CHAPTER VII.

OF THE MANNER IN WHICH CAPITAL CONTRIBUTES TO role Cablus

PRODUCTION.

SECTION I.

CAPITAL DEFINED-ITS POTENT AGENCY IN PRODUCTION -DISTINCTION OF FIXED AND CIRCULATING CAPITALS -THE ACQUISITION OR EXISTENCE OF BOTH THOSE SORTS OF CAPITALS, OR OF CAPITAL IN GENERAL, A CONDITION NECESSARY TO THE EXISTENCE OR ATTAINMENT OF THE SYSTEM OF THE DIVISION OF LABOUR.

THE manner in which land and labour contribute to production is obvious enough, and has been already perhaps sufficiently explained in the foregoing chapters. It remains to explain the manner in which capital contributes.

Capital consists of all accumulated wealth, which is or may be applied to assist in the work of production, which is nearly equivalent to saying that it consists of all wealth whatsoever.* It contributes to production by assisting and in

* There is no real use in the distinction which has been attempted to be established by some writers, (Torrens, Prod. W. p. 4, et seq.; Malthus' Definitions in Pol. Econ. chap. x, p. 237,) between stock or wealth generally, and capital. To know whether any portion of stock, capital, or accumulated wealth, be productive or unproductive, it is necessary to know in what manner it is employed; and all that is requisite to enable the student to form a judgment upon this point has been already explained in the third chapter.

E

creasing the productive energies of the other two instruments;-of land by improvements and cultivation of the soil; and of labour by abridging its processes, and increasing the dexterity and efficiency of the human arm.

The land yields more rude produce (of that sort at least which is fit to be converted to the use of mankind) when it is highly cultivated and improved by means of capital, than when it lies waste; and the human arm produces an incomparably greater effect by means of the spade and the plough, or of the cotton-frame and the steam-engine, than it could do naked and unprovided with those potent instruments and ⚫ items of capital.

Capitals are commonly distinguished into two different kinds, called fixed and circulating capitals.*

The fixed capitals consist of those articles which are calculated to assist in the work of production, "without changing masters," or going out of the possession or ownership of the proprietors or employers thereof. Such are all permanent improvements or meliorations of the land, and all farm-buildings constructed thereupon, as well as all agricultural implements, labouring cattle, &c. Such also are all the manufactories within a country, and all the canals, roads, harbours, docks, ships, &c., as also all the useful machines and tools or instruments of trade, and things of the like sort.

The circulating capitals, again, consist of those articles which are continually changing either their shape or their place, or both, while the process of production is going for

* The distinction here noticed, though not perhaps of essential importance, will sometimes be found useful for the purpose of preventing circumlocution, as in the instance of the present chapter, in explaining the manner in which the different sorts of capitals contribute to production.

+ Wealth of Nations, book ii. chap. 1.

ward to its completion, and which frequently change masters or proprietors in the course of that process. They comprise among other things the raw materials of every manufacture, and the food, clothes, and other articles immediately necessary to the maintenance of the labourer.

The manner in which the fixed capitals contribute to production is generally not difficult to be discerned; and with regard to such portions of them as take the form of particular instruments, as the spade, the plough, &c., the manner in which these contribute is manifest, because the manner in which they increase the power and efficiency of the human arm is open and apparent; but the manner in which a great part of the circulating capitals contribute to the same end appears to be not generally so well understood.

The necessity indeed of that part of the circulating capitals, which consists of the raw materials of the different manufactures, is self-evident; but the necessity in production of the capitals consisting of food, clothes, and the other articles of subsistence, is not perhaps, on a first view, quite so obvious. They are, however, not less useful or less necessary than the others. Nay, they are absolutely indispensable to render the fixed capitals as well as the other part of the circulating capitals of any value or effect. To be aware of this, we have only to reflect that the machinery and work-looms will not work themselves, but require hands or labourers to conduct the operations; and these must be provided with the means of subsistence.

And let it not be imagined that such capitals are inconsiderable or trifling in amount. Let any one calculate the value of the maintenance for one year of the whole of the productive labourers of any extensive, highly-populous, and civilized country, and he will at once be made sensible of the amount and importance of this part of the circulating capitals.

This part of the circulating capitals then is evidently indispensable to give effect and activity to all the other capitals employed in production, because it is indispensable to the maintenance or existence of the labourers in all the variety of employments or species of productive industry.

And this consideration brings us directly to the grand instance wherein the supreme utility and importance of capital in general will most distinctly and decidedly appear, namely, in its indispensableness to the attainment of the system of the arrangement and division of labour,—a system which increases the productive powers of labour and the dexterity and efficiency of the human arm to a degree that is almost incredible. And to this system capitals of every description are necessary or subservient; but, first of all, capitals consisting of food, clothes, and any other articles necessary to the maintenance of the labourer, without which no species of industry could be undertaken or successfully followed out, which does not afford a direct and immediate return of such necessaries.

By the system of the division of labour is meant, that arrangement which takes place in the progress from barbarism to civilization, and which is the very first step in that progress, whereby each individual labourer finds it his interest to confine himself and his labour mainly to one distinct and peculiar occupation, and to exchange his productions against those brought to market by the other labourers, instead of engaging himself in all the variety of pursuits which would be necessary were he to attempt to do every thing for himself, and to produce directly, by his own isolated and unassisted exertions, every article of wealth he had occasion to consume. By this system the great body of the people gradually form themselves into distinct classes of producers, and, as society advances, attach themselves more and more to separate and distinct businesses, exchang

ing their productions one with another "by treaty, by barter, and by purchase,"* to the great advantage of every particular labourer and of the whole community.+

It is this system which we observe grown to a degree of perfection in all highly-populous and civilized countries, and which occasions that abundance of commodities and general diffusion of wealth which, under a good administration of government, extends itself downwards to the very lowest ranks of the people.

But before a single individual can confine himself and his labour to any single species of business or employment, (except the production or acquisition of the immediate necessaries of life,) and continue to follow it exclusively as a constant and regular occupation, a certain accumulation of provisions must have previously taken place, which may be accessible to him for the purpose of supplying his natural daily wants; and before the division of labour can be fully and universally established in a country, and every different trade or employment be followed by a separate and distinct set of people, stores and savings or accumulations of every different description of wealth or capitals must be provided and established beforehand within such country or in its neighbourhood. There are, in the first place, the houses to dwell in and the houses to work in; next there is the machinery required, and the tools or instruments to work with ; there are farther the materials to be wrought up into all the variety of products or commodities; there are still farther

* Wealth of Nations, book i. chap. 2.

+ In the sequel it will be shown, that the principle which gives rise to this system of the division of labour is at the same time the great regulator of distribution; and that the more every individual labourer can produce under this system, the more he will find it necessary to give in exchange to other labourers for their productions.-See book ii. chap. 1.