lent it to a producer, there would have been the same immediate good to trade and as much profit; but there would also have been ever afterwards, an additional income of wealth for employing labourers and buying at shops; labourers and shopkeepers would have had increased benefit in perpetuity.

5. The residuum, the profit, will be responsible for a special charge in one of two forms. That charge may be appropriated by the producer, if he works with his own capital, or it may be given to a lender who has assisted him with a loan of capital. This portion of the profit is called interest, and is usually calculated as so many pounds to be paid annually for each hundred lent. It is certain that every man of business who invests capital in it will expect to earn the same interest upon it as if he had lent it to a borrower, else he would not take up the business at all, but assume, without trouble or risk to himself, the position of lender to some other man.

I am obliged to employ here the language of money; it cannot be helped. In the preceding pages all reference to money has been avoided as much as possible, nor has it been wanted for explaining the realities discussed. Political Economy, rightly conceived, ought to know nothing about money except its qualities and services as a tool when actually used. But the world is ever backsliding into money as being capital, and wages, and profits, and indeed all wealth; a kind of hard fate drives them into this feeling. It is impossible to speak of cotton, and sugar, and iron, as being profit, and wages, and loans, through all the details of each separate business; hence they are necessarily summed

up and generalised in the one common substance which measures, and as it were embodies them all. But the injury thereby done to the mind in its understanding of the real facts is enormous. It is trained to forget that the substances transferred by money are the things of which Political Economy treats. It is, therefore, necessary at the outset of a discussion in which reference must constantly be made to money to call upon the reader to remember that profits and wages are not the money in which they are spoken of, but the substances which are made to satisfy human desires and which money exchanges. A portion of the cotton spun and sold is the true profit; another portion, the true wages of the workmen at Manchester. Some of the iron made at Barrow, and some of the woollen cloths woven at Bradford, are the true rewards of the employers and their men in those places. The iron, yarn, and cloth are turned into money by the employer, the money distributed to himself and his workmen, and then the things bought with these monies ultimately satisfy the wants and desires of all. The money is first bought with the products of the industry, and then reconverted back into commodities. To an amazing extent in England, money, though spoken of and stipulated in these transactions, is never touched at all. The exchange of the things produced for the things bought is effected by a machinery of paper and

account.

We now return to Profit, and bearing in mind the above caution, we shall speak more freely of money. The man who puts money, such is the phrase, into his business, will expect from it something more than the interest which he could have procured by simple lend

ing; he will look for a larger return than that. In estimating the results of his operations, the interest on his own capital will figure as a charge, precisely as that on his borrowed money. It will not reckon as an item of profit derived from his trading, but as an item of debt due to him or to his creditor. Interest then, is not the true residuum, it is not the profit. Mr Mill pronounces that gross profits provide for three purposes: reward for abstinence in creating the capital; indemnity for risk; and remuneration for the labour and skill required for superintendence. Mr Danson follows in the same track, only laying more stress on insurance against risk. This analysis is manifestly not exhaustive, Insurance is no gain, it only serves to replace loss. The reward of abstinence is interest, which can be obtained without going into business; reward, therefore, for superintendence and skill is all which, upon this view, can be regarded as profit. But, as before remarked, this, in essence, is mere wages, it cannot be specifically profit. Profit bears no direct and necessary relation to skill in the same sense as the reward of the philosophical instrument-maker, or of the great surgeon. Many a dull merchant, or not over-intellectual banker, accumulates a vast fortune out of a business which he has inherited, and in whose management he takes very little part, if even any at all; as far as he is concerned, connection and routine do the work, or a hired manager, in whom the skill and care reside. Mr Shadwell very aptly illustrates the difference between the reward of superintendence and profit by a reference to joint-stock companies. "The managers receive regular salaries, like the clerks and artisans who are employed, and the

owners of the concern form a distinct class who receive the profits for no other reason than that they have provided the capital with which it is carried on. The dividends on the ordinary shares constitute profit, which varies according to the ability and success with which the particular company is managed. The dividends of the debentures and preference shares are interest on loans raised by the companies."* Such companies furnish clear and well-marked examples of the three different kinds of payment: superintendence, interest, and profit. Take, for instance, a railway company which gives a dividend of 10 per cent. Superintendence and skill of management have been charged in the account before the dividend was struck; so also has risk. The losses from accidents and other risks have been placed on the debit side of the account. Further-as to this item of risk, additional provision is usually made by not using up the last shilling of the balance as dividend. A sum, often considerable, is held back as reserve, distinctly to guard against risks. Then comes the dividend of 10 per cent. to the idle shareholder. Of this he reckons 4 per cent. as interest on the capital he embarked in the railway. The remainder is pure residuum or profit; and whence was it derived? From the productiveness of the capital and labour employed, from more wealth being created that was consumed upon every charge. Then again, profits vary enormously, from lucky chances, or a sudden drop in the cost of raw material, or an unexpected new market, or an extension of business through the growth of population. Abstinence, skill, and personal superintendence remain all unchanged, * "Elements of Political Economy," page 442.

yet profit raises its head, and swells into larger dimensions. Monopolies too, as Mr Mill admits, have the same effect and augment profits. Combination too,

amongst dealers, is often equally powerful, especially amongst retailers who conspire not to conform to a fall in the wholesale market. Such gains are wholly out of the region of the three enumerated elements of profit; indeed, the very idea of a general level of profits indicates that there is something more in them than interest, insurance, and superintendence.

We are compelled therefore to continue our search to discover in what true profit really consists. We are not obliged to travel far. We find it in the clear surplus gain which the employment of capital creates. It serves all the three purposes, and then there is a remainder, something over and above compensation for every charge. It still does something more. The nett product is a residuum, and that residuum was the very object for which the business was undertaken, and the capital applied. It is the work of the business itself, which pays for interest, insurance, and superintendence, and yields still something additional. It is a balance remaining over and above, after the three satisfactions have been provided, and it is because there is such a balance that labourers are able to make assaults on profits to the benefit of wages. That balance varies widely in different businesses. It may come from a number of different sources. It is incapable of being analysed further. It is enough to know that it exists. Two other points remain to be noticed in respect of profits.