PLACES, DISTANCES, AND FARES ON THE BOSTON AND WORCESTER ROAD, FROM WORCESTER,

We made several visits to Worcester during the last summer, and collected considerable information, which we have attempted to embody in the preceding pages; and, although this article has grown to a much greater length than we proposed in the outset, we have been compelled to omit many points of interest in its industrial progress and social condition, which it would have afforded us pleasure to introduce. The fact is, with but few exceptions, we received but little aid in collecting facts and materials for that purpose from the residents of Worcester. We may, however, resume the subject at some future time, and should our friends in Worcester furnish us with the desired information, we shall be able to give a more comprehensive and complete account of one of the most interesting and important inland towns in New England. Every city or town, of any considerable importance in the industrial scale, would do well to collect, at intervals of one or two years, all the "facts and figures" bearing upon their industrial interests, and upon their moral and social condition and progress, not only for the use of the citizens, as a contribution to the general information, but for the common benefit of our common country. It will, we may remark in this connection, afford us great pleasure to embody all reliable information calculated to exhibit the condition of any of our large towns, wherever located, and embrace an account of their resources in our series of "COMMERCIAL CITIES AND TOWNS OF The United States.”

Art. VI. BANKRUPTCY-BANKING.

Mr. FREEMAN HUNT, Esq, Editor of the Merchants' Magazine, etc.

DEAR SIR:-The article in your Magazine for November, 1849, whose title we have placed at the head of our communication, deserves attention for the importance of the subject it discusses, and for its originality. The fact which it assumes as its basis, the extensive prevalence of bankruptcy among the mercantile class of society, is no doubt one of its characteristics; whether to the extent asserted is of no importance to the argument. The cause of the fact should, if practicable, be ascertained; but we believe the cause assigned by your correspondent inadequate-not the true one-and the reasons which he gives for his opinion entirely fallacious.

After various statements to prove the truth of his first position, which con

* Branches of the Boston and Worcester Road. VOL. XXII.-NO. I.

5

firm the general proposition, and go far to establish the fact that mercantile pursuits are particularly liable to the result of bankruptcy, he reaches the conclusion that the cause of the evil is "the too high rate of interest." He assumes his conclusion to be true, and all further investigation as useless.

Let us first ascertain-what is the true nature and character of interestexamine his reasons for his opinion, and then endeavor to assign other and better causes as reasons for the generally admitted fact, the tendency of mercantile pursuits to bankruptcy.

Interest is the amount paid for the use of capital in the form of money. In the earlier days of society the opinion prevailed that this was a proper subject for legal enactment, and that opinion still pervades society. There is some reason for the opinion, especially since money of credit is so generally in use; but were capital only used as money, then there would be no propriety in legalizing the price of its use, except what arises from the fact that it is the legal medium for the extinguishment of debt. The law should certainly be retained in relation to those who exercise the power of creating the money of credit. General laws, however, still exist on the subject; but in reality they are of little force, the price of money, like that of all other commodities, is determined by the law of supply and demand. Money being capital in a form adapted to ready conversion into all other forms, interest, or the price of its use may be more than the price of the use of other forms of capital; it can never be less; it may be assumed, however, that the price of the use of money will, as a general rule, correspond to the use of other capital; the rent of lands, of houses, and other forms of capital must correspond to the rent of money, or interest, the tendency to an equilibrium in the productive power of capital would undoubtedly bring about such a result.

If, then, it is demonstrated by your correspondent that the rate of interest is too high, the demonstration goes farther, and proves that the income derived from all capital is too great. If the small amount of capital as money used by others than its owners is productive of the mischief described, then the price paid for the vastly greater amount of capital, in other forms, would long since have worked the bankruptcy of all classes of society who use property not their own; the tendency to bankruptcy would have been general, and not peculiar.

