FINANCES OF THE UNITED STATES. 



295 



tariff system of the country has contributed 

 largely to the general prosperity, and that this 

 general and continued prosperity is the only 

 basis on which even a wise financial policy 

 can rest. He, therefore, more fully expresses 

 his views thus : 



If, ten years since, it was the thought of any that 

 the only way to a successful contest with Europe was 

 in the reduction of the wages of labor to the Euro- 

 pean standard, that thought has disappeared prob- 

 ably in presence of the fact that high wages on this 

 side of the Atlantic have stimulated immigration until 

 there is a near approach to equality in the cost of 

 labor, and of the coexisting fact that the addition 

 thus made to the number of laborers has only aided 

 in the development of our resources without yield- 

 ing in any quarter an excess of products, or retarding 

 in any degree the prosperity of the laboring popula- 

 tion. This prosperity on their part is associated 

 with a higher and constantly improving intellectual 

 and social culture and condition. It being given 

 that an intelligent person has all the special knowl- 

 edge of an art or trade possessed by the most experi- 

 enced and best-trained operative, who, outside of 

 this special training and experience, is an ignorant 

 person, and equal advantages of capital and machin- 

 ery being given also, the intelligent person proceeds 

 to improve and simplify methods of production to 

 such an extent that an addition to his wages of even 

 100 per cent, represents but a small ^>art of the ad- 

 vantage gained. Yet the special training and knowl- 

 edge of the ignorant man is the basis of the improve- 

 ment made. 



This truth, considered first with reference to a sin- 

 gle American laborer, and then multiplied many 

 hundred thousand times, represents the advantages 

 of America over Europe and Asia in the contest for 

 final, peaceful supremacy in the affairs of the world. 

 Thus is America solving the industrial problem of 

 the ages by exacting cheap production from expen- 

 sive labor. 



He then proceeds to discuss the other 

 changes caused by the war, such as the issues 

 of United States notes and the notes of na- 

 tional banks. Thus he presents an argument 

 in favor of a paper currency, composed in part 

 of United States notes, and in part of national 

 bank notes. The aid which such a currency 

 would afford in resuming and maintaining spe- 

 cie payments is fully presented. He says : 



In the view I am now to take, I exclude the idea 

 that the Government will ever abandon the issue 

 of national bank notes, and undertake the issue of 

 United States notes in their place. The result of 

 such a policy may be foreseen. The people, de- 

 prived of the facilities for business afforded by banks, 

 would seek relief through State institutions, and 

 without much delay Congress would concede to 

 them the right to issue notes for circulation. This 

 concession would be followed by a surrender by the 

 General Government of all control over the paper cir- 

 culation of the country. The true policy will be found 

 in continuing the national banking system, with- 

 out, however, yielding to the claim for a material in- 

 crease of its issues in proportion to the volume of 

 paper in circulation. There are two effectual and 

 certain ways of placing the country in a condition 

 when specie and paper will possess the same com- 

 mercial value. By diminishing the amount of paper 

 in circulation the difference between the commercial 

 value of paper and coin will diminish, and by pursu- 

 ing this policy the difference will disappear alto- 

 gether. All legislation limited in its operation to 

 the paper issues of the banks and of the Govern- 

 ment, whether bearing interest or not, and which, 

 in its effects, shall tend to diminish the market value 



of coin, will be found, upon analysis, to contain a 

 plan for contracting the volume of paper currency ; 

 and all legislation so limited, which does not contain 

 such a plan, will prove ineffectual. Accepting this 

 proposition, and believing that the country is not 

 prepared to sustain the policy of contraction, it only 

 remains for me to consider the means by which the 

 value of our currency must be improved. The basis 

 of a policy of improvement must be found in a sturdy 

 refusal to add to the paper in circulation until it is 

 of the same value substantially as coin. This being 

 accepted as the settled purpose of the country, there 

 can be no permanent increase of the difference be- 

 tween paper and coin, and an opportunity will be 

 given for the influence of natural causes, tending, 

 upon the whole to a better financial condition. We 

 may count first among these the increase of popula- 

 tion and its distribution over new fields of business 

 and labor; secondly, in the South especially, the 

 number of persons having property, and using and 

 holding money, will increase ; next, we may antici- 

 pate a more general use of paper in Texas and the 

 Pacific States, by which, practically, for the rest of 

 the country, the volume of paper will be diminished, 

 and the quantity of coin increased two facts tending 

 to produce an equality of value. The influence of 

 these natural causes will be counteracted in some 

 degree by the .increasing facility for the transfer of 

 money from one point to another, and by the greater 

 use of bank checks and certificates of deposit. The 

 rap^id transit of merchandise, in bringing the period 

 of its consumption nearer to the time^f its produc- 

 tion, is an agency of a similar sort, giving to these 

 views their full weight. 



In conclusion, the Secretary anticipates a 

 financial improvement in the affairs of the 

 country of a permanent nature, and thus pre- 

 sents the reasons upon which such anticipa- 

 tions are founded. He says : 



I am prepared to say that the experience of the last 

 three years coincides with the best judgment I can 

 form, and warrants the opinion that, under the in- 

 fluence of existing natural causes, our financial con- 

 dition will gradually improve. During the last fis- 

 cal year there were several circumstances of unusual 

 character tending to counteract the natural course of 

 affairs. Our exports _of cotton fell off $37,000,000, 

 and there were excessive imports of wool, tea, coffee,, 

 and sugar. The stock^ of wool in warehouse on the 

 80th of June was sufficient for six months' consump- 

 tion ; of sugar for four and a half months, of coffee 

 for five months, and of tea for twelve months. In 

 the ordinary course of trade the importation of these 

 articles will be small during the current year, with 

 consequent favorable effect upon the balance be- 

 tween this and other countries. This anticipation 

 of the wants of the country, in connection with the 

 decrease of our exports, augmented the balance f 

 trade, created an active demand for coin, and ad- 

 vanced the price. Notwithstanding these adverse 

 influences, gold has averaged, substantially, the 

 same premium from January 1st to November 1st of; 

 the present year as for the corresponding period of 

 1871. Not doubting that natural causes will in time 

 produce the result sought, it is yet advisable to bring 

 the power of the Government in aid of the move,- 

 ment as far as practicable. 



The revival of our foreign commerce is one instru- 

 mentality, and perhaps the most efneient one of 

 all. If the annual earnings of American vessels wer<& 

 $80,000,000 instead of $30,000,000, the difference in 

 the amount of exchange available abroad would meet 

 a large part of the adverse balance in ordinary years. 

 The experience of Europe tends to show that the 

 ability of a country to maintain specie payments is 

 due largely to the condition of its foreign trade. 

 Next, every measure which increases or improves 

 the channels of transportation between the seaboard 



