ries of laborers, evidently is not, all of it, strictly and indispensably necessary for production. As much of it as exceeds the actual necessaries of life and health (an excess which in the case of skilled laborers is usually considerable) is not expended in supporting labor, but in remunerating it, and the laborers could wait for this part of their remuneration until the production, is completed; it needs not necessarily pre-exist as capital: and if they unfortunately had to forego it altogether, the same amount of production might take place. In order that the whole remuneration of the laborers should be advanced to them in daily or weekly payments, there must exist in advance, and be appropriated to productive use, a greater stock, or capital, than would suffice to carry on the existing extent or production; greater, by whatever amount of remuneration the laborers receive, beyond what the self-interest of a prudent slavemaster would assign to his slaves. In truth, it is only after an abundant capital had already been accumulated, that the practice of paying in advance any remuneration of labor beyond a bare subsistence, could possibly have arisen; since whatever is so paid, is not really applied to production, but to the unproductive consumption of productive laborers, indicating a fund for production sufficiently ample to admit of habitually diverting a part of it to a mere convenience.

It will be observed that I have assumed, that the laborers are always subsisted from capital; and this is obviously the fact, although the capital needs not necessarily be furnished by a person called a capitalist. When the laborer maintains himself by funds of his own, as when a peasant farmer or proprietor lives on the produce of his land, or an artisan works on his own account, they are still supported by capital, that is, by funds provided in advance. The peasant does not subsist this year on the produce of this year's harvest, but on that of the last. The artisan is not living

on the proceeds of the work he has in hand, but on those of work previously executed and disposed of. Each is supported by a small capital of his own, which he periodically replaces from the produce of his labor. The large capitalist is, in like manner, maintained from funds provided in advance. If he personally conducts his operations, as much of his expenditure on himself and family as does not exceed a fair remuneration of his labor at the market price, must be considered as a part of his capital, expended, like any other capital, for production: and his personal consumption, so far as it consists of necessaries, is productive consumption.

3. At the risk of being tedious, I must add a few more illustrations, to bring out into a still stronger and clearer light the idea of Capital. As M. Say truly remarks, it is on the very elements of our subject that illustration is most usefully bestowed, since the greatest errors which prevail in it may be traced to the want of a thorough mastery over the elementary ideas. Nor is this surprising: a branch may be diseased and all the rest healthy, but unsoundness at the root diffuses unhealthiness through the whole tree.

Let us therefore consider whether, and in what cases, the property of those who live on the interest of what they possess, without being personally engaged in production, can be regarded as capital. It is so called in common language, and, with reference to the individual, not improperly. All funds from which the possessor derives an income, which income he can use without sinking and dissipating the fund itself, are to him equivalent to capital. But to transfer hastily and inconsiderately to the general point of view, propositions which are true of the individual, has been a source of innumerable errors in political economy. In the present instance, that which is virtually capital to the individual, is or is not capital to the nation, according as the

fund which by the supposition he has not dissipated, has or has not been dissipated by somebody else.

For example, let property of the value of ten thousand pounds belonging to A, be lent to B, a farmer or manufacturer, and employed profitably in B's occupation. It is as much capital as if it belonged to B. A is really a farmer or manufacturer, not personally, but in respect of his property. Capital worth ten thousand pounds is employed in production—in maintaining laborers and providing tools and materials; which capital belongs to A, while B takes the trouble of employing it, and receives for his remuneration the difference between the profit which it yields, and the interest he pays to A. This case is the simplest of all.

Suppose next that A's ten thousand pounds, instead of being lent to B, are lent on mortgage to C, a landed proprietor, and by him employed in improving the productive powers of his estate, by fencing, draining, road-making, or permanent manures. This is productive employment. The ten thousand pounds are sunk, but not dissipated. They yield a permanent return; the land now affords an increase of produce, sufficient, in a few years, if the outlay has been judicious, to replace the amount, and in time to multiply it manifold. Here, then, is a value of ten thousand pounds, employed in increasing the produce of the country. This constitutes a capital, for which C, if he lets his land, receives the returns in the nominal form of increased rent; and the mortgage entitles A to receive from these returns, in the shape of interest, such annual sum as has been agreed upon between them. We will now vary the circumstances, and suppose that C does not employ the loan in improving his land, but in paying off a former and more onerous mortgage, or in making a provision for children. Whether the ten thousand pounds thus employed are capital or not, will depend on what is done with the amount by the ultimate receiver. If the children invest their fortunes

in a productive employment, or the mortgagee, on being paid off, lends the amount to another landholder to improve his land, or to a manufacturer to extend his business, it is still capital, because productively employed.

Suppose, however, that C, the borrowing landlord, is a spendthrift, who burthens his land not to increase his fortune but to squander it, expending the amount in equipages and entertainments. In a year or two it is dissipated, and without return. A is as rich as before; he has no longer his ten thousand pounds; but he has a lien on the land, which he could still sell for that amount. C, however, is £10,000 poorer than formerly, and nobody is richer. It may be said that those are richer who have made profit out of the money while it was being spent. No doubt, if C lost it by gaming, or was cheated of it by his servants, that is a mere transfer, not a destruction, and those who have gained the amount may employ it productively. But if C has received the fair value for his expenditure in articles of subsistence or luxury, which he has consumed on himself, or, by means of his servants or guests, these articles have ceased to exist, and nothing has been produced to replace them; while, if the same sum had been employed in farming or manufacturing, the consumption which would have taken place would have been more than balanced at the end of the year by new products, created by the hands of those who would in that case have been the consumers. By C's prodigality, that which would have been consumed with a return, is consumed without return. C's tradesmen may have made a profit during the process; but if the capital had been expended productively, an equivalent profit would have been made by builders, fencers, tool-makers, and the trades-people who supply the consumption of the laboring classes; while at the expiration of the time, (to say nothing of any increase,) C would have had the ten thousand pounds or its value replaced to him, which now he has not. There

is, therefore, on the general result, a difference to the disadvantage of the community, of at least ten thousand pounds, being the amount of C's unproductive expenditure. To A, the difference is not material, since his income is secured to him, and while the security is good, and the market rate of interest the same, he can always sell the mortgage at its original value. To A, therefore, the lien of ten thousand pounds on C's estate, is virtually a capital of that amount; but is it so in reference to the community? It is not. A had a capital of ten thousand pounds; but this has been extinguished-dissipated and destroyed by C's prodigality. A now receives his income, not from the produce of his capital, but from some other source of income belonging to C, probably from the rent of his land, that is, from payments made to him by farmers out of the produce of their capital. The national capital is diminished by ten thousand pounds, and the national income by all which those ten thousand pounds, employed as capital, would have produced. The loss does not fall on the owner of the destroyed capital, since the destroyer has agreed to indemnify him for it. But his loss is only a small portion of that sustained by the community, since what was devoted to the use and consumption of the proprietor, was only the interest; the capital itself was, or would have been, employed in the perpetual maintenance of an equivalent number of laborers, regularly reproducing what they consumed; and of this maintenance they are deprived without compensation.

Let us now vary the hypothesis still further, and suppose that the money is borrowed, not by a landlord, but by the state. A lends his capital to government to carry on a war he buys from the state what are called government securities; that is, obligations by the government to pay a certain annual income. If the government employed the money in making a railroad, this might be a productive employment, and A's property would still be used as cap7*

VOL. I.