The first argument of your correspondent in support of his proposition is, that as the increase of the wealth of the State of New York, for ten years, from 1835 to 1845, was only 1 per cent, per annum, upon its capital of $531,000,000, without compounding the interest, therefore seven per cent interest is excessive. In the first place, is any reliance to be placed upon the statistics? During the ten years the population of the State has increased 30* per cent; to have preserved its wealth, per capita, it should have been in 1845, $690,000,000, assuming it to have been in 1835, $531,000,000, while it is stated to be only $605,000,000. Now, will it be pretended that the per capita wealth of New York in 1845 is not equal to what it was in 1835? Has the State been adding thousands of acres of cultivated land, building cities, constructing canals, railroads, ships, and all other forms and varieties of permanent capital during the period, and yet its wealth, per capita, been diminishing? The idea is ridiculous; such statistics are not only of no value, but positively mischievous, since, while they claim to be authoritative, they prove not only that the people of New York cannot afford to pay 7 per cent,

*Sufficiently near the truth for our argument.

but that they would grow poor without paying any interest; and more, that the interest paid is abstracted from the general wealth, though paid to its own citizens; or in other words, that capital is of no advantage to the results of labor. Doubtless something is to be attributed to the great expansion of price in 1835; but statistics which militate against all the known facts of experience are of no possible value or use. The same disposition may be made of the statistics of Massachusetts; they are of no avail in the argument. His allusion to "Kellogg on Labor and other Capital" leads us to say with your correspondent, it is "a work well worthy attentive perusal and study, because it discusses the great subjects of currency and finance, subjects with which society are yet in almost utter ignorance, but which are the basis of economic science," and not because its principles are true, its reasons logical, or its suggestions original.

The next proposition which forms the basis of your correspondent's argument is, that as society cannot afford to pay interest upon its whole capital, therefore it cannot pay interest upon any portion which might be added, and which might give increased activity to the whole. The general public is but an aggregation of individuals; what is true of the individual must be true of the aggregate. Labor is the primal cause of all increase of wealth; but mere labor is a weak instrument of production, compared with itself, in combination with capital. The farmer without a plough, and the artizan without tools or materials, are examples of the former, and with them of the latter; it would be difficult to persuade either of these parties, destitute of the capital necessary to make their labor productive, that 7 per cent per annum was unwise in them to pay, or unreasonable in others to receive, for the use of the capital without which their capital, labor, would be either wasted, or of little avail. If it quadrupled, as it would, the product of their labor, your correspondent, with all his sophistry, would hardly be able to induce them to forego its use, because its proprietor demanded one fourteenth, not of the general result, but of the sum which he contributed to its production; while both the plough, and the tools, and materials, remain to repay the principal when required. And though society, if entirely destitute of capital, and obliged to borrow its whole stock, might not be able to pay 7 per cent, while indulging in its present liberal consumption of the products of its industry, in combination with its borrowed capital, yet it might pay interest at the present rate, and yet be in a better situation than if entirely destitute of capital, and dependent upon mere labor for the supply of its wants.

But all such comparisons are ideal merely; capital is civilization; without it man is a savage; like all other commodities, its value must depend upon the law of supply and demand. No man is compelled to use it, and no one has a right to its use except with the consent of its owner; to encourage its accumulation is the method to reduce its price; that is also the wisdom of the State, since its accumulation is the basis of civilization, and the larger the accumulation the less will be its value, and the more facile its appropriation by those, who in the order of Providence, are without it.

Your correspondent further alleges that the fact that though interest upon our debts is payable to our own citizens, and not to those of another country, yet this "serves only to cover up the fatal wound." This is mere dogmatism, obviously; if interest were payable out of the country, its tendency would be constantly to diminish capital, and thus increase its price, especially on his assumption that the amount of interest is greater than its advantage to labor; and not only that, but it would diminish the value of our labor, since

its expenditure, for which only it is desired, and by which alone it can be made productive, would go to employ the labor of other countries, while if expended at home it would increase the demand for, and value of, our own labor, as well as increase the amonnt of, and thus diminish the value of, capital.

Money does not produce does not increase of itself”—its only "accumulation is that of rent." Neither do houses, nor lands, nor labor saving machinery; they do not only not increase, they perish if labor is not bestowed upon them, not only for their preservation, but for their occupation; so money, if left idle, is of no value, and in this condition commands no interest. Human hands and human skill, if not exercised, produce nothing; are they, therefore, of no value, and is their use and exercise worthy of no reward? "The burden of interest upon our debts must be borne by production;" does not capital produce? The railroad and the spinning jenny are capital; do not they produce when they transport commodities which must otherwise be carried on men's backs, or make yarn which would otherwise be twisted with the fingers? The only value to capital is its power of production; who would pay for that which would produce nothing. Capital is the coördinate of labor, its aid and friend, equally necessary with labor to any adequate supply of human wants; neither can produce without the other, and every effort to array them in opposition to each other is treason to humanity.

