The Nature of Capital

September 30, 2015

Stewart was the leading advocate of the mercantile system. Its maxim is= the wealth of one set of men is derived from the impoverishment of another.

He is wrong in asserting, that, “when once a stop is put to external commerce, the stock of internal wealth cannot be aug- mented.” 54 Wealth, it seems, can come only from abroad; but abroad, where does it come from? from abroad also. So that in tracing it from abroad to abroad, we must necessarily, in the end, exhaust every source, till at last we are compelled to look for it beyond the limits of our own planet, which is absurd.

As we advance in the investigation of the processes of industry. we cannot fail to perceive, that mere unassisted industry is insufficient to invest things with value. The human agent of industry must, besides, be provided with pre-existing prod- ucts; without which his agency, however skilful and intelligent, would never be put in motion. These pre-existing requi- sites are,

  1. The tools and implements of the several arts. The husbandman could do nothing without his spade and mattock, the weaver without his loom, or the mariner without his ship. Forbonnais, 55 too, builds his prohibitory system on this glar- ing fallacy; and to speak freely, on this fallacy are founded the exclusive systems of all the short-sighted merchants, and all the governments of Europe and of the world. They all take it for granted, that what one individual gains must needs be lost to another; that what is gained by one country is inevita- bly lost to another= as it the possessions of abundance of indi- viduals and of communities could not be multiplied, without the robbery of somebody or other. It one man or set of men, could only be enriched at others’ expense, how could the whole number of individuals, of whom a state is composed, be richer at one period than at another, as they now confess- edly are in France, England, Holland, and Germany, com- pared with what they were formerly? How is it, that nations are in our days more opulent, and their wants better supplied in every respect, than they were in the seventeenth century?

Whence can they have derived that portion of their present wealth, which then had no existence? Is it from the mines of the new continent? They had already advanced in wealth be- fore the discovery of America. Be sides, what is that which these mines have furnished? Metallic wealth or value. But all the other values which those nations now possess, beyond what they did in the middle ages, whence are they derived? Is it not clear, that these can be no other than created values?

  1. The products necessary for the subsistence of the industri- ous agent, as long as he is occupied in completing his share of the work or production. This outlay of his subsistence is, indeed, in the long run, replaced by the product he is occu- pied upon, or the price he will receive for it; but he is obliged continually to make the advance.
  2. The raw materials, which are to be converted into finished products by the means of his industry. These materials, it is true, are often the gratuitous offerings of nature, but they are much more generally the products of antecedent industry, as in the case of seed-corn supplied by agriculture, metals, the fruit of the labour of the miner and smelter, drugs brought by the merchant perhaps from the extremities of the globe. The value of all these must be found in advance by the industrious agent that works them up. The value of all these items constitutes what is denominated productive capital. Under this head of productive capital must likewise be classed the value of all erections and improvements upon real or 29Jean-Baptise Say, A Treatise on Political Economy the establishment of her present paper money, was never reck- oned by the highest estimates at more than 47 millions ster- ling; 58 that is to say, about 1–50th of her capital. Smith reck- oned it at no more than 18 millions, which could not be the 1–127th part. 59 landed property, which increase its annual produce, as well as that of the farming live and dead stock, that operates as machinery in aid of human industry. Another item of productive capital, is money, whenever it is employed to facilitate the interchange of products, without which production could never make any progress. Money dis- tributed through the whole mechanism of human industry, like the oil that greases the wheels of complex machinery, gives the requisite ease and facility to its movements. But gold and silver are not productive unless employed by industry= they are like the oil in a machine remaining in a state of inaction. And so also of all other tools and implements of human in- dustry.

Capital in the hands of a national government forms a part of the gross national capital.

We shall see, by-and-by, how capital, which is subject to a continual wear and consumption in the process of produc- tion, is continually replaced by the very operation of produc- tion; or rather, how its value, when destroyed under one form, re-appears under another. At present it is enough to have a distinct conception, that, without it, industry could produce nothing. Capital must work, as it were, in concert with indus- try; and this concurrence is what I call the productive agency of capital.

It would evidently be a great mistake to suppose that the capital of a community consists solely of its money. The merchant, the manufacturer, the cultivator, commonly have the least considerable portion of the value composing their capital in- vested in the form of money; nay, the more active their con- cern is, the smaller is their relative proportion of their capital so vested to the residue. The funds of the merchant are placed out in goods on their transit by land or water, or warehoused in different directions= the capital of the manufacturer chiefly consists of the raw material in different stages of progress, of tools, implements, and necessaries for his workmen= while that of the cultivator is vested in farming buildings, live stock, fences and enclosures. They all studiously avoid burthening themselves with more money than is sufficient for current use.


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