IN the foregoing chapter, I have shown how productive
capital,
though kept, during the progress of production, in a
continual state
of employment, and subject to perpetual change and wear,
is yet
ultimately reproduced in full value, when the business of
production
is at an end. Since, then, wealth consists in the value of
matter or
substance, not in the substance or matter itself, I trust
my readers
have clearly comprehended, that the productive capital
employed,
notwithstanding its frequent transmutations, is all the
while the same
capital.
It will be conceived with equal facility, that, inasmuch as
the value produced has replaced the value consumed, that produced value may be
equal, inferior, or superior in amount, to the value consumed, according to
circumstances. If equal, the capital has been merely replaced and kept up; if
inferior, the capital has been encroached upon; but if superior, there has been
an actual increase and accession of capital. This is precisely the point to
which we traced the cultivator, cited by way of an example in the preceding
chapter. We supposed him, after the complete re-establishment of his capital, so
as to put him in a condition to begin the new year’s
cultivation with
equal means at his disposal, to have netted a surplus
produce beyond
his consumption of some value or other; say of 1000
dollars.
Now, let us .observe the various methods, in which he may
dispose
of his surplus of 1000 dollars; for simple as the matter
may appear
to be, there is no point upon which more error has
prevailed, or
which has greater influence upon the condition of mankind.
Whatever kind of produce this surplus, which we have
valued at
1000 dollars, may consist of, the owner may exchange it
for gold or
silver specie, and bury it in the earth till he wants it
again. Does
the national capital suffer a loss of 1000 dollars by this
operation?
Certainly not; for we have just seen, that the value of that
capital was before completely replaced. Has any one been injured to that amount
? By no means; for he has neither robbed nor cheated any body, and has received
no value whatever, without giving an equivalent. It may be said, perhaps, he
has given wheat in exchange for the dollars he has thus buried, which wheat was
very soon consumed;, yet the 1000 dollars still continue withdrawn from the capital
of the community. But I trust it will be recollected, that wheat, as well as
silver or gold, may compose a part of the national capital; indeed, we have
seen that national capital must necessarily consist, in a great measure, of
wheat and such like substances, liable to either partial or total consumption,
without any diminution ofcapital thereupon ; for, in short, that reproduction
completely replaces the value consumed, including the profits of the producers,
productive agency is part of the value consumed. Wherefore, the instant that
the cultivator has fully replaced his capital, and begins
again with the same means as before, the 1000 dollars may
be
thrown into the sea without reducing the national capital.
But let us trace the disposal of this surplus of 1000
dollars to
every imaginable destination. Suppose, for instance, that
instead of
being buried, they have been spent by the cultivator upon
an elegant
entertainment. In this case, this whole value has been
destroyed in
an afternoon; a sumptuous feast, a ball, and fireworks,
will have
swallowed up the whole. The value thus destroyed exists no
longer
in the community: it no longer forms an item in the
aggregate of
wealth; for those persons, into whose hands the identical
pieces of
silver have come, have given an equivalent in wines,
refreshments,
eatables, gunpowder, & c , all which values are
reduced to nothing;
the gross national capital, however, is no more diminished
in this
case than in the former. A surplus value had been
produced; and
this surplus is all that has been destroyed, so that
things remain just
as they were.
Again, suppose these 1000 dollars to have been spent in
the purchase of furniture, plate, or linen. Still there is no reduction ofnational
productive capital; although it must be allowed there is no
accession; for in this case, nothing more is gained than
the additional
comforts the cultivator and his family derive from the
newly pur
chased moveables.
Fourthly and lastly, suppose the cultivator to add this
excess ot
1000 dollars to his productive capital, that is to say, to
re-employ it
in increasing the productive powers of his farm as
circumstances
may require, in the purchase of more beasts of husbandry,
or the
hire and support of more labourers; and in consequence, at
the end
of the year, to gather produce enough to replace the full
value of the
1000 dollars, with a profit, in such manner, as to make
them capable
of yielding a fresh product the year after, and so on
every year to
eternity. It is then, and then only, that the productive
capital of the
community is really augmented to that extent.
It must on no account be overlooked, that, in one way or
other, a saving such as that we have been speaking of, whether expended productively
or unproductively, still is in all cases expended and consumed; and this is a
truth, that must remove a notion extremely
false, though very much in vogue—namely, that saving limits
and injures consumption. No act of saving subtracts in the least from consumption,
provided the thing saved be re-invested or restored to productive employment.