Capital has the advantage of labor in that while it is comparatively permanent, labor is evanescent; the advancing hours consume the one, while the tooth of time but slowly destroys the other; in the natural antagonism between these two forces, capital has the advantage, and therefore should be liberal to its weaker friend; but if labor would be more careful of capital, it would soon render its burden light.

Having demonstrated, as we think, the defects of your correspondent's positions, we will endeavor in our next to offer our own reasons for the fact admitted the extensive prevalence of bankruptcy among the mercantile classes of society.

G. B.

Art. VII.-GILBART'S PRACTICAL TREATISE ON BANKING.*

In our number for July, 1849, we gave a brief notice, with extracts, of a "Treatise on Banking Bookkeeping," as practised in the banking houses of Great Britain, stating that the work then before us was only a single section of a "Practical Treatise on Banking," then passing through the press. The complete work is now received, consisting of two volumes, and extending to nearly eight hundred pages. It is beautifully executed, and invites a perusal from all who are interested to understand the details of the system, by which the monetary affairs of the Old World are managed, and the practical operation of principles, which centuries of large experience have developed and matured.

We do not profess a thorough acquaintance with the subject discussed in this work, nor have we any other interest in it than that we feel for every

* A Practical Treatise on Banking. By JAMES WILLIAM GILBART, F. R. S., General Manager of the London and Westminster Bank. Fifth Edition. In two volumes. London: 1849.

department of mercantile science, on the fair development and just application of which the prosperity and happiness of civilized nations so much depend. In this point of view, it has strong claims upon the attention of several classes of persons to whom we beg leave to commend it as a study. To those who are practically engaged in the business of banking, however deeply they may be versed in the science, it may offer many useful suggestions. To those who are called upon to write, speak, or legislate upon the system, as it is every year, in one form or another, agitated among us, it may furnish sound practical views in place of those unfledged theories and crude conceptions, which so often disturb the harmony of our counsels, and the symmetry of our legislative enactments.

The

The principles of a science are always and everywhere the same. practical application of them may vary indefinitely with the habits and customs of the people among whom they are applied. However widely, therefore, the mode of conducting the business of banking in Great Britain may differ from that of the United States, the fundamental principles, which lie at the bottom of the system, must be the same in both. Money is the same element here as there, and is regulated and controlled by the same fixed and unchangeable laws. It is subject to the same fluctuations of scarcety and plenty, of pressure and plethora, and from the same general causes. Whoever, therefore, treats ably of these matters, as observed and understood in Europe, may be profitably consulted and studied by the political economist of America.

Mr. Gilbart's work, to use a common phrase in such cases, seems "to cover the whole ground." It surveys the entire field of the science of banking, and of the art, as practised in England, and leaves nothing unsaid which can elucidate the one, or illustrate the other. It realizes, to the full, the high anticipations of our previous notice, being strictly scientific in its arrangement and analysis, and attractively artistic in the disposition and finish of its parts. Mr. Gilbart's style is beautifully clear and lucid, blending the brevity and point of a thorough bred merchant, with the purity and harmony of a finished scholar. In this respect, we take leave to commend it, as a model, to any who may have occasion to treat elaborately of mercantile science or practice.

The work is divided into two parts, each part comprising a volume. Part I. treats of Practical Banking. Part II. of Banking Institutions.

Part I. comprises fourteen sections, and treats of the Nature and Utility of Banking-Banking Terms-The General Administration of a Bank-Its Administration, with reference to several Departments of its Business, and during a Pressure-The Administration of the Bank of England and of Joint Stock Banks, with an Inquiry into the Causes of the Failure of the Latter-Banking Bookkeeping-Banking Calculations-and Banking docu

ments.

Part II. comprises ten sections, and treats of the Bank of England-The London Private Bankers-The Joint Stock Banks of London--The Banks of the Country, of Scotland, and of Ireland-and the Moral and Religious Duties of Banking Companies.

The following extracts will serve to justify to our readers the opinion we have expressed of the style and manner of the work. We should be gratified to know that they also served to create a demand, not for an American edition of the work, but for such an importation of the original as shall give to the accomplished author substantial evidence that we are not alone in our appreciation of his merits :