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sented to as soon as it is distinctly apprehended. The expression “applying capital ” is of course metaphorical : what is really applied is labour; capital being an indispensable condition. Again, we often speak of the “productive powers of capital.” This expression is not literally correct. The only productive powers are those of labour 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 coöperate with labour. The food of labourers and the materials of production have no productive power ; but labour 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. Selfevident 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 labour, but of past. They consume what has been produced, not what is about to be produced. Now, of what has been produced, a part only is allotted to the support of productive labour; and there will not and cannot be more of that labour 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 labour ; these are objects to which the government can, in some degree, indirectly contribute. But without any increase in the skill or energy of the labourers, and without causing any persons to labour who had previously been maintained in idleness, it was still thought that the government, with out 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 labour 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 labour 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 labourers obtainable, as the capital would maintain and employ. This has been known to occur in new colonies, where capital has sometimes perished

* An exception must be admitted when the industry created or upbeld by the restrictive law belongs to the class of what are called domestic manufactures. These being carried on by persons already fed—by labouring families, 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 inconsiderable. If, therefore, a protecting duty causes this occupation te 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 labourers 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 labour 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 labour of making it. They will not continue their labour unless society will give them more for it, than in their own opinion its product is worth.

uselessly for want of labour: the Swan River settlement (now called Western Australia), 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 labourers 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 labourers, the whole of which is now supplied by capital, might cease, or be postponed until the produce came in; and additional productive labourers 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 labourers, bring it nearer to that limit: as by the importation of Coolies and free Negroes into the West Indies. 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 fund holder, 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 expenditure, since people do not wholly 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

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any increase in the productive power of capital (or, more properly speaking, of labour) by improvements in the arts of life, or otherwise, tends to increase the employment for labour; 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 labourers, 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 coöperate with Jabourers, 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 the 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.

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

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 labour 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 labour, since as long as there was a single want unsaturated (which material objects could supply), of any one individual, the labour 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 a 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 labourer, he ought not to fare better; and accordingly laid by, from conscientious motives, the surplus of his profits; or suppose this abstinence not spontaneous, but imposed by law or opinion upon all capitalists, and upon landowners 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, (it is said) will remain unsold ; they will

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