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Smith's view of the origin of inventions is mistaken. Nevertheless the division of labor has a large part in the matter, because in an elaborated and advancing state of industry it allows a man of ingenuity to adopt the profession of an inventor. It is indeed a hazardous profession, and one to which no man not impelled by the force of genius would be likely to devote himself. But there can be no question that men like Watt, Smeaton, Bramah, Bessemer, not to mention the still more recent names of Whitworth, Armstrong, Siemens, Edison, Bell, and the like, distinctly devote themselves to the labor of invention. The principles of machine construction are now, indeed, so well understood that self-acting machinery can now be designed almost ad libitum for the accomplishment of any ordinary work. The proprietors of large factories often employ an ingenious draughtsman in the capacity of inventor of machines. Of this class of machine designers Roberts, of Manchester, was the best example. It may be added that this view of the matter is clearly suggested by Mr. Smiles, whose admirable works contain most of what we know about the history of invention in this country.

It is also easy to see that the division of labor immensely assists invention, and is indeed the necessary condition of any considerable advance, by allowing the manufacturer to carry on a special kind of industry on a large scale, and surround himself with extensive special machinery and appliances. This point of the matter will be further considered below.





1. The Doctrine of Mill 1


A second fundamental theorem respecting capital, relates to the source from which it is derived. It is the result of saving. The evidence of this lies abundantly in what has been already said on the subject. But the proposition needs some further illustration.

If all persons were to expend in personal indulgences all that they produce, and all the income they receive from what is pro

1 Principles of Political Economy, Bk. I, chap. v.
2 Mill had already defined capital as follows (Bk. I, chap. iv):

It has been seen in the preceding chapters that besides the primary and universal requisites of production, labor, and natural agents, there is another requisite without which no productive operations beyond the rude and scanty beginnings of primitive industry are possible : namely, a stock, previously accumulated, of the products of former labor. This accumulated stock of the produce of labor is termed Capital. The function of capital in production it is of the utmost importance thoroughly to understand, since a number of the erroneous notions with which our subject is infested originate in an imperfect and confused apprehension of this point.

Capital, by persons wholly unused to reflect on the subject, is supposed to be synonymous with money. To expose this misapprehension would be to repeat what has been said in the introductory chapter. Money is no more synonymous with capital than it is with wealth. Money cannot in itself perform any part of the office of capital, since it can afford no assistance to production. To do this it must be exchanged for other things; and anything which is susceptible of being exchanged for other things is capable of contributing to production in the saine degree. What capital does for production is to afford the shelter, protection, tools, and materials which the work requires, and to feed and otherwise maintain the laborers during the process. These are the services which present labor requires from past, and from the produce of past, labor. Whatever things are destined for this use destined to supply productive labor with these various prerequisites

are capital. — Ev.

duced by others, capital could not increase. All capital, with a trifling exception, was originally the result of saving. I say, with a trifling exception ; because a person who labors on his own account may spend on his own account all he produces without becoming destitute ; and the provision of necessaries on which he subsists until he has reaped his harvest, or sold his commodity, though a real capital, cannot be said to have been saved, since it is all used for the supply of his own wants, and perhaps as speedily as if it had been consumed in idleness. We may imagine a number of individuals or families settled on as many separate pieces of land, each living on what their own labor produces, and consuming the whole produce. But even these must save (that is, spare from their personal consumption) as much as is necessary for seed. Some saving, therefore, there must have been, even in this simplest of all states of economical relations; people must have produced more than they used, or used less than they produced. Still more must they do so before they can employ other laborers, or increase their production beyond what can be accomplished by the work of their own hands. All that any one employs in supporting and carrying on any other labor than his own, must have been originally brought together by saving ; somebody must have produced it and forborne to consume it. We may say, therefore, without material inaccuracy, that all capital, and especially all addition to capital, are the result of saving.

In a rude and violent state of society it continually happens that the person who has capital is not the very person who has saved it, but some one who, being stronger, or belonging to a more powerful community, has possessed himself of it by plunder. And even in a state of things in which property was protected, the increase of capital has usually been, for a long time, mainly derived from privations which, though essentially the same with saving, are not generally called by that name because not voluntary. The actual producers have been slaves, compelled to produce as much as force could extort from them, and to consume as little as the self-interest or the usually very

slender humanity of their taskmasters would permit. This kind of compulsory saving, however, would not have caused any increase of capital, unless a part of the amount had been saved over again, voluntarily, by the master. If all that he made his slaves produce and forbear to consume had been consumed by him on personal indulgences, he would not have increased his capital, nor been enabled to maintain an increasing number of slaves. To maintain any slaves at all implied a previous saving; a stock, at least of food, provided in advance. This saving may not, however, have been made by any self-imposed privation of the master, but more probably by that of the slaves themselves while free; the rapine or war, which deprived them of their personal liberty, having transferred also their accumulations to the conqueror.

There are other cases in which the term saving, with the associations usually belonging to it, does not exactly fit the operation by which capital is increased. If it were said, for instance, that the only way to accelerate the increase of capital is by increase of saving, the idea would probably be suggested of greater abstinence and increased privation. But it is obvious that whatever increases the productive power of labor creates an additional fund to make savings from, and enables capital to be enlarged not only without additional privation, but concurrently with an increase of personal consumption. Nevertheless there is here an increase of saving, in the scientific sense. Though there is more consumed, there is also more spared. There is a greater excess of production over consumption. It is consistent with correctness to call this a greater saying. Though the term is not unobjectionable, there is no other which is not liable to as great objections. To consume less than is produced is saving; and that is the process by which capital is increased ; not necessarily by consuming less, absolutely. We must not allow ourselves to be so much the slaves of words as to be unable to use the word “saving” in this sense, without being in danger of forgetting that to increase capital there is another way besides consuming less, — namely, to pro

duce more.


A third fundamental theorem respecting capital closely connected with the one last discussed is, that although saved, and the result of saving, it is nevertheless consumed. The word “ saving” does not imply that what is saved is not consumed, nor even necessarily that its consumption is deferred; but only that, if consumed immediately, it is not consumed by the person who saves it. If merely laid by for future use it is said to be hoarded; and while hoarded, is not consumed at all. But if employed as capital, it is all consumed, though not by the capitalist. Part is exchanged for tools or machinery which are worn out by use ; part for seed or materials which are destroyed as such by being sown or wrought up, and destroyed altogether by the consumption of the ultimate product. The remainder is paid in wages to productive laborers, who consume it for their daily wants; or if they in their turn save any part, this also is not, generally speaking, hoarded, but (through savings banks, benefit clubs, or some other channel) reëmployed as capital, and consumed.

The principle now stated is a strong example of the necessity of attention to the most elementary truths of our subject; for it is one of the most elementary of them all, and yet no one who has not bestowed some thought on the matter is habitually aware of it, and most are not even willing to admit it when first stated. To the vulgar it is not at all apparent that what is saved is consumed. To them every one who saves appears in the light of a person who hoards; they may think such conduct permissible, or even laudable, when it is to provide for a family, and the like, but they have no conception of it as doing good to other people; saving is to them another word for keeping a thing to oneself, while spending appears to them to be distributing it among others. The person who expends his fortune in unproductive consumption is looked upon as diffusing benefits all around, and is an object of so much favor that some portion of the same popularity attaches even to him who spends what does not belong to him, — who not only destroys his own capital, if he ever had any, but, under pretense of borrowing

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