and of the arts, that he may learn in what manner a cheaper article may be substituted for a dearer in the creation of his product. A fortune has frequently been realised by the discovery of a cheaper dye-stuff, or the substitution of a single cheaper material in the place of that ordinarily in use. 3. Every utility possessed by the material consumed should be rendered in the best manner available. Thus in an oil-mill the flax-seed from which linseed oil has been expressed is a valuable food for cattle. After the brewer has extracted the saccharine matter from barley, the grains, as they are called, are valuable for the same purpose. The tan bark, after the tanning matter has been extracted, is valuable for fuel. This economy of materials is very well illustrated in the manufacture of combs. In a well-conducted establishment of this kind, every part of the horn, the core, the body, the tip, the shavings, the fat, and the mucilage, are all turned to some available purpose. Nor is this all. The values which are consumed should be consumed to the very last. Thus in the working of a steam-engine it is necessary to evolve a great amount of caloric, and this is the most expensive part of the process. Now economy demands that this caloric should be produced at the least possible expense, and that having been produced, it should be used for every purpose that it can be made to serve. But every one must have perceived, by the flame which escapes from the chimney of a furnace, that a very large portion of the caloric evolved is absolutely wasted. A very great economical improvement has of late been made in some of the iron-works in Great Britain. This caloric, which was formerly wasted, is used to heat the air which is blown into the furnace. By this expedient a very great saving of fuel is accomplished. bring a knowledge of any delinquency to the notice of the competent authority. Besides this, much time is saved by system and regularity. When one is obliged to wait for another, much labour is of necessity wasted. Tools should always be in the best possible condition. This saves time, and takes away one of the most common excuses for negligence. Consumption for Gratification. 6 Consumption may be conducted upon economical principles or the reverse. It is clearly the interest of every individual that he should not consume his capital by expenditure upon objects which are to yield him no pleasure or profit of any kind; that everything he purchases should be consumed as thoroughly as possible, and not in any respect wasted. In this way no labour is lost. It is the same with national consumption or expenditure. When the public money is spent upon war, upon idle functionaries or sinecurists, or upon any kind of public work which is not to be either directly or indirectly useful, the labour which produced that money is lost, or has gone in vain. It is nothing in such cases to say that money has been circulated, that employment has been given, and so forth. Men do not absolutely need to be kept working in any particular way, and every idle consumer of others' goods than his own is a source of loss to the community. The labour could have been applied otherwise, and to a useful instead of a useless end. There is one duty,' says a recent writer, very often ostentatiously professed by the richer to the working and trading classes, from which political economists would readily grant them an exemption-the spending of money for the good of trade. People have been known to claim credit for this amiable motive not only when pomp and luxury are in reality the exciting causes of their purchases, but even when they fail to pay the price of what they have obac-tained. The epistolary and miscellaneous literature of the eighteenth century shows that it was sometimes a fixed creed, especially in France, that if the rich did not spend their money on a certain humane and rational scale, the world of tradesmen and labourers must necessarily starve. There is, however, a material difference between what is spent in the ordinary acceptation of the term, and what is devoted to productive purposes. In the latter case, whoever receives the money in his hands, be he speculator or workman, must restore something at least equal to it in value, if not more valuable. But spending does not involve this phenomenon in all its grades. Much of the money dis3. We should employ labour of no higher price than persed around him by an extravagant man is consumed is necessary. In any extensive operation, it will be in this or that stage; it very seldom leaves behind it seen upon reflection that some parts of the process re-value nearly equal to its amount. .. If it be right quire more skill and attention than others. Some will require labour worth five or ten shillings a day, and others labour worth not more than eightpence or one shilling a day. It is of great importance in any large establishment so to arrange the labourers that no workman shall be employed at a higher price than the labour which he performs is actually worth. It is, however, to be remarked that an error may exist of the opposite kind. It is as bad economy to employ too cheap as too dear labour. In the one case we lose by paying too high a price for labour, in the other by that destruction of materials which always results from the want of skill in a labourer. Consumption of Labour.-As labour is expensive in the same manner as capital, economy teaches us to consume precisely as much of it as is necessary to complish our purpose in the best possible manner. 