of gold or silver money, and are buried in the earth; then, indeed, they are not consumed, because they are not used at all, either for present gratification or future gain.

We see the fallacy, then, of the common opinion, that the prodigals who waste their substance in riotous or ostentatious living, though they and their families afterwards suffer for it, are yet benefactors to the community, because their liberal expenditures keep laborers in employ, increase the profits of shop-keepers, and diffuse benefits all around them. He who saves, on the contrary, appears in the light of one who hoards; saving seems but another word for keeping a thing to one's self, while spending appears to be distributing it among others.

This popular error arises chiefly from the fact that the wasteful person consumes his income and his capital mostly on the spot where he resides, where the public eye can follow his wealth, and see it passing into the hands of laborers, tradesmen, and dependents. But these persons do not obtain it for nothing. They give services, goods, articles of luxury, in exchange; and when these services are rendered, and the articles consumed, there is an end of the prodigal's wealth. He has nothing left, and they are but little richer than before, having only made their ordinary gains, or received their accustomed wages. The community, then, is the poorer by the whole amount which the prodigal has squandered. The savings of the frugal person, on the other hand, are often withdrawn from sight of the immediate neighborhood, being. quietly invested in a bank or manufactory, where they are consumed productively; that is, they are still applied to the purchase of labor or goods, and so equally keep industry in motion, though this beneficial result is not easily traced back, and ascribed to the proper author of it.

To make this point clearer, I will take a particular example. Suppose a prodigal maintains an establishment of ten menial servants, at an expense of $3,000 a year. At the end of the year, he has expended this portion of his capital, and the servants have received their usual wages; but as they have toiled only to pamper his desire of enjoyment, and to gratify his love of ostentation, no products of their labor remain at the end of the year, and they are no better off than they would have been if they had obtained equal wages for making boots and shoes, or laboring on a farm.

Then suppose a frugal person, having an equal sum of $3,000 a year to spend, instead of hiring menial servants with it, should invest it in the shoemaking business, or in agriculture. It is obvious that an equal number of persons might thus be employed, and at the same wages; at the end of the year, moreover, instead of nothing being left, there would be an additional stock of one or two thousand pairs of boots and shoes, or of four or five thousand bushels of corn. The capital of the frugal person and the riches of the community would thus be augmented to the extent perhaps of $ 4,000 (ordinary allowance being made for profits); and this would be a fund for the support of industry, for an indefinite period, or until it came into the hands of a prodigal who should waste it in luxuries and self-indulgence.

It should be observed, that the only fund from which savings can be made, and capital thereby increased, is the annual income or revenue of the individual. If the manufacturer, for instance, at the end of the year, has merely got his capital back again, the values created exactly replacing those which were consumed, though he has preserved his property, he has effected no saving; he is neither richer nor poorer than he was before. His capital ought to be replaced with a profit; and the aggregate of the profits for a year, not the aggregate of all the values produced during that time, constitutes his income or revenue. This income, like the year's wages of a laborer, seems to be the fund naturally designed for his own maintenance and that of his family. A portion of it must be spent in this manner, that is, must be spent unproductively; for health and strength must be kept up by food, drink, and clothing; in addition to which, in order to keep up the full vigor of mind and body, a small portion of every one's income ought to be devoted to amusement and a few luxuries. But if these personal expenditures, and the replacement of the capital consumed during the year, do not absorb the whole income, what remains is a true saving, an addition to capital, a benefit both to the individual and the community.

"It would be a great error," says Mr. Mill, "to regret the large proportion of the annual produce which, in an opulent country, goes to supply unproductive consumption. It would be to lament that the community has so much to spare from its necessities, for its pleasures and for all higher uses. This portion of the produce

is the fund from which all the wants of the community, other than that of mere living, are provided for, - the measure of its means of enjoyment, and of its power of accomplishing all purposes not productive. That so great a surplus should be available for such purposes, and that it should be applied to them, is a subject only of congratulation."

The wealth which is employed in creating more wealth has been divided by Adam Smith into Fixed and Circulating Capital. "There are two ways," he says, "in which a capital may be employed so as to yield a revenue or profit.

"First, it may be employed in raising, manufacturing, or purchasing goods, and selling them again with a profit. The capital employed in this manner yields no revenue or profit to its employer while it either remains in his possession or continues in the same shape. The goods of the merchant yield him no revenue or profit till he sells them for money, and the money yields him as little till it is again exchanged for goods. His capital is continually going from him in one shape, and returning to him in another; and it is only by means of such circulation, or successive exchanges, that it can yield him any profit. Such capitals, therefore, may properly be called Circulating capitals.

