that which disappears rapidly. Fixed capital is, indeed, produced and preserved by circulating capital; but it is, for the most part, transformed again into circulating capital Besides, it is only by means of the latter, that the former can be productively employed. The relative importance of fixed and circulating capital to a country depends upon whether the country is an advanced or only an advancing one. A people with very much and very fixed capital are indeed very rich; but run the risk of offering many vulnerable points to an aggressive enemy, and of thus turning the easily jeopardized mammon into an idol. To make a passing sacrifice of the country that the people and the state may be saved, as did the Scythians against Darius, the Athenians against Xerxes, and the Russians against Napoleon, becomes difficult, in proportion as the nation has become richer in fixed capital.

But, as

'The first beginnings of this division are to be found in Quesnay (Analyse du Tableau économique, 1758), in which he develops the difference between avances primitives and avances annuelles. See also Adam Smith, W. of N., II, ch. 1, who, however, reduces the difference between them mainly to the relations of possession, and hence includes grain and seed in fixed capital. Hermann, Staatsw. Untersuch, 269 ff.; Ricardo, Principles, ch. 1, sec. 2; Schmittherner, Staatswissenschaften, I, 387, divides capital into I, infungible, that is, I, fixed in the strict sense of the word; 2, transportation-capital; II, fungible, 1, transformable capital; a, material (raw material, auxiliary material etc.), b, formed products; 2, circulating capital; a, wares; b, money. A. Walker, S. of W., 57, calls circulating capital that which may be easily transferred from one branch of production to another; fixed, that which can be used with advantage only for the purpose for which it was originally intended.

"Old wood-work is burned; old iron utensils sold; also houses when pulled down. Emminghaus, Allg. Gewerbelehre, 1868, 175.

3 If the Mongols, for instance, should despoil China of all its moveable property with the exception of its buried money, its immovable property would become productive only from the time that that money would be used to secure other moveable articles. In any case, the production would be proportioned only to the borrowed seed, cattle, etc. (Sismondi, Richesses commerciale, 1803, I, p. 61.

4 That the Athenians left everything in the lurch to oppose Xerxes, much more readily than under Pericles, even, the flat country of Attica, Büchsenschutz (Besitz und Erwerb im griech. Alterthum, 589) explains by the fact that in the interval between the two periods, fixed capital increased largely. In rude

the destination of the latter is changed with much greater difficulty than that of circulating capital, highly cultivated nations would find it very hard to satisfy new wants, if they could not always appropriate the results of additional savings to the production of new fixed capital.

SECTION XLV.

CAPITAL.-HOW IT ORIGINATES.

Capital is mainly the result of saving which withdraws new products from the immediate enjoyment-consumption of their possessor, and preserves them, or at least their value, to serve as the basis of a lasting use.1 As capital represents the solidarity of the economic past, present and future, it, as a rule, reaches back into the past and forward into the future, through a period of time longer in proportion as its amount and efficiency are greater. Those producers, too, whose products perish rapidly may, also, effect savings by exchanging their products

ages under the appellation of a community or nation was understood a number of inen; and the state, while its members remained, was accounted entire. With polished and mercantile states, the case is sometimes reverted. The nation is a territory cultivated and improved by its owners; destroy the possession even while the master remains, the state is undone. Ferguson, Hist. of civil Society, V, 4; v. Mangoldt, Volkswirthschaftslehre, 159. Fixed capital is not so sure of being completely used up as circulating. On this point see Schäffle, N. Œk., 53.

1 If the aggregate productive activity of man be designated by the word labor (just as everything produced on a piece of land is inaccurately called its product), then all capital may be considered as the unconsumed result of labor. The recent socialistic theory that considers capital as the wages which have been earned but not paid, is a gross misconception of this truth. This is the origin only of the capital of oppressors and deceivers, and of theirs only in part. See infra, § 189.

2" While we are clothed in our winter garments, the spring stuffs are already in the shops of retail dealers; the light material of next summer's wear is already manufacturing, and the wool for our next winter's clothing spun." Think of the study in advance which the physician must have gone through, whom we summon to us at a moment's notice! Menger, Grundsätze, I, § 33, seq.

and capitalizing their counter-value. Thus, the actor, whose playing leaves after it nothing but a memory, may use the wheat received by him from a farmer who came to listen to him, in the employment of an iron-worker, and invest the product permanently in a railroad. The transformation may be effected by means of money, bonds etc., but it is none the less real on that account. Order, foresight and self-restraint are the intellectual conditions precedent of saving and capital. The childish and hail-fellow-well-met disposition which cares only for the present is inimical to it. True, the desire of saving can be developed only where there are legal guaranties to ownership; guaranties which are both the conditions precedent and the effect of all economic civilization. The Indians, Esquimaux etc., had to be taught for the first time by the missionaries and merchants—and it was with the greatest difficulty it was done to save their booty, and spare the natural sources of their acquisition. Originally, they were, in the heat and excitement of their wild hunting and fishing, wont to destroy on the spot what they could not enjoy in the moment. In the lowest stages of civilization, the first saving of capital of any importance is effected frequently through robbery or in the way of slavery. In both cases, it is the stronger who compel the weaker to consume less than they produce. See in

6

Thus in dangerous callings, as for instance, among saldiers and sailors, there is very little saving. The same may be said of times of plague. See 7. Rae, New Principles on the Subject of Political Economy, 1834.

