Wherein do Capitals consist? THE theory of capitals is new, and entirely of Adam Smith's creation. The notions afloat on this subject prior to his time, were confused, partial and limited. The nature, formation, employment, and general and particular influence of capitals, were so many problems, or gave rise to numberless errors and misconceptions.

The first writers on political economy made capi... tals consist in metallic currency, and derived them

from foreign commerce ; which caused their system to be denominated the mercantile system.

The French economists who attacked this system, and substituted the agricultural system, acknowledged no capitals but the advances on cultivation.

Adam Smith took a more extensive view of capitals. He stated them to consist in the advances and prime materials of all labours, in the improvements of the soil, in the implements and machines of agriculture, manufactures, and trade, which comprise both metallic and paper currencies, and in commodities reserved for general consumption.*

This enumeration of capitals is not absolutely above criticism. It certainly is a matter of surprise, that commodities reserved for consumption, and incapable of being accumulated, should be ranked among capitals, which, according to Adam Smith himself, are the produce of accumulation ; but as this criticism is of no utility to the science, I shall not dwell upon it.

Some modern French writers appear disposed to assign the rank of capitals to lands, mines, and fisheries, which they regard as instruments of production, and little different from any other machine or implement destined to produce commodities. t .

Lastly, a Noble English Author limits capitals to the instruments and machines proper to shorten and facilitate labour. I

I think I shall give a correct and comprehensive definition of capital, by stating it to consist in the accumulation of the produce of labour.

According to this definition, lands, mines, and fisheries, in their original state, would not be comprised among capitals; but, stripped of the improvements, instruments, and machines, which render them productive, they scarcely deserve to hold a place in the capital stock of any nation. Their spontaneous produce is but the smallest part of the general produce of


* Adam Smith's Wealth of Nations, vol. i. book ij. chap. 1. and


+ De Say and Canard.

The Earl of Lauderdale.

labour, and cannot constitute any separate article in the wealth of nations. If we deduct from agricultural produce, the part which is due to cultivation ; from the produce of fisheries, that which is due to the implements and tools for fishing, and particularly to the art of salting, drying, and curing fish ; and from the produce of mines, that which is due to the aid of machines and extraordinary labours; there remains so little, that there is no danger of erring in ranking them among the produce of labour, and admitting them only as such among capitals.

Capital, then, consists in the accumulation of the produce of labour.

In theory, capitals offer three different considerations, equally interesting to the science, to its progress, and to its results, viz. their formation, their employinent, and their influence upon public and private wealth. Each of these considerations has given birth to various opinions, which it is important to analyse and investigate,

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How are Capitals formed ? D R . 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 “trade.”

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.*

Theincreased price of agricultural produce through

The greatest part of the expences of land-owners are, at least, unproductive expences. Those only can be excepted which they incurto maintain and improve their estates, and to augment the cultivation of their lands. Phusiocratie, Seconde Observation sur le Tube

leau 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 foreigu 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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of Physiocratie, Obs. 4 et 5, sur le Tableau Economique.

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