Fixed capital

“ No fixed capital can yield any revenue but by means of a circulating capital. ”

“ What is called the consumption of one's income in advance is nothing but the consumption of a portion of capital which the [Pg 192] consuming party intends to make good from his future income. [210-2] Fixed capital, too, can certainly be directly consumed; for instance, when the owner of a house treats the entire rent he receives from it as net income, makes no repairs, and no savings to put up a new building at some future time. As a rule, however, the owner of fixed capital must, in order to consume it, first exchange it against circulating capital. ”

“ Increase of Fixed Capital, when, at the Expense of Circulating, might be Detrimental to the Laborers. There is a great difference between the effects of circulating and those of fixed capital, on the amount of the gross produce of the country. Circulating capital being destroyed as such, the result of a single use must be a reproduction equal to the whole amount of the circulating capital used, and a profit besides. ”

“ The gross produce of industry consists of two parts; one portion serving to replace the capital consumed, while the other portion is profit. Now, equal capital in two branches of production must have equal expectations of profit; but if a greater portion of the one than of the other is fixed capital, or if that fixed capital is more durable, there will be a less consumption of capital in the year, and less will be required to replace it, so that the profit, if absolutely the same, will form a greater proportion of the annual returns. ”

“ In practice, the procedure is that every capitalist sets aside from his annual production, from the realisation of his commodities, a certain amount for the redemption of his fixed capital. These individual annual deductions must amount to a certain quantity of capital, therefore the capitalist has in fact renewed his fixed capital, that is, he has replaced it by new and more efficient items. ”

“ If more labourers are employed, a larger fund, in the form of circulating capital, must be devoted to pay their wages. Improvements in the various processes of industry cannot be introduced without the expenditure of capital. Machinery, warehouses, manufactories, railroads, ships, all such industrial appliances as these, exhibit the various modes in which the fixed capital of a nation assists her industry.
and, therefore, increased saving.It has been previously asserted as a fundamental proposition, that capital, whether fixed or circulating, is the result of saving. ”

“ Fixed capital is always secured by consumption of circulating capital. The extension of railroads always implies great reduction of ready supplies. Money between individuals and communities ranks as circulating capital, but within any community the stock of money needed for domestic trade may be thought of as a permanent machine. Even machinery may be circulating capital in the hands of one who manufactures or sells it, though fixed when located in its work, and for the whole community is “fixed” as soon as its destined use is determined by its form. ”

“ When fixed and circulating capital coöperate in production, the latter, because it can be more easily withdrawn, but also more easily replaced, first takes out its own profit, that is the profit usual in the country and leaves all the rest to the former. When fixed capital is sold, practically no attention is paid to what it originally cost. The purchaser pays only for the prospective revenue it will yield, which he capitalizes at the rate of interest usual in the country. ”

“ But the same immediate reproduction of wealth does not take place if the capital is converted into fixed capital; and therefore there need not immediately be produced so large an amount of wealth as if the capital were consumed by a single use, and had, in consequence, to be at once reproduced. Now, labourers derive their wages from circulating capital; hence, if the circulating capital is diminished, their wages will temporarily fall. As an example, the construction of a railway may cause circulating to be converted into fixed capital. ”

“ The amount of fixed capital employed in the production of a piece of British muslin is at least a hundred, probably a thousand times greater than that employed in a similar piece of Indian muslin. And the proportion of circulating capital is a hundred or thousand times less ... the whole of the annual savings, added to the fixed capital, would have no effect in increasing the demand for labour. ”

“ Capital is usually said to be either fixed or circulating capital, and we ought to learn very thoroughly the difference between these two kinds. Fixed capital consists of factories, machines, tools, ships, railways, docks, carts, carriages, and other things, which last a long time, and assist work. It does not include, indeed, all kinds of fixed property. Churches, monuments, pictures, books, ornamental trees, &c., last a long time, but they are not fixed capital, because they are not used to help us in producing new wealth. ”

“ In proportion as fixed capital is less durable, it approaches to the nature of circulating capital. It will be consumed in a shorter time, and its value reproduced in order to preserve the capital of the manufacturer. ”

“ By the adoption of machinery, a circulating capital, which was perpetually consumed and reproduced, has been converted into a fixed capital, requiring only a small annual expense to keep it up: and a much smaller produce will suffice for merely covering that expense, and replacing the remaining circulating capital of the producer. ”

“ For instance, we may suppose, that, instead of dispensing with the whole of the fixed capital, material, &c, and taking on labourers in equal number to those by whom these were produced, half only of the fixed capital and material is dispensed with; so that, instead of 60 labourers and a fixed capital worth 60 quarters of corn, we have 80 labourers and a fixed capital worth 30. ”

