from which, if we deduct 1 1-2 per cent. for expenses, would leave 7 1-2 per cent. for the net profit on the whole capital invested. The expenses, it must, however, be remembered, will be greater than in an ordinary bank, on account of its deposit stock both for legal advice, and in collecting the interest.

But, if the proportion of specie required by the bank should exceed what has been supposed, as it probably would, the dividends would be proportionally diminished. It must be recollected, that the means of circulating the notes have not been at all aided by the stock, except so far as, by increasing the public confidence, it may have extended their circulation. But this effect might be insignificant, and could not be much. Bank notes do not circulate at all, unless the public have entire confidence in the solvency of the bank that issued them; but, whatever may be the confidence, they will still be converted into specie for the various purposes of being sent or taken to a distance, of being wrought into plate and jewelry, and of being placed in another bank. It is then the $750,000 of specie, in the case supposed, which has put and keeps in circulation the notes. This was the real banking capital. But, to suppose that this sum would be adequate to loans or discounts for $2,500,000, or more than three times its amount, is against all experience. It might not be sufficient for more than two thirds of that amount; of course, to put the whole $2,000,000 of notes into circulation, a much larger amount of specie will be required.

Nor is this all. The proportion of 12 1-2 per cent. of the notes in circulation for the specie―the minimum required by the law- although it might be sufficient for country banks in prosperous times, is not enough for them in ordinary times, and not enough for city banks at any time. The banks of the city of New York, on the 1st of January, 1837, when their loans were unusually great, had $3,854,453 in specie, to a circulation of $8,155,883; that is, 47 per cent., nearly four times as much as we have supposed. To be prepared, then, for the smallest fluctuations in the money market, the bank would find it necessary to increase the amount of its specie much above 121-2 per cent., and, if it should resort to the sale of its stock, in times of emergency, the same pressure for money which has driven them to this expedient will lower the market value of stock, and they may lose in one sale the amount of seven years' dividends. And, so far as real estate is substituted, the hazards of loss, as well as the expense of management, will be greatly enhanced; so that the plan does not seem calculated to invite prudent and substantial capitalists, who have no other purpose to serve than to make safe and profitable investments; in which case, the public must eventually find its best reliance is on a well-organized bank, with a capital of gold and silver, placed under the management of cautious, judicious, and experienced men."

We shall probably take an occasion very soon to go more fully into an examination of the present work, in the course of which we propose to give some ideas of our own upon the effect of the free banking law, and to controvert the opinion maintained by our author, of the expediency of more than one national bank. In the mean time, however, we freely recommend it to all who are already interested in the subject, as a work full of excellent views, and to those who desire to make themselves acquainted with it as a good guide and authority. The author has appended, also, several very valuable and convenient tables.

ART. VIII. COMMERCE AND PROTECTION.

[We insert with pleasure the following communication, as it is our object to present to reflecting minds, both sides of a vexed question; one which has extensively agitated the country, and is destined to agitate it again; but not to so great a degree as at the time the Tariff Compromise Bill was passed by Congress, in 1833. In the interim, both parties have had time for reflection, and ultraists on both sides are now, we believe, few and far between. The South has realized the value of a domestic market for its cotton, on which it could fall back, when prices declined in Europe; and manufacturers have become convinced that extravagant and unreasonable duties are not the best protectives of home industry.

We are in favor of a full and fair protection to our manufacturers and mechanics. to every thing which can call out the skill, and develope the resources of our country,

as contributing to our prosperity in peace, and our independence in a state of warfare. But high duties act as encouragement to reckless and injurious competition in the branches of industry they are meant to foster, and by the idea of extraordinary profits, divert labor and capital from natural and healthful channels, and the domestic productions of a country may be as injuriously increased by artificial stimulants, as imports may be made to exceed our ability to pay for, by the recklessness of commercial men, grasping at shadows, and losing the reality. The "juste milieu" applies to all things.

