Political Economy

”
Tout ce qui est produit,”
*17 says M. Say, ”
est consommé; par conséquent, toute valeur crée est détruite, et n’ a été créé que pour être détruite.“

“Consumption,” says Mr. Malthus, “is the great purpose and end of all production.”
*18 “By Consumption,” says Mr. M’Culloch, “is meant the annihilation of those qualities which render commodities useful or desirable. To consume the products of Art and Industry is to deprive the matter of which they consist of utility, and consequently of the exchangeable value communicated to it by labour. Consumption is, in fact, the end and object of human exertion, and when a commodity is in a fit state to be used, if its consumption be deferred, a loss is incurred.”
*19

That almost all that is produced is destroyed is true; but we cannot admit that it is produced for the purpose of being destroyed. It is produced for the purpose of being made use of. Its destruction is an incident to its use, not only not intended, but, as far as possible, avoided. In fact, there are some things which seem unsusceptible of destruction except by accidental injury. A statue in a gallery, or a medal or a gem in a cabinet, may be preserved for centuries without apparent deterioration. There are others, such as food and fuel, which perish in the very act of using them, and hence, as these are the most essential commodities, the word consumption has been applied universally as expressing the making use of any thing. But the bulk of commodities are destroyed by those numerous gradual agents which we call collectively
time, and the action of which we strive to retard. If it be true that consumption is the object of all production, the inhabitant of a house must be termed its consumer, but it would be strange to call him its destroyer; since it would unquestionably be destroyed much sooner if uninhabited. It would be an improvement in the language of Political Economy if the expression “to use” could be substituted for that “to consume.” There is, however, so much difficulty in changing an established nomenclature, that we shall continue to use the word consumption, premising that we use it to signify primarily the making use of a thing; a circumstance to which its destruction is generally, but not necessarily, incidental.

The wealth of a Country will much depend on the question, whether the tastes of its inhabitants lead them to prefer objects of slow or of rapid destruction.

It will depend, however, much more on their preference of productive or unproductive consumption.

Productive and Unproductive Consumption.—Productive consumption is that use of a commodity which occasions an ulterior product. Unproductive consumption is, of course, that use which occasions no ulterior product. The characteristic of unproductive consumption is, that it adds to the enjoyment of no one but the consumer himself. Its only effect upon the rest of the community is to diminish
pro tanto the mass of commodities applicable to their use.

Some commodities are unsusceptible of any but unproductive consumption; such are lace, embroidery, jewellery, and the other personal ornaments which are simply decorative, and afford neither warmth nor protection. Under this head may also be ranked tobacco and snuff, and the other stimulants, of which the best that can be said is, that they are not injurious. A much larger class of commodities is designed solely for productive use, and is never consumed unproductively, but by mistake. In this class are all tools, from the simplest to the most complicated; from the spade and the raft, to the steam engine and the Indiaman. But the generality of commodities may be used, according to the will of the proprietor, productively or unproductively; may be consumed so as to substitute some product in lieu of that which has been destroyed, or without any further beneficial result than the immediate pleasure which has accompanied their use. Whatever is capable of supporting human existence may be used to maintain those who are themselves producers, or those who are not. In the first case it is productively, in the second unproductively consumed.

The distinction between productive and unproductive
consumers is less clearly marked than that between productive and unproductive
consumption. To divide men into two classes, productive and unproductive consumers, would, in fact, be a false division, there being few who do not in some respects belong to both classes. So far as a man’s consumption is essential to his production, he belongs to the first class; so far as it is not essential, to the second. Those only can be called simply unproductive who return nothing whatever for what they consume; those only simply productive who indulge in no superfluous consumption whatever.

To the first description belong those who, being provided, through their own previous exertions, or by the accidents of donation or inheritance, with a fund sufficient for their subsistence, are content to dedicate their revenue and their leisure to the purposes of mere enjoyment. This class is never large in any state of society. In an ignorant, and consequently a poor community, the number of those possessing a maintenance independent of exertion is necessarily small. Among civilized nations the love of accumulation, of power, of distinction, and of occupation, and the nobler desire of being more or less extensively useful, all powerfully counteract the slothful principles of our nature. As property becomes more secure, as the avenues to influence are opened, as merit and wealth rise in public estimation over the accidents of birth, as barbarous prejudices degrading to industry wear out, as the influence of sound religion teaches men that they were created for better purposes than selfish pleasure or useless mortification, in fact, as civilization improves, all the motives to voluntary exertion acquire force. And though the number of those who
might live in idleness increases, the proportion of those who are unhappy enough to exercise that privilege diminishes.

Another class consists of those who derive their support solely from the spoil or the charity of others. The number of those who live by rapine has obviously a tendency to diminish in the progress of civilization. About mendicancy there may be some doubt, as some superfluous wealth seems necessary to its existence, and it may be supposed likely to increase with the superfluity on which it feeds. That laws ill framed or ill administered may allow it so to increase we know, from our own experience. But there seems to be no reason to doubt that, under a wise system of commercial and municipal legislation, the number of able-bodied paupers might be so reduced as to be practically unimportant.

The last class of unproductive consumers consists of those whom age or infirmity has rendered permanently incapable of production. We say
permanently, to exclude children, and those suffering under temporary disability. Though a child or an invalid make no immediate return, their support is the necessary condition of their future services. This is by far the largest of the unproductive classes, and one not likely to suffer relative diminution, the same causes which tend to obviate disease and injury tending also to prolong life where their effects are incurable. But from the information collected in the House of Commons’ Report on Friendly Societies, 5th July, 1825, vol. iv., we are inclined to think that in this Country the class in question cannot amount to a fortieth part, or about two-and a-half per cent. of the whole community.

The number of absolutely productive consumers, that is, of persons who consume solely for the purpose of reproducing, is much smaller. It may be a question indeed whether in a Country free from slavery, or regulations resembling slavery, any such class is to be found. The humblest labourer has some expenses which are not essential to his health and strength. We endeavour to give to our domestic animals nothing beyond what is strictly necessary, and in the Countries where man is considered as a domestic animal it might be expected that the consumption of a slave would be equally limited. But even the slave generally acquires some peculium, which implies that his ordinary subsistence somewhat exceeds his wants.

It appears from this analysis that the bulk of the community are neither productive nor unproductive consumers, but may be referred to the one class or to the other, according to the portion of their expenses for the time being under consideration. So far as the husbandman takes just enough of the least expensive food, is just sufficiently clad with the simplest raiment, and inhabits a dwelling just sufficiently weather-tight and spacious to protect him from the seasons, he is a productive consumer. But his pipe and his gin, and generally speaking his beer, and the humble ornaments of his person and his dwelling, form his unproductive consumption.

We do not, of course, mean it to be inferred that all personal expenditure beyond mere necessaries is necessarily unproductive. The duties of those who fill the higher ranks in society can seldom be well performed unless they conciliate the respect of the vulgar by a certain display of opulence. If a Judge, or an Ambassador, required by his station to support an establishment costing £2000 a-year, should spend £4000, half of his consumption would be productive, and the other half unproductive. It would be a great mistake, however, to consider the third footman behind his coach, though a mere useless weight to the horses, an unproductive consumer. What the footman consumes are his wages, and, so far at least as he consumes them in order to enable himself to perform his services as footman, he is a productive consumer. The things unproductively consumed are his services, and
they are consumed by his master. Nor is it to be supposed, on the other hand, that all consumption even of necessaries by those who are themselves producers, is a productive consumption. The half-employed pauper whose labour is worth £10 a-year, and whose consumption is £20, consumes unproductively the difference.

Instruments of Production.

Having explained the nature of Production and Consumption, we now proceed to consider the Agents by whose intervention Production takes place.

I. Labour.—The primary Instruments of Production are Labour and those Agents of which nature, unaided by man, affords us the assistance.

Labour is the voluntary exertion of bodily or mental faculties for the purpose of Production. It may appear unnecessary to define a term having a meaning so precise and so generally understood. Peculiar notions respecting the causes of value have, however, led some Economists to employ the term labour in senses so different from its common acceptation, that for some time to come it will be dangerous to use the word without explanation. We have already observed that many recent writers have considered value as solely dependent on labour. When pressed to explain how wine in a cellar, or an oak in its progress from a sapling to a tree, could, on this principle, increase in value, they replied that they considered the improvement of the wine and the growth of the tree as so much additional labour bestowed on each. We do not quite understand the meaning of this reply; but we have given a definition of labour, lest we should be supposed to include in it the unassisted operations of nature. It may also be well to remind our readers that this definition excludes all those exertions which are not intended, immediately or through their products, to be made the subjects of exchange. A hired messenger and a person walking for his amusement, a sportsman and a gamekeeper, the ladies at an English ball and a company of Natch girls in India, undergo the same fatigues; but ordinary language does not allow us to consider those as undergoing labour who exert themselves for the mere purpose of amusement.

