Section II. That Which Is Annually Produced Is Annually Consumed

From what we have now ascertained of the nature of production and consumption, it will easily be seen, that the whole of what is annually produced is annually consumed; or, that what is produced in one year, is consumed in the next.

Every thing, which is produced, belongs to somebody, and is destined by the owners to some use. There are however, but two sorts of use: that for immediate enjoyment, and that for ultimate profit. To use for ultimate profit, is to consume productively. To use for immediate enjoyment, is to consume unproductively.

We have just observed, that what is used for ultimate profit, is laid out, as expeditiously as possible, in wages of labour, machinery, and raw material. This is a fact of primary importance; and many errors of those who reason loosely in Political Economy, arise from the neglect of it. Whatever is saved from the annual produce, in order to be converted into capital, is necessarily consumed; because to make it answer the purpose of capital, it must be employed in the payment of wages, in the purchase of raw material to be worked into a finished commodity, or, lastly, in the making of machines, effected in like manner by the payment of wages, and the working up of raw materials. With respect to that part of the annual produce, which is destined for unproductive consumption, there is less frequently any mistake. As it would be attended with a loss to lay in a greater stock of articles of this class than is required, for immediate use, all of them, except a few, of which the quality is improved by their age, are always expeditiously consumed, or put in a course of consumption.

A year is assumed, in political economy, as the period which includes a revolving circle of production and consumption. No period does so exactly. Some articles are produced and consumed in a period much less than a year. In others, the circle is greater than a year. It is necessary, for the ends of discourse, that some period should be assumed as including this circle. The period of a year is the most convenient. It corresponds with one great class of productions, those derived from the cultivation of the ground. And it is easy, when we have obtained forms of expression, which correspond accurately to this assumtion, to modify them in practice to the case of those commodities, the circle of whose production and consumption is either greater or less than the standard to which our general propositions are conformed.