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the product will have acquired an exchangeable value sufficient to replace the original material in additional quantity, and also to repay him for his labor, and pay the interest of his capital. The amount of difference between the exchangeable value of his original material, together with his labor, and the exchangeable value of his product, is his profit. The annual amount of these profits, is his annual gross revenue. The annual amount of these profits in a nation, is the gross national revenue.

It is obvious, that it matters not in what form capital re-appears, if it only re-appear in a form bearing a greater exchangeable value. The smith exchanges gold or silver for coal; he burns up his coal, and nothing is left but ashes. But it has produced an invisible substance, called caloric, by means of which he has been able to give such an increased value to iron, as will not only replace his gold and silver, but also the iron itself, and will also pay him for his labor. The farmer exchanges his gold or silver for manure, but this manure will so increase his harvest, that he will be able to replace his gold and silver, and also be abundantly repaid for his labor. The principle is the same, in all cases of change of capital. It matters not into what we change our capital, nor how valuable the substance may be that is exchanged, if we only receive, in return, a greater amount of exchangeable value, or that which will procure for us a greater amount of objects of desire.

We see, hence, in what manner nations and individuals grow rich. It is by uniting the industry of this year to the capital of last year, and, by this process, creating an augmentation of capital. This augmentation will be either greater or less, in proportion as our industry has been successful in giving additional value to that value which previously existed. If we destroy a value, and produce another only equal to it, we lose our labor. If we destroy

. a value, and re-produce nothing, we losé both labor and capital. It is only as the value created is supe

rior to the value of labor and capital consumed, that we are enriched. Hence we see, that wealth is acquired by small, but oft repeated accumulations. The gross amount of these accumulations will be decided by our skill and industry. But, as from this amount our various expenditures must be subtracted, our nett revenue will depend not only on our skill and industry, but also on our frugality. Though a man earn much, yet, if he spend all, he will grow no richer. Hence, industry and frugality are the great sources of wealth. "Nor is this the less true of nations. Hence it is, that wars, unnecessarily expensive, governments, or high taxes, for whatever purpose, may keep the most enterprising and industrious nation always poor.

Fifth. Of Productive and Unproductive Capital.

Productive capital is that, which, being in any manner united with industry, is in the process of augmentation. Unproductive capital is that, which, not being united with industry, remains, at the end of the year, just the same as it was at the beginning. Money at interest, capital undergoing the various transformations effected by industry, tilled land, and manufactories in operation, are productive capital. Money lying in coffers, materials unsaleable, manufactories unoccupied, and land lying waste, are unproductive capital.

When capital is unproductive, it may be considered as losing for us, annually, its ordinary rate of interest; because it must have been purchased with that which would have yielded that interest. Hence it is, that every sound economist is anxious to have the whole of his capital productively invested. He who acts otherwise, is ignorant of the principles of production, indolent, or slovenly. The farmer who allows a heap of manure to lie in his farm yard for a year, instead of spreading it on his land; the merchant who allows his ships to lie idle, or his goods to be scattered, unsold, over several

warehouses; or the manufacturer who owns twice as much machinery as he is able to employ, are annually losing all the accumulation which this capital, properly invested, would produce. And still more, as we have seen that all gains arise from small and successive accumulations, and as almost every product is liable to waste, it is manifest that habitual negligence of this sort must greatly diminish, if it do not entirely consume, all the nett revenue of an establishment.

The effort of every man should be, to unite every fraction of his capital with industry, and to keep it so united, continually. Any gain, even the smallest, if it be sure, is better than no gain at all.

From what has been said, it is evident that the process of accumulation, in all branches of production, is the same. It will also appear, that where capital is free, that is, where there are no restrictions upon the use of it, there can be no great permanent difference in the rate of accumulation, between the different modes in which it is employed. If the profits of one kind of business are above the average rate, other capital will flow into that channel. If the profit in any branch of production be below the ordinary rate, capital will be withdrawn from it. If commerce be unusually lucrative, men will leave other pursuits and devote themselves to commerce, until, by competition, they reduce the profits to the ordinary rate. If commerce be depressed, men will leave it, until, by the reduction of the supply of commercial facilities, the rate of profit is increased. Rates of profit cannot be rendered permanently unequal in any other manner, than by oppressive legislation. The differences in profit, in the various departments of industry, are, therefore, more apparent than real. When profit is sure, it is of course less than when it is uncertain. But, how much soever individual cases may differ, it will be found that the average is, for long periods, very nearly equal.

Sixth. Of Fixed and Circulating Capital. The capital from which the owner derives profit only by exchanging its form or place, is circulating capital. Thus, the wares of the merchant, the products of the manufacturer, the harvests of the farmer, are circulating capital. On the other hand, the instruments which each of these producers uses, in performing his various operations, are fixed capital. Such are the ships and warehouses of the one, the machines and buildings of the other, and the tools and land of the third.

Circulating capital is, in general, that which is already prepared for the gratification of human desire, or that which is in a course of preparation for this state. Fixed capital, in general, consists of the instruments, or fixtures, which, in some form or other, assist us in accomplishing this result. Tools, machinery, houses, ships, roads, canals, and improvements on farms, &c., are fixed capital. Circulating capital is generally rapidly consumed. It is commonly an annual product, and subject to an annual consumption. Fixed capital is not an annual product, and may last for a year, a life time, or indefinitely. It is, however, still liable to gradual decay, which decay must be replaced, or else the possessor would find himself growing poorer, inasmuch as these tools and machinery are the means by which his labor is rendered productive.

The amount of fixed capital employed in some branches of industry, is much greater than that in others. Some mechanical trades require no more fixed capital than a cheap set of tools. Others, as large manufacturing establishments, require a large fixed investment. In proportion to the amount which must be thus employed, must be the amount of accumulated property necessary to be possessed him who wishes to employ himself in that particular department of industry. Sometimes, by far the greater part of the investment is fixed capital, and it is also very great in amount. In this case, it is frequently apportioned among individuals, who each subscribe and pay a part of the cost. Such is the case with railroads, canals, and works of public improvement, generally,

There is an obvious tendency, in the nature of things, to convert circulating, into fixed capital. As circulating capital is annually consumed, it must be annually replaced, or mankind, after the first year, would all perish. It is replaced by the annual productions of the earth, either vegetable, animal, or mineral. But, if the industry of man has been successfully exerted, the amount of annual production will be sufficient, not only to supply the ordinary wants of the producers, and to repair the waste and wear of fixed capital, but also to leave a surplus unappropriated. Now, as this kind of capital is annual, and as it is also perishable, if it be not used in some way, this surplus must be a total loss. If it be appropriated to the multiplication of annual capital, it will only increase that surplus, which is already too great. Hence, it can be usefully employed only in the creation of fixed capital. To accomplish this result, it is offered in the form of wages, to mechanics, artisans, and those persons who employ themselves in the manufacture of those articles, in which fixed capital consists. Hence, the wages of this class of persons will rise, and a portion of them will be drawn from the production of circulating capital. This might at first be supposed to diminish the amount of circulating capital. Such would be the result, were it not for the fact, that the very object of fixed capital, is, to enable us to create circulating capital, with a less amount of labor. A society, in which a part of the members are devoted to the making of useful machines, will create a greater amount of annual products, than one in which all are devoted exclusively to the creation of annual products. Thus, in a short time, the annual surplus is greater than before, and a greater number of persons is employed in creating fixed capital, and that kind of

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