Economic structure

“ Capital offered facilities for the planting of new industries, the development of trade, and the opening up of mines and other natural advantages; so that the means lay at hand for promoting material progress of every kind. Hence new questions of economic policy came to the front. The efforts of traders were no longer confined to retaining exclusive commercial rights; but they began to consider how the various resources within a given area might be developed, so that by the interaction of different interests the greatest material prosperity might be attained in the community as a whole. ”

“ Production requires for its continuation ... only material, tools, and means of subsistence for the workers, therefore as such it consumes only the corresponding part of the products: other consumers must be found for the surplus which makes up the profit, and for which there is no room in the permanent structure of industrial life, in production—consumers, namely, who are not organically connected with production, who are fortuitous to a certain extent. ”

“ We may readily see, moreover, that those two primary allocations subdivide into almost infinitesimal and extremely confusing secondary categories, comprising every variety of Labor, every variety of Land, every variety of Wealth, every variety of Economic desire. It is to satisfy those desires out of that continuous flow of Wealth that the infinitude of processes indicated in the next preceding Lesson enter into the comprehensive Productive Process which includes delivery to ultimate consumers, and that an infinitude of corresponding processes enter into Distribution. ”

“ Capital does not limit industry, the only limit to industry being the access to natural material. But capital may limit the form of industry and the productiveness of industry, by limiting the use of tools and the division of labour. ”

“ Economic growth has liberated societies from the natural pressures that forced them into an immediate struggle for survival; but they have not yet been liberated from their liberator. The commodity’s independence has spread to the entire economy it now dominates. This economy has transformed the world, but it has merely transformed it into a world dominated by the economy. ”

“ If every commodity on an average remained unsold for a length of time equal to that required for its production, it is obvious that, at any one time, no more than half the productive capital of the country would be really performing the functions of capital. ”

“ Effects experienced within Economic Society from Interchanges with the Environing Area.—The introduction of improved methods of production within the central area usually calls for an expenditure of capital there, and this is largely furnished from the net profits from previous economies in production, and will, in its turn, furnish net profits that will convert themselves into the capital needed for applying future inventions. ”

“ It is to these subgroups that a large portion of the new capital itself will come, and the labor will come with it. Larger incomes, more luxury, more labor spent in elaborating goods as compared with that required for procuring crude materials,—such is the order. ”

“ Capital is increasing faster than labor, and consumption is growing relatively more luxurious; dwellings, furnishings, equipage, clothing, and food are improving in quality more than they are increasing in quantity. Goods of high cost are predominating more and more, and the subgroups that produce them are getting larger shares of both labor and capital. Population drifts locally toward centers of manufacturing and commerce. ”

“ The circulating medium existing in a country at a given time, is partly employed in purchases for productive, and partly for unproductive consumption. According as a larger proportion of it is employed in the one way or in the other, the real capital of the country is greater or less. ”

“ The higher civilization advances, the dearer all those commodities in the production of which the factor nature with [pg 390] value in exchange predominates are apt to become; and the cheaper, on the other hand, all those in which labor and capital play the principal productive part.790 This is accounted for, not only by the almost unlimited capacity of labor and capital to be increased, while the natural forces which have value in exchange are susceptible of increase to so small an extent ”

“ A previous application of labour to produce the capital required for consumption during the work, is no less essential than the application of labour to the work itself. Of capital, again, one, and by far the largest, portion, conduces to production only by sustaining in existence the labour which produces: the remainder, namely the instruments and materials, contribute to it directly, in the same manner with natural agents, and the materials supplied by nature.
We now advance to the second great question in political economy; on what the degree of productiveness of these agents depends. ”

“ Has the progress of wealth and industry no effect in regard to cost of production, but to diminish it? Are no causes of an opposite character brought into operation by the same progress, sufficient in some cases not only to neutralize, but to overcome the former, and convert the descending movement of cost of production into an ascending movement? ”

“ Land, labour and capital are the factors of production. The term land includes all natural opportunities and forces; the term labour, all human exertion; and the term capital, all wealth used to produce more wealth. In returns to these three factors is the whole produce distributed. The part that goes to landowners as payment for the use of natural opportunities is called rent; the part that constitutes the reward of human exertion is called wages; and the part that constitutes the return for the use of capital is called interest. ”

“ I maintain, as I think you have done, that consumption as compared with production is always greatest where capital is most accumulated. Diminish the capital of England one half, and you undoubtedly augment profits, but it will not be in consequence of a greater proportion of demand but of a greater proportion of production; demand as compared with production could hardly fail to diminish. Individuals do not estimate their profits by the material production, but nations invariably do. ”

“ The real price of manufactures, the quantity of labour and capital necessary to produce a given quantity of them, is almost constantly diminishing; while the quantity of labour and capital, necessary to procure the last addition that has been made to the raw produce of a rich and advancing country, is almost constantly increasing. ”

“ Whether we were dealing with the price of an ordinary commodity, with joint products, land or capital, we came across relationships which seemed altogether more fundamental than our present industrial system ”

