Hamilton Report on Manufactures TEXT Part I

"To endeavour, by the extraordinary patronage of government, to accelerate the growth of manufactures, is, in fact, to endeavour, by force and art, to transfer the natural current of industry, from a more to a less beneficial channel. Whatever has such a tendency must necessarily be unwise: indeed it can hardly ever be wise in a government, to attempt to give a direction to the industry of its citizens. This, under the quick-sighted guidance of private interest, will, if left to itself, infallibly find its own way to the most profitable employment; and it is by such employment, that the public prosperity will be most effectually promoted. To leave industry to itself, therefore, is, in almost every case, the soundest as well as the simplest policy.

"This policy is not only recommended to the United States, by considerations which affect all nations; it is, in a manner dictated to them by the imperious force of a very peculiar situation. The smallness of their population, compared with their territory, the constant allurements to emigration from the settled to the unsettled parts of the country; the facility with which the less independent condition of an artisan can be exchanged for the more independent condition of a farmer; these, and similar causes, conspire to produce, and for a length of time must continue to occasion, a scarcity of hands for manufacturing occupation, and dearness of labour generally. To these disadvantages for the prosecution of manufactures, a deficiency of pecuniary capital being added, the prospect of a successful competition with the manufacturers of Europe, must be regarded as little less than desperate. Extensive manufactures can only be the offspring of a redundant, at least of a full population. Till the latter shall characterise the situation of this country, it is vain to hope for the former.

"If, contrary to the natural course of things, an unseasonable and premature spring can be given to certain fabrics, by heavy duties, prohibitions, bounties, or by other forced expedients; this will only be to sacrifice the interests of the community to those of particular classes. Besides the misdirection of labour, a virtual monopoly will be given to the persons employed on such fabrics; and an enhancement of price, the inevitable consequence of every monopoly, must be defrayed at the expense of the other parts of the society. It is far preferable, that those persons should be engaged in the cultivation of the earth, and that we should procure, in exchange for its productions, the commodities with which foreigners are able to supply us in greater perfection, and upon better terms.”

This mode of reasoning is founded upon facts and principles, which have certainly respectable pretensions. If it had
governed the conduct of nations, more generally than it has done, there is room to suppose, that it might have carried them faster to prosperity and greatness, than they have attained by the pursuit of maxims too widely opposite. Most general theories, however, admit of numerous exceptions; and there are few, if any, of the political kind, which do not blend a considerable portion of error with the truths they inculcate.

In order to an accurate judgment how far that which has been just stated ought to be deemed liable to a similar imputation, it is necessary to advert carefully to the considerations which plead in favor of manufactures, and which appear to recommend the special and positive encouragement of them, in certain cases, and under certain reasonable limitations.

It ought readily to be conceded, that the cultivation of the earth, as the primary and most certain source of national supply; as the immediate and chief source of subsistence to man; as the principal source of those materials which constitute the nutriment of other kinds of labour; as including a state most favourable to the freedom and independence of the human mind: one, perhaps, most conducive to the multiplication of the human species; has intrinsically a strong claim to pre-eminence over every other kind of industry.

But, that it has a title to anything like an exclusive predilection, in any country, ought to be admitted with great caution. That it is even more productive than every other branch of industry, requires more evidence than has yet been given in support of the position. That its real interests, precious and important as, without the help of exaggeration, they truly are and will be advanced, rather than injured by the due encouragement of manufactures, may, it is believed, be satisfactorily demonstrated. And it is also believed, that the expediency of such encouragement, in a general view, may be shown to be recommended by the most cogent and persuasive motives of national policy.

It has been maintained, that agriculture is not only the most productive, but the only productive species of industry. The reality of this suggestion, in either aspect, has, however, not been verified by any accurate detail of facts and calculations; and the general arguments, which are adduced to prove it, are rather subtle and paradoxical, than solid or convincing.

Those which maintain its exclusive productiveness are to this effect:

“Labour, bestowed upon the cultivation of land, produces enough not only to replace all the necessary expenses incurred in the business, and to maintain the persons who are employed in it, but to afford, together with the ordinary profit on the stock or capital of the farmer, a net surplus, or rent for the landlord or proprietor of the soil. But the labour of artificers does nothing more than replace the stock which employs there on (or which furnishes materials, tools and wages) and yield the ordinary profit upon that stock. It yields nothing equivalent to the rent of land. Neither does it add anything to the total value of the whole annual produce of the land and labour of the
country. The additional value given to those parts of the produce of land, which are wrought into manufactures, is counterbalanced by the value of those other parts of that produce, which are consumed by the manufacturers. It can therefore only be by saving or parsimony, not by the positive productiveness of their labour, that the classes of artificers can in any degree augment the revenue of the society.”

