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

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

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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 unproductive 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 prodi66 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 à 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.

* Adam Smith's Wealth of Nations. London: 1805. vol. ii. book ii. chap. 3. page 13.

Thus the savings consumed by the labouring classes evidently increase both wealth and population.

When the savings are consumed by the idle classes, they serve to employ a greater number of individuals in labours of luxury. Suppose the annual savings amount to one hundred quarters of wheat, and that the idle classes employ them in taking twenty individuals more in their service, what will be the consequence of the consumption of these savings?

These twenty individuals quit useful labour, to pass over to labours of luxury. The classes which they have quitted, repair their absence by more labour, and obtain higher wages. This increase of wages in a short time produces the same number of individuals of which these classes were composed; and the twenty individuals who left them, occasion an actual increase of population.

Being become necessary to the opulent class, these twenty individuals consume the one hundred quarters of wheat economized annually, and re-produce by their labour the capital with which they are fed. It matters little whether the savings be made by the idle classes, or whether they be borrowed by the latter from the labouring class. In the first case, the savings serve only to augment the population; in the second, the savings of the labouring class are exchanged for the capitals of the idle classés: and it ought to be particularly remembered, that this exchange of the savings of the labouring class for the capitals of the idle classes is no-wise injurious to the national capital; it simply effects a change of capitalists per

fectly indifferent to the formation of capitals and wealth, and no-wise prejudicial to population.

It is, therefore, evident, that Dr. Quesnay and even Adam Smith were both mistaken, when they suppo'sed that savings cannot contribute to the formation of capitals, except they are, in the opinion of the former, applied to agricultural, and according to the latter, to productive labour.

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They still contribute to the formation of capital, though they be employed in labours of luxury.

This kind of labour, the least beneficial to wealth, constantly and infallibly replaces the savings by which it is paid, and consequently produces the population which is maintained by these savings.

Capitals, then, are always derived from economy, and can neither be formed nor increased otherwise than by economy.

This system has been strenuously opposed by the Earl of Lauderdale; and as the noble Lord is the only author who has raised a controversy on this subject, I hope I shall be pardoned for having rather extracted than analysed that part of his work in which he has endeavoured to subvert the doctrine established on this important point of political economy.

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"As animals," says the noble Earl, "are only multiplied by the means by which they are produced; "as vegetable substances also can only be increased

by the means by which they are produced; as a greater quantity of metals and other productions "from the bowels of the earth, can only be acquired 66 by an increase of that labour which procures them; "and as a greater quantity of raw materials can only