On the contrary, it gives rise to a consumption perpetually renovated and
recurring; whereas there is no repetition of an unproductive consumption.
It must be
observed, too, that the form in which the value saved
is so saved and
re-employed productively, makes no essential difference. The saving is made
with more or less advantage, according
to the
circumstances and intelligence of the person making it. Nor
is there any
reason why this portion of capital should not have been
accumulated,
without ever having for a moment assumed the form of
specie. It may
be that an actual product of the farm has been saved
and resown or
planted, without having undergone any transmutation ;
perhaps the
wood, that might have been used as firing to warm superfluous apartments, may
have been converted into palings or other
carpenter's
work; and what was cut down in the first instance as an
item of revenue,
be so employed, as to become an item of capital.
Now, the only
way of augmenting the productive capital of individuals, as well as the
aggregate productive capital of the community,
is by this
process of saving; in other words, of re-employing in production more products created
than have been consumed n their creation. Productive capital cannot be
accumulated by the mere scraping together of values without consuming them; nor
any otherwise,
than by
withdrawing them from unproductive, and devoting them to
reproductive
consumption. There is nothing odious in the real
picture of the
accumulation of capital; we shall presently see its
happy
consequences.
The form under
which national capital is accumulated, is commonly determined by the respective
geographical position, the moral
character, and
the peculiar wants of each nation. The accumulations of a society in its early
stages consist, for the most part, of
buildings,
implements of husbandry, live stock, improvements of
land; those of a
manufacturing people chiefly of raw materials, or
such as are
still in the hands of its workmen, in a more or less
finished state;
and in some part, of the necessary manufacturing
tools and
machinery. In a nation devoted to commerce, capital is
mostly
accumulated in the form of wrought or unwrought goods,
that have been
bought by the merchant for the purpose of re-sale.
A nation that at
the same time directs its energies to all three
branches of
industry, namely, agriculture, manufactures, and commerce, has a capital
compounded of all three different forms of production ; of that amazing
quantity of stores of every kind, that we
find civilized
society actually possessed of; and which, by the intelligent use that is made
of them, are constantly renovated, or even
increased, in
spite of their enormous consumption, provided that the
industry of the
community produces more than is destroyed by its
consumption.
I do not mean to
say, that each nation has produced and laid by
the identical
article that composes its actual capital. Values, in some
shape or other,
have been produced and laid by; and these, through
various
transmutations, have assumed the form most convenient fot
the time being.
A bushel of wheat saved will feed a mason as well
as a worker in
embroidery. In the one case, the bushel of wheat
will be
reproduced in the shape of the masonry of a house; in the
other, under
that of a laced suit.
Every adventurer
in industry, that has a capital of his own embarked in it, has ready means of
employing his saving productively;
if engaged in
husbandry, he buys fresh parcels of land ; or, by judicious outlays and
improvements, augments the productive powers of
what already
belongs to him; if in trade, he buys and sells a greater
quantity of
merchandise. Capitalists have nearly the same advantage : they invest their
whole savings in the same manner as their
former capital
is invested, and increase it pro tanto, or look out for
new ways of
investment, which they are at no loss to discover; for
the moment they
are known to be possessed of loose funds, they
seldom have to
wait for propositions for the employment of them;
whereas the
proprietors of lands let out to farm, and individuals that
live upon fixed
income, or the wages of their personal labour, have
not equal
facility in the advantageous disposal of their savings, and
can seldom
invest them till they amount to a good round sum.
Many savings are
therefore consumed, that might otherwise have
swelled the
capitals of individuals, and consequently of the nation at
largf. Banks and
associations, whose object is to receive, collect,
and turn to
profit the small savings of individuals, are consequently
very favourable
to the multiplication of capital, whenever they are
perfectly
secure.
The increase of
capital is naturally slow of progress: fur it can
never take place
without actual production of value, arid the creation
of value is the
work of time and labour, besides other ingredients.*
Since the
producers are compelled to consume values all the while
they are engaged
in the creation of fresh ones, the utmost they can
accumulate, that
is to say, add to reproductive capital, is the value
they produce
beyond what they consume; and the sum of this sui
plus is all the
additional wealth that the public or individuals can
acquire. The
more values are saved and reproductively employed
in the year, the
more rapid is the national progress towards prosperity. Its capital is swelled,
a larger quantity of industry is set in
motion, and
saving becomes more and more practicable, because the
additional
capital and industry are additional means of production.
