1859.] Advantages to Australia of the Gold Discoveries, their dealings Australia and California are gainers-gainers directly in proportion to the reduced cost of their gold, modified by the rise, so far as it has taken place, in foreign prices. A given exertion of labour enables them to command, not only more gold, but more of every other thing which foreign countries can supply. It is thus exclusively in the foreigh branch of their trade that the advantage of their cheap gold resides it is only so far as they part with their money that they derive from it any benefit; and yet, so completely in political economy is the ostensive at variance with the real, and so inveterate, consequently, are the prejudices of mere experience, that the cry of • Protection' has been heard even in Victoria. It might, perhaps, shake the Victorian Protectionist's faith in his doctrine, if he would reflect that his most effectual protection against the foreigner would be the exhaustion of his own gold-fields. Such have been the results of the discovery of gold on the industry, trade, and general interests of Australia. Let us now observe the light which these conclusions throw on the more general questions connected with this occurrence. And, in the first place, as to the extent of the prospective depreciation. We have seen that, in the disturbance in the value of gold, or, what comes to the same thing, in the gold prices of commodities, which followed the discoveries, there was a point about which the fluctuations moved, and beyond which the advance or decline did not permanently pass. Prices were in the first instance forced upwards through an increased demand for commodities, the increase of demand led to an increase of supply, and this to a reaction in prices towards their former level. In the case of imported commodities this reaction was carried to the full extent of the previous rise, but in domestic products the decline was arrested at a higher point, the further fall being prevented by the check given to production through the high rate of money wages. The natural level of Australian prices, and therefore the value of gold in See on this point Senior's Essay 275 Australia, was thus determined by the rate of wages measured in gold, and this, as we have seen, was regulated by average earnings on the gold-fields. The rate of gold earnings, or, as this is in technical language expressed, the cost of gold,' is therefore the circumstance which, in the final resort, regulates the value of the metal, and sets the limit beyond which depreciation cannot permanently pass. Now we have seen that in Australia gold wages have, in consequence of the gold discoveries, risen in rather more than a twofold proportion, and since, whether gold is raised from mines or imported in exchange for commodities, gold wages, or the return to labour in gold, will always represent the cost of the metal,* it follows that the cost of gold has been reduced in Australia by the gold discoveries to the extent of about fifty per cent. Fifty per cent., therefore, gives the maximum beyond which (on the supposition that no more productive mines are discovered) the general value of gold cannot permanently fall. Further, it has appeared that, although a reduction in the cost of gold tends to cause a corresponding fall in its value, the actual realization of this result depends upon the possibility of so enlarging the circulation as to admit of this fall. Thus we have seen that the price of gold in Australia fell, pending the enlargement of the currency by the importation of sovereigns from England, which is in other words to say that the value of the currency was, during this period, maintained above its natural cost level. This disconnexion of value from cost was indeed in Australia of brief continuance, because, the local circulation being small, it required but a short time to double, quadruple, or otherwise augment it as the occasion might render necessary. But throughout the world at large, the process of augmentation, owing to the vast dimensions of its currencies, is one necessarily of slow accomplishment, and pending its fulfilment, the value of gold is of necessity maintained above its natural level. It is this which at present sustains the value On the Cost of Obtaining Money. of gold, notwithstanding the reduction in its cost. Whether that value will ever be lowered in the same proportion, whether gold will ever fall throughout the world at large as it has fallen in the gold countries, depends upon whether the conditions which have lowered its value in them can be generally satisfiedthat is to say, depends upon whether the increased supply which such a fall would render necessary can be obtained at the present cost. Into the further discussion of this question I do not now enter, the object of this paper being to point out the principal issues which the general problem involves, not to attempt its solution. But from the facts which have been stated, we are justified in concluding that, so long as the present want of conformity between the cost and value of gold continues, so long a constant premium will exist on its production, and so long our supply of gold will continue to increase. But secondly, let us consider what light our conclusions respecting the gold countries throw upon a question which has been much discussed-as to the effect of this movement on the real wealth, the substantial well-being, of the world. That the gold discoveries have added to the real wealth of the inhabitants of Australia and California is indeed exceedingly apparent; but what has been their effect upon the interests of other nations? Has the cheapness of Australian or Californian gold added equally to the effectiveness of their industry, and extended their command over the comforts and enjoyments of life? The answer of some writers to this question has been very strongly in the affirmative; but, with the light which we obtain from the previous discussion, we may perhaps see grounds for arriving at a different conclusion. We have seen that the gain of Australia and California from their gold-fields