The Sun.
London, England, 1870-11-18 00:00:00

frIE SUN, LONDON, FRIDA.Y, NOVEMBER 18, 1870.

V.-PAYMENT OF THE NATIONAL DEFT,

(BY THOMAS DE MESCHIN, M.A., LL.D.)

The general rate of wages may rise from three causes :-
1. A cheapening of commodities forming the staple of
the labourer's consumption.
2. Increased productiveness of labour.
3. An increased] share or proportion of the product of
his own labour.
The general rate of wages may fall from three opposite
causes :

1. An increase in the price of those commodities which
form the staple of the labourer's consumption.

2. Diminished productiveness of labour.
3. A lessening of the share or proportion of the product
of his own labour.

Ist. The amount of the rate of wages may have risen
from the cheapening of those commodities which form the
staple of the.labourer's consumption—a peculiarly bountiful
harvest may have lowered the price of all the prime
articles of the labourer's consumption—unrestricted
importation of the necessaries of life may make them more
abundant ; in short, if, from any source, the supply of
sustenance be increased, the fund for the maintenance of
labour will to that extent be enlarged.
2nd. The rate of wages may have risen from the
ir creased productiveness of labour, in the production of
those commodities directly or indirectly consumed by the
labourers. If the whole people received a thoroughly
sound, intellectual, industrial, and moral education, this
would vastly increase the productiveness of labour, and
augment wages. The people, therefore, have a direct
interest of the gravest moment in selecting the right men
on the Education Boards throughout the country. It may
be remarked, if the reformatory schools should succeed if
imparting to juvenile offenders diligence, skill, and cha.
racter, the productiveness of labour will thereby be
increased; also, if industrial education were imparted to
all workhouse and ragged school children, it is impossible
to predict to what extent such effort would increase the
production of the country.

3rd. Wages may rise from an increase in the share or
proportion which the labourer receives of the product on
his own labour. The rapid accumulation of capital in a
country tends to lower, profits and advance wages ; the
reverse happens on the rapid destruction, or unproductive
consumption, of capital ; in this case profits rise and wages
fall. This almost always happens when the Government
comes into the money market and effects a loan.

When McCulloch regards wages from this point of view
he calls them proportional wages ; but proportional wages
are very far from being an index to the amount actually
received; in fact, these may be very high, and the amount
of the actual rate of wages very low ; the proportion may
be at once great and the amount small, or vice versa :—e.y
"During the last four or five Years," says Mr. Senior'
" many a hand-loom weaver has received only Bs. 3d. fo;
producing fortnightly a web that the capitalist has sold
for Bs. 4d. A coal merchant often pays his men £2 a week,
and charges their employers £2 10s. a week for their ser-
vices." Here the weaver's wages are 4s. lid. a week
while the coalheaver has £2, although the weaver receive,
99 per cent. of the value of his labour—the coalheaver but
80 per cent. In the weaver's case the proportion is large
and the amount small; in the coalheaver's it is just the
reverse. But when all other things remain the same, the
proportion of profits rise—as in the case of a loan—not
only are the proportional wages diminished, but the actual
amount is lessened pro Canto.

As to the causes which produce a decline in the rate of
wages :

Ist. Wages may fall from an increase in the price of those
articles which form the staple of his consumption. This
may occur when there has been a very great apparent
rise in wages, as during the late French war, wages, esti-
mated in money, rose 100 per cent ; while estimated in
commodities they indicated a decline of between 30 and
40 per cent.

