capacity has therefore great value and is wealth to them. Did working men create their professional ability and give it value? (9) Mill says justly that everything is wealth which has purchasing power. Merchants and traders purchase commodities almost exclusively with their credit, i. e. by giving a promise to pay at a future time; and these promises to pay have value, because they will be paid at maturity. Merchants and traders make a profit by trading with their credit: their credit has great value to them and is wealth. Did working men create the credit of our merchants and traders and give it value? (10) The express purpose of a bank is to create credit, i.e. to issue promises to pay several times the amount of cash they hold in reserve. The floating rights of action issued by all the banks in Great Britain, and at present in circulation, are about £1,000,000,000. These thousand millions of circulating credits have all the effects of an equal amount of gold. They have value and are wealth. Did working men create the credit of our great banks and give it value? We must now say something about credit, because the dogma that labour is the cause of all value has made the subject absolutely unintelligible. We shall first explain what credit is. When one person has the legal right to compel another person to pay or do something for him he is termed a creditor; the person who is legally bound to pay or do that something is termed a debtor; and the right of action which the creditor has against the debtor is termed indifferently a credit or a debt. It is to be carefully observed that this credit or debt is not the right to any specific material chattel; the creditor has no right to any part of his debtor's property; that is absolutely intact; it is simply the right against the person of the debtor to compel him to part with some part of his property in exchange for this right of action, credit or debt, at a fixed time. It is, therefore, a pure abstract right. But the creditor can sell his right of action to any one else for money; and it may be bought and sold any number of times like any material chattel. And because the right of action may be bought and sold, the Roman jurists termed it pecunia, res, bona, merx; the Greek jurists, χρῆμα, πρᾶγμα, ἀγαθόν, οἶκος, οὐσία, οὐσία dpavýs; and English jurists, goods, chattels, vendible commodities, merchandise, incorporeal property, incorporeal wealth. So Mill acknowledges that the promise to pay of a solvent merchant or banker is of the value of gold, which is very clear, because the gold is the value of the promise. Thus the whole mass of circulating credits or debts is a mass of exchangeable property just like any other, such as gold, silver, corn, manufactured goods, or any other. These credits, debts or rights of action have value for exactly the same reason that any other commodities have value, because at the proper time they will be exchanged for money or its equivalent. The whole commerce of the country is now carried on by them, except only to an infinitesimal degree, and the aggregate of money and all these credits under various forms constitute the circulating medium, or currency of the country, or the measure of prices. The whole system of credit is based upon this principlethat every future profit, from whatever source arising, has a present value, and that this present value may be bought and sold like money or any other chattel. Few persons have any idea of the enormous magnitude of this species of property in this country. In a return laid before Parliament by an eminent city firm it was shown that out of £2,000,000 of payments and receipts by the firm only £40,986 were made in gold, silver and copper; all the rest in different forms of credit; and some bankers found that in banking only four per thousand, or '0025 per cent., were paid in coin; all the rest in credit. Thus if we say that ninety-nine per cent. of the transactions of this country are carried on by credit, and only one per cent. by coin,. our statement will be well within the mark, and we may obtain a very rough approximate estimate of the actual amount of this circulating credit, because the best estimates of the actual coin in the country place it at about £110,000,000; now if we multiply this by ninety-nine we shall find the result to be £10,890,000,000, as the proximate actual quantity of credit in all its different forms in this country. Thus it is seen of what supreme importance it is to comprehend the great principles and mechanism of credit, if we would understand the commerce of the country, and the theory of prices. Now, in no sense can it be said that working men created these ten thousand millions of credit and gave it value. Thus we see that the whole basis of socialism, founded on the Ricardian doctrine of value and incorporated as the leading idea of Karl Marx's Capital, is utterly overthrown. Labour, like everything else, has value in so far as it is exchangeable. Attempts to raise the price of labour by artificial restrictions on its sale are destructive of the mechanism of exchange, from which alone value is derived. The theory of Economics here developed contains a complete vindication of the equity and beneficence of the principle of free exchange as applied to all forms of wealth, to Labour, to Credit, and to material commodities. English Economics can never emerge from its present deplorable state until we utterly discard the doctrine that labour is the basis of value, and dismiss from our mind the concept of Economics as the 'production, distribution and consumption of wealth,' by which it is impossible to create it a science. When we shift the basis of value to exchangeability, and revert to the original concept of Economics as the science of commerce, or exchanges, scientific order succeeds to chaos, everything becomes clear and simple, and we have a definite, positive, and intelligible science. Economics is the theory of value, which, next to civil government, is the most important thing in human affairs. It may be summed up in words which M. Michel Chevalier did me the honour to say contained the best definition of the science which has yet been proposed-Economics is the science which treats of the laws which govern the relations of exchangeable quantities.' HENRY DUNNING MAC LEOD. |