II. Natural Agents.—Under the term “the agents offered to us by nature,” or, to use a shorter expression, “Natural Agents,” we include every productive agent so far as it does not derive its powers from the act of man.

The term “Natural Agent” is far from being a convenient designation, but we have adopted it partly because it has been already made use of in this sense by eminent writers, and partly because we have not been able to find one less objectionable. The principal of these agents is the land, with its mines, its rivers, its natural forests with their wild inhabitants, and, in short, all its spontaneous productions. To these must be added the ocean, the atmosphere, light and heat, and even those physical laws, such as gravitation and electricity, by the knowledge of which we are able to vary the combinations of matter. All these productive agents have in general, by what appears to be an inconvenient synecdoche, been designated by the term
land; partly because the land, as a source of profit, is the most important of those which are susceptible of appropriation, but chiefly because its possession generally carries with it the command over most of the others. And it is to be remembered that, though the powers of nature are necessary to afford a substratum for the other instruments of production to work upon, they are not of themselves, when universally accessible, causes of value. Limitation in supply is, as we have seen, a necessary constituent of value; and what is universally accessible is practically unlimited in supply.

III. Abstinence.—But although Human Labour, and the Agency of Nature, independently of that of man, are the primary Productive Powers, they require the concurrence of a Third Productive Principle to give to them complete efficiency. The most laborious population, inhabiting the most fertile territory, if they devoted all their labour to the production of immediate results, and consumed its produce as it arose, would soon find their utmost exertions insufficient to produce even the mere necessaries of existence.

To the Third Principle, or Instrument of Production without which the two others are inefficient, we shall give the name of
Abstinence: a term by which we express the conduct of a person who either abstains from the unproductive use of what he can command, or designedly prefers the production of remote to that of immediate results.

It was to the effects of this Third Instrument of Production that we adverted, when we laid down, as the third of our elementary propositions, that
the Powers of Labour and of the other Instruments which produce Wealth may be indefinitely increased by using their Products as the means of further Production. All our subsequent remarks on abstinence are a development and illustration of this proposition; we say development and illustration, because it can scarcely be said to require formal proof.

The division of the Instruments of Production into three great branches has long been familiar to Economists. Those branches they have generally termed Labour, Land, and Capital. In the principle of this division we agree; though we have substituted different expressions for the second and third branches. We have preferred the term Natural Agents to that of Land, to avoid designating a whole genus by the name of one of its species: a practice which has occasioned the other cognate species to be generally slighted and often forgotten. We have substituted the term Abstinence for that of Capital on different grounds.

The term Capital has been so variously defined that it may be doubtful whether it have any generally received meaning. We think, however, that, in popular acceptation, and in that of Economists themselves, when they are not reminded of their definitions, that word signifies
an article of wealth, the result of human exertion, employed in the production or distribution of wealth. We say the result of human exertion, in order to exclude those productive instruments to which we have given the name of natural agents, and which afford not profit, in the scientific sense of that word, but rent.

It is evident that Capital, thus defined, is not a simple productive instrument; it is in most cases the result of all the three productive instruments combined. Some natural agent must have afforded the material, some delay of enjoyment must in general have reserved it from unproductive use, and some labour must in general have been employed to prepare and preserve it.
By the word Abstinence, we wish to express that agent, distinct from labour and the agency of nature, the concurrence of which is necessary to the existence of Capital, and which stands in the same relation to Profit as Labour does to Wages. We are aware that we employ the word Abstinence in a more extensive sense than is warranted by common usage. Attention is usually drawn to abstinence only when it is not united with labour. It is recognised instantly in the conduct of a man who allows a tree or a domestic animal to attain its full growth; but it is less obvious when he plants the sapling or sows the seed corn. The observer’s attention is occupied by the labour, and he omits to consider the additional sacrifice made when labour is undergone for a distant object. This additional sacrifice we comprehend under the term Abstinence; not because Abstinence is an objectionable expression for it, but because we have not been able to find one to which there are not still greater objections. We once thought of using “providence;” but providence implies no self-denial, and has no necessary connection with profit. To take out an umbrella is provident, but not in the usual sense of the word profitable. We afterwards proposed “frugality,” but frugality implies some care and attention, that is to say, some labour; and though in practice Abstinence is almost always accompanied by some degree of labour, it is obviously necessary to keep them separate in an analysis of the instruments of production.

It may be said that pure abstinence, being a mere negation, cannot produce positive effects; the same remark might as well be applied to intrepidity, or even to liberty; but who ever objected to their being considered as equivalent to active agents? To abstain from the enjoyment which is in our power, or to seek distant rather than immediate results, are among the most painful exertions of the human will. It is true that such exertions are made, and indeed are frequent in every state of society, except perhaps in the very lowest, and have been made in the very lowest, for society could not otherwise have improved; but of all the means by which man can be raised in the scale of being, abstinence, as it is perhaps the most effective, is the slowest in its increase, and the least generally diffused. Among nations, those that are the least civilized, and among the different classes of the same nation those which are the worst educated, are always the most improvident, and consequently the least abstinent.

Capital.—We have already defined Capital to be an article of wealth, the result of human exertion, employed in the production or distribution of wealth, and we have observed that each individual article of capital is in general the result of a combination of all the three great instruments of production—labour, abstinence, and the agency of nature.

Different Modes in which Capital may be employed.—When a man has possessed himself of any article of wealth, and resolves to employ it, not for the mere purposes of enjoyment, but as Capital, or, in other words, as a means of further production, or of distribution, there appear to be eight modes in which his design may be effected.

Most capitalists employ portions of their capital in all these eight modes.

If we suppose a wine retailer’s capital to consist of the knowledge which he has acquired during his education for his business, of the warehouse and the simple machinery necessary to his trade, of the stock of commodities necessary for his own current consumption, and of one hundred pipes of wine in wood and in bottle, we shall find that his knowledge, and machinery, and necessaries, are destroyed without ever being directly exchanged: the only difference being, first, that his knowledge remains unimpaired until either his death, or his retirement from business makes it suddenly valueless, while his buildings, and machinery, and clothes, furniture, and food are consumed and replaced at successive periods; and, secondly, that the destruction of his food is immediate, and that of his buildings, machinery, furniture, and clothing is gradual. We shall find that of the wine he retains a portion until it shall have been improved by age, and keeps a portion as stock in trade ready for immediate sale, but ultimately sells the whole and pays away its price, partly in rent for the land covered by his buildings, partly in wages to his clerks, porters, shopmen, and other labourers, partly in keeping up his buildings and machinery, and partly in the repurchase of wine, bottles, and corks to keep up the stock in his warehouse and shop. What remains of the price of his wine, and something must remain, or he would be in a worse situation than one of his own labourers, is generally termed his
profit: a part of it he must employ in replacing the stock of commodities necessary to keep himself in health and strength; the remainder he may employ either in his own personal enjoyment and that of his friends, which is an unproductive use, or in the increase of his own capital, or in creating a capital for some other person, in the education, for instance, of his son, which are productive uses.

Fixed and Circulating Capital.—Adam Smith has divided Capital into fixed and circulating.

“There are two ways,” he observes, “in which a capital may be employed so as to yield a revenue or profit.

“First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit. The capital employed in this manner yields no revenue or profit to its employer while it either remains in his possession or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another, and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capitals, therefore, may properly be called
circulating capitals.

“Secondly, it may be employed in the improvement of land, in the purchase of useful machines and implements of trade, or in such like things as yield a revenue or profit without changing masters or circulating any further. Such capitals, therefore, may properly be called
fixed capitals.

“The capital of a merchant is altogether a circulating capital. He has occasion for no machines or instruments of trade, unless his shop or warehouse be considered as such.

“Some part of the capital of every master artificer or manufacturer must be fixed in the instruments of his trade. This part, however, is very small in some, and very large in others. A master tailor requires no other instrument of trade than a parcel of needles; those of a master shoemaker are a little, though but a little, more expensive.

“In other works a much greater fixed capital is required. In a great iron work, for example, the furnace, the forge, the slit mill, are instruments of trade which cannot be erected without a very great expense. That part of the capital of the farmer which is employed in the instruments of agriculture is a fixed, that which is employed in the wages and maintenance of his labouring servants is a circulating, capital. He makes a profit of the one by keeping it in his own possession, and of the other by parting with it. A herd of cattle, bought in to make a profit by their milk and increase, is a fixed capital; the profit is made by keeping them. Their maintenance is a circulating capital; the profit is made by parting with it.” (Book ii. ch. i.)

