Section II. Capital

We have already observed, that labour performs its operations, either simply, by the unaided powers of the human body; or, with the use of instruments, which augment not only the quantity, but often also the accuracy and precision of its results.

As examples of the earliest and simplest of the instruments, contrived for this purpose, we may mention the bow and arrow, and the sling, of the huntsman. The spade is an instrument easily invented for turning the soil; and a certain rude machine, to which the force of cattle may be applied, and which is the first form of a plough, suggests itself at an early stage of improvement.

From these beginnings men proceed, inventing one instrument after another, the axe, the hammer, the saw, the wheel, the wheel-carriage, and so on, till they arrive at last at that copious supply of complicated machinery by which labour is rendered productive in the most artificial states of society. The provision which is made of these instruments is denominated capital.

This, however, is not the whole of what is denominated capital. Labour in its earliest stage is not employed upon any materials but such as nature presents, without any preparation at the hands of man. When the savage climbs the tree, to gather the fruit; when the huntsman tears down the branch, to form his club or his bow, he operates upon materials, which are prepared for him by the hand of nature. At a subsequent stage in the progress of industry, the materials upon which labour is employed, have generally been the result of previous labour. Thus, the flax and the cotton, which are to be manufactured into cloth and muslin, have been the result of the labour of agriculture; the iron has been the result of the labours of the miner and smelter, and so of other things. The materials, upon which labour is to be employed, when they have thus been the result of previous labour, are also denominated capital.

When we speak of labour, as one of the instruments of production, and of capital, as the other, these two constituents, namely, the instruments which aid labour, and the materials on which it is employed, are all that can be correctly included in the idea of capital. It is true that wages are in general included under that term. But, in that sense, labour is also included; and can no longer be spoken of as an instrument of production apart from capital. We have already seen, that, whenever labour is spoken of as a separate, distinct, instrument of production, the idea of the subsistence, or consumption, of the labourer, for which wages is but another name, is included in the idea of the labour.

Having thus endeavoured to annex precise ideas to the terms Capital and Labour, a matter of the utmost importance in the study of political economy, and to distinguish their respective departments, in the business of production, it is only further necessary, to advert to the origin of capital, and the laws of its accumulation.

It is easy to discover, that the source, from which capital is ultimately derived, is labour. Production, of necessity, begins with the hands. There can be no instrument till it is made; and the first instrument had no previous instrument to be made with.

The first portion of capital, therefore, was the result of pure labour, without the co-operation of capital.

Speedily, however, after the first instrument, which increased the productive powers of labour, had been made, another instrument would be made to assist in the formation of it, as a knife, to aid in the formation of the bow; and then capital, for the first time, becomes the result of labour, and of capital, conjoined.

This subject is too clear to need to be illustrated, by tracing the mode, in which capital and labour combine, in producing the articles, of which capital is composed, from the simplest, to the most complicated, cases. It will be hereafter seen, that, in the more artificial and improved states of the business of production, a very great proportion of the whole of the labour and capital of the country is constantly employed in the production of the articles, which form capital.

As capital, from its simplest, to its most complicated state, means, something produced, for the purpose of being employed, as the means towards a further production; it is evidently a result of what is called saving.

Without saving there could be no capital. If all labour were employed upon objects of immediate consumption, all immediately consumed, such as the fruit, for which the savage climbs the tree, no article of capital, no article to be employed, as a means to further production, would ever exist. To this end, something must be produced, which is not immediately consumed; which is saved and set apart for another purpose.

Of the consequences of this fact, all, to which it is necessary here to advert, are sufficiently obvious.

Every article, which is thus saved, becomes an article of capital. The augmentation of capital, therefore, is every where exactly in proportion to the degree of saving; in fact, the amount of that augmentation, annually, is the same thing with the amount of the savings, which are annually made.

The labour and the capital, which combine to the production of a commodity, may belong both to one party, or one of them may belong to one party, the other to another. Thus, when the savage, who kills a deer, kills it with his own bow and arrows, he is the owner both of the labour and of the capital: when he kills it with the bow and arrows of another man, the one is the owner of the labour, the other of the capital. The man, who cultivates his little farm with his own labour and that of his family, without the aid of hired servants, is owner both of the capital and of the labour. The man, who cultivates with none but hired servants, is owner of the capital. The servants may be considered, at least for the present purpose, as owners of the labour, though we shall presently see under what modification that meaning is to be taken.