1. We should employ no more labour than is necessary. Too many labourers will always encourage each other in idleness. When there is one man at leisure to tell stories, the time of several others must be consumed in listening to them. 2. We should employ no less labour than is necessary. When, from want of a sufficient number of labourers, one labourer is obliged to perform several kinds of work, we lose the advantage of division of labour, and also expose ourselves to all the inconveniences of confusion and disorder. 4. The labour which we have paid for should all be performed. Time is money, to him at least who pays money for it. If it be wasted, his money is thrown away; and by throwing away money no one ever became rich. In order to secure this result, several things must, however, be attended to. The most important of these is, that he who employs labourers should in person superintend his own affairs. No one will take as much interest in our own concerns as ourselves. When this cannot be done, the establishment should be so arranged as to insure full and vigilant superintendence over every part, and under such responsibilities as will to preach that men should spend money for the good of trade, economy ought to be dumb; it is a paltry household quality that must sink before the philanthropic spirit of animating trade and labour by expenditure. We do not find, however, that any one dares thus to set the two virtues in antagonism against each other. When people speak of encouraging trade, they do so generally, and without reference to any antagonistic principle; and if it were asked whether it were more consistent with duty, both public and private, to spend a sum which would be missed in the household for the benefit of trade, or to retain it for home purposes, it would be difficult to find any one prepared seriously to support the former line of expenditure. In fact, when expenditure for the benefit of trade comes to be considered along with other serious uses of the pecuniary means of a family, they never are deliberately weighed against each other, and the philanthropic motive remains forgotten until the head of the house grows rich.' *We have to acknowledge ourselves indebted for the above sketch of the science of Political Economy to an American writer. It is abridged, with a few alterations, from a small work entitled The Elements of Political Economy, by Francis Wayland, D.D., President of Brown University.' Boston, United States, 1837. COMMERCE-MONEY-BANKS. COMMERCE. MAN has been defined by some naturalists as an exchanging animal-an animal who buys and sells-that being an act performed by no other living creature, and therefore suitable as a distinction in character, though others, much more exalted, might readily be found. The practice of exchanging one commodity for another is doubtless coeval with the first herding of mankind together. No man, even in the rudest savage state, and who lives in the society of neighbours, can rest satisfied with such objects as he can procure or fashion by his own labour. He must depend on others for assistance, while he assists them in return. The cultivator of the ground would exchange some of its produce for an animal from the flocks of his neighbour; and both would be glad to give a portion of their wealth for the clothing or weapons made by a third party. Thus exchanging becomes a matter of convenience between two parties, each of whom is anxious to obtain a share of the other's goods for a share of his own, and a mutual advantage is the result. Such desires and practices must have been displayed in the very earliest stages of society. No nation of African or Indian savages is ever found without a strong inclination to exchange the rude products of their country for the articles possessed by the traveller; an ox or sheep being perhaps eagerly offered by them for a single needle, a nail, or a small toy looking-glass. As mankind advance in their social condition, the practice of exchanging increases; the desires and necessities become more urgent; each person finds it more profitable and agreeable to adopt and hold by one fixed employment, and to sell the produce of his labour for a variety of articles made by others, than to attempt to make everything for himself; and finally, for the sake of convenience, a class of persons are engaged to conduct the exchanges from one hand to another. In this improved condition, the production of articles of general consumption is called manufacturing; while that department of industry in which the exchanging is transacted is called trade or commerce. For still further convenience, the business of exchanging is committed to several orders of traders the wholesale merchants, who in the first instance purchase large quantities of goods from the producers; the retail dealers, who have been supplied in smaller quantities from the merchants, and sell individual articles or minute portions to the public; and to these sometimes an intermediate dealer is added. In this manner the transfer from the workshop of the manufacturer to the house of the actual consumer is interrupted by several distinct processes of exchange, in which each seller obtains a certain profit at the expense of the person who has ultimately to buy and use the article. It is a principle of trade, that the fewer hands through which any article is made to pass the better for the consumer, because the article can be brought with the least burthen of profits, or at the lowest price, into general use. But this principle, sound as it is in the abstract, is counteracted by another, which must on no account be lost sight of. This is the principle of convenience. A manufacturer engaged deeply in his own pursuits finds it more profitable and agreeable to sell his articles in large than small quantities. The maker of millions of yards of cloth has no time to spend in selling single yards. If he were compelled to sell by retail, he would have no time to conduct his