must be regarded solely as an instrument for getting commodities into the hands of consumers.

The scientific measurement of industrial prosperity would consist in an assessment of real incomes as expressed in goods and services paid to members of the community in return for the use of some capital or labour-power which they possessed, or as a pension, valued according to some objective or subjective standard of utility. The services here included in real income would comprise all official, professional, domestic, and other personal services bought and paid for by the money income of members of the community. Such services, though generally admitted to be wealth, are usually excluded from considerations of the industrial condition of a nation, and are sometimes excluded from estimates of the national income. But, however convenient for some purposes, this exclusion is quite unjustified. The real income of a nation, as of an individual, must be held to consist of all the utilities, whether embodied in material forms or in human services, which it is able to command. A nation which devotes a larger proportion of its productive energy to increasing the speed and accuracy of the distribution of material goods, or to the better cultivation of the intellectual arts and the provision of professional, artistic, and recreative services, cannot reasonably be regarded as stationary or retrogressive in industrial prosperity. If we describe the money income of the British

nation as amounting to £1,700,000,000 per annum, we must regard that money income as represented by a real income consisting partly in consumable material goods consumed during the year, partly in material goods non-consumable which constitute "savings" and form an increase of the forms of capital, and partly in non-material goods which are either consumed as "services" or saved as personal capital, ¿.e. increased power of producing services.

It must be clearly understood that here is no attempt to break down the ordinary limits of wealth and income adopted for the purposes of economic science. We do not include in real income all the intellectual, artistic, and other output which might be loosely regarded as part of the "wealth" of the nation; but only such part as is actually bought and sold.

§ 2. While, therefore, it is allowable and convenient to restrict "industry" for some purposes to the production of material wealth for markets, we cannot apply such restriction in a philosophic consideration of the industrial prosperity of a nation. All forms of nonmaterial wealth which are produced, sold, and consumed by the nation must be regarded as forming part of the real income of the nation equally with food and furniture; and the energy which goes into the production of this wealth must rank as industrial energy. Unless thinking persons will consent entirely to ignore the old cleavage between material and non

material wealth, and between productive and unproductive services, and to regard as "industrial" all processes which conduce to the production of anything that is bought and sold, it is impossible to form clear judgments about the industrial prosperity of a nation and the part which external trade plays in it.

§ 3. The reason for this insistence becomes evident when we regard the development of needs and satisfactions which mark the history of a progressive nation. In earlier stages of industrial development, progress will consist primarily in the increase of the quantity and variety of material goods for the satisfaction of simple physical wants. Most of the industrial energy of a population in an early stage will go into the extractive arts of agriculture and of certain simple modes of manufacture; a little later on mining will play a considerable part as an extractive industry, and the modes of manufacture will be more numerous and complex. As industrial civilisation. advances under the pressure of expanding needs, a smaller proportion of energy will be devoted to the extractive arts and the primary manufactures, a larger proportion to the more complex industrial processes adapting raw materials or crude manufactures to the more special needs of various classes of A very rapid increase of population may delay this process by keeping a large proportion of energy employed in raising food; a very rapid

consumers.

expansion of certain crude sorts of manufacture for foreign trade with less advanced peoples may similarly cause a temporary retardation. But the universal tendency of modern industrial civilisation is to engage a larger proportion of industrial energy in the later and more specialised processes of adapting matter to the satisfaction of a greater variety of special needs. This implies the growth of a qualitative economy of wealth; every further increase of wealth will be attended by a reduction of the increase of raw materials. Still more important will be the increasing proportion of industrial energy engaged in the transport and distributive industries, with the expansion of the area and the complexity of markets which belong to modern industrial civilisation. Finally, a rapidly increasing proportion of energy passes into the production and distribution of nonmaterial wealth, governmental and other public work, professional and personal services, the fine arts, recreation and amusement.

§ 4. The statistics of occupations in every civilised modern nation prove that internal transport, the distributive trades, and professional and other nonmaterial productions are engaging an ever-growing proportion of the national energy; while, as regards production of material forms of wealth, a larger proportion of workers are occupied in the final processes of adapting goods to the special tastes and habits of local groups of consumers. Now this implies that

in a normal condition of industrial development a smaller proportion of the real wealth of a nation, i.e. of the aggregate of goods and services, is capable of forming the material of international trade.

The actual volume of international trade, and its value, may continue to grow, and the fluctuations in this growth may be matter of serious concern, but external trade will not continue to keep pace with the growth of the wealth of the nation as a whole.

The truth of this generalisation is not impaired by adducing special abnormalities. The external trade of England during the middle decades of the nineteenth century, that of Germany and the United States during the last three decades, may possibly have grown at a more rapid rate than the internal trade and industry, though no proof of such a conjecture is attainable. The sudden quick adoption of new manufacturing methods with new facilities of transport by a few pioneer nations have opened up for them such vast possibilities of profit by trading with the ruck of backward nations as to engage in mining and crude manufacture large masses of industrial energy. Thus for a time the normal tendency may be checked. But since the chief result of the recent preponderating stress on railroad, steamship, and electric development over the whole surface of the globe will be to enable the backward nations to advance more rapidly in agriculture, mining, and manufactures, it is clear that this abnor