The things to be regretted and to be remedied are the prodigious inequality with which this surplus is distributed, and the large share which falls to the lot of persons who render no equivalent service in return."

The wealth which is employed in creating more wealth has been divided by Adam Smith into Fixed and Circulating Capital. "There are two ways," he says, " in which a capital may be employed so as to yield a revenue or profit.

"First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit. The capital employed in this manner yields no revenue or profit to its employer, while it either remains in his possession or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another; and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capitals, therefore, may properly be called circu lating capitals.

"Secondly, it may be employed in the improvement of land, in the purchase of useful machines and implements of trade, or in such like things as yield a revenue or profit without changing masters or circulating any further. Such capitals, therefore, may properly be called fixed capitals."

This distinction has been further illustrated by the remark, that Circulating Capital fulfils the whole of its office in production by a single use; while Fixed Capital produces its effect, not by being parted with, but by being kept, and its efficacy is not exhausted by a single use. Observe, also, that the same articles may be Circulating Capital while in the hands of one person, and become Fixed Capital as soon as they are transferred to another. A stock of finished ploughs, for instance, belongs to the former class while they are owned by the manufacturer or the merchant, who expects not to use, but to sell them, and can obtain his profit only from the proceeds of such a sale; but they become Fixed Capital when they are purchased by the farmers, who expect to retain and use them till they are worn out.

Fixed Capital, Adam Smith remarks, "consists chiefly of the four following articles:

"First, of all useful machines and implements of trade which facilitate and abridge labor.

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Secondly, of all buildings used for the purpose of trade or manufacture, such as shops, warehouses, and farm buildings. They are a sort of instruments of trade, and may be considered in the same light.

"Thirdly, of the improvements of land, of what has been profitably laid out in clearing, draining, inclosing, manuring, and reducing it into the condition most proper for culture. An improved farm may be regarded in the same light as one of those useful machines which facilitate and abridge labor.

"Fourthly, of the acquired and useful abilities of all the members of the society. The acquisition of such talents by the maintenance of the acquirer during his education, study, or apprenticeship, costs an expense, which is a capital fixed and realized, as it were, in his person. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade, which facilitates and abridges labor.

"The Circulating Capital is composed likewise of four parts :

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First, of the money by means of which all the other three are circulated and distributed to their proper consumers.

"Secondly, of the stock of provisions in the possession of the butcher, the grazier, &c. for the purpose of sale.

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Thirdly, of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and building, which are not yet made up, but remain in the hands of the growers, manufacturers, or merchants.

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“ Fourthly, of the work which is made up and completed, but is still in the hands of the merchant or manufacturer; such as the finished work in the shops of the smith, the goldsmith, the jeweller, and the China merchant. The Circulating Capital consists in this manner of the provisions, materials, and finished work of all kinds, which are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them to their final consumers."

To this enumeration by Adam Smith must be added two classes of articles, which seem to have been excluded by him for insufficient reasons; namely, food and the other necessaries

of life, and dwelling-houses. The name of capital has been denied to these two classes of things, because they are consumed as revenue, with a view to subsistence or enjoyment, and not as capital, with a view to production. But it may be replied, that the laborer, before he can construct or fashion anything, must not only have raw materials and tools, but must be secure of a lodging and a dinner. An expenditure for all four of these objects is necessary before he can complete his task; and the aggregate of such expenditure is therefore properly considered as an advance of capital, the means for this advance having been previously obtained by abstinence or frugality.

CHAPTER VII.

THE CIRCUMSTANCES WHICH FAVOR THE GROWTH OF CAPITAL: THE SECURITY OF PROPERTY.