affairs; he could manufacture only a small quantity, and therefore being limited in his amount of produce and sales, he must take larger profits. Thus, upon the whole, it is No. 82, much better for all concerned to allow the manufacturer to pursue his own way in selling only very large quantities to wholesale merchants. To these traders the same rule may be applied. They seek out the seats of manufacture, and purchasing a large variety of goods, they send them to the towns and places where they are required by the public, and there the articles can be had individually from a shop. It is evident that if any man wish to buy a handkerchief, he may procure it much more cheaply from any shop in which such things are sold at an advance upon the original cost, than if he were to travel perhaps hundreds of miles to the house of the manufacturer, and there make the purchase. The use of an intermediate class to conduct exchanges is thus very conspicuous; and any attempt to revert generally to the original practice of causing the maker to deal with the consumer, would be entirely incompatible with an enlarged system of trade between different countries, or even between different places in the same country. We say generally, because there are instances in which makers may, with advantage to themselves and the community, sell their produce in small quantities or single articles to the public; but these are exceptions to a common rule. Convenience-which is for the most part but another name for time, or labour, or capital-forms, it is evident, a guiding principle of trade, and requires the same consideration as the actual value of an article. This, however, has been recognised only in very recent times. At one period there were laws to prevent farmers from selling their grain in a large quantity or by the lump, without exposing it in an open market. Such laws were manifestly unjust. They interfered with the liberty of the farmer, who, in his capacity of manufacturer, had surely a right to sell his produce in whichever way he felt it to be most for his advantage. It would be the same kind of injustice if the law, for example, were to prevent a manufacturer of handkerchiefs from selling them at his own workshop to wholesale dealers, and causing him to take them many miles to a certain street in a certain town, and there expose them for sale in small lots to the public. It is of the greatest importance in matters of trade and commerce never to interfere in any shape to prevent men from dealing in whatever manner appears most beneficial and convenient to themselves, provided it be conformable with strict justice. Sellers, of whatever grade, being left to consult their own interest and inclinations, the public in the end, though probably in a way not easily recognisable by an unreflecting mind, reaps the advantage. Commerce, by which we comprehend traffic carried on at home or with foreign countries, is of great antiquity, and both in the earliest times and in our own day has been one of the principal engines of civilisation. Among the industrious nations which at a remote period of history were planted on the borders of the Mediterranean Sea, it became a means of spreading knowledge in the interior of Asia, and many parts of Africa and Europe. Unfortunately, the intelligence which was so disseminated was afterwards obliterated by the overruling powers of barbarous and warlike nations; but the efficacy of commerce in modern times is likely to be permanent wherever its influence is extended, seeing that the greatest manufacturing and mercantile people are at the same time the most powerful and most capable of offering protection to those who sustain a commercial intercourse with them. It is exceedingly pleasing thus to reflect on what commerce is capable of effecting, independent of the actual comfort which it produces wherever it is fairly introduced. By its appeals to the selfishness, the vanity, and other passions, good and bad, of mankind, it appears to be the 497 lations which governments usually impose upon commerce do not perhaps originate so much in the plea that manufacturers and merchants stand in the condition of children, and require to be taken care of lest they should hurt themselves, as from the unfortunate exigencies under which the governments happen to be placed. They have all less or more engaged in wars, which have been conducted at an enormous expense to their respective countries. In order to liquidate these expenses, all kinds of taxes are levied, directly and indirectly; but as the levying of these taxes breeds discontent, large bodies of military have usually to be kept up, to act as an armed national police. Thus the people of these countries have for ages to go on paying not only the price of the wars, or the interest of the sums borrowed and laid out upon the wars, but as much more for the military force afterwards imposed upon them. What is more distressing, the people have probably to give a deal of money, in order that their re best of all forerunners to the efforts of the schoolmaster | pursuits of the smuggler. The restrictions and reguand the missionary. Its influence in this respect has been remarkably exemplified in the boundless regions of Hindoostan, which, by the efforts of a company of merchants, have been laid open to the settlement of enlightened men from Europe, who, though by slow degrees, will ultimately spread the blessings of education and the decencies of social life among many millions of human beings. In the remote islands in the Pacific Ocean, the influence of commerce has been recently of marked utility. The introduction of articles of a fanciful nature, both for the ornamenting and covering of the person, has induced a desire of following European manners and