Chapter 10: the Transformations Undergone by Capital in The Progress of Production

September 30, 2015

So much it was necessary to specify, in enumerating the various means of production. We now come to consider and exam- ine, what becomes of capital in the progress of production, and how it is perpetuated and increased. To avoid fatiguing the reader with abstract speculation, I shall begin with giving examples, which I shall take from every day’s experience and observation. The general principles will follow of themselves, and the reader will immediately see their applicability to all other cases, which he may have oc- casion to pronounce a judgment upon. This portion of his capital is little subject to wear and tear; trifling occasional repairs will preserve it entire. If the culti- vator obtain from the annual produce wherewithal to effect these repairs, this item of capital is thereby preservable in perpetuity. Ploughs, and other farming implements and utensils, together with the animals employed in tillage, form another item of 44Book I= On Production the cultivator’s capital, and an article of much quicker con- sumption, which, however, may in like manner be kept up and renovated, as occasion may require, at the expense of the annual produce of the concern, and thus be maintained at its full original amount. dyeing indigo cease to be Brazil wood or annatto, as the case may be, and are incorporated with the fabric they are employed in colouring. And so of the wages and maintenance of the labourers.

In commerce, almost the whole capital undergoes complete transmutation, and many items of it several times in the course of a year. A merchant exchanges his specie for woollens or jewellery, which is one change of form. He ships them for Turkey, and on the voyage, some more of his money is con- verted into the wages of the crew. The cargo arrives at Constantinople, where he sells the investment to the Whole- sale dealers, who pay him in bills upon Smyrna, which is a second metamorphosis; the capital embarked is now in the shape of bills, which he makes use of in the purchase of cot- ton at Smyrna; a third transformation. The cotton is shipped for France and sold there, which completes the fourth change of form; thus reproducing the capital, most probably with profit, under its original shape of French coin. Finally, he must have stores of various kinds; seeds for his ground, provisions, fodder for his cattle, and food as well as money for his labourers’ wages, &c. 97 Observe, that this branch of capital is totally decomposed once in the course of the year, at least; and sometimes three or four times over. The money, grain and provisions of every description disappear altogether; but so it must necessarily be, and yet not an atom of the capital is lost, if the cultivator, after abstracting from the produce a fair allowance for the productive service of his land (rent) for the productive service of the capital embarked (interest) and for the productive service of the personal labour that has set the whole in motion (wages), contrive to make the annual produce replace the outlay of money, seed, live stock, &c., even to the article of manure, so as to put himself in possession of a value-equal to what he started with the preceding year.

Many things can serve as capital.

The most insignificant and perishable articles are a part, and often a very important part, too, of the national capital; that although the items of capital are in a continual course of consumption and decomposition, it by no means follows, that the capital itself is destroyed and consumed, provided that its value be preserved in some other shape; consequently, that the introduction or import of the vilest and most perishable commodities may be just as prof- itable as that of the most costly and durable — gold or silver; that, in fact, the former, are more,profitable the instant they are more sought after; that the producers themselves are the only competent judges of the transformation, export, and import, of these various matters and commodities= and that every government which interferes, every system calculated to influence production, can only do mischief.

Thusm, capital may yet be kept up. Though almost every part of it have undergone some change, and many parts be completely annihilated; for, indeed, capital consists not in this or that commodity or substance, but in its value.

If the estate were large and managed well, the cultivator’s profits may enable him to lay by a surplus, after replacing the entire value of his capital, and defraying the expenses of himself and family. The mode of dis- posing of this surplus is of the utmost importance to the com- munity, and will be treated of in the next chapter.

All that is at present necessary is, to impress a clear conviction, that the value of capital, though consumed, is not yet destroyed, wher- ever it has been consumed in such way as to reproduce itself; and that a concern may go on forever, and annually render a new product with the same capital, although that capital be in a perpetual course of consumption.

After tracing capital through its various transformations in the department of agriculture, it will be easy to follow its transformations in the other two departments of manufacture and commerce.

There are concerns, in which the capital is completely renovated, and the work of production begun afresh, several times in the year. An operation of manufacture, that can be perfected and the product sold in three months, will admit of the capital being turned to account annually four times.