We are not aware that the principle of Adam Smith’s division has ever been directly objected to. There may be some doubt, perhaps, whether the terms fixed and circulating are the best that could have been selected; but Adam Smith has stamped on them the meaning which he intended, and they have passed current in that signification ever since.

Mr. Ricardo, however, with the inattention to established usage which so much diminishes the usefulness of his writings, has used the terms fixed and circulating capital in a totally different sense. In this he has been followed by Mr. Mill; and as neither of these writers intimates that his use of the words is not the common one, it may be well to mark the difference.

“According as capital is rapidly perishable,” says Mr. Ricardo, “and requires to be frequently reproduced, or is of slow consumption, it is classed under the heads of circulating or of fixed capital: a division not essential, and in which the line of demarcation cannot be accurately drawn. A brewer, whose buildings and machinery are valuable and durable, is said to employ a large portion of fixed capital: on the contrary, a shoemaker, whose capital is chiefly employed in the payment of wages, which are expended on food and clothing, commodities more perishable than buildings and machinery, is said to employ a large proportion of capital as circulating capital.” (Ch. i. sec. 4.)

Mr. Ricardo might well remark that the line of demarcation between his two sorts of capital cannot be accurately drawn; for what can be more vague, or more void of positive meaning, than such comparative terms as slow and rapid? The singular circumstance is that both he and Mr. Mill should have supposed, and it appears clear that they did suppose, that their division followed that of Adam Smith. It is obviously a cross division. The master tailor’s needles which Adam Smith selects as an example of fixed capital, because the tailor retains them, would, according to Mr. Ricardo, be circulating, because they are perishable. On the other hand, the materials and stock in trade of an iron founder would be circulating capital according to Smith, and fixed according to Ricardo.

We may be able to make the nature of capital, and Adam Smith’s conception of it, still clearer, by quoting his subdivision of fixed and circulating capitals.

“Fixed capital,” he says, “consists chiefly of the four following articles:—

“First, of all useful machines and instruments of trade which facilitate and abridge labour.

“Secondly, of all buildings used for the purpose of trade or manufacture; such as shops, warehouses, and farm-buildings, &c. They are a sort of instruments of trade, and may be considered in the same light.

“Thirdly, of the improvements of land, of what has been profitably laid out in clearing, draining, enclosing, manuring, and reducing it into the condition most proper for culture. An improved farm may be regarded in the same light as one of those useful machines which facilitate and abridge labour.

“Fourthly, of the acquired and useful abilities of all the members of the society. The acquisition of such talents by the maintenance of the acquirer during his education, study, or apprenticeship, costs an expense, which is a capital fixed and realized, as it were, in his person. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour.

“The circulating capital is composed likewise of four parts:—

“First, of the money by means of which all the other three are circulated and distributed to their proper consumers.

“Secondly, of the stock of provisions in the possession of the butcher, the grazier, &c., for the purpose of sale.

“Thirdly, of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and building, which are not yet made up, but remain in the hands of the growers, manufacturers, or merchants.

“Fourthly, of the work which is made up and completed, but is still in the hands of the merchant or manufacturer; such as the finished work in the shops of the smith, the goldsmith, the jeweller, and the china merchant. The circulating capital consists in this manner, of the provisions, materials, and finished work of all kinds which are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them to their final consumers.” Book ii. ch. i.

This enumeration contains, perhaps, some useless distinctions, and, we think, two improper exclusions, but generally speaking, it gives an excellent view of the different species of capital.

The things which appear to be improperly excluded are, first, the necessaries of life, consumed by the labourer and the capitalist for their own support: and, secondly, the houses and other commodities of slow consumption which the owner lets out to the consumer.

Adam Smith can scarcely be said to have explained his reason for excluding from the term capital the necessaries in the possession of the labourer. He merely observes that the labourer consumes as sparingly as he can, and derives his revenue only from his labour. The attention of Mr. Malthus has been drawn to the subject; he agrees in this respect with Adam Smith, and on the following grounds:

“The only productive consumption, properly so called, is the consumption or destruction of wealth by
capitalists with a view to reproduction. This is the only marked line of distinction which can be drawn between productive and unproductive consumption. The workman whom the capitalist employs consumes that part of his wages which he does not save, as revenue, with a view to subsistence or enjoyment; and not as capital with a view to production.”
Definitions, p. 258.

Mr. Malthus would admit that the coals in the furnace of a steam-engine are productively employed; because their consumption is the necessary condition to the engine’s performing its work. And in what does the consumption of food by a labourer differ from that of coals by a steam-engine? Simply in this, that the labourer derives pleasure from what he consumes, and the steam-engine does not. If a labourer were so constituted as so feel no craving for food, and no gratification from eating, and were reminded of its necessity only by the debility consequent on its want, would not his meals, taken as they would be solely to enable him to undergo his fatigues, be productively consumed? Nature has wisely enforced an act of daily necessity by the stimulus of hunger, and the reward of enjoyment, but do that stimulus and enjoyment detract from its productiveness? Is the ploughman’s dinner less the means of his toils because he considers it as their end? Is not the food of working cattle productively employed? Does not the owner of a West Indian estate consider the supplies which he sends to his slaves as a capital destined to productive consumption?

Adam Smith has stated at length his reasons for excluding from the term capital the houses and other articles which the owner lets out to the consumer.

“One portion,” he states, “of the stock of a society is reserved for immediate consumption, of which the characteristic is that it affords no revenue or profit. The whole stock of mere dwelling-houses makes a part of this portion. If a house be let to a tenant, as the house itself can produce nothing, the tenant must pay the rent out of some other revenue which he derives either from labour, or stock, or land. Where masquerades are common, it is a trade to let out dresses for the night. Upholsterers frequently let furniture by the month or the year. The revenue, however, which is derived from such things must always be ultimately derived from some other source of revenue. A stock of clothes may last for several years; a stock of furniture half a century or a century; but a stock of houses, well built and properly taken care of, may last many centuries. Though the period of their total consumption, however, is more distant, they are still as really a stock reserved for immediate consumption as either clothes or furniture.” Book ii. ch. i.

This language would have been consistent if Adam Smith, like most of his successors, had confined the term capital to the instruments of further consumption. But we have seen that he includes under that term things incapable of productive consumption, if they have not reached the hands of those who are finally to use them. If a diamond necklace in a jeweller’s shop be correctly termed capital, and Adam Smith has expressly stated that it is so, why is not a house which has been just finished by a speculative builder? It is difficult to perceive why he should have laid so much stress on the perishableness of the things in question. Perishableness and durability are not elements in the distinction between what is and what is not to be correctly termed capital. Many of the things which are used productively are of almost evanescent existence, such as the gas which lights a manufactory. On the other hand, the jewels of a noble family are not capital, though no limits can be assigned to their duration. It is at least conceivable that a house might be built so as not to require repair, and would this circumstance affect the question? In fact, however, the perishableness of these things is unfavourable to Adam Smith’s view, as it shows their resemblance to things which he has admitted to be capital. A cellar of wine at a tavern-keeper’s falls under his third class of circulating capitals; gradually the cellar is emptied, and when the last bottle has been drunk the capital is at an end. A house let ready furnished, a circulating library, a job carriage, a stage coach, or a steam-packet, differs from the cellar of wine only because the progress of its consumption is less capable of being measured. Every day that it is used a portion wears away; and that portion is as much purchased and as much consumed by the hirer of the house or the carriage as the bottle of wine taken from the cellar. It is true that it may be consumed unproductively, and that in that case the hirer must pay the rent from some other revenue, as is the case with the price of
whatever is unproductively consumed. But the portion of the house and furniture and carriage, for the time being unconsumed, is as much the capital, in the sense in which Adam Smith uses that word, of the upholsterer and the hackneyman, as the unconsumed portion of the wine is the capital of the tavern-keeper.

Capital may again be divided, according to the purposes to which it is applicable, into Reproductive, Simply Productive, and Unproductive.

We apply the term
Reproductive to all those articles of wealth which may be used to produce things of the same kind with themselves. All agricultural stock is reproductive; and so are all the necessaries of life. That portion of them which is consumed by the capitalists and labourers employed in producing necessaries is one of the means by which the regular supply is kept up. The coals in the furnace of a steam engine used in working a coal mine, the iron instruments in an iron work, and a ship freighted with timber and naval stores are all reproductively employed,

We apply the term
Simply Productive to those articles of wealth which, though instruments of production, cannot be employed in producing things of the same kind with themselves. A lace machine is simply productive. Its use is to make lace, but that lace cannot be employed to make a new machine. All the tools and machinery employed in the production of those things which cannot be productively consumed are themselves simply productive.

We apply the term
Unproductive or distributive capital to those commodities which are destined to unproductive use, but have not become the property of those who are to be their ultimate consumers.

A very great portion, perhaps the greater portion in value, of the commodities produced in an improved state of society, fall under this head at their first production.