Every saving or
increase of capital lays the groundwork of a
perpetual annual
profit, not only to the saver himself, but likewise to
all those whose
industry is set in motion by this item of new capital.
It is for this
reason that the celebrated Adam Smith likens the frugal
man, who
enlarges his productive capital but in a solitary instance,
to the founder
of an almshouse for the perpetual support cf a body
of labouring
persons upon the fruits of their own labour; and on the
other hand,
compares the prodigal that encroaches upon his capita],
to the roguish
steward that should squander the funds of a charitable
institution, and
leave destitute, not merely those that derived present
subsistence from
it, but likewise all who might derive it hereafter.
He pronounces,
without reserve, every prodigal to be a public pest,
and every
careful and frugal person to be a benefactor of society, f
It is fortunate,
that self-interest is always on the watch to preserve
the capital of
individuals; and that capital can at no time be withdrawn from productive
employment, without a proportionate loss of
revenue.
Smith is of
opinion, that, in every country, the profusion and ignorance of individuals and
of the public authorities, is more than compensated by the prevalent frugality
of the people at large, and by their careful atttention to their own
interests.* At least it seems
undeniable, that
almost all the nations of Europe are at this moment
advancing in
opulence; which could not be the case, unless each of
them, taken in
the aggregate, produced more than it consumed
unproductively.f
Even the revolutions of modern times appear to
have been rather
favourable than otherwise to the progress of opulence ; for they are no longer,
as in ancient days, followed by continued hostile invasion, or universal and
protracted pillage; whereas,
on the other
hand, they have commonly overthrown the barriers of
prejudice, and
opened a wider field for talent and enterprise. But
it is still a
question, whether this frugality, which Smith gives individuals credit for, be
not, in the most numerous classes of society, a
forced
consequence of a vicious political organization. Is it true,
that those
classes receive their fair proportion of the gross produce,
in return for
their productive exertions? How many individuals
live in constant
penury, in the countries considered as the most
wealthy! How
many families are there, both in town and country,
whose whole
existence is a succession of privations; who, with every
thing around
them to awaken their desires, are reduced to the satisfaction of the very
lowest wants, as if they lived in an age of the
grossest
barbarism and national poverty!
Thus I am forced
to infer, that, though unquestionably there is an
annual saving of
produce in almost all the nations of Europe, this
saving is
extorted much more commonly from urgent and natural
wants, than from
the consumption of superfluities, to which policy
and humanity
would hope to trace it. Whence arises a strong suspicion of some radical defect
in the policy and internal economical
systems of most
of their governments.
Again, Smith
thinks that the moderns are indebted for their comparative opulence, rather to
the prevalence of individual frugality, than to the enlargement of
productive power. I admit, tha sonn
absurd kinds of
profusion are more rare now-a-days than formerly ;*
but it should be
recollected, that such profusion can never be practised, except by a very small
number of persons; and if we take
the pains to
consider how widely the enjoyment of a more abundant
and varied
consumption is diffused, particularly among the middle
classes of
society, I think it will be found, that consumption and frugality have
increased both together; for they are by no means incompatible. How many
concerns are there in every branch of industry,
that, in times
of prosperity, yield enough produce to the adventurers
to enable them
to enlarge both their expenses and their savings ?
What is true of
one particular concern, may possibly be true of the
national
production in the aggregate. The wealth of France was
progressively
increasing during the first forty years of the reign of
Louis XIV., in
spite of the profusion, public and private, that the
splendour of the
court occasioned. The stimulus given to production by Colbert, multiplied her
resources faster than the court squandered them. Some people supposed, that
this very prodigality was
the cause of
their multiplication; the gross fallacy of which notion
is demonstrated
by the circumstance, that after the death of that
minister, the
extravagancies of the court continuing at the same rate,
and the progress
of production being unable to keep pace with them,
the kingdom was
reduced to an alarming state of exhaustion. The
close of that
reign was the most gloomy that can be imagined.
After the death
of Louis XIV., the public and private expenditure of France have been still
further increasing ;f and to me it appears indisputable, that her national
wealth has advanced likewise:
Smith himself
admits that it did ; and what is true of France is so of
most of the
other states of Europe in some degree or other.