The profit each time might be less than when the capital is turned but once in twelve months. Were it otherwise, there would be four times the profit gained; an advantage that would soon attract an overflow of capital in this particular channel, and lower the profit by competition. On the other In manufacture, as well as agriculture, there are some branches of capital that last for years; buildings and fixtures for instance, machi. nery and some kinds of tools; others, on the contrary, lose their form entirely; the oil and pot-ash used by soap-makers cease to be oil and pot-ash when they assume the form of soap. In the same manner, the drugs employed in hand, products that it requires more than a year to perfect, such as leather, must, over and above the original capital, yield the profits of more than one year; otherwise, who could undertake to raise them? sists in the value of matter or substance, not in the substance or matter itself, I trust my readers have clearly comprehended, that the productive capital employed, notwithstanding its frequent transmutations, is all the while the same capital. In the trade of Europe with China and the East Indies, the capital embarked is two or three years before its return. Nor is it iecessary in commerce or in manufacture, any more than in agriculture, which has been cited as an example, that the capital should be realized in the form of money, to be entirely replaced. Merchants and manufacturers, for the most part, realize in this way the whole of their capital but once in their lives, and that is when they wind up and leave off business.

Yet they are at no loss to discover at any time whether their capital be enlarged or diminished, by referring to the inven- tory of their assets for the time being. It will be conceived with equal facility, that, inasmuch as the value produced has replaced the value consumed, that produced value may be equal, inferior, or superior in amount, to the value consumed, according to circumstances. If equal, the capital has been merely replaced and kept up; if inferior, the capital has been encroached upon; but if superior, there has been an actual increase and accession of capital. This is precisely the point to which we traced the cultivator, cited by way of an example in the preceding chapter.

We supposed him, after the complete re-establishment of his capital, so as to put him in a condition to begin the new year’s cultivation with equal means at his disposal, to have netted a surplus produce beyond his consumption of some value or other; say of $1000.

The capital employed on a productive operation is always a mere advance made for payment of productive services, and reimbursed by the value of their resulting product.

How can he dispose of his surplus of $1000?

The miner extracts the ore from the bowels of the earth; the iron-founder pays him for it. Here ends the miner’s production, which is paid for by an advance out of the capital of the iron-founder. This latter next smelts the ore, refines and makes it into steel, which he sells to the cutler= thus is the production of the founder paid, and his advance reimbursed by a second advance on the part of the cutler, made in the price for the steel. This again the cutler works up into razor-blades, the price for which replaces his advance of capital, and at the same time pays for his productive agency. Whatever kind of produce this surplus, which we have valued at 1000 dollars, may consist of, the owner may exchange it for gold or silver specie, and bury it in the earth till he wants it again. Does the national capital suffer a loss of 1000 dollars by this operation? Certainly not; for we have just seen, that the value of that capital was before completely replaced.

Has any one been injured to that amount? By no means; for he has neither robbed nor cheated any body, and has received no value whatever, without giving an equivalent.

He has given wheat in exchange for the dollars he has thus buried, which wheat was very soon consumed; yet the 1000 dollars still continue withdrawn from the capital of the community. But I trust it will be recollected, that wheat, as well as silver or gold, may compose a part of the national capital; indeed, we have seen that national capital must necessarily consist, in a great measure, of wheat and such like substances, liable to either partial or total consumption, without any diminution of capital thereupon; for, in short, that reproduction completely replaces the value consumed, including the profits of the producers, whose productive agency is part of the value consumed. Wherefore, the instant that the cultivator has fully replaced his capital, and begins again with the same means as before, the 1000 dollars may be thrown into the sea without reducing the national capital. It is manifest, then, that the value of the ultimate product. razorblades, has been sufficient to replace all the capital successively employed in its production, and, at the same time, to pay for the production itself; or rather, that the successive advances of capital have paid for the productive services, and the price ofthe product has reimbursed those advances; which is precisely the same thing as if the aggregate or gross value of the product had gone immediately ic defray tne charges of its production.

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