680 BEPOET— 1880. 



subject in Political Economy. The question What is Capital ? is still answered 

 by economists in a most various and unsatisfactory way. Approaching the question 

 from the side of a large conversancy with economic facts, he would point out where 

 the conclusions of economic theory appeared to him at variance with the facts 

 of life. He first gave the prevailing theories as to capital, and then contrasted 

 them with what capital actually was in the world of fact and life. Adam Smith's 

 view was, that everything dealt with to yield revenue or profit was Capital. This 

 view, although still partially held, had been largely departed from since, and the 

 prevailing view now was, that capital was that only which was concerned in pro- 

 duction. Then again arose the question of two kinds of capital, the iixed and the 

 circulating, and what rule or principle distinguished them. Here Smith's criterion 

 was fixity as distinguished'frotn mobility ; but Ricardo had suggested rather relative 

 durability, and in this had carried most economists with him, so that the prevail- 

 ing view now was that things of a durable kind, as land, buildings, railways, were 

 of fixed capital, while perishable or renewable things, as food, clothing, furniture, 

 were of circulating capital. But as Professor Jevons and others admit, there is 

 no clear line between a throng of things which are neither very durable nor yet 

 very perishable. He then passed to a suggestion of Mr. Jevons, which he noticed 

 favourably as tending to a correct view of capital. This is in effect that the so- 

 called fixed capital is not itself capital, but is that which has had capital spent 

 upon or sunk in it. He proposes thus to distinguish a ' free ' from an invested 

 capital. But as to this free capital, he falls back upon the ' production ' idea, 

 already adverted to, and limits capital to articles of food, clothing, furniture, and 

 such direct needs of ' labour of all kinds and classes.' Lastly, as to the origin, 

 maintenance, and increase of capital, most economists are agreed that these all 

 result from sa^-ing, abstinence, and improving industry, so that the less the spend- 

 ing of what is produced, the more the capital, and on apparently to indefinite 

 increase. 



All these views Mr. Westgarth considered to differ more or less from that of 

 the capital of fact as confronting us in actual life. This capital we see to be one 

 fund — one homogeneous fund we might call it — wliich supports indiscriminately 

 not production only, but all exchange or business lil'e. He insisted, as speaking 

 from the world of fact, that exchange was essential to the idea of capital. What 

 caused exchange was the subdivision, or, to speak more comprehensively, the 

 association of labour. With the association of labour, he remarked, we enter upon 

 Economic Science, and it has thus, in this its limitation, a sufiiciently marked 

 distinction from the far wider Sociology, or the Science of Societj-. Capital, 

 then, is the fruit of exchange. It consists of the stock of things which arise and 

 are maintained as the needs of exchange. These stocks are mainly of three kinds : 

 first, raw materials, or thmgs in preparation for our use ; second, the things pre- 

 pared, and for sale in the shops and markets; and third, the prepared things 

 which are not passed out of exchange for ' consumption,' but kept as the ' rolling 

 stock ' of trading or exchanging life. The chief and most notable item of this thu'd 

 kind is money. Money is simply one kind of goods used to value the other 

 kinds, and where independently originated, it has ahvaJ^s made its first appearance 

 in this simple 'wa.j. Coinage and the change of material for the * precious metals ' 

 were afterthoughts to increase convenience, but they noways altered relationships. 

 The fund of capital then consisted of goods and monej' — of these indiscriminately, 

 as one and the same class of things. This fund was distinguished from the so-called 

 fixed capital, which, as to its leading idea, was not capital at all, but only agency, 

 which agency, in conjuction with that of man himself, enabled us to produce the 

 real things of capital, namely the requisites of our direct use. Lnnd, for instance, 

 is such agency, and only its crop belongs to capital. These direct requisites are 

 capital while within the sphere of exchange ; outside of exchange they cease to 

 be capital. Thus the limitation or law of capital is that it constitutes the stocks 

 required for the time being by exchange. As exchange extends in a country and 

 larger stocks are needed, (here is more capital to the country. What causes ex- 

 change or trading to extend, in spite of this cost of larger capital, is the increased 

 economy of production gained by the larger scale of business. All trade extension 