We have already observed that, in every state of society, the number of absolutely unproductive
consumers is small, and the number of absolutely productive consumers still smaller. But as wealth increases every man increases his unproductive
consumption, until the whole amount of the whole society of such consumption may, and often does, exceed the whole amount of productive consumption. If we look through the shops of an opulent city, we shall find the commodities destined to mere enjoyment far exceeding in value those destined to be employed in further production.

Some of Adam Smith’s successors have excluded the things of which we are now speaking from the term capital. We have followed his example in including them, for two reasons:—

First, because their exclusion is an unnecessary deviation from ordinary language. To say that a jeweller, with £50,000 worth of diamond ornaments in his shop, had no capital, would be an assertion of which few hearers would be able to guess the meaning,

But, in the second place, if it were possible to do, what certainly is much wanted, to form a new technical nomenclature for Political Economy, still we should include under the term capital the commodities in question. All Economists include under that term the materials and the instruments with which these commodities are formed. If the rough diamond and the gold in which it is to be set are capital while separate, it seems difficult to see what convenience there is in a nomenclature which denies them to be capital when united. Again, no Economist will doubt that a profit is received in proportion to the average time during which the commodities in question are retained by the capitalist. Why this profit is paid we shall endeavour to show hereafter, but the fact that it is paid may be assumed as unquestioned. But Economists are agreed that whatever gives a profit is properly termed capital.

Statement of Advantages derived from the Use of Capital.

The principal advantages derived from Abstinence, or, to express the same idea in more familiar language, from the Use of Capital, are two: first, the Use of Implements; and second, the division of Labour.

I. The Use of Implements.—Implements, or tools, or machines (words which express things perhaps slightly different in some respects, but precisely similar so far as they are the subjects of Political Economy) have been divided into those which produce power, and those which transmit power. Under the first head are comprehended those which produce motion independently of human labour. Such are, for instance, those machines which are worked by the force of wind, of water, or of steam,

The second head comprises what are usually termed tools, such as the spade, the hammer, or the knife which assist the force, or save the time of the workman, but receive their impulse from his hand.

To these two classes a third must be added, including all those instruments which are not intended to produce or transmit motion, using that word in its popular sense. This class includes many things to which the name of implement, tool, or machine is not generally applied. A piece of land prepared for tillage, and the corn with which it is to be sown, are among the implements by whose use the harvest is produced. Books and manuscripts are implements more productive than those invented by Arkwright or Brunel. Again, many of the things which popularly
are called implements, such as the telescope, have no reference to motion; and others, such as a chain, or an anchor, or indeed any fastening whatever, are intended not to produce or transmit, but to prevent it.

The instruments which derive their impulse from the person who works them are in general of a simple description, and some of them are to be met with in the rudest state of human society. The first subsistence offered by nature to the savage consists of the brutes around him; but some instruments beyond the weapons which she has given to him must enable him to take advantage of her bounty.

It will be observed, that we consider the use of all implements as implying an exercise of abstinence, using that word in our extended sense as comprehending all preference of remote to immediate results. In civilized society this appears to be strictly true. It is obviously true as to the
use of all those instruments and materials which may be used at will, either for the purpose of present enjoyment, or for that of further production, such, for example, as the greater part of agricultural stock. It is equally true as to the
making of all those implements which are incapable of any but productive use, such as tools and machinery in the popular acceptation of those words. In an improved state of society, the commonest tool is the result of the labour of previous years, perhaps of previous centuries. A carpenter’s tools are among the simplest that occur to us. But what a sacrifice of present enjoyment must have been undergone by the capitalist who first opened the mine of which the carpenter’s nails and hammer are the product! How much labour directed to distant results must have been employed by those who formed the instruments with which that mine was worked? In fact, when we consider that all tools, except the rude instruments of savage life, are themselves the product of earlier tools, we may conclude that there is not a nail, among the many millions annually fabricated in England, which is not to a certain degree the product of some labour for the purpose of obtaining a distant result, or, in our nomenclature, of some abstinence undergone before the Conquest, or perhaps before the Heptarchy.

The same remark applies to the acquired abilities which Adam Smith has properly considered a capital fixed and realized in the person of their possessor. In many cases they are the result of long previous exertion and expense on his own part; exertion and expense which might have been directed to the obtaining objects of immediate enjoyment, but which have, in fact, been undergone solely in the hope of a distant reward. And in almost all cases they imply much expense, and consequently much sacrifice of immediate enjoyment on the part of parents or guardians. The maintenance of a boy during the first eight or nine years of his life is indeed an unavoidable burden, and therefore cannot be considered a sacrifice. But almost all that is expended on him after that age is voluntary. At nine or ten he might earn a maintenance in an agricultural, and more than a bare maintenance in a manufacturing employment, and at twenty-one obtain better wages than at any subsequent period of his life. But even the lowest department of skilled labour is in general inaccessible except at an expense very great, when we consider by whom it is to be borne; £15 or £20 is a low apprentice fee, but amounts to half the average annual income of an agricultural family. The greater part of the remuneration for skilled labour is the reward for the abstinence implied by a considerable expenditure on the labourer’s education.

We must admit, however, that this reasoning does not apply to society in that rude state which is not perhaps within the scope of Political Economy. The savage seldom employs in making his bow or his dart time which he could devote to the obtaining of any object of immediate enjoyment. He exercises, therefore, labour and providence, but not abstinence. The first step in improvement, the rise from the hunting and fishing to the pastoral state, implies an exercise of abstinence. Much more abstinence, or, in other words, a much greater use of capital, is required for the transition from the pastoral to the agricultural state; and an amount not only still greater, but constantly increasing, is necessary to the prosperity of manufactures and commerce. An agricultural Country can remain stationary; a commercial and manufacturing one cannot. The capital which fifty years ago enabled England to be the first of commercial and manufacturing nations, was probably far inferior in extent and efficiency to that now possessed by France, or even to that of the late Kingdom of the Netherlands. If our capital had remained stationary, we should have sunk to a second or third-rate power. The same consequence might now follow if commercial restraints, or the waste of a long war, should check the increase of our present capital, while that of our rivals should continue progressive.

Having shown the connection between abstinence and the employment of implements, the next thing to be considered is the advantage which the use of implements affords. This subject, however, we shall pass over very briefly; partly because an attempt to give any thing like an adequate account of it, however concise, would far exceed the limits of this Treatise; partly because the subject has been considered at some length in the Articles in this Encyclopædia on Mechanics and Manufactures; and partly because we believe all our readers to be aware that the powers of man are prodigiously increased by the use of implements, though probably no man ever had, or ever will have, sufficient knowledge of details and perception of their relations and consequences, to estimate the whole amount of that increase. A few remarks on those instruments which produce motion, or, as it is technically termed,
power, are all that we can venture on.

The superior productiveness of modern compared with ancient labour depends, perhaps, principally on the use of these instruments. We doubt whether all the exertions of all the inhabitants of the Roman Empire, if exclusively directed to the manufacture of cotton goods, could, in a whole generation, have produced as great a quantity as is produced every year by a portion of the inhabitants of Lancashire; and we are sure that the produce would have been generally inferior in quality. The only moving powers employed by the Greeks or Romans were the lower animals, water, and wind. And even these powers they used very sparingly. They scarcely used wind except to assist their merchant vessels in a timid coasting; they used rivers as they found them, for the purposes of communication, but did not connect them by canals; they used horses only for burthen and draught, and the latter without the assistance of springs. They made little use of that powerful machine to which we give the general name of a mill, in which a single shaft, turning under the impulse of animal power, or wind, or water, or steam, enables a child to apply a force equal sometimes to that of a thousand workmen.

A ship of the line under full sail has been called the noblest exhibition of human power: it is, perhaps, the most beautiful. But if dominion over matter, if the power of directing inanimate substances, at the same time to exert the most tremendous energy, and to perform the most delicate operations, be the test, that dominion and power are no where so strikingly shown as in a large cotton manufactory. One of the most complete which we have seen is that constructed by the late Mr. Marsland at Stockport; and, as it exhibits very strikingly both the power and the manageableness of machinery, it may be worth while to give a short description of it, as we saw it in 1825.

