CHAPTER III.

Capital Intelligently Employed-Capital and its Earnings go to the Payment of Labour—Machinery and Labour-saving Processes -Their Influence on the Production of Wealth and on the Welfare of the Labour-sellers.

A 3. “CAPITAL INTELLIGENTLY APPLIED" is not merely an aid, but indeed a positive necessity, to wealth-creation. At p. 12 we have shown that the three factors of all wealth are land, labour, and capital. The two former-land and labour-are present in greater or smaller proportions, at all times and in all places, but the latter-capital-is the work of human hands, and owes its existence to man's industry, foresight, and self-denial. Let us frame a clear notion of what we mean by "capital," and then inquire into its functions and

use.

In the first place, we shall find that, although all capital is wealth, all wealth is not capital-far from it. The wealth which human exertions have obtained or created is used by its possessors in a variety of ways, which we may classify under the following four divisions. Wealth may be devoted 1. To reproductive purposes; that is, to the creation of fresh wealth.

2. To purposes which are not reproductive, but are necessary or useful; for instance, to social arrangements for the security of person and property, to the reasonable enjoyment of material comforts, to education,

to intellectual and moral development, to recreation, &c.

3. To useless purposes, such as a redundancy of public servants and other non-productive consumers, or the indulgence in superfluous luxuries, ostentatious displays, &c.

4. To destructive and evil purposes, such as unnecessary wars the employment of brute force to crush liberty or perpetrate injustice, &c.

It is that portion of the world's wealth which is devoted to the first of these four sets of purposes--viz., to reproductive purposes-which alone constitutes what we call capital. In the other three ways, wealth is absorbed and consumed; whereas the wealth which is used as capital is not only not consumed, but continuously yields a large accession of fresh wealth. It is like the seed-wheat that is saved for sowing, and that lays the foundation of future rich harvests.

Capital, therefore, is that part of wealth which is devoted to reproductive purposes. It consists of the savings effected by means of an excess of production over consumption. The larger that excess, the more rapid the accumulation of capital. Roughly speaking, then, " capital" and "savings" are convertible terms. The working man who puts by half-a-crown out of his weekly wages thereby becomes a capitalist, and not only benefits himself, but the world at large. He is a contributor to that reproductive fund by means of which fresh wealth is created.

To the part which capital plays in the creation

DEPENDENCE OF LABOUR ON CAPITAL. 29

of wealth we have already made some reference at p. 12. We have there shown that without capital labour must be sterile, and could engage in very little work beyond such as would each day provide food for that day. In order to apply labour to work requiring time to yield results, a stock must be previously laid up to provide subsistence during that time. Such stock is the earliest and simplest form of capital. In this shape we see capital sustaining labour, while labour is engaged in creating fresh wealth. Under the complex conditions of old civilised communities, the same principle-a principle on which is founded the mutual dependence of capital and labour on each other-is carried out, but on a far larger scale, and in a less obvious form. The capitalist (that is, the savingsholder) supplies the labourer (that is, the wagereceiver) with the means of subsistence, &c., during the time that the latter is working for him at a task-let us say constructing a railroad-which will not be completed for a year or two, and will yield no return till completed; the contract between them being that, in exchange for the wage, the work done shall belong to the wage-payer. Whether the savings thus used belonged to one person, or consisted of contributions made by many persons, is immaterial. Indeed, all the better if the savings of the labourer have, through the medium of banking accumulations, gone towards forming the capital. In such case the labourer is at once earning interest on his savings and wages by his labour. But it is not only subsistence, &c., in the form of wages that the capitalist advances.

He also supplies-taking a cotton factory as an instance the machinery with which, the raw materials on which, and the costly building in which, the labourer performs his work.

Not only is capital an indispensable element in the production of wealth, but we may go further, and say that the extent to which fresh wealth is producible depends on, and is strictly proportionate to, the swifter or slower growth of the world's capital. If the accumulation of capital be suspended, the productive power of man will be repressed in the same ratio. Of the three elements of wealth-land, labour, and capital-the two first have scarcely ever, unless locally and temporarily, been otherwise than superabundant; whereas capital has, on the other hand, seldom reached the full limit of the requirements for it. It is the want ot capital, not the want of land or of labour, that has fixed the bounds of the world's productiveness. As more capital becomes available, more land will be utilised, more labour will be employed, and more wealth will be created. It is where and when population increases faster than capital that labour becomes redundant and wages fall.

The remedy for the redundancy of labour, and for the consequent competition which depresses wages is therefore to accelerate the growth of capital. In the long-run, be it a little sooner or a little later, capital is sure to find some channel for employment. For it is useless and profitless to its possessors unless it is utilised, and it cannot be utilised without creating a demand for labour. Some one may be found to say that a

sum of

DEPENDENCE OF CAPITAL ON LABOUR. 31

money invested in land, or in consols, does not create a demand for labour; but he overlooks that the money paid for land or consols by one person is received by another, and therefore still remains to be employed, directly or indirectly, in some form of labour. We therefore come to this conclusion-viz., that as long as there remains on the globe cultivable land uncultivated, and available labour seeking employment, there can be no redundancy of capital; and that the greater the abundance of the latter, the greater the amount of land and labour that will be utilised, and the more active will be the creation of wealth.

But if, on the one hand, labour is dependent on capital for its employment, on the other, capital equally depends on labour for its utilisation. Unused capital gradually shrivels and wastes away: ships rot, mines get inundated, machinery rusts, &c. Labour is the vivifying principle which preserves capital from decay. Let us inquire in what shape capital (that part of wealth which is devoted to reproductive purposes) exists. We shall find it to consist chiefly of ships, roads, and railways; of farm-buildings, factories, and foundries; of implements, machinery, and tools; of horses, sheep, and other cattle; of mines, docks, and harbours; and of an infinite multitude of other forms of wealth. All these objects we find it convenient to class under the generic name of "fixed capital." A very small and insignificant portion of capital exists in the shape of money (not wealth of itself, but counters entitling the bearer to a definite