customs; and as these commodities cannot be procured but by the exchange of native commodities, a spirit of industry has consequently been produced which cannot fail to be of both moral and physical advantage to the natives. It is always thus with the intercourse which commerce necessarily in volves. New tastes are created, and to be gratified industry must be exerted. But to witness the extra-spective governments may be the more able to secure ordinary influence of commerce in producing civilised and refined habits, we need not look beyond our own country. Commerce, in this its chosen seat, has caused roads everywhere to be cut, canals to be opened, railways to be formed, expeditious modes of travelling and communicating by sea and land to be effected; all of which great accessories to our comfort have tended in the most wonderful manner to introduce not only useful commodities and personal luxuries, but highly cultivated sentiments, literature, and the arts, into districts which at no distant period lay in a comparatively primitive condition. The intercourse which commerce in this manner requires is the grand lever which, it is apparent, must in the first place be employed to lift the load of ignorance from off the natives of Africa and other barbarous regions; and when this lever is properly insinuated, the way will soon be prepared for the introduction of those measures of melioration which philanthropists so anxiously design. the attachment of men of consequence to assist in allaying the general clamours for a redress of grievances. This is a very rough view of the matter, but it is enough to show the dreadful exigencies into which nations fall by their engaging in wars or other expensive follies. In whatever manner, however, national exigencies originate, the plan pursued for relief consists chiefly in the imposition of duties on certain commodities much in demand, and at various stages of their manufacture, transmission, and sale. It is likewise customary to impose duties on goods imported from foreign countries, with the view of protecting the manufacturers of such articles in this country; but this only benefits a class, or a few persons, at the expense of the whole community, and therefore all such duties are in the main as detrimental to trade and the public welfare as those imposed for the liquidation of national debt and expenditure. For further observations in relation to this subject, we refer to the article POLITICAL ECONOMY. It is obvious that this scheme of mutual interchange There is,' observes Mr M'Culloch in his 'Dictionary of among nations of the commodities which they respec- Commerce,'' no jugglery in commerce. Whether it be tively produce is agreeable to every rational prin- carried on between individuals of the same country, or ciple, and must have been designed by a wise Provi- of different countries, it is in all cases bottomed on a fair dence for the universal benefit of His creatures. In principle of reciprocity. Those who will not buy need order that manufactures may be produced, and com- not expect to sell, and conversely. It is impossible to merce brought in to disseminate them both at home export without making a corresponding importation. and abroad where they are wanted, no species of legisla- We get nothing from the foreigner gratuitously; and tive enactment requisite either to encourage or direct. hence, when we prevent the importation of produce from The law which governs production and consumption is abroad, we prevent by the very same act the exportaa law of nature-it is the overruling principle of self- tion of an equal amount of British produce. All that interest, by which only that quantity of manufactures the exclusion of foreign commodities ever effects, is the is produced which can be advantageously disposed of, substitution of one sort of demand for another. It has and only those commodities purchased and consumed been said, that "when we drink beer and porter we which the wants of individuals require. And curiously consume the produce of English industry, whereas, enough, this principle of self-interest, if allowed free when we drink port or claret we consume the produce scope, is uniformly and sufficiently competent to regulate of the industry of the Portuguese and French, to the both the production and consumption of commodities, obvious advantage of the latter, and the prejudice of to a degree more nice and satisfactory than could be our countrymen!" But how paradoxical soever the asattained by the best devised statutes which the wisest sertion may at first sight appear, there is not at bottom legislators could enact. The grand principle, therefore, any real distinction between the two cases. What is which can alone regulate commerce and manufactures it that induces foreigners to supply us with port and is found in the natural passion for gain; and the sole claret? The answer is obvious: We either send diessential requisite for the successful advancement of rectly to Portugal and France an equivalent in British mercantile and manufacturing industry and wealth produce, or we send such equivalent, in the first place, among any people, is for that people to be unfettered to South America for bullion, and then send that bullion by enactments; each one buying and selling when, to the continent to pay for the wine. And hence it is where, and at what price he pleases. as clear as the sun at noonday, that the Englishman who drinks only French wine, who eats only bread made of Polish wheat, and who wears only Saxon cloth, gives, by occasioning the exportation of a corresponding amount of British cotton, hardware, leather, or other produce, the same encouragement to the industry of his countrymen that he would were he to consume nothing not