The free trade system advocated by the English theorists, is, like the majority of their manufactures, intended for exportation, and not for home use, other nations are to furnish the raw material, but they are to have the profit on the manufactured article. There, every thing that can stimulate production, is applied with unsparing hand, until at last the system has become so complex and interwoven with the existence of the government, that like her national debt, and her privileged aristocracy, an attempt at change might shake the whole social fabric to its foundation. Fortunately for the United States, we are placed in a position in which we can select the good and reject the evil. No one interest can be built up in our republic, at the expense of another; not only the spirit of the constitution forbids it, but the state of things, as we find them, renders it impossible. The agriculturist, the manufacturer, the merchant, and the mechanic, all the productive, as well as what economists call the unproductive classes, are represented in Congress, by delegates generally chosen specially by themselves. We recognise no privileged order, but that of industry, intellect, and worth; we bow to no supremacy but that of mind; no law can be passed, unless a majority of the great interests represented, shall agree that it is of a national and advantageous character. Our growth in some particular departments may, in this way, possibly be retarded, but it is more natural and healthy. And if the great national edifice progresses less rapidly, the foundation is surer, and the proportions will be more just and beautiful.

We do not believe in the opposition of commercial men to a just protection to home industry. They have realized the value of the internal trade the deep root taken by the manufacturing interest of the country-the importance of the coasting businessand the vast impulse which these united, give to domestic and foreign commerce.

The raising of a revenue for the support of government, by means of a Tariff, is the least onerous to all, indeed, the only one acceptable to the genius of the people, for direct taxation is out of the question; this point conceded, the only difficulty to be disposed of, is the amount of duties to be imposed on foreign commere, commensurate to the wants of the government, and fully and fairly favoring the different branches of domestic industry; but on this head we do not feel ourselves called on to express our opinion at the present moment.

As we have before said, the ultraists of free trade, are few and far between; we believe our talented friend has engaged in a fanciful contest with imaginary opponents but as he poises a sharp and polished lance, we have no objection to let him throw it, and if he can find an ultraist any where, to let him hit him we belong to the "juste milieu."]

IT has ever been the special effort of the foes of the protective system, to enlist the mercantile interest, as such, in the support of their cause. The merchants, as a body, are calculated on to furnish the vanguard of the anti-protective army, and to supply it with the sinews of war. However other classes may break or waver, they are expected to constitute an immoveable phalanx. Others may need argument and demonstration, but their anti-tariff prepossessions are assumed as a matter of instinct. To be a merchant, and to be hostile to laws for the protection of home industry, are regarded as identical.

Not that merchants are known or believed to be, in fact, universally hostile to protection. Every man's observation teaches him the contrary. It is well known to every writer on the subject, that many of the most enlightened, able, and efficient advocates of protection, have been found in the mercantile class. But the assumption of the free trade doctors avers, that commerce is, in the very nature of things, hostile to the protective system; that, though individuals may be induced to favor that system, by personal and peculiar interests, these are but eddies in the great stream of commercial feeling and in

terest, while the current bears unequivocally and powerfully in a contrary direction. This question of fact is one of lesser moment; but that of absolute interest and policy, is one of vital importance. For, be it known to all, the great controversy of protection versus free trade, is by no means at an end. Suspended in 1833, by a nine years' truce, it will be renewed after 1842, with an intensity equal to any that this country has ever yet experienced. It must, in the nature of things, be so. The free traders, flushed by an advantage achieved for them in 1833, mainly, if not solely, by the force of circumstances wholly extraneous from the proper controversy, are running into the wildest ultraism. They are disporting their fancies in a region never adventured upon by them in the earlier stages of the controversy. Hitherto the clamor on that side has been for a reduction of imports to a revenue basis to the measures of the fiscal wants of the government. We have already reached that point-nay, gone beyond it and the cry is still onward. Free trade now strikes at the root of revenue duties also. No tariff-no impostsabsolute freedom of importation, is now the demand. Throw open your ports, tear down, or convert to other uses, your custom-houses-banish the very idea of customs- raise your revenue by direct taxation. Such are the present modest demands of the free trade theorists. How soon they may be extended to require the government to furnish ships for the importation, free of cost, of such foreign products as the country may prefer to its own, is a question rather out of the scope of the present essay.