4 That we keep our property under lock and key, while it was customary in Plato's time to seal it up, is in itself a great advance. See Becker, Charicles, I, 202 seq. Earlier yet, artificial knots were used. Homer, Odyss. VII, 443.

5 Compare Hearne, Reise, nach Prinzwalesfort, 43, 58, 119. Barrow von Sprengel, 282. Humboldt, Relation historique, II, 245. Ausland, 1844, No. 359; 1845, No. 84. Stein-Wappäus, Handbuch der Geographie, I, 310. For proof that the clergy by preaching self denial contributed largely to the creation of capital in the earlier part of medieval history, see Guérard, Polyptiques d'Irminon Préf., 13.

• On the inevitableness of slavery, where capital is needed, and no one cares to save, see de Metz Noblet, Phénomènes économiques, I, 306.

VOL. I.-11

fra, § 68. Where civilization is at its highest, the inclination to save, as a rule, is very marked. It begins to decline where a people are themselves declining in civilization, and especially where legal guaranties have lost their force.

But capital may be increased even without personal sacrifice; as for instance, by mere occupation, as of certain goods, not hitherto recognized as such. Thus, also, by the establishment of valuable relations, the advantages of which either become the common good of all; or which, because at the exclusive command of one individual, obtain value in exchange. The progress of civilization itself may increase the value of existing capital. Thus, for instance, a house, considered as capital, may double in value if a frequented street be opened in its neighborhood. To this category belong all improvements in the arts which enable existing capital to achieve more than it could before. The invention of the compass increased the value of the capital employed in the merchant marine to an extent that cannot be calculated. The increase of capital effected by saving soon finds a limit unless such limit is widened by the progress of civilization.9 10

The origination of capital by "social connexions" (gesellschaftliche Zusammenhänge) Lassalle (Bastiat-Schultze, 92, 98) exaggerates into the absurdity that no capital was ever saved. This is in part related to his confounding land with capital (103 seq.). On the other hand, P. L. (v. Lilienfeld), Geuanken über de Staatswissenschaft der Zukunft (1873), distinguishes between the external and internal creation of capital in human society; the latter based on the condition of every organic being, by virtue of which the present is generated by the past, and generates the future. The intercellular substance of plants, the honey-comb of bees, and the blood in the animal body, correspond to the capital of a nation.

8 Hermann, St. Untersuchungen, 289 ff.; List, System der politischen Ekonomie, I, 325 ff. Thus, for instance, capitalization among a race of hunters may be continued longest by the creation of herds; that of a race of shepherds by the building of houses, and by land-improvements; that of an agricultural people by the establishment of trades, artificial roads, etc. As to how, in general the accumulation of goods to any great extent, supposes exchange, and as to how, first of all, with exchange through the existence of a superabundance wealth may originate, see Hermann, loc. cit., II, Aufl., 25 ff.

CHAPTER II.

CO-OPERATION OF THE FACTORS.

SECTION XLVI.

THE PRODUCTIVE COÖPERATION OF THE THREE FACTORS.

All economic production generally demands the coöperation of the three factors: external nature, labor and capital. But with the political economist, labor is the principal thing; and not merely because all capital presupposes labor, nor because every combination of the three factors is an act of labor;

The annual increase of the capital of France during the later years of Louis Philippe's reign, was estimated at from 200 to 300 million of francs; during the best years of Napoleon III's reign, at 600 million. Journal des Econ., Nov., 1861, 170. The capital of the British empire, judging from the statistics of the income tax, increased from 1843 to 1853, in Great Britain alone, at least £42,000,000 yearly; from 1854 to 1860, in the whole empire, at least £114,000,000; and in 1863 alone by £130,000,000. London Statis. Journal, 1864, 118 ff. A war carried on on English soil would doubtless be more destructive of capital than one waged in Russia; but Russia would recover from one like that of 1854-55 with much greater difficulty because of the small tendency of its people to amass capital. In countries in which the middle classes preponderate, the influence of the amassing of capital on foreign politics is one that favors peace. In despotic or democratic countries, it may as readily favor war.

10 The "absolute formation" of capital above described is, of course, the only one in the general economy of mankind. In the economy of individuals, we frequently meet with another which is only "relative," as when the increase of one's resources is attended by as great or even greater decrease of another's. This is the case, for instance, where privileges or monopolies are granted. The same phenomenon is found also in the intercourse of economies of different nations. Supra, § 64.