necessarily the owner of circulating capital to some extent, not only to guarantee the landlord's rent and the laborers' wages, but also to purchase live stock, seed, tools, and machinery, and to make advance of wages while the crops are growing. But he is not necessarily the owner of circulating capital to anything like the extent to which he uses it; good character and a reputation for business capacity will enable him, under the modern organization of credit, to command the use of far more than he actually possesses.

In France, peasant proprietorship gives form to the agriculture of the country; but even under the old régime the seignior-capitalist did not directly employ labor, and Arthur Young pokes fun at the great lords who, desiring the reputation of cultivating the soil, when that had become a fashion in France, let out on shares portions of their estates immediately about the chateau! In the United States the land is, as a rule, held either by persons corresponding industrially to the "peasant proprietors" of Europe, but rejecting that term, and calling themselves very inappropriately "farmers," or by larger operators who hold the fee of the land and cultivate it by hired labor. Land leased for purposes of agriculture is here highly exceptional. But while the legal owner of the land is thus in a considerable degree the employer of labor, it is to a very large extent capital borrowed on note or mortgage which enables him to eke out the purchase money of the "farm," to stock it, and to pay wages in anticipation of the crop.

We thus see that even in agriculture, where the effects of lordship still survive, the capitalist is not necessarily the employer of labor, nor is the employer of labor limited in his operations by the extent of his personal ownership of capital. But if we turn to the department of mechanical industry, in which lordship never had existence, and al. that has survived from feudal times (the trades unions, as

the illegitimate successors of the ancient guilds) is antago nistic to the employer's authority; a department which is eminently the field of " new men," and in which the hereditary principle is reduced to a minimum, we find the assumption that the capitalist is the employer, the employer the capitalist, monstrously unreal. True it is that the employer should be a capitalist, that he should have possession of some accumulations, not only to guarantee 1 the loans he contracts and the wages he becomes responsible for, but also to steady his own operations, lest he should act as one who has everything to gain and nothing to lose; true it is that able employers come to own an increasing share of the capital used in their increasing business; and that the larger their accumulations become, the greater the freedom and strength with which they conduct business. Yet it still remains that the employer is not an employer because he is a capitalist, or in proportion as he is a capitalist. Of capitalists under our modern organization of industry, but a small minority employ labor; of employers few but use capital far in excess of what they own. Moreover the employer who owns little capital; the employer who owns much, and the employer who owns perchance all he employs, are not to be distinguished in their industrial attitude and relations, or in the nature, or, generally we may say, in the extent of their operations; but differ only in the ease, freedom, and security with which they conduct their respective businesses. And that difference is, in ordinary times, not very noticeable. One employer, indeed, is down on the books of the Commercial Agency with A five times repeated, and his paper is known as

Mr. Ricardo makes this distinction in respect to the banker himself. "The distinctive function of the banker begins as soon as he uses the money of others." Yet, though it is the use of other people's money that characterizes the banker, it is important that he should be known or supposed to have money of his own to afford guaranty of his good faith and prudence.

'gilt edged." Another must be content to be rated lower by the Agency, live smaller, pay a little more interest on loans, run around a little more lively before the close of banking hours, and be served after his betters. But the outside world sees very little difference, granting them equality of business ability, in their employment of labor or conduct of affairs.

Who, then, are the capitalists who are not employers of labor? I answer, first, those who by age, sex, or infirmity are disabled from active operations; men retired from business, women of all ages, children and young persons of both sexes, the crippled and incompetent for whom provision has been made; these, in the order of nature, own a large part of the property of the world. If their wealth is in their own hands, they know their limitations, and do not undertake to employ it personally; if their wealth is held for them, the responsibilities of the trustee or guardian are incompatible with the ventures of manufacture or trade. Secondly, those who, from dignity and love of leisure, as is especially the case with men of inherited means, are indisposed to increase their store by active exertions, but live upon their income; and those who are engaged in professions which do not allow the investment of their earnings. Thirdly, the laboring classes, whether receiving wages or salaries, who are able, even out of scanty earnings, to make savings which they are, from the nature of their industrial position, unable to apply personally to production. Sinall as are the individual contributions of this class to the loanable capital of a community, the statistics of the savings banks show what is the virtue of a large multiplier. There might be added, perhaps should be added, to the vast aggregate of capital thus constituted, the accumulating profits of industries

E. g., Lawyers, physicians, clergymen, architects, engineers, gov ernment officials, and the like.

which are already full of capital up to the point of "di minishing returns," where overflow must take place into newer branches of production. Thus no small part of the net annual profits of agriculture in Somersetshire and Hampshire go up to London to be loaned to the manufacturers of Yorkshire and Lancashire; while in the United States the current is reversed, and the manufacturing dividends of New England go to the West to be invested in agriculture, which can still afford to pay eight, ten, and even twelve per cent. Here again we have a large body of capital, which, though the owners of it are employers in some branch of industry, yet goes to swell the aggregate of loanable capital to which employers who are not capitalists, or who wish to be employers beyond the extent which their own capital permits, may resort under the modern organization of credit.

It is so clear that the membership of the capitalist class is not coincident with that of the employing class, notwithstanding the use by the economists of the word capitalist to signify the employer of labor; and the subject of the relation of the capitalist to the employer is, as far as I have occasion to consider it, so simple, that I should not have devoted a separate chapter to this class, but have defined it in remarks introductory of the employing class proper, were it not that I desired to emphasize this my difference with the text-book writers; and secondly and chiefly, that it becomes necessary for me to take exception to the use, by the same writers, of the word Profits, an exception best taken under the present title.

My exception is not on linguistic grounds. Profits, so far as the etymology of the word goes, might include interest, rent, wages, and the gain derived from the conduct

Bagehot's Lombard Street, p. 12.

of business, any one or all of these. The economists generally use the word to express the returns of capital.1 I propose to express by it the gains of the employing class, letting the returns of capital stand as previously explained in this chapter. By what, then, do the economists express that which I call profits? I answer, that as they refuse to the employing class a separate entity, so they, logically enough, practically deny the existence of profits distinctly from the returns of capital. If the employer, who is assumed to become an employer because he is a capitalist, and to the extent to which he is a capitalist, gives his per sonal attention and his time to the business, they acknowledge that he receives an addition to his income on that account, which addition they define as "the wages of supervision and management." This they regard as belonging strictly to the category of wages, and treat the case precisely as if the employer or "capitalist" had dispensed with a paid overseer, superintendent, or manager, and drawn the salary of the position himself-otherwise his "profits" are all the proper returns of capital. If he chooses to withdraw his personal attention and retain the overseer, superintendent, or manager, then his "profits have no such foreign admixture.

But inasmuch as the theory of distribution offered in

"Profits proper, or interest."-Prof. Rogers, Pol. Econ., p. 139. "The return for abstinence is profit."-Prof. Cairnes' "Some Leading Principles," etc., p. 48.

As Mr. Amasa Walker is the only systematic writer on political economy, with whose work I am familiar, who recognizes the employ. ers of labor as constituting a distinct industrial class, so he is the only one who gives the word Profits the significance it has in the text, "By the term profits we mean that share of wealth, which, in the general distribution, falls to those who effect an advantageous union between labor and capital. . . . the parties, then, to production are (1) the laborer, (2) the capitalist, (3) the employer, or manager. Each has a distinct province and a separate interest."--Science of Wealth, pp. 279–80.