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ital; but since it is employed in war, that is, in the pay of officers and soldiers who produce nothing, and in destroying a quantity of gunpowder and bullets without return, the government is in the situation of C, the spendthrift landlord, and A's ten thousand pounds are so much national capital which once existed, but exists no longer; virtually thrown into the sea, as far as wealth or production is concerned ; though for other reasons the employment of it may have been justifiable. A's subsequent income is derived, not from the produce of his own capital, but from taxes drawn from the produce of the remaining capital of the community, to whom his capital is not yielding any return, to indemnify them for the payment; it is lost and gone, and what he now possesses is a claim on the returns to other people's capital and industry. This claim he can sell, and get back the equivalent of his capital, which he may after. wards employ productively. True ; but he does not get back his own capital, or anything which it has produced ; that, and all its possible returns, are extinguished : what he gets is the capital of some other person, which that person is willing to exchange for his lien on the taxes. Another capitalist substitutes himself for A as a mortgagee of the public, and A substitutes himself for the other capitalist as the possessor of a fund employed in production, or available for it. By this exchange the productive powers of the community are neither increased nor diminished. The breach in the capital of the country was made when the government took A's money; whereby a value of ten thousand pounds was withdrawn or withheld from productive employment, placed in the fund for unproductive consumption, and destroyed without equivalent.

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$ 1. If the preceding explanations have answered their purpose, they have given not only a sufficiently complete possession of the idea of Capital according to its definition, but a sufficient familiarity with it in the concrete and amidst the obscurity with which the complication of individual circumstances surrounds it, to have prepared even the unpracticed reader for certain elementary propositions or theorems respecting capital, the full comprehension of which is already a considerable step out of darkness into light.

The first of these propositions is, That industry is lim-'; ited by capital. This is so obvious, as to be taken for granted in many common forms of speech; but to see a -truth occasionally is one thing, to recognize it habitually, and admit no propositions inconsistent with it, is another.

The axiom was until lately almost universally disregarded by legislators and political writers; and doctrines irreconcilable with it are still very commonly professed and inculcated.

The following are common expressions, implying its truth. The act of directing industry to a particular employment is described by the phrase "applying capital” to the employment. To employ industry on the land is to apply capital to the land. To employ labor in a manufacture is to invest capital in the manufacture. This implies that industry cannot be employed to any greater extent than there is capital to invest. The proposition, indeed, must be assented to as soon as it is distinctly apprehended. The expression “applying capital” is of course metaphorical, what is really applied is labor; capital being an indispen

sable condition. Again, we often speak of the productive powers of capital.” This expression is not literally correct. The only productive powers are those of labor and natural agents; or if any portion of capital can by a stretch of language be said to have a productive power of its own, it is only tools and machinery, which, like wind or water, may be said to co-operate with labor. The food of laborers and the materials of production have no productive power; but labor cannot exert its productive power unless provided with them. There can be no more industry than is supplied with materials to work up and food to eat. Self-evident as the thing is, it is often forgotten that the people of a country are maintained and have their wants supplied, not by the produce of present labor, but of past. They con

sume what has been produced, not what is about to be pro| duced. Now, of what has been produced, a part only is | allotted to the support of productive labor; and there

will not and cannot be more of that labor than the portion so allotted (which is the capital of the country) can feed, and provide with the materials and instruments of production.

Yet, in disregard of a fact so evident, it long continued to be believed that laws and governments, without creating capital, could create industry. Not by making the people more laborious, or increasing the efficiency of their labor ; these are objects to which the government can in some degree contribute. But when the people already worked as hard and as skilfully as they could be made to do, it was still thought that the government, without providing additional funds, could create additional employment. A government would, by prohibitory laws, put a stop to the importation of some commodity; and when by this it had caused the commodity to be produced at home, it would plume itself upon having enriched the country with a new branch of industry, would parade in statistical tables the

amount of produce yielded and labor employed in the production, and take credit for the whole of this as a gain to the country, obtained through the prohibitory law. Although this sort of political arithmetic has fallen a little into discredit in England, it still flourishes in the nations of continental Europe. Had legislators been aware that industry is limited by capital, they would have seen that, the aggregate capital of the country not having been increased, any portion of it which they by their laws had caused to be embarked in the newly acquired branch of industry must have been withdrawn or withheld from some other ; in which it gave, or would have given, employment to probably about the same quantity of labor which it employs in its new occupation.*

$ 2. Because industry is limited by capital, we are not, however, to infer that it always reaches that limit. There may not be as many laborers obtainable, as the capital would

• An exception must be admitted when the industry created or upheld by the restrictive law belongs to the class of what are called domestic manufactures. These being carried on by persons already fed-by the laborer, or his wife or children, in the intervals of other employment—no transfer of capital to the occupation is necessary to its being undertaken, beyond the value of the materials and tools, which is often quite inconsiderable. If, therefore, a protecting duty causes this occupation to be carried on, when it otherwise would not, there is in this case a real increase of the production of the country.

In order to render our theoretical proposition invulnerable, this peculiar case must be allowed for; but it does not touch the practical doctrine of free trade. Domestic manufactures cannot, from the very nature of things, require protection, since the subsistence of the laborers being provided from other sources, the price of the product, however much it may be reduced, is nearly all clear gain. If, therefore, the domestic producers retire from the competition, it is never from necessity, but because the product is not worth the labor it costs, in the opinion of the best judges, those who enjoy the one and undergo the other. They prefer the sacrifice of buying their clothing to the labor of making it. They will not continue their labor unless society will give them more for it, than in their own opinion its product is worth.

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maintain and employ. This has been known to occur in new colonies, where capital has sometimes perished uselessly for want of labor; the Swan River settlement, in the first years after its foundation, was an instance. There are many persons maintained from existing capital, who produce nothing, or who might produce much more than they do. If the laborers were reduced to lower wages, or induced to work more hours for the same wages, or if their families, who are already maintained from capital, were employed to a greater extent than they now are in adding to the produce, a given capital would afford employment to more industry. The unproductive consumption of productive laborers, the whole of which is now supplied from capital, might cease, or be postponed until the produce came in; and additional productive laborers might be maintained with the amount. By such means society might obtain from its existing resources a greater quantity of produce; and to such means it has been driven, when the sudden destruction of some large portion of its capital rendered the employment of the remainder with the greatest possible effect, a matter of paramount consideration for the time.

Where industry has not come up to the limit imposed by capital, governments may, in various ways, for example, by importing additional laborers, bring it nearer to that limit; as in the importation of coolies and free negroes into our sugar colonies. There is another way in which governments can create additional industry. They can create capital. They may lay on taxes, and employ the amount productively. They may do what is nearly equivalent; they may lay taxes on income or expenditure, and apply the proceeds towards paying off the public debts. The fundholder when paid off would still desire to draw an income from his property, most of which therefore would find its way into productive employment, while a great part of it would have been drawn from the fund for unproductive

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