POLITICAL ECONOMY. 



employed. Elegant mansions, deer-forests, equi- 

 pages, works of art, costly wines, are capital 

 employed unproductively, being used for the most 

 part as instruments of enjoyment. But where land 

 is used to raise crops ; or a water-fall is made to 

 turn a mill; where wages are paid not to a retinue 

 of domestic servants, but to spinners, or weavers, 

 or bakers, or road-makers, capital is employed 

 productively. 



Capital productively employed is usually divided 

 into fixed and floating capital. It is impossible 

 to draw an exact line of distinction between the 

 two, but there is a well-recognised difference. 



Most of the natural agents, used productively, are 

 to be regarded as fixed capital ; such as land, or a 

 water-fall. There is also a large mass of fixed capi- 

 tal, the product of labour accumulated in the soil, 

 as the accumulated tillage of land, canals, railways, 

 and roads. An enormous amount of fixed capital 

 is also accumulated in the multitudinous variety 

 of machinery employed in the arts and manufac- 

 tures. The use of such agents, natural or artificial, 

 largely contributes to, and is essential to any con- 

 siderable measure of production. It is the perma- 

 nence of these agents of production that leads to 

 their being denominated fixed capital ; land is as 

 useful one year as another ; a railway is not quite 

 so lasting, but, at the expense of a certain outlay, 

 may be maintained for an indefinite period ; a 

 steam-engine is worn out sooner, nevertheless it 

 lasts for a considerable number of years ; and 

 there are all varieties in the scale. Probably, it 

 would not be far from the mark to denominate, as 

 fixed capital, anything used in aid of production, 

 which is not thereby consumed within the usual 

 period of balancing business accounts. In differ- 

 ent branches of business, the period varies, but 

 in many it is a year. Moreover, what is fixed 

 capital to one man, is floating capital to another. 

 A steam-engine, or a ship, is fixed capital to the 

 user, but was floating capital to the engineer or 

 ship-builder who produced it. 



The materials used in manufacture are an 

 important part of floating capital. These, for the 

 most part, are consumed by being used once. 

 The other great division of floating capital consists 

 in wages paid for labour expended on commod- 

 ities intended for the market. 



So long as a man produces each day by his 

 own labour enough food, and other necessaries, to 

 maintain himself for the day, there is no need of 

 capital to support labour ; but if labour is inter- 

 rupted, as in the winter of many climates, man 

 must at the proper time lay by a store to meet the 

 season of want. And if, in a civilised community, 

 a man's labour is confined to one commodity, and 

 that, perhaps, not a necessary of life, some lapse of 

 time must occur between the manufacture of the 

 commodity he produces, and the opportunity of ex- 

 changing it for articles manufactured by others, such 

 as he desires to have. It is necessary, therefore, 

 to be able to maintain himself while preparing 

 for the market the commodities he manufactures. 



As civilisation advances, this effort is found to 

 be quite beyond the unassisted means of the mere 

 labourer. The commodities he produces may have 

 to be exchanged with cotton grown in America, 

 the tea and coffee of Asia, or other article pro- 

 duced at a distance; it may be years before the 

 exchange be effected, and the means of effecting it 

 may be unknown to him. 



Suppose a man produces cloth, and that the 

 article he desires to have in exchange is coffee. 

 It will take several months for his cloth to be 

 carried to Ceylon, and several months to bring 

 back the coffee. Our producer, therefore, must 

 wait a full year before he obtain what he desires 

 to get in exchange for the produce of his labour. 

 But in the interval, till the coffee reach him, he 

 must have other means of obtaining a supply. 

 By economy, he may have produced a store of 

 cloth, a year previously, and may have despatched 

 it to Ceylon in anticipation, so that the supply of 

 coffee may now be coming in ; or if he did not 

 himself save enough of cloth for that purpose, he 

 may have borrowed a supply from others. 



All commodities take a longer or shorter period 

 to pass from production to exchange, and from 

 exchange to consumption ; and according to the 

 time so occupied, the community must have a suffi- 

 cient supply beforehand, to meet people's wants in 

 the interval. 



Thus during the interval between production, 

 exchange, and consumption, commodities form an 

 important portion of floating capital. And as 

 they are held solely for the purpose of being ex- 

 changed, the more speedily that is effected, the 

 better. The shorter the interval between produc- 

 tion and exchange, and between exchange and 

 consumption, the less value of commodities is it 

 necessary to have at one time, compared with the 

 number of exchanges ; and some of the severest 

 crises in commerce occur when, from any cause, 

 the period betwixt production and exchange, or 

 between exchange and consumption, is prolonged 

 beyond the usual limits. 



For, be it remembered, that the object for which 

 these goods were manufactured was by exchange 

 to fetch other goods in return, a supply of which 

 is really wanted. The store saved to provide for 

 such wants during the usual interval of exchange, 

 is in the case supposed exhausted, and now they 

 reach a famine price ; while the goods held for 

 exchange are for the time useless towards effect- 

 ing the purpose for which they were made. 



But how fares the mere labourer in all this ? He 

 cannot wait till the produce of his labour be sent to 

 foreign parts ; he can seldom, indeed, wait beyond 

 a fortnight or so to get a return for his work in 

 kind ; his only store consisting of his clothing, his 

 furniture, and perhaps a few tools. He has no stock 

 of comestibles from which to support his family in 

 the interim, nor anything to purchase a supply. 

 He therefore makes an arrangement with his 

 employer to give the latter the benefit of his 

 labour, on condition that he receive in return the 

 means of obtaining the necessaries of life, and 

 this the employer gives him in the form of a 

 money-payment, wherewith to purchase these for 

 himself it being the part of another set of capital- 

 ists to maintain a store of such necessaries suffi- 

 cient for the wants of the community till a fresh 

 supply comes in. 



Production, therefore, depends greatly on cap- 

 ital : first, on fixed capital in the form of the 

 natural agents ; second, on fixed capital derived 

 rom labour, expended either on the natural agents 

 themselves, or in the construction of machinery ; 

 third, on floating capital expended on materials, 

 or retained in the form of manufactured goods ; 

 and, fourth, on floating capital expended on 

 wages. 



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