CHAP. IV.

Of the influence of Capitals on the progress of

Public Wealth.

DR. Quesnay and Adam Smith are perfectly agreed about the importance of capitals and their share in the progress and growth of wealth.

The former teaches, that " the prosperity of an agricultural country consists in great advances to perpetuate and augment the national revenue and taxes."*

Adam Smith says, that "the previous accumulation of capital stock is necessary to the great developement of the productiveness of labour; that it necessarily precedes the division of labour; that the progressive subdivision of labour itself is in proportion to the previous augmentation of the capital stock which has been gradually accumulated; and that industry increases in proportion to the accumulation of capital stock, which puts it into motion.”

But while they acknowledge the powerful influence of capital, both authors think this influence is not equal in every employment of capital, or that all modes of employing capital are not equally beneficial to the wealth of the nation by which it is employed.

* Physiocratie, page 296.

+ Adam Smith's Wealth of Nations, vol. i. Introduction.

Constantly prepossessed in favour of the agricultural system, Dr. Quesnay considers the employment of capital useful only as far as it is applied to agriculture.

Adam Smith admits likewise, that "the quantity of productive labour which equal capitals are capable of putting into motion, varies extremely according to the diversity of their employment; as does likewise the value which that employment adds to the annual produce of the land and labour."*

We recognize in these two theories the difference of the systems adopted by these two authors; it is a restatement of their opinion respecting the sources of wealth and the nature of labour. I shall not go over this ground again, nor shall I endeavour to prove that what I have stated with regard to labour applies alike to the capital stock which puts it into motion and of which it is but, as it were, the agent and tool; it would betray me into useless and tedious repetitions.

But independently of the opposition which prevails, and must prevail, between these two authors, Adam Smith has set up a particular doctrine to determine the degrees of utility of capital employed in the different ramifications of productive labour. This doctrine is too important to pass it over in silence; it behoves us to examine and appreciate it, if possible.

Adam Smith asserts, that " capitals of equal value will put into motion very different quantities of productive

* Adam Smith's Wealth of Nations; London, 1805: vol. ii, book ii. chap. 5, pages 48, 49.

labour, and augment in very different proportions the value of the annual produce of the land and labour of the society to which they belong, according as they are employed either in procuring the rude produce annually required for the use and consumption of the society in manufacturing and preparing that rude produce for inmediate use and consumption; in transporting either the rude or manufactured produce from the places wuere they abound to those where they are wanted; or, lastly, in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them."

Accordingly, he teaches that "no equal capital puts into motion a greater quantity of productive labour than that of the farmer, because nature performs seldom less than a fourth, and frequently more than a third, of the labour; and no equal quantity of productive labour employed in manufactures can ever occasion so great a production."

Next to the capital of the farmer, Adam Smith ranks that of the manufacturer, "who augments the value of the raw materials he employs by the wages of his different workmen, and by his own profits upon the whole stock of wages, materials, and instruments of trade employed in the business."

To the capital of the wholesale-merchant he assigns the last rank, because “it augments the price of his goods merely by the value of his profits, and the wages of the sailors and carriers who transport his goods from one place to another."

The difference too he states to be very great,

according to the different sorts of wholesale-trade ́ in which any part of the capital is employed, which he reduces to three.

"The capital employed in the home-trade is the most lucrative, because its returns come in three or four times in the year, which multiply three or four times the sum of national labour.

"The capital employed in the foreign trade of consumption, is less productive than that employed in the home-trade, because its profits are shared between the native merchant and the foreign one.

Lastly, the capital employed in the carrying trade is the least productive of all, because it is altogether withdrawn from supporting the productive labour of the country to support that of some foreign countries."*

This theory, it must be acknowledged, is ingenious and captivating; it does honour to the sagacity of its author: but is it not in reality more brilliant than solid? Is it not a merely ideal and perfectly fanciful abstraction? And would it not frequently be fatal and almost always dangerous, to put it into practice?

To obtain correct notions in this respect, we must descend from the speculative and often fascinating heights of theory, and convince ourselves of its truth or fallacy by an attentive examination of the different cases to which it may apply. We must know whether it is in all situations, or only in some particular situations, that the employment of capital in agriculture is the most proper to enrich a nation, or whether any

* Adam Smith's Wealth of Nations, book ii. chap. 5.

other employment is more or less favourable to wealth. In short, we must follow capitals in their progress, ascertain their effects, and determine in some degree their absolute and relative power. This examination will either unveil the error, or confirm the accuracy, of the fascinating doctrine of Adam Smith.

If a nation possessed of a territory of large extent, great fertility, and fit to be cultivated, had large capitals, and employed them chiefly in agriculture; that nation would undoubtedly obtain a very considerable agricultural produce: but this produce, whatever might be its magnitude, would not of itself constitute any real and effective wealth; it would be wealth only when it had the power of obtaining in exchange all the other objects which the cultivators of the soil might be in want of, or which might suit their convenience. That part of produce which they could neither consume nor exchange, would be without any value, and as if it did not exist. A country possessed of none but such wealth, would be completely wretched. If agricultural produce is to constitute wealth, it is absolutely necessary that it may easily be exchanged against equivalents.

But where are we to look for, where to find these equivalents, which alone can give it a value, and raise it to the rank of wealth?

Is it in the interior of the country, where the agricultural produce has been gathered? The attempt will prove abortive, if manufactures and commerce have not made a progress similar to that of agriculture; if the manufacturing and trading classes are inconsiderable in number, and not sufficiently rich to give