THE EIFFECT OF THE GOLD DISCOVERIES, MORE ESPECIALLY UPON MEN OF BUSINESS.

Southland Times, Volume III, Issue 25, 4 January 1864, Page 5 (Supplement)

THE EIFFECT OF THE GOLD DISCOVERIES, MORE ESPECIALLY UPON MEN OF BUSINESS.

(From the Economist.) We showed in a previous article that there was some^-reason — not perhaps absolutely demonstrative reason, but still probable and sufficient reason — to believe that the value of gold in this country is undergoing a gradual progressive fan; What," theh/ io lively to be the effect of that fall ? The first effect is very obvious $ and we last week explained it, and dwelt upon one consequence of it. If the value of gold falls, all contracts to repay gold at a distant date are really advantageous to the repayer, and disadvantageous to the lender. A thousand pounds lent at the beginning of the depreciation, and repaid after it has been in progress ten years, will still be the same number of sovereigns — the same nominal sum of money, but its purchasing power (the only attribute that makes money of value) will be less than before : in plain English, it will buy fewer things when repaid than it would buy when lent. The depreciation is thus favorable to the borrowing class, and unfavorable to the lending class. This is equivalent almost to saying that the depreciation is advantageous to people in business, and disadvantageous to people out of business. Taken as a whole, the. mercantile, class is a very large borrower from the non-mercantile class. It is true that a large number of people of business are professional lenders : bankers, bill-brokers, and all i such persons gain their profits in that manner. But it is to be observed that these classes are professional borrowers also; that which- they lend, speaking \ roughly and in the main, is not their own monej, but the money of others ; i they are simple distributors ; they lend ' to some what was before lent to. them by others. A middleman of this sort is not affected by the depreciation of gold at all ; he repays the same sum which he borrowed, and whether it buys j more or less is nothing to him. Such I men of business — the only class of men of business who are very great lenders — are no ? at all affected by the gold discoveries, and the { borrowing class of men of business are benefited ; and that class comprehends almost all men of business. Mr Jevons does not scruple to pronounce this effect advantageous. He ' regards the unmercantile class as the drones of the hive, and the mercantile class as the working bees ; he is glad of anything that benefits those who do something at the expense of those who do not do something. And it is possible that there may be times and countries in which a hounty on production, an artificial and accessory stimulus to pecuniary energy, may be very advantageous. But such is not the state of England at this moment. Quiet people living on their means fulfil various valuable functions in a society like ours. They maintain the tradition of learning, which busy men are too hurried either to acquire or to teach ; they maintain a standard of delicate refinement, which hurried people can perhaps appreciate, but which they could never establish; they maintain, above all, a steady aggregate of sober thought, which men in the exciting and now almost feverish occupation' of busy life need as a medicine, and will not produce as an enjoyment. This leisured class is now too straitened in this country, and the augmenting social weight which is now given to mere ' wealth tends already to deprive cultivated people, of small means of the intellectual authority to which they are entitled. We do, not wish to give any class a bonus at the expense of any other class ; we do not wish to disturb by any unusual element the common . forces of industry ;Jbut if we were to give a bonus — -an Unnatural and extraordinary stimulus— rto any class, we would rather, in this country and at this time give it to the learned. The active /classes are quite able to take care of /themselves ; business has already ample encouragements ; it is the quiet people of gentle reflection whom" we rather ought to foster, and; whom we are likely to be in want of. - Certail classes of men of business are

