The Four Employment of capitals

¹ The destiny of all capitals is to maintain productive labour.

But the amount of that labour varies extremely according to:

• the diversity of their employment and
• the value it adds to the national annual produce.

² A capital may be employed in 4 ways:

1. In procuring the rude produce required for society’s use and consumption

• Examples are the capitals used in improving or cultivating lands, mines, or fisheries

2. In manufacturing and preparing that rude produce for immediate use and consumption

• Examples are the capitals of all master manufacturers

3. In transporting the rude or manufactured produce from where they abound to where they are wanted

• Examples are the capitals of all wholesale merchants

4. In dividing portions of rude or manufactured produce into small parcels for those who want them.

• Examples are the capitals of all retailers

It is difficult to conceive any other way that a capital can be employed other than those four.

³ Each of these 4 methods is needed by the other three, or to the conveniency of society.

⁴ Unless capital was employed to multiply rude produce, neither manufactures nor trade could exist.

⁵ Unless capital was employed in processing rude produce for use and consumption, it would never be produced because there could be no demand for such rude produce.

If it was produced spontaneously, it would be of no value.

⁶ Unless capital was employed to transport rude or manufactured produce to where it is wanted, no more could be produced than was necessary for the consumption of its neighbourhood. The merchant’s capital exchanges the surplus produce of one place for that of another. It encourages industry and increases the enjoyments of both places.

⁷ Unless capital were used to divide those produce into small parcels, everyone would need to buy more than needed.

If there were no butchers, every man would need to buy a whole ox or sheep at a time.

• This would be inconvenient to the rich and more inconvenient to the poor.

If a poor worker were obliged to buy a month’s provisions at a time, most his capital would be forced into his stock for immediate consumption, which yields him no revenue.

• It is most convenient for him to buy them daily or hourly as needed.
• This allows him to employ more of his stock as a capital and furnish work of a greater value.
• The profit he makes in this way will more than compensate the added price that the retailer imposes on those smaller goods.

The prejudices of some political writers against shopkeepers and tradesmen are unfounded.

• It is unnecessary to tax them or restrict their numbers so that they can never multiply to hurt the public.
• They may hurt one another by their multiplication.

The amount of grocery goods which can be sold in a town, is limited by the demand of that town and its neighbourhood.

The capital, which can be employed in the grocery trade cannot exceed what is enough to buy that amount.

• If this capital is divided between two grocers, their competition will make them sell cheaper than if it were with just one.
• If it were divided among 20, their competition would be much greater.
  • The chance of them combining to raise the price would be much less.
  • Their competition might perhaps ruin some of themselves.

But it is their business to take care of this.

• It may safely be trusted to their discretion.
• It can never hurt the consumer or the producer.
• It will make the retailers sell cheaper and buy dearer than if the whole trade was monopolized by one or two persons.

Some of them may sometimes decoy a weak customer to buy what he does not need. However, this evil is of too little importance to deserve the public attention.

It would not be prevented by restricting their numbers. It is not the multitude of ale-houses that causes drunkenness among common people. Drunkeness from other causes creates a multitude of ale-houses.

8 People who employ their capitals in any of those four ways are themselves productive labourers.

Their labour, when properly directed, realizes itself in a subject or vendible commodity. It adds to its price the value of their own maintenance and consumption at least. The profits of the farmer, manufacturer, merchant, and retailer, are all drawn from the price of the goods which the farmer and manufacturer produce and the merchant and retailer trade. However, equal capitals employed in those four ways, will immediately mobilize very different amounts of productive labour and increase the value of their national annual produce in very different proportions.

The Four Employments Of Capitals

9 The retailer’s capital replaces, with profits, the merchant’s capital from whom he buys goods. It enables the merchant to continue his business. The retailer is the only productive labourer whom it immediately employs. His profits makes up the value which his capital adds to the national annual produce.

10 The capital of the wholesale merchant replaces, with profits, the capitals of the farmers and manufacturers he buys from.

It enables them to continue their business.

In this way, the merchant indirectly supports the productive labour of society. His capital also employs the sailors and carriers who transport his goods. This is all the productive labour which it immediately mobilizes. His capital increases the price of those goods by the value of his profits and their wages. This is all the value which it immediately adds to the annual produce. Its operation in these respects is much superior to that of the retailer’s capital.

11 Part of the capital of the master manufacturer is employed as a fixed capital in the instruments of his trade. It replaces, with profits, the fixed capital of other artificers whom he buys from. Part of his circulating capital is employed in buying materials. It replaces, with profits, the capitals of the farmers and miners whom he buys from. But a great part of it is always distributed among the workers he employs. It increases the value of those materials by their wages and by their masters’ profits It immediately mobilizes more productive labour. It adds a much greater value to the national annual produce than an equal capital of any wholesale merchant.

