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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 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 7 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 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 landowners. 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 labourers to whom they give employment. Now, there are two possible suppositions in regard to the labourers; 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 labourers, in the form of additional wages. We will assume them to be already sufficiently supplied with necessaries. What follows 2 That the labourers become consumers of luxuries; 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 production might, rigorously speaking, continue, until every labourer had every indulgence of wealth, consistent with continuing to work; supposing that the power of their labour 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 labour either additional employment, or additional remuneration; enriches either the country, or the labouring class. If 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.

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

§ 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 labours 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 perhaps as speedily as if it had been consumed in idleness. We may imagine a number of individuals or families settled on as many separate pieces of land, each living on what their own labour produces, and consuming the whole produce. But even these must save (that is, spare from their personal consumption) as much as is necessary 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 mpre must they do so before they can employ other labourers, 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 labour 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 in which property was protected, the increase of capital has usually been, for a long time, mainly 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 taskmasters 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 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 labour, 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 besides 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, nor even necessarily that its consumption is deferred ; but only that, if consumed immediately, 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; though not by the capitalist. 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 labourers, who consume it for their daily wants; or if they in their turn save any part, this also

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