is confined to that portion of their trade which they carry on with foreign countries; that it is only so far as they part with their gold that they derive from it any benefit. Now the world, as a whole, has no foreign trade; it has no means of exchanging for the pro ductions of other planets the gold which it produces; from which it seems to follow that, regarded as a single community, the world is incapable of realizing those conditions on which the benefit to be derived from cheap money depends. The conclusion to which this consideration points is, that the operation of the new gold will be confined to causing a new distribution of real wealth in the world without affecting its aggregate amount; and that consequently the gain of the gold countries must be reaped at the expense of other nations. This conclusion is no doubt much at variance with prevailing notions, and with the deep-seated prejudices of the 'mercantile system;' and will therefore not be easily admitted. Nevertheless, if we reflect on the character of the commerce which has arisen out of these discoveries, we may see reason for accepting its truth. The trade between the gold countries and the rest of the world is one in which consumable commodities on one side are exchanged against money, or the materials of money, on the other. A large portion of the industry of the world is, through the medium of this trade, employed in ministering to the rea! wants the appetites, tastes, and other human needs-of Australia and California. Let us inquire what is the want to which these countries minister in return. It will be said the want of more gold-the want of an enlarged circulating medium. True; but what is the foundation of this want? and in what way does its satisfaction promote human happiness? Human industry is not rendered more efficient, nor human happiness more full, by the use of two coins instead of one. Why, therefore, may not the business of production and exchange be carried on upon the former terms? I apprehend that the correct answer to this question is that gold-the great medium of exchange and universal equivalent having been cheapened in Australia and California, these countries of necessity possess an exceptional advantage in their commercial dealings with the rest of the world, until the gold prices of commodities in other countries are proportionally raised, and that to effect 1859.] Industrial Development of the Gold Countries. this object-to raise the prices of their productions in proportion to the diminished cost of gold-the quantity of their gold circulation must be increased. The nations of the world have thus by the gold discoveries been placed under the necessity of enlarging their cur rencies; and this can only be accomplished by parting with their productions in exchange for the required supply. Hence the character of the traffic which we are now witnessing-a traffic in which consumable goods are exchanged for money, and real for nominal wealth. It is therefore no natural want to which this one-sided trade is subservient-no desire, the satisfaction of which adds an iota to human enjoyment: it is merely an artificial requirement-a disagreeable and unprofitable necessity, originating in the gold discoveries, and satisfied at the expense of commercial nations. 6 I am aware indeed that there are writers who regard gold not simply as a convenient medium for the exchange of commodities independently produced, but as in itself a source of productive energy, as the motive power of all industry and commerce, and who accordingly consider an addition to the quantity of money to be the same thing as an addition to the fixed capital of a country't as equivalent in its effects upon industry to 'improved harbours, roads, and manufactories.' According to such views the influence of the gold discoveries must be universally beneficial,beneficial, not merely in relation to the countries which produce the cheap money, but in a still more eminent degree in relation to those which permanently retain it. But in spite of the plausibilities of the mercantile theory, common sense, no less than economic science, will continue to ask how the world is enriched by parting with its real wealth ?-how the well-being of Europe and Asia is promoted by parting with the materials of well-being, receiving in return not materials of well-being-not augmented supplies of wool and tallow, 277 corn and provisions; not those com- So singular and abnormal indeed • Seyd's California and its Resources, p. 5. + Tooke's History of Prices, vol. vi. p. 46. Ibid. money. In the gold countries, as we have seen, these causes are the productiveness of industry in raising gold; and therefore, so long as the present productiveness of the goldfields is maintained, the rate of wages in Australia and California cannot fall permanently below its present level. How long this rate of productiveness is likely to last, is a question the discussion of which would carry me entirely beyond the necessary limits of this paper, but on the supposition of its being maintained, we can have no dif ficulty in discovering the condition. on which the industrial development of the gold countries depends. That condition is briefly thisthat prices throughout the world should rise in proportion as the cost of gold in the gold countries has fallen. So long as the present pecuniary rates of the gold countries are exceptional, so long Australian and Californian producers (with the single exception of gold miners), will labour under a disadvantage in their competition with foreigners; and so long their non-monetary exports to foreign countries will be limited to that small class of commodities, in which their advantage over other countries is as great as it is in their command of gold. But with the advance of gold-prices in foreign markets, this class of commodities will be extended; it will become more profitable to raise and export other things; it will become less profitable to raise and export money; and a larger share of the whole labour and capital of the country will consequently be turned to the former purposes. We may