but life, depends, and the use of which is absolutely universal. Its price rises and falls, not merely in proportion to the deficiency or excess of the crop, but to the alarm and the spirit of speculation which are excited by that deficiency or excess. A failure of one sixth of the crop, instead of raising the value in the market only in that proportion, will often double the price; a surplus of not more than an eighth of the average annual harvest may sink the price below the actual cost of production. A mere rumor of an apprehended partialfailure of the crop in England has power to raise the price of grain and flour from five to twenty per cent on the banks of

the Ohio. Here, obviously, a correct statement of a law of Political Economy is a general fact in the science of human nature, a law of which we must take cognizance in the philosophy of the human mind. The sensitiveness and excitability of the American character give peculiar prominence to the operation of such laws within our nearest range of observation.

What Mr. Mill calls "the perpetual overflow of capital into colonies or foreign countries, to seek higher profits than can be obtained at home," is certainly a powerful agent in equalizing the rates of profit in different lands. But that it is not so efficient for this purpose as we might be tempted at first thought to imagine, appears from the notorious fact, that the rate of interest for money is twice as high here as in Great Britain. This difference of rate would be greater than it is, if British capital were not occasionally sent hither in large amounts. But why is not the migration sufficient to equalize the rates at once, since every man would prefer to receive six, rather than three, per cent for his money? Several answers may be given to this question. In the first place, the capitalist is not often willing to emigrate along with his capital. He is bound to his native soil by many ties of feeling and interest, which he cannot easily sever, and which, being at any rate in easy circumstances, he is under no strong temptation to break. He must be separated from his property, then, and the distance of the place of investment, other things being equal, enhances the risk; no one likes to trust his capital in operations that he cannot oversee, to individuals of whom he knows but little, or to places where it will be controlled by laws and institutions dif fering from those with which he is familiar. War may possibly break out between the two countries, or their peaceful relations be so far disturbed, that the profits cannot be remitted with regularity, or perhaps the principal itself may be lost. Lastly, the sentiment from which no man is entirely free, -a sentiment which may be dignified by the name of patriotism, or branded as national prejudice, prevents the credit of foreigners from being fairly estimated. Public affairs may be more widely and accurately known than private enterprises; foreigners, therefore, usually prefer government stocks to other means of investment. Next to these, chartered companies,

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