Book I, Chapter VI
A Treatise on Political Economy
BOOK I, CHAPTER V
ON THE MODE IN WHICH INDUSTRY, CAPITAL, AND NATURAL AGENTS UNITE IN PRODUCTION.
We have seen how industry, capital, and natural agents concur in production, each in its respective department; and we have likewise seen that these three sources are indispensable to the creation of products. It is not, however, absolutely necessary that they should all belong to the same individual.
An industrious person may lend his industry to another possessed of capital and land only.
The landholder may lend his estate to a person possessing capital and industry only.
Whether the thing lent be industry, capital, or land, inasmuch as all three concur in the creation of value, their use also bears value, and is commonly paid for.
The price paid for the loan of industry is called wages.
The price paid for the loan of capital is called interest.
And that paid for the loan of land is called rent.
The ownership of land, capital, and industry is sometimes united in the same hands. A man who cultivates his own garden at his own expense, is at once the possessor of land, capital, and industry, and exclusively enjoys the profits of proprietor, capitalist, and labourer.
The knife-grinder's craft requires no occupancy of land; he carries his stock in trade upon his shoulders, and his skill and industry at his fingers' ends; being at the same time adventurer,*65 capitalist, and labourer.
It is seldom that we meet with adventurers in industry so poor, as not to own at least a share of the capital embarked in their concern. Even the common labourer generally advances some portion; the bricklayer comes with his trowel in his hand; the journeyman tailor is provided with his thimble and needles; all are clothed better or worse; and though it be true, that their clothing must be found out of their wages, still they find it themselves in advance.
Where the land is not exclusive property, as is the case with some stone-quarries, with public rivers and seas to which industry resorts for fish, pearls, coral, &c., products may be obtained by industry and capital only.
Industry and capital are likewise competent to produce by themselves, when that industry is employed upon products of foreign growth, procurable by capital only; as in the European manufacture of cotton and many other articles. So that every class of manufacture is competent to raise products, provided there be industry and capital exerted. The presence of land is not absolutely necessary, unless perhaps the area whereon the work is done, and which is commonly rented, may be thought to come under this description, as in extreme strictness it certainly must. However, if the ground where the business of industry is carried on, be reckoned as land used, it must at least be admitted, that, with aid of a large capital, an immense manufacturing concern may be conducted upon a very trifling spot of ground. Whence this conclusion may be drawn, that national industry is limited, not by territorial extent, but by extent of capital.
A stocking manufacturer with a capital say of 4000 dollars, may keep in constant work ten stocking frames. If he manages to double his capital he can employ twenty; that is to say, he may buy ten more frames, pay double ground-rent, purchase double the quantity of silk or cotton to be wrought into stockings, and make the requisite advances to double the number of workmen, &c. &c.
But that portion of agricultural industry, devoted to the tillage of land, is, in the course of nature, limited by extent of surface. Neither individuals nor communities can extend or fertilize their territory, beyond what the nature of things permits; but they have unlimited power of enlarging their capital, and consequently, of setting at work a larger body of industry, and thus of multiplying their products; in other words, their wealth.
There have been instances of people, like the Genevese, who with a territory that has not produced the twentieth part of the necessaries of life, have yet contrived to live in affluence. The natives of the barren glens of Jura are in easy circumstances because many mechanical arts are there practised. In the 13th century, the world beheld the republic of Venice, ere it held a foot of land in Italy, derive wealth enough from its commerce to possess itself of Dalmatia, together with most of the Greek isles, and even the capital of the Greek empire. The extent and fertility of a nation's territory depend a good deal upon its fortunate position. Whereas the power of its industry and capital depends upon its own good management; for it is always competent to improve the one and augment the other.
Nations deficient in capital, labour under great disadvantage in the sale of their produce; being unable to sell at long credit, or to grant time or accommodation to their home or foreign customers. If the deficiency be very great indeed, they may be unable even to make the advance of the raw material and their own industry. This accounts for the necessity, in the Indian and Russian trade, of remitting the purchase-money six months or sometimes a year in advance, before the time when an order for goods can be executed. These nations must be highly favoured in other respects, or they never could make considerable sales in the face of such a disadvantage.
Having informed ourselves of the method in which the three great agents of production, industry, capital and natural agents, concur in the creation of products, that is to say, of things applicable to the uses of mankind, let us proceed to analyze more minutely the particular operation of each. The inquiry is important, inasmuch as it leads imperceptibly to the knowledge of what is more and what is less favourable to production, the true source of individual affluence, as well as national power.
Notes for this chapter
The term entrepreneur is difficult to render in English; the corresponding word, undertaker, being already appropriated to a limited sense. It signifies the master-manufacturer in manufacture, the farmer in agriculture, and the merchant in commerce; and generally in all three branches, the person who takes upon himself the immediate responsibility, risk, and conduct of a concern of industry, whether upon his own or a borrowed capital. For want of a better word, it will be rendered into English by the term adventurer. Translator.
Book I, Chapter VI
End of Notes
Return to top