THE circumstances on which the rapidity of accumulation, or the growth of capital, depends, are various, and the study of them is one of the most interesting researches in which the economist or the historian can engage. Laws and political institutions generally have a vast influence in this respect, as well as differences of national character and peculiarities of geographical position. The results of the former may be traced, by the light both of theory and history, often in quarters where they would be the least suspected, the most prominent and marked effect being frequently attributable to the noiseless working, through many generations, of peculiar customs and laws, which do not attract much notice precisely because they are ingrained or deeply seated. Foremost among these silent but potent causes, which escape the attention of the superficial observer, must be ranked the legislative and consuetudinary provisions which regulate the succession to the estates of persons deceased. I believe the striking differences in the social and economical condition of the English and the American people, who are of the same blood, who speak the

same language, who have many similar traits of national character, and whose political institutions in the main are very much alike, are more attributable to their different modes of regulating the succession to property, than to any other single cause whatsoever. But this subject will be more conveniently considered hereafter.

Our general question is, When is labor most energetic, universal, and effective in the creation of wealth, and by what means are the motives to accumulation from savings most strongly stimulated? I cannot attribute much importance in this respect to what are called the natural advantages of a country, its genial climate, fertile soil, large expanse of territory, or happy geographical position. These natural advantages, as they are termed, have fearful drawbacks in the indolence and sense of security which they foster, and the luxurious habits to which the people who possess them incline, their chief luxury always being repose. Some of the countries of South America are as highly favored in these respects as any part of the habitable globe; but it is not to this portion of our continent that we look for instances of the most rapid growth of national wealth. "In the ancient world and in the Middle Ages," it has been well remarked, "the most prosperous communities were not those which had the largest territory or the most fertile soil, but rather those which had been forced by natural sterility to make the utmost possible use of a convenient maritime situation; as Tyre, Marseilles, Venice, the free cities on the Baltic, and the like." And that we may not over-estimate even this convenience of position, it should be remembered that Athens, Tyre, and Venice stand just where they did, though their commercial glory has long since passed away. The geographical position of Greece, with its long line of deeply indented sea-coast on a tideless sea, is precisely what it was when Greece almost monopolized the commerce and the arts of the Mediterranean. She is now the most insignificant kingdom in Europe, and with difficulty supports an ignorant and thinly scattered population.

But we need not go abroad for illustrations of this truth. At home, here in Massachusetts, where we are indebted to the rigor of our climate and the hardness of our soil for our only natural exports, capital has increased, and is increasing, as

fast as in any portion of the United States, - faster probably than in Louisiana, with its rich staples of cotton and sugar, and its unequalled position at the outlet into the great Gulf of five thousand miles of internal navigation, -as fast as in Pennsylvania, with its inexhaustible stores of mineral wealth, and its soil so fertile that one county might produce more wheat than the whole Bay State. Natural wealth enervates both body and mind. Where an abundance can be had with little labor, much labor will never be practised. What seems a paradise on earth, the nearest natural semblance of a Garden of Eden, may be found in the isles of the South Pacific, or in the West Indies, where a race of white colonists seem to be fast becoming as feeble and brutish as were the natives whom they dispossessed. Here again, as in so many other instances, we are reminded that the essential quality of wealth, properly so called, is difficulty of attainment,—difficulty that can be overcome only by long and strenuous exertion.

The principal causes of the rapid growth of national opulence are moral rather than physical; a situation which shall make foreign commerce at least practicable, seems to be the only indispensable condition that is not connected with the character of the people. By moral causes alone can we hope to solve that interesting and difficult problem, the decline and fall of the opulence and grandeur of Spain. Hardly two centuries ago, Spain was what Great Britain is now, the richest, noblest, and most powerful kingdom in Europe, on whose dominions the sun never set, and whose people, distinguished alike in arts and arms, carried their flag and their renown to either pole, and encircled the earth with the golden chains of their commerce. Now, language seems hardly adequate to describe their poverty and abasement, and the wretched condition of Spain. I do not speak merely of the decline of her military strength and political influence among the nations of Europe. This is an effect, rather than a cause, of the great change which has taken place in the economical condition of her people, of the decay of her commerce, the loss of her manufactures, the wretched state of her agriculture, and the gradual wasting away of her population. And her decline cannot be attributed to the loss of her American colonies; since it became marked at least a century before the first of