ket." The practical result in this case will be, that the payment of the duties will be divided more or less unequally between the foreign producer and the home consumer. Thus the heavy duty imposed in 1867 on some varieties of woollen goods so increased the stocks of them in foreign markets, "that prices receded to an extent nearly or quite equivalent to the increase of duties."

Customs duties on raw materials, imported for purposes of manufacture within the country, are so obviously inexpedient that they would never be imposed, except from a vague impression that the domestic producer ought to have an advantage equivalent to that which the domestic manufacturer obtains from the duty on the importation of the foreign manufactured article, or that any one article ought to be taxed about as much as another, in order that the aggregate burden of taxation might be equally distributed among all classes of the people. all classes of the people. But this is the reasoning of ignorant or short-sighted persons, who cannot see that to impose duties indiscriminately is only to duplicate, or increase in some higher ratio, the burden of taxation, and to sacrifice many of its indirect advantages or compensations, without any gain to the Treasury. Duties upon imported raw materials are equivalent to a tax upon domestic manufactures; and this amounts to a tax upon the labor, especially the skilled labor, of the country, or to a general reduction of wages. England is indebted for the vast development of her manufactures to the great facilities which she has afforded for the importation of raw materials, more even than to the large command which she has of some of these materials, such as iron and coal, at home. A tax upon such materials as cannot be produced at all within the country, though they are needed for the manufacture of other products, is a great discouragement to domestic industry without gain to anybody. Other raw materials would not be imported at all, if the domestic supply of them were not insufficient; and the fact that it is insufficient is attributable to the scarcity and high wages of labor.

The natural advantages of this country for raising any sort of crude material adapted to her soil and climate are so immense that she has no foreign competition to dread. The home producer is secure in his possession of the home market; he is on the spot where the article is needed, and the great bulk or weight, in proportion to their value, of such articles as lumber, salt, hides, pig

iron, and even the coarser wools, prevent them from being brought from a distance, except at such cost as will afford him all the protection that he needs. To tax the importation of them is to enhance in two respects the price of the articles into which they are manufactured: first, by the additional cost of the raw material; and, secondly, by the higher protective duty which will then be needed to guard the home manufacturer against his rivals abroad. Thus the home producer of the raw material will have gained nothing; the higher price which he will have to pay for all manufactured goods will more than offset the advantage gained in disposing of his own products. To tax pig-iron, hides, and lumber 20 per cent will be to add 40 per cent to the cost of houses, implements, ships, boots and shoes, and every other article made out of these rude products. It will be to tax skilled industry twice over, for the sake of an imaginary benefit to rude labor.

The amount, estimated in gold coin, received from taxation by the government of the United States, for the year ending July, 1869, was almost exactly 300 millions. The corresponding amount for Great Britain and Ireland, excluding several sources of revenue which cannot properly be regarded as taxes, for the year ending April, 1869, was about 325 millions of dollars. But then the local taxation, only about 90 millions of dollars in the United Kingdom, is much greater in the United States. There are no means for estimating it with accuracy; but the aggregate of State and municipal taxation here cannot safely be taken at less than half of the amount levied by the national government; that is, it does not probably fall short of 150 millions in gold. Taking national and local taxation together, the rate per capita in England is $13.80; in the United States, assuming the population to be 39 millions, it is $11.54.

But the relative weight of taxation is to be estimated, not so much by the extent of the population on whom it rests, as by their comparative ability to bear it; this ability consisting partly in the wealth which they have already accumulated, but still more in the annual productiveness of their industry. Unquestionably the English people have amassed a much larger capital than ours; but there are strong reasons for believing that the aggregate amount of savings from income, or, in other words, the annual addition to previous capital, is now larger in the United States

than in any other country in the world. Nowhere else is industry so productive, nowhere else is so large a portion of the earnings of industry saved from unproductive consumption, and added to the accumulated fund which fosters and facilitates future labor and enterprise. The proof of this assertion might be safely rested on two facts alone: the first is, that the rate of interest, and, of course, the profits of capital, which are proportional to the rate of interest, are here twice as large as in Great Britain; and the second is, that the enormous expense of the war of the Great Rebellion was entirely defrayed out of the surplus earnings, the net product of the national industry, — during the four years of its continuance. Now, taxes are necessarily paid out of this fund of annual savings ; and the larger the fund, the more easily will the burden of taxation be supported. The mere amount of the burden, therefore, is not formidable, especially as the increase of population, more than keeping pace with the growth of opulence, is adding 35 per cent to the efficient strength of the country every ten years, and, of course, is lessening the pressure of the weight on any one person nearly in that proportion.