To this it has been answered,

I. “That inasmuch as it is acknowledged, that manufacturing labour reproduces a value equal to that which is expended or consumed in carrying it on, and continues in existence the original stock or capital employed, it ought, on that account alone, to escape being considered as wholly unproductive. That though it should be admitted, as alleged, that the consumption of the produce of the soil, by the classes of artificers or manufacturers, is exactly equal to the value added by their labour to the materials upon which it is exerted; yet it would not thence follow, that it added nothing to the revenue of the society, or to the aggregate value of the annual produce of its land and labour. If the consumption for any given period amounted to a given sum, and the increased value of the produce manufactured, in the same period, to a like sum, the total amount of the consumption and production during that period, would be equal to the two sums, and consequently double the value of the agricultural produce consumed. And though the increment of value produced by the classes of artificers should at no time exceed the value of the produce of the land consumed by them, yet there would be at every moment, in consequence of their labour, a greater value of goods in the market than would exist independent of it.

II. “That the position, that artificers can augment the revenue of a society, only by parsimony, is true in no other
sense, than in one, which is equally applicable to husbandmen or cultivators. It may be alike affirmed of all these classes, that the fund acquired by their labour and destined for their support, is not, in an ordinary way, more than equal to it. And hence it will follow, that augmentations of the wealth or capital of the community, (except in the instances of some extraordinary dexterity or skill) can only proceed, with respect to any of them, from the savings of the more thrifty and parsimonious.

III. “That the annual produce of the land and labour of a country can only be increased, in two ways — by some improvement in the productive powers of the useful labour, which actually exists within it, or by some increase in the quantity of such labour. That with regard to the first, the labour of artificers being capable of greater subdivision and simplicity of operation, than that of cultivators, it is susceptible, in a proportionably greater degree, of improvement in its productive powers, whether to be derived from an accession of skill, or from the application of ingenious machinery; in which particular, therefore, the labour employed in the culture of land can pretend to no advantage over that engaged in manufactures. That with regard to an augmentation of the quantity of useful labour, this, excluding adventitious circumstances, must depend essentially upon an increase of capital, which again must depend upon the savings made out of the revenues of those, who furnish or manage that, which is at any time employed, whether in agriculture, or in manufactures, or in any other way.”

But while the exclusive productiveness of agricultural labour has been thus denied and refuted, the superiority of its productiveness has been conceded without hesitation. As this concession involves a point of considerable magnitude, in relation to maxims of public administration, the grounds on which it rests are worthy of a distinct and particular examination.

One of the arguments made use of in support of the idea, may be pronounced both quaint and superficial. It amounts to this — that in the productions of the soil, nature co-operates with man; and that the effect of their joint labour must be greater than that of the labour of man alone.

This, however, is far from being -a necessary inference. It is very conceivable, that the labour of man alone laid out upon a work, requiring great skill and art to bring it to perfection, may be more productive, in value, than the labour of nature and man combined, when directed towards more simple operations and objects. And when it is recollected to what an extent the agency of nature, in the application of the mechanical powers, .is made auxiliary to the prosecution of manufactures, the suggestion which has been noticed, loses even the appearance of plausibility.

It might also be observed, with a contrary view, that the labour employed in agriculture is in a great measure periodical and occasional, depending on seasons, and liable to various and long intermissions; while that occupied in many manufactures is constant and regular, extending through the year, embracing in some instances, night as well as day. It is also probable, that there are among the cultivators of land, more examples of remissness, than among artificers. The farmer, from the peculiar fertility of his land, or some other favourable circumstance, may frequently obtain a livelihood, even with a considerable degree of carelessness in the mode of cultivation; but the artisan can with difficulty effect the same object, without exerting himself pretty equally with all those, who are engaged in the same pursuit. And if it may likewise be assumed as a fact, that manufactures open a wider field to exertions of ingenuity than agriculture, it would not be a strained conjecture, that the labour employed in the former, being at once more constant, more uniform, and more ingenious, than that which is employed in the latter, will be found at the same time more productive.

But it is not meant to lay stress on observations of this nature; they ought only to serve as a counterbalance to those of a similar complexion. Circumstances so vague and general, as well as so abstract, can afford little instruction in a matter of this kind.

Another, and that which seems to be the principal argument offered for the superior productiveness of agricultural labour, turns upon the allegation, that labour employed on manufactures yields nothing equivalent to the rent of land; or to that net surplus, as it is called, which accrues to the proprietor of the soil.