Suffice it that in its present shape, the doctrine of free trade strikes at the existence of all duties on imports whatever. It will be satisfied with nothing short of this. Abolish all discriminating duties, (which was the extent of its earlier demand,) and we still have a revenue impost which, in view of the largely increased expenditures of the federal government, can hardly be estimated below twenty, certainly not below fifteen per cent. This still operates, to its extent, as a protection and a stimulus to domestic industry. It is still an eyesore and an abomination to free trade. Mordecai the Jew still sits in the king's gate, and the wrath of Haman is unsated. Nothing less than the abolition of customs and custom-houses, and the overspreading of our whole land with a locust tribe of tax-gatherers, will satisfy its urgent aspirations.

Thus, then, stands the question between the free trade theorists, and the advocates of protection; and we are now prepared to consider to which side the interests of commerce should incline its votaries. Is it commercially expedient that the great producing interests of the country be fostered and stimulated to their highest possible activity and force, or that they be left entirely to take care of themselves, and in each department to encounter the depressing and disastrous rivalry of whatever portion of the globe may be able to undersell our productions in its particular staple? Shall our producers of grain be exposed to an equal competition for their own market, with the serfs of Russia, who are content to labor for a supply of the coarsest necessaries of life? Shall our cities be supplied mainly with the potatoes of Ireland, because the Irish laborer is thankful for a shilling a day, while the American receives five or six? Shall the vast manufacturing interest of this country, which gives direct employment to one fourth of its commerce and navigation, and consumes the surplus products of one half its agriculture, be exposed to certain prostration and ruin, in a competition with the older and wealthier manufacturing interests of England, France, and Germany, backed by an unlimited command of capital, at four or five per cent. per annum, and of labor at ten to forty cents a day? Is it possible that the interests of American com

merce can be subserved by a general recklessness and wreck of all other American interests?

But it is asked, why cannot American skill and industry, like American valor and enterprise, sustain themselves in an equal competition with those of Europe? The question is based on an entire misapprehension of the subject. They can sustain themselves in an equal contest; and it is for that very equality we plead. They cannot engage in the combat with naked limbs and empty hands, against a mailed and armed adversary. They cannot successfully struggle, while infantile and unprotected, against the well established and protected rivalry of their most favored competitors. The peace of 1815 found American manufactures in a state of great activity, prosperity, and progress. In three years thereafter, British rivalry, most desperately pursued, had wrought their entire ruin. Protection then came to their relief, and they again revived and prospered. A few years found them, not only supplying the home market, at prices of unprecedented cheapness, but rivaling their old antagonist and former vanquisher, in the markets of South America, of China, and wherever else a fair competition was attainable. This they are still enabled to do, to the great benefit of American commerce and navigation, and will continue to do, so long as they shall enjoy a just preference and protection in the supply of the home market. But deprive them of this-place them in unequal and disadvantageous competition for foreign markets, against their rivals of Great Britain, France, and Germany, which have an exclusive home market as an assured basis for their operations, and they must inevitably wither. Human skill and management cannot withstand the double advantage thus afforded to our rivals in the command of labor at half price, and a protected market against competitors who have neither. The overthrow of protection must be a signal for the recommencement of the great national tragedy of 1815-19.

