In the year 1800, dollars, in order to effect distant exchanges, had to be transported by mounted messengers, snail-coaches or sailing vessels; now they are transmitted by railways, steamboats and telegraphs; formerly, even as to nearby exchanges, they were sent by hand; now they are pad by checks. For the most part only purchases over the counter are now settled with money. Another and opposite con sideration must also be held in view. Formerly every was obliged to keep a stock of provisions, raiment, arms and implements; and the valuation of these commodities helped to swell the returns of wealth made to the as sessors. Such is now the superior organization of industry and trade that similar precautions are no longer necessary. The official returns now include little beyond real properties, their improvements and the stocks of producers, manufacturers and merchants; in short, taxable commodities. Any comparison of per capita wealth in dollars at one time with another which omits these considerations must, there fore, be fallacious.
But while the average individual wealth in tangible things may not have greatly increased, another sort of wealth has taken its place, which, though it cannot be computed in money, has enormously multiplied the national wealth and diffused it among individuals. This is the wealth of education, knowledge and skill Relation of Capital to The earlier cadastres of the United States embrace con tinual accessions of territory, either by con quest from the Indians or purchase from France and Spain. For this and other reasons the summations of wealth do not afford a re liable guide to the average annual rate of profit in trade or investment. The doubling of na tional wealth from 1820 to 1840 is equal to about 3YS per cent compounded annually. The doubling from 1850 to 1860 is influenced by the accession of California and other territory in consequence of the war with Mexico; while that from 1860 to 1870 is complicated by the Civil War and an inflated currency. From 1870 to 1890 the returns indicate aprofit on capital of about 4 per cent compounded annually; from IWO to 1900 about 3v, per cent ; and from 1890 to 1910 again about 35,/, per cent, compounded annually. Even before the frequent repetition of 3Vi per cent annual net profit at all normal periods, its identity with the net rate of in terest for capital was gleaned from an analysis of the market rate of interest made in 18W1. It is now widely recognized by economists, and as such it confers an additional value on the census returns and affords a useful guide to merchants, bankers and investors.
Relation of Capital to the Rate of Interest. — Temporarily and in any given market the of interest depends upon the local supply of money and credit; but in the long run and throughout any extensive country it depends upon the profits of production an agriculture. fishene,. mining, manufactures and the means of transportation; while these again depend upon the rate at which the animals and plants increase and the minerals are produced under the hand of man. Other things being equal, were this rate to double, the net rate of in terest (that is, the rate, divested of risk, taxes and the cost of superintending loans of capital) would tend to double; and contrariwise, were the rate of growth of the means of subsistence to diminish one-half, the rate of interest would tend to diminish one-half; for that would be all that capital could earn when invested in production. ('The Science of Money,' Chap. XIII).
Such being the case, it follows that the rate at which in the long run the capital of a nation increases (leaving out of view adventitious gains by discovery, invention or conquest, or, on the other hand, losses by war or other na tional calamity) affords a reliable indication of the prevailing rate of interest. Indeed, when
stripped of all adventitious circumstances, the two things are seen to be essentially the same thing; the net rate of interest is itself the measure of national growth and vice-versa, the rate of national growth marks the net rate of interest.
International When the growth of capital in the United States is com pared with that in other leading countries, the practical results of a liberal constitution, a common school system and the popular diffu sion of education will be readily recognized. At the beginning of the 19th century Great Britain had a capital of $8,753,000,000; in the course of a century it increased eight times. France had a capital of about $11,000,000,000; in 100 years it increased about five times. Ac cording to an estimate from the data in Zim mermann's 'Survey' (London 1787), Germany, as now constituted, had a capital of about $10,000.000.000; in 100 years it increased about four and one-half times. The United States had a capital of about $1,000,000,000; and in the course of a century it has increased 88 times.
Before the events which, preceding the European %%ar of 1914, began to disturb the normal rate of progress in each country, Great Britain annually added to her national capital about 2',/, per ccnt; France, per cent; and Germany less than 2 per cent. Meanwhile the United States was increasing (is still increas ing) her national wealth to the extent of about per cent per annum. Were it regarded as a fair reward of superior industry, skill and invention, this rapid rate of progress in wealth stand in no jeopardy of arrest, But in the tierce rivalry of international interests the palm of victory has not only to be won; it has to he defended.
National cannot be deduced solely from either population, income, taxation, wages, the prices of commodities or the stock of money In atternptinv to do this, many of the computations cited in Mulhall's 'Statistics,' Putnam's edition of Hayden's 'Dictionary of Dates' and other works of reference, have ended in the wildest misapprehension and con fusion. In the absence of an official cadastre, the only reliable guide is the net rate of inter est for capital, and even this must be employed with judgment. When either is ignored, the results can only be regarded as misleading.
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