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but more probably by that of the slaves themselves while free; the rapine or war, which deprived them of their personal liberty, having transferred also their accumulations to the conqueror.

There are other cases in which the term saving, with the associations usually belonging to it, does not exactly fit the operation by which capital is increased. If it were said, for instance, that the only way to accelerate the increase of capital lsbyincrease of saving, the idea would probably be suggested of greater abstinence, and increased privation. But it is obvious that whatever increases the productive power of labour, creates an additional fund to make savings from, and enables capital to be enlarged not only without additional privation, but concurrently with an increase of personal consumption. Nevertheless, there is here an increase of saving, in the scientific sense. Though there is more consumed, there is also more spared. There is a greater excess of production over consumption. It is consistent with correctness to call this a greater saving. Though the term is not unobjectionable, there is no other which is not liable to as great objections. To consume less than is produced, is saving; and that is the process by which capital is increased; not necessarily by consuming less, absolutely. We must not allow ourselves to be so much the slaves of words, as to be unable to use the word saving in this sense, without being in danger of forgetting that to increase capital there is another way besides consuming less, namely, to produce more.

§ 5. A third fundamental theorem respecting Capital, closely connected with the one last discussed, is, that although saved, and the result of saving, it is nevertheless consumed. The word saving does not imply that what is saved is not consumed, nor even necessarily that its consumption is deferred; but only that, if consumed immediately, it is not consumed by the person who saves it. If merely laid by for future use, it is 6aid to be hoarded; and while hoarded, is not consumed at all. But if employed as

capital, it is all consumed; though not by the capitalist. Part is exchanged for tools or machinery, which are worn out by use: part for seed or materials, which are destroyed as such by being sown or wrought up, and destroyed altogether by the consumption of the ultimate product. The remainder is paid in wages to productive labourers, who consume it for their daily wants; or if they in their turn save any part, this also is not, generally speaking, hoarded, but (through savings banks, benefit clubs, or some other channel) re-employed as capital, and consumed.

The principle now stated is a strong f" example of the necessity of attention toy the most elementary truths of our subject: for it is one of the most elementary of them all, and yet no one who has not bestowed some thought on the mutter is habitually aware of it, and most are not even willing to admit 't when first stated. To the vulgar, it is not at all apparent that what is saved is consumed. To them, every one who saves, appears in the light of a person who hoards; they may think racD conduct permissible, or even laudable, when it is to provide for a family, and the like; but they have no conception of it aB doing good to other people: saving is to them another word for keeping a thing to oneself; while spending appears to them to be distributing it among others. The person who expends his fortune in unproductive consumption, is looked upon as diffusing benefits all around; and is an object of so much favour, that some portion of the same popularity attaches even to him who spends what does not belong to him; who not only destroys his own capital if he ever had any, but, under pretence of borrowing, and on promise of repayment, possesses himself of capital belonging to others, and destroys that likewise.

This popular error comes from attending to a small portion only of the consequences that flow from the saving or the spending; all the effects of either which are out of sight, being out of mind. The eye follows what is saved, inl<> an imaginary strong box, and there loses sight of it; what is spent, ft fol

lows into the hands of tradespeople and dependents; bat without reaching the ultimate destination in either case. Saving (for productive investment), and spending, coincide very closely in the first stage of their operations. The effects of both begin with consumption; with the destruction of a certain portion of wealth; only the things consumed, and the persons consuming, are different. There is, in the one case, a wearing out of tools, a destruction of material, and a quantity of food and clothing supplied to labourers, which they destroy by use; in the other case, there is a consumption, that is to say, a destruction, of wines, equipages, and furniture. Thus far, the consequence to the national wealth has been much the same; an equivalent quantity of it has been destroyed in both cases. But in the spending, this first stage is also the final stage; that particular amount of the produce of labour has disappeared, and there is nothing left; while, on the contrary, the saving person, during the whole time that the destruction was going on, has had labourers at work repairing it; who are ultimately found to have replaced, with an increase, the equivalent of what has been consumed. Aid as this operation admits of being repeated indefinitely without any fresh act of saving, a saving once made becomes a fund to maintain a corresponding number of labourers in perpetuity, reproducing annually their own maintenance with a profit.

