Part 1

A SPEECH ON THE PRINCIPLES OF FINANCE,

BY

VICTORIA C. WOODHULL,

DELIVERED AT

COOPER INSTITUTE, NEW YORK CITY,

THURSDAY, AUGUST 3, 1871.

NEW YORK: WOODHULL, CLAFLIN & CO., No. 41 BROAD STREET. 1871.

THE PRINCIPLES OF FINANCE.

MONEY! IS IT A PRINCIPLE OR A PROPERTY?

To the careful student of history, there is a very great deal more to be considered than the mere political facts that stand as landmarks along the path of progress which the nations have traversed since the plains of Iran poured forth their hosts westward. These facts are the mere externals that adorn the pages of historic lore, and embellish the memories of the great men who have lived in and moved the world at various times in various nations, or which clothe the lives of tyrants and usurpers with their just reward.

The superficial student of history cares only for the _results_ of the evolution of nations—for the _fact_ that Sesostris was the greatest of Egyptian kings; or that Semiramis rose by her military sagacity from the rank of a mean official’s wife to be, first, the Queen of Ninas, and afterward, to be the Assyrian Queen, who should march an army of three millions men across the Indus to conquer the Indian King. Running down the course of events, he traces the rise and fall of nations—after Assyria then Egypt, next Persia, Greece, Rome and then the Dark Ages, out of whose womb was evolved modern Europe; and, lastly, the birth, development, struggle and recovery of the most remarkable nation which has yet arisen in the world.

Behind these facts, which are but results, lie the real motor powers of history; and they are deeper, broader and more important than is that which _they_ evolve. There is an external and an internal phase to everything existent in the world. Up to _this_ generation the external has apparently borne the more prominent part in determining what should be next. But _now_ the analytic age has begun, wherein facts do not suffice; wherein new systems, new theories, new philosophies and even new religions are constructed, not by an examination of the _errors_ of what has been, but by the _discovery_ and _application_ of the principles, the powers, which underlie those errors.

Heretofore there has been no inquiry made by the rulers of the people into the general principles of government. It was sufficient that there was a government maintained, the governors caring for little but the power to compel the people to do their bidding. But it is beginning to dawn upon the minds of those who have something more than a selfish interest in humanity that there _is a science_ of government; aye, even that there is a science of society: and such minds are endeavoring by the deepest researches to discover the principles of these sciences.

In our government, the principle of individual rights is theoretically held, though in its application government still interferes with those rights. The legitimate functions of a government, based upon the rights of every individual over whom its power is exercised, are limited to the _duties_ that will best _subserve_ and _protect_ the interests of individuals. The proper understanding and practice of these functions is the most important thing for a people to arrive at, but, having arrived at this as the basis of all the relations of the people, the scientific construction of the various departments of the complete superstructure which is to cover all the public interests of all the people, as well as to maintain their private interests intact, can be begun.

After the general principles of government are properly formulated in Constitutions and vitality given them by laws, a correct, a scientific financial system stands _next_ in importance. If a country have a true system of _government_, and do not have a true system of _finance_, it can never attain to any _permanent_ prosperity. Literally speaking, finance is a _part_ of government; since, in organizing it, means for its support are among the first considerations. Hence it is plain, if there are principles of government, so must there also be principles of finance.

It has never been pretended, so far as I know, even by the profoundest political economists, who are sticklers for the gold standard, that any financial systems the world has ever known were developed by the scientific application of self-evident truths, which is the nature of principles.

The various systems of which use has been made were simply _experimental_, devised for _politic_ reasons, as the _best_ methods to meet the exigencies of the times in which they were required. Instance the Greenback, the necessity for which was such as to shake the nation to its very centre, and to fill the minds of all patriots with a dread foreboding.

If there have been no scientific money systems in vogue, and it now comes out that the world has arrived at that degree of advancement wherein _policy_ should give way to _principles_, even in finance, there can be nothing gained by going back to review the errors, failures and fallacies of the past. Nothing valuable can be gained by wading through the almost innumerable statistics which have accumulated to a sufficiently great extent to bewilder the most comprehensive intellects. Having for ten years been deeply engaged in studying the principles of government, I learned that no system of government could be perfect unless its financial department was perfected; therefore I have frequently endeavored to solve the financial problems which statistics propose, but _invariably_ failed to learn anything that even promised to look well as a basis for a new and improved system, to say nothing of its promises in operation.

The conclusion was inevitable, that there have been _no_ acknowledged or even known, fundamental principles of finance operating in _any_ of the many systems of the many nations, and that the so-called money of the world _is not now, nor ever was_, money, in the scientific sense of that term.

