expenditure, since people do not usually pay their taxes from what they would have saved, but partly, if not chiefly, from what they would have spent. It may be added, that any increase in the productive power of capital (or, more properly speaking, of labor) by improvements in the arts of life, or otherwise, tends to increase the employment for labor; since, when there is a greater produce altogether, it is always probable that some portion of the increase will be saved and converted into capital; especially when the increased returns to productive industry hold out an additional temptation to the conversion of funds from an unproductive destination to a productive.

§ 3. While, on the one hand, industry is limited by capital, so on the other, every increase of capital gives, or is capable of giving, additional employment to industry; and this without assignable limit. I do not mean to deny that the capital, or part of it, may be so employed as not to support laborers, being fixed in machinery, buildings, improvement of land, and the like. In any large increase of capital, a considerable portion will generally be thus employed, and will only co-operate with laborers, not maintain them. What I do intend to assert is, that the portion which is destined to their maintenance, may (supposing no alteration in anything else) be indefinitely increased, without creating an impossibility of finding them employment; in other words, that if there are human beings capable of work, and food to feed them, they may always be employed in producing something. This proposition requires to be somewhat dwelt upon, being one of those which it is exceedingly easy to assent to when presented in general terms, but somewhat difficult to keep fast hold of, in the crowd and confusion of the actual facts of society. It is also very much opposed to common doctrines. There is not an opinion more general among mankind than this, that the

unproductive expenditure of the rich is necessary to the employment of the poor. Before Adam Smith, the doctrine had hardly been questioned; and even since his time, authors of the highest name and of great merit* have contended that if consumers were to save and convert into capital more than a limited portion of their income, and were not to devote to unproductive consumption an amount of means bearing a certain ratio to the capital of the country, the extra accumulation would be merely so much waste, since there would be no market for the commodities which the capital so created would produce. I conceive this to be one of the many errors arising in political economy, from the practice of not beginning with the examination of simple cases, but rushing at once into the complexity of concrete phenomena.

Every one can see that if a benevolent government possessed all the food, and all the implements and materials, of the community, it could exact productive labor from all to whom it allowed a share in the food, and could be in no danger of wanting a field for the employment of this productive labor, since as long as there was a single want unsaturated (which material objects could supply) of any one individual, the labor of the community could be turned to the production of something capable of satisfying that want. Now, the individual possessors of capital, when they add to it by fresh accumulations, are doing precisely the same thing, which we suppose to be done by our benevolent government. As it is allowable to put any case by way of hypothesis, let us imagine the most extreme case conceivable. Suppose that every capitalist came to be of opinion that not being more meritorious than a well-conducted laborer, he ought not to fare better; and accordingly laid by, from conscientious motives, the surplus of his

* For example, Mr. Malthus, Dr. Chalmers, M. de Sismondi.

profits; or suppose this abstinence not spontaneous, but imposed by law or opinion upon all capitalists, and upon land-owners likewise. Unproductive expenditure is now reduced to its lowest limit; and it is asked, How is the increased capital to find employment? Who is to buy the goods which it will produce? There are no longer customers even for those which were produced before. The goods, therefore, will remain unsold; they will perish in the warehouses; until capital is brought down to what it was originally, or rather to as much less, as the demand of the consumers has lessened. But this is seeing only one half of the matter. In the case supposed, there would no longer be any demand for luxuries, on the part of capitalists and land-owners. But when these classes turn their income into capital, they do not thereby annihilate their power of consumption; they do but transfer it from themselves to the laborers to whom they give employment. Now, there are two possible suppositions in regard to the laborers; either there is, or there is not, an increase of their numbers, proportional to the increase of capital. If there is, the case offers no difficulty. The production of necessaries for the new population, takes the place of the production of luxuries for a portion of the old, and supplies exactly the amount of employment which has been lost. But suppose that there is no increase of population. The whole of what was previously expended in luxuries, by capitalists and landlords, is distributed among the existing laborers, in the form of additional wages. We will assume them to be already sufficiently supplied with necessaries. What follows? That the laborers become consumers of Inxuries; and the capital, previously employed in the production of luxuries, is still able to employ itself in the same manner; the difference being, that the luxuries are shared among the community generally, instead of being confined to a few. The increased accumulation and increased pro

duction might, rigorously speaking, continue, until every laborer had every indulgence of wealth, consistent with. continuing to work, supposing that the power of their labor were physically sufficient to produce all this amount of indulgences for their whole number. Thus the limit of wealth is never deficiency of consumers, but of producers and productive power. Every addition to capital gives to labor either additional employment, or additional remuneration; enriches either the country or the laboring class. it finds additional hands to set to work, it increases the aggregate produce: if only the same hands, it gives them a larger share of it; and perhaps even in this case, by stimulating them to greater exertion, augments the produce itself.

If

§ 4. A second fundamental theorem respecting Capital

relates to the source from which it is derived. It is the result of saving. The evidence of this lies abundantly in what has been already said on the subject. But the proposition needs some further illustration.

If all persons were to expend in personal indulgences all that they produce, and all the income they receive from what is produced by others, capital could not increase. All capital, with a trifling exception, was originally the result of saving. I say, with a trifling exception; because a person who labors on his own account, may spend on his own account all he produces, without becoming destitute; and the provision of necessaries on which he subsists until he has reaped his harvest or sold his commodity, though a real capital, cannot be said to have been saved, since it is all used for the supply of his own wants, and no abstinence has been practiced. We may imagine a number of individuals or families, settled on as many separate pieces of land, each living on what their own labor produces, and consuming the whole produce. But even these must save (that is, spare from their personal consumption) as much as is neces

sary for seed. Some saving, therefore, there must have been, even in this simplest of all states of economical relations; people must have produced more than they used, or used less than they produced. Still more must they do so before they can employ other laborers, or increase their production beyond what can be accomplished by the work of their own hands. All that any one employs in supporting and carrying on any other labor than his own, must have been originally brought together by saving; somebody must have produced it and forborne to consume it. We may say, therefore, without material inaccuracy, that all capital, and especially all addition to capital, are the result of saving.

In a rude and violent state of society, it continually happens that the person who has capital is not the very person who has saved it, but some one, who being stronger, or belonging to a more powerful community, has possessed himself of it by plunder.. And even in a state of things several degrees more advanced, the increase of capital has usually been in a great measure derived from privations which, though essentially the same with saving, are not generally called by that name, because not voluntary. The actual producers have been slaves, compelled to produce as much as force could extort from them, and to consume as little as the self-interest or the usually very slender humanity of their task-masters would permit. This kind of compulsory saving, however, would not have caused any increase of capital, unless a part of the amount had been saved over again, voluntarily, by the master. If all that he made his slaves produce and forbear to consume, had been consumed by him on personal indulgences, he would not have increased his capital, nor been enabled to maintain an increasing number of slaves. To maintain any slaves at all, implied a previous saving; a stock, at least of food, provided in advance. This saving may not, however, have