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§ 2. Because industry is limited by capital, we are not however to infer that it always reaches that limit. Capital may be temporarily unemployed, as in the case of unsold goods, or funds that have not yet found an investment; during this interval it does not set in motion any industry. Or 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 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 an other way in which governments can create additional industry. They can create capital. They may lay on their labour unless society will give them more for it, than in their own opinion its

product is worth.

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 fundholder, 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 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 co-operate with labourers, 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 them 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 some what

dwelt upon, being one of those which came to be of opinion that not being it is exceedingly easy to assent to more meritorious than a well-conducted when presented in general terms, but labourer, he ought not to fare better; and somewhat difficult to keep fast hold of, accordingly laid by, from conscientious in the crowd and confusion of the motives, the surplus of his profits; or actual facts of society. It is also very suppose this abstinence not spontamuch opposed to common doctrines. neous, but imposed by law or opinion There is not an opinion more general upon all capitalists, and upon landamong mankind than this, that the cwners likewise. Unproductive exunproductive expenditure of the rich is penditure is now reduced to its lowest necessary to the employment of the limit: and it is asked, how is the inpoor. Before Adam Smith, the doc- creased capital to find employment ? trine had hardly been questioned; and Who is to buy the goods which it will even since his time, authors of the produce? There are no longer cushighest name and of great merit* have tomers even for those which were procontended, that if consumers were to duced before. The goods, therefore, save and convert into capital more (it is said) will remain unsold; they than a limited portion of their income, will perish in the warehouses; until and were not to devote to unproductive capital is brought down to what it was consumption an amount of means bear- originally, or rather to as much less, ing a certain ratio to the capital of the as the demand of the consumers has country, the extra accumulation would lessened. But this is seeing only onebe merely so much waste, since there half of the matter. In the case supwould be no market for the commo- posed, there would no longer be any dities which the capital so created demand for luxuries, on the part would produce. I conceive this to be of capitalists and landowners. But one of the many errors arising in poli- when these classes turn their intical economy, from the practice of not come into capital, they do not thereby beginning with the examination of annihilate their power of consumption; simple cases, but rushing at once into they do but transfer it from themselves the complexity of concrete phenomena. to the labourers to whom they give Every one can see that if a benevo- employment. Now, there are two poslent government possessed all the food, sible suppositions in regard to the and all the implements and materials, labourers; either there is, or there is of the community, it could exact pro- not, an increase of their numbers, productive labour from all capable of it, portional to the increase of capital. If to whom it allowed a share in the food, there is, the case offers no difficulty. and could be in no danger of wanting The production of necessaries for the a field for the employment of this pro- new population, takes the place of the ductive labour, since as long as there production of luxuries for a portion of was a single want unsaturated (which the old, and supplies exactly the material objects could supply), of any amount of employment which has been one individual, the labour of the com- lost. But suppose that there is no inmunity could be turned to the produc- crease of population. The whole of tion of something capable of satisfying what was previously expended in that want. Now, the individual pos- luxuries, by capitalists and landlords, sessors of capital, when they add to it is distributed among the existing by fresh accumulations, are doing pre- labourers, in the form of additional cisely the same thing which we sup- wages. We will assume them to be pose to be done by a benevolent govern- already sufficiently supplied with necesment. As it is allowable to put any saries. What follows? That the case by way of hypothesis, let us ima- labourers become consumers of luxu gine the most extreme case conceiv-ries; and the capital previously emable. Suppose that every capitalist *For example, Mr. Malthus, Dr. Chalmers,

M. de Sismondi.

ployed 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 com- | duce. But even these must save (that munity generally, instead of being con- is, spare from their personal consumpfined to a few. The increased accumu- tion) as much as is necessary for seed. lation and increased production might, Some saving, therefore, there must have rigorously speaking, continue, until been, even in this simplest of all states every labourer had every indulgence of of economical relations; people must wealth, consistent with continuing to have produced more than they used, or work; supposing that the power of used less than they produced. Still their labour were physically sufficient to more must they do so before they can produce all this amount of indulgences employ other labourers, or increase their for their whole number. Thus the production beyond what can be accomlimit of wealth is never deficiency of plished by the work of their own hands. consumers, but of producers and pro- All that any one employs in supporting ductive power. Every addition to and carrying on any other labour than capital gives to labour either additional his own, must have been originally employment, or additional remunera- brought together by saving; somebody tion; enriches either the country, or must have produced it and forborne to the labouring class. If it finds addi- consume it. We may say, therefore, tional hands to set to work, it increases without material inaccuracy, that all the aggregate produce: if only the capital, and especially all addition to same hands, it gives them a larger capital, are the result of saving. share of it; and perhaps even in this case, by stimulating them to greater exertion, augments the produce itself.

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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 pro

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.

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 is not, generally speaking, hoarded, but (through savings banks, benefit clubs, or some other channel) re-em

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 what-ployed as capital, and consumed. ever 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

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 favour, 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.

This popular error comes from attending to a small portion only of the consequences that flow from the saving or the spending; all the effects of either which are out of sight, being out of mind. The eye follows what is saved, int n imaginary strong box, and there loses sight of it; what is spent, it fol

lows into the hands of tradespeople 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 labourers, 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 cases. But in the spending, this first stage is also the final stage; that particular amount of the produce of labour 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 labourers 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 labourers in perpetuity, reproducing annually their own maintenance with a profit.

It is the intervention of money which obscures, to an unpractised 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 feature in the transaction; and since that does not perish, but only changes hands, people overlook the destruction which takes place in the case of unproductive expenditure. The money being merely transferred, they think the wealth also has only been handed over from the spendthrift to other people. But this is simply confounding money with wealth. The wealth which has been destroyed was not the money, but the wines, equipages,

and furniture which the money purchased; and these having been destroyed without return, society collectively is poorer by the amount. It may be said, perhaps, that wines, equipages, and furniture, are not subsistence, tools, and materials, and could not in any case have been applied to the support of labour; that they are adapted for no other than unproductive consumption, and that the detriment to the wealth of the community was when they were produced, not when they were consumed. I am willing to allow this, as far as is necessary for the argument, and the remark would be very pertinent if these expensive luxuries were drawn from an existing stock, never to be replenished. But since, on the contrary, they continue to be produced as long as there are consumers for them, and are produced in increased quantity to meet an increased demand; the choice made by a consumer to expend five thousand a year in luxuries, keeps a corresponding number of labourers employed from year to year in producing things which can be of no use to production; their services being lost so far as regards the increase of the national wealth, and the tools, materials, and food which they annually consume being so much subtracted from the general stock of the community applicable to productive purposes. In proportion as any class is improvident or luxurious, the industry of the country takes the direction of producing luxuries for their use; while not only the employment for productive labourers is diminished, but the subsistence and instruments which are the means of such employment do actually exist in smaller quantity.

Saving, in short, enriches, and spending impoverishes, the community along with the individual; which is but saying in other words, that society at large is richer by what it expends in maintaining and aiding productive labour, but poorer by what it consumes in its enjoyments.*

It is worth while to direct attention to several circumstances which to a certain extent diminish the detriment caused to the

general wealth by the prodigality of in

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