It is the intervention of money which obscures, to an unpractised apprehension, the true character of these phenomena. Almost all expenditure being carried on by means of money, the money comes to be looked upon as the main feature in the transaction; and since that does not perish, but only changes hands, people overlook the destruction which takes place in the case of unproductive expenditure. The money being merely transferred, they think the wealth also has only been handed over from the spendthrift to other people. But this is simply confounding money with wealth. The WBalth which has been destroyed was not the money, but the wines, equipages,

and furniture which the money purchased; and these having been destroyed without return, society collectively is poorer by the amount. It may be said, perhaps, that wines, equipages, and furniture, are not subsistence, tools, and materials, and could not in any case have been applied to the support of labour; that they are adapted w >in other than unproductive consumption, and that the detriment to the wealth of the community was when they were produced, not when they were consumed. I am willing to allow this, as far as is necessary for the argument, and the remark would be very pertinent if these expensive luxuries were drawn from an existing stock, never to be replenished. But since, on the contrary, they continue to be produced as long as there are consumers for them, and are produced in increased quantity to meet an increased demand; the choice made by a consumer to expend five thousand a year in luxuries, keeps a corresponding number of labourers employed from year to year in producing things which can he of no use to production; their services being lost so far as regards the increase of the national wealth, and the tools, materials, and food which they annually consume being so much subtracted from the general stock of the community applicable to productive purposes. In proportion as any class is improvident or luxurious, the industry of the country takes the direction of producing luxuries for their use; while not only the employment forproductive labourers is diminished, but the subsistence and instruments which are the means of such employment do actually exist in smaller quantity.

Saving, in short, enriches, and spend- t ing impoverishes, the community along / with the individual; which is but say- » ing in other words, that society at large is richer by what it expends in maintaining and aiding productive labour, but poorer by what it consumes in its enjoyments.*

* It is worth while to direct attention tn several circumstances which to a certain extent diminish the detriment caused to the general wealth by the prodigality of uv

§ 6. To return to our fundamental theorem. Everything which is produced is consumed; both what is saved and what is said to be spent; and the former quite as rapidly as the latter. All the ordinary forms of language tend to disguise this. When people talk of the ancient wealth of a country, of riches inherited from ancestors, and similar expressions, the idea suggested is, that the riches so transmitted were produced long ago, at the time when they are said to have been first acquired, and that no portion of the capital of the'country was produced this year, except as much as may have been this year added to the total amount. The fact is far otherwise. The greater part, in value, of the wealth now existing in England has been produced by human hands within the last twelve months. A very small proportion indeed of that large aggregate Whs in existence ten years ago; —of the present productive capital of the country scarcely any part, except farm-houses and manufactories, and a

dlviduala, or raise up a compensation, more or less ample, as a consequence of the detriment itself. One of these is that spendthrifts do not usually succeed in consuming all they spend. Their habitual carelessness as to expenditure causes them to be cheated and robbed on all quarters, often by persons of frugal habits. Large accumulations are continually made by the agents, stewards, and even domestic servants, of improvident persons of fortune; and they pay much higher prices for all purchases than people of careful habits, which accounts for their being popular as customers. They are, therefore, actually not able to get Into their possession and destroy a quantity of wealth by any means equivalent to the fortune which they dissipate. Much of it is merely transferred to others, by whom a part may be saved. Another thing to be observed is, that the prodigality of some may reduce others to a forced economy. Suppose a sudden demand for some article of luxury, caused by the caprice of a prodigal, which not having been calculated on beforehand, there has been no increase of the usual supply. The price will rise; and may rise beyond the means or the inclinations of some of the habitual consumers, who may in consequence forego their accustomed indulgence, and save the amount. If they do not, but continue to spend as great a value as before on the commodity, the dealers in it obtain, for only the same quantity of the article, a return increased by the whole of what the spendthrift has paid t and thus the amount