immediately produced at home. A quantity of port wine and a quantity of Birmingham goods are respectively of the same value; so that whether we directly consume the hardware, or having exchanged it for the wine, consume the latter, in so far as the Evident as these principles must be to all who have any knowledge of social life, they have, either from ignorance or some other cause, been generally lost sight of by governments in all ages of the world, and plans have been contrived to regulate that which, if left alone, would have much better regulated itself. To such an extent have regulating and restrictive laws been carried in some countries, that they have nearly annihilated both manufactures and legitimate commerce, and reduced masses of the people to the condition of paupers, besides encouraging the pernicious and demoralising employment of British or native labour is concerned it | consideration. In commerce there is, strictly speaking," is altogether indifferent.' From these explanations, it will be observed that it is immaterial what is given in exchange for imported goods whether money or native produce. At the same time it must be understood that if money is given, there must exist some active industry in the country by which the money is realised. As a general question in commerce, it is of no consequence what is the nature of the industry by which the money is produced. It may consist in the raising of superabundant crops, or other raw produce for exportation, or of manufacturing raw and comparatively valueless materials into articles of value and demand, or of carrying goods from one country to another. Unless a country possess one or more of these branches of industry, it is without the means of paying for imported articles, and must retire from the field of general commerce. England is not of sufficiently large dimensions to export superabundant crops of grain, but it possesses in an extraordinary degree the means of manufacturing mineral and other substances into articles for exchange, and it derives no inconsiderable profit from the carrying of commodities. Its manufactured goods, therefore, pay for imports of foreign articles, including bullion or the raw material of money, and these again, in a manufactured state, are a fund for the payment of still further imports. Thus the wealth of our country has increased. PRINCIPLES OF COMMERCE. The practice of commerce is in a great measure dependent on mutual good faith, and the integrity of seller and buyer, and can in no case permanently flourish where these fundamental qualities are wanting. The first or great leading quality, therefore, in the character of a merchant ought to be scrupulous honesty both in word and deed. The article which he proposes to dispose of must be exactly what he declares it to be, not inferior or in any respect unsound in its nature. If it possess any blemishes, these must be announced to the buyer before the bargain is concluded, and if necessary, though at a considerable loss, an allowance made for them. The merchant is not less called on to be faithful in the fulfilment of all promises which he may make, whether with respect to goods or their payment; because those to whom the promises have been made may on that account have made similar promises to others, and therefore the breaking of a single promise may prove injurious in every link of a whole train of transactions. Perfect honesty or integrity is a fundamental principle of trade; and the next most important are strict regularity in all proceedings, according to established usage, and also steady perseverance. The merchant must give regular attendance during the hours of business; be regular in executing all orders and answering all letters; regular in the keeping of his books, and in the reckoning of his stock and monies; in short, he must be methodic and careful in all branches of his concerns, for without this species of attention the best business is apt to become confused, and to be ultimately ruined. What is true of individuals holds true also when applied to a whole nation. No people have ever attained opulence and high mercantile consideration who have not possessed a character for integrity and regularity in all their dealings. Besides these indispensable qualities in the individual character of a merchant or tradesman, there is required a happy combination of enterprise and prudence with the utmost coolness-enterprise to embrace favourable opportunities of buying and selling, and prudence and coolness to restrain from engaging in over-hazardous and ruinous speculations. In all his transactions, the man of business is understood to proceed upon a cool, inflexible principle of doing that which is most advantageous for himself, without fear or favour; because in commerce each party is supposed to be governed by motives of self-interest (always within the rules of honesty and propriety), and is under no obligation to deal from mere personal regard, or any kind of friendly no friendship in the ordinary acceptation of the term. If there be friendship among the parties concerned, it is a thing aloof from business transactions-a matter of private arrangement-and is only to be regarded as such. On this account, even among the most intimate friends, there must be an exact mode of dealing, and the most accurate counting and reckoning. The British, for several centuries, seem to have been endowed above all other nations with those qualities of mind which are suitable for the conducting of commerce on an enlarged and liberal scale. Their integrity, persevering industry, enterprise, prudence, and liberality of sentiment, have never been excelled. In patient industry they have been rivalled by the Dutch; but in point of enterprise and liberality that