part of their demonstrations, have followed Adam Smith. Godwin, in Political Justice (1793), remarks: 'The wealth of any state may intelligibly enough be considered as the aggregate of all the incomes which are annually consumed within that state without destroying the materials of an equal consumption in the ensuing year.' 1 Malthus, indeed, in the Essay on Population, uses the word wealth in such a vague way that it is quite impossible to say whether, if the question had been put to him, he would have explained the wealth of a country to be its capital or its income; he had no very clear conception of the difference between the two things.2 Lauderdale also, in his Inquiry into the Nature and Origin of Public Wealth, entirely failed to separate the idea of capital and income. But in his reply to Spence's Britain Independent of Commerce, James Mill expressed plainly the opinion that the wealth of a country is its annual produce and not its capital : 'Mr. Spence,' he says, 'has an extremely indistinct and wavering notion of national wealth. He seems on the present occasion to regard it as consisting in the actual accumulation of the money and goods which at any time exists in the nation. But this is a most imperfect and erroneous conception. The wealth of a country consists in her powers of annual production, not in the mere collection of articles which may at any instant of time be found in existence.'8 Subsequent writers generally allowed themselves to be diverted from the task of explaining what they understood by the wealth of a nation into an attempt to define the mere word 'wealth' in such a way as to make it applicable to every single thing which might constitute a part of the wealth of a nation or individual, and to nothing else. Such definitions do not advance the question. A definition of wealth as, for instance, 'things which have value in exchange,' does not help us in the least. By substituting the definition of the word for the word itself, we should only get the result that 'the wealth of a nation' consists of 'the things which have 1 Pp. 791, 792. * See especially 1st ed. ch. xvi., 2d. ed. Bk. III. ch. vii. 3 Commerce Defended, pp. 51, 52. Cp. p. 72. B value in exchange of a nation.' Other words must be substituted for the preposition ' of,' and the question turns on what these should be. But if we disregard the economists' definitions and look at the general drift of their works, it becomes obvious that the wealth of the nation is understood to be its income and not its capital. Production' and 'the production of wealth,' which are always treated as being the same thing, are, primarily at any rate, the production of income, because capital is never considered as directly produced, but as being saved or accumulated from produce or income. 'Distribution' and 'the distribution of wealth' are still more plainly the distribution of the income and not of the capital of the nation; it is not the capital but the income that is distributed into rent, wages, and profits.1 It must be admitted, however, that very often the economists use the expression 'the wealth of a nation' in its older sense, and make a country 'richer' when it has larger accumulations rather than when it has a larger income. J. S. Mill, in his Essays on some Unsettled Questions of Political Economy, declares distinctly that 'the wealth of a country consists of the sum-total of the permanent sources of enjoyment, whether material or immaterial, contained in it.' 2 § 7. Restriction to Material Objects. Adam Smith's failure to perceive that the wealth of a nation may mean either its capital or its income had a great deal to do with the length to which the controversy about productive and unproductive labour was drawn out. In the first paragraph of his 'Introduction,' he seems to imply that the income-wealth of a nation consists of 'necessaries and conveniences of life,' and at the beginning of Book I. chap. v. he says: 'Every man is rich or poor according 1 Sometimes we come very near a definite statement that the wealth of a country is its income and not its capital; e.g. 'We want to know, then, by what causes mankind, or the inhabitants of a particular country, are led to increase their wealth; that is, to produce every year a greater quantity of the "necessaries, comforts, and conveniences of life” (to use a phrase which I know is somewhat vague), than they did the year before.'-An Inquiry into those Principles respecting the Nature of Demand and the Necessity of Consumption, lately advocated by Mr. Malthus, etc., 1821, p. 2. 2 P. 82. to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life,"1 a phrase which may have been suggested by unconscious reminiscence of Cantillon's proposition that 'la richesse en elle-même n'est autre chose que la nourriture, les commodités et les agrémens de la vie.'2 Now if the wealth of a man or nation consists of necessaries, conveniences, and amusements, it clearly does not consist entirely of material objects, such as bread and meat, clothes and houses, chairs and tables. The surgeon and the policeman supply necessaries, the cab-driver and the hairdresser supply conveniences, the actor and the musician supply amusements, which cannot, without straining the accepted meaning of words, be called material objects. Throughout the First Book Adam Smith discloses no design of excluding the products of these labourers from the annual produce, and appears to have no idea that their produce is of a fundamentally different character from that of other labourers. In the chapters Of the wages of labour,' and 'Of wages and profit in