few ships and machines; and even these would not in most cases have survived so long, if fresh labour had not been employed within that period in putting them into repair. The lana subsists, and the land is almost the onlv thing that subsists. Everythirg which is produced perishes, ana most things very quickly. Most kinds of capital are not fitted by their nature to be long preserved. There are a few, and but a few productions, capable of a very prolonged existence. Westminster Abbey has lasted many centuries, with occasional repairs; some Grecian sculptures have existed above two thousand years; the Pyramids perhaps double or treble that time. But these were objects devoted to unproductive use. If we except bridges aud aqueducts (to which may in some countries be added tanks and embankments), there are few instances of any edifice ar plied to industrial purposes which has been of great duration; such buildings do not hold out against wear and tear, nor is it good economy

which he loses is transferred bodily to them, and may be added to their capital: his Increased personal consumption being made up by the privations of the other purchasers, who have obtained less than usual of their accustomed gratification for the same equiva. lent. On the other hand, a counter-procesmust be going on somewhere, since the prodigal must have diminished his purchases in some other quarter to balance the augmentation in this; he has perhaps called In funds employed In sustaining productive lahour, and the dealers la subsistence and in the instruments of production have had commodities left on their hands, or have received, for the usual amount of commodities a less than usual return.. But such losses of income or capital, by industrious persons, except when of extraordinary amount, are generally made up by increased pinching and privation; so that the capital of the coin* munity may not be, on the whole, impaired, and the prodigal may have had his self* indulgence at the expense not of the permanent resources, but of the temporary pleasures and comforts of others. For in every case the community are poorer by what any one spends, unless others are in consequence led to curtail their spending. There are yet other and more recondite ways in which to* profusion of some may bring about its compensation in the extra savings of others; but these can only be considered In that part of the Fourth Book, which treats of the limiting principle to the accumulation of capital.

to construct them of the solidity necessary for permanency. Capital is kept in existence from age to age not by preservation, but by perpetual reproduction: every part of it is used and destroyed, generally very soon after it is produced, but those who consume it are employed meanwhile in producing more. The growth of capital is similar to the growth of population. Every individual who is bom, dies, but in each year the number born exceeds the number who die: the population, therefore, always increases, though not one person of those composing it was -.live until a very recent date.

, $7. This perpetual consumption / and reproduction of capital affords the axplanation of what has so often excited wonder, the great rapidity with which countries recover from a state of devastation; the disappearance, in a short time, of all traces of the mischiefs done by earthquakes, floods, hurricanes, and the ravages of war. An enemy lays waste a country by fire and sword, and destroys or carries away nearly all the moveable wealth existing in it: all the inhabitants are ruined, and yet in a few years after, everything is much as it was before. This vis medicatrix natures has been a subject of sterile astonishment, or has been cited to «xemplify the wonderful strength of the principle of saving, which can repair such enormous losses in Bo brief an interval There is nothing at all wonderful in the matter. What the enemy have destroyed, would have been destroyed in a little time by the inhabitants themselves: the wealth which they so rapidly reproduce, would have needed to be reproduced and would have been reproduced in any case, and probably in as short a time. Nothing is changed, except that during the reproduction they have not now the advantage of consuming what had been produced previously. The possibility of a rapid repair of their disasters, mainly depends on whether the country has been depopulated. If its effective population have not been extirpated at the tune, and are not starved afterwards; then, with the same skill and

knowledge which they had before, with their land and its permanent improvements undestroyed, and the more durable buildings probably unimpaired, or only partially injured, they have nearly all the requisites for their former amount of production. If there is as much of food left to them, or of valuables to buy food, as enables them by any amount of privation to remain alive and in working condition, they will in a short time have raised as great a produce, and acquired collectively as great wealth and as great a capital, as before; by the mere continuance of that ordinary amount of exertion which they are accustomed to employ in their occupations. Nor does this evince any strength in the principle of saving, in the popular sense of the term, since what takes plac< is not intentional abstinence, but involuntary privation.