people have fallen far short of them, and their trade has languished accordingly. The British are pre-eminently a commercial as well as a manufacturing people. Taking them generally, they possess a spirit of restless industry, which renders them actually unhappy unless when busily engaged in some pursuit calculated to enrich them, or at least to produce for their families the means of a respectable subsistence. The Americans, who are but a branch of the same British stock, are equally if not more remarkable for this fervent spirit of industry; and though only set up as a separate nation within a comparatively recent period, and less distinguished for their integrity and prudence than the English, have already distanced many of those dignified European principalities and powers which first discovered and colonised their country. The French, the Germans, the Spaniards, the Portuguese, the Italians, and others, though each possessing a larger or smaller extent of manufactures and commerce, are obviously deficient in a national sense of the eager spirit of industry which is so characteristic of the people of Great Britain. Taken in the gross, they are too apt to addict themselves to amusement in preference to business. They delight in holidays, and will at any time leave their work to mingle in a dance or some kind of buffoonery in which an Englishman would be ashamed to appear. Scarcely one of the continental nations, moreover, has yet settled down under a well-conducted government appointed by the people. There indeed seems to be little which is settled amongst them. Some of the principal are yet at that stage of social life which was common in England about the reign of Henry VII.; others are not farther advanced than a period considerably earlier; and all have yet much to suffer and to learn before they attain that state of quietude and security to life and property, that condition of domestic comfort and national prosperity, which Great Britain, with all its imperfections, so amply enjoys. COMMERCIAL TERMS AND TRANSACTIONS. The following explanations of the principal terms used in commerce will illustrate the mode of conducting business transactions: Firm.-Every business, whether private or public, is conducted under a specified designation or title, called the name of the firm. This name may be that of a single individual to whom the business belongs, or of two or more individuals, or any title which it may be found advisable to adopt. Sometimes the name of a firm remains long after all who are indicated by it are dead. In such a case the business has passed into the hands of new proprietors, who, though legally responsible for its obligations, are not for some private reason inclined to change the old and well-known title of their firm. A particular firm or business-concern is sometimes personified in the term house-as, Such a house does a great deal of business, &c. Company. Two or more individuals engaged in one business constitute a company or copartnery, each individual being called a partner. Companies are of two kinds-private and public. A private company is organised by a private arrangement among the parties, each having certain duties to perform, and a certain share in the concern. In companies of the private and common description no individual can leave the concern at his own pleasure, for by doing so he might seriously injure or embarrass his partners. He can withdraw only after giving a reasonable warning, by which time is allowed to wind up the concern, or place it in a condition to pay him back the capital which he has risked, or the profits which are his due. No partner, however, can transfer his share to another person, by which a new member would be introduced into the firm without the consent of the partners. The profits of partnerships are divided according to a specified agreement or deed of copartnery. Generally in the case of partnerships of two or three persons, each receives the same share on the occasion of an annual division, but in other cases a partner may not be entitled to more than a fourth or sixth part of what another receives. The amount of capital which a partner invests in the concern, the service he can be to the business, and other circumstances, regulate the amount of his share. When each of two persons sinks the same capital, but one takes the whole of the trouble, then he on whom the trouble falls, who is called the active partner, is entitled to receive a stated sum in the form of salary over and above his share of profits. Whatever be the share which individual partners have in a concern, the whole are equally liable for the debts incurred by the company, because the public give credit only on the faith that the company generally is responsible. He who draws the smallest fraction of profit, failing the others, may be compelled to pay the whole debts. On this account every partner, on leaving a company, should be careful to advertise in the Gazette and newspapers that he no longer belongs to the firm of which he was a member; he is then responsible for no debts incurred subsequent to the announcement. Public companies are very different: they consist of a large body of partners, or proprietors of shares, the aggregate amount of which forms a joint stock, and hence such associations are called joint-stock companies. They are public, from being constituted of all persons who choose to purchase shares, and these shares or rights of partnership are also publicly saleable at any time without the consent of the company. The value of a share in a joint-stock company is always the price which it will bring in the market; and this may be either greater or less, in any proportion, than the sum which its owner stands credited for in the stock of the