the different employments of labour and stock,' there is no hint of any such difference. The office of the physician and the lawyer is exalted; 'the price of their labour' is enhanced by the expense of their education and the large income they must have to prevent them being of a very mean or low condition.' The last paragraph of the chapter 'Of the principle which gives occasion to the division of labour' even goes so far as to imply that the 'philosopher' is a useful labourer.4 Before he wrote the Second and Fourth Books, however, Adam Smith had come under the influence of the French physiocrats. In their revolt against Colbertism, the physiocrats were led to deny that commerce is a creation of wealth; they represented it as consisting merely of exchanges of things of equal value. Now, of course, exchange in itself is no creation of wealth, and the things which are exchanged for each other are for the moment of equal value, but this does not prove that persons engaged in facilitating exchanges do not create wealth, for, where private property is established, 1 P. 13 b. 2 Essai sur le Commerce en général, 1775, repr. Boston, 1892, pp. 1, 2. * P. 46 a, 47 b. P. 8 a. exchange is necessary in order to secure the advantages of division of employments and the localisation of industries in the places best fitted for them. The physiocrats not only failed to see this, but endeavoured to show that all workers who do not happen to be engaged in growing crops or cattle or in obtaining raw produce in some other way -directly from the earth, are exchangers and not producers. The extra value added to raw produce by the labour of the artisan was, they said, only the equivalent of the earnings of the artisan, and these earnings they seem to have supposed to consist entirely of raw produce. Manufactures are thus, like commerce, merely exchanges of equal values, and produce no wealth. The point involved is made very clear in one of Quesnay's dialogues : 'M. N. [Quesnay]. Mes réponses, mon ami, ne vous paraissent abstraites que parce que vous n'avez pas encore vu bien clairement que la valeur vénale de ces marchandises n'est que la valeur même de la matière première et de la subsistance que l'ouvrier a consommée pendant son travail, et que le débit de cette valeur vénale, répété par l'ouvrier, n'est au fond qu'un commerce de revendeur. Avez-vous donc dessein de me faire croire que revendre est produire? Je pourrais vous rétorquer à mon tour que votre intention serait fort captieuse. M. H. [antiphysiocrat]. Mon intention n'est point captieuse, car je pense bien sincèrement que REVENDRE AVEC PROFIT EST PRODUIRE. M. N. Vous m'accuserez donc encore de ne répondre que par des maximes générales, si je vous répète que le commerce n'est qu'un échange de valeur pour valeur égale et que relativement à ces valeurs il n'y a ni perte ni gain entre les contractants.'1 Agriculture, on the other hand, not only provides the subsistence of the labourer, but also the rent of the land and the taxes levied from the land. It is therefore, Quesnay thought, something more than an exchange of equal values; it is productive, while commerce and manufactures are sterile. So in the Tableau Économique, the productions and the reproduction totale consist of raw produce only. Classes which do not produce raw produce are conceived as being 'paid out of the raw produce. This system,' as Adam Smith himself says, 'seems to suppose' that 'the revenue of 1Œuvres de Quesnay, ed. Oncken, pp. 537, 538. 2 Ib. pp. 305 ff. the inhabitants of every country' consists altogether 'in the quantity of subsistence which their industry could procure to them.'1 2 Adam Smith was not prepared to go as far as this. The epithet stérile, which he translates 'barren and unproductive,' applied to the labour of artificers, manufacturers, and merchants,' appeared to him, as it did to most other people, 'improper.' But instead of falling back on his necessaries, conveniences, and amusements of human life,' and saying that no labour which produced any of them was barren or unproductive, he seems to have begun looking about him to see where the division between productive and barren or unproductive labour ought to be drawn. To his frugal mind there was one form of labour which was obviously barren or unproductive, that of the menial servant. A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants.' The observation bears a sort of semblance of truth because it is so very much more likely that a man will ruin himself by employing too many menial servants than by employing too many factory hands, just as it is more likely that he will ruin himself by buying too much wine than by buying too many spades. Adam Smith, however, thought he had detected a difference between the labour of the 'manufacturer' and that of the 'menial servant,' in the fact that the manufacturer produces a tangible article which can be sold,) a 'vendible commodity,' while the work done by the menial servant adds to the value of nothing, 'and does not fix or realise itself in any permanent subject or vendible commodity which endures after that labour is past.' Finding that the sovereign, the officers of justice and war, churchmen, lawyers, physicians, men of letters of all kinds (even economists), players, buffoons, musicians, operasingers, dancers, resemble in this respect menial servants, he sets them all down as 'unproductive.' But unproduc tive or not productive of what? It does not seem he meant that the labour in question is productive of nothing. That it produces something seems to be implied 1 Book IV. ch. ix. p. 306b. 2 Ibid. p. 305 a. |