Mr. Marsland was the proprietor of the Mersey for about a mile of its course, and of a tongue of land which two reaches of the river form into a peninsula. Through the isthmus of this peninsula he bored a tunnel sufficient to receive seven wheels of large diameter, and to give passage to enough of the river to turn them; these wheels communicated rotatory motion to perpendicular shafts; and the perpendicular shafts communicated the same motion to numerous horizontal shafts connected with them by pinions. Each horizontal shaft ran below the ceiling of a work-room, more than a hundred feet long. The buildings connected with the wheels worked by the river contained six or seven storeys of work-rooms, each supplied with its horizontal shaft. The rotatory motion was carried on from each horizontal shaft by means of small solid wheels called drums, affixed to the principal shaft of each detached piece of machinery, and connected with the great horizontal shaft of the work-room by a leathern strap. Many of these rooms were not occupied by Mr. Marsland himself. He let out, by the hour, the day, or the week, a certain portion of the floor of a work-room, and the liberty to make use of a certain portion of the horizontal shaft. The tenant placed his own machinery on the floor, connected its drum with the shaft that revolved rapidly above, and instantly saw his own small mechanical world, with its system of wheels, rollers, and spindles, in full activity, performing its motions with a quickness, a regularity, and, above all, a perseverance, far beyond the exertions of man. In the operation of machinery, power, like matter, seems susceptible of indefinite aggregation and of indefinite subdivision. In the performance of some of its duties the machinery moved at a rate almost formidable, in others at one scarcely perceptible. It took hold of the cotton of which a neckcloth was to be made, cleaned it, arranged its fibres longitudinally, twisted them into a strong and continuous thread, and finally wove that thread into muslin. It took the wool of which a coat was to be made, and, after subjecting it to processes more numerous than those which cotton experiences, at last wove it into cloth. For thousands of years, in fact, from the last great convulsion which traced the course of the river, until Mr. Marsland bored his tunnel, had the Mersey been wasting all the energy that now works so obediently.

One of the most striking qualities of machinery is its susceptibility of indefinite improvement. On looking through the instructive evidence collected by the Committee on Artisans and Machinery, (1824,) it will be found that nothing is more impressed on the minds of the witnesses than the constant tide of improvement, rendering obsolete in a very few years all that might have been supposed to be perfect.

Mr. Holdsworth, a spinner and machine-maker at Glasgow, states that the best mills at Glasgow are equal to the best mills at Manchester erected three or four years before. Mr. Holdsworth’s history of his own proceedings will illustrate many of the previous observations.

He is asked whether he got his machinery from Manchester when he first commenced business. He replies: “I did not; I contemplated making it myself, and made the attempt, but there was so much difficulty in getting good workmen, and the expense of tools was so serious, that I desisted. I then selected a well-qualified young mechanic, and engaged him to make it for me. I gave over to him my patterns and my plans, and he executed well the machinery required in the first mill. Two years after I built a second mill, the machinery of which was also executed by him. After two years more I built a third and larger mill, the machinery of which I made myself”

He is asked why he made the last machinery himself, and replies:

“In the first place that machine-maker was very busy;” (it appears, subsequently, that, at the time of the examination, that maker could not have taken an order to execute any part of it under sixteen months, and that there were then eight or nine mills waiting for machinery, some of which had been ready for twelve months, and had only a small part of their machinery, and others had been ready six months, and were empty;) “and as machine-makers do not like to alter their plans, I could not prevail upon him to execute the improvements then recently made in Manchester.” (Fifth Report, p. 378.)

Mr. J. Dunlop is asked (p. 473,) how far he considers the American factories behind those of Glasgow. He replies, about thirty years. He goes on to state that they are in a progressive state, and the men very active and industrious. He is then asked whether, “supposing English machinery transported to America, with the assistance of English foremen, he does not think the population of America would soon be taught to work in their factories equally to the men of this Country?” He answers, “Yes, I think they would; but before they could acquire that we should be ahead of them a long way again. I reason comparing Scotland with England. We began the business of cotton-spinning later, we were of course behind, and we have always been behind; we have never been able to get up, and I believe never will.”

Sixty years form a short period in the history of a nation; yet what changes in the state of England and the Southern parts of Scotland have the steam engine and the cotton machinery effected within the last sixty years! They have almost doubled the population, more than doubled the wages of labour, and nearly trebled the rent of land. They enabled us to endure, not certainly without inconvenience, but yet to endure, a public debt more than trebled, and a taxation more than quadrupled. They changed us from exporters to importers of raw produce, and consequently changed our corn laws from a bounty on exportation to nearly a prohibition of importation. They have clad the whole world with a light and warm clothing, and made it so easy of acquisition that we are perhaps scarcely aware of the whole enjoyment that it affords.

There appears no reason, unless that reason be to be found among our own commercial institutions, why the improvements of the next sixty years should not equal those of the preceding. The cotton machinery is far from perfection; the evidence which we have quoted shows that it receives daily improvements; and the steam engine is in its infancy; its first application to vessels is within our recollection; its application to carriages has scarcely commenced; and it is probable that many other powers of equal efficiency lie still undiscovered among the secrets of nature, or, if known, are still unapplied. There are doubtless at this instant innumerable productive instruments known, but disregarded, because separately they are inefficient, and the effect of their combination has not been perceived. Printing and paper are both of high antiquity. Printing was probably known to the Greeks; it certainly was practised by the Romans, as loaves of bread stamped with the baker’s initials have been found in Pompeii. And paper has been used in China from times immemorial. But these instruments separately were of little value. While so expensive a commodity as parchment, or so brittle a one as the papyrus, were the best materials for books, the sale of a number of good copies sufficient to pay the expense of printing could not be relied on. Paper without printing was more useful than printing without paper; but the mere labour necessary to constant transcription, even supposing the materials to be of no value, would have been such as still to leave books an expensive luxury. But the combination of these two instruments, each separately of little utility, has always been considered the most important invention in the history of man.

II. Division of Labour.—The second of the two principal advantages derived from Abstinence, or, in other words, from the use of Capital, is the Division of Labour.

We have already observed that Division of Production would have been a more convenient expression than Division of Labour; but Adam Smith’s authority has given such currency to the term Division of Labour, that we shall continue to employ it, using it, however, in the extended sense in which it appears to have been used by Adam Smith. We say
appears to have been used, because Smith, with his habitual negligence of precision, has given no formal explanation of his meaning. But in the latter part of his celebrated first chapter, he appears to include among the advantages derived from the division of labour all those derived from internal and external commerce. It is clear, therefore, that, by Division of Labour, he meant Division of Production, or, in other words, the confining as much as possible each distinct producer and each distinct class of producers to operations of a single kind.

The advantages derived from the division of labour are attributed by Smith to three different circumstances. “First, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.”

Smith was the first writer who laid much stress on the division of labour. The force and the variety of the examples by which he has illustrated it make the first chapter perhaps the most amusing and the best known in his whole Work. But, like most of those who have discovered a new principle, he has in some respects overstated, and in others understated, its effects. His remark, “that the invention of all those machines by which labour is so much facilitated and abridged seems to have been originally owing to the division of labour,” is too general. Many of our most useful implements have been invented by persons neither mechanics by profession, nor themselves employed in the operations which those implements facilitate. Arkwright was, as is well known, a barber; the inventor of the power-loom is a clergyman. Perhaps it would be a nearer approach to truth if we were to say that the division of labour has been occasioned by the use of implements. In a rude state of Society, every man possesses, and every man can manage, every sort of instrument. In an advanced state, when expensive machinery and an almost infinite variety of tools have superseded the few and simple implements of savage life, those only can profitably employ themselves in any branch of manufacture who can obtain the aid of the machinery, and have been trained to use the tools, by which its processes are facilitated; and the division of labour is the necessary consequence. But, in fact, the use of tools and the division of labour so act and react on one another, that their effects can seldom be separated in practice. Every great mechanical invention is followed by an increased division of labour, and every increased division of labour produces new inventions in mechanism.

——— Alterius sic
Altera poscit opem res et conjurat amice.

The increased dexterity of the workman, and the saving of the time which would be lost in passing from one sort of work to another, deserve the attention which they have received from Adam Smith. Both are consequences, and the first is a very important consequence of the division of labour. But he has passed by, or at least has not formally stated, other advantages derived from that principle which appear to be far more important.

One of the principal of these advantages arises from the circumstance that the same exertions which are necessary to produce a single given result are often sufficient to produce many hundred or many thousand similar results. The Post Office supplies a familiar illustration. The same exertions which are necessary to send a single letter from Falmouth to New York are sufficient to forward fifty, and nearly the same exertions will forward ten thousand. If every man were to effect the transmission of his own correspondence, the whole life of an eminent merchant might be passed in travelling, without his being able to deliver all the letters which the Post Office forwards for him in a single evening. The labour of a few individuals, devoted exclusively to the forwarding of letters, produces results which all the exertions of all the inhabitants of Europe could not effect, each person acting independently.

The utility of government depends on this principle. In the rudest state of society each man relies principally on himself for the protection both of his person and of his property. For these purposes he must be always armed, and always watchful; what little property he has must be moveable, so as never to be far distant from its owner. Defence or escape occupy almost all his thoughts, and almost all his time, and, after all these sacrifices, they are very imperfectly effected. “If ever you see an old man here,” said an inhabitant of the confines of Abyssinia to Bruce, “he is a stranger; the natives all die young by the lance.”

