TOPICS OF THE DAY.

A SECOND INSPECTION OF MR. SENIOR'S GOLDEN TOOTH.

OUR critical examination of " Mr. SENIOR'S golden tooth" has drawn upon us an angry shout from some persons, who dislike re- linquishing the deduction which his erroneous statement was in- tended to support. A correspondent of our own writes as follows.

"TO TILE EDITOR OF THE SPECTATOR.

•• Ealing, 24th March 1814.

" Sir—For the first time, after many years' perusal of your paper, I regret to find you taking advantage of an incorrect phrase to cause a sneer at an ad- versary. In your notice of Mr. Senior's tooth,' you accuse him of the ab- surdity of expecting the fixed capital to be replaced every year : a very little care would have shown you, that when he says ' 100,0001. out of the 115,000L simply replace the capital,' he alluded to the floating capital of 20,000/. ; which being turned over ' between five or six times in a year, gives the amount 115,000/, from which he argued. What he should have said was, 100,0001. re- places money paid for material and wages-5,0001. wear and tear of property- 10,000/. profit. " I am, Sir. your constant reader, it vim. L.,.

There was no " adversary " in the case. We will presently show our correspondent that there is more in the mistake than an " incorrect phrase"; the whole argument really resting on that " phrase," which is essential to what was to be proved.

