In the following book, I have endeavoured
to explain the nature of stock, the effects
of its accumulation into capital of different
kinds, and the effects of the different employments
of those capitals. This book is divided
into five chapters. In the first chapter, I have
endeavoured to shew what are the different
parts or branches into which the stock, either
of an individual, or of a great society, naturally
divides itself. In the second, I have endeavoured
to explain the nature and operation
of money, considered as a particular branch
of the general stock of the society. The stock
which is accumulated into a capital, may either
be employed by the person to whom it
belongs, or it may be lent to some other person.
In the third and fourth chapters, I have
endeavoured to examine the manner in which
it operates in both these situations. The fifth
and last chapter treats of the different effects
which the different employments of capital immediately
produce upon the quantity, both of
national industry, and of the annual produce
of land and labour.
CHAP. I.
OF THE DIVISION OF STOCK.
When the stock which a man possesses is no
more than sufficient to maintain him for a few
days or a few weeks, he seldom thinks of deriving
any revenue from it. He consumes it
as sparingly as he can, and endeavours, by his
labour, to acquire something which may supply
its place before it be consumed altogether.
His revenue is, in this case, derived from his
labour only. This is the state of the greater
part of the labouring poor in all countries.
But when he possesses stock sufficient to
maintain him for months or years, he naturally
endeavours to derive a revenue from the
greater part of it, reserving only so much for
his immediate consumption as may maintain
him till this revenue begins to come in. His
whole stock, therefore, is distinguished into
two parts. That part which he expects is to
afford him this revenue is called his capital.
The other is that which supplies his immediate
consumption, and which consists either,
first, in that portion of his whole stock which
was originally reserved for this purpose; or,
secondly, in his revenue, from whatever source
derived, as it gradually comes in; or, thirdly,
in such things as had been purchased by either
of these in former years, and which are
not yet entirely consumed, such as a stock of
clothes, household furniture, and the like. In
one or other, or all of these three articles, consists
the stock which men commonly reserve
for their own immediate consumption.
There are two different ways in which a
capital may be employed so as to yield a revenue
or profit to its employer.
First, it may be employed in raising, manufacturing,
or purchasing goods, and selling
them again with a profit. The capital employed
in this manner yields no revenue or profit to
its employer, while it either remains in his
possession, or continues in the same shape.
The goods of the merchant yield him no revenue
or profit till he sells them for money,
and the money yields him as little till it is
again exchanged for goods. His capital is
continually going from him in one shape, and
returning to him in another; and it is only
by means of such circulation, or successive
changes, that it can yield him any profit.
Such capitals, therefore, may very properly be
called circulating capitals.
Secondly, it may be employed in the improvement
of land, in the purchase of useful
machines and instruments of trade, or in such
like things as yield a revenue or profit without
changing masters, or circulating any further.
Such capitals, therefore, may very properly
be called fixed capitals.
Different occupations require very different
proportions between the fixed and circulating
capitals employed in them.
The capital of a merchant, for example, is
altogether a circulating capital. He has occasion
for no machines or instruments of trade,
unless his shop or warehouse be considered as
such.
Some part of the capital of every master
artificer or manufacturer must be fixed in the
instruments of his trade. This part, however,
is very small in some, and very great in others.
A master tailor requires no other instruments
of trade but a parcel of needles. Those of the
master shoemaker are a little, though but a
very little, more expensive. Those of the
weaver rise a good deal above those of the
shoemaker. The far greater part of the capital
of all such master artificers, however, is
circulated either in the wages of their workmen,
or in the price of their materials, and
repaid, with a profit, by the price of the work.
In other works a much greater fixed capital
is required. In a great iron-work, for example,
the furnace for melting the ore, the
forge, the slit-mill, are instruments of trade
which cannot be erected without a very great
expense. In coal works, and mines of every
kind, the machinery necessary, both for drawing
out the water, and for other purposes, is
frequently still more expensive.
That part of the capital of the farmer which
is employed in the instruments of agriculture
is a fixed, that which is employed in the wages
and maintenance of his labouring servants is
a circulating capital. He makes a profit of
the one by keeping it in his own possession,
and of the other by parting with it. The
price or value of his labouring cattle is a fixed