illustrate the principle by an actual case. For several years subsequent to the gold discoveries, timber was largely imported into Australia from the Baltic; and I perceive that it is still upon the list of her imports. But during all this time there have been within a few miles of the localities where this Baltic timber has been used, extensive forests of gum-trees, inviting the axe of the pioneer, capable of affording timber perfectly suited to the purposes for which timber in the mining districts is principally required. Indeed this gum-tree timber has been freely employed where it could be obtained close to the spot where it was wanted, but rather than go fifty miles to cut it, the Australian workman prefers to import it from the other side of the globe. The explanation of this conduct is the low comparative cost of Australian gold. A day's labour employed in crushing quartz or in digging auriferous clay, enables the Australian to obtain more timber than the same labour employed in felling trees. Every rise in prices, however, in foreign markets, will diminish the cost of gold to the foreigner, and thus lessen the comparative advantage of gold digging: the domestic production will gradu ally gain upon the foreign trade, and the area over which timbercutting is profitable will be extended. This process has already taken place to some extent, partly through the rise in the cost of gold, with the exhaustion of some of the richer deposits, partly through the advance in the price of timber in foreign markets; and it will doubtless continue. It is obvious that the same principle will operate equally in the case of every commodity which the gold countries are capable of producing. With every rise in gold prices throughout the world, gold will become a less profitable remittance, other commodities will become more profitable, and this will continue until either prices throughout the world rise in proportion to the reduction in the cost of gold-that is to say, to double their present amount, or until, through the exhaustion of the present gold-fields, gold can no longer be produced at its present cost. It will not be till one or other of these contingencies happens, that the industrial development of the gold countries can be fully accomplished, or that the world can derive from their commerce that contribution to its real well-being and happiness, which their great and varied resources render them so competent to yield. JOHN E. CAIRNES. See Senior's Essay On the Cost of Obtaining Money. HOLMBY HOUSE: A Tale of Old Northamptonshire. BY G. J. WHYTE MELVILLE, AUTHOR OF 'DIGBY GRAND,' 'THE INTERPRETER,' ETC. CHAPTER XXVI. THE WHEEL GOES ROUND.' THE HE cultivated enclosures round Naseby village have been reaped and sown once and again. The grass on the wide expanse of Naseby-field, so poached and trodden down scarce two short years ago, has yielded one heavy crop, and promises again to enrich the peasant with its luxurious produce. In certain spots the sheep refuse to feed, so rank and coarse grows the herbage where the earth has been fattened with the blood of her children. The shepherd tending his flocks, or the herd watching his drowsy cattle, scarce stoops to notice sword or helmet, pike-head or musket-barrel, stained with rust, and protruding from the surface of the moor, so thickly are they strewn, these implements of slaughter that flashed bravely in the summer sun when he shone on the great battle only the year before last. Nay, there are ghastlier tokens than these of man's goodly handiwork and the devil's high festival. Bones of horse and rider still lie bleaching on the slopes, and skulls of the half-buried combatants grin at the labourer as he passes, whistling cheerfully, to his work. He heeds them not. Why should he? What though yon mouldering sphere of bone, with its broad white teeth and vacant sockets, was once the type of manly beauty and divine intellect, was once so fair and gallant, with its love-locks flaunting under its burnished head-piece, was once tended so carefully, and prized so highly, and kissed so fondly by lips that are even now perhaps writhing in their misery at the thought of the loved one lying where he fell on Naseby-fieldwhy should the labourer care? He has his daily toil to urge, his daily pittance to receive, his daily wants to provide for. He turns the skull over with coarse raillery and a kick from his heavy boot. A peasant's jest is the epitaph of him who died with his blood a-flame for victory and renown, his heart beating high with the noblest impulses of chivalry and romance. What matter? Were he any better lapped in lead, under a marble monument, side by side with his knightly ancestors in the old church at home, than lying here under the wide changing sky, to rot, a nameless skeleton Naseby-field? on Time takes no note of human life and worldly changes. The old mower works steadily on, stroke by stroke, and furrow by furrow; when he reaches the end of the ridge he pauses not to wipe the toil-drops from his brow, but turns and applies him to his task unchecked and unwearied, sparing the shrinking wild flower no more than the tall rank weed, and sweeping down all indiscriminately, level with the short close sward. And yet Destroyer though he be, he is the great Restorer too-at least in the natural world. Where the storm of civil war has passed over merry England, sullying many a fair scene and blighting many a happy homestead, the lull of even one short twelvemonth has done much to bring back fertility to the meadow and comfort to the hearth. Spring has thrown her fair green mantle over the horrors of many a battle-field; and the daily recurring hopes and fears of Life have choked the pangs of sorrow, and dried the tears of many a weeping mourner. All but the few desolate ones that refuse to be comforted by Time, trusting, not unwisely, in the sure consolation of Eternity. The months that have passed over since the battle of Naseby have indeed been pregnant with great events; but ever since that fatal struggle the Royal Cause has been hastening step by step to its final downfall. The flame has |