Secondly, it may be employed in the improvement of land, in the purchase of useful machines and implements of trade, or in such like things as yield a revenue or profit without changing masters, or circulating any further. Such capitals, therefore, may properly be called Fixed capitals."

This distinction has been further illustrated by the remark, that Circulating Capital fulfils the whole of its office in production by a single use; while Fixed Capital produces its effect, not by being parted with, but by being kept, and its efficacy is not exhausted by a single use. Observe, also, that the same articles may be Circulating Capital while in the hands of one person, and become Fixed Capital as soon as they are transferred to another. A stock of finished ploughs, for instance, belongs to the former class while they are owned by the manufacturer, or the merchant, who expects not to use, but to sell them, and can obtain his profit only from the proceeds of such a sale; but they become Fixed Capital when they are purchased by the farmers, who expect to retain and use them till they are worn out.

Fixed Capital, Adam Smith remarks, "consists chiefly of the four following articles:

"First, of all useful machines and implements of trade which facilitate and abridge labor.

Secondly, of all buildings used for the purpose of trade or manufacture, such as shops, warehouses, and farm buildings. They are a sort of instruments of trade, and may be considered in the same light.

"Thirdly, of the improvements of land, of what has been profitably laid out in clearing, draining, enclosing, manuring, and reducing it into the condition most proper for culture. An improved farm may be regarded in the same light as one of those useful machines which facilitate and abridge labor.

"Fourthly, of the acquired and useful abilities of all the members of the society. The acquisition of such talents by the maintenance of the acquirer during his education, study, or apprenticeship, costs an expense, which is a capital fixed and realized, as it were, in his person. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor.

"The Circulating Capital is composed likewise of four parts:'First, of the money by means of which all the other three are circulated and distributed to their proper consumers.

"Secondly, of the stock of provisions in the possession of the butcher, the grazier, etc., for the purpose of sale.

"Thirdly, of the materials, whether altogether rude, or more or less manufactured, of clothes, furniture, and building, which are not yet made up, but remain in the hands of the growers, manufacturers, or merchants.

Fourthly, of the work which is made up and completed, but is still in the hands of the merchant or manufacturer; such as the finished work in the shops of the smith, the goldsmith, the jeweller, and the China merchant. The Circulating Capital consists in this manner of the provisions, materials, and finished work of all kinds, which are in the hands of their respective dealers, and of the money that is necessary for circulating and distributing them to their final consumers."

To this enumeration by Adam Smith must be added two classes of articles, which seem to have been excluded by him for insuffi

cient reasons; namely, food and the other necessaries of life, and dwelling-houses. The name of capital has been denied to these two classes of things, because they are consumed as revenue, with a view to subsistence or enjoyment, and not as capital, with a view to production. But it may be replied, that the laborer, before he can construct or fashion anything, must not only have raw materials and tools, but must be secure of a lodging and a dinner. An expenditure for all four of these objects is necessary before he can complete his task; and the aggregate of such expenditure is therefore properly considered as an advance of capital, the means for this advance having been previously obtained by abstinence or frugality.

The circumstances on which the rapidity of accumulation, or the growth of capital, depends, are various, and the study of them is one of the most interesting researches in which the economist or the historian can engage. Laws and political institutions generally have a vast influence in this respect, as well as differences of national character and peculiarities of geographical position. The results of the former may often be traced, by the light both of theory and history, in quarters where they would be the least suspected; the most prominent and marked effect being frequently attributable to the noiseless working, through many generations, of peculiar customs and laws, which do not attract much notice precisely because they are ingrained or deeply seated.

Our general question is, When is labor most energetic, universal, and effective in the creation of wealth, and by what means are the motives to accumulation from savings most strongly stimulated? I cannot attribute much importance in this respect to what are called the natural advantages of a country, its genial climate, fertile soil, large expanse of territory, or happy geographical position. These natural advantages, as they are termed, have fearful drawbacks in the indolence and sense of security which they foster, and the luxurious habits to which the people who possess them incline, their chief luxury always being repose. Some of the countries of South America are as highly favored in these respects as any part of the habitable globe; but it is not to this portion of our continent that we look for instances of the most rapid growth of national wealth. "In the ancient world and in the Middle

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