2nd. Wages may fall from diminished productiveness
of labour, which would happen in case of a diminution in
the bodily vigour of the people; or should anything lessen
the ratio which adults bear to the whole population ; or
should anything deteriorate the education and intelligence
of the people ; or an increase of continued strikes ; or if
any large portion of machinery for industrial purposes
be destroyed during a popular commotion.
3rd. The amount of wages may fall from7the share or
proportion of the produce:of his own labour being lessened.
This happens when a large portion of the capital of a
country is destroyed, either by being laid waste by an
enemy's sword, or when a Government abstracts a large
part of the circulating capital of the country by loans.
Owing to the many elements of disturbance which per-
petually affect the general rate of wages, before one could
speak decisively as to the effect produced by a given
cause, an intimate knowledge of the condition of the
various branches of industry, would be an essen-
tial pre-requisite. I have ahewn a priori that a
loan has a tendency, in fact does, lower wages.
This was borne out by the fact that during the late war
with France wages fell very considerably. Thus, accord-
ing to Young, in 1770 wages were nearly Is. 3d. a day,
and in 1812 they were about 2s. sd. ; but, notwithstanding
this apparent rise, estimated in the commodities that
those sums could purchase, which is the true measure of
value, wages had fallen very considerably. Thus, while
they had experienced a rise of 100 per cent., wheat had
risen from less than 50s. a quarter to above 110 s., shewing
a rise of above 115 per cent. Butcher's meat had also
risen in a greater ratio, the rise in that being 146 per
cent. Butter had risen 140 per cent., and cheese 153 per
cent., giving a gross rise in those four prime articles of
subsistence of 1381 per cent., and making a decline in
wages to the enormous amount of 38} per cent. Such are
the facts as to wages. Now let us see what effect loans
have had upon interest. In the reign of William 111. the
rate of interest during the period of borrowing was 8 per
cent. ;on the return of peace it sunk to 5 per cent. All
the first year of the seven years' war the rate of interest was
3 per cent. ; the second year it rose to 3} per cent. When
the Government took by way of loan 11 millions the next
year it took £3,500,000, and interest rose above 4 per cent.,
and in the last year of the war (the Government borrow-
ing every year) it rose to 10 per cent. Before the American
war the rate of interest was 3 per cent. ; in the second
year of that war it rose considerably above 4 per cent.,
and in the seventh year of the war rose to 5i per cent.
In the late French war, the first year the rate of interest
rose to £4 3s. 4d. per cent. ; the next year it was above 4i
per cent. ; in the fifth year it had risen to £6 15s. 102 d.
We quote the following passage from Mr. J. S. Mill :
" If the capital taken in loans is abstracted from funds
either engaged in production, or destined to be employed
in it, their diversion from that purpose is equivalent to
taking the amount from the wages of the labouring classes.
Borrowing in this case is not a substitute for raising the
supplies within the year. A Government which borrows
does actually take the amount within the year, and that,
too, by a tax exclusively on the labouring classes : than
which it could havo done nothing worse if it had supplied
its wants by avowed taxation ; and in that case the
transaction and. its evils would have ended, with the
emergency ; while by the circuitous mode adopted, the
value extracted from the labour is gained, not by the
State, but by the employers of labour, the State remaining
charged with the debt besides, and with its interest in
perpetuity. The system of public loans, in such circum-
stances, may be pronounced the very worsa which is still
included in the catalogue of financial expedients." [Pol.
Econ., book v., chap. vii., p. I.]
He goes on to remark that there are two cases in which
loans are not chargeable with the pernicious conse-
quences :

Ist. When what is borrowed is foreign capital.
2nd. When it is capital which either would not have
been saved at all unless this mode of investment were
open to it, or after being saved would have been wasted in
unproductive enterprises, or sent to seek employment in
foreign countries.

"To this extent the loan system may be carried, with-
out being liable to the utter and peremptory condemna-
tion which is due to it, when it overpasses this limit.
What is wanted is an index to determine whether, in any
given series of years, as during the last war, for example,
the limit has been exceeded or not."

" Such an index exists, at once a certain and an obvious
one. Did Government, by its loan operations augment
the rate of interest?" So long, he goes on to say, as loans
do no more than absorb capital falling under the second
above-mentioned exception, "they prevent any tendency
to a fall of the rate of interest, but they cannot occasion
any rise. When they do raise the rate of interest, as
they did in a most extraordinary degree during the late
war, this is a positive proof that the Government is a
competitor for capital with the ordinary channels of pro-
ductive investment, and is carrying off not merely funds
which would not, but funds which would, have found
productive employment within the country. To the full
extent, therefore, to which the loans of Government,
during the last war, caused the rate of interest to exceed
what it was before, and what it has been since; those
loans cannot be relieved from the severest condemnation."
We take our stand on what is here laid down by Mr. Mill,
and mention that experience has always shewn that when-
ever the Government have carried on a war by loans they
have raised the rate of interest—e. g., in the seven years'
war the rate of interest was raised from 3 per cent. to
nearly 5 per cent.; in the American war of 1776 the rate
of interest was raised from 3 percent. to 5i per cent.; and
ui the late war arum 3 per cent. to above 61 per cent.
Mr. AIL" goe4 on to say ;—" if it be objected- that