But the labour which every individual, who relies on himself for protection, must himself undergo, is more than sufficient to enable a few individuals to protect themselves, and also the whole of a numerous community. To this may be traced the origin of governments. The nucleus of every government must have been some person who offered protection in exchange for submission. On the governor and those with whom he is associated, or whom he appoints, is devolved the care of defending the community from violence and fraud. And so far as internal violence is concerned, and that is the evil most dreaded in civilized society, it is wonderful how small a number of persons can provide for the security of multitudes. About fifteen thousand soldiers, and not fifteen thousand policemen, watchmen, and officers of justice, protect the persons and property of the seventeen millions of inhabitants of Great Britain. There is scarcely a trade that does not engross the labour of a greater number of persons than are employed to perform this the most important of all services.

It is obvious, however, that the division of labour on which government is founded, is subject to peculiar evils. Those who are to afford protection must necessarily be intrusted with power; and those who rely on others for protection lose, in a great measure, the means and the will to protect themselves. Under such circumstances, the bargain, if it can be called one, between the government and its subjects, is not conducted on the principles which regulate ordinary exchanges. The government generally endeavours to extort from its subjects, not merely a fair compensation for its services, but all that force or terror can wring from them without injuring their powers of further production. In fact, it does in general extort much more: for if we look through the world we shall find few governments whose oppression does not materially injure the prosperity of their people. When we read of African and Asiatic tyrannies, where millions seem themselves to consider their own happiness as dust in the balance compared with the caprices of their despot, we are inclined to suppose the evils of misgovernment to be the worst to which man can be exposed. But they are trifles compared to those which are felt in the absence of government. The mass of the inhabitants of Egypt, Persia, and Burmah, or to go as low as perhaps it is possible, the subjects of the Kings of Dahomi and Ashantee, enjoy security, if we compare their situation with that of the ungoverned inhabitants of New Zealand. So strongly is this felt, that there is no tyranny which men will not eagerly embrace, if anarchy is to be the alternative. Almost all the differences between the different races of men, differences so great that we sometimes nearly forget that they all belong to the same species, may be traced to the degrees in which they enjoy the blessings of good government. If the worst government be better than anarchy, the advantages of the best must be incalculable. But the best governments of which the world has had experience, those of Great Britain and of the Countries which have derived their institutions from Great Britain, are far from having attained the perfection of which they appear to be susceptible. In these governments the subordinate duties are generally performed by persons specially educated for these purposes, the superior ones are not. It seems to be supposed that a knowledge of politics, the most extensive and the most difficult of all Sciences, is a natural appendage to persons holding a high rank in society, or may be acquired at intervals snatched from the bustle and the occupation of laborious and engrossing professions. In despotisms, the principal evils arise partly from the ignorance, and partly from the bad passions of the rulers. In representative governments, they arise principally from their unskillfulness. It is to be hoped that a further application of the division of labour, the principle upon which all government is founded, by providing an appropriate education for those who are to direct the affairs of the State, may protect us as effectually against suffering under ignorance or inexperience in our governors, as we are now protected against their injustice.

Another important consequence of the division of labour, and one which Adam Smith, though he has alluded to it, has not prominently stated, is the power possessed by every nation of availing itself, to a certain extent, of the natural and acquired advantages of every other portion of the commercial world. Colonel Torrens is the first writer who has expressly connected foreign trade with the division of labour, by designating international commerce as “the territorial division of labour.”

Nature seems to have intended that mutual dependence should unite all the inhabitants of the earth into one commercial family. For this purpose she has indefinitely diversified her own products in every climate and in almost every extensive district. For this purpose, also, she seems to have varied so extensively the wants and the productive powers of the different races of men. The superiority of modern over ancient wealth depends in a great measure on the greater use we make of these varieties. We annually import into this Country about thirty million pounds of tea. The whole expense of purchasing and importing this quantity does not exceed £2,250,000, or about 1s. 6d. a pound, a sum equal to the value of the labour of only forty-five thousand men, supposing their annual wages to amount to £50 a-year. With our agricultural skill, and our coal mines, and at the expense of above 40s. a pound instead of 1s. 6d., that is, at the cost of the labour of about one million two hundred thousand men instead of forty-five thousand, we might produce our own tea, and enjoy the pride of being independent of China. But one million two hundred thousand is about the number of all the men engaged in agricultural labour throughout England. A single trade, and that not an extensive one, supplies as much tea, and that probably of a better sort, as could be obtained, if it were possible to devote every farm and every garden to its domestic production.

The greater part of the advantage of rather importing than growing and manufacturing tea arises, without doubt, from the difference between the climates of China and England. But a great part also arises from the different price of labour in the two Countries. Not only the cultivation of the tea plant, but the preparation of its leaves, requires much time and attention. The money wages of labour are so low in China, that these processes add little to the money cost of the tea. In England the expense would be intolerable. When a nation, in which the powers of production, and consequently the wages of labour, are high, employs its own members in performing duties that could be as effectually performed by the less valuable labour of less civilized nations, it is guilty of the same folly as a farmer who should plough with a Race-horse.

Another important consequence of the division of labour is the existence of retailers; a class who, without being themselves employed in the direct production of raw or manufactured commodities, are, in fact, the persons who supply them to their ultimate purchasers, and that at the times and in the portions which the convenience of those purchasers requires. When we look at a map of London and its suburbs, and consider that that province covered with houses contains more than a tenth of the inhabitants of England, and consumes perhaps one-fifth in value of all that is consumed in England, and obtains what it consumes, not from its own resources, but from the whole civilized world, it seems marvellous that the daily supply of such multitudes should be apportioned with any thing like accuracy to their daily wants. It is effected principally by means of the retailers. Each retailer, the centre of his own system of purchasers, knows, by experience, the average amount of their periodical wants. The wholesale dealer, who forms the link between the actual producer or importer, and the retailer, knows also, by experience, the average amount of the demands of his own purchasers, the retailers; and is governed by that experience in his purchases from the importer or producer. And the average amount of these last purchases affords the data on which the importers and producers regulate the whole vast and multifarious supply. It can scarcely be necessary to dwell on the further advantages derived from the readiness and subdivision of the retailer’s stock; or, to point out the convenience of having to buy a steak from a butcher, instead of an ox from a grazier. These are the advantages to which we formerly referred, as enabling the retailer to obtain a profit proportioned to the average time during which his stock in trade remains in his possession.

We now proceed to show that the Division of Labour is mainly dependent on Abstinence, or, in other words, on the use of Capital.

“In that rude state of society,” says Adam Smith, “in which there is no division of labour, in which exchanges are seldom made, and in which every man provides every thing for himself, it is not necessary that any stock should be accumulated or stored up beforehand in order to carry on the business of the society. Every man endeavours to supply, by his own industry, his own occasional wants as they occur. When he is hungry, he goes to the forest to hunt; when his coat is worn out, he clothes himself with the skin of the first large animal he kills; and when his hut begins to go to ruin, he repairs it as well as he can with the trees and the turf that are nearest to it.

“But when the division of labour has once been thoroughly introduced, the produce of a man’s own labour can supply but a very small part of his occasional wants. The far greater part of them are supplied by the produce of other men’s labour, which he purchases with the produce, or, what is the same thing, with the price of the produce of his own. But his purchase cannot be made until such time as the produce of his own labour has not only been completed, but sold. A stock of goods of different kinds, therefore, must be stored up somewhere, sufficient to maintain him, and to supply him with the materials and tools of his work, till such time, at least, as both these events can be brought about. A weaver cannot apply himself entirely to his peculiar business, unless there is beforehand stored up somewhere, either in his own possession, or in that of some other person, a stock sufficient to maintain him, and to supply him with the materials and tools of his work, till he has not only completed, but sold his web. This accumulation must evidently be previous to his applying his industry for so long a time to such a peculiar business.”
Wealth of Nations, Book ii.
Introduction.

Perhaps this is inaccurately expressed; there are numerous cases in which production and sale are contemporaneous. The most important divisions of labour are those which allot to a few members of the community the task of protecting and instructing the remainder. But their services are sold as they are performed. And the same remark applies to almost all those products to which we give the name of services. Nor is it absolutely necessary in any case, though, if Adam Smith’s words were taken literally, such a necessity might be inferred, that, before a man dedicates himself to a peculiar branch of production, a stock of goods should be stored up to supply him with subsistence, materials, and tools, till his own product has been completed and sold. That he must be kept supplied with those articles is true; but they need not have been stored up before he first sets to work, they may have been produced while his work was in progress. Years must often elapse between the commencement and sale of a picture. But the painter’s subsistence, tools, and materials for those years are not stored up before he sets to work: they are produced from time to time during the course of his labour. It is probable, however, that Adam Smith’s real meaning was, not that the identical supplies which will be wanted in a course of progressive industry must be already collected when the process which they are to assist or remunerate is about to be begun, but that a fund or source must then exist from which they may be drawn as they are required. That fund must comprise in species some of the things wanted. The painter must have his canvas, the weaver his loom, and materials, not enough, perhaps, to complete his web, but to commence it. As to those commodities, however, which the workman subsequently requires, it is enough if the fund on which he relies is a productive fund, keeping pace with his wants, and virtually set apart to answer them.