“ But in a country of great annual savings and low profits, no such effects need be apprehended. Since even the emigration of capital, or its unproductive expenditure, or its absolute waste, do not in such a country, if confined within any moderate bounds, at all diminish the aggregate amount of the wages fund— still less can the mere conversion of a like sum into fixed capital, which continues to be productive, have that effect. ”

“ Again two manufacturers may employ the same amount of fixed, and the same amount of circulating capital; but the durability of their fixed capitals may be very unequal. ”

“ We think that in the Act of 1918, in which the tax upon an association is based upon the average value of its 'capital stock,' including surplus and undivided profits, these words are not to be given a technical meaning, but should be interpreted, in their entirety, and, in the absence of a fixed share capital, as equivalent to the capital invested in the business, that is, the net value of the property owned by the association and used in its business. ”

“ The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably. ”

“ The surplus beyond the prices which would be fixed by a freedom in exchanging property, gained by the owners of factories, transfers property without any equivalent, and goes in company with the other enumerated means, to the accumulation of a property-transferring capital, and not to the increase of a property-exchanging currency. ”

“ So long as these commodities remain unconsumed, they are called free capital; when they are employed to sustain laborers engaged in building a warehouse, a bridge, or a railway, the capital is said to become "fixed," or sunk in such enterprise. If the investment is a paying one, returning the cost with interest, the capital is in time released; if it loses money, ultimately becoming worthless, then the capital is fixed forever, or lost. And the true cost of these works to the community is correctly expressed by the price paid for them, Mr. ”

“ But whether the amount of capital ever does limit the productiveness of industry, and thus fix a maximum which wages cannot exceed, it is evident that it is not86 from any scarcity of capital that the poverty of the masses in civilized countries proceeds. For not only do wages nowhere reach the limit fixed by the productiveness of industry, but wages are relatively the lowest where capital is most abundant. ”

“ And further, it is assumed that whoever is once a hired laborer is fixed in that condition for life.
Now there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.
Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. ”

“ The conditions for the capitalisation of surplus value clash increasingly with the conditions for the renewal of the aggregate capital—a conflict which, incidentally, is merely a counterpart of the contradictions implied in the law of a declining profit rate. ”

“ If the whole or any part of that income be saved, so much new capital is generated,—the infallible operation of which is to lower the value of money, and consequently to conduce towards the improvement of public credit. ”

“ If the yielding of a plank by the borrower to the lender is a natural, equitable, lawful remuneration, the just price of a real service, we may conclude that, as a general rule, it is in the nature of capital to produce interest. ”

“ But is it nevertheless true that, during the whole of the interval between the creation of the capital of $100 and its reduction to a sum not greater than that of the annual revenue appropriated to its redemption, there will be a greater active capital in existence than if no debt had been contracted. ”

“ Surely the legislative intent that the full value of the stock authorized and required to be subscribed, in other words, the entire capital, shall be, in fact, paid in when required,-that it shall be real, and not merely nominal,-is plain enough when the authority to exist as a corporation and to do business is given on condition that the capital subscribed shall not be less than a specified sum. ”

“ When a case has been brought before the courts in which the contention was advanced that the charges of the railway or public-service corporation were too high, the courts appear to have taken the ground that stocks and bonds should be classed together in order to determine the aggregate capitalization of the company, and that the justice or injustice of the contention that the charges are too high should be determined by ascertaining whether if the charges were made lower the net earnings would still be sufficient to pay a fair return on the total capital invested. ”

“ It is too powerful a weapon in the hands of those alive to its possibilities, enabling a small group of men with a relatively insignificant investment of capital to control a country-wide industry. Take the simplest possible illustration: The industry of manufacturing a particular commodity is carried on by a number of corporations scattered throughout the country with an aggregate capitalization of, say, $10,000,000. A, B, and C form a holding company to acquire a bare majority of the stock of each corporation, say $5,100,000 in the aggregate. ”

“ In the same way that the costs of installing machinery in position and ready for use are capitalized by being added to the value of the equipment, so may the organization expenses of a corporation be legitimately capitalized as being the measure of the amount of the greater value which these organized business elements have over the same elements unorganized. Capital has been brought together and set to work, management and plan of operation have been secured, and business is ready to begin. ”

“ If the ratio of saving which the capitalists (taken together) choose to make exceeds the rate of accumulation dictated by technical progress, the excess savings can only be ‘capitalised’ if there is an outlet for investment outside the system. ”