Book 2, Chapter 1c

Circulating Capital Icon

January 1, 2020

18 The third division is the circulating capital.

It only affords a revenue by circulating or changing masters. It has four parts=

19 1. The money which circulates and distributes the three other stocks to their proper consumers.

20 2. The stock of food owned by the butcher, farmer, wheat-merchant, brewer, etc.

21 3. The unfinished products (clothes, furniture, and building) which remain with the growers, manufacturers, drapers, timber merchants, carpenters and joiners, brick-makers, etc.

22 4. The finished products that are still with the merchant or manufacturer but not yet disposed of, or distributed to the proper consumers.

  • Examples are the finished work in the shops of the smith, cabinet-maker, goldsmith, jeweller, china-merchant, etc.

Therefore, the circulating capital consists of=

  • the food, materials, and finished work that are with their respective dealers, and
  • the money for circulating and distributing them to consumers.

23 Of these four parts, the food, materials, and finished work, are regularly withdrawn and placed either=

  • in the fixed capital, or
  • in the stock reserved for immediate consumption.

24 Every fixed capital is originally derived, and requires continual support, from a circulating capital.

All useful machines and instruments of trade are originally derived from a circulating capital. The circulating capital furnishes=

  • the materials which the fixed capital are made from, and
  • the maintenance of the workers who make them.

Fixed capital needs circulating capital to keep them in constant repair.

25 Fixed capital can only yield a revenue through a circulating capital.

The most useful machines and tools will produce nothing without the circulating capital which provides raw materials and the maintenance of the workers who use them. Land, however improved, will yield no revenue without a circulating capital to maintain the labourers who work on them.

26 The sole purpose of fixed and circulating capitals is to maintain and increase the stock for immediate consumption.

This stock feeds, clothes, and lodges the people. Their wealth depends on the stock reserved for immediate consumption from those two capitals.

27 Circulating capitals need to be resupplied constantly because so much of it is continually being withdrawn=

  • to be placed in the fixed capital, or
  • to be used for immediate consumption.

These supplies are drawn from the produce of land, mines, and fisheries.

These afford continual supplies and materials which are then made into finished work. These replace the food, materials, and finished work continually withdrawn from the circulating capital.

Metal money is maintained, increased, and drawn from mines. But it also needs to be resupplied because it can be wasted, worn out, lost, or sent abroad.

28 Land, mines, and fisheries, all require a fixed and a circulating capital to cultivate them. Their produce replaces those capitals to society with a profit.

The farmer resupplies the manufacturer with the food which the manufacturer used.

  • The manufacturer resupplies the farmer with the finished work which the farmer wasted or worn out.
  • This is the real exchange that is made between farmers and manufacturers.

The farmer’s produce and the manufacturer’s goods are seldomly directly bartered for one another.

  • The farmer seldomly sells his corn, cattle, flax, and wool to the manufacturer from whom he buys his clothes, furniture, and tools.
  • He sells his rude produce for money which he can use to buy the goods that he wants.

The land even resupplies some of the capitals used in cultivating fisheries and mines.

  • Food from the land helps draw fish from the sea.
  • Fuel from the land helps extract minerals from under the land.

29 When their natural fertility is equal, the produce of land, mines, and fisheries is proportional to the capitals employed on them.

When equal capitals are employed, their produce is proportional to their natural fertility.

30 In all countries where there is tolerable security, every man will try to use his stock in procuring present enjoyment or future profit.

  • If he uses it to get present enjoyment, it is called a stock reserved for immediate consumption.
  • If he uses it to get future profit, it must=
    • stay with him, or
      • In this case, his stock is a fixed capital.
    • leave him.
      • In this case, his stock is a circulating capital.

A man must be crazy to not employ all his stock, whether borrowed or not, in any of those three ways, if there is tolerable security.

30 In some unfortunate countries, men are constantly afraid of the violence of their superiors, causing people bury most of their stock in times of disaster.

  • This is a common practice in Turkey, India, and most other Asian governments.
  • It was a common practice among our ancestors during the violence of the feudal government.

Treasure-trove was buried treasure that belonged to no one.

  • It was then considered as a part of the revenue of the European sovereigns, and did not belong to the finder nor to the land owner, unless the right to it was expressly conveyed in a charter.
  • It was put on the same footing with gold and silver mines.

Without a special clause in the charter, buried treasures and gold and silver mines were never included in the grant of the lands, though lead, copper, tin, and coal mines were included.


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