“ It will be seen that the quantity of capital which will, or even which can, be accumulated in any country, and the amount of gross produce which will, or even which can, be raised, bear a proportion to the state of the arts of production there existing; and that every improvement, even if for the time it diminish the circulating capital and the gross produce, ultimately makes room for a larger amount of both than could possibly have existed otherwise. ”

“ That capital may limit the form of industry is clear. Without the factory, there could be no factory operatives; without the sewing machine, no machine sewing; without the plough, no ploughman; and without a great capital engaged in exchange, industry could not take the many special forms that are concerned with exchanges. ”

“ The use of capital consists in its advance. It goes before all operations of labour and trade. It is the power that sets labour and trade in motion; just as the power of wind, or water, or steam, gives movement to wheels and pistons.
Let us briefly see how capital operates upon the three great branches of human industry, namely, upon agriculture, manufactures, and commerce.
A farmer having acquired capital, either by the former savings of himself or his fathers, or by borrowing from the savings of others, takes a certain number of acres of land. ”

“ In the case of a more complicated manufacturing establishment, it should also be perfectly clear that the greatest permanent prosperity for the workman, coupled with the greatest prosperity for the employer, can be brought about only when the work of the establishment is done with the smallest combined expenditure of human effort, plus nature's resources, plus the cost for the use of capital in the shape of machines, buildings, etc. ”

“ Continuing the inquiry into the nature of the economical changes taking place in a society which is in a state of industrial progress, we shall next consider what is the effect of that progress on the distribution of the produce among the various classes who share in it. We may confine our attention to the system of distribution which is the most complex, and which virtually includes all others—that in which the produce of manufactures is shared between two classes, laborers and capitalists, and the produce of agriculture among three, laborers, capitalists, and landlords. ”

“ Trade, finance and commerce, by producing a regular flow of abundant income, brought into existence a new field of occupations and a new class--business and the businessmen. Herdsmen and farmers depended for their livelihood on nature, her niggardliness or generosity. The businessmen required only the presence of a group large enough to purchase goods and services, pay rent and interest, work for wages and leave the profits to the enterpriser. Each profit beyond the subsistence level enabled the businessmen to expand, buying more goods, hiring more labor, making still greater profits. ”

“ If the additional demand could continue to be supplied from the superior lands, by applying additional labour and capital, at no greater proportional cost than that at which they yield the quantity first demanded of them, the owners or farmers of those lands could undersell all others, and engross the whole market. ”

“ We may, therefore, consider the capital of a producer as measured by the means which he has of possessing himself of the different essentials of production: namely, labour, and the various articles which labour requires as materials, or of which it avails itself as aids. ”

“ Industry, commerce, shipping, and banking concentrated in the narrow area of less than 200,000 square miles, earned yearly returns equal as a rule to the total of the capital invested. Money changed hands rapidly, credits did the work of capital, and the rapid growth of population added large unearned increments to the fortunes of those who owned land or had established themselves in trade. ”

“ In the case of an altogether declining trade, in which it is necessary that the production should be, not occasionally varied, but greatly and permanently diminished, or perhaps stopped altogether, the process of extricating the capital is, no doubt, tardy and difficult, and almost always attended with considerable loss; much of the capital fixed in machinery, buildings, permanent works, &c. ”

“ The rate of profits is never increased by a better distribution of labour, by the invention of machinery, by the establishment of roads and canals, or by any means of abridging labour either in the manufacture or in the conveyance of goods. ”

“ Seeing distinctly that labor was the basis of all production (not merely in agriculture) , he shows (Books I and II) that the wealth of a country depends on the skill with which its labor is applied, and upon the proportion of productive to unproductive laborers. The gains from division of labor are explained, and money appears as a necessary instrument after society has reached such a division. He is then led to discuss prices (market price) and value; and, since from the price a distribution takes place among the factors of production, he is brought to wages, profit, and rent. ”

“ The possibility of substituting the large system of production for the small, depends, of course, in the first place, on the extent of the market. The large system can only be advantageous when a large amount of business is to be done: it implies, therefore, either a populous and flourishing community, or a great opening for exportation. ”

“ In manufactures, accordingly, the causes tending to increase the productiveness of industry, preponderate greatly over the one cause which tends to diminish it: and the increase of production, called forth by the progress of society, takes place, not at an increasing, but at a continually diminishing proportional cost. ”

“ All this capital is now lent at interest, and made available for production. Capital thus circumstanced forms a large portion of the productive resources of any commercial country; and is naturally attracted to those producers or traders who, being in the greatest business, have the means of employing it to most advantage; because such are both the most desirous to obtain it, and able to give the best security. Although, therefore, the productive funds of the country are not increased by credit, they are called into a more complete state of productive activity. ”

“ The quantity of industry which any capital can employ, must evidently be equal to the number of workmen whom it can supply with materials, tools, and a maintenance suitable to the nature of the work. Money may be requisite for purchasing the materials and tools of the work, as well as the maintenance of the workmen ”

“ The inevitable result was to check production, and this check to production propagated itself in a cessation of demand, which checked production to the furthest verge of the wide circle of exchanges, operating with accumulated force in the centers of the great industrial commonwealth into which commerce links the civilized world. ”