Turgot* falls in
with Smith's opinion. He expresses his belief,
that frugality
is more generally prevalent now than in former times,
and gives the
following reasons: that, in most European countries,
the interest of
money was, on the average, lower than it had ever
before been, a
clear proof of the greater abundance of capita]; therefore, that greater
frugality must have been exerted in the accumulation of that capital than at
any former period; and, certainly, the
low rate of
interest proves the existence of more abundant capital:
but it proves
nothing with regard to the manner of its acquirement
in fact, it may
have been acquired just as well by enlarged production as by greater frugality,
as I have just been demonstrating.
However, I am
far from denying, that in many particulars, the
moderns have
improved the art of saving as well as that of producing.
A man is not
easily satisfied with less gratifications than he has been
accustomed to:
but there are many which he has learnt to procure
at a cheaper
rate. For instance, what can be more beautiful than the
coloured
furniture papers that adorn the walls of our apartments,
combining the
grace of design with the freshness of colouring 1 Formerly, many of those
classes of society that now make use of paper
hangings, were
content with whitewashed walls, or a coarse ill-executed tapestry, infinitely
dearer than the modern paperings. By the
recent discovery
of the efficacy of sulphuric acid in destroying the
mucilaginous
articles of vegetable oils, they have been rendered
serviceable in
lamps on the Argand principle of a double current of
air, which
before could only be lighted with fish oil, twice or thrice
as dear. This
discovery has of itself placed the use of those lamps,
and the fine
light they give, within reach of almost every class.f
For this
improvement in frugality, we are indebted to the advances
of industry,
which has, on the one hand discovered a greater number
of economical
processes; and, on the other, everywhere solicited
the loan of capital,
and tempted the holders of it, great or small, by
better terms and
greater security. In times when little industry
existed,
capital, being unprofitable, was seldom in any other shape
than that of a
hoard of specie locked up in a strong box, or buried in
the earth as a
reserve against emergency: however considerable in
amount, it
yielded no sort of benefit whatever, being in fact little
else than a mere
precautionary deposit, great or small. But the
moment that this
hoard was found capable of yielding a profit proportionate to its magnitude,
its possessor had a double motive for
increasing it,
and that not of remote or precautionary, but of actual, immediate benefit;
since the profit yielded by the capital might,
without the
least diminution of it, be consumed and procure additional gratifications.
Thenceforward it became an object of greater
and more general
solicitude than before, in those that had none to
create, and in
those that had one to augment, productive capital; and
a capital
bearing interest began to be regarded as a property equally
lucrative, and
sometimes equally substantial with land yielding rent.
To such as
regard the accumulation of capital as an evil, insomuch as
it tends to
aggravate the inequality of human fortune, I would suggest, that, if
accumulation has a constant tendency to the multiplying
of large
fortunes, the course of nature has anjequal tendency to divide
them again. A
man, whose life has been spent in augmenting hi;
own capital and
that of his country, must die at last, and the succession rarely devolves upon
a sole heir or legatee, except where the
national laws
sanction entails and the right of primogeniture. In
countries exempt
from the baneful influence of such institutions,
where nature is
left to its own free and beneficent action, wealth is
naturally
diffused by subdivision through all the ramifications of the
social tree,
carrying health and life to the furthest extremities.*
The total
capital of the nation is enlarged at the same time that the
capital of
individuals is subdivided.
Thus, the
growing wealth of an individual, when honestly acquired
and
reproductively employed, far from being viewed with jealous
eyes, ought to
be nailed as a source" of general prosperity. I say
honestly acquired,
because a fortune amassed by rapine or extortion
is no addition
to the national stock; it is rather a portion of capital
transferred from
the hands of one man, where it already existed, to
those of
another, who has exerted no productive industry. On the
contrary, it is
but too common, that wealth ill-gotten is ill-spent also.
The faculty of
amassing capital, or, in other words, value, I apprehend to be one cause of the
vast superiority of man over the brute
creation.
Capital, taken in the aggregate, is a powerful engine consigned to the use of
man alone. He can direct towards any one
channel of
employment the successive accumulations of many generations. Other animals can
command, at most, no more than their respjctiAie vnd vidual accumulations,
scraped together in the course
of a lew days,
or a season at the utmost, which can never amount
to any tiling
considerable: so that, granting them a degree of intelligence they do not seem
possessed of, that intelligence would yet
remain
ineffectual, for want of the materials to set it in motion.
Moreover, it may
be remarked, that the powers of man, resulting
from the faculty
of amassing capital, are absolutely indefinable;
because there is
no assignable limit to the capital he may accumulate, with the aid of time,
industry, and frugality.
