scarcely any dealer or producer on a considerable scale, who confines his business to what can be carried on by his own funds. When trade is good, he not only uses to the utmost his own capital, but employs, in addition, much of the credit which that capital obtains for him. When, either from oversupply or from some slackening in the demand for his commodity, he finds that it sells more slowly or at a lower price, he contracts his operations, and does not apply to bankers or other money dealers for a renewal of their advances to the same extent as before. A business which is increasing, holds out, on the contrary, a prospect of profitable employment for a larger amount of this floating capital than previously, and those engaged in it become applicants to the money dealers for larger advances, which, from their improving circumstances, they have no difficulty in obtaining. A different distribution of floating capital between two employments, has as much effect in restoring their profits to an equilibrium, as if the owners of an equal amount of capital were to abandon the one trade and carry their capital into the other. This easy and as it were spontaneous method of accommodating production to demand, is quite sufficient to correct any inequalities arising from the fluctuations of trade, or other causes of ordinary occurrence. In the case of an altogether declining trade, in which it is necessarythat the production should be, not occasionally varied, but greatly and permanently diminished, or perhaps stopped altogether, the process of extricating the capital is, no doubt, tardy and difficult, and almost always attended with considerable loss; much of the capital fixed in machinery, buildings, permanent works, &c., being either not applicable to any other purpose, or only applicable after expensive alterations, and time being seldom given for effecting the change in the mode in which it would be effected with least loss, namely, by not replacing the fixed capital as it wears out. There is besides, in totally changing the destination of a capital, so great a sacrifice of established connexion, and of acquired skill and experience, that people

are always very slow in resolving upon it, and hardly ever do so unless a change of fortune has become quite hopeless. These however are distinctly exceptional cases, and even in these the equalization is at last effected. It may also happen that the return to equilibrium is considerably protracted, when, before one inequality has been corrected, another cause of inequality arises; which is said to have been continually the case during a long series of years, with the production of cotton in the Southern States of North America; the commodity having been upheld at what was virtually a monopoly price, because the increase of demand, from successive improvements in the manufacture, went on with a rapidity so much beyond expectation that for many years the supply never completely overtook it. But it is not often that a succession of disturbing causes, all acting in the same direction, are known to follow one another with hardly any interval. Where there is no monopoly, the profits of a trade are likely to range sometimes above and sometimes below the general level, but tending always to return to it; like the oscillations of the pendulum.

In general, then, although profits are very different to different individuals, and to the same individual in different years, there cannot be much diversity at the same time and place in the average profits of different employments, (other than the standing differences necessary to compensate for difference of attractiveness), except for short periods, or when some great permanent revulsion has overtaken a particular trade. If any popular impression exists that some trades are more profitable than others, independently of monopoly or of such rare accidents as have been noticed in regard to the cotton trade, the impression must in all probability be fallacious, since if it were shared by those who have greatest means of knowledge and motives to accurate examination, there would take place such an influx of capital as would soon lower the profits to the common level. It is true that, to persons with the same amount of original

means, there is more chance of making a large fortune in some employments than in others. But it would be found that in those same employments bankruptcies also are more frequent, and that the chance of greater success is balanced by a greater probability of complete failure. Very often it is more than balanced: for, as was remarked in another case, the chance of great prizes operates with a greater degree of strength than arithmetic will warrant, in attracting competitors; and I doubt not that the average gains, in a trade in which large fortunes may be made, are lower than in those in which gains are slow, though comparatively sure, and in which nothing is to be ultimately hoped for beyond a competency. The timber trade of Canada is one example of an employment of capital, partaking of much of the nature of a lottery, as to make it an accredited opinion that, taking the adventurers in the aggregate, there is more money lost by the trade than gained by it; in other words, that the average rate of profit is less than nothing. In such points as this, much depends on the characters of nations, according as they partake more or less of the adventurous, or, as it is called when the intention is to blame it, the gambling, spirit. This spirit is much stronger in the United States than in Great Britain; and in Great Britain, than in any country of the Continent. In some Continental countries the tendency is so much the reverse, that safe and quiet employments probably yield a less average profit to the capital engaged in them, than those which, at the price of greater hazards, offer greater gains.

It must not however be forgotten, that even in the countries of most active competition, custom also has a considerable share in determining the profits of trade. There is sometimes an idea afloat as to what the profit of an employment should be, which although not adhered to by all the dealers, nor perhaps rigidly by any, still exercises a certain influence over their operations. There is in England a kind of notion, how widely prevailing I know not, that fifty per

cent is a proper and suitable rate of profit in retail transactions: understand, not fifty per cent on the whole capital, but an advance of fifty per cent on the wholesale prices : from which have to be defrayed bad debts, shop rent, the pay of clerks, shopmen, and agents of all descriptions, in short all the expenses of the retail business. If this custom were universal, and strictly adhered to, competition indeed would still operate, but the consumer would not derive any benefit from it; the way in which it would diminish the advantages of those engaged in retail trade, would be by a greater subdivision of the business. The intensity however of modern competition, in England at least, is tending to break down all customs of this description. In almost all trades, (at least in the great emporia of trade,) there are now numerous dealers whose motto is, "small gains and frequent"-a great business at low prices, rather than high prices and few transactions; and by turning over their capital more rapidly, and adding to it by borrowed capital when needed, these dealers often obtain individually higher profits; though they necessarily lower the profits of those among their competitors, who do not adopt the same principle.

§ 5. The preceding remarks have, I hope, sufficiently elucidated what is meant by the common phrase, “the ordinary rate of profit;" and the sense in which, and the limitations under which, this ordinary rate has a real existence. It now remains to consider, what causes determine its amount.

I assume, throughout, the state of things, which, where the labourers and capitalists are separate classes, prevails, with few exceptions, universally; namely, that the capitalist advances the whole expenses, including the entire remuneration of the labourer. That he should do so, is not a matter of inherent necessity; the labourer might wait until the production is complete, for all that part of his wages which exceeds mere necessaries; and even for the whole, if he has funds in hand, sufficient for his temporary support. But

in the latter case, the labourer is to that extent really a capitalist, investing capital in the concern, by supplying a portion of the funds necessary for carrying it on; and even in the former case he may be looked upon in the same light, since, contributing his labour at less than the market price, he may be regarded as lending the difference to his employer, and receiving it back with interest (on whatever principle computed) from the proceeds of the enterprise.

The capitalist, then, may be assumed to make all the advances, and receive all the produce. His profit consists of the excess of the produce above the advances; his rate of profit is the ratio which that excess bears to the amount advanced. But what do the advances consist of?

It is, for the present, necessary to suppose, that the capitalist does not pay any rent; has not to purchase the use of any appropriated natural agent. This indeed is scarcely ever the exact truth. The agricultural capitalist, except when he is the owner of the soil he cultivates, always, or almost always, pays rent; and even in manufactures, (not to mention ground-rent), the materials of the manufacture have generally paid rent, in some stage of their production. The nature of rent, however, we have not yet taken into consideration; and it will hereafter appear, that no practical error, on the question we are now examining, is produced by disregarding it.

If, then, leaving rent out of the question, we inquire in what it is that the advances of the capitalist, for purposes of production, consist, we shall find that they consist of wages of labour.

A large portion of the expenditure of every capitalist consists in the direct payment of wages. What does not consist of this, is composed of materials and implements, including buildings. But materials and implements are produced by labour; and as our supposed capitalist is not meant to represent a single employment, but to be a type of the productive industry of the whole country, we may suppose that he