All the statistics, failures and errors of the past, with which the history of money abounds, being of no value, must be utterly ignored in any inquiry which proposes to predicate a natural and scientific money, as distinguished from arbitrary inventions, devised to meet the various exigencies of nations in their growth, prime and decay. And _any_ person who proposes to teach finance, or a new system, by arraying before you the evidences of the past, contained in figures amounting to billions of dollars, simply proposes to try _another experiment_, to _culminate_ in another failure.

Therefore I shall present no principals, per cents. and compounded amounts, except, perhaps, as examples to illustrate the mathematical impossibilities of the fallacious theories by which financiers have attempted to dazzle the world, but who have only succeeded in accumulating in the hands of a very select few that which by an exact justice should belong to, and be distributed among, the people generally.

In order to intelligently discuss and arrive at legitimate conclusions regarding the question of money, it should be _first_ determined just what is to be involved in the discussion; for around this, as around all other general things, there has been such a mass of rubbish and extraneous matter aggregated that the main question is always in danger of being lost sight of, unless this be first removed and the real issue left clearly exposed.

Most of the confusion which follows the attempts to solve the money question arises out of the fact that the _same_ words in the mouths of _different_ people do not mean the _same_ things, or that _different_ words are used by _different_ people to mean the _same_ thing. If there are two words in common use to represent similar objects, but which, upon close analysis, _do not_ represent precisely the same thing, it is better that _one_ of them be discarded. It is necessary, therefore, to settle, prior to the beginning of this argument, _precisely_ what the several terms _do_ mean which are prominently in use in connection with the money question. It is, perhaps, near the truth to say that this settlement is the argument. Very few persons have any well-defined comprehension of what is the _real_ significance of the terms _gold_, _money_, _currency_, _intrinsic value_ and _wealth_. If these words are analyzed, what do they scientifically represent?

Gold is a product of the earth only to be originally obtained by labor and expense, and both practically and scientifically bears like relations _to_ labor that all other things do which are produced _by_ labor; and none other. But there has been an importance attached to gold which has not been accorded to _any other_ product of labor. It has been coined and called money, because it was coined, and by custom and common acceptance made an _arbitrary_ standard of value, which _none_ of its qualities warrant when subjected to analysis, as will be shortly shown.

Gold bears the same relation to _real_ money that a religious theory bears to _real_ religion, which theory, when comprehended by the intellect of the people, loses its value as a substitute for real religion; but which, until comprehension comes, it is better to have than to have none at all. So also with gold. It has in _theory_ been considered as _money_; but when a _true_ money comes to be comprehended, it will lose its value as a substitute therefor, and sink to its proper sphere among the other products of labor.

It is altogether probable that gold was the very best substitute for money during that part of the world’s evolution wherein people were guided and controlled by policy and before principles were recognized as that which should govern, let their action lead where it might. As the world is now beginning to act from _principle_, for the sake of the _truth_, so also must they now begin to formulate the principle of money for the sake of the principle.

Wealth is whatever is produced by labor which adds to the _comforts_, the _happiness_ or the _life_ of man; and everything that does this, either directly or indirectly, has intrinsic value—that is, has the capacity to bless mankind.

Wealth may, and should, be divided into two kinds, namely, _permanent_ wealth and _transitory_ wealth.

Permanent wealth consists of all those products of labor which are not themselves _transferable_ into life, comfort or happiness, but which may at all times be _exchanged_ for that which is thus transferable into that which can be used to continue life. Gold, silver and precious stones are among the best illustrations there are of permanent wealth.

Transitory wealth consists of all those products of labor of which direct use is made to maintain life or to add to its comforts and happiness, and which, _by_ such process, are absorbed _into_ and become _a part of_ the life of humanity. Transitory wealth, it will be seen, is much the more important of the two, since, if people only possessed permanent wealth, their life could not be continued an hour by it, unless there were a possibility of exchanging it for the necessities of life.

It would seem that _all_ kinds of wealth are intrinsically valuable, since its various kinds may be either _directly_ used to maintain life or may be _exchanged_ for those which will maintain life. Wealth and intrinsic value, then, mean the same thing.

But what does the term _money_ mean: or has it no necessary significance in the inquiry?

There was a time when there was no such _thing_ or _word_ as money; but at that time there was life to continue, for which wealth was necessary. It seems that _wealth_ had existence before _money_ was thought of. Wealth is substance, of which money is the principle or representative, but which, in itself, has no intrinsic value.

