CONVERSATION XXII. ON EXPENDITURE. Of the disposal of revenue. Of the expenditure of individuals.—Effects of consuming capital.--Increase of revenue of a country beneficial to all classes of people.-Except in cases where government interferes with the disposal of capital. Of sumptuary laws.— Of luxury.-Industry promoted by luxury.-Passages from Paley on luxury.-Sudden increase of wealth prejudicial to the laboring classes.-Passages from Bentham on_legislation.-Luxury of the Romans not the result of industry.--Of the disadvantages arising from excess of luxury. MRS B. I TRUST that you now understand both the manner in which capital is accumulated, and the various modes of employing it to produce a revenue. It remains for us to examine how this revenue may be disposed of. Caroline. I have already learnt that a revenue may either be spent, or accumulated and converted into capital; and that the more a man economizes for the latter purpose, the richer he becomes. Mrs B. This observation is equally applicable to the capital of a country, which may be augmented by industry and frugality, or diminished by prodigality. Caroline. The capital of a country, I think, you said, consisted of the capital of its inhabitants taken collectively? Mrs B. It does; but you must be careful not to estimate the revenue of a country in the same manner, for it would lead to very erroneous calculations. us for instance suppose my income to be 10,000l. a Let 1220. Of what does the capital of a country consist? -1221. Why cannot we estimate the revenue in the same manner?-—1222, What instance is given? year and that I pay, 500l. a year for the rent of my house-it is plain that this 5007. constitutes a portion of the income of my landlord; and since therefore the same property by being transferred from one to another, may successively form the income of several individuals, the revenue of the country cannot be estimated by the aggregate income of the people. Caroline. And does not the same reasoning apply to the expenditure of a country; since the 500l. a year which you spend in house rent will be afterwards spent by your landlord in some other manner? Mrs B. True, because spending money is but exchanging one thing against another of equal value;— is giving, for instance, one shilling in exchange for a loaf of bread, five guineas in exchange for a coat; instead of a shilling we are possessed of a loaf of bread; instead of five guineas, of a coat; we are therefore as rich before as after these purchases are made. Caroline. If so, how is it that we are impoverished by spending money. Mrs B. It is not by purchasing, but by consuming the things we have purchased, that we are impoverished. When we have eaten the bread and worn out the coat, we are the poorer by five guineas and a shilling than we were before. A baker is not poorer for purchasing a hundred sacks of flour, nor a clothier for buying a hundred pieces of cloth, because they do not consume these commodities. When a man purchases commodities with a view of reselling them, he is a dealer in such commodities, and it is capital which he lays out. But when he purchases commodities for the purpose of using and consuming 1223. Why cannot the revenue of a country be estimated by the aggregate income of the people?--1224. Does the same reasoning apply to the expenditure?--1225. Give some instances? 1226. If so, how is it we are impoverished by spending money 1227. What is called expenditure? them, it is called expenditure. Expenditure therefore, always implies consumption. Caroline. I understand the difference perfectly. The one lays out capital with a view of reselling his goods with profit. The other spends money with the view of consuming the goods, with loss;-that is to say, the loss of the value of the goods he consumes. Mrs B. Just so. Thus, though the sum of money you spend will serve the purpose of transferring commodities successively from one purpose to another, yet the commodities themselves can be consumed but once. Therefore the consumption of a country may, like its capital, be estimated by the aggregate consumption of its inhabitants; and the great question relative to the prosperity of the country, is, how far that consumption takes place productively, and how far unproductively. Caroline. That certainly is a very important point; for in the former case it increases wealth, in the latter it destroys it. Yet, Mrs B., supposing a man were so prodigal as to spend not only the whole of his income, but even the capital itself, provided that it were spent in the maintenance of productive laborers, though it would ruin the individual, I do not conceive that it would injure the country; for whether a man lay out his capital in the maintenance of productive laborers with a view to profit, or whether he spend it in purchasing the fruits of their industry for the purpose of enjoyment, I can perceive no difference relative to the country; in both cases an equal number of people would be employed, and consequently an equal quantity of wealth produced. Mrs B. I have a strong suspicion that the difficulty you feel in understanding clearly the distinction between 1228. What does it always imply?- -1229. How may the consumption of a country be estimated?. -1230. What is a great question relative to the prosperity of a country?--1231. From what does the difficulty in understanding the distinction between employment and expenditure arise ? the employment and expenditure of capital, arises from confounding capital with money? Caroline. Indeed I think not; my notion of capital is, that it consists of any kind of commodity useful to man. Mrs B. Well, then, suppose that two persons are possessed of such commodities to the value of 5000l. each;-that the one distributes them out to industrious workmen, furnishing them with food and materials to work upon, and that by the time the various commodities have been finally distributed, the workmen have fashioned them into objects of another form, but of superior value to what has been consumed. Let the other distribute his capital amongst his servants, who in return amuse their employer with theatrical representations, fire-works, or any other species of enjoyment, which, by the time the commodities have been consumed, leave no other traces than the recollection that they have existed. Can you see no difference in these two instances? Caroline. Oh yes; I see a very material difference: one of the capitals of 5000l. is destroyed, and the person who has consumed it thus idly is reduced to beggary. But this is not the case I put. Let the prodigal, instead of consuming his capital in the way you have described, spend it amongst tradesmen, who will furnish him, with articles for his enjoyment, such as magnificent apparel, splendid equipages, sumptuous entertainments. He will then replace the capital that those tradesmen have been consuming, in order to produce these commodities, which capital will again be usefully employed in producing more. Mrs B. That is very true; and so far the prodigal has done no harm. In spending his capital amongst tradesmen, he has exchanged his various commodities, for others of equal value, and the same quantity of capi 1232. What do you understand by capital?-1233. illustration is given of the difference in expenditure of capital? What tal exists as before the exchange took place; but what is the prodigal to do with the new stock that he has acquired? Caroline. It will be applied to the gratification of his desires; he will regale with his friends at the sumptuous feasts, he will use the equipages, and clothe himself and his servants in the rich apparel. Mrs B. Then don't you see that you have only removed the evil one step farther? He and his friends will consume amongst servants and dependents in fetes and entertainments, what the tradesmen furnished him with, instead of that which he gave in exchange for it; and that as much capital will be lost to himself and to the community in the one case as in the other. The spending of capital is a steril consumption of it, whilst its employment is a reproductive consumption. Caroline. But if money were not thus spent, what would the tradesman do with the luxuries which he had prepared for the purpose of supplying the demand of persons who spend in order to enjoy ? Mrs B. Such tradesmen would certainly find less employment; but you would not thence conclude that the community would be injured. You have already seen that capital cannot produce revenue unless it is consumed; if it be consumed by industrious persons, who work whilst they are consuming it, something of superior value will be produced, and that product, whatever it may be, will be exchanged against other productions; it will be distributed amongst another order of tradesmen, and will afford precisely the same amount of encouragement, though of a different kind. Whatever is saved from the extravagant consumption of the rich, 1234. If money were not spent in procuring luxuries, what would the tradesman do with those he had prepared for the demand of persons who spend in order to enjoy? -1235. Can capital produce revenue unless it is consumed?. -1236. What will be the effect if consumed by industrious persons?--1237. What becomes of that portion of capital saved from the consumption of the rich? |