But if the employment of capital is required for the purpose of allowing a single workman to dedicate himself to one pursuit, it is still more obviously necessary in order to enable aggregations, or classes of producers, to concur, each by his separate exertions, in one production. In such cases even the mere matter of distribution, the mere apportionment of the price of the finished commodity among the different producers requires the employment of a considerable capital, and for a considerable time, or, in other words, a considerable exertion of abstinence. The product of independent labour belongs by nature to its producer. But where there has been a considerable division of labour, the product has no
one natural owner. If we were to attempt to reckon up the number of persons engaged in producing a single neckcloth, or a single piece of lace, we should find the number amount to many thousands; in fact, to many tens of thousands. It is obviously impossible that all these persons, even if they could ascertain their respective rights as producers, should act as owners of the neckcloth or the lace, and sell it for their common benefit.

This difficulty is got over by distinguishing those who assist in production by advancing capital, from those who contribute only labour—a distinction often marked by the terms master and workman; and by arranging into separate groups the different capitalists and workmen engaged in distinct processes, and letting each capitalist, as he passes on the commodity, receive from his immediate successor the price both of his own abstinence and of his workmen’s labour.

It may be interesting to trace this process in the history of a coloured neckcloth or a piece of lace. The cotton of which it is formed may be supposed to have been grown by some Tennessee or Louisiana planter. For this purpose he must have employed labourers in preparing the soil and planting and attending to the shrub for more than a year before its pod ripened. When the pod became ripe, considerable labour, assisted by ingenious machinery, was necessary to extricate the seeds from the wool. The fleece thus cleaned was carried down the Mississippi to New Orleans, and there sold to a cotton factor. The price at which it was sold must have been sufficient, in the first place, to repay to the planter the wages which had been paid by him to all those employed in its production and carriage; and, secondly, to pay him a profit proportioned to the time which had elapsed between the payment of those wages and the sale of the cotton; or, in other words, to remunerate him for his abstinence in having so long deprived himself of the use of his money, or of the pleasure which he might have received from the labour of his work-people, if, instead of cultivating cotton, he had employed them in contributing to his own immediate enjoyment. The New Orleans factor, after keeping it perhaps five or six months, sold it to a Liverpool merchant. Scarcely any labour could have been expended on it at New Orleans, and, in the absence of accidental circumstances, its price was increased only by the profit of the cotton factor, a profit which was the remuneration of his abstinence in delaying, for five or six months, the gratification which he might have obtained by the expenditure on himself of the price paid by him to the planter. The Liverpool merchant brought it to England and sold it to a Manchester spinner. He must have sold it at a price which would repay, in the first place, the price at which it was bought from the factor at New Orleans; in the second place, the freight from thence to Liverpool; (which freight includes a portion of the wages of the seamen, and of the wages of those who built the vessel, of the profits of those who advanced those wages before the vessel was completed, of the wages and profits of those who imported the materials of which that vessel was built, and, in fact, of a chain of wages and profits extended to the earliest dawn of civilization;) and, thirdly, the merchant’s profit for the time that these payments were made before his sale to the manufacturer was completed.

The spinner subjected it to the action of his work-people and machinery, until he reduced part of it into the thread applicable to weaving muslin, and part into the still finer thread that can be formed into lace.

The thread thus produced he sold to the weaver and to the lace-maker; at a price repaying, in addition to the price that was paid to the merchant, first, the wages of the work-people immediately engaged in the manufacture; secondly, the wages and profits of all those who supplied, by the labour of previous years, the buildings and machinery; and, thirdly, the profit of the master spinner. It would be tedious to trace the transmission of the thread from the weaver to the bleacher, from the bleacher to the printer, from the printer to the wholesale warehouseman, from him to the retailer, and thence to the ultimate purchaser; or even its shorter progress from the lace-maker to the embroiderer, and thence to the ultimate purchaser. At every step a fresh capitalist repays all the previous advances, subjects the article, if unfinished, to further processes, advances the wages of those engaged in its further manufacture and transport, and is ultimately repaid, by the capitalist next in order, all his own advances, and a profit proportioned to the time during which he has abstained from the unproductive enjoyment of the capital thus employed.

It will be observed, that we have not mentioned the Taxation that must have been incurred throughout the whole process which we have described, or the Rent that must have been paid for the use of the various appropriated natural agents whose services were requisite or beneficial. We have left rent unnoticed, because its amount depends so much on accident, that any further allusion to it would have much increased the complexity of the subject. We have not expressly mentioned taxation, because it is included under the heads which we have enumerated. The money raised by taxation is employed in paying the wages and profits of those who perform, or cause to be performed, the most important of all services, the protecting the community from fraud and violence. Those who are thus employed afford precisely the same assistance to the merchant or the manufacturer, as the private watchman who protects the warehouse, or the smith who fortifies it with bars and padlocks.

Our limits prohibit our attempting to trace the gradual increase of the value of a pound of cotton from the time it was gathered on the banks of the Mississippi, till it appears in a Bond-Street window as a piece of elaborate lace. We should probably be understating the difference if we were to say that the last price was a thousand times the first. The price of a pound of the finest cotton wool, as it is gathered, is less than two shillings. A pound of the finest cotton lace might easily be worth more than a hundred guineas. No means, except the separation of the functions of the capitalist from those of the labourer, and the constant advance of capital from one capitalist to another, could enable so many thousand producers to direct their efforts to one object, to continue them for so long a period, and to adjust the reward for their respective sacrifices.

Development of the Fourth Elementary Proposition of the Science, namely,

That Agricultural Skill remaining the same, Additional Labour employed on the Land within a given district, produces in general a Less Proportionate Return.

Additional Labour when employed in Manufactures is MORE, when employed in Agriculture is LESS, efficient in proportion.—Before we quit the subject of Production, it is necessary to explain an important difference between the efficiency of the different productive instruments when employed in cultivating the earth, and their efficiency when employed in preparing for human use the raw produce obtained by agriculture: or, in other words, between the efficiency of Agricultural and Manufacturing Industry. In the course of this discussion we shall illustrate the last of the four elementary propositions on which we believe the Science of Political Economy to rest; namely, that,
agricultural skill remaining the same, additional labour employed on the land within a given district produces in general a less proportionate return.

The difference between the efficiency of agricultural and of manufacturing industry which we have now to consider, consists in the power which agricultural industry possesses, and manufacturing industry does not possess, of obtaining an additional product from the same materials. We have seen that the use of implements and the division of labour assist the exertions of man to an extent quite incalculable at present, and apparently capable of indefinite increase. But manufacturing improvements, though they enable one man to do the work of hundreds or of thousands,—though they enable the same amount of labour employed on the same materials to produce a more and more useful commodity, cannot enable the same amount of labour, or even increased labour, employed on the same quantity of
materials, to produce a much larger amount of finished work of the same quality, than could have been produced before. If the labour and the skill now employed throughout England on the manufacture of cotton were doubled, but the quantity of raw materials remained the same, the quantity of manufactured produce could not be sensibly increased. The value of that produce might perhaps be much increased; it might be made much finer, and consequently of greater length or breadth; but supposing the quality of the produce unaltered, its quantity could be increased only by the saving which might be made of that small portion of the raw material which now is wasted.

The case of agriculture is different. Those regions, indeed which lie within the limits of perennial snow, or consist of rock or loose sand, or precipitous mountain, are unsusceptible of improvement. But with these exceptions, the produce of every extensive district seems capable of being almost indefinitely increased by constantly increasing the labour bestowed on it. Nothing appears more hopelessly barren than an extensive bog, with its black looking pools and rushy vegetation. But, by draining, by burning the limestone on which, in Ireland at least, it generally rests, and by employing the lime to convert the matted fibres of the turf into a vegetable mould, the bog may be made not only productive but fertile. There are about thirty-seven millions of acres in England and Wales. Of these it has been calculated that not eighty-five thousand, less in fact than one four-hundredth part, are in a state of high cultivation, as hop grounds, nursery grounds, and fruit and kitchen gardens; and that five millions are waste. All that is not waste is productively employed, but how small is its produce compared to the amount to which unlimited labour and abstinence might raise it! If the utmost use were made of lime, and marl, and the other mineral manures; if by a perfect system of drainage and irrigation water were nowhere allowed to be excessive or deficient; if all our wastes were protected by enclosures and planting; if all the land in tillage, instead of being scratched by the plough, were deeply and repeatedly trenched by manual labour; if minute care were employed in the selecting and planting of every seed or root, and watchfulness sufficient to prevent the appearance of a weed; if all live stock, instead of being pastured, had their food cut and brought to them; in short, if the whole Country were subjected to the labour which a rich citizen lavishes on his patch of suburban garden; if it were possible that all this should be effected, the agricultural produce of the Country might be raised to ten times, or indeed to much more than ten times, its present amount. No additional labour or machinery can work up a pound of raw cotton into more than a pound of manufactured cotton; but the same bushel of seed-corn, and the same rood of land, according to the labour and skill with which they are treated, may produce four bushels, or eight bushels, or sixteen.