But this distinction, important as it has been deemed, appears rather verbal than substantial.

It is easily discernible, that what in the first instance is divided into two parts, under the denominations of the ordinary profit of the stock of the farmer, and rent to the landlord, is in the second instance united under the general appellation of the ordinary profit on the stock of the undertaker; and that this formal or verbal distribution constitutes the whole difference in the two cases. It seems to have been overlooked, that the land is itself a stock or capital, advanced or lent by its owner to the occupier or tenant, and that the rent he receives is only the ordinary profit of a certain stock in land, not managed by the proprietor himself, but by another to whom he lends or lets it, and who, on his part, advances a second capital to stock and improve the land, upon which he also receives the usual profit. The rent of the landlord and the profit of the farmer are therefore nothing more than the ordinary profits of two capitals belonging to two different persons, and united in the cultivation of a farm; as in the other case, the surplus which arises upon any manufactory, after replacing the expenses of carrying it on, answers to the ordinary profits of one or more capitals, engaged in the prosecution of such manufactory. It is said one or more capitals; because in fact, the same thing which is contemplated in the case of a farm, sometimes happens in that of a manufactory. There is one, who furnishes a part of the capital, or lends a part of the money, by which it is carried on; and another, who carries it on, with the addition of his own capital. Out of the surplus which remains, after defraying expenses, an interest is paid to the money-lender for the portion of the capital furnished by him, which exactly agrees with the rent paid to the landlord; and the residue of that surplus constitutes the profit of the undertaker or manufacturer, and agrees with what is denominated the ordinary profits on the stock of the farmer. Both together make the ordinary profits of two capitals employed in a manufactory; as, in the other case, the Tent of the landlord and the revenue of the farmer compose the ordinary profits of two capitals, employed in the cultivation of a farm.

The rent, therefore, accruing to the proprietor of the land, far from being a criterion of exclusive productiveness, as has been argued, is no criterion even of superior productiveness. The question must still be, whether the surplus, after defraying expenses, of given capital, employed fn the purchase and improvement of a piece of land, is greater or less, than that of a like capital employed in the prosecution of a manufactory; or whether the whole value produced from a given capital and a given quantity of labour, employed in one way, be greater or less than the whole value produced from an equal capital and an equal quantity of labour employed in the other way; or rather, perhaps, whether the business of agriculture or that of manufactures will yield the greatest product, according to a compound ratio of the quantity of the capital and the quantity of labour, which are employed in the one or in the other.

The solution of either of these questions is not easy. It involves numerous and complicated details, depending on an accurate knowledge of the objects to be compared. It is not known that the comparison has ever yet been made upon sufficient data properly ascertained and analysed. To be able to make it on the present occasion with satisfactory precision, would demand more previous inquiry and investigation, than there has been hitherto either leisure or opportunity to accomplish.

Some essays, however, have been made towards acquiring the requisite information; which have rather served to throw doubt upon, than to confirm, the hypothesis under examination. But it ought to be acknowledged, that they have been too little diversified, and are too imperfect to authorize a definitive conclusion either way; leading rather to probable conjecture than to certain deduction. They render it probable, that there are various branches of manufactures, in which a given capital will yield a greater total product, and a considerably greater net product, than an equal capital invested in the purchase and improvement of lands; and that there are also some branches, in which both the gross and the net produce will exceed that of agricultural industry; according to a compound ratio of capital and labour. But it is on this last point, that there appears to be the greatest room for doubt. It is far less difficult to infer generally, that the net produce of capital engaged in manufacturing enterprises is greater than that of capital engaged in agriculture.

In stating these results, the purchase and improvement of lands, under previous cultivation, are alone contemplated. The comparison is more in favour of agriculture, when it is made with reference to the settlement of new and waste lands; but an argument drawn from so temporary a circumstance could have no weight in determining the general question concerning the permanent relative productiveness of the two species of industry. How far it ought to influence the policy of the United States, on the score of particular situation, will be adverted to in another place.

The foregoing suggestions are not designed to inculcate an opinion that manufacturing industry is more productive than that of agriculture. They are intended rather to show that the reverse of this proposition is not ascertained; that the general arguments which are brought to establish it, are not satisfactory; and consequently that a supposition of the superior productiveness of tillage ought to be no obstacle to listening to any substantial inducements to the encouragement of manufactures, which may be otherwise perceived to exist, through an apprehension, that they may have a tendency to divert labour from a more to a less profitable employment.