Money is an invention made to _represent_ wealth, or value, in order that its various kinds may be exchanged with facility, or that they may be exchanged without the absolute and direct and immediate receipt and delivery of one product of labor for another product of labor. All the products of labor may be exchanged _directly_, and without the use of any representative or go-between, which for the time being stands representative of the one or the other, but _not so well_ at all times and under all circumstances. Money is _anything_ which stands representative of any product of labor; that is, that can be made use of to facilitate the exchange of any of the results of labor, which are wealth. A representative of anything cannot be the thing itself, therefore, if money is a representative of wealth it is not itself wealth. Were A, B and C to at all times exchange their products between themselves by _direct transfer_, they would have _no use_ for money; they would exchange—deliver and receive—_actual_ values. But when A desires from B some of his products, himself not having on hand any of his products which B desires, he receives from B his value and gives him his representative of value—his note—promising that at a future time he will deliver B the _actual_ value which he desires.

_Currency_ is only a _form_ of money, the same as _gold_ is only a form of wealth; and in the same manner that gold is wealth, is currency money. Money being the principle of representation in exchange, everything of which use is made to facilitate exchange in the form of representative value is money. Anything which can be transferred from one party to another, anything that is negotiable which is not actual value of itself, is money. This includes not only all currency, bank notes, but also bills of exchange, the ledger and bonds. These are _all_ representatives of wealth, _all_ demands for payment at a future time of a certain specified sum, and consequently are money. It is quite evident that, with the terms _wealth_ and _money_, we have all the necessary distinctions which should enter into the abstract question of finance. All other terms are but names for separate kinds or forms of these terms, to be made use of when they respectively arise in making exchanges.

Now, every one must at once concede that that which best represents all of the products of labor will also best _exchange_ them, and is therefore the _best_ money. It is _equally clear_ that gold in _no way_ represents _any_ labor but that which produces it. If gold were a true representative of the results of _all_ other labor, except that which produces it, would it not also be apparent that _such_ labor must be _equal_ to _all_ other labor. Were gold a thousand times more valuable than it is held to be, it would not _even then_ be able to represent all other values. Therefore, gold is a _false_ standard of value, a _false_ representative of wealth.

Many people think and speak as if gold would be of no use to this country if it were to come into disuse as _money_; that we should entirely lose it as _wealth_; the very reverse is really true, since we should have just the same quantity of gold that we _now_ have, to be used for the _same_ purposes for which it is now required, to wit: to export to other countries in exchange for imports.

Suppose our imports to amount to a thousand millions dollars per annum, and that we export cotton, corn and pork to that amount, what use would we have for gold except to loan other countries, and could we not _loan_ it as _gold_, taking their representatives of value for it equally as well as though it were coined into money, having the seal and stamp of the government? It is well known that we do not export gold to Europe as so many American dollars, but as so much gold, by weight of a certain degree of fineness, the stamp of the government attesting to that degree.

Again: Suppose that we had no cotton, corn or pork to give in exchange for our imports, and that we produced a thousand millions dollars’ worth of gold per annum, should we not be _equally_ well conditioned to trade with Europe?

It is seen that the real character and qualities of gold are the same as are those of any other product of labor, which we can exchange direct, for other products of labor which we want more than we do the gold. If at any time the balance of trade is _against_ us, and we have _no_ cotton, corn, pork, gold or _anything else_ to make it good, we must then make it good by our representatives of value—our bonds—to be converted when we shall have these products. This process has been actually going on ever since we began to export bonds, either national, state, county, city, railroad or bonds of other incorporated companies.

Now, is it not _perfectly_ evident that we have not only produced by labor what we have exported, which we have been pleased to denominate merchandise, but also that we have produced all the gold that has been exported; and in this connection is it not just as much an article of merchandise as is either cotton or corn? Gold cannot at _one_ and the _same_ time be both _money_ and _merchandise_. If _gold_ is money, so also is _wheat_, _cotton_ and _corn_ money, since they perform the same _services_ and possess the same _qualities_ as merchandise that gold does.

To be perfectly clear in our conclusions, money must be resolved into its _uses_ and entirely divested of all its _fictitious_ and _irrelevant_ relations. The fact that money is that thing which is made use of to exchange real values must be the initial starting-point, of which sight must never be lost until it is _definitely_ settled what will _best_ perform this service. Anything which can be made use of for _any other purpose whatever_, is _not_ the _best_ thing to be made use of as money; because the demand for such a thing for such other purposes destroys its positive value as money by causing fluctuations in its exchanging power.