The Morning Chronicle—who, having more at stake, for he adopted Mr. SENIOR'S argument, and challenged proof of a weak point in it—is angrier, and replies, on Monday, in a paper headed. " Political Economy of the Spectator," with some explanation. " The error of the Spectator—and we shall show that he has committed a gigantic error—must have arisen either from his not having read Mr. Senior's otters, or from his not having understood them. Mr. Senior states that he found the common computation among cotton-manufacturers to be, that the fixed capital bears to the circulating capital the proportion of four to one ; that the whole capital is turned over (or, in other words, that goods are produced and sold equal in value to the whole capital and the manufacturer's profit) in about a year—in favourable times in rather less time, in unfavourable ones in rather more ; that the gross profit is about 15 per cent, from which 5 per cent must be set apart as a sinking-fund to keep up the fixed capital. From these data, it logically follows, that if the whole capital be 100,000!., (80.0001. fixed and 20,000/. circulating,) and goods costing 100,000/. and selling for 115,0001. are produced and sold each year, the circulating capital must be turned over, that is to say, expended and reproduced, five times every year—to speak accurately, once in every 73 days, a period which Mr. Senior designates as 'rather more than two months.' In real life, this process of conversion and reconversion from raw material, wear of fixed capital, and wages, into finished goods, from finished goods into money, and from money into raw material, replacing of fixed capital and wages, goes on from week to week, or rather from day to day. Every week the manufacturer pays wages ; every day he sells, purchases, and repairs. But, to simplify the illustration, we will suppose all the manufacturer's sales and repairs to be made on the expiration of every successive period of 73 days. The manufacturer, then, who on the 1st of January started with 10,000/. in money and 10,0001. in raw material, will, by the 14th of March, the day of the expiration of the first period of 73 days have converted, by the application of 10,0001. in wages, his raw material into finished goods, which on the 15th of March he sells for 23,0001. Of this 23,000/. be employs 1,0001. in repairing his machinery, takes 2,000/. as his own profit, and employs the remaining 20,000/. in the purchase of raw material and payment of wages during the next 73 days. On the 27th of May he is again in precisely the same situation he was in on the 14th of March. He has goods which have cost him 20,0001., which he sells for 23,000/. ; and he can again take out of that sum 2,000/. as net profit for himself. On the following 8th of August he has again entitled him- self to a net profit of 2,0001., and again on the 20th of October; and ultimately, on the 1st of January following, he finds himself still possessed of his 80,000L worth of fixed capital, (on the repairs of which 5,000/. has been expended during the year,) and of 20,000/. circulating capital, and of that portion, if any, of his 10,0001. of net profit which he has not expended during the year on his own maintenance or pleasure. "Now, let us apply these data to Lord Ashley's proposal. It is assumed— and this is not an arbitrary assumption, but a necessary inference from the i general computation of those whose whole lives are spent in ascertaining the fatesthat on a capital of 100,000/. each period of 73 days produces a gross produce worth 23,0001., obtained by working twenty-three half-hours a day for six days every week: take away, as Lord Ashley proposes to do, three out of these twenty-three half-hours, then, all other things remaining the same, the produce will be 3.23 less, or only worth 20,0001. instead of 23,0031.—all profit is destroyed. The millowner has worked for seventy-three days, and finds himself precisely as he was when he set out, except so far as his fixed capital has deteriorated. The next period of seventy-three days will produce precisely similar results ; and at the end of the year he will find that, at the cost of 100,000!., k'that is to say, 20,000/. turned over five times,) he has produced goods which have sold for 100,000/., and that all his labour and all the dete- rioration of his fixed capital have been endured for nothing. They have not given to him even the wages of one of his own piecera. " The Spectator's error—and we repeat that it is a gigantic one—consists in his supposing that the 115,000/. worth of finished goods are produced by the single expenditure, once for all, of one sum of 21,0001.; in which case, the capitalist, selling for 115,000!. what cost him 21,0001., would certainly get a profit which would admit of great reduction : the real fact being, that the goods cost 21,000!. five times repeated, or 105,0001., instead of 21,0001.; leaving a profit of 101. per cent, which Lord Ashley is striving to convert into a loss of 51. per cent. " If our readers are not tired, we will request them to test the Spectator's theory by a more familiar example. Suppose