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been made by any self-imposed privation of the master, 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 is by increase 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 labor, 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 beside 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, but only that it is not consumed by

the person who saves it. If merely laid by for future use, it is said to be hoarded; and while hoarded, is not consumed at all. But if employed as capital, it is all consumed ; not indeed by the capitalist, but by his work-people. 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 laborers, 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) reemployed as capital and consumed.

The principle now stated, is a strong example of the necessity of attention to 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 matter is habitually aware of it, and most are not even willing to admit it 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 such conduct permissible, or even laudable, when it is to provide for a family, and the like; but they have no conception of it as 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 favor, 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.

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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 coní

sume what has been produced, not what is about to be produced. Now, of what has been produced, a part only is i 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 This popular error comes from attending to a small portion only of the consequences that flow from the saving or the spending; all that part of the effects of either which is out of sight, being out of mind. The eye follows what is saved, into an imaginary strong box, and there loses sight of it; what is spent, it follows into the hands of tradesmen and dependents; but 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 laborers, 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

* 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.

But in the spending, this first stage is also the final stage; that particular amount of the produce of labor 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 laborers at work repairing it; who are ultimately found to have replaced, with an increase, the equivalent of what has been consumed. And 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 laborers in perpetuity, reproducing annually their own maintenance with a profit.

It is the intervention of money which obscures, to an unpracticed 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


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