T°" ' ■■ ....^-v ■ -- --^ ■■ -;—r ■■■■-- also benefitted by tfce deprecation in. Other way/Si; 7 All persons- ~whV liiv© already a larjpf fixed capital invited in their business derive a considerable ad- . vantage from it in comparison with their competitors who have, to start anew. - A man who has a factory built when the cost of building was low, will be better off than a man who has to build his factory after . the value of moUey has fallen, and the cost of building risen. Each will sell his goods for the same Bum, but the maunfacturer of old standing will have higher, profits than the manufacturer of new standing. As a rule, persons with large capitals in durable forms will- gain in the course of the gold depreciation considerably more than the average rate of profit. Again, the depreciation of gold, as we showed but recently, will not operate upon articles at the same time or at the same rate. Those articles will be first affected which the persons who first get possession of the new field first want. The articles which the Australian community wanted, a rough set of Anglo-Saxon descent, with the habits and tastes characteristic of their class and origin, were those most immedeately affected by theiresh power to purchase given by tfae/^oid. The articles secondarily affected "were those purchased by the class who produced and sold these first commodities. If spirits and haberdashery and wooden houses were sent to Australia and sold at high rates, the sellers had large incomes to spend, and they laised the price of what they wished for. The producers of the firbt articles affected by the depreciation of gold gained a large retl profit f om the high price at which they sold their goods. In the end, of course, there is no advantage to the producers at all ; the producer of the article last affected by the depreciation gains nothing and loses nothing. If gold is depreciated ten per cent, he will sell his goods for ten per cent more, but then everything he himself has to buy will be ten per cent dearer too. But during the transition, those who sell articles which have risen, and who buy vtrtlqles that as yet have not risen, will be really andlruly ber/*fitted. There is a much more recondite consequence of the same principle which I proves that England as a whole, and as a country, is benefitted in comparison with other countries by the gold discoveries; benefitted, that is, temporarily, < and during the course of the depreciation ; for ultimately, betw.en country and country, just as between individual and individual, the depreciation will have no effect. This rather more abstruse result of the gold discoveries was, some years ago, pointed out by Mr Cairnes, but it has never received the attention which we think it deserves. Nor are we surprised that it has been somewhat neglected, for it rests Upon doctrines which, although admitted and assumed as not worth mentioning by scientific economists, are, nevertheless, not familiar to the mass even of thinking men, and are opposed to some very natural prejudices. A theoretical economist lays down, and most justly, that the profitableness of a foreign trade consists entirely in its imports, but a common parson undeniably takes an exactly opposite view. He looks at foreign trade as a mode of employing our own people, and of in\esting our i own capital ; he regards exports as the end. Unless his attention is directed to the subject, he hardly regards imports at all. A very little reflection will show that the political economist is, in reality, right. It is of no use employing people in exportation unless they get in return something for that exportation. Selling is of course desirable, but it is only desirable if the purchase money is paid. Imports are the purchase money which we receive in return for our exports. The more we can receive in return for a given quantity the better; the larger the aggregate imports we can obtain in exchange for the same entire exports the more profitable is the trade. The profits of commerce, in a word, to a country should be estimated exactly as an accountant estimates the gain or loss of a year's trade to an individual. He says. How much more have you got at the end of the year than you had at the beginning? If you have earned money it must be somewhere ; your liabilities must be less, or your visible property must be more. If a country is getting rich by foreign trade, it must be by obtaining continually more and more valuable commodities ; by possessing finer, better, and more useful things of foreign origin ; in' a word, by importing more. Exporting is only a necessary evil. If foreigners would give us these imports for nothing, so much the better. We should have the resources now spent in producing our exports to spend on other things. A country, therefore, which gets its imports on the best terms, is likely to be in the best position for a foreign trade. A dear country — a country in which the general range of prices is in that position. Every addition to the price of commodities in country A, not shared by countries B and C, is a bounty , on the transfer of goods from country Ato countries B and C. The more you raise the price of articles in England, the more articles, the more aggregate imports, England will obtain from the rest of the -world. Now, as England is the first country /which communicates with .the mining countries, or at any rate the country which first communicates with them to the largest extent, it is the country in which the range of prices will soonest be affected by the. „new discoveries. " Any improvement," . , says Ricardo, "in the facility of working the mines by which the jpreoioua metals may be produced quantity of labor, will sink tb^^iijß of money generally^ It will-then/ exchange for fewer commodities in all/countries"; but whenany

particular country excels in tn&nufactureai so as to occasion an .influx of mone^to wards it, the value of "money will be ; lower, and the prices of corn and labor will be relatirety higher in that country than in any otJier." England is precisely in this position ; she excels in the manufacture of most of the -articles most desired by the persons into whose hands the new gold at first comes t it is on her commodities that the hew gold is first spent ; it is to her shores that/it at first comes. Accordingly, prices here being higher than prices elsewhere, the imports to England tend to increase. As things are dearer here, foreigners are more anxious to send us things. We attract: wealth in a less degree, but in the same manner as the gold countries themselves attract it. There gold is easily obtained, and, in consequence, all articles desired by possessors of gold rush thither. The • old countries pur- ..; chase their imports at the smallest prices ever known, at the price of mere gold, which was at first attainable with extreme ease, and which is still obtainable with great ease. As England first receives the gold, it obtains with it an advantage in international trade, of less magnitude but of a similar nature. In this manner, therefore, the depreciation of gold not only tends to augment the profits of certain English capitalists by giving them a bounty at the expense of those from whom they have borrowed, by increasing the proportionate profits of their durable capital ; but in the case of articles first affected by lowering the price of what they buy, it likewise tends to augment the profitableness of all English foreign commerce, by enabling us to obtain more useful and costlier imports on easier terms than we should otherwise obtain them.