It is extremely probable, that on a full and accurate development of the matter, on the ground of fact and calculation, it would be discovered that there is no material difference between the aggregate productiveness of the one, and of the other kind of industry; and that the propriety of the encouragements, which may in any case be proposed to be given to either, ought to be determined upon considerations irrelative to any comparison of that nature.

II. But without contending for the superior productiveness of manufacturing industry, it may conduce to a better judgment of the policy, which ought to be pursued respecting its encouragement, to contemplate the subject, under some additional aspects, tending not only to confirm the idea, that this kind of industry has been improperly represented as unproductive in itself; but to evince in addition, that the establishment and diffusion of manufactures have the effect of rendering the total mass of useful and productive labour, in a community, greater than it would otherwise be. In prosecuting this discussion, it may be necessary briefly to resume and review some of the topics which have been already touched. To affirm that the labour of the manufacturer is unproductive because he consumes as much of the produce of land, as he adds value to the raw materials which he manufactures, is not better founded, than it would be to affirm, that the labour of the farmer, which furnishes materials to the manufacturer, is unproductive, because he consumes an equal value of manufactured articles. Each furnishes a certain portion of the produce of his labour to the other; and each destroys a correspondent portion of the produce of the labour of the other. In the meantime the maintenance of two citizens, instead of one, is going on; the state has two members instead of one; and they together consume twice the value of what is produced from the land.

If instead of a farmer and artificer, there were a farmer only, he would be under the necessity of devoting a part of his labour to the fabrication of clothing and other articles, which he would procure of the artificer, in the case of there being such a person; and of course he would be able to devote less labour to the cultivation of his farm, and would draw from it a proportionably less product. The whole quantity of production, in this state of things, in provisions, raw materials and ' manufactures, would certainly not exceed in value the amount of what would be produced in provisions and raw materials only, if there were an artificer as well as a farmer.

Again — If there were both an artificer and a farmer, the latter would be left at liberty to pursue exclusively the cultivation of his farm. A greater quantity of provisions and raw materials would of course be produced, equal, at least, as has been already observed, to the whole amount of the provisions, raw materials, and manufactures, which would exist on a contrary supposition. The artificer, at the same time, would be going on in the production of manufactured commodities; to an amount sufficient not only to repay the farmer, in those commodities, for the provisions and materials which were procured from him, but to furnish the artificer himself with a supply of similar commodities for his own use. Thus, then, there would be two quantities or values in existence instead of one; and the revenue and consumption would be double in one case, what it would be in the other.

If, in place of both these suppositions, there were supposed to be two farmers and no artificer, each of whom applied a part of his labour to the culture of land, and another part to the fabrication of manufactures; in this case, the portion of the labour of both, bestowed upon land, would produce the same quantity of provisions and raw materials only, as would be produced by the entire sum of the labour of one applied in the same manner; and the portion of the labour of both bestowed upon manufactures would produce the same quantity of manufactures only, as would be produced by the entire sum of the labour of one applied in the same manner. Hence the produce of the labour of the two farmers would not be greater than the produce of the labour of the farmer and artificer; and hence it results that the labour of the artificer is as positively productive as that of the farmer, and as positively augments the revenue of the society. The labour of the artificer replaces io the farmer that portion of his labour with which he provides the materials of exchange with the artificer, and which he would Otherwise have been compelled to apply to manufactures; and while the artificer thus enables the farmer to enlarge his stock of agricultural industry, a portion of which he purchases for his own use, he also supplies himself with the manufactured articles of which he stands in need. He does still more — Besides this equivalent which .he gives for the portion of agricultural labour consumed by him, and this supply of manufactured commodities for his own consumption; he furnishes still a surplus, which compensates for the use of the capital advanced either by himself or some other person, for carrying on the business. This is the ordinary profit of the stock employed in the manufactory, and is, in every sense, as effective an addition to the income of the society as the rent of land.

The produce of the labour of the artificer, consequently, may be regarded as composed of three parts; one, by which the provisions for his subsistence and the materials for his work are purchased of the farmer; one by which he supplies himself with manufactured necessaries; and a third which constitutes the profit on the stock employed. The two last portions seem to have been overlooked in the system, which represents manufacturing industry as barren and unproductive.

In the course of the preceding illustrations, the products of equal quantities of the labour of the farmer and artificer have been treated as if equal to each other. But this is not to be understood as intending to assert any such precise equality. It is merely a manner of expression adopted for the sake of simplicity and perspicuity. Whether the value of the produce of the labour of the farmer be somewhat more or less than that of the artificer, is not material to the main scope of the argument, which hitherto has only aimed at showing that the one, as well as the other, occasions a positive augmentation of the total produce and revenue of the society.