But although the land in England is capable of producing ten times, or more than ten times as much as it now produces, it is probable that its present produce will never be quadrupled, and almost certain that it will never be decupled.

On the other hand, unless our manufactures be checked by war, or by the continuance or introduction of legislative enactments unfavourable to their progress, their produce may increase during the next century at the same rate, or at a still greater rate, than it increased during the last century. It may be quadrupled, or much more than quadrupled.

The advantage possessed by land in repaying increased labour, though employed on the same materials, with a constantly increasing produce, is overbalanced by the diminishing proportion which the increase of the produce generally bears to the increase of the labour. And the disadvantage of manufactures in requiring for every increase of produce an equal increase of materials, is overbalanced by the constantly increasing facility with which the increased quantity of materials is worked up.

A century ago the average annual import of cotton wool into Great Britain was about one million two hundred thousand pounds. The amount now annually manufactured in Great Britain exceeds two hundred and forty millions of pounds. But though the materials now manufactured are increased at least two hundred times, it is obvious that the labour necessary to manufacture them has not increased two hundred times. It may be doubted whether it has increased thirty times. The whole number of families in Great Britain, exclusively of those employed in agriculture, amounted, at the enumeration in 1831, to 2,453,041; if we suppose the transport, manufacture, and sale of cotton to employ about one-eighth of them, or about 300,000 families, it is a large allowance. But with the inefficient machinery in use a century ago, the annual manufacture of one million two hundred thousand pounds of cotton could not have required the annual labour of less than ten thousand families. It probably required many more. The result has been that, although we now require two hundred times as much of the raw material as was required a century ago, and although that additional quantity of raw material is probably obtained from the soil by more than two hundred times the labour that was necessary to obtain the smaller quantity, yet, in consequence of the diminution of the labour necessary to manufacture a given amount, the price of the manufactured commodity, (a price which exhibits the sum of the labour necessary for both obtaining the materials and working them up) has constantly diminished. In 1786, when our annual import was about twenty millions of pounds of cotton wool, the price of the yarn denominated No. 100 was 38s. a pound. In 1792, when the import amounted to thirty-four millions of pounds, the price of the same yarn was 16s. a pound. In 1806, when the import amounted to sixty millions, the price of the yarn had fallen to 7s. 2d. a pound; and with the increased quantity manufactured, it has now fallen below 3s. a pound. Every increase in the quantity manufactured has been accompanied by improvements in machinery, and an increased division of labour, and their effects have much more than balanced any increase which may have taken place in the proportionate labour necessary to produce the raw material.

The proposition that, in agriculture, additional labour generally produces a less proportionate result, or, in other words, that the labour of twenty men employed on the land within a given district, though it will certainly produce more than that of ten men, will seldom produce twice as much, will be best illustrated by confining our attention to a single example.

We will suppose a farm consisting of one thousand acres, two hundred very good land, three hundred merely tolerable, and the remainder barren down, affording only a scanty sheep-walk. We will suppose the farmer to employ upon it twenty men, and to obtain an average annual product, which, to reduce it to a single denomination, we will call six hundred quarters of wheat. We will suppose him now to double the number of his labourers, and we shall see what probability there is that the produce will consequently be doubled. If the twenty additional labourers are employed in cultivating the down land, they must necessarily produce a less return than that which is produced on the other land by the previous twenty, as the land is supposed to be worse. It is equally clear that their labour, if applied to the land already in cultivation, will be less productive than the labour previously applied to it; or, in other words, that the produce of that land, though increased, will not be doubled, since on no other principle can we account for any land except the very best having been ever cultivated. For if the farmer could have gone on applying additional labour to land already in cultivation without any diminution in the proportionate return, it is clear that he never would have cultivated the three hundred acres of inferior land. In fact, if this were the case, if additional labour employed in agriculture gave a proportionate return, he never need have cultivated more than a single acre, or even a single rood. It is probable that in the supposed case he would employ some of his additional labourers in breaking up a portion of the down, and some of them in cultivating more highly the land already in tillage. So employed, they might produce an additional crop of four hundred, or five hundred, or five hundred and fifty quarters, but it is certain that the additional crop would not be equal to the whole six hundred previously obtained: the produce would be increased, but would not be doubled.

This imaginary farm is a miniature of the whole Kingdom. We have in England large tracks of barren waste, and we have under cultivation soil of every description of fertility, from that which produces forty bushels of wheat an acre, to that which produces, with the same labour, and on the same extent of land, only twelve or thirteen. If additional produce is to be raised, the resource, generally speaking, must be either the cultivation of what has been as yet untilled on account of its barrenness, or the employment of additional labour on what is now in cultivation. That in either case the additional produce is not likely to be in the proportion of the additional labour, is as obvious in the case of the whole Kingdom, as it has appeared to be in that of a single farm.

But the proposition which we have been endeavouring to illustrate, though general, is not universal; it is subject to material exceptions. In the first place, the negligence or ignorance of the occupier, or proprietor, or obstacles of ownership, often prevent for a long time particular portions of land from being subjected to the average degree of labour bestowed on land of equal capability. Increased labour, when at length bestowed on land so circumstanced, may fairly be expected to be as productive, indeed more productive, than the average of agricultural labour. Advantages of this kind have sometimes been derived from extensive operations of drainage and embankment; but the chances of great profit are so apt to blind men to the amount of physical obstacles, that projects of this kind are perhaps more frequently attempted prematurely, than deferred till after the time when an increased demand for raw produce first rendered them fair speculations. Undertakings which have been postponed in consequence of obstacles arising from ownership, are far more frequently productive. The enclosure of a common often subjects to the plough land of which the former unproductiveness was not owing to deficient fertility. Effects similar in kind, though not in degree, often take place when an estate becomes unfettered, after the title has been long so circumstanced that the farmers could not rely on the duration or renewal of their leases. In these cases considerable additional produce may often be obtained by a comparatively small addition of labour.

But the most important exception to the general rule takes place when increase of labour is accompanied by increase of skill. More efficient implements, a better rotation of crops, a greater division of labour, in short, improvements in the art of agriculture generally accompany the increase of agricultural labour. They always accompany that increase when it is accompanied by an increase of the capital as well as of the population of a Country; and they always counteract, and often outweigh, the inferiority or diminished proportional powers of the soil to which they are applied.

The total amount of the annual agricultural produce of Great Britain has much more than doubled during the last hundred years; but it is highly improbable that the amount of labour annually employed in agriculture has also doubled. It is not supposed that during that period the population of Great Britain has more than doubled; and the principal increase has till lately been in the manufacturing districts. The last hundred years, with all their misfortunes, form the most prosperous period of our History. We owe to them the enclosure of millions of acres formerly almost useless common fields; we owe to them almost all that we possess that deserves the name of Agricultural Science; and we owe to them also all the canals, and almost all the roads, which, by obviating in a great measure the accidents of situation, enable the amount of labour to bear throughout the Kingdom something like an average proportion to the quality of the soil on which it is employed. It is possible, though certainly not probable, that our progress may be equal during the next hundred years; but though indefinite, it certainly cannot be infinite. It is obviously impossible that the produce of the soil of a given district can increase geometrically for ever, whatever be the amount of the labour employed on it.

On the other hand, every increase in the number of manufacturing labourers is accompanied not merely by a corresponding, but by an increased productive power. If three hundred thousand families are now employed in Great Britain to manufacture and transport two hundred and forty millions of pounds of cotton, it is absolutely certain that six hundred thousand families could manufacture and transport four hundred and eighty millions of pounds of cotton. It is, in fact, certain that they could do much more. It is not improbable that they could manufacture and transport seven hundred and twenty millions. The only check by which we can predict that the progress of our manufactures will in time be retarded, is the increasing difficulty of importing materials and food. If the importation of raw produce could keep pace with the power of working it up, there would be no limit to the increase of wealth and population.