a tavern-keeper to have a fixed capital of 10,000/. invested in his house, furniture, plate, glass, &c., requiring 30/. a week to keep it up, and a circulating capital of 950/. in money, and to be able to turn that circulating capital every week. Suppose his 9501. to supply dinners which sell for 1,0001. A' the end of the first week he has 1,000t.; of which 953/. must be retained to provide dinners during the next week, 301. to keep up his fixed capital, and 20/., according to Mr. Senior's computation, is his net profit ; which, at the end of the year, amounts to 1,040!., or about 10L per cent on his whole capital. But, according to the Spectator's computation, his profit at the end of the year would be above 50.1)001.; since it would consist of the whole yearly produce, minus the first 1,0001., and the 301. a week de- voted to repairs. And this is the sort of reasoning which is to persuade us to peril the whole commercial and manufacturing prosperity of Great Britain, and with that prosperity her wealth, her happiness, her internal peace, and perhaps her national independence." The Standard of Monday having, in the teeth of this elaborate tal just five times in the year : with improved railways and steam- says is turned once in the year ; he then works a different propo- navigation, or any extraordinary impulse to trade, he might turn it sition with the aggregate 100,0001. circulating capital, from which he oftener. It is also an accident that the fixed capital happens to bear deduces certain profits ; then, reverting to the idea of the original to the circulating capital the ratio of 4 to 1 : manufacturers find 100,0001. capital, he draws his inference from the amount of profit that machinery, &c. worth a certain sum enables them to employ a derived from the aggregate capital and the unqualified fixed quarter of that sum as circulating capital, in wages of people attend- charge of the original capital. We cannot accept the explanation sag the machinery and in raw material used up by it ; but that acci- of the Chronicle, because the practical inference, for which the dental proportion could not have existed when machinery was less whole elaboration was got up, depends upon the erroneous part of efficient; it must cease the moment any improvement should make the original statement : expunge the error, and the inference is un- machinery more efficient. Improvements in machine-making supported. A strong test of the miscalculation is, that if the doubling the power of the machine at the same price (and who can 80,0001. of fixed capital had to be replaced, the calculation and say what is possible ?) would go so far to increase the proportion of the inference would be almost right. By a less elaborate process, circulating capital that might be employed as compared with fixed another correspondent has come to precisely the same conclusion capital. It may be very well to state for our information the pre- as our own ; and his compact statement of the case forms a very sent proportion between the two kinds of capital, and to state the good summing up— gross amount of fixed capital in order to find its yearly value; but " Assuming that the value of a manufactured article is always greater than the gross amount of fixed capital is no item in a yearly account of ex- the sum expended for raw materials and wages, and that, were there. no fixed charges—that is to say, none that did nut result from and bear a direct pro- penditure and income. That so many successive reconversions portion to the quantity of goods manufactured—there would be a profit on the of the circulating capital amount to the sum of the fixed and cir- production of any quantity, however small ; there would be a profit on work cnlating capital, is another accident, which has no sort of force ing one hour, as well as twenty -four. to Mr. SENIOR'S case, before deducting in an account of the kind : it may be " pretty to observe," the fixed charge of 5,0001. per annum, the annual profit from the mill would be but it signifies nothing whatever to the matter in hand. 11.50,m000eat.c.hpalmdorbIetihne daily labour hit: of 23hoa halt-hours; bouorfs ihtehsee proportion derived In fact, the Chronicle virtually disclaims the gross amount of thus yield a gross profit of 13,0401. per work from which deduct the fixed fixed capital ; and the only items retained in the account are the charge 5,0001., and there would remain a net profit of 8,0401." yearly value of the fixed capital, (or what it costs the manufacturer The inadvertence in the original statement might have been to maintain it,) the circulating capital, and profit. This is quite readily confessed, and as readily pardoned. But the blunder is legitimate : the gross amount of fixed capital has been expunged ostentatiously exhibited as the only truth : Mr. MILNER GIBSON * As the reader may find it convenient to refer to Mr. SENIOR'S statement, vaunts it as " indisputable "; the Chronicle as " irrefmgable " : we reprint it here, as copied verbatim from the Morning Chronicle of last Friday. defence of it is furnished to the Chronicle—perhaps from " the

