450.  This principle will appear more clearly by taking an example.  Let two capitalists have embarked L10,000 each, in two trades:  A in supplying a district with water, by means of a steam-engine and iron pipes; B in manufacturing bobbin net.  The capital of A will be expended in building a house and erecting a steam-engine, which costs, we shall suppose, L3000; and in laying down iron pipes to supply his customers, costing L7000.  The greatest part of this latter expense is payment for labour, and if the pipes were to be taken up, the damage arising from that operation would render them of little value, except as old metal; whilst the expense of their removal would be considerable.  Let us, therefore, suppose, that if A were obliged to give up his trade, he could realize only L4000 by the sale of his stock.  Let us suppose again that B, by the sale of his bobbin net factory and machinery, could realize L8000 and let the usual profit on the capital employed by each party be the same, say 20 per cent:  then we have

Capital invested; Money which would arise from sale of machinery; Annual rate of profit per cent; Income

L         L    L        L
Water works            10,000    4000   20     2000
Bobbin net Factory     10,000    8000   20     2000

Now, if, from competition, or any other cause, the rate of profit arising from water-works should fall to 20 per cent, that circumstance would not cause a transfer of capital from the water-works to bobbin net making; because the reduced income from the water-works, L1000 per annum, would still be greater than that produced by investing L4000, (the whole sum arising from the sale of the materials of the water-works), in a bobbin net factory, which sum, at 20 per cent, would yield only L800 per annum.  In fact, the rate of profit, arising from the water-works, must fall to less than 8 per cent before the proprietor could increase his income by removing his capital into the bobbin net trade.

451.  In any enquiry into the probability of the injury arising to our manufacturers from the competition of foreign countries, particular regard should be had to the facilities of transport, and to the existence in our own country of a mass of capital in roads, canals, machinery, etc., the greater portion of which may fairly be considered as having repaid the expense of its outlay, and also to the cheap rate at which the abundance of our fuel enables us to produce iron, the basis of almost all machinery.  It has been justly remarked by M. de Villefosse, in the memoir before alluded to, that Ce que l’on nomme en France, la question du prix des fers, est, a proprement parler, la question du prix des bois, et la question, des moyens de communications interieures par les routes, fleuves, rivieres et canaux.

The price of iron in various countries in Europe has been stated in section 215 of the present volume; and it appears, that in England it is produced at the least expense, and in France at the greatest.  The length of the roads which cover England and Wales may be estimated roughly at twenty thousand miles of turnpike, and one hundred thousand miles of road not turnpike.  The internal water communication of England and France, as far as I have been able to collect information on the subject, may be stated as follows: