
Book
Two:
OF
THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK.
CHAPTER I
Of the Division of Stock
When the stock which a man possesses is no more than sufficient
to maintain him for a few days or a few weeks, he seldom thinks
of deriving any revenue from it. He consumes it as sparingly
as he can, and endeavours by his labour to acquire something
which may supply its place before it be consumed altogether.
His revenue is, in this case, derived from his labour only.
This is the state of the greater part of the labouring poor
in all countries.
But when he possesses stock sufficient to maintain him for
months or years, he naturally endeavours to derive a revenue
from the greater part of it; reserving only so much for his
immediate consumption as may maintain him till this revenue
begins to come in. His whole stock, therefore, is distinguished
into two parts. That part which, he expects, is to afford
him this revenue, is called his capital. The other is that
which supplies his immediate consumption; and which consists
either, first, in that portion of his whole stock which was
originally reserved for this purpose; or, secondly, in his
revenue, from whatever source derived, as it gradually comes
in; or, thirdly, in such things as had been purchased by
either of these in former years, and which are not yet entirely
consumed; such as a stock of clothes, household furniture,
and the like. In one, or other, or all of these three articles,
consists the stock which men commonly reserve for their own
immediate consumption.
There are two different ways in which a capital may be employed
so as to yield a revenue or profit to its employer.
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
very properly be called circulating capitals.
Secondly, it may be employed in the improvement of land,
in the purchase of useful machines and instruments of trade,
or in suchlike things as yield a revenue or profit without
changing masters, or circulating any further. Such capitals,
therefore, may very properly be called fixed capitals.
Different occupations require very different proportions
between the fixed and circulating capitals employed in them.
The capital of a merchant, for example, is altogether a
circulating capital. He has occasion for no machines or instruments
of trade, unless his shop, or warehouse, be considered as
such.
Some part of the capital of every master artificer or manufacturer
must be fixed in the instruments of his trade. This part,
however, is very small in some, and very great in others.
A master tailor requires no other instruments of trade but
a parcel of needles. Those of the master shoemaker are a
little, though but a very little, more expensive. Those of
the weaver rise a good deal above those of the shoemaker.
The far greater part of the capital of all such master artificers,
however, is circulated, either in the wages of their workmen,
or in the price of their materials, and repaid with a profit
by the price of the work.
In other works a much greater fixed capital is required.
In a great iron-work, for example, the furnace for melting
the ore, the forge, the slitt-mill, are instruments of trade
which cannot be erected without a very great expense. In
coal-works and mines of every kind, the machinery necessary
both for drawing out the water and for other purposes is
frequently still more expensive.
That part of the capital of the farmer which is employed
in the instruments of agriculture is a fixed, that which
is employed in the wages and maintenance of his labouring
servants, is a circulating capital. He makes a profit of
the one by keeping it in his own possession, and of the other
by parting with it. The price or value of his labouring cattle
is a fixed capital in the same manner as that of the instruments
of husbandry. Their maintenance is a circulating capital
in the same manner as that of the labouring servants. The
farmer makes his profit by keeping the labouring cattle,
and by parting with their maintenance. Both the price and
the maintenance of the cattle which are brought in and fattened,
not for labour, but for sale, are a circulating capital.
The farmer makes his profit by parting with them. A flock
of sheep or a herd of cattle that, in a breeding country,
is bought in, neither for labour, nor for sale, but in order
to make a profit by their wool, by their milk, and by their
increase, is a fixed capital. The profit is made by keeping
them. Their maintenance is a circulating capital. The profit
is made by parting with it; and it comes back with both its
own profit and the profit upon the whole price of the cattle,
in the price of the wool, the milk, and the increase. The
whole value of the seed, too, is properly a fixed capital.
Though it goes backwards and forwards between the ground
and the granary, it never changes masters, and therefore
does not properly circulate. The farmer makes his profit,
not by its sale, but by its increase.
The general stock of any country or society is the same
with that of all its inhabitants or members, and therefore
naturally divides itself into the same three portions, each
of which has a distinct function or office.
The first is that portion which is reserved for immediate
consumption, and of which the characteristic is, that it
affords no revenue or profit. It consists in the stock of
food, clothes, household furniture, etc., which have been
purchased by their proper consumers, but which are not yet
entirely consumed. The whole stock of mere dwelling-houses
too, subsisting at any one time in the country, make a part
of this first portion. The stock that is laid out in a house,
if it is to be the dwellinghouse of the proprietor, ceases
from that moment to serve in the function of a capital, or
to afford any revenue to its owner. A dwellinghouse, as such,
contributes nothing to the revenue of its inhabitant; and
though it is, no doubt, extremely useful to him, it is as
his clothes and household furniture are useful to him, which,
however, makes a part of his expense, and not of his revenue.
If it is to be let to a tenant for rent, as the house itself
can produce nothing, the tenant must always pay the rent
out of some other revenue which he derives either from labour,
or stock, or land. Though a house, therefore, may yield a
revenue to its proprietor, and thereby serve in the function
of a capital to him, it cannot yield any to the public, nor
serve in the function of a capital to it, and the revenue
of the whole body of the people can never be in the smallest
degree increased by it. Clothes, and household furniture,
in the same manner, sometimes yield a revenue, and thereby
serve in the function of a capital to particular persons.
In countries where masquerades are common, it is a trade
to let out masquerade dresses for a night. Upholsterers frequently
let furniture by the month or by the year. Undertakers let
the furniture of funerals by the day and by the week. Many
people let furnished houses, and get a rent, not only for
the use of the house, but for that of the furniture. The
revenue, however, which is derived from such things must
always be ultimately drawn from some other source of revenue.
Of all parts of the stock, either of an individual, or of
a society, reserved for immediate consumption, what is laid
out in houses is most slowly consumed. A stock of clothes
may last several years: a stock of furniture half a century
or a century: but a stock of houses, well built and properly
taken care of, may last many centuries. Though the period
of their total consumption, however, is more distant, they
are still as really a stock reserved for immediate consumption
as either clothes or household furniture.
The second of the three portions into which the general
stock of the society divides itself, is the fixed capital,
of which the characteristic is, that it affords a revenue
or profit without circulating or changing masters. It consists
chiefly of the four following articles:
First, of all useful machines and instruments of trade which
facilitate and abridge labour:
Secondly, of all those profitable buildings which are the
means of procuring a revenue, not only to their proprietor
who lets them for a rent, but to the person who possesses
them and pays that rent for them; such as shops, warehouses,
workhouses, farmhouses, with all their necessary buildings;
stables, granaries, etc. These are very different from mere
dwelling houses. 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 tillage and
culture. An improved farm may very justly be regarded in
the same light as those useful machines which facilitate
and abridge labour, and by means of which an equal circulating
capital can afford a much greater revenue to its employer.
An improved farm is equally advantageous and more durable
than any of those machines, frequently requiring no other
repairs than the most profitable application of the farmer's
capital employed in cultivating it:
Fourthly, of the acquired and useful abilities of all the
inhabitants or members of the society. The acquisition of
such talents, by the maintenance of the acquirer during his
education, study, or apprenticeship, always costs a real
expense, which is a capital fixed and realized, as it were,
in his person. Those talents, as they make a part of his
fortune, so do they likewise of that of the society to which
he belongs. The improved dexterity of a workman may be considered
in the same light as a machine or instrument of trade which
facilitates and abridges labour, and which, though it costs
a certain expense, repays that expense with a profit.
The third and last of the three portions into which the
general stock of the society naturally divides itself, is
the circulating capital; of which the characteristic is,
that it affords a revenue only by circulating or changing
masters. It 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 which are in the possession
of the butcher, the grazier, the farmer, the corn-merchant,
the brewer, etc., and from the sale of which they expect
to derive a profit:
Thirdly, of the materials, whether altogether rude, or more
or less manufactured, of clothes, furniture, and building,
which are not yet made up into any of those three shapes,
but which remain in the hands of the growers, the manufacturers,
the mercers and drapers, the timber merchants, the carpenters
and joiners, the brickmakers, etc.
Fourthly, and lastly, of the work which is made up and completed,
but which is still in the hands of the merchant or manufacturer,
and not yet disposed of or distributed to the proper consumers;
such as the finished work which we frequently find ready-made
in the shops of the smith, the cabinet-maker, the goldsmith,
the jeweller, the china-merchant, etc. The circulating capital
consists in this manner, of the provisions, materials, and
finished work of all kinds that are in the hands of their
respective dealers, and of the money that is necessary for
circulating and distributing them to those who are finally
to use or to consume them.
Of these four parts, three- provisions, materials, and finished
work- are, either annually, or in a longer or shorter period,
regularly withdrawn from it, and placed either in the fixed
capital or in the stock reserved for immediate consumption.
Every fixed capital is both originally derived from, and
requires to be continually supported by a circulating capital.