12 The farmer’s capital mobilizes the most amount of productive labour.

His labouring servants and labouring cattle are productive labourers. In agriculture, nature labours along with man. The labour of nature is free, but its produce has its value. The most important agricultural operations are intended not so much to multiply plants but to direct nature’s fertility towards the producing the plants most profitable to man. A field overgrown with briars and brambles may frequently produce as many vegetables as the best cultivated vineyard or corn field. Planting and tillage often regulates more than animating nature’s fertility. Most of the work always remains to be done by nature. The agricultural labourers and labouring cattle reproduce more value than their own consumption through their owner’s profits. They regularly reproduce the landlord’s rent in addition to the farmer’s profits. This rent is the produce of those powers of nature. The use of those powers is lent by the landlord to the farmer. This rent depends on the extent of those powers of nature, or according to the land’s fertility. It is the work of nature which remains after deducting the work of man. The work of nature is seldom less than 1/4. It is frequently more than 1/3 of the whole produce. No equal quantity of manufacturing labour can ever create such a great production because nature contributes no work in manufactures. Production must always be in proportion to the strength of the agents that create it. Agricultural capital mobilizes more productive labour than any equal amount of manufacturing capital. It also adds a much greater value to the national annual produce through this productive labour. Of all the ways capital can be employed, agriculture is by far the most advantageous to society.

Residence of Capitals Used in Different Employments

13 The agricultural and retail capital of any society must always reside within that society.

Their employment is confined to a precise spot, to the farm and to the retailer’s shop. They must generally belong to the residents.

14 The wholesale merchant’s capital has no fixed residence anywhere.

It may wander about according as it can buy cheap or sell dear.

15 The manufacturer’s capital must reside where the manufacture is done. This place is not always determined. It may be far from where the materials grow and from where the finished product is consumed. Lyons is very distant from the source of raw materials and from its consumers. The people of fashion in Sicily are clothed in silks from overseas which they process locally. Part of the wool of Spain is manufactured in Great Britain. Some part of that cloth is then sent back to Spain.

16 It is not important whether the merchant exporter is a native or a foreigner. If he is a foreigner, the number of foreign productive labourers will be less by one man. only than if he had been a native. The difference of the value of their annual produce will be determined by the profits of that one man. The sailors or carriers he employs may still belong to whatever country. The capital of a foreigner gives a value to their surplus produce equally with that of a native. His capital buys surplus produce in demand at home. It replaces the capital of the person who produces that surplus and enables him to continue his business. This is how the merchant’s capital chiefly supports productive labour. It increases the value of the annual produce of his society.

17 It is of more consequence that the capital of the manufacturer should reside within the country.

It mobilizes more productive labour, and adds a greater value to the national annual produce. It may, however, be very useful to the country that it should reside overseas. The capitals of the British manufacturers who process the flax and hemp imported from the Baltic coasts are very useful to the countries which produce them. Those raw materials are part of the surplus produce of those countries which would otherwise be of no value, and would not be produced. The merchants who export those raw materials replace the capitals of the producers and encourage them to continue production. The British manufacturers who buy those raw materials replace the capitals of those merchants.

18 A country, like a person, may frequently not have capital sufficient=

• to improve and cultivate all its lands
• to manufacture or process their rude produce for immediate use and consumption
• to transport their surplus produce to distant markets.

All the British do not not capital sufficient to improve and cultivate all their lands. Most of the wool of southern Scotland is manufactured far in Yorkshire through bad roads because of the lack of capital to manufacture it at home.

There are many little manufacturing towns in Great Britain. Its inhabitants do not have the capital to transport their produce to distant markets where there is demand for it. The only merchants among them are the agents of wealthier merchants residing in the greater commercial cities.

19 When the capital of any country is employed largely in agriculture, more productive labour will be mobilized within the country and increase the value it adds to the national annual produce.

After agriculture, the capital employed in manufactures mobilizes the most productive labour. It adds the greatest value to the annual produce. The capital employed in exportation has the least effect of the three.

20 The country which has insufficient capital for all those three purposes has not reached opulence.

Prematurely attempting to do all three with insufficient capital is certainly not the shortest way for a society to acquire a sufficient capital, no more than it would be for an individual. The capital of all the members of society has its limits in the same way as the capital of a single individual. It is increased by their continual accumulation and savings out of their revenue. The national capital is likely to increase fastest when it brings greatest revenue to all its citizens. This will enable them to make the greatest savings. But the revenue of all its citizens is in proportion to the value of the national annual produce.

21 Our American colonies progress rapidly towards wealth mainly because almost all their capitals are employed in agriculture.

• They have no manufactures except the household and course manufactures.
• These accompany the progress of agriculture.
• These are the work of the women and children in every private family.

Most of the exportation and coasting trade of America is done by the capitals of merchants living in Great Britain. Many of the stores and warehouses used in retail, particularly in Virginia and Maryland, belong to British merchants. It is one of the few examples of local retail being carried on by the capitals of non-residents. If the Americans stop imports of European manufactures by combination or violence, they would= give a monopoly to the Americans who could manufacture similar goods, divert American capital into manufacturing, retard the increase in the value of their annual produce, obstruct the progress of their country towards real wealth and greatness. This and much worse would also happen if the Americans monopolized their entire exports to themselves.

22 Human prosperity has never lasted long enough to enable any great country to acquire capital for all those three purposes.

Perhaps only the following have been wealthy and cultivated enough to do this=

• China
• ancient Egypt
• ancient India

Even those three countries are chiefly renowned for their agriculture and manufactures, not for foreign trade.

• The ancient Egyptians and the Indians had a superstitious antipathy to the sea.
• The Chinese have never excelled in foreign commerce.

Most of the surplus produce of those three countries were always exported by foreigners who gave gold and silver for their surplus produce.

23 In any country, the same capital will mobilize varying amounts of productive labour.

It will add a varying value to the national annual produce, according to the proportions of it employed in=

• agriculture
• manufactures
• wholesale trade

This variation can be very big depending on the kinds of wholesale trade it is employed in.