But let us keep in view the interests of commerce. What is the first element of commercial prosperity? Is it not notoriously national wealth and home production? Isolated cities have, indeed, risen suddenly to commercial eminence on the enjoyment of a lucrative carrying trade between foreign nations; but such prosperity is of necessity extremely precarious, and usually of brief duration. Its decline is as sudden as its growth. A war, an embargo, a revolution, the discovery of a cheaper channel of communication, of a new instrument of navigation, even and Petra, Tyre, Carthage, Venice, is hurled from the summit of its fortune and its glory, leaving but crumbling ruins and desolate streets to mark the former site of commercial greatness. A flourishing and stable commerce, mainly based upon an interchange of commodities between foreign nations, is a reverie unsuited to this age of the world.

No-it is on a simple traffic of the surplus products of its own country for those of other lands, and on the exchange of commodities between different sections of our own country, that American commerce must mainly rely. Obviously then, it becomes an object of primary solicitude with our commercial interest, that the amount of our country's productions be as large as possible, and that every consistent means be employed to increase that amount. For, let the necessities and desires of our people be ever so urgent, it is evident that goods can only be purchased at any rate, can only be paid for to the extent of the surplus products of the country. For a single year, we might bowl merrily onward on the strength of our credit abroad; another year's deficiency might be eked out by the exportation of our stock of the precious metals, &c.; and then the game would be ended. After the interven

tion of two or three years of prostration and distress, commerce might resume its former course, subject to the feebleness and exhaustion which a succession of excess and paralysis would be sure to induce. During the virtual suspension of commercial vitality, the consumers will have learned to dispense with or produce many articles of foreign origin for which they had formerly trusted to commerce; and the revival of trade would be marked by a sensible diminution of its value and vigor, as compared with its earlier prosperity. The highest possible incentive to home industry-the utmost practicable stimulus to domestic production-is then as essential to the well being of commerce as of any other great national interest. It is the idlest folly to fear that our country will produce so much and so variously that she will want to purchase little or nothing. Even were our wide expanse of territory made to supply abundantly all the varieties of agricultural and manufactured products of which it is capable, it is doubtful if the foreign trade of the country would be thereby reduced, while it is certain that the domestic interchange of commodities, which already forms the basis of the Larger half of our commercial transactions, would be very greatly increased. Man is so constituted, that his wants increase and amplify at least in proportion to his ability to gratify them. Were all our present requirements to be henceforth supplied by domestic production, while we should retain the ability to purchase largely from foreign nations, our fancies would soon seek out new gratifications, and find different necessities, until the amount of our imports should speedily equal the measure of our abilities.

In an enlarged and enlightened view, therefore, every addition to or new development of the internal resources of the country is certain to redound to the substantial and permanent advantage of commerce, and should be hailed with gladness, and fostered if need be by its votaries. In the narrow view too commonly taken, if the United States should henceforth produce twentyfive millions' worth of silk per annum, instead of importing it, there would be a loss of so much to commerce. But practical men know that the reverse of this is true; that such production would largely increase and stimulate the mercantile business of the country, at least to the extent of the value produced, by increasing at once the ability of our citizens to pay for foreign products, and the amount of their own commodities to be interchanged through the medium of commerce. If by any line of policy, any new incentives to industry and enterprise, the amount of our country's aggregate productions could be increased one half or one fourth beyond the increase of its popula tion, its commercial activity and prosperity must be increased in far more than an equal ratio: for the first hundred million's worth of annual production is doubtless consumed in supplying the merest and most absolute wants of the producers themselves, without entering at all into the elements of commerce; but whatever rises above that, being appropriated to the comforts and the luxuries of life, begins at once to circulate through the channels of trade; and if the present annual production of the country may be estimated at three hundred millions, the addition of one hundred millions more to that production would probably double the commercial business of the country. The day when protection could be made a bugbear-at least in this part of the country-is over. We have tested by experience the falsity of the original foreboding, that the adoption of the protective system would destroy our commerce-at any rate, our foreign commerce-altogether. All the free trade forebodings of the early stages of this controversy have signally failed. It is not yet twenty years since a doleful anticipation was widely

VOL. 1. NO. I.

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