All useful machines and instruments of trade are originally
derived from a circulating capital, which furnishes the materials
of which they are made, and the maintenance of the workmen
who make them. They require, too, a capital of the same kind
to keep them in constant repair.
No fixed capital can yield any revenue but by means of a
circulating capital. The most useful machines and instruments
of trade will produce nothing without the circulating capital
which affords the materials they are employed upon, and the
maintenance of the workmen who employ them. Land, however
improved, will yield no revenue without a circulating capital,
which maintains the labourers who cultivate and collect its
produce.
To maintain and augment the stock which may be reserved
for immediate consumption is the sole end and purpose both
of the fixed and circulating capitals. It is this stock which
feeds, clothes, and lodges the people. Their riches or poverty
depends upon the abundant or sparing supplies which those
two capitals can afford to the stock reserved for immediate
consumption.
So great a part of the circulating capital being continually
withdrawn from it, in order to be placed in the other two
branches of the general stock of the society; it must in
its turn require continual supplies, without which it would
soon cease to exist. These supplies are principally drawn
from three sources, the produce of land, of mines, and of
fisheries. These afford continual supplies of provisions
and materials, of which part is afterwards wrought up into
finished work, and by which are replaced the provisions,
materials, and finished work continually withdrawn from the
circulating capital. From mines, too, is drawn what is necessary
for maintaining and augmenting that part of it which consists
in money. For though, in the ordinary course of business,
this part is not, like the other three, necessarily withdrawn
from it, in order to be placed in the other two branches
of the general stock of the society, it must, however, like
all other things, be wasted and worn out at last, and sometimes,
too, be either lost or sent abroad, and must, therefore,
require continual, though, no doubt, much smaller supplies.
Land, mines, and fisheries, require all both a fixed and
a circulating capital to cultivate them; and their produce
replaces with a profit, not only those capitals, but all
the others in the society. Thus the farmer annually replaces
to the manufacturer the provisions which he had consumed
and the materials which be had wrought up the year before;
and the manufacturer replaces to the farmer the finished
work which he had wasted and worn out in the same time. This
is the real exchange that is annually made between those
two orders of people, though it seldom happens that the rude
produce of the one and the manufactured produce of the other,
are directly bartered for one another; because it seldom
happens that the farmer sells his corn and his cattle, his
flax and his wool, to the very same person of whom he chooses
to purchase the clothes, furniture, and instruments of trade
which he wants. He sells, therefore, his rude produce for
money, with which he can purchase, wherever it is to be had,
the manufactured produce he has occasion for. Land even replaces,
in part at least, the capitals with which fisheries and mines
are cultivated. It is the produce of land which draws the
fish from the waters; and it is the produce of the surface
of the earth which extracts the minerals from its bowels.
The produce of land, mines, and fisheries, when their natural
fertility is equal, is in proportion to the extent and proper
application of the capitals employed about them. When the
capitals are equal and equally well applied, it is in proportion
to their natural fertility.
In all countries where there is tolerable security, every
man of common understanding will endeavour to employ whatever
stock he can command in procuring either present enjoyment
or future profit. If it is employed in procuring present
enjoyment, it is a stock reserved for immediate consumption.
If it is employed in procuring future profit, it must procure
this profit either staying with him, or by going from him.
In the one case it is fixed, in the other it is a circulating
capital. A man must be perfectly crazy who, where there is
tolerable security, does not employ all the stock which he
commands, whether be his own or borrowed of other people,
in some one or other of those three ways.
In those unfortunate countries, indeed, where men are continually
afraid of the violence of their superiors, they frequently
bury and conceal a great part of their stock, in order to
have it always at hand to carry with them to some place of
safety, in case of their being threatened with any of those
disasters to which they consider themselves as at all times
exposed. This is said to be a common practice in Turkey,
in Indostan, and, I believe, in most other governments of
Asia. It seems to have been a common practice among our ancestors
during the violence of the feudal government. Treasure-trove
was in those times considered as no contemptible part of
the revenue of the greatest sovereigns in Europe. It consisted
in such treasure as was found concealed in the earth, and
to which no particular person could prove any right. This
was regarded in those times as so important an object, that
it was always considered as belonging to the sovereign, and
neither to the finder nor to the proprietor of the land,
unless the right to it had been conveyed to the latter by
an express clause in his charter. It was put upon the same
footing with gold and silver mines, which, without a special
clause in the charter, were never supposed to be comprehended
in the general grant of the lands, though mines of lead,
copper, tin, and coal were as things of smaller consequence.
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