In this sense of the term "owners of labour," the parties, concerned about production, are divided into two classes, that of capitalists, the rich men who supply the materials and instruments of production; and that of the workmen, who supply the labour.

These terms are all sufficiently familiar; but a few observations are further necessary, in order, on this important subject, to preclude, as far as possible, confusion of ideas.

The great capitalist, the owner of a manufactory, if he operated with slaves instead of free labourers, like the West India planter, would be regarded as owner both of the capital, and of the labour. He would be owner, in short, of both instruments of production: and the whole of the produce, without participation, would be his own.

What is the difference, in the case of the man, who operates by means of labourers receiving wages? The labourer, who receives wages, sells his labour for a day, a week, a month, or a year, as the case may be. The manufacturer, who pays these wages, buys the labour, for the day, the year, or whatever period it may be. He is equally therefore the owner of the labour, with the manufacturer who operates with slaves. The only difference is, in the mode of purchasing. The owner of the slave purchases, at once, the whole of the labour, which the man can ever perform: he, who pays wages, purchases only so much of a man's labour as he can perform in a day, or any other stipulated time. Being equally, however, the owner of the labour, so purchased, as the owner of the slave is of that of the slave, the produce, which is the result of this labour, combined with his capital, is all equally his own. In the state of society, in which we at present exist, it is in these circumstances that almost all production is effected: the capitalist is the owner of both instruments of production: and the whole of the produce is his.

There is a distinction of capital into two sorts, arising from a difference in the mode of applying it. To this distinction as some consequences of importance are attached, it is necessary that a correct idea should be attained of it.

Of the articles, whereof capital consists, some are of a durable nature, and contribute to production without being destroyed. Of this nature is a great proportion of the tools and machines, which are employed both in agriculture and manufactures. Such are the buildings subservient to the various kinds of production; and such are all the other accommodations, not necessary to be enumerated, which do not perish in the using. That portion of capital, which comes under this description, has been denominated "Fixed Capital."

There is another portion of the articles, subservient to production, which do perish in the using. Such are all the tools worn out in one set of operations, all the articles, which contribute to production only by their consumption, as coals, oil, the dye stuffs of the dyer, the seed of the farmer, and so on. Of this nature, also, are the raw materials worked up in the finished manufacture. The wool of the clothier is consumed in the making of his cloth, the cotton of the cotton manufacturer in making his muslins. Under the same head must be included the expence of repairing and keeping in order the more durable articles of fixed capital. The distinctive character of all this portion of capital is, that it is necessarily consumed, in contributing to production, and that it must be reproduced, in order to enable the producer to continue his operations. This has been denominated "circulating" capital; but by a very inappropriate appellation. There is nothing in its consumption and reproduction which bears much resemblance to circulation. It would be much better to call it "reproduced" capital, although the word "reproduced," being a past and not a future participle, is not unexceptionable; it is capital which constantly needs to be reproduced, because, in contributing to production, it is constantly consumed.

There is another thing, which is also constantly consumed, and constantly needs to be reproduced, and that is, the subsistence, or consumption, or wages of the labourer; and that, equally, whether the labourer supplies it to himself, or receives it from the capitalist, in the shape of wages; that is, pay, in advance, for his labour. In this latter shape, being advanced by the capitalist out of those funds, which would otherwise have constituted capital in the distinctive sense of the word, and being considered as yielding the same advantage, it is uniformly spoken of under the name of capital, and a confusion of ideas is sometimes the consequence.

When all these items are included, it is obvious, that a very great proportion of the consumption and production, of every country, takes place for the sake of reproduction. This is a highly important fact, of which the consequences will hereafter occur for more particular consideration.

It follows, necessarily, if the instruments of labour, the materials on which it is employed, and the subsistence of the labourer, are all included under the name of capital, that the productive industry of every country is in proportion to its capital; increases when its capital increases; and declines when it declines. If the instruments of labour, the materials to work upon, and the pay of workmen, are all increased, the quantity of work will be increased, provided more workmen can be obtained. If more workmen cannot be obtained, two things will happen: First, wages will be raised; which, giving an impulse to population, will increase the number of labourers: Secondly, the scarcity of hands will whet the ingenuity of capitalists to supply the deficiency, by new inventions in machinery, and by distributing and dividing labour to greater advantage.