Yet so fatal is the habit of thinking through the medium of only one set of technical phrases, and so little reason have studious men to value themselves on being exempt from the very same mental infirmities which beset the vulgar, that this simple explanation was never given (so far as I am aware) by any political economist before Dr. Chalmers; a writer many of whose opinions I think erroneous, but who has always the merit of studying phenomena at first hand, and expressing them in a language of his own, which often uncovers aspects of the truth that the received phraseologies only tend to hide.

| 8. The same author carries out this train of thought to some important conclusions on another closely connected subject, that of government loans ft» war purposes or other unproductive expenditure. These loans, being drawn from capital (in lieu of taxes, which would generally have been paid from income, and made up in part or alto, gether by increased economy) must, according to the principles we have laid down, tend to impoverish the country: yet the years in which expenditure of this sort has been on the greatest scale, have often been years of great apparent prosperity: the wealth *nd resources of the country, instead of diminishing, have given every sign of rapid increase during the process, and of greatly expanded dimensions after its close. This was confessedly the case with Great Britain during the last long Continental war; and it would take some space to enumerate all the unfounded theories in political economy, to which that fact gave rise, and to which it secured temporary credence; almost all tending to exalt unproductive expenditure, at the expense of productive. Without entering into all the causes which operated, and which commonly do operate, to prevent these extraordinary drafts on the productive resources of a country from being so much felt as it might seem reasonable to expect, we will suppose the most unfavourable case possible: that the whole amount borrowed and destroyed by the government, was abstracted by the lenaer from a productive employment in which it had actually been invested. The capital, therefore, of the country, is this year diminished by so much. But unless the amount abstracted is something enormous, there is no reason in the nature of the case why next year the national capital should not be as great as ever. The loan cannot have been taken from that portion of the capital of the country which consists of tools, machinery, and buildings. It must have been wholly drawn from the portion employed in paying labourers: and the labourers will suffer accordingly. But if none of them are starved; if their wages can bear such an amount of reduction, or 'f charity interposes between them and absolute destitution, there is no reason that their labour should produce less in the next year than in the year before. If they produce as much as usual, having been paid less by so many millions Bterling, these millions are gained by their employers. The breach made in the capital of the country is thus instantly repaired, but repaired by the privations and often the real miserv of the labouring class. Here is ample reason why such periods, even in the most unfavourable circumstances, may easily be times of great

gain to those whosw prosperity uroalry passes, in the estimation of society, for national prosperity.*

This leads to the vexed question to which Dr. Chalmers has very particularly adverted; whether the funds required by a government for extraordinary unproductive expenditure, are best raised by loans, the interest only being provided by taxes, or whether taxes should be at once laid on to the whole amount; which is called in the financial vocabulary, raising the whole of the supplies within the year. Dr. Chalmers is strongly for the latter method. He says, the common notion iB that in calling for the whole amount in one year, you require what is either impossible, or very inconvenient; that the people cannot, without great hardship, pay the whole at once out of their

* On the other hand, it must he remembered that war abstracts from productive employment not only capital, but likewise labourers, that the funds withdrawn from the remuneration of productive labourers are partly employed in paying the same 01 other individuals for unproductive labour and that by this portion of its effects, war expenditure acts in precisely the opposite manner to that which Dr. Chalmers points out, and, so far as it goes, directly counteracts the effects described in the text. So far as labourers are taken from production to man the army and navy, the labouring classes are not damaged, the capitalists are not benefited, and the general produce of the country » diminished by war expenditure. Accordingly, Dr. Chalmers's doctrine, though true of this country, is wholly inapplicable to countries differently circumstanced; to Prance, for example, during the Napoleon wars. At that period the draught on the labouring population of France, for a long series of years, was enormous, while the funds which supported the war were mostly supplied by contributions levied on the countries overrun by the French arms, a very small proportion alone consisting ol French capital. In France, accordingly, the wages of labour did not fall, but rose ; the employers of labour were not benefited, but injured; while the wealth of the country was impaired by the suspension or total low of so vast an amount of its productive labour. In England all this was reverted. England employed comparatively raw additional soldiers and sailors of her own, while she diverted hundreds of millions of capital from productive employment, to supply munitions of war and support armies for her Continental allies. Consequently, as shown in the text, her labourers suffered, her capitalists prospered, and her permanent productive resources did not fall off

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