ries on his business more by his own efforts, and with less expense; and, lastly, sells, as he will be likely to do, to reliable men, who most certainly discover where they can purchase to the greatest advantage.

RAPIDITY OF EXCHANGE.

The necessary rate of profit depends greatly on the rapidity of sales, as compared with the capital employed and the expense of conducting business.

This may be shown in the following illustration:

A, with a capital of $10,000, which he turns every six months, charges twenty per cent profit.

B, with same amount, turns his capital once in three months, at fifteen per cent.

C, with same amount, turns his capital every thirty days, at seven and one-half per cent.

Large sales, with small profits, or a rapid turning of capital, is the natural tendency of trade, as population and wealth increase, and especially as credits are diminished.

Those who sell for cash have immensely the advantage of those who give long credits, particularly under a mixed currency, which so largely increases the hazards of trade.

In those communities in which the people are generally poor, and their wants great and pressing, as in newly settled countries, credits are naturally much extended, and, of course, the rate of profits proportionally increased. This is known to be the case over a large part of our Western States. The people can afford to pay large profits, if by so doing they can get the use of capital, because capital produces so large a return; as, for example, one thousand dollars invested in the spring in ploughing the prairie, and getting in a crop of wheat, will, not unlikely, give a net profit, within six months, of one hundred per cent. But when such communities accumulate capital, and are able to pay as they purchase, they come to buy at greatly reduced rates, and profits fall to the minimum. This is the general law in all countries, though most clearly seen in new settlements. The average rate of profits in a country is determined by the same law as wages. Profits are merely wages received | by the employer. This idea should be kept constantly in mind. The wages of the laborer depend upon supply and demand: why not the wages of those who employ him? The employer is as truly a laborer as the man who toils with the spade, only on a higher plane.

If there are more laborers than are wanted, wages fall; if fewer, they advance: just so with employers, or business undertakers. If there are too many competing for profits, the rate will fall until the excess is driven back into the ranks of labor. As there are, however, comparatively few, in proportion to the whole number of persons capable of labor, who have the requisite capacity and training required for transacting business successfully, and fewer still who can command the necessary means or capital, it will follow that the rewards of the employer will be larger than those of the persons employed. But we must not forget that this differ

ence is less than at first appears, because our observation shows us, that, of all who undertake to trade or manufacture, a large majority become bankrupts; and, consequently, the average difference between the employer and the employed is greatly reduced.

There is, undoubtedly, a constant tendency to an equalization and reduction of profits from continual improvements in the means of locomotion, and the increasing intelligence of the people. The opening of railroads has wrought a great revolution in this particular. These not only greatly reduce the cost of transportation, but the average rate of profits. For example, a given town is one hundred miles from the mart of trade, by which it is supplied. There are only common roads, and those of bad construction. Eight or ten days are required to pass teams to and from the city. Under such circumstances, the people generally will be likely to know but little of the market value of commodities. they must very rarely visit the places where merchandise is obtained, and, consequently, are ignorant of the worth of the articles they are obliged to purchase, and quite unable to supply themselves directly, they are charged large profits on what they buy. Let a railroad be put in operation, so that the time distance is reduced from eight or ten days to four or five hours, the price of all commodities in market will be known, and those who supply them must do so at a small advance; while yet, it may be, the dealers will make as large aggregate profits from increased sales.

EFFECTS ON PROFITS OF A TEMPORARY RISE OF WAGES.

As

The effect of a temporary rise of wages upon profits may be illustrated as follows:

A manufacturer of kerseymeres is able to produce an article for one dollar per yard, for which he can get one dollar and twenty cents in the usual state of trade. A sudden rise of wages advances the cost to one dollar and ten cents. The result, under ordinary circumstances, will be that the

manufacturer will not be able to obtain at once an advance equal to the enhanced cost. He will be fortunate if he can get one dollar and twenty-five cents for his goods, leaving him but fifteen cents profit. But, if the rise in wages holds on until the market has been cleared of the stock of goods on hand, the price will then be easily brought up to one dollar and thirty or one dollar and thirty-five cents.

But a rise of wages, especially if occasioned by an expansion of the currency, is sure to be followed by a corresponding decline when contraction takes place. The manufacturer will then gain the advantage he lost by the rise of wages. His goods will not fall at once as much as the fall in wages. This is the practical experience of business men; and they can safely calculate to gain as much on the one hand as they lost on the other. Wages, we have previously shown on page 258, fall faster than commodities. It is from the operation of this law that the entrepreneur gains in the fall as much, ordinarily, as he lost in the rise of wages.

DIVIDENDS.

A large share of the income received by owners of capital, at the present day, comes in the form of dividends on stock, held in corporations and joint-stock companies, formed for almost every conceivable purpose. The introduction of railroads has caused immense investments, the income from which is received in dividends. How are these to be classed? They cannot be regarded as synonymous with interest, or rent: they must be considered as profits. They are received for the profits of business done by proxy. The capitalist may not have the slightest agency in the affairs of the company from which he gets an income; still he is a partner, though a limited and silent one, and receives his share of the profits or loss. .

It may be objected, that bank dividends must surely be classed with interest, since they are made up wholly of interest received for the loan of capital. This is not strictly

Be

correct. No inconsiderable share of profit to the banks of the United States is derived from the premiums charged for exchange. American banks are exchange-brokers. sides, nearly one-half of all the income of mixed-currency banks is derived from the manufacture of currency, not the loaning of money or capital. Although the dividends of banks, of this kind, approach nearer to interest than those of ordinary business corporations, still they are most properly classed with profits.

Through associations, capital is largely connected with the industrial operations of the country, and shares directly in their prosperity or adversity. This result is in so far a favorable one, as it unites the interest of capital with the industry of the country.

CHAPTER VI.

INTEREST.

WHAT is paid for the use of money, or any other form of loanable capital, is called "interest." Hence the term "usury." It is all the reward that capital receives, not embraced in the term "rent." It ordinarily insures the return made for the employment of money, because loans are commonly made in that form; but the idea of interest is general to all articles having value, but not bringing rent.

Interest has its justification in the right of property. If a man can claim the ownership of any kind of wealth, he is the owner of all it fairly produces. Past labor has all the sacredness of present labor, and as justly claims its reward. An associate in production, it is entitled to a share in the product. Whoever by labor produces wealth, and by selfdenial preserves it, should be allowed all the benefit that wealth can render in future production. This is the only