A Short History of Paper Money and Banking

CHAPTER XXI. Of the Remote Consequences of the System.

Our view of the extent to which paper-money Banking affects our social condition, will be very imperfect, if we confine it to the direct operations of the system. These are, as it were, but the first links of a long extended chain. Each effect becomes in its turn a cause; and the remote consequences are of more importance than the immediate. To prove this, a few plain truths will suffice.

If two men start in life at the same time, and the one gets, at the commencement, but a small advantage over the other, and retains the advantage for twenty or thirty years, their fortunes will, at the end of that period, be very unequal.

If a man at the age of twenty-one years, is deprived of one hundred dollars which he had honestly earned, and honestly saved, the injury done to this man must be estimated by the advantage he would have derived from the use of his little property during the rest of his life. The want of it may prevent his turning his faculties to the best account. The loss may dispirit his future exertion.

If a man is, at any period of his life, deprived of a property, large or small, accumulated for him by the honest industry and economy of his ancestors, the wrong done to him is of the same character as that which he sustains when he is unjustly deprived of property which was the fruits of his own industry. It is the dictate of nature that parents shall leave their wealth to their children, and the law of the land, in this case, only confirms the dictate of nature.

It is not easy to set bounds to the effects of a single act of injustice. If you deprive a man of his property, you may thereby deprive him of the means of properly educating his children, and thus affect the moral and intellectual character of his descendants for several generations.

Such being the consequences of single acts, we may learn from them to estimate the effects of those political and commercial institutions which operate unequally. They lay the foundation of an artificial in equality of wealth: and, whenever this is done, the wealth of the few goes on increasing in the ratio of compound interest, while the reflux operations of the very causes to which they owe their wealth, keep the rest of the community in poverty.

Where the distribution of wealth is left to natural and just laws, and the natural connection of cause and effect is not violated, the tendency of “money to beget money,” or rather of wealth to produce wealth, is not an evil. A man has as strong a natural right to the profits which are yielded by the capital which was formed by his labor, as he has to the immediate product of his labor. To deny this, would be to deny him a right to the whole product of his labor. The claims of the honest capitalist and of the honest laborer, are equally sacred, and rest, in fact, on the same foundation. Nor is it the law of nature that the idle and improvident shall suffer temporary inconvenience only. By neglecting to form a capital for themselves, they render their future labor less productive than it otherwise might be: and finally make themselves dependent on others for the means of both subsistence and employment.

But, unequal political and commercial institutions invert the operation of the natural and just causes of wealth and poverty—take much of the capital of a country from those whose industry produced it, and whose economy saved it, and give it to those who neither work nor save. The natural reward of industry then goes to the idle, and the natural punishment of idleness falls on the industrious.

Inasmuch as personal, political, commercial, and accidental causes, operate sometimes in conjunction, and sometimes in opposition, it is diffiult to say, in individual cases, in how great degree wealth or poverty is owing to one cause or to another. Harsh judgments of rich and poor, taking them individually, are to be avoided. But it is notorious, that, as regards different classes in different countries, wealth and poverty are the consequences of the positive institutions of those countries. Peculiar political priviliges are commonly the ground of the distinction: but peculiar commercial privileges have the same effect: and when the foundation of the artificial inequality of fortune is once kid, (it matters not whether it be by feudal institutions or money corporations,) all the subsequent operations of society tend to increase the difference in the condition of different classes of the community.

One consequence of unequal institutions is increasing the demand for luxuries, and diminishing the effective demand for necessaries and comforts. Many being qualified to be producers of necessaries, and few to be producers of luxuries, the reward of the many is reduced, and that of the few raised to an enormous height. The inventor of some new means of gratification for the rich, is sure to receive his recompense, though thousands of able-bodied men may be starving around him.

This may be illustrated by a case drawn from England, where the favorite opera-singer receives her thousands per annum, while the able-bodied agricultural laborer is forced to draw on the parish rates for subsistence.

Something similar to it may be found in our own country, where the second rate singers, dancers, and players of Europe, accumulate fortunes in a few years, while multitudes of humble but useful women in all our large cities, struggle hard for the means of a bare subsistence.

Now, there is no cause of complaint in people’s lavishing their thousands on favorite singers and dancers, if those thousands have been honestly earned and fairly got. But if they owe their thousands to political or commercial institutions operating specially to their advantage, those political and commercial institutions are not of the kind most conducive to social happiness.

Through all the operations of business, the effects of an unequal distribution of wealth may be distinctly traced The rich have the means of rewarding most liberally the professional characters whom they employ, and the tradesmen with whom they deal. An aristocracy in one department of society, introduces an aristocracy into all.

These effects are, it is true, most obvious in countries where the causes of an artificial inequality of wealth are of a permanent character, and connected with political organization: but they can be discovered in our own country. The inequality of reward our lawyers and physicians receive, is caused but in part by inequality of talent. It is owing in part to the inequality of the means of those who employ them: and to the disposition the many have to prefer the lawyer or the physician who is patronized by the rich and fashionable. They feel that their own education disqualifies them for forming a proper estimate of professional talent, and take the judgment of those they suppose must, from their superior wealth, have better means of information.

It is, however, among the hard-working members of society, that the ultimate effects of such causes are most observable.

The condition of a multitude of poor women in our large cities, has lately attracted the attention of the benevolent. It appears from the statements that have been published, that they can, by working ten or twelve hours every day, earn no more than from seventy-five cents to a dollar a week. Half of this sum goes for house rent and fuel, leaving them from thirty-seven and a half cents to fifty cents a week for food and clothing for themselves and children. Some thousands are said to be in this situation in Philadelphia alone.

Various proposals have been made to better their condition: some futile, others absolutely pernicious. The laws of supply and demand are too powerful to yield to sermons and essays. The low rate of the wages of these poor women, is the effect of general causes—causes which affect, in one way or another, every branch of business. In the great game we have been playing, much of the wealth of the country has passed into a few hands. Many men dying, have left nothing to their widows and children; and others who still live, cannot support their families, except by the additional industry of their wives. The work of a seamstress can be done by a woman in her own house, in the intervals she can spare from attention to her children. In this way, the number of seamstresses has been increased.

On the other hand, many families who would gladly employ these poor women, are compelled by their own straitened circumstances, to do this kind of work themselves. In this way the demand for seamstresses is diminished.

Private benevolence may improve the condition of individuals of this class: but the class itself can be benefitted by such causes only as will diminish the number of seamstresses or increase the demand for their labor. The cause that will improve the condition of one of the industrious classes of society, will improve the condition of all. When an end shall be put to unfair speculation, then, and not till then, will honest industry have its just reward.