company. Unless specially provided for in the fundamental deed of copartnery, every member of a joint-stock company is liable in his whole personal property or fortune for the debts of the concern. In some instances this liability is obviated by the provisions of an act of parliament, or parliamentary charter, establishing the company. Joint-stock companies are managed by directors appointed by the shareholders. It is an axiom in commerce, that business is much better conducted by single individuals for their own behoof, than by companies of any kind; as respects joint-stock associations, they are only useful in very great concerns requiring enormous capital and involving serious risks of loss. Capital. What is now termed capital was in former times called stock. The capital of a merchant is strictly the amount of money which he embarks in his trade, or trades upon that is, employs for buying goods, paying wages of servants, and liquidating all debts when due. When trading within the limits of his capital, business is done upon a secure footing; but if he proceed beyond these in any material degree, he is said to be over-trading, and is exposed to the chance of ruin or very serious embarrassment. Trading beyond the amount of available capital is, nevertheless, a prevailing error, and causes innumerable bankruptcies. With a comparatively small capital, a tradesman may carry on a large business by receiving payments shortly after making his outlays. By this means there is a rapid turning over of money, and small profits upon the various transactions speedily mount up to a large revenue. For example, if a tradesman turn over his capital twelve times in the year, at each time receiving money for what he sells, he can afford to do business on a twelve times less profit than if he could turn over the same capital only once during the year. This leads us to a consideration of credit. Credit in business is of the nature of a loan, and is founded on a confidence in the integrity of the person credited, or the borrower. An individual wishes to buy an article from a tradesman, but he has not money to pay for it, and requires to have it on credit, giving either a special or implied promise to pay its value at a future time. This is getting credit; and it is clear that the seller is a lender to the buyer. In all such cases the seller must be remunerated for making his loan. He cannot afford to sell on credit on the same favourable terms as for ready money; because if he were to receive the money when he sold the article, he could lay it out to some advantage, or turn it over with other portions of his capital. By taking credit the buyer deprives the seller of the opportunity of making this profit, and accordingly he must pay a higher price for the article, the price being increased in proportion to the length of credit. It very ordinarily happens that the seller himself has purchased the article on credit; but this only serves to increase its price to the consumer, and does not prevent the last seller from charging for the credit which he gives and the risk of ultimate payment which he runs. Credit for a short period is almost essential in all great transactions; but when going beyond fair and reasonable limits, it acts most perniciously on trade, by inducing heedless speculation, and causing an undue increase in the number of dealers with little or no capital. An excessive competition among these penniless adventurers is the consequence; each strives to undersell the other with the hope of getting money to meet his obligations, and thus vast quantities of goods are sometimes thrown upon the market below the original cost, greatly to the injury of the manufacturer and the regular trader. What are technically designated gluts in the market' frequently ensue from causes of this nature. Defoe, who wrote upwards of a century ago, makes the following observations on credit and over-trading in his Complete English Tradesman: There are two things which may properly be called over-trading, and by both of which tradesmen are often overthrown: 1. Trading beyond their stock [or capital]; 2. Giving too large credit. A tradesman ought to consider and measure well the extent of his own strength: his stock of money and credit is properly his beginning; for credit is a stock as well as money. He that takes too much credit is really in as much danger as he that gives too much credit; and the danger lies particularly in this, if the tradesman overbuys himself—that is, buys faster than he can sell-buying upon credit, the payments perhaps become due too soon for him; the goods not being sold, he must answer the bills upon the strength of his proper stock-that is, pay for them out of his own cash; if that should not hold out, he is obliged to put off his bills after they are due, or suffer the impertinence of being dunned by the creditor, and perhaps by servants and apprentices and that with the usual indecencies of such kind of people. This impairs his credit, and if he comes to deal with the same merchant or clothier, or other tradesman again, he is treated like one that is but an indifferent paymaster; and though they may give him credit as before, yet depending that if he bargains for six months, he will take eight or nine in the payment, they consider it in the price, and use him accordingly; and this impairs his gain, so that loss of credit is indeed loss of money, and this weakens him both ways. A tradesman, therefore, especially at his beginning, ought to be very wary of taking too much credit; it would be preferable to let slip the occasion of buying now and then a bargain to his advantage, for that is usually the temptation, than buying a greater quantity of goods than he can pay for, run into debt, and be ins |