BOOK III.

EXCHANGE.

PART FIRST.-TRADE.

CHAPTER I.

THE PRINCIPLES OF TRADE.

EXCHANGE has its origin from the division of labor; and the further that division is carried, the greater extension is given to exchange. If each man supplied his own wants by his own work, trade could not exist. But, so far from this being the rule of industrial society, the article to which a man devotes all his labor may be such as he never used, perhaps never saw used.

Exchange is that agency which brings a man what he wants for what he does not want, which furnishes gratification for his desires out of objects which are adapted to gratify few or none of his desires.

As the division of labor begins in the most savage state, so exchange is known there. One goes into the woods for venison; another, to the river for fish. At night, they divide. Half the fish is given for half the meat. Perhaps other parties are introduced. Instead of exchanging the whole of their fish or venison, each of the two gives a portion for a trinket, and another portion to the medicine man for herbs which he alone knows how to collect. We have here brought in exchange, not only in regard to the plain necessaries of life, but to the services of science and to luxuries. Yet all this occurs in the daily life of the savage.

Only one went for venison: four have venison now. Only one went fishing: four have fish to eat. The hunter and the fisherman have trinkets and medicine they know not how to get. The doctor and the cripple who made the trinket have fish and venison they could not procure for themselves.

This is the idea of exchange. It extends first to the industry of a hamlet; it enlarges to take in the entire community; it remains through all the successive modifications and refinements of labor and accumulations of capital. It goes abroad; it crosses rivers, then narrow seas, then the broad ocean; hunting out everywhere what the seller wants, carrying everywhere what the buyer wants. The word "exchange" expresses the economical principle of all this: its office is the creation and apportionment of wealth.

"Trade" is a technical term for the sum of all actual exchanges. It is exchange realized.

There are several kinds of trade:

1st, Domestic or home trade, which includes what is commonly known as the coasting trade.

2d, Carrying trade, in which the carriers have no interest in the commodities beyond their transportation.

3d, Foreign or international trade, to which the word "commerce" is generally applied.

These kinds of trade are subdivided into the wholesale, retail, and jobbing trades; and specialized indefinitely as the iron, cotton, shoe trades, &c.

Whence does trade arise?

From the desire which individuals and communities have for each other's products. It is evident that this is essential to trade; since, if men or peoples produced by themselves all they wished for, there could, as we have said, be no occasion for an exchange. It is evident, also, that this is sufficient for trade, since it supplies all the motive that can exist for an exchange.

To what extent can trade be carried?

To the extent of the surplus production of each individ

ual or nation. Given the aggregate surplus products of all the people of a country severally, and we have the amount of its entire trade. Given the aggregate surplus products of the people collectively, and we have the amount of its foreign trade.

Illustration: Suppose a community of one hundred individuals, each producing three hundred dollars' worth a year, -aggregate revenue, thirty thousand dollars. If each person desires to consume only one hundred dollars' worth of his own articles, he will have left for trade two hundred dollars' worth, aggregate in the community, twenty thousand dollars. But if, after exchanging around with his neighbors, it is found that each member of the community has one hundred dollars which he does not wish to part with for any thing he can get at home, we have the aggregate surplus available for foreign trade, ten thousand dollars.

Ordinarily, individuals or peoples do not wish to part with all their products. Ohio, for example, does not wish to dispose of all her wheat. A share must be kept for home consumption. The surplus will be exchanged for other commodities abroad.

Exactly the amount to be so retained will depend, within certain limits, on the degree of disposability. The more the wheat is in demand, that is, the more of desirable things are offered for it,-the less will the producers be inclined to retain it; the greater effort will they make to dispense with its use themselves, or substitute other things for it at home. But this result will be limited by the necessities of the people. It cannot be calculated on to increase very largely the amount available for trade.

It will, of course, be remarked, that the amount of surplus, in particular countries, will vary with the character of their products. We can suppose an entire people engaged in industry, of which they make no use themselves. In such a case, their trade would be to the amount of their whole production and their whole consumption. In fact,

The nearer it is

The more vital

this condition of things is never realized. approached, the more general the trade. and primitive the articles produced, the greater will be the share consumed at home. Ohio has no such trade, proportionately, as Rhode Island; not necessarily because the latter produces more, but that she produces more of what she does not want. The people of Birmingham consume but an infinitesimal part of the articles they produce.

We have here the principle that the wealth of a people is not determined by the extent of its trade.

We have said that the trade of a community, whose whole production was exchanged, would be equal to its production and consumption. It would be so, but that would be determined by its production only. It would be this alone which it would carry in its hands into the markets of the world, and on this would depend what it should get there.

What persons or communities will trade most largely with each other?

Other things equal, those whose productions differ most. Two tailors will not traffic much together. Both will trade with the shoemaker and hatter. Indiana will not trade extensively with Illinois; but both will trade largely with Louisiana and Massachusetts, Russia and Sweden will make very few exchanges, because their productions are as much alike. Both will deal largely with the West Indies.

What determines the character and kind of products each country will afford?

1st, Soil and physical conformation. One will be a wheatraising, another a wool-growing country. Each will spontaneously turn its industry in that direction where it will produce the greatest values with the least outlay of labor and capital. This must be where the natural adaptations of the land are followed. This operates, in respect to nations, precisely as we see it in smaller communities, where one farm is especially fitted for grazing, another for tillage, another for timber.

2d, Climate.

From the Arctic regions to the tropics, from Siberia to Hindostan, is infinite variety, both of heat and moisture. Some countries are deluged with twenty-five feet of water in a season; * others parch the year round with ten inches. Some are locked with frost eight months in twelve; others are open the year round. It is evident that the conditions which are admitted to have given rise to the differing species of fruits and grains and vegetables will control their increase.

3d, Social condition. Take, for examples, England and Brazil, one distinguished for the high moral and mental endowments of its citizens; the other having a heterogeneous population, in a poor and semi-barbarous condition. The latter would, plainly, seek to enrich themselves from the spontaneous yield of the soil, from the wild wealth of the pampas and the forests, from the precious ores and stones along their streams and in natural caves, rather than till the ground to the fertility of a garden, sink shafts into the solid rock, cast up highways upon the rivers, and work iron into the needle and lancet.

4th, Difference of race.

This is additional to differences of social condition, and looks to those peculiarities of industrial character in the races of man, which are no less distinguishable than their peculiarities of stature, complexion, and feature. These do not affect the degree of production only, as greater or less, but multiply the fashions, and complete the varieties of wealth.

All the causes here enumerated conspire to give a great extent and activity to trade. It is in the commerce of the world that we have illustrated ·

THE TERRITORIAL DIVISION OF LABOR.

The Chinese raise tea and silk. This is their specialty,

*The mountains south of Bombay receive three hundred and twenty inches of water a year, mostly in three months.