" Under the present law, no mill in which persons under eighteen years of best authority," as the saying is ; that defence is repeated next day age are employed (and, therefore, scarcely any mill at all) can be worked more than eleven-and-a-half hours a day, that is twelve hours for five days in a _Examiner had paraded

week and nine on Saturday. The following analysis will show, that in a mill &mos himself openly so worked, the whole net profit is derived from the last hour. I will suppose a appears in the field, with a reprint of his pamphlet, and an appen- manufacturer of 100,000L-80,000/. in his mill and machinery, and 20,000/. in dix adopting the defence from the Chronicle. Fathers sometimes raw material and wages. The annual return of that mill, supposing the capi- adopt their own children when they do not know how otherwise to tal to be turned once a year, and gross profits to be 15 per cent, ought to

be

at- goods worth 115,0001., produced by the constant conversion and reconversion take them home. You might suppose, from the importance at- of the 20,0001. circulating capital from money into goods and from goods into lathed to it, that the whole case ot the manufacturers rests upon money, in periods of rather more than two months. Of this 115,0001., each of this statement, utterly fallacious and inconsistent with itself as the 28 half-hours of work produces 5.115ths, or 1-23d. Of these 23 23ds it is. For our part, we take it to prove nothing—not even to (constituting the whole 115,000/0 20, that is to say, 100,0001. out of the prove that the manufacturers have no case. But when we see false 115,000/., simply replace the capital; 1-23d (or 5,0001. out of the 115,0001.) makes up for the deterioration of the mill and machinery; the remaining evidence produced as " irrefragable " we believe that the cause of 2-23ds, the last two of the twenty-three half-hours of every day, produce the truth is served by checking the circulation of such false coin, by net profit of 10 per cent. If, therefore, (prices remaining the same,) the whomsoever issued. Mr. SENIOR and his friends, on the other factory could be kept at work 13 hours instead of 111, by an addition of about hand, seem to think that something is gained by sticking to a de- 2,600/. to the circulating capital, the net profit would be more than doubled. tected fallacy. They are like children who have more fear of COD.. On the other hand, if the hours of working were reduced by one hour per day, fessing to the doctor the disease that is in them, than of the die- (prices remaining the same,) net profit would be destroyed ; if they were re- duced hy an hour-and-a-half, even gross profit would be destroyed. The or- ease itself, and fancy that they have achieved a great exploit by =elating capital would be replaced, but there would be no fund to compensate hardy denial of the malady to be cured. "And this is the sort of tfie progressive deterioration of the fixed capital." reasoning," &c. exposition, adopted the Spectator's view, the Chronicle repeated on from the accost:ft by the Cfronick. "'Now, let tie. apply these Tuesday the argument cued above, verbatim, with the omission of data to Lord Ashley's proposal." Lord AtsszEr proposes to the tavern illustration; and yesterday it was at the subject again, abridge time by one-sixth, or, still to follow the Chronicle's figures, combating a correspondent of its own, who found another flaw in to take away three out of the twenty-three half-hours. In that She case—that Mr. SENIOR'S figures of 1837 are no longer applicable case, "prices remaining the same," the manufacturer would he un- til 1844. able to do so much business—would not be able either to In recurring to a topic which has thus been kept before the public, work up so much raw material or to employ his people so long : in so many forms, throughout the week, let us first observe, that in the expenditure of raw material and wages would be proportion- our former brief paper we put forth no general argument at all : our ately less—in round numbers, 17,392L five times a year. " Prices remarks were strictly limited to the analysis of an erroneous ac- remaining the same," he would realize, after replacing his floating count, and did not go beyond that account to establish anything capital, a gross profit of 15 per cent, or 2,608/. As the machinery on one side or the other : no question of political economy came in would be less worked, wear and tear would be less ; but, supposing issue ; for it appears that the Morning Chronicle does not make it that charge to be absolutely fixed, the manufacturer would devote a question whether or not it is necessary to " replace" fixed capital 1,0001. under that bead to maintain his fixed capital; leaving of within the year, and there was no other point that could be called net profit 1,6081. for each period of 73 days, or 8,0401. in the a question of political economy. The real question was one of the year. The direct loss occasioned to him by the curtailment of correctness of an account or estimate. Further, though we believe time, " prices remaining the same," would be the difference between we must have read Mr. Samoa's pamphlet at the time of its pub- 10,0001. and 8,0401. We have allowed the yearly charge on account ffcation, some seven years ago, we cannot plead that we remembered of fixed capital to remain the same : if so, the mill working only the context of the much-quoted passage. We took the passage five-sixths of the time, while the fixed charge remained the same, from the Parliamentary reports and newspaper writings of the one-sixth of that expenditure would be absolutely lost—namely, week, in the sense which it appeared to us to bear ; and if we mis- 8331.: that small sum represents the total loss on account of the construed it, the charge of dulness would be more just than that of fixed capital; but it is allowed for already in the reduced profit. misrepresentation, and it would also be less repugnant to our feeling. The clear result is, that, making every allowance implied in the But let us see in what position the explanation of the Chronicle account as explained by the Chronicle, net profit is reduced from places the matter. It now appears that the whole of the fixed 10 to 8 per cent, but not reduced to nil, or " destroyed," as Mr. capital is not to be replaced ; nor does Mr. SENIOR mean, although SENIOR says. he uses the words, that " the capital "—previously explained to But his statement is adduced expressly to prove that the loss Consist of 80,0001. fixed capital and 20,0001. circulating capital—is of an hour in time would " destroy ' net profit, the loss of an I' turned once a year "; but that only the " circulating or floating hour and a half entail a loss of 5 per cent ; and to that deduction

capital is turned, and it is turned five times over.* the Chronicle sticks. That deduction also remains, not to be ex- There is some confusion between sequence and accumulation in plained away, in Mr. SENIOR'S calculation. It rests solely on the using the figures 100,0001. said to " replace the capital"; for, we notion of some such vast proportion of fixed charge, that the greater

are told, the capital meant is only the circulating capital, which was, part of the manufacturer's time is employed in making good that and is to the end of the chapter, only 20,0001. In the first of the great fixed charge before profit can accrue. The arithmetician was

five periods into which the year is divided, the manufacturer betrayed into the error by the sound of "fixed capital" which spends 20,0001. and realizes 23,0001. : that is, he recovers the escaped him, and a coincidence of figures. In fact, the passage in 20,0001. plus 3,0001.; 1,0001. being devoted to meet wear and tear Mr. SENIOR'S letter comprises two distinct and incompatible ideas,

of the machinery, &c. in which fixed capital is invested, and 2,0001. inextricably confused ; and a careful examination ot the passage being appropriated as profit : his circulating capital is the same as will enable the reader to detect the crossing of the two ideas, when he started, 20,0001. In the next period be respends the same though there is no distinction in the terms : indeed, had the two 20,0001., and reaps the similar surplus of 3,0001., devoted as before. ideas been made distinct, the writer himself would have paused, and At the end of the year, after various reconversions of his circulat- the mistake would never have been allowed to go forth. '1 he original ing capital, he retains the 20,0001., he has devoted 5,0001. of capital, composed of 80,0001. fixed and 20,0001. circulating capital, the money gained to the maintenance unimpaired of his fixed capi- happens to make 100,0001. ; the aggregate sum of the circulating

in the journalist's "leading article"; the the identical quotation ; and finally, Mr.