How are Capitals formed *

HDR. Quesnay derives capitals from “economy in “ the costs of agricultural labour, from the savings “ in the expences of the land-owners, as far as those “ savings are applied to improve the soil, and from “ the increased price of commodities through foreign “ trado.” . But these means being analysed and reduced to their just value, contribute simply to form capitals by economy in consumption. The saving in the costs of agricultural labour is nowise different from economy in consumption. The expences of agricultural labour, like those of all other labours, consist in consumption. Consequently, the saving of agricultural expences is an actual economy in consumption, an economy no-wise distinct from that of the expences of the land-owners, which Dr. Quesnay considers as forming capitals, when they are applied to improve the soil.” The increased price of agricultural produce through

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* The greatest part of the expences of land-owners are, at least, unproductive expences. Those only can be excepted which they incur to maintain and improve their estates, and to augment the cultivation of their lands. Physiocratie, Seconde Observa. tion sur le Tableau Economique.

foreign commerce appears, at first sight, different from the two other means of forming capitals. But when analysed with care, it is evident that it can contribute to the formation of capital, only as far as it tends to increase the means of economy in the consumption of the land-owners. According to Dr. Quesnay's system, the increased price of commodities, through foreign commerce, gives no advantage to the national over the foreign produce. He literally states that, “ in the foreign trade, there “ is but an exchange of value for equal value, without “ any profit or loss on either side.” Thus foreign commerce gives neither more nor less commodities than what the exchanged home produce contained : it only gives different commodities: but as it is only after its price has been fixed in money, that the national and foreign produce is interchanged, it follows that the increased price of the national produce, through foreign commerce, only bestows upon it a greater value in money ; that is to say, that a quarter of wheat, which without foreign commerce would Have been worth only eighteen shillings, is worth twenty-four through the foreign commerce. But by whom is this increase of six shillings per quarter paid Not by the foreigner, since there is no other exchange with him than of value against equal value, without any profit or loss on either side; it is paid by the national consumer, and consequently the increase of price, through foreign commerce, has no other effect than to diminish the share of the

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+ Physiocratie, Obs. 4 et 5, sur le Tableau Economique.

labouring, or paid classes, in the national produce, and to augment that of the land-owners or paymasters; an augmentation advantageous to the formation of capital only as far as the land-owners apply it to improve the soil. The increased price of agricultural produce through foreign commerce, like economy in the costs of labour, is therefore not distinct from economy in the expences of the land-owners; and, consequently, it may be affirmed that, in Dr. Quesnay's system, nothing contributes to the formation of capital but the savings of the land-owners, when they are devoted to agricultural improvements. That this is the Doctor's opinion, cannot be doubted, since he positively denies to the savings of the paid or mercenary classes the faculty of increasing the capital stock; and the reason which he gives for it, is, that these classes cannot have any means of saving; and that, if they should happen to have any surplus, it could only proceed from an error or disorder in civil society.* Thus, according to the system of the French economists, nothing contributes to the formation of capitals but the savings of the net produce, when employed in agricultural improvements. Adam Smith derives capitals from the greater or smaller quantity of productive labour relatively to un

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* If the unproductive class save to increase their money—their labours and profits will be diminished in the same proportion, and their decline, certain. Physiocratic, page 321.

productive labour, from the proportion of the productive to the non-productive consumers, and from economy in private consumption.* Let us investigate these different sources of capital, and we shall again see that they simply consist in economy in private consumption. The proportion of productive to unproductive labour contributes, in Adam Smith's opinion, to the formation of capitals when it is in favour of the productive classes, when it leaves in their hands a disposable produce to be economized and used in extending and improving their labour. This proportion then affords nothing but a power of saving, and cannot be viewed in any other light. The same may be affirmed of the proportion between the productive consumers and those whom Adam Smith denominates un-productive consumers. If this proportion be in favour of the productive consumers, if the latter exceed the number necessary for the maintenance of the non-productive consumers, they have a greater stock of disposable produce left, which they may economize and employ in more or less productive labours. Thus the two first means, which, in Adam Smith's opinion, contribute to the formation of capitals, contribute to it merely by economy in consumption, and are necessarily the same with it. We are not afraid of mistaking his opinion in this respect, since he positively states, that “ capitals are


* Adam Smith's Wealth of Nations, vol. ii. book ii. chap. 3,

“ increased by parsimony, and diminished by prodi“ gality and misconduct.” It is deserving of remark, that Dr. Quesnay and Adam Smith, the one faithful to his agricultural system and the other to his system of productive labour, regard none but the savings applied to agricultural or productive labours as proper to form capitals. This circumstance revives, concerning the formation of capitals, the question which I have already discussed on the nature and effects of labour, and obliges me to examine the same question once more with particular regard to the formation of capitals. This new inquiry, by throwing a fresh light on the two systems, will tend to improve the science, elucidate its tenets, and fix its principles. In whatever way economy may be effected, it leaves at liberty a sum of produce which is consumed by the idle, or by the labouring classes. If by the latter, it serves to pay for more labour. The farmer, the manufacturer, and all undertakers of useful works, pay their labourers higher wages on condition that they shall either perform more labour, or perform it better; increased or improved labour gives more or better productions, and consequently more wealth. Higher wages, at the same time, procure more comforts to the labouring class; and more comforts become the immediate and infallible cause of a greater population in that class.

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* Adam Smith's Wealth of Nations. London: 1805. vol. ii.

book ii. chap. 3. page 13.

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