It is a grave financial error for this country to endeavor to return to gold as money. All the practices under the gold standard have been positive and ample refutations of the arbitrary value accorded to gold. A _dollar_ in gold can only exchange a _dollar_ in value in any other substance; and the practice of issuing a greater amount of bank notes than the bank has gold dollars to redeem them by, is a _legalized_ system to _rob_ the people; since it is _evident_ that a bank having three hundred thousand dollars in notes in circulation, and only one hundred thousand dollars in gold in its vaults, can redeem but _one-third_ of its circulation if it be all presented at once for redemption. All the other securities of a bank, such as its discounts, personal property and real estate, may become of no value, or may be placed out of reach of the holders of its circulation, so that the only _real_ security for its circulation is what it may have in gold in its vaults. Beside, what right has a bank to receive legal interest on three times the amount of its real security? Is not this a most _transparent_ method of _swindling_ the people? Hence I assert that the use of gold as money _always_ results disastrously to the producers of wealth, and _always_ beneficially to those who are permitted to absorb all their productions.

Another unanswerable reason why gold cannot answer the requirements of money is found in the _degrees of value_ which belong to different products of labor, and which are _universally_ determined by the sacrifice required to produce them. That is to say, all other things being equal, the _relative_ value of products is determined by the _time_ and _labor_ required to produce them. The increase in the value of manufactured material is in _exact_ proportion to the _time_ required and _wealth_ consumed in their manufacture. The value of gold is determined in _precisely_ the same manner; and it is simply foolishness to assert that the value of gold never changes, or that it has the same purchasing power at all times.

Suppose there should be immense fields of gold suddenly developed all over the country, so that it would become as common and plentiful as iron or coal, would it not decrease in value in comparison with other products? That is to say, would an ounce of gold then possess as great a proportionate value to other products as it now does? No one will pretend it. Then gold is just as much the subject of fluctuation as is any other product of labor, and for _just the same_ reasons—demand and supply—which are the great arbitrators of values in all parts of the world.

Everybody knows that for a certain quantity of gold a certain quantity of cotton may be obtained, and for a certain quantity of corn, a horse. The fact that the horse is obtainable by the corn does not convert the corn into money, neither does gold any more than the corn become money because the cotton is obtained thereby. The gold for the time is equal in value to the cotton, and so is the corn to the horse. Now, what is required of money is this: Suppose the gold, cotton, corn and the horse to be of equal value, a person possessing an amount of money representing the value of either of the four can, at his discretion, purchase whichever he may choose; since the money would equally represent the gold, cotton, corn and the horse. Anything that may be used for money that will not do the same thing for any variety of the products of labor, values being equal, is not money in any sense of that term.

Incidentally in this connection, because it has an indirect bearing upon the question under consideration, I wish to call attention to a mistake that has been productive of more financial ills and consequent injustice to a large proportion of the people, who are the wealth producers, than any other single cause, and that is the fundamental error of making land, wealth, which it is no more entitled to be, scientifically, than gold is to be called money. Wealth is that which is produced. Land exists. All improvements made upon land are wealth; _but the land proper, never_.

In this almost fatal mistake—almost fatal to the humanitarian interests of the so-called common people—which is fundamental in its nature, is found the _basis_ upon which rest the vast disparities in the distributions of wealth, and which gives to certain favored individuals the means of realizing vast fortunes without ever resorting to the production of wealth, or of even accumulating it by trafficking in the different kinds of wealth.

There are numerous examples of this manner of becoming possessed of riches. People acquire title to lands which, by favorable location, come into great demand and consequently rise in value from _one dollar per acre to hundreds of thousands of dollars per acre_. By what principle of _equity_ and _right_ should _any_ person be entitled to such vast increases in capital invested in land, when it is entirely attributable to the movements of the community which produce it, and in no single particular to the individual? To be so entitled is for the individual to possess advantages over others to which no just communal government should for a moment consent—is to have the right to appropriate to self the results of labor which belong in common to all the people. Such results are against _all_ principles of equity and justice, and is one of the _greatest_, if not _the_ greatest error of the present, regarding the equities of property, and is the foundation and prophecy of all other kinds of monopoly.

It occurs to me that an objection may be raised to my argument classing gold as wealth, and defining wealth to be that which can be made use of to minister to life, comfort and happiness; or perhaps to the distinction of permanent and transitory wealth. Gold, as permanent wealth, can only minister to man through its exchange for other valuables of which direct use can be made. It may be said that in _that_ sense gold can legitimately be money.