But there is another circumstance of equally great importance to be taken into view, in estimating ability to bear taxation. The wide distribution of wealth, which approaches equality here more nearly than in any other nation, makes Americans the most taxable people in the world; that is, a given tax, in proportion to the number and wealth of the people, will here yield more, without distressing anybody, and causing less discontent, than in any other country on the globe. A tax is more productive and less annoying, wherever the middle classes, or those who are neither very rich nor very poor, are relatively more numerous; the poor can bear but little, the rich are unwilling to support their share, because it is a large one; and there are, moreover, but few modes of taxation which take from the rich in anything like a full proportion to their means. Heavy taxes, if they are uniform, must bear heavily upon the very poor, whom they restrict in the use of the necessaries, and almost wholly deprive of the comforts and conveniences, of life. Hence, when the number of the poor is relatively large, such taxes cause great and well-founded discontent. On the other hand, the rich are jealous of taxation which is proportioned to their means, and especially of that from which the bulk of the

community are free; for, they argue, it partakes of the nature of confiscation of property, and even takes away one great inducement to industry, by discouraging the accumulation of wealth. Moreover, when riches, as they are in England, are mostly inherited, they bring with them a proportionate scale of expenditure and show, leaving a smaller surplus really at command of their owners than is possessed by many persons of comparatively moderate means. Reckoning the degree of poverty by the embarrassments and mortifications which it occasions, some of the poorest men in England are the holders of large and deeply mortgaged estates; and perhaps the sorest trials to which these are subjected are the visits of the tax-gatherer.

It would be hardly possible to exaggerate the difference between England and the United States in respect to the distribution of wealth. There, 60,000 persons own nearly all the land, and less than 250,000 possess four fifths of the whole property, both real and personal. Mr. Baxter, the latest and best authority on the subject, estimates that "the upper and middle classes," counting their families with them, contain but 22 per cent of the whole population, thus leaving over 23 millions for what he calls "the manual - labor class," who are either entirely dependent upon wages, or engaged in occupations in which their gains are as small as if they worked for hire. In the United States, the number in the corresponding class cannot be relatively more than half as large; and there are certainly more than 60,000 land-owners in New England alone.

But there are special causes which make heavy indirect taxation, whether by customs duties or excise, a serious evil for the United States. Great Britain is an island of limited dimensions and dense population, where the administration is thoroughly organized, and the police and preventive service are well drilled and efficient; there, consequently, it is comparatively easy to prevent smuggling, and even to make evasions of excise difficult and infrequent. On the other hand, the United States are of vast size, stretching across a broad continent, with a coast-line measuring several thousand miles, and a northern frontier of immense length, the boundary often being only a river or an imaginary line that can be easily crossed. With such a frontier, how can smuggling be prevented, especially when there is so much temptation for it as

is offered by a tariff imposing a duty on nearly all imported goods, the average rate being as high as 48 per cent? Under such circumstances, the people probably pay at least one fourth more for taxes on imports than the government receives.

Under the excise system, also, evasion and fraud are frequent, and probably can never be in any great degree prevented. A rigorous enforcement of internal taxation in such a country as the United States is impossible. The character of our institutions, and the habits of the people, require great freedom of action for every one; the restraints imposed must be few, and the perquisitions of the tax-gatherer slight. The police and other agents of the administration must not be too compactly organized and drilled, or too rigid in their demands; they must not carry their watchfulness too far. The legitimate consequence of the theory that the people govern themselves is, that in many respects they are but imperfectly governed. The inconveniences which result from this state of things ought not to be complained of; they are the price of democratic government. A loose and defective mode of collecting the revenue is inevitable. During the first four years after the war, for every dollar which the government collected from the excise on tobacco and distilled spirits, the consumers probably paid three dollars.

CHAPTER XIX.

EFFECTS OF SPECULATION ON PRICES : THE PHENOMENA OF A COMMERCIAL CRISIS.

THE Price of a thing may be defined to be its present market value, or temporary exchangeable power reckoned in money. Its permanent or natural Exchangeable Value, as we have already seen, depends on the Cost of its Production, and is the pivot about which the Price, or immediate market value, is perpetually oscillating, never departing from it far, or for any long time, in either direction. If the Price falls below the Cost, a smaller quantity of the article will be produced, and therefore, the Demand continuing the same, the Price will soon begin to rise. If the Price considerably exceeds the Cost, production will be stimulated, more of