POLITICAL ECONOMY. 



outlay of 1'iiman l;il.our u derated toward* those object* or 

 H whii-li arc neither direetly or indirectly i-'n.iucive to 

 mut'Tiiil pr.,i!uct-, i.r to liie industry which stipplicH mn-h pro- 

 ducts, it iloos not follow that 8uoh an outlay of labour is to be 

 ated. It is not desirable that a life of nioro labour, un- 

 reliored by any enjoyments beyond those essential to the con- 

 tinuity of labour itself, and always burdened with anxiety, that 

 H'icli | .1 should bo the lot of each person, should bo 



continually before tho mass of mankind, or ovon before a number 

 of persons, however Mnall that number may bo. If men live a 

 pciinrioiiH or ascetic lifo for tho sake of some great and worthy 

 object, they are doubtlessly to be commended. If they live 

 such a life from sheer love of hoarding, they are suffering under 

 a delusion, which ia at once contemptible and perverse. But 

 that a whole society should be determined to live coarsely and 

 . to abjure all that is beautiful or elegant, to repudiate 

 all art ami refinement, is simply to prefer barbarism to civilisa- 

 tion, to set up a low instead of a high ideal, and ultimately to 

 bring about a great deal of general misery. There are forms 

 of expenditure which are waste and mischief; but the general 

 distribution of comforts and conveniences is as much a means 

 for elevating men, as it ia in accordance with tho manifest 

 designs of a beneficent Providence. 



That which a person saves, in order to make provision on 

 behalf of those perpetual or continual needs of his life, or in order 

 to provide against occasional emergencies, he cither employs or 

 hoards. Every individual who ia above the practice of merely 

 living from hand to mouth, possesses some accumulation, the 

 purpose of which is to afford some security against the risks of 

 sickness, or suspended employment, or the loss which his death 

 might inflict on his family. The man who subscribes to a benefit 

 society, or who insures his life, or keeps a balance at his bankers, 

 hoards against emergencies. It is an accident that his accumu- 

 lations yield him interest. It is possible to conceive a state of 

 society in which tho disposition to save might be excessively 

 strong, the necessity of saving very urgent, but in which no 

 opportunity might be given for any profit in tho shape of inte- 

 rest on such savings. It ia important to notice this, because 

 not a few eminent economists have argued as though the dis- 

 position to accumulate was entirely dependent on the interest 

 which the person who saves could get for his savings. It is 

 true that in a country like our own, where a very perfect, and, 

 on the whole, trustworthy Eystem exists, under which loans 

 may be made, they who save do get an addition to their savings, 

 from the interest paid by borrowers ; but if such a machinery did 

 not exist men could still save, and might save largely. That 

 such a practice does prevail, has been proved of late years more 

 than once, by the success with which the French Government has 

 negotiated loans by the small subscriptions of the poorer classes 

 in France. These loans have been mob out of the hoards of the 

 people, and the amount offered was far in excess of the amount 

 which the Government wished to raise, and did raise. At tho 

 present moment, a very large part of the specie which exists in 

 the world has been absorbed by tho exigencies of war, partly as 

 the most convenient machinery by which to meet extraordinary 

 expenses, but also as a hoard. A hoard, in short, ia wealth 

 reserved in the hands of those who own it, or which, at least, 

 is put in some place from which it can be easily and safely 

 recovered. We shall see, by-and-bye, that the fact that some 

 part of the savings of a country is always invested in such a 

 form as to be easily recoverable, carries some very important 

 results. 



Men, then, save with an object, and this object is to provide 

 against emergencies. If they are obliged to hoard their savings, 

 they will, on the anticipation of these emergencies, save just as 

 anxiously and carefully. If an additional motive is presented 

 to them, that of making or getting an advantage out of what 

 they have saved, all the better. In a country like our own, 

 where the machinery exists by which these savings can be 

 turned to account to tho profit of the individual, what can bo 

 saved is generally turned to account. And we should remem- 

 ber, also, that what a man can save ia all that remains over and 

 above the cost of maintaining himself and hia children, and of 

 making provision against his own old age or other incapacity. 



Wealth Trhich is saved and used is called capital. Economists 

 make a distinction between that capital which is circulating and 

 that which ia fixed. The former of these phraaes is awkward 

 and ambiguous, and tho distinction itself is not very important. 



It ia Hufticient to Bay that by circulating capital in meant that 

 wealth which i exhausted or (economically (peaking) ooo. 

 anmed in a single act, while fixed capital in that which perform* 

 a Buoceamon of act*. Thoa the grain which a farmer aowa i 

 tho former, the machine with which he aowa it U the latter. 

 The coals which feed the fire of a Ktcam-cngine are the former. 

 the engine itself ia the latter. But the ezpreaaion "circulating" 

 ia very ambiguous. Nothing circulates so much a* a abillm; 

 or a sovereign ; for each piece of money performs, in the 

 economy of society, an infinite number of operationa. Hut it 

 does circulate .BO freely and BO readily, because it can perform 

 ao many operations that is, because it in so eminently fixed. 

 Perhaps it would be better to call these two proocases of capital 

 exhaustive and recurrent. 



Though navinga may be collected with a view to security, 

 wealth is generally hoarded with a view to profit. In order, 

 however, to have any clear idea on this subject, the true inter- 

 pretation of which gives the solution of many among the moat 

 intricate problems of Political Economy, we must see what 

 profit means. 



It is the common practice to say that profit includes the into 

 rest of capital, the wages of managing the employment of thi.i 

 capital, and insurance against the risk of losing all or any part 

 of it. And no doubt, in the ordinary use of the word that is, 

 as implying the advantage which a person gets for carrying on 

 his business these three facts always enter into the calculations 

 of such a person ; and it ia no less clear that a person whoso 

 energy enables him to exercise a considerable management over 

 large affairs, and whose acuteness assists him to calculate and 

 obviate many risks, will procure a far greater profit, in the 

 ordinary sense of the word, than other traders do. For there 

 ia no doubt that all the persons who are engaged in any business 

 get an average rate of profit, and that they who get more than 

 this rate are more acute and intelligent, while they who get 

 less are less fortunate or less capable than the average. 



It is manifest, however, that the wages of management ar> 

 regulated by exactly tho same causes which control other rates 

 of wages. If no natural, legal, or social hindrance is put in 

 the way of a man who works, the wagea of labour conform to 

 the cost of producing the labourer, and to the effectiveness of 

 the labour itself. But the qualities of a man of business do 

 not differ, except in degree and direction, from the qualities of 

 any other person who works for wages. It is true that the 

 mind can often do a multitude of things, while the hands can 

 only do one; and that, therefore, unless tho management bo 

 too vast for one man's control, the wages of management may bo 

 indefinitely increased. But a thoroughly good man of business 

 has to be trained, is greatly prosperous only by a vigorous 

 selection from other men of business, and ia in reality an 

 exceedingly effective labourer. Unlesa, therefore, wo arc to 

 confuse wages with profit, we must account in this way for the 

 wages of management. 



Again, risk is an element which can either be calculated on a 

 general average, or which is more or less subject to the control 

 of acuteness and foresight. Some persona have gone so far 

 aa to say that every kind of risk or contingency ia subject to 

 some law, which determines the average recurrence of the risk. 

 Perhaps this is a paradox ; but it ia certain that when taken 

 on a large scale, and with a sufficient margin over which the 

 average may oscillate, and with some care in estimating the 

 character of the objects to which the risk attaches, the risk is 

 practically capable of calculation. This, as we all know, has 

 long been effected in the insurance of ships, of lives, and o. 

 property from fires and other accidents. But of course, even 

 here, the examples from which the average is calculated have 

 to be selected. No underwriter would insure an nnaeaworthy 

 ship, no agent would take a thoroughly unsound life, or insure 

 a powder-mill. So again, in a much more delicate matter, 

 insurances of character are effected, when persons who are put 

 in situations of confidence cannot obtain any other kind of 

 guarantee. Those who insure character are, I presume, obliged 

 to take a considerable margin in order to cover risks ; but they 

 are, no doubt, much more anxious to inquire into the character 

 or antecedents of those who treat with them. No such associa- 

 tion or office would insure the integrity of a man who had been 

 convicted of peculation or fraud, and would probably look very 

 suspiciously on a person